Can charitable donations be included as expenses? Checklist to avoid being disallowed during final accounting.

In practice, during tax settlement, charity donation costs This is one of the easiest types of donations to be disqualified, even if the business spends the money for good and completely transparent purposes. The reason isn't about "right or wrong charity," but rather... the nature of the expenditure, the recipient of the funding, and the accompanying documentation..

This article will help you answer frequently asked questions in detail: Can charitable donations be included in expenses?, Are charitable donations deductible expenses?, and cost accounting support charity How to avoid being disqualified during corporate income tax settlement.

Are charitable donations deductible expenses when calculating corporate income tax?

The short answer is: CONDITIONALLY.

Not all "charitable" expenses are deductible. According to tax regulations, Only "funding" grants that are directed to the correct target group, the correct recipient, and have complete documentation as per the template will be considered. These expenses are only considered deductible when settling corporate income tax.

Conversely, the following amounts:

• Spontaneous support
• Transfer the funds to the individual who made the request.
• There is no properly formatted sponsorship confirmation document.

very easy to get total costEven if the business has complete bank statements.

Key insight: Taxes without considering "social significance", which we consider validity of the document.

What are the differences between "charity," "support," "sponsorship," "CSR," and "media sponsorship"?

This is the most common point of confusion that leads to the expense being disqualified.

In terms of accounting and taxation, Internal naming conventions do not determine eligibility for deductions., but nature of the transaction That's the core element.

1. “Financing” – a concept of tax interest

"Sponsorship" is a concept that tax law recognizes, provided that:

• Sponsorship the correct target group is allowed.
• Sponsorship through the designated receiving point..
• Have Confirmation of funding in accordance with the prescribed form..

Only funding new potential to be included Deductible expenses when calculating corporate income tax..

2. "Support," "charity" – emotional concepts

Words like "support" and "charity" are social in nature. Not a legal term in taxation.
If it cannot be proven that this is eligible sponsorshipThat expenditure is very easy to disallow.

3. CSR (Corporate Social Responsibility)

CSR can:

• To be funding → Treat as a funding expense.
• Or marketing – branding → Treat as advertising/service expenses.

The classification depends on:

• Is there or isn't there? media rights.
• Is there a contract or service acceptance certificate?

4. Media Sponsorship

Media sponsorship not charity.
If any:

• Service contract.
• Communication obligations.
• Acceptance report.

This expenditure Treat it as advertising service fees., not for charity.

Key insight: Businesses should Label the expense item right from the moment the payment request is made., don't wait until the final settlement to "rename" it.

Which types of "sponsorship" are deductible expenses when calculating corporate income tax?

According to current regulations (Circular 96/2015/TT-BTC, Circular 78/2014/TT-BTC and related documents), Only grants specifically for the following target groups are eligible for deduction.:

• Funding for education
  • Schools, public or licensed educational institutions.

• Funding for healthcare
  • Hospitals and licensed medical facilities.

• Funding for disaster relief
  • Through authorized agencies and organizations.

• Funding for the construction of charitable houses, solidarity houses, and houses for the poor.
  • According to the program authorized by the State.

• Funding for scientific research, policy beneficiaries, and areas facing extreme difficulties.
  • According to the program approved by the State agency.

In addition to the groups above, Any other form of "funding" carries the risk of being rejected..

For funding to be deductible, is it mandatory for it to go through an organization that is responsible for fundraising?

Yes – and this is the most common reason why funding expenses are disallowed when filing taxes.

From the tax authorities' perspective, businesses Do not distribute money without permission. they too Do not transfer money. The following entities are eligible to include the grant as a deductible expense:

• Individual He stepped forward to make the appeal.
• Volunteer group It does not have legal personality.
• This unit does not have the function of receiving donations. as prescribed by law.

Even if the expenditure is real and has social significance, if wrong receiving point, the tax authorities still have grounds to total cost.

Eligible funding recipients typically include:

• Schools, hospitalsEducational and medical facilities are permitted to operate.
• Funds and organizations are entities responsible for mobilizing and receiving donations. as prescribed.
• Agencies and units authorized by the State to receive funding. according to specific programs (natural disasters, social welfare, policies, etc.).

Quick checklist for accountants

• Look Recipient's name on the statement: Have legal personality Are not?
• That unit has The function of receiving funding in a targeted manner. Are not?

