Công văn 158/TCT-CS

To: Tax Departments of centrally-affiliated provinces and cities

The General Department of Taxation received official dispatches from some Tax Departments and enterprises requesting guidelines for welfare and reward expenses for employees.

On August 19, 2016, the Ministry of Finance sent Official Dispatch No.11644/BTC-TCT to the Prime Minister.

 On October 28, 2016, in response to above-mentioned Official Dispatch, Office of the Government sent Official Dispatch No.9247/VPCP-KTTH on how to account for expenses incurred on welfare and reward of enterprises to the Ministry of Finance.

 According to guidelines of the Deputy Prime Minister specified in Official Dispatch No.9247/VPCP-KTTH and guidelines of the head of the Ministry of Finance, the General Department of Taxation has the following opinions:

Clause 4 in Article 1 of Decree No.91/2014/ND-CP dated October 01, 2014 of the Government on amendment to some articles of Decree on tax provides for deductible expenses for determining taxable income as follows:

“Welfare-related expenses intended for employees with documents as regulated such as expenses incurred on funeral and wedding of employees and their family; expenses incurred on holiday allowance, treatment support, professional training; expenses incurred on supporting employees' family affected by natural disaster, hostilities, accidents, sickness; expenses incurred on providing reward to children with outstanding academic records of the employees, transport allowance during holidays and other welfare-related expenses under the guidance of the Ministry of Finance; total expenses must not exceed actual average one month’s salary within the tax year.”

Point c in Clause 3 in Article 31 of Decree No.91/2015/ND-CP dated October 13, 2015 of the Government on state capital investment in enterprises, use and management of capital and assets in enterprises stipulates as follows:

“c) Set aside reward and welfare funds for employees in enterprises:

- Enterprises rated A shall be allowed to set aside amount of money equivalent to three months' realized income of employees for two reward and welfare funds;

- Enterprises rated B shall be allowed to set aside amount of money equivalent to one and a half months' realized income of employees for two reward and welfare funds;

- Enterprises rated C shall be allowed to set aside amount of money equivalent to one month’s realized income of employees for two reward and welfare funds;

- Unrated enterprises shall not be allowed to set aside two reward and welfare fund.”

Clause 4 in Article 32 of Decree No.91/2015/ND-CP mentioned above prescribes as follows:

“4. Welfare funds shall be used for:

a) Investing in construction or repair of welfare facilities of enterprises.

b) Paying for welfare activities of employees in enterprises including managers, controllers who work under labor contracts and stated-appointed mangers and controllers.

c) Investing a portion of capital in development of welfare facilities commonly shared among industries or with other agencies under agreed contract.

d) Make use of a part of welfare funds to assist employees in dealing with their unexpected difficulties including those who are retired, incapable of working, suffer hardships, homeless conditions or serve charitable purposes.

dd) Welfare expense amount decided by Director General of Director of enterprises shall be specified in regulations on management and use of enterprise funds."

In Point 8 of Decree No.53/2016/ND-CP dated June 13, 2016 of the Government providing for labor, salaries, remunerations and bonuses of joint-stock companies with state controlling stakes are prescribed as follows:

“Article 8. Welfares and bonuses

According to annual profit after deduction from financial obligations to the State and capital contributors as regulated by the State and company rules, a company shall award bonuses and welfares to its employees and managers as follows:

1. Maximum reward and welfare funds for the employees must not exceed average three months’ salary in case the realized profit reaches the target one. In case the realized profit exceeds the target one, the reward and welfare funds shall be added 20% of the excess of realized profit but not exceeding actual average three months' realized income.

Pursuant to the above-mentioned regulations, welfare-related expenses intended for employees prescribed in Clause 4 in Article 1 of Decree No.91/2014/ND-CP dated October 01, 2014 of the Government will count towards deductible for assessing earnings on which corporate income tax is imposed if enterprises could provide adequate invoices and documents for these expenses and total expenses must not exceed actual average one month’s salary in the tax year.

For state-owned enterprises, joint-stock companies with state controlling stakes whose welfare-related expenses intended for employees within a year count towards deductible for determining earnings on which corporate income tax is imposed as mentioned above, if enterprises set aside welfare funds as regulated, they are required to assure that an amount of welfare expense must not be deducted from two sources including cost and welfare funds.