Cost of Deductible When Declaring Corporate Income Tax and the Role of Electronic Invoices

When declaring corporate income tax (CIT), correctly identifying deductible and non-deductible expenses is crucial. This not only helps businesses optimize taxes legally but also avoids risks of tax inspection and audit. Alongside this, the electronic invoice system plays a key role in proving the reasonableness of these expenses.

This article will help you understand the types of deductible expenses allowed when calculating CIT, as well as how GTG CRM supports businesses in managing invoices and documents effectively.

Basic Principles of Deductible Expenses

According to current CIT Law, expenses deductible when determining taxable income must fully meet the following conditions:

Conditions for Deductible Expenses

• Actual expenses incurred related to business production activities
• Possession of full legal invoices and documents as prescribed
• Expenses not included in the list of non-deductible expenses as stipulated by law
• Correctly and fully calculated into the cost of goods and services
• Fully declared in accounting and tax records

Common Types of Deductible Expenses

1. Raw Material and Goods Expenses

• Costs of purchasing raw materials directly for production
• Costs of purchasing goods for sale
• Costs of supplies and tools

Note: Must have full input VAT invoices and payment documents

2. Labor Expenses

• Wages, salaries, and allowances
• Social insurance, health insurance, unemployment insurance (employer's contribution)
• Occupational accident and disease insurance
• Trade union fees (according to prescribed rates)

3. Fixed Asset Depreciation Expenses

• Tangible fixed assets (factories, machinery, equipment...)
• Intangible fixed assets (software, copyrights...)
• Must be depreciated in accordance with regulations

4. Outsourced Service Expenses

• Office and factory rental expenses
• Consulting, auditing, legal fees
• Transportation and delivery expenses
• Advertising and marketing expenses (within allowed limits)

5. Sales Expenses

• Transportation and warehousing costs for goods
• Packaging and labeling costs
• Commissions and trade discounts
• Promotional and advertising expenses (according to prescribed rates)

6. Business Management Expenses

• Stationery, electricity, water, telephone
• Asset repair and maintenance costs
• Asset insurance costs
• Employee training costs

7. Loan Interest Expenses

• Interest on capital loans for business production
• Limit: Loan interest must not exceed 150% of market interest rate (for unsecured loans or loans from related parties)

Non-Deductible Expenses

1. Expenses Without Valid Invoices or Documents

• Invoices not bearing the correct name or tax identification number of the business
• Invoices without signatures or seals
• Invoices from non-operating or non-tax-paying businesses

2. Administrative Penalty Expenses

• Traffic violation fines
• Tax violation fines, late payment penalties
• Environmental, construction, etc., violation fines

3. Expenses Unrelated to Business Production Activities

• Personal expenses of the business owner
• Expenses for charitable activities (unless deductible as prescribed)
• Expenses for purchasing personal assets

4. Gift and Entertainment Expenses Exceeding Limits

• Entertainment expenses exceeding the allowed limit (10 million VND/occasion)
• Gift expenses without specific lists

5. Invalid Provision Expenses

• Provisions for inventory valuation losses (except for certain specific industries)
• Provisions for bad debts (except for credit institutions)

6. Other Expenses

• CIT, personal income tax (paid on behalf of employees)
• Interest on capital loans not supported by equity (exceeding the ratio)
• Expenses from illegal transactions

Guide to Determining Deductible Expenses for Tax Declaration

Step 1: Classify Expenses by Nature

Divide expenses into categories:

• Direct production costs
• Sales expenses
• Business management expenses
• Other expenses

Step 2: Verify Document Validity

Checklist:

• ✅ Valid VAT invoices
• ✅ Payment documents (bank transfer, check...)
• ✅ Economic contracts (for large transactions)
• ✅ Liquidation or acceptance reports (if necessary)
• ✅ Information on documents matches the business

Step 3: Compare with Allowed Expense Limits

Some expenses have maximum deductible limits:

• Advertising expenses: Not exceeding 15% of total deductible expenses
• Promotional expenses: Not exceeding 15% of total deductible expenses
• Entertainment expenses: Must have a list, not exceeding reasonable limits
• Loan interest: Not exceeding 150% of market interest rate (for unsecured loans)

Step 4: Record and Store Documents

• Arrange documents chronologically
• Number sequentially, create detailed ledgers
• Store fully as prescribed (minimum 10 years)
• Be prepared for inspections and audits

Step 5: Declare and Settle Taxes

• Fill in all expenses on the CIT declaration form
• Reconcile with accounting records
• Prepare complete financial statements
• Submit tax settlement documents on time

💡 Benefits of Managing Deductible Expenses

• ✅ Legal Tax Optimization: Minimize tax liability transparently
• ✅ Avoid Legal Risks: No penalties during tax inspections or audits
• ✅ Effective Financial Management: Understand cost structure, optimize profits
• ✅ Enhance Business Reputation: Ensure compliance with legal regulations
• ✅ Facilitate Loans and Partnerships: Have transparent and complete documentation

Important Notes When Declaring Expenses

Be Cautious with Electronic Invoices

• Check invoice status on the tax portal before accounting
• Only accept invoices from operating businesses
• Regularly reconcile with suppliers

Non-Cash Payments

• Prioritize bank transfers for large transactions (over 20 million VND)
• Keep bank transfer documents along with invoices
• Clearly state payment details on the transfer order

Economic Contracts

• Large transactions (from 50 million VND or more) should have a contract
• Contracts must be signed before expenses are incurred
• Contract details must be consistent with invoices and payment documents

GTG CRM - Automated Electronic Invoice Management Solution

To support businesses in managing invoices and documents effectively, GTG CRM offers a built-in automatic electronic invoice generation feature:

Key Features:

• 🧾 Automatic Invoice Generation: Automatically create electronic invoices upon order completion
• 📊 Centralized Management: Store all outgoing invoices in one system
• 🔗 Integration with Invoice Providers: Connect with Sinvoice and MISA to issue legally compliant electronic invoices
• 🔗 Connect to Accounting Software: Easily synchronize invoice data to accounting software
• 📱 Instant Invoice Delivery: Automatically send invoices via email/SMS to customers
• 🔍 Quick Search: Search invoices by various criteria

Connect with Electronic Invoice Providers

GTG CRM supports direct connection with:

Sinvoice

• Automatically push order data to Sinvoice upon sales completion
• Issue legally compliant electronic invoices as per the General Department of Taxation regulations
• Automatically receive invoice codes and digital signatures
• Synchronize invoice status (issued, cancelled...)

MISA

• Integrate with MISA's electronic invoice system
• Issue VAT invoices, direct sales invoices directly from GTG CRM
• Automatically update invoice status from MISA to the system
• Support easy invoice lookup and reconciliation

Benefits for Businesses:

• Save time on manual invoice processing
• Minimize errors during invoice generation
• Ensure compliance with electronic invoice regulations
• Support accurate and transparent tax declaration
• Legally recognized invoices by the General Department of Taxation
• Fully automated process from sales to invoice generation

Important Note: GTG CRM is a customer relationship and sales management system, not a tax declaration tool. However, automated and accurate invoice management through integration with reputable invoice providers like Sinvoice and MISA will provide businesses with reliable and legal input data for future accounting and tax declaration.

Conclusion

Understanding deductible and non-deductible expenses when declaring CIT is fundamental for businesses to optimize taxes legally and avoid risks. Combined with an automated invoice management system like GTG CRM – integrated with reputable electronic invoice providers (Sinvoice, MISA) – businesses will have accurate, transparent, and legal data for accounting and tax purposes.