If the answer is "not sure", then that expenditure currently at very high risk. and you need to stop to check the records before paying.

What documents are required to ensure the grant is not rejected during the final settlement process?

This is The most important part for the accounting and finance department., because in fact, The majority of rejected grants were not due to "misappropriation of funds," but rather to "missing or incorrect documentation.".

Tax authority without assessing social significance, which evaluate legality and probability of the transactionTherefore, businesses need to be fully prepared. The "three-part" set of required documents hereafter.

1. Internal funding decisions/policies

This is the document Establishing the will of the enterprise, proving that the funding:

• Okay valid approval.
• This is not an unauthorized personal expense within the company.
• Have clear objectives, in accordance with the approved funding group.

This decision is usually made by:

• The General Manager/Director signs, or
• Board of Directors (for large companies).

Minimum required content:

• Name of the funding program.
• Target audience and funding objectives.
• Value of sponsorship (money/in-kind).
• The organization receiving the grant.

Lack of internal decision-making → tax authorities can easily assess this as unplanned expenditureThe risk of being eliminated is very high.

2. Payment documents (bank transfer preferred)

Payment documents are evidence of actual cash flowThis helps the tax authorities to verify the information:

• Who's paying?
• Who is it for?
• Time of payment.

Safety principles:

• Bank transfer is preferred. through the bank.
• The recipient's name on the statement must Matches the valid receiving unit..

Cases high risk:

• Transfer to individual.
• Large cash payments.
• The bank statement only contains general information and does not clearly state the purpose of the donation.

There is a confirmation document, but Cash flow cannot be proven. → The expenditure may still be disallowed.

3. The sponsorship confirmation document must be in the prescribed format.

This is This document determines whether the grant can be included as a deductible expense..

Tax authority Handwritten confirmations, thank-you notes, and self-written confirmation letters are not accepted. If incorrect sample.

4. Required funding confirmation forms

Businesses need to use Use the correct template corresponding to each type of funding., according to the regulations of the tax authorities:

• Form 03/TNDN: Sponsorship Confirmation Memorandum education.
• Form 04/TNDN: Sponsorship Confirmation Memorandum medical.
• Form 05–07/TNDN: Applies to the other specific funding target groups (Disaster relief, charitable housing, beneficiaries of social policies, etc.).

Very important note:

• Incorrect model or using the wrong template → very easy to be eliminated,
• Even if the business has:
  • Confirm receipt in another written form,
  • Letter of thanks,
  • A self-prepared report.

During tax settlements, tax authorities often reach conclusions very quickly: "Not in the correct format as prescribed → not eligible to be included as a deductible expense."

5. What additional documents are needed for in-kind donations?

In actual settlement, In-kind donations are a category of expenditures with a higher risk of being disqualified compared to cash donations.because the tax authorities do not only check will to fund but also check flow of goods and recorded value.

Outside Sponsorship confirmation document, business It is mandatory to prove 3 factors.:
(1) real artifacts,
(2) determined value,
(3) The handover has been completed.

Specifically, The minimum required documents for the application include the following::

Purchase invoice (for items purchased externally)

The purchase invoice serves as the basis for:

• Identify value of donated items.
• Proof that the goods originate from a legitimate source.
• To assist with cost accounting and VAT processing (if applicable).

Note:

• The invoice must listed as the sponsoring company.
• The goods listed on the invoice must be clearly stated. suitable for the donated items.

Missing purchase invoices → tax authorities can easily draw conclusions The cost value cannot be determined., from there eliminate all funding.

Warehouse delivery note

A warehouse release form is a document that proves:

• The goods have out of the company warehouse.
• The time of shipment coincides with the time of financing.

The tax authorities usually check the following:

• Date of shipment ↔ Date of handover ↔ Date of funding agreement.
• Quantity and type on the delivery note ↔ purchase invoice.

No delivery note → very high risk of being rated as recorded only on paper, there is no actual flow of goods.

Record of handover of items

The handover record serves as proof:

• The company has actual delivery of physical objects for the receiving unit.
• The receiving unit has Received the correct type and quantity..

The handover record should clearly state:

• Information from both sides.
• List of artifacts.
• Quantity, condition.
• Time and place of handover.
• Signatures representing both parties.

In numerous tests, The handover record is a document that "recovers costs". when the tax authorities suspect the transaction exists only on paper.

