Deductible Expenses for Corporate Income Tax Calculation in 2026: Conditions and Key Updates Businesses Need to Know

Deductible expenses for corporate income tax (CIT) calculation in 2026 directly affect the determination of taxable income and every enterprise’s tax obligations. As the new regulations take effect, understanding how deductible expenses are determined will enable businesses to manage their accounting more effectively, minimize errors in tax declarations, and reduce potential risks during tax inspections, audits, or final tax settlements.

In this article, Green NRJ explores the eligibility requirements, key considerations, and notable deductible expenses that businesses should understand under the current regulations.

Legal Basis for Deductible Expenses in Corporate Income Tax Calculation

The determination of deductible expenses for taxable income from the 2026 tax period onward is governed by the Law on Corporate Income Tax No. 67/2025/QH15 and Decree No. 320/2025/ND-CP. These legal documents provide the primary framework for businesses to accurately identify deductible expenses when calculating corporate income tax. They were introduced to establish a consistent approach to expense recognition between businesses and tax authorities while enhancing transparency in tax declaration and tax finalization procedures.

In addition to specifying the conditions under which an expense may be accepted as deductible, the legislation also clarifies the requirements relating to invoices, supporting documents, and payment methods to ensure the legality of each expense. For businesses, understanding these legal provisions not only helps ensure accurate accounting records but also reduces the likelihood of expenses being disallowed during tax inspections. It also provides a solid foundation for developing more effective documentation management procedures and tighter cost control from the moment each transaction occurs.

Conditions for an Expense to Be Considered Deductible

To qualify as a deductible expense when determining taxable income, an expense must not only arise in the course of the company’s operations but must also satisfy all conditions prescribed by law. If any mandatory requirement is not met, the expense may be disallowed during the tax finalization process, resulting in higher taxable income and increased tax liabilities for the business. Therefore, understanding each requirement is essential for businesses to manage supporting documents proactively and minimize unnecessary compliance risks.

The Expense Must Be Actually Incurred and Directly Related to Business Operations

The first requirement is that the expense must have been genuinely incurred and must be directly connected to the company’s production or business activities. In other words, the expenditure must serve the purpose of generating revenue, maintaining business operations, or supporting the company’s commercial activities.

In practice, expenses such as purchasing raw materials, leasing business premises, transportation costs, machinery repairs, electricity and water used in production, or product marketing expenses may all qualify as deductible, provided the business can demonstrate that they were incurred for legitimate business purposes.

On the other hand, expenses incurred for personal purposes or those unrelated to the company’s operations do not satisfy the conditions for deductibility. For this reason, businesses should clearly identify the purpose of every expense at the time the transaction occurs and retain all relevant supporting documents to substantiate its business nature whenever requested by the tax authorities.

The Expense Must Be Supported by Valid Invoices and Required Documentation

Besides being actually incurred, supporting documentation plays a decisive role in determining whether an expense is deductible. Every expense must be supported by valid invoices and lawful documentation in accordance with the applicable regulations, demonstrating that the transaction was properly conducted and has a sufficient legal basis.

During normal business operations, companies should not limit their recordkeeping to invoices alone. They should also retain all relevant documents, including contracts, acceptance reports, goods delivery records, payment documents, and any additional records required depending on the nature of each transaction.

Maintaining a complete set of supporting documents enables businesses to provide explanations more efficiently whenever requested by the tax authorities. In many cases, expenses genuinely incurred for business purposes have still been rejected simply because the invoices were invalid or the supporting documents were incomplete. Therefore, document management should be implemented consistently from the outset rather than being reviewed only when tax finalization takes place.

Expenses of VND 5 Million or More Must Be Supported by Non-Cash Payment Evidence

In addition to invoice and documentation requirements, the payment method is another important condition that businesses must pay close attention to. For expenses with a value of VND 5 million or more, the business must possess valid proof of non-cash payment in accordance with the regulations for the expense to qualify as deductible.

This requirement is intended to enhance transparency in financial transactions and facilitate verification and reconciliation whenever necessary. Non-cash payment methods also help reduce disputes and concerns regarding the authenticity of transactions between the parties involved.

Accordingly, whenever significant expenses arise, businesses should proactively choose an appropriate payment method from the beginning. Compliance with these requirements will help avoid expense adjustments during tax finalization and ensure that businesses fully enjoy their tax rights under the current regulations.

Important Notes When Determining Deductible Expenses

In addition to satisfying the general eligibility requirements, businesses should also pay close attention to several situations that commonly arise in practice. These are typical scenarios encountered during the purchase of goods, procurement of services, or expense recognition in accounting. Without a clear understanding of the applicable regulations, businesses may inadvertently record expenses incorrectly, resulting in those expenses being disallowed when determining taxable income.

Multiple Purchases from the Same Supplier on the Same Day Must Be Aggregated to Determine the Applicable Payment Method

In the course of business operations, companies often make multiple purchases from the same supplier on the same day. While each individual transaction may only amount to a few million Vietnamese dong, the combined value of all purchases may exceed the regulatory threshold.

Under the current regulations, if a business purchases goods or services multiple times from the same seller on the same day, the total value of those transactions must be aggregated to determine whether non-cash payment is required. This means businesses are not permitted to split transactions into smaller amounts solely to avoid the non-cash payment requirement.

