Tax deductibility of personnel expenses is a matter of significant concern for many enterprises, as it directly impacts their tax obligations and financial interests. Current legislation clearly provides that certain expenditures, such as salaries, bonuses, and allowances, are deductible, provided that they comply with mandatory insurance requirements and are supported by valid documents.

I. Current situation regarding tax deductibility of personnel expenses

In practice, tax deductibility of personnel expenses remains a major concern for numerous enterprises. During accounting processes, many enterprises encounter difficulties in determining which expenses qualify as deductible for corporate income tax purposes.

Items such as salaries, bonuses, allowances, and compulsory insurance contributions often lead to complications due to requirements relating to valid supporting documents, insurance compliance, or disputes with tax authorities. Such a situation underscores the need for enterprises to thoroughly understand applicable legal regulations in order to optimize their legitimate interests.

II. Legal regulations on tax deductibility of personnel expenses

1. What is the tax deductibility of personnel expenses?

Tax deductibility of personnel expenses refers to the inclusion by an enterprise of reasonable and valid expenditures related to employees, such as salaries, bonuses, allowances, training costs, and compulsory insurance contributions, into deductible expenses when calculating corporate income tax. Pursuant to the Law on Corporate Income Tax 2008 (as amended and supplemented), only those expenses that are actually incurred, directly related to business operations, and supported by lawful invoices and documents are deductible, thereby reducing the enterprise’s tax liability.

2. In which cases are personnel expenses deductible for tax purposes?

Under Clause 1, Article 9 of the Law on Corporate Income Tax 2025 (as amended) (effective from 01 October 2025), an expense is deductible when determining taxable income if:

  • It is actually incurred and directly related to the enterprise’s production and business activities; and
  • It is supported by complete and lawful invoices and documents, and must be paid via non-cash methods unless otherwise stipulated by the Government.

Accordingly, expenses such as salaries, bonuses, allowances, and employee insurance contributions shall be deductible if they satisfy the above conditions.

3. What are the current legal provisions governing tax deductibility of personnel expenses?

Personnel expenses (such as salaries, bonuses, and allowances) are deductible if they satisfy the conditions set out in Clause 1, Article 9 of the Law on Corporate Income Tax 2025, effective from October 1st, 2025:

  • The expenses are actually incurred and related to production and business activities;
  • They are supported by complete and lawful invoices and documents; all expenses must be invoiced and paid via non-cash methods (except for specific cases prescribed by the Government), regardless of value (including VAT);
  • Expenses for vocational training, national defense and security education, militia and self-defense forces, Party and socio-political organizations within enterprises, HIV/AIDS prevention, and training activities are deductible if supported by lawful documents;
  • Notably, expenses for personnel assigned to specially controlled credit institutions or compulsorily transferred commercial banks are also deductible.

Pursuant to Clause 2, Article 9 of the Law on Corporate Income Tax 2025, the following expenses are non-deductible, including those related to personnel:

  • Expenses that fail to meet deductibility conditions (e.g., lack of valid documents or not actually incurred);
  • Welfare expenses provided directly to employees exceeding statutory limits, such as supplementary pension insurance, life insurance, or social security contributions beyond prescribed thresholds;
  • Expenses not commensurate with taxable revenue, except for specific cases stipulated by the Government, for example, bonuses or allowances lacking clear internal policies may be disallowed.

Previous detailed regulations (under Circular 96/2015/TT-BTC, applicable prior to October 1st, 2025) include:

  • Salaries and bonuses not clearly stipulated in labor contracts or internal policies are non-deductible;
  • Salaries and wages accrued but not actually paid, or lacking payment documentation, are non-deductible;
  • Allowances exceeding prescribed limits or payments made after tax finalization deadlines may be disallowed, unless properly provisioned in accordance with regulations (up to 17%).

Accordingly, under the Law on Corporate Income Tax 2025, personnel expenses are deductible if they satisfy requirements regarding actual occurrence, valid documents, non-cash payment (where applicable), and fall within permissible categories such as training or secondment. They are non-deductible if these conditions are not met, if welfare limits are exceeded, if expenses are inconsistent with revenue, or if no clear internal policies exist.