Confirmation of funding in accordance with the prescribed form (03–07/TNDN)

This is legally binding documents, confirming that:

• Funding that meets the target group is permitted.
• The right recipients.
• Eligible to be included as a deductible expense.

Even though we have invoices, delivery notes, and handover records, but lacks the correct funding confirmation document. → expenditure It is still possible to be eliminated..

6. Is it mandatory to transfer funds via bank transfer for donations exceeding 20 million VND?

In terms of legal texts, There is no clause stating that "bank transfer is mandatory" for monetary donations.. However, In reality, tax settlement is different..

A realistic perspective from the settlement process.

• Bank transfer
  → Clear and easily verifiable cash flow.
  → Recipient's name, time, and value must be clearly stated.
  → Low risk when giving an explanation.
• Payment by cash
  → It is difficult to prove that the money has reached the correct recipient.
  → Easily suspected of being an internal expenditure or an uncontrolled expenditure.
  → It's very easy to be eliminated., especially with large sums of money.

In many inspection records, the tax authorities No debate about right or wrong according to the law., which asks the question: "How can the business demonstrate this cash flow?"

If the answer is not convincing enough → cost excluded.

In which four cases are charitable expenses disallowed when settling taxes?

In practice, during tax audits and settlements, The majority of charitable donations are disallowed not because the businesses are "bad."because Incorrect method, incorrect documentation, or incorrect transaction nature.. Below is 4 most common cases which the tax authorities usually disallow from the outset, almost without any further debate.

1. Spontaneous donations, transferring money to individuals who are soliciting donations.

This is a very common occurrence, especially during outbreaks:

• Storms, floods, and natural disasters.
• Appeals for aid were made on social media.
• A spontaneous volunteer group.

Despite the business actually spent money, but if:

• The recipient is individual.
• Volunteer group does not have legal personality.
• The function of receiving funding as required by regulations could not be demonstrated.

This expenditure almost certainly eliminated when settling

The tax authorities don't assess "social significance," but rather... validity of the recipient.

2. There is no proper sponsorship confirmation document in the prescribed format.

Many businesses:

• I have a bank statement.
• There is a thank-you letter.
• A separate written confirmation of receipt will be provided.

But There is no sponsorship confirmation record in accordance with form 03–07/TNDN. corresponding to each type of funding (education, healthcare, social welfare, etc.).

In this case, Even though the money has been spent and the recipient is the right person., expense still eliminated because:

• The tax filing format is not complete.
• There is insufficient legal basis to recognize the expense as deductible.

3. Funding is provided to the wrong recipients, for the wrong purposes, or without proof of a "recipient authorized to mobilize funds".

Laws and regulations Not all "charitable donations" are tax-deductible..

High-risk scenarios include:

• Funding for organizations and associations not on the permitted list is not allowed.
• The support was "general for the local area" but lacked a clear program definition.
• Receiving unit It has no function in mobilizing or receiving funding. for that purpose.

When the tax authorities asked, "What evidence proves that this entity has the function to receive this donation?"

If the business Unable to provide a clear answer in written legal terms. → The cost is eliminated.

4. The application only includes bank statements but lacks confirmation of funding receipt.

Bank statement Only prove cash outflow., not proven:

• Purpose of using the money.
• Are the funds being used correctly for the intended purpose of the funding?
• Does the expenditure fall within the tax-deductible target group?

Therefore, if the record only bank statement but:

• There is no written confirmation of funding.
• There were no internal funding decisions.
• There are no documents describing the program.

Cost very easy to be eliminated, even if the recipient is a legitimate organization.

In some cases, sponsorships have media rights but are mistakenly recorded as charitable donations.

For example:

• The businesses sponsoring the program include:
  • The logo appeared.
  • Media rights.
  • The right to promote the brand.
• But the record says Charitable/Social Welfare Sponsorship.

Consequences:

• Input VAT cannot be deducted (because it is considered a charitable donation).
• Simultaneously disallowed corporate income tax expenses due to the factual nature of media services, But:
  • There is no service contract.
  • There was no service acceptance.
  • There was no proper service invoice.

This is an error. incorrect transactionIt's very difficult to save them once they've reached the final settlement stage.

How to account for charitable donations

From an accounting perspective, Charitable donations are typically recorded as other expenses.because it does not directly serve normal production and business activities.

General principles

• Accounting according to the nature of the expenditure.
• Distinguish clearly:
  • Accounting entries (recording actual expenses).
  • Are these expenses deductible when settling corporate income tax?

