Can expenses without invoices be deducted?

During operations, businesses very frequently incur expenses without invoices, especially when dealing with individuals. If the legal nature is not understood correctly, businesses are very likely to have these expenses disallowed during tax finalization, leading to an increase in corporate income tax payable and the risk of retrospective taxation and penalties.

So, can expenses without invoices be deducted, and in which cases?

What is a deductible expense according to tax regulations?

Deductible expenses (allowable expenses) are expenses that can be included in the cost when determining taxable income, provided they fully meet legal conditions.

According to current regulations, an expense is considered deductible if:

• It is actually incurred and directly related to production and business activities.
• It has sufficient legal documents and records for each specific case.
• It does not fall under the category of prohibited or restricted expenses according to tax law.

Important Note: Some expenses do not require an invoice but can still be considered deductible expenses if alternative documentation is correctly provided.

Cases where expenses without invoices can still be deducted

Purchasing goods and services from individuals not engaged in business

Businesses are allowed to not have invoices when purchasing:

• Assets from individuals not engaged in business.
• Services from individuals not registered for business.
• Goods directly sold by individuals who self-produce, self-exploit, or self-catch.

In this case, businesses must prepare a purchase declaration form without invoices (Form 01/TNDN) and are responsible for its accuracy.

Practical Note: If the purchase price stated on the declaration is higher than the market price, tax authorities have the right to adjust the expenses to the market price.

Purchasing goods and services from business households or individuals with revenue below 100 million VND/year

In cases where households or individuals are exempt from issuing invoices, businesses can still deduct expenses if:

• They have the declaration form 01/TNDN.
• They have complete records of the actual transactions.
• They can prove the source and nature of the expense.

In this case:

• No personal income tax arises for the seller.
• Businesses are not required to make non-cash payments, even for transactions over 20 million VND.

Purchasing goods and services from individuals or business households with revenue above 100 million VND/year

This is a very important legal boundary.

If the seller:

• Is an individual or a business household.
• Has revenue above 100 million VND/year.

They are REQUIRED to have an invoice.

In this case:

• Individuals or business households must obtain an invoice from the tax authority.
• Businesses cannot use declaration form 01/TNDN as a substitute for an invoice.

If there is no invoice, the expense will be entirely disallowed during corporate income tax finalization.

Hiring seasonal labor, outsourcing short-term tasks

Businesses can deduct expenses when:

• Hiring individuals to work under seasonal contracts or outsourcing.
• The work is short-term and not regular.

Tax obligations:

• Businesses must deduct 10% personal income tax before payment.
• This deducted tax is still considered a deductible expense.

Renting assets from individuals (houses, vehicles, warehouses, etc.)

Rental expenses do not require an invoice, but taxes must be paid on behalf of individuals in certain cases.

Distinguish clearly:

• Contracts below 100 million VND/year: no VAT, personal income tax, or license fee arises.
• Contracts above 100 million VND/year:
  • VAT: 5%
  • Personal income tax: 5%

Businesses can pay on behalf of individuals if agreed in the contract.

How to calculate corporate income tax and personal income tax for expenses without invoices

Each type of expense has a different tax treatment; a general formula cannot be applied.

Principles to remember:

• Expenses deductible for corporate income tax depend on the documentation and the nature of the transaction.
• Personal income tax only arises when individuals are subject to tax according to regulations.

Example:

• Purchasing goods from self-producing individuals: no personal income tax.
• Hiring services from individuals not engaged in business: deduct 10% personal income tax.
• Renting assets from individuals with high revenue: 5% personal income tax + 5% VAT.

Read more: How Much Revenue Triggers Tax Liability?

Mistakes that lead to the disallowance of expenses without invoices

In actual tax audits, the most common errors include:

• Using declaration form 01/TNDN for incorrect subjects.
• Failure to prove that individuals are not engaged in business.
• Absence of handover minutes or contracts.
• Recording purchase prices that are unusual compared to the market.
• Incorrect deduction of personal income tax according to regulations.

Even a small error can lead to the entire expense being disallowed.

Read more: What Expenses Are Tax Deductible in Business?

Conclusion

The fact that an expense lacks an invoice does not mean that expense will automatically be disallowed when calculating taxes. Current tax laws allow businesses to record many types of expenses without invoices, provided that businesses correctly determine the nature of the transaction, the subject incurring the expense, and prepare sufficient alternative supporting documentation as per regulations.

In practice, the risk lies not in the lack of an invoice, but in the incorrect application of cases, using declaration forms for the wrong subjects, failing to deduct personal income tax when necessary, or failing to prove the reality of the transaction. In such cases, even if the expense was genuinely incurred, businesses may still have the expense disallowed and be subject to retrospective corporate income tax.

Therefore, to protect their tax interests, businesses need to clearly understand each group of expenses, grasp the corresponding legal conditions, and organize their records fully and consistently from the moment the transaction occurs. Doing it right from the start not only helps optimize legal expenses but also serves as an important foundation for businesses to operate transparently, safely, and sustainably in the long term.