Advertising, marketing, promotional activities, brokerage commissions, hiring receptionists – inaugurations, giving gifts, giving newspapers or press agencies, etc. are necessary activities in the business process of companies, but not all of the above expenses are deducted when declaring corporate income tax.
1. Advertising And Promotional Expenses
Advertising, marketing, and some other activities such as promotions, commissions for brokerage activities, hiring receptionists – inaugurations for conferences, journalism activities – newspapers donated by press agencies, etc. are necessary for the business process of a company.
Law on Enterprise Income Tax 2008 and Circular No. 78/2014/TT-BTC of the Ministry of Finance also clearly define the expenses as mentioned above, if they directly relate to the production and business activities and the company has sufficient invoices and legal expenditure documents, it can be considered for deduction when determining the company’s taxable income.
Besides, it should be noted that the said promotional and advertising expenses, in addition to having legal invoices, must also comply with having full documents and procedures under the current Commercial Law on trade promotion activities such as: notifying promotion organizations to the Provincial People’s Committee and the Department of Industry and Trade; adhering to the Rules of promotion programs according to the form of the Department of Industry and Trade, etc.
2. Deductions for Advertising and Marketing Expenses
According to previous regulations related to corporate income tax for the above expenses, the enterprises shall not be able to deduct with amount 100%. The deductible amounts are limited to 10% of the total deductible expenses of the company and 15% of the total expenditure deducted in the first 3 years for the newly established company.
However, Circular 96/2015/TT-BTC, effective from 06/08/2015, abolished the above regulation. Therefore, advertising expenses serving the company’s production and business activities will be included in deductible expenses when determining income subject to corporate income tax if they meet the conditions specified in Article 4 of Circular No. 96/2015/TT-BTC of the Ministry of Finance.
This is reasonable as regards the increasingly competitive economic trend, that leads enterprises to increase promotion and introduction of products to promote product consumption, dominate the market, and limit advertising expenses has restricted enterprises, including small and medium-sized enterprises, from developing their markets, affecting the efficiency of enterprises’ production and business activities. In addition, international experience shows that countries do not control advertising expenses ceilings.
3. Conclusion
Thus, current law considers advertising expenses as one of the deductible expenses when calculating taxable income and there is no longer a ceiling limit for this type of expense.
Accordingly, this expense is deductible when the following conditions are met:
- Actual expenses incurred related to production and business activities of the enterprise; expenses for vocational education activities; expenses for carrying out national defence and security tasks of the enterprise according to the provisions of laws;
- Expenses have sufficient invoices and documents as prescribed by law. For invoices for each purchase of products and services with a value of twenty million VND or more, there must be non-cash payment documents, except in cases where non-cash payment documents are not required by law.
