Which expenses are deductible for CIT in 2026? An update under the 2025 CIT Law and Decree 320/2025

The short answer

The 2026 tax year is the first full year under CIT Law No. 67/2025/QH15 and Decree No. 320/2025/ND-CP. An expense is deductible if it meets three conditions:

• it is actually incurred and relates to the business;

• it is supported by valid invoices and documents;

• invoices of VND 5 million or more are paid by non-cash means (previously VND 20 million).

The changes most likely to cause differences at finalisation are:

• interest on loans from non-credit institutions above the Civil Code cap;

• overtime pay beyond the limits of labour law;

• spending that fails the conditions of sector-specific laws.

The three general conditions

1. Actually incurred and related to the business. The new law clarifies that certain expenses are deductible even where they do not yet correspond to revenue in the period, as prescribed by the Government. It also expressly recognises a number of social expenditures, including:

• national defence and security education;

• support for Party and socio-political organisations within the enterprise;

• vocational training for employees;

• HIV/AIDS prevention in the workplace;

• sponsorships as prescribed.

2. Valid invoices and documents. Invoices must be issued at the right time, carry correct details and come from a legitimate seller. Article 02 in this series covers invoicing time under Decree 254/2026 in detail.

3. Non-cash payment for invoices of VND 5 million or more. The threshold has fallen from VND 20 million to VND 5 million and has applied since 15 December 2025. Where several purchases are made from the same seller on the same day, each below VND 5 million but together VND 5 million or more, non-cash payment is also required.

New or clarified deductible items

• Input VAT not fully credited and not refundable: deductible if directly related to business activities. Any amount expensed can no longer be credited against output VAT.

• VAT on business gifts: deductible where the gifts serve business purposes.

• Write-off of obsolete inventory, including goods that are out of fashion, technically outdated or no longer compliant with sector laws. The previous rules focused mainly on natural deterioration and expiry.

• Costs of unsuccessful bids.

• Spending on emission reduction, carbon neutrality and net-zero related to business operations.

• Research and development, technology development and digital transformation, subject to the detailed conditions and limits.

Non-deductible items that need close attention

Item	New rule	Practical note
Cash purchases	Invoices of VND 5 million or more must be paid by non-cash means	Review cash-advance and petty-cash policies at branches and stores now
Interest on loans from non-credit institutions (companies or individuals)	The portion above the Civil Code cap (20% p.a. under Article 468) is disallowed	Applies to shareholder loans too. Related-party loans are also subject to the interest deduction cap under the transfer pricing rules
Supplementary pension, voluntary pension and life insurance for employees	The portion above VND 5 million per person per month is disallowed (previously VND 3 million)	Higher cap, but a formal policy and defined eligibility are still required
Overtime pay beyond labour law limits	Non-deductible	Link timekeeping data to the statutory overtime limits
Spending that fails sector-specific legal conditions	Non-deductible	A common example is spending on activities that lack a mandatory licence. Regulatory compliance now feeds directly into tax
Golf memberships and golf expenses	Non-deductible	Keep separate from client entertainment
Depreciation of fixed assets not used for business or lacking ownership documents	Non-deductible	Review company-owned assets used for personal purposes

Two points beyond expenses

New limits on the reduced SME rates. Companies with annual revenue of up to VND 3 billion qualify for a 15% rate; those with VND 3–50 billion qualify for 17%. These rates do not apply, however, where the company is a subsidiary or related party of an enterprise that does not itself qualify. Splitting a business into smaller entities to access the lower rates therefore no longer works.

Loss carry-forward. Losses are carried forward against taxable income of subsequent years under the new rules.

Worked example

Company B incurs the following in 2026:

Expense	Amount disallowed
Supplies of VND 18 million paid in cash. This would have been fine in 2024, being below the old VND 20 million threshold	VND 18 million
A VND 5 billion loan from an individual shareholder at 24% p.a. Interest above 20% p.a.: VND 5 billion × 4%	VND 200 million
Voluntary pension insurance of VND 6 million per month for 10 employees. Excess: VND 1 million × 12 months × 10 employees	VND 120 million
Overtime pay beyond the statutory limit	VND 50 million
Total disallowed expenses	VND 388 million

At the 20% CIT rate, Company B owes an additional VND 77.6 million of CIT. If the issue is found in a tax audit rather than self-corrected, late-payment interest and possible penalties will be added. Most of this is avoidable if internal policies are updated at the start of the year.

Pre-closing checklist for 2026

1. Filter all invoices of VND 5 million or more that lack bank payment evidence.

2. List all loans from non-credit institutions and test interest rates against the 20% p.a. cap and the related-party rules.

3. Review pay, bonus, benefits and insurance policies alongside overtime data.

4. Check licences and business conditions for activities that generate significant costs.

5. Complete write-off documentation for obsolete inventory before year-end close.

6. Re-test eligibility for the 15% or 17% rates if the company is part of a related-party group.

FAQs

What invoice amount requires bank payment to be deductible?

VND 5 million or more, effective 15 December 2025. The previous threshold was VND 20 million.

Is interest on loans from a director or shareholder deductible?

Yes, but interest above the Civil Code maximum (20% p.a.) is not. If the lender is a related party, the related-party interest deduction cap also applies.

How much employee life insurance is deductible?

Up to VND 5 million per person per month, combined with supplementary and voluntary pension contributions.

Can non-refundable input VAT be expensed?

Yes, if it relates directly to business activities, has not been fully credited and is not eligible for refund.

Legal basis

• CIT Law No. 67/2025/QH15 dated 14 June 2025.

• Decree No. 320/2025/ND-CP dated 15 December 2025 guiding the CIT Law.

• Civil Code 2015, Article 468 (interest rates).

• Decree No. 255/2026/ND-CP on tax administration of related-party transactions.

How W&A can help

The 2026 CIT finalisation is the first full cycle under the new framework. In our experience, most disallowed expenses stem from internal policies that have not been updated, not from deliberate non-compliance. W&A supports businesses with:

• Pre-closing expense review: identifying items at risk of disallowance and recommending fixes while there is still time.

• Updating finance, remuneration and benefits policies: aligning them with tax, labour and social insurance law at the same time.

• Funding structure advice: shareholder and intra-group loans within Civil Code limits and related-party rules.

• CIT filing and finalisation services, plus support with explanations during tax audits.