Common accounting methods

1. Pay with money

• Record the expense:
  • Debit Other Expenses Account
  • Have a money account (cash or bank deposit)

2. Payment by goods (in kind)

• Recorded as cost of capital:
  • Debit Other Expenses Account
  • There is an inventory account.

This expenditure still recorded in accountingbut the Is it deductible when settling taxes? It depends entirely on the funding application.

Scenario-based accounting table (suggested implementation)

Businesses should have Accounting table based on 5 common scenarios To avoid confusion:

Situation	Accounting	Tax risk
Financial support	Other costs	Low if all documents are complete.
Donations in kind	Other costs based on cost of goods sold	Average to high if documentation is missing.
Funding services	Service costs	Easily misinterpreted.
Sponsors have media rights.	Marketing costs	It's wrong to mistakenly write "charity" instead of "charity".
Third-party funding	Other costs	Depends on the receiving point.

 

Is the input VAT on goods donated as a form of support deductible?

This is the point very often misunderstood.

General principles

• Social welfare and charity funding:
  • Not for use in activities subject to VAT.
  • → Input VAT is not deductible. of goods donated.

In case output VAT is generated

If the business:

• Gifting goods.
• Both the sponsor and the sponsor have the obligation to issue invoices as required by regulations.

Then you need:

• Define clearly nature of the transaction:
  • Pure charity.
  • Gift-giving, promotion, and advertising are all good options.

Each nature will have:

• The methods for handling input VAT vary.
• The obligations for issuing output VAT invoices vary.

If handled incorrectly, businesses may:

• Fit Input VAT is not deductible..
• Just got Collecting back output VAT.

Below is Detailed implementation section – from the correct accounting perspective – written in blog format., which can be inserted directly into the SEO article. The content is clearly separated to Avoid the very common confusion between "mandatory contributions" and "voluntary donations"., while simultaneously naturally transitioning to the Bizzi solution.

Is a disaster relief fund considered "charity," and is it allowed to charge fees?

This is one of the questions. They appear frequently every storm and flood season.This is also a point where many businesses misunderstand when settling their taxes.

A disaster relief fund is not entirely the same as "charity".

In legal terms, The disaster relief fund is not a typical voluntary charity..

This amount is adjusted by Decree 78/2021/ND-CP (and recent amendments and supplements), with the following characteristics:

• It has characteristics obligatory For certain categories of individuals as stipulated.
• Contribution rates, collection methods, management, and utilization. as prescribed by the State, regardless of the voluntary will of the business.
• Forms 03-07/TNDN for confirming sponsorships are not applicable for sponsorships related to education, healthcare, and social welfare.

So, The Disaster Relief Fund should not be included in the "charitable expenditure" category. when accounting for and settling taxes.

Are contributions to the Disaster Prevention Fund considered expenses?

In most cases, Contributions to the Disaster Prevention Fund are considered a financial obligation as stipulated by law.Similarly, other mandatory fees and charges.

• If the business is subject to the regulations requiring payment:
  • This expenditure included in deductible expenses when determining taxable corporate income.
• Supporting documents typically include:
  • Notice of collection or decision to collect from the competent authority.
  • Payment receipt.

Points to note:

• The logic of "voluntary funding" does not apply. to handle the Disaster Relief Fund.
• It is not necessary (and not advisable) to prepare a confirmation of funding using form 03–07/TNDN for this expenditure.

Why is it necessary to separate "mandatory contributions" and "voluntary donations"?

In practice, during the tax settlement process, many businesses:

• Combine all expenses "related to storms and floods" into a single charity expense category.
• Incorrect documentation was submitted to the Disaster Relief Fund (requesting a confirmation document for funding).
• Or conversely, using the logic of "mandatory fundraising" to justify spontaneous donations.

The consequence is:

• File mismatch in nature.
• It is easy for the tax authorities to request further explanation or disallow the expense.

So, Separating it into a distinct item within the accounting and tax process is absolutely essential..

How does Bizzi help control the cost of her charitable donations?

In reality, the biggest risk doesn't lie with the business. Is there a fee or not?, which lies in the fact The payment is correct but lacks documentation, uses the wrong form, or is inaccurate in nature.This is where Bizzi provides strong support in the cost control process.

Establish a payment approval process with checkpoints that prioritize the right target and include the right documentation.

