According to the Law on Corporate Income Tax 2008, amended and supplemented in 2020, effective from July 15, 2020, there are regulations on deductible and non-deductible expenses when determining income subject to corporate income tax (CIT), including sponsorships. Specifically, what are the sponsorships that are deducted from CIT, what documents are required and what should businesses pay attention to comply with the law?

Enterprises should note that only the following financing expenditures will be considered subtracted from income subject to corporate income tax, which includes:

1. Funding for educational activities

  • Funding public and private schools under the national education system without the aim of contributing capital or buying shares in schools;
  • Funding facilities for teaching, learning, and school activities;
  • Sponsoring scholarships for pupils and students of general education institutions, vocational education institutions, and higher education institutions as prescribed in the Law on Education;
  • Sponsoring competitions on subjects taught at schools in which the participants are learners;
  • Funding the establishment of educational promotion funds.

2. Medical funding

  • Financing medical facilities established in accordance with the law on health but not to contribute capital or buy shares in such hospitals and medical centers;
  • Financing of medical equipment, medical instruments, and medicines;
  • Supporting the regular operations of hospitals and medical centers;
  • Funding in cash for the patients through an agency or organization that has the function of mobilizing funding in accordance with the law.

3. Disaster recovery funding

  • Funding in cash or other methods to overcome direct disaster consequences for organizations established and operating in accordance with law;
  • Funding in cash or other methods to overcome direct disaster consequences for individuals suffering from natural disasters through an agency or organization that has the function of mobilizing funding as prescribed by law.

4. Funding for the construction of houses of gratitude for the poor

It means: Spending in money or in kind to build houses of charity for the poor is regulated by the Prime Minister.

The identification of the sponsor in accordance with the provisions of the law is only a necessary condition. In order for the above expenses to be truly deducted from the taxable income of the enterprise, there must be an additional sufficient condition, which is a document proving the existence of a sponsorship, including:

  • A written certification of the grant signed by the representative of the business establishment that is the donor, and the signature of the representative of the sponsor (or the agency or organization with the function of raising funding);
  • Invoices, vouchers for the purchase of goods (if sponsored in kind) or vouchers for payment (if sponsored in cash).

In the event that the enterprises do the financing but do not satisfy one of the mentioned conditions, these expenses will not be considered deductible expenses when calculating CIT, and the enterprises must pay CIT for the amount calculated on the portion of misuse in the tax period in which the misuse arises.

For example, an enterprise A sponsors study for students who are studying at a university established by enterprise A itself. This expense is also known as funding expenditure, but will not be included in the deductible sponsorship expenses as required by law.

Through this article, we hope that enterprises can determine which expenses are deductible and which are not deductible when determining taxable income so that enterprises can calculate CIT accurately. Furthermore, enterprises should pay attention to the conditions to ensure compliance with the requirements of the law on deductible expenses when calculating CIT for sponsorship expenses.

The article is based on laws applicable at the time noted as above and may no longer be appropriate at the time the reader approaches this article as the applicable laws and the specific cases that the reader may wish to apply may have changed. Therefore, the article is for referencing only.


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