Quick answer: Salary expense is CIT-deductible when three conditions are met together: actual payment to employees, complete documentation (labor contracts, payroll sheets, payment vouchers), and fulfillment of personal income tax withholding and filing duties. A missing link anywhere can get the salary expense disallowed.
Applicable legal bases
The instruments below are in force as of the writing date (20/10/2026) and directly govern this article:
- Corporate Income Tax Law 67/2025/QH15 (effective 01/10/2025) — deductible salary principles.
- Personal Income Tax Law 109/2025/QH15 (passed 10/12/2025; effective 01/7/2026, replacing Law 04/2007/QH12) — employment income; withholding duties of payers.
- Law on Tax Administration 108/2025/QH15 (effective 01/7/2026) — withholding, filing and payment on behalf.
- Decree 125/2020/ND-CP — administrative penalties for tax and invoice violations.
In-depth analysis
Payroll is the largest expense of most FDI enterprises and simultaneously the most disallowed item in tax audits — not because of fraud, but because the documentation chain breaks at seemingly minor links. Cash salaries without recipient signatures, Tet bonuses recorded generically without a decision, allowances absent from contracts or collective agreements — each gap is a disallowed amount.
The second link is the attached PIT duty: the salary-paying enterprise is the PIT withholder before paying employees. Failure to withhold, or wrong withholding, brings not only PIT penalties but also undermines the validity of the salary expense itself for CIT. The two taxes lock together through the same payment dossier.
For foreign experts — the FDI-specific equation — there is an additional double-tax-treaty layer. Experts resident in Vietnam bear PIT on worldwide income; non-residents only on Vietnam-sourced income. Misjudging residence status leads to wrong withholding rates, and the related salary expense may be questioned. Each treaty Vietnam has signed carries its own employment-income article — check the specific treaty, never apply one template.
The standard payroll dossier
- Labor contracts: stating salary levels, allowances and extras; every payment must be grounded in the contract, the collective agreement or company regulations.
- Monthly payroll sheets: detailed per person and per item; employee signatures or bank transfer vouchers.
- Payment vouchers: bank transfer orders or cash vouchers with signatures; note current cashless-payment conditions for related input-VAT credit.
- PIT withholding vouchers: monthly/quarterly PIT withholding returns, tax payment vouchers; annual PIT finalization and withholding certificates issued to employees.
- Bonus and allowance decisions: every non-base-salary item (bonuses, holiday pay, allowances) needs a written decision or regulation.
Common risks and prevention
- Off-book salaries: extra cash outside the payroll. Undocumented payments are non-deductible and create PIT exposure.
- Bonuses without decisions: Tet bonuses by “custom” without paperwork. Issue a bonus decision before payment, even for customary amounts.
- Wrong withholding for foreign experts: applying resident rates to non-residents or vice versa. Determine each individual’s residence status under the rules and the relevant treaty.
- Ungrounded allowances: housing or travel allowances actually paid but absent from contracts. Add every allowance to the contract or an appendix.
Frequently asked questions
1. Is the 13th-month salary deductible?
Yes, if provided in the labor contract, collective agreement or company regulations, supported by a payment decision, with PIT withheld. No paperwork means disallowance.
2. How is tax withheld for a 2-month foreign expert?
It depends on residence status and the tax treaty with the expert’s home country. Non-residents are typically withheld at the rate for non-resident employment income — check current rules and the specific treaty.
3. Are cash salary payments deductible?
Yes with complete vouchers (payroll sheets, signed cash vouchers) and PIT withheld. Cashless payment is nonetheless encouraged and conditions some related credits.
4. Are employer social and health insurance contributions deductible?
Mandatory insurance at statutory rates is deductible. Above-statutory or voluntary coverage must be tested against current rules.
Key takeaway for investors
Build a closed payroll documentation chain: contracts covering every item, per-person payroll detail, traceable payment vouchers, full PIT withholding, and written decisions for everything beyond base salary. Salary expense stands only when no link in the chain breaks — and the cheapest link to reinforce is one written decision.
This article has been quality-reviewed by the FLAW AI Legal Council This content is legal reference only and does not replace counsel for a specific case.