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Circular 20/2026/TT-BTC makes it clear that while legitimate costs are real, they can still be disallowed if enterprises cannot prove the economic substance of transactions. The focus shifts from simply having expenses to demonstrating that the spending is properly supported and tied to business activity.
A common problem for businesses is the “paradox” of having expenses that are incurred but rejected during tax finalization. The issue is not necessarily that the expenses were misused, but that the company lacks sufficient evidence to substantiate the transaction’s substance.
For instance, a trading company spends 200 million dong on marketing and has invoices, but cannot provide advertising data, campaign reports, or evidence that the work was actually carried out. During a tax authority review, the cost may be treated as lacking substantiation and fully disallowed. By contrast, a company with the same level of marketing expense can have it accepted if it has clear contracts, performance reports, advertising data, and complete work-related exchanges.
To avoid the situation of “real costs but disallowed,” enterprises are advised to standardize documentation from the outset. A deductible expense typically requires more than an invoice; it should be supported by contracts, quotes, acceptance minutes, and related evidence showing the transaction was implemented as agreed.
For example, for a consulting service cost of 100 million dong, if the company only has an invoice, the risk remains high. If the invoice is accompanied by a service proposal, service content, email exchanges, and performance reports, the expense becomes easier to defend when explaining to tax authorities.
Cash flow management has also become a key filtering measure. New management trends indicate that cash payments—especially where there are signs of fragmentation or inconsistent records—are more likely to be questioned. As a result, many companies have introduced internal rules favoring bank payments even for smaller-value costs, to improve transparency and controllability.
For example, a materials purchase of 30 million dong paid by bank transfer, supported by contracts and invoices, reduces risk. If the same total amount is paid in cash in multiple smaller installments, even though the total value is unchanged, it may raise concerns about transparency. In addition, cash payments of 5 million dong or more can be difficult to explain to tax authorities.
Wages and employee benefits are recurring, large cost categories and are relatively easy to misreport if the company does not have clear policies. Many firms pay large year-end bonuses without predefined policies, which can lead to disallowance. Conversely, if a company establishes transparent salary and bonus policies, issues them internally, and applies them consistently, these costs are more likely to be accepted.
For example, a Tet bonus equivalent to two months’ salary can be deductible if it is included in the company’s policy and supported by complete payment documentation.
Depreciation also requires tight management. A company that purchases machinery for production with full records and proper depreciation treatment is generally accepted. However, if the asset is registered under the company’s name but used for personal purposes—such as a car used privately by executives without business-related justification—the related depreciation expense may be disallowed. This highlights that “business use” matters as much as, or more than, paperwork.
Interest expenses are closely controlled, particularly in the context of anti-transfer pricing. A loan supported by a clear contract, an interest rate aligned with market rates, and used for production and business activities is more likely to be accepted. But if a company borrows from individuals at unusually high rates or cannot prove the purpose, deductible interest exceeding a reasonable amount may be disallowed.
Another common mistake is pushing costs toward year-end to reduce taxes. This approach can distort financial statements and trigger questions from tax authorities. Instead, costs should be recognized and allocated according to actual accruals, reflecting business activity in each period. When cost flows align with operational activity, the business has a stronger basis to justify the expenses.
Overall, Circular 20/2026/TT-BTC is not described as imposing overly heavy rules, but it requires enterprises to be transparent and consistent in operations. Tax optimization is no longer about adjusting year-end figures; it is about governance throughout the transaction process. Companies that adapt early can reduce the risk of tax reassessment while maximizing benefits from legitimate costs.
In other words, the “game” has changed: it is not simply spending more to reduce taxes, but spending correctly, demonstrably, and controllably to support sustainable optimization.
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