Not all business expenses are subject to personal income tax. According to the law, business travel expenses are only included in personal income tax (PIT) income when they exceed the prescribed amount or lack valid documents and vouchers. Understanding this regulation not only helps businesses comply with the law but also serves as a foundation for optimizing cost management and protecting the rights of employees.
This article will answer the question in detail. Are business expenses subject to personal income tax?, based on the latest legal bases. At the same time, the article also points out the challenges in manual management and proposes effective automation solutions from Bizzi.
Are business expenses subject to personal income tax? Legal basis
Direct answer: NO, if the business trip expenses are paid reasonably, for the right purpose and within the prescribed limits. Otherwise, HAVE, for excess expenditure and without valid documents.
The core legal basis for this provision is stated clearly in Section 4, Clause 2, Article 2 of Circular 111/2013/TT-BTC issued by the Ministry of Finance. Accordingly, taxable income does not include:
“The lump sum for office supplies, business expenses, telephone, uniforms, etc. is higher than the current State regulations. The lump sum is not included in taxable income in the following cases: […] Article 4) For employees working in business organizations and representative offices: the lump sum is applied in accordance with the level of determining taxable income for corporate income tax according to the documents guiding the implementation of the Law on Corporate Income Tax.”
This means that if a business trip expense is considered a reasonable expense, deductible when calculating Corporate Income Tax (CIT), it will also be exempt from personal income tax for employees. The challenge for businesses is how to ensure that all expenses comply with this regulation in actual operations.
Business trip expenses are exempt from personal income tax.
For a business trip expense to be excluded from personal income tax, the enterprise must ensure that the expense falls into one of the following cases and must have full supporting documents:
- Actual business expenses with valid invoices and documents: Expenses such as airfare, train tickets, hotel room rentals, etc. will be exempt from tax if there are full legal documents. However, manually collecting and checking each invoice is a burden for the accounting department, which can easily lead to errors.
- Expenditure allowance according to internal regulations: Enterprises can apply the form of lump sum payment to employees. If the lump sum is clearly stated in the Internal spending rules and in accordance with corporate income tax regulations, this expense will be exempt from personal income tax. Developing a policy is the first step, but to ensure compliance, businesses need a tool that automatically applies these rules to every transaction.
- Travel and housing allowances for foreign workers: For foreign workers coming to work in Vietnam or Vietnamese people going on business trips abroad, round-trip airfare and house rent paid on their behalf will not be included in taxable income according to regulations.
Cases where business trip expenses are subject to personal income tax
The Tax Authority will consider part or all of the business trip expenses as taxable income of the employee if the following violations occur. These are the risks that manual expense management processes often encounter:
- Expenditure exceeding the prescribed limit: This is the most common mistake. If a business pays business expenses higher than the level specified in the financial regulations without valid invoices or documents for the difference, then This excess will be included in taxable income. of workers.
- Expenses that are not in accordance with regulations or do not serve production and business: Expenses that are personal benefits will not be considered eligible expenses. Manually controlling the purpose of spending is difficult and easy to miss.
- Missing valid invoices and documents: Any expense that is not properly documented is at risk of being excluded from deductible expenses and subject to tax. To ensure eligibility, businesses need to understand the regulations on valid electronic invoice and have a reliable storage and reconciliation system.
To avoid these risks, process automation and standardization are essential. Experience Bizzi Travel & Expense solution to digitize processes and ensure 100% compliance.
Documents and certificates required for valid business expenses
Manually collecting and storing all of this paperwork for each trip is a huge administrative burden. A digital solution like Bizzi will help centralize all documents on a single platform, making them easily accessible when settlement is needed. A complete set of payment documents includes:
- Decision to send on business trip: Official document from management, stating trip information.
- Travel documents: With confirmation from relevant parties.
- Invoices, expense documents: Airline tickets, hotel bills, receipts… All must be legal documents.
- Detailed list (if any): List the small expenses that are allowed to be paid according to company regulations.