III. Questions on tax deductibility of personnel expenses

1. If an enterprise pays salaries but has not fully contributed mandatory insurance, are such salaries deductible?

Pursuant to Article 6 of Circular 78/2014/TT-BTC (as amended by Circular 96/2015/TT-BTC), salaries paid to employees are still considered deductible expenses when determining corporate income tax, provided that they are supported by adequate documents, contracts, and actual payment. Failure to fully contribute mandatory insurance only affects the deductibility of certain insurance-related expenses (such as voluntary pension or life insurance contributions), but does not disqualify salary expenses.

2. Are Lunar New Year (Tet) bonuses deductible?

Tet bonuses are deductible when determining taxable income for corporate income tax purposes if they satisfy two groups of conditions:

  • General conditions under Clause 1, Article 6 of Circular 78/2014/TT-BTC (as amended): The expense must be actually incurred, related to business operations, supported by lawful invoices and documents, and for payments of 20 million VND or more, made via non-cash methods;
  • Specific conditions for Tet bonuses: Eligibility criteria and bonus levels must be clearly stipulated in one of the following documents:
  • Labor contract;
  • Collective labor agreement;
  • Financial regulations of the company, corporation, or group;
  • Bonus policy issued by a competent authority in accordance with financial regulations.

If these conditions are satisfied, Tet bonuses qualify as deductible expenses.

3. Are there limits on tax deductibility of personnel expenses?

Under corporate income tax regulations, not all personnel expenses are deductible without limitation; specifically:

  • Salaries, wages, bonuses, and regular allowances: It is not subject to level limits, provided they are actually incurred, properly documented, directly related to business activities, and paid in accordance with regulations;
  • Employee welfare expenses (e.g., funeral/wedding support, vacations, hardship assistance, gifts): It is deductible up to a maximum of one month’s average actual salary in the tax year;
  • Uniform allowances:
    + Paid in cash: It may be deductible up to 5 million VND per person per year;
    + Provided in kind: It must be supported by full invoices and documents and stipulated in financial regulations or labor agreements.

In general, core personnel expenses such as salaries and bonuses are fully deductible, while certain welfare benefits and allowances are subject to statutory limits.

4. How should enterprises handle disputes with tax authorities regarding deductibility of personnel expenses?

In the case of a dispute, enterprises should take the following steps:

  • Preparing complete documents: Reviewing labor contracts, collective agreements, financial regulations, payroll records, invoices, and payment documents to substantiate that expenses meet deductibility conditions under Article 6 of Circular 78/2014/TT-BTC (as amended);
  • Providing explanations to tax authorities: Submitting all required documents and prepare written explanations citing legal grounds to support deductibility;
  • File complaints or initiate legal action: if disagreeing with tax assessments or reassessments, enterprises may file complaints under the Law on Complaints 2011 or initiate administrative lawsuits under the Law on Administrative Procedures 2015.

To safeguard their interests, enterprises should rely on transparent documents and clear legal grounds. If tax authorities misapply the law or exceed their authority, enterprises may file complaint or litigation procedures in accordance with applicable laws.

5. Are salaries paid to part-time employees deductible?

Pursuant to Clause 1, Article 4 of Circular 96/2015/TT-BTC, salary and wage expenses are deductible if they are actually incurred, related to business activities, supported by lawful documents, and paid in accordance with regulations.

Additionally, under Point b.1 and Point i, Clause 1, Article 25 of Circular 111/2013/TT-BTC, personal income tax withholding obligations depend on the type of labor contract:

  • Contracts of 03 months or more: Withholding based on the progressive tax tariff;
  • Contracts of less than 03 months or no contract, with income of 2 million VND or more per payment: 10% withholding prior to payment.

Accordingly, salaries paid to part-time employees are deductible for corporate income tax purposes if supported by valid labor contracts, payment documents, and proper records, and if personal income tax withholding obligations are fulfilled as required.

IV. Legal advisory services on tax deductibility of personnel expenses

NPLaw provides support to enterprises in reviewing labor contracts, developing salary and bonus policies, preparing documentation, and advising on corporate income tax and personal income tax regulations to ensure lawful deductibility of personnel expenses and minimize risks during tax finalization.