For example, a company purchases office supplies three times in a single day, with each purchase valued at VND 2 million. Although each invoice is below the VND 5 million threshold, the combined transaction value for that day reaches VND 6 million. In this case, the company must make the payment using a non-cash payment method in accordance with the regulations for the expense to qualify as deductible for corporate income tax purposes.

Therefore, the accounting department should monitor the total daily transaction value with each supplier to ensure that the appropriate payment method is selected, thereby avoiding adjustments during the tax finalization process.

Purchases Made by Employees on Behalf of the Business May Still Qualify as Deductible Expenses if All Requirements Are Met

In many situations, a business does not carry out a transaction directly but instead authorizes an employee to purchase goods or services for its production or business activities.

This is a common practice, particularly when purchasing materials, equipment, or handling urgent business-related expenses. Under the regulations, these expenditures may still qualify as deductible expenses, provided that all statutory requirements are fully satisfied. The key requirement is that the transaction must be conducted for the legitimate business purposes of the company and must be supported by complete documentation, including valid invoices and payment records that comply with the applicable regulations.

For example, a company assigns an employee to purchase a printer valued at VND 8 million for office use. If the purchase follows the company’s internal procedures, a valid invoice is issued, and the payment complies with the applicable regulations, the expense remains eligible to be recognized as a deductible expense.

To minimize potential risks, businesses should establish clear internal procedures or written authorizations whenever employees are assigned to make purchases on behalf of the company.

Expenses May Still Be Recognized Before Payment Is Made

In practice, not every business expense is paid immediately when it is incurred. Many companies purchase goods or services on credit, recognize the payable in their accounting records, and make payment later in accordance with the agreed payment terms.

Under the current regulations, if payment has not yet been made at the time the expense is recorded, the expense may still be recognized as deductible. However, once payment becomes due, the business must ensure that the payment method complies with the applicable requirements based on the transaction value.

For example, a company records a service expense of VND 12 million in January but does not settle the payment until February. If the payment is ultimately made through a compliant non-cash payment method, the expense continues to satisfy the conditions for deductibility.

Conversely, if the company makes a cash payment in a situation where non-cash payment is legally required, it must declare an adjustment to reduce the expense that had previously been recognized. This is an issue that many businesses overlook during the tax finalization process, often leading to accounting adjustments after a tax inspection or audit.

Notable Deductible Expenses from 2026

In addition to the general eligibility requirements, the new regulations also provide greater clarity on several categories of expenses that may be treated as deductible when determining taxable income. A clear understanding of these expense categories enables businesses to strengthen financial management while making full use of the tax incentives and policies permitted under the law.

Research and Development (R&D) Expenses

Expenses incurred for research and development (R&D) activities are deductible, provided that they satisfy all applicable legal requirements. This policy is designed to encourage businesses to invest in technological innovation, improve products, enhance their competitive edge, and support sustainable long-term growth. Expenditures related to research, testing, or the development of new products may be recognized as deductible expenses, as long as they are supported by complete and valid documentation.

Vocational Training Expenses

Expenses incurred for vocational training provided to employees are also deductible when they comply with the applicable regulations. Investing in employee training not only improves professional knowledge and technical skills but also contributes to higher productivity and better overall business performance. For this reason, the law allows businesses to recognize these expenditures as deductible expenses, provided they can substantiate them with adequate supporting documentation.

Sponsorships for Technology Development and Innovation

Sponsorships made to support technology development or innovation initiatives are likewise eligible for deduction, provided that all statutory conditions are met. This policy encourages businesses to participate in research, technology transfer, and innovation activities, thereby contributing to long-term economic development and technological advancement.

Expenses Related to Science, Technology, and Digital Transformation

As digital transformation continues to reshape the business environment, expenditures supporting science, technology, and digital transformation have also become an area of focus under the law. Investments made to modernize technology, upgrade systems, implement digital solutions, or carry out scientific and technological activities may qualify as deductible expenses, provided they comply with the applicable legal requirements.

This policy is intended to help businesses strengthen their competitiveness while accelerating their adaptation to the rapidly evolving digital economy.

Losses Caused by Natural Disasters, Epidemics, or Force Majeure Events That Have Not Been Compensated

During the course of business operations, companies may suffer losses resulting from natural disasters, epidemics, fires, or other force majeure events. The portion of such losses that has not been compensated by insurance providers or other organizations or individuals may be recognized as deductible expenses, provided that the required supporting documentation is maintained in accordance with the regulations. This provision helps ease the financial burden on businesses facing unexpected and unavoidable risks.

Certain Expenses Incurred Before Corresponding Revenue Is Generated

In addition to expenses directly associated with revenue earned during the tax period, the law also allows businesses to recognize certain expenses even though they do not yet correspond to revenue generated in the same period. This reflects the practical nature of business operations, as many expenditures must be incurred in advance to support future revenue-generating activities.

Conclusion

Deductible expenses for corporate income tax calculation in 2026 are an important area that every business should proactively keep up to date with in order to ensure full compliance in accounting and tax reporting. A thorough understanding of the applicable conditions, key considerations, and categories of deductible expenses will help businesses minimize tax risks during tax finalization while safeguarding their legitimate tax benefits under the law.

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