Before the company exists, the project is already spending money: market surveys, lawyers drafting the investment dossier, office deposits, the founding team’s travel. Once the company is established, the investor naturally wants all of it “inside” the company — expensed, tax-deductible and VAT-creditable. The law does not prohibit this, but it imposes three conditions that cannot be repaired if missed at the start: in whose name the documents are issued, whether the company accepts to bear the cost, and whether the transfer file is complete.
Which costs may be brought into the company?
In practice, pre-establishment costs fall into three groups. Group one — entity and project formation costs: registration fees, legal fees for the Investment Registration Certificate and enterprise registration dossiers, site surveys, initial design. This is the classic group the company bears when the investor so decides. Group two — operating preparation costs: office lease deposits, initial recruitment, account opening, labour registration; if incurred before certification but directly serving to bring the company into operation, they follow the same logic. Group three — the founders’ personal costs: travel, accommodation and entertaining not tied to a specific project file. As a rule this group cannot be transferred into company expenses, however willing the investor, because it fails the test of serving the enterprise’s production and business activities and lacks documentation in the legal entity’s name.
Conditions for recognition: an acceptance decision plus a transfer file
Costs incurred while the company did not exist do not automatically become company costs. The correct legal mechanism: the investor/founder pays first in a personal or founding-organisation capacity; after establishment, the company’s competent body (owner, members’ council) issues a decision accepting to pay and bear the pre-establishment costs serving the project, with an itemised schedule, original documents and a cost transfer minute from the founder to the company. This file is the central evidence when the auditor audits the first-year financial statements and when the tax authority finalises: without it, the expenditure is treated as the investor’s personal cost, not the enterprise’s. Where the founder is a foreign organisation, add a written agreement between the founding organisation and the company on the cost transfer, specifying currency, conversion rate and reimbursement timing.
Accounting and allocation: do not expense everything in one period
When the recognition conditions are met, pre-establishment costs are accumulated in prepaid expenses (account 242 under the Circular 99/2025/TT-BTC regime) and allocated gradually to expenses as the company commences operations, instead of being dumped into the first month — dumping distorts first-year results and invites tax authority challenge. For CIT, under the deductible expense rules (Circular 78/2014/TT-BTC as amended by Circular 96/2015/TT-BTC), enterprise formation costs are deductible but must be allocated over a maximum of three years from the start of production and business operations. The chief accountant should set a single allocation schedule serving both accounting and tax (usually within the three-year cap, matched to when the project begins generating revenue) and apply it consistently; any allocation difference between accounting and tax, if it arises, must be tracked separately for finalisation explanations.
What about invoices in the founder’s personal name?
This is the biggest bottleneck. Input VAT credit requires lawful invoices bearing the correct name, address and tax code of the purchaser being the enterprise (the credit principles in Article 14 of Circular 219/2013/TT-BTC, as amended). Restaurant, hotel and airline invoices in the founder’s personal name — even if genuinely spent on the project — as a rule do not qualify for the company’s VAT credit, and are weak on CIT deductibility as well. Practical handling, in decreasing order of safety: (i) from the preparation stage, have suppliers invoice the founding organisation (the parent company) — an entity with legal personality and a clear file — then transfer the costs with input VAT under the investment refund mechanism if eligible; (ii) for services bought in Vietnam after certification, invoice the company directly; (iii) for small personal-name items that truly could not be avoided: build a full explanation file, recognise the cost in accounting if the company accepts it, but proactively claim no VAT credit and assess the CIT disallowance risk. What must be avoided absolutely is “borrowing” another entity’s invoices to regularise the costs — that is an invoice offence with its own sanctions, far heavier than losing a credit.
VAT credit/refund for the investment phase
For a new investment project, input VAT arising during the investment phase (before revenue) is not lost: the enterprise declares and carries it forward, and where the project qualifies under tax administration law and Circular 219/2013/TT-BTC, may be considered for a refund for the investment phase. The precondition remains lawful documentation in the correct entity’s name and a complete project file. Documentation discipline must therefore be established from the project’s very first day — before the company even exists — through a spending guide for the founding team: what to spend, in whose name invoices are issued, and where originals are kept.
Frequently asked questions
Can market survey and pre-incorporation legal fees be expensed by the company?
Yes, if three conditions are met: the cost directly serves the project’s formation; documentation is lawful; and the company issues a decision accepting to bear the cost with a transfer minute from the founder after establishment. The costs accumulate in prepaid expenses and are allocated gradually; for CIT the allocation is capped at three years from the start of operations (Circular 78/2014/TT-BTC as amended by Circular 96/2015/TT-BTC).
How are invoices in the founder’s personal name handled?
As a rule they fail the conditions for the company’s VAT credit (Article 14 of Circular 219/2013/TT-BTC) and are weak for deductibility. The root solution is prevention: invoice the founding organisation or, once certified, the company directly, with a written cost-transfer mechanism. For items already in a personal name: document fully, claim no VAT credit, and never use borrowed invoices to regularise them.
Over how many years are pre-establishment costs allocated?
Accounting: into prepaid expenses (account 242, Circular 99/2025/TT-BTC regime) and allocated gradually once operating. CIT: formation costs are allocated into deductible expenses over a maximum of three years from the start of production and business. Use one consistent schedule for both purposes.
Can VAT on pre-establishment costs be credited?
Only with lawful invoices in the correct entity’s name (founding organisation or the company) and a qualifying investment project; investment-phase input VAT is credited cumulatively and may be refunded under the investment project refund mechanism (Circular 219/2013/TT-BTC and tax administration law). Invoices in the founder’s personal name do not qualify.
This article has been quality-reviewed by the FLAW AI Legal Council