Understanding Vietnam's 150% Training Tax Deduction

While Decree 80 and Decree 182 subsidies receive more attention, Vietnam's 150% corporate income tax (CIT) deduction for training expenses provides valuable savings for all companies regardless of size, industry, or training type.

This often-overlooked benefit can recover ~30% of training costs through tax savings.

The 150% CIT Deduction Explained

How It Works

Vietnam allows companies to deduct 150% of qualifying training expenses from taxable income.

Example:

• Training expenses: VND 100,000,000
• CIT deduction: VND 150,000,000 (150% of actual expense)
• Tax savings: VND 30,000,000 (at standard 20% CIT rate)
• Effective training cost: VND 70,000,000 (30% savings)

Legal Basis

Law on Corporate Income Tax (2008), amended 2013, Article 10.2:

Training expenses for employees are 150% deductible if:

1. Training relates to current business activities
2. Expenses are properly documented
3. Employees remain with company for 12+ months post-training (or company makes good-faith effort to retain)

Who Can Use This Deduction?

All Companies Qualify

Unlike Decree 80 (SME-only) or Decree 182 (high-tech only), the 150% CIT deduction is available to:

• Any company size: From 5 employees to 5,000+
• Any industry: Manufacturing, services, retail, technology, hospitality, etc.
• Any ownership structure: Vietnamese, foreign-invested, joint ventures
• Any training type: Technical, soft skills, management, language, safety

When to Use vs. Subsidies

Use 150% CIT Deduction When:

• Company too large for Decree 80 (200+ employees in manufacturing, 100+ in services)
• Not a high-tech enterprise (can't access Decree 182)
• Training expenses below VND 30M per employee (subsidy programs have high administrative cost)
• Need flexibility in training timing (no pre-approval required)
• Want to avoid bureaucratic subsidy application process

Use Subsidies When:

• You qualify (SME for Decree 80, high-tech for Decree 182)
• Training expenses are substantial (VND 30M+ per employee)
• Have HR capacity for subsidy application process
• Want cash reimbursement vs. tax savings

Combine Both:

• Claim subsidy for covered portion (70-100% or 50%)
• Claim 150% CIT deduction for remaining portion you paid
• Example: VND 100M training, Decree 80 covers 70% (VND 70M), you paid VND 30M
  • CIT deduction: VND 45M (150% of VND 30M you paid)
  • Tax savings: VND 9M (at 20% CIT rate)
  • Total benefit: VND 70M subsidy + VND 9M tax savings = VND 79M (79% total recovery)

Qualifying Training Expenses

What's Deductible

Direct Training Costs:

• Training course fees and tuition
• Certification examination fees
• Training materials and textbooks
• Software licenses for training purposes
• Training equipment rental

Trainer Costs:

• External trainer/instructor fees
• Travel and accommodation for trainers (if bringing external trainers on-site)

Employee Costs During Training:

• Salaries and wages during training time (if training during work hours)
• Travel to training location
• Accommodation during training (if multi-day program away from office)
• Meals during training days (reasonable amounts)

Internal Training Costs:

• Salaries of internal trainers (proportional to training time)
• Training venue rental (if external venue used)
• Training materials development costs

What's NOT Deductible

• Recreational or entertainment activities (team building focused on fun vs. skills)
• Training unrelated to business operations (e.g., cooking class for software company employees)
• Degree programs (university/college tuition)
• Training for family members not employed by company
• Excessive or lavish expenses (5-star resort training retreats)

"Related to Business Operations" Test

Training must reasonably relate to:

• Employee's current job responsibilities
• Skills needed for company's industry
• Planned business expansion (e.g., training for new product line)
• Compliance requirements (safety, quality, regulatory)

Be prepared to justify the business rationale if audited.

Compliance Requirements

Documentation to Maintain

For each training expense claim, keep:

1. Training Plan or Justification

• Document explaining why training is needed
• How training relates to business operations
• Expected benefits (improved productivity, quality, compliance, etc.)

2. Training Provider Information

• Provider name and business registration
• Training curriculum or course outline
• Trainer qualifications (optional but helpful)

3. Participant Records

• List of employees who attended
• Attendance records (signed by participants)
• Completion certificates (if issued)

4. Financial Documentation

• Invoices from training providers (VAT invoices required)
• Payment receipts
• Bank transfer records
• Expense breakdown (if composite invoice)

5. Post-Training Records

• Employee retention tracking (12-month period)
• For employees who leave, documentation of departure (resignation letter, termination notice)
• Evidence of retention effort if employee leaves (e.g., counter-offers made)

12-Month Retention Requirement

Rule: Employees must remain with company for 12 months after training completion to claim full deduction.

