Many accountants still carry a dead number in their heads: the 15% cap on entertainment and advertising spend. That number was abolished in 2015, but abolishing the cap does not mean any amount is deductible — control has shifted from a percentage to invoices, documents and business purpose. This article clarifies the current state of client entertainment and gifts, and the tax consequences of giving gifts without issuing invoices.
The current limit: the percentage cap is gone, document conditions rule
The 15% cap on total deductible expenses once applied to the group of advertising, marketing, promotion, brokerage commission, conference, reception and ceremonial expenses was abolished by Law 71/2014/QH13 from 1 January 2015. Since then, under the deductible-expense conditions of the Law on Corporate Income Tax 67/2025/QH15, client entertainment and gifts are fully deductible when three conditions are met: actually incurred; related to production and business activities; and supported by full lawful invoices and documents plus non-cash payment evidence where required. In other words, there is no longer a percentage answer to how much entertainment is deductible — the limit today is document quality and the business rationality of the spend.
The commonly confused point is the employee welfare cap: welfare-nature spending paid directly to employees (holidays, treatment support, retraining and the like) remains capped at one month of actual average salary in the year. That cap applies to the enterprise’s own employees, not to external client entertainment and gifts. Accountants who apply the welfare cap to client entertainment wrongly cut their own deductible expenses; conversely, routing employee gifts into the entertainment group to dodge the welfare cap is a practice inspectors strip immediately when reconciling recipient lists.
Client gifts and the no-invoice trap
Goods given as gifts to clients must be invoiced like sold goods under the invoice and VAT rules of the Law on Value Added Tax 48/2024/QH15: the invoice carries the same particulars as a sales invoice, and the taxable price is the selling price of the same or equivalent goods at the time of gifting — except goods used for promotion lawfully conducted under commercial law, which bear a taxable price of zero. The cost of purchased gifts enters deductible expenses with valid input invoices and proof of business purpose such as client recipient lists and customer care programmes. An enterprise gifting its own products must also invoice the gifted goods like sales.
When gifts have been given without invoices, three layers of consequences stack up. First, the tax authority imposes output revenue and VAT on the gifted goods at the same-kind selling price, plus under-declaration penalties and late-payment interest. Second, the gift value risks removal from deductible expenses if the whole document chain is missing, turning a legitimate customer care cost into an undocumented expense. Third, if gifting recurs systematically, the conduct may be recharacterised from under-declaration to tax evasion where intent is proven. The correct remedy is issuing supplementary invoices for goods already gifted as soon as discovered, adjusting VAT in the current period and accepting the late interest on the adjustment — self-correction is always cheaper than being found by inspection.
Conclusion and recommendations
The current answer for entertainment and gifts is: no percentage cap, but deduction follows documents. Enterprises should build the entertainment and gifting process with three things ready — full invoices, recipient lists tied to business purpose, and output invoices for gifted goods — instead of struggling to compute a percentage against a cap that has not existed since 2015.
Frequently asked questions
1. Is there a cap on entertainment expenses?
There is currently no percentage cap on client entertainment: the 15% cap on total deductible expenses for the advertising, marketing and reception group was abolished from 1 January 2015 by Law 71/2014/QH13. Entertainment is now fully deductible if actually incurred, related to production and business activities, and supported by full lawful invoices and documents with prescribed payment evidence. The one-month average salary cap people often mention applies only to welfare spending paid directly to the enterprise’s own employees, not to client entertainment and gifts — confusing the two caps is a very common accounting error.
2. Which invoices are valid?
For entertainment, a valid invoice is a VAT e-invoice of the restaurant, hotel or catering provider, showing the buying enterprise’s correct name and tax code and the specific service content, plus non-cash payment evidence for invoices within the mandatory threshold prescribed by period. Invalid items include: invoices naming an individual or leaving the buyer blank, invoices of businesses that have fled their registered address, handwritten receipts, a restaurant’s bill slip that is not an invoice, and scattered goods invoices that cannot prove a real entertainment event. The prescribed purchase list in lieu of an invoice applies only to specific cases of goods bought from non-business individuals — catering for client entertainment is not in that group.
3. Must client gifts be invoiced?
Yes. Goods given as gifts to clients must be issued VAT e-invoices like sold goods under the Law on Value Added Tax 48/2024/QH15, with the same particulars as an ordinary sales invoice and a taxable price equal to the selling price of the same or equivalent goods at the time of gifting — except promotional goods lawfully conducted under commercial law, which bear a zero taxable price. The duty applies both to purchased gifts and to the enterprise’s own products given away. Not invoicing gifted goods leads to imposed output VAT with penalties and late interest when discovered.
4. If disallowed, how are the books handled?
When the tax authority disallows an expense, the accounting books are not rewritten — the spend stays in the books as the enterprise’s real cost; the handling happens on the finalisation return: add the disallowed amount back to taxable income through the upward adjustment line, supported by the authority’s minutes and decision. If the disallowance is determined after that year’s finalisation was filed, the enterprise files a supplementary adjustment for the corresponding year and pays the additional tax with late-payment interest. In the financial statements, reassessed tax and fines are accounted under the current accounting regime — fines are non-deductible for tax — with disclosure if material; never delete the original expense from the books, as that breaks document continuity and creates bigger risk at the next inspection.
This article has been quality-reviewed by the FLAW AI Legal Council