Corporate - Deductions

Last reviewed - 15 February 2024

Depreciation and amortisation

Tax depreciation may differ from accounting depreciation. Depreciation in excess of the rates specified in the regulations on tax depreciation is not deductible. These regulations specify maximum and minimum permissible effective lives for various classes of assets, including intangibles. Current straight-line tax depreciation rates range from 2% to 33.33%.

The depreciation period of assets of the Build Operate Transfer (BOT) and Business Cooperation Contract (BCC) projects is the remaining life of the contract.

Start-up expenses

Pre-establishment expenses (i.e. expenses for setting up a company) and certain expenses (i.e. training, advertising before establishment, costs for the research stage, relocation cost) can be amortised over a period of up to three years from the commencement of operations. In order for pre-establishment and pre-operating expenses to be deductible for CIT purposes, supporting documents to substantiate the fact that these pre-operating expenses were necessarily and legitimately incurred for the establishment of the company should be available.

Interest expenses

Interest expenses are generally deductible, except for certain cases.

Interest on loans corresponding to the portion of charter capital not yet contributed as scheduled is not deductible.

Interest on loans from non-economic and non-credit organisations exceeding 1.5 times the interest rate set by the State Bank of Vietnam is not deductible.

Interest on loans that has been capitalised is not deductible.

Tax deductibility of interest on loans is capped at 30% of earnings before interest, taxes, depreciation, and amortisation (EBITDA) when a taxpayer has related-party transactions (see Transfer pricing in the Group taxation section).

The decree on transfer pricing could be amended soon.

Bad debt

Provisions for bad debts are deductible if the provision is made in accordance with the guidance by the MoF. Certain conditions must be satisfied in order to set up a provision for bad debts (e.g. the debts must be supported by original documentation, the debts must be overdue under the terms of an economic contract, etc). In the absence of satisfying the necessary conditions, the provision for bad debts will generally not be deductible.

Fines and penalties

Administrative penalties and fines are specifically considered non-deductible.


Creditable input VAT, CIT, and other fees/charges are not deductible for CIT purposes.

Other significant items

The following other expenditures are specifically stated to be non-deductible:

  • Employee remuneration expenses that are not actually paid or are not stated in a labour contract, collective labour agreement, or the financial regulations of the company.
  • Staff welfare (including certain benefits provided to family members of staff) exceeding a cap of one month’s average salary.
  • Provisions for severance allowance (except for companies not subject to mandatory unemployment insurance contributions) and payments of severance allowance in excess of the prescribed amount per the Labour Code.
  • Contributions to voluntary pension funds and the purchase of voluntary pension for employees exceeding VND 3 million per month per person.
  • Reserves for R&D that are not in accordance with the prevailing regulations.
  • Provisions for stock devaluation, bad debts, financial investment losses, product and services warranties, government/corporate/government-guaranteed bonds, or construction work that are not in accordance with the prevailing regulations.
  • Unrealised foreign exchange gain/losses due to the revaluation of foreign currency items other than account payables at the end of a financial year.
  • Management expenses allocated to PEs in Vietnam by the foreign company’s head office that are not in accordance with the regulations.
  • Certain expenses directly related to the issuance, purchase, or sale of shares.
  • Services fees paid to related parties that do not meet certain conditions.

For certain businesses (e.g. insurance companies, securities trading, lotteries), the MoF provides specific guidance on deductible expenses for CIT purposes.

Net operating losses

Losses may be carried forward fully and consecutively for a maximum of five years. Carryback of losses is not permitted.

Payments to foreign affiliates

There are no special restrictions on the deductibility of royalties, loan interest, and service fees paid to foreign affiliates (except for those paid by branches). However, the payment must be defendable on an arm’s-length basis as required by transfer pricing regulations and substantiated by sufficient supporting documents for CIT deduction purposes (see Transfer pricing in the Group taxation section). Certain contracts for the transfer of technology and foreign loans must be registered with the competent authorities.