Bizzi allows businesses to:

• Design a separate payment approval flow for each item. sponsorship, charity, CSR.
• Attach mandatory checkpoints:
  • Which expenditure category does this expense belong to?
  • Is form 03–07/TNDN required?
  • Does the receiving entity have the appropriate legal standing?

As a result, high-risk expenditures will Blocked right from the proposal stage.They didn't wait until the final settlement to discover the error.

Please remind me if you are missing documents before clicking "pay".

A very common mistake is: "Paying first and then asking for a receipt."

Bizzi helps:

• Remind the accountant and the person requesting the payment. Lack of required documentation.
• Payment will not be processed until all attachments are included:
  • Funding decision.
  • The confirmation report is in the correct format.
  • Invoice, delivery note (if donating in kind).

This helps businesses This significantly reduces the risk of paying correctly but losing the right to deduct..

Consolidate all funding documents into a single transaction set.

Instead of:

• The decision is in the email.
• The bank statement is at the bank.
• The minutes are in my personal folder.

Bizzi allows:

• Gather Decision – Statement – Confirmation record – Invoice for goods enter a single cost transaction.
• During final settlement or audit, the accountant Just extract a complete set of documents..

Generate a report with the tag "funding" for pre-final review.

Before the tax filing period, accountants can:

• Filter out all expenses tagged "donations/charities".
• Quick check:
  • Which items have sufficient documentation?
  • Which item lacks a sample form?
  • Which donation is incorrect in nature (a grant with PR but labeled as charity).

This is the step proactive defenseThis helps businesses address issues early instead of resorting to "firefighting" after tax authorities have already conducted an inspection.

Frequently Asked Questions about Charitable Funding – Donations

Can donations sent through the Vietnam Fatherland Front be deducted from the tax?

It may be deductible. If:

• The Vietnam Fatherland Front is the legitimate receiving point.
• There is a proper sponsorship confirmation document.
• The target group is correct as per regulations.

Is it deductible to transfer money to a charity group?

No. Volunteer group does not have legal personality Expenses are often disallowed, even with bank statements.

What form should be used for in-kind donations and how is it valued?

• A confirmation of funding form (Form 03–07/TNDN) is required.
• The value of physical objects is usually recorded as follows: cost price or purchase price I have a valid invoice.

Is it possible to submit form 03–07/TNDN later if it's missing?

Additional information may be required in some cases. but high risk If:

• The timing of the confirmation was inappropriate.
• The receiving unit is no longer operational or is not cooperating.

Recommendation: Right from the start..

Should "CSR with PR" expenses be accounted for as charity or marketing?

It must be accounted for as follows actual nature:

• Having media rights → marketing/service costs.
• No benefits → consider sponsoring group.

Misrepresenting the nature of an expense is a very common mistake that can result in the expense being disallowed.

Conclude

Can charitable donations be included in the expenses? The answer doesn't lie in whether the business "has good intentions or not," but rather in... The nature of the expenditure, the correct recipient, and the complete documentation as required by tax regulations.In actual settlement, many items... Can charitable donations be included in the expenses? Whether or not this happens depends on a few key factors: going to the right authorized fundraising channel, using the correct confirmation form, and demonstrating the transparency of the cash flow.

The key point that businesses need to remember is: Not every money transfer is eligible for a deduction., and Not all expenses labeled as "charity" are accepted by the tax authorities.Only grants that meet the target group, comply with the regulations in Circular 96/2015/TT-BTC, and have a complete set of required documents are eligible to be included as deductible expenses when calculating corporate income tax.

From an accounting perspective, Accounting for charitable donation expenses It's not overly complicated, but the biggest risk isn't in the accounting entry, but in... misrepresentation of the nature of the expenditure or lack of valid documentation.Properly processing an expenditure from the proposal, approval, and record-keeping stages will help businesses avoid the situation of "discovering it was disallowed at the final accounting period."

Instead of reacting passively when tax authorities conduct an audit, businesses should Proactively standardize the process for controlling charitable and sponsorship costs.Verify the receiving point, require the correct transaction form from the outset, and maintain records for each transaction. This ensures that expenditures are both socially meaningful and safe in terms of taxation, accounting, and financial reporting.

If a business regularly generates grants, donations, or CSR contributions, then applying Centralized cost and document management tools This will significantly reduce the risk of expense disallowances and give accountants and finance departments more confidence as they approach tax settlement.