03 Jan Work Permit and Visa/TRC, are they considered as reasonable expenses in Vietnamese Accounting Standards (VAS)?

Regarding the expenses for Work Permit, TRC and visa, we would like to remark some points below:

1/ There are 03 important “documents” for a foreigner to come to Vietnam to work as an employee, i.e. visa to enter the country, Work Permit to legally work for a company and TRC to stay legally in Vietnam.

2/ If you hire foreigners to come to Vietnam and work for your company, you will need to consider the expenses for the 03 elements cited above, whether you (the company) will cover or the employees will need to cover it themself and its fiscal impact.

3/ To consider who will and should cover these expenses, we would like to clarify the related tax(es):

3.1/ For Work permit

i/ CIT deduction for the company

The responsibility to apply for the work permit rests on the employer (the company), thus, the cost of obtaining the work permit that is covered by the company will be included for CIT deduction, as it meet the conditions:

– The expenses are related to the business;

– Have legitimate invoices and contracts;

– Payments of 20M needs to go through a bank; and

– The expenses are not included in the list of non-deductible expenses.

Please ensure that you stipulate the terms of WP expense covered by the company in your labor contract and you receive the VAT invoice from the agency for the WP registration service.

ii/ PIT for the foreign employees

It will not be included in the taxable income of the employees, hence, they do not need to pay PIT upon the WP registration expenses.

Legal basis: Article 4 Circular No. 96/2015/TT-BTC; point g.9 clause 2 Article 2 Circular No. 111/2013/TT-BTC; Official Dispatch No. 3867/TCT-TNCN of the General Tax Department.

3.2/ For visa and TRC

i/ CIT deduction for the company

Your company can not consider the expenses for visa and TRC for foreign employees as reasonable expenses for CIT deduction as it is much related to the benefits of the employees when they can stay in Vietnam for a registered period. It is not the expenses that meet 04 conditions we mentioned in section 3.1.i/.

ii/ PIT for the foreign employees

It will be included in the taxable income of the employees, hence, they need to declare and pay PIT even when the company covers these expenses.

Legal basis: Article 4 Circular No. 96/2015/TT-BTC; point g.9 clause 2 Article 2 Circular No. 111/2013/TT-BTC; Official Dispatch No. 3867/TCT-TNCN of the General Tax Department.

As a result,

– WP: Your company can deduct this expense (for CIT), the foreign employees do not need to pay PIT on top of WP expense as it is not considered as a benefit.

– Visa and TRC: Your company can not deduct that expense (for CIT), the foreign employees need to pay PIT on top of VISA and/or TRC expense if paid by the company as it is considered as a benefit for the employees.

Therefore we recommend issuing VAT invoice for WP, not issuing VAT invoice for visa and/or TRC so that the beneficiary does not need to declare and pay PIT for the the visa and/or TRC if paid by the company.

Contact PCA Company Services today. We will help you info@pcacompanyservices.com