ENTERPRISES MAY RECORD EXPENSES AND MAKE VAT DEDUCTION FOR PURCHASES PAID BY INDIVIDUALS’ CREDIT CARDS

According to Official Letter No. 62652/CTHN-TTHT dated 25/08/2023 responding to an enterprise's dispatch on tax policy when paying by personal credit card ("Official Letter 62652"), the Hanoi City Tax Department instructs that in case the enterprise authorizes an individual who is an employee of the enterprise to pay for the purchase of assets used for production and business activities of the enterprise with a value of twenty (20) million VND or more (price including VAT) to the seller with that individual's credit card, then the enterprise refunds the money to the individual employee through the form of transfer from the enterprise's account (account registered with the tax authority) to that individual's account,  the enterprise is declared,  withholding input value-added tax ("VAT") and being included in deductible expenses when calculating corporate income tax ("CIT").

Thus, it can be understood that enterprises will be recognized expenses and VAT deductions for expenses of the business but paid by the individual's credit card if the following conditions are met:

1. This form of payment is specified in financial management regulations or corporate governance regulations;
2. Such expenditures have sufficient documents and documents proving assets used for production and business activities of the enterprise;
3. Having an invoice for the purchase of goods and services bearing the name and tax identification number of the enterprise;
4. Have documents related to the authorization of the business for the individual to pay with the seller and pay back with the business; credit statement documents from the individual's credit card to the seller, documents of money transfer from the bank account of the business to the individual.

Official Letter 62652 has great significance, creating a new precedent and new mechanism for businesses to apply when facing situations where they are forced to deploy purchase and spending transactions without being able or in time to apply the form of payment by their accounts. The recognition of expenses in the form of personal credit cards as expenses for CIT deduction still ensures the substance and suitability of the expenditure in accordance with current laws.