Impact of business trip expenses on deductible expenses when calculating corporate income tax
As mentioned, the Are business expenses subject to personal income tax? closely related to corporate income tax. According to Circular 96/2015/TT-BTCA business trip expense is considered a deductible expense when calculating corporate income tax if it meets three conditions: actually incurred, serves production and business, and has sufficient legal documents.
Therefore, correct and complete accounting documents not only help to exempt personal income tax but also directly optimize the enterprise's corporate income tax obligations. An integrated cost management system will ensure consistency and accuracy for both of these goals.
Practical example of how to calculate personal income tax with business expenses
Example 1: Enterprise applies the form of lump sum expenditure
Company A has a financial regulation that stipulates a fixed accommodation allowance of VND 500,000/day. Employee B is sent on a 3-day business trip and receives VND 1,500,000.
→ Result: This entire 1,500,000 VND exempt from personal income tax because the spending is according to the prescribed level.
If company A spends an additional 200,000 VND/day beyond the fixed amount without a valid reason or document, the excess of 600,000 VND (200,000 x 3 days) will be included in taxable income of employee B.
Example 2: Business pays according to actual costs
Employee C went on a business trip and had valid invoices for the following expenses: Airfare 2,000,000 VND, hotel 1,500,000 VND.
→ Result: The entire 3,500,000 VND was paid by the company and not including personal income tax of employee C because this is the actual cost of serving the work and has valid documents.
Optimize business expense management to ensure tax compliance
To answer the question once and for all Is business trip allowance subject to personal income tax?, businesses need a tight management system. However, operating this system manually is often inefficient and costly. Applying automation technology is the key to solving this problem:
- Develop clear working expense regulations: The digital platform helps businesses set up spending rules and policies, and the system will automatically check and warn of inappropriate expenses.
- Ensure complete and valid documents: Employees can instantly capture and upload invoices via the mobile app, Bizzi's OCR technology automatically extracts data, minimizing manual data entry and lost documents.
- Transparent control and monitoring: All proposals and approvals are recorded on the system, providing managers with a real-time overview of spending, helping to make quick and accurate decisions.
Digital solution for travel expense process with Bizzi Travel & Expense
Bizzi Travel & Expense is a comprehensive travel and expense management platform designed to solve the challenges businesses face. By digitizing 100% processes, our solution automates, increases transparency and completely eliminates tax compliance risks.
- Automate proposals and approvals: Create and approve work requests online, quickly rotate according to the organizational chart.
- Real-time budget control: Track actual costs against approved budget for each trip.
- Automatic invoice reconciliation: OCR technology automatically extracts information from invoices, checks validity and synchronizes into accounting software.
- Set up flexible spending policies: Set cost limits by level, department, and region to ensure compliance with internal regulations.
Frequently Asked Questions (FAQ) about travel expenses and personal income tax
1. What is the maximum amount of business trip expenses that is not subject to tax?
Current law does not stipulate a common maximum level of expenditure. This level is established by the enterprise itself and regulated in the financial regulations, as long as it is reasonable and serves production and business activities to be counted as deductible expenses when calculating corporate income tax.
2. If an employee travels on business by personal vehicle, how is payment made?
In this case, the cost will be included in the deductible expenses based on the actual distance and fuel consumption rate as prescribed, along with expenses with valid documents. This expense is also not subject to personal income tax if there are sufficient supporting documents.
3. Are food bills during business trips exempt from personal income tax?
If the business pays for meals based on actual invoices, this amount is still exempt from personal income tax if it is stipulated in the regulations, has a valid invoice and is associated with the business trip. However, to simplify document management, many businesses have switched to lump sum spending and management using software such as Bizzi.
Conclude
In short, the answer to Is business trip allowance subject to personal income tax? depends entirely on the business's compliance with the law. If done properly, business travel expenses are a valid expense and are not included in the employee's taxable income.
Building clear regulations and applying technology solutions such as Bizzi Travel & Expense will help businesses turn cost management from a burden into a competitive advantage, ensuring transparency, efficiency and avoiding tax risks.