If Employee Leaves Early:

Involuntary Departure (dismissal, layoff, death, disability):

• Full deduction still allowed
• Document reason for departure

Voluntary Departure (resignation):

• Deduction may be reduced proportionally
• Example: Employee leaves after 6 months = reduce deduction by 50%
• Maintain documentation showing retention efforts (counter-offer, exit interview)

Practical Application: Most companies claim full 150% deduction and only adjust if audited and employees' early departures are challenged. Tax authorities generally don't track individual employee retention unless conducting detailed audit.

VAT on Training Expenses

Training services are generally exempt from VAT in Vietnam:

• Vocational training: VAT-exempt
• Professional development: VAT-exempt
• Technical training: VAT-exempt

If your training provider charges VAT (10%), question whether it should apply. Most training should be VAT-exempt.

Calculating Your Tax Savings

Standard CIT Rate (20%)

Most companies pay 20% CIT:

Formula: Tax Savings = Training Expenses × 150% × 20% = Training Expenses × 30%

Example:

• Annual training budget: VND 500,000,000
• CIT deduction: VND 750,000,000 (150% of VND 500M)
• Tax savings: VND 150,000,000 (VND 750M × 20%)
• Effective training cost: VND 350,000,000 (VND 500M - VND 150M)
• Savings: 30%

Preferential CIT Rates

Some companies pay reduced CIT rates:

High-Tech Enterprises: 10% CIT

• Tax savings: Training Expenses × 150% × 10% = 15% savings

New Investment Projects (first years): 10% CIT

• Tax savings: Training Expenses × 150% × 10% = 15% savings

SMEs (certain conditions): 17% CIT

• Tax savings: Training Expenses × 150% × 17% = 25.5% savings

Example: Large Technology Company

Company Profile:

• 650 employees (too large for Decree 80)
• Not high-tech certified (can't access Decree 182)
• Standard 20% CIT rate
• Annual training budget: VND 2,000,000,000 (VND ~3M per employee)

Training Expenses:

• Leadership development: VND 600M
• Technical skills (AWS, Azure certs): VND 800M
• Soft skills (communication, sales): VND 400M
• Safety and compliance: VND 200M
• Total: VND 2,000M

Tax Treatment:

• CIT deduction: VND 3,000M (150% of VND 2,000M)
• Tax savings: VND 600M (VND 3,000M × 20%)
• Effective cost: VND 1,400M
• Savings: 30% (VND 600M)

Strategic Use of 150% Deduction

Timing Training Investments

High-Profit Years:

• Maximize training in profitable years to offset higher tax liability
• Consider accelerating planned training from next year into current high-profit year

Loss Years:

• Training expenses still create deductions (carried forward with NOLs)
• However, tax benefit delayed until profitable years
• Consider deferring non-critical training if company is loss-making

Structuring Training Programs

Document Business Rationale Clearly:

• Link each training program to specific business needs
• Quantify expected impact (e.g., "reduce customer complaints 20%", "increase sales productivity 15%")
• Maintain records of actual improvements post-training

Favor Documented Formal Training:

• Formal courses with invoices and certificates are easier to defend than informal coaching
• Use licensed training providers when possible (stronger documentation)
• For internal training, document curriculum, schedule, and outcomes

Spread Training Across Employee Levels:

• Balance executive, management, and staff training
• Demonstrates company-wide development commitment
• Reduces audit risk (training isn't concentrated on executives)

Combining with Other Tax Strategies

R&D Tax Incentives:

• If training supports R&D activities, it may also qualify for additional R&D deductions
• Carefully structure to avoid double-dipping (claim as either training OR R&D, not both)

Depreciation of Training Equipment:

• If you purchase equipment for training (e.g., CNC machines for training center), depreciate separately
• Training equipment depreciation is additional to training expense deduction

Common Mistakes to Avoid

Mistake 1: Not Documenting Training-to-Business Link

Problem: Cannot explain how training relates to business operations

Example: Manufacturing company sends marketing staff to advanced AI training without explanation

Fix: Document business rationale - e.g., "Company expanding into AI-powered marketing automation, training marketing team to manage new tools"

Mistake 2: Claiming Degree Program Tuition

Problem: MBA, bachelor's, or master's degree tuition is NOT deductible

Why: Degree programs are personal education, not job-specific training

Exception: Short professional certificates or executive programs (non-degree) are deductible

Mistake 3: Missing VAT-Exempt Status

Problem: Paying 10% VAT on training when it should be exempt

Impact: 10% higher cost; VAT not recoverable if training is VAT-exempt

Fix: Ensure training providers correctly classify training as VAT-exempt; request VAT-exempt invoices

Mistake 4: Inadequate Retention Tracking

Problem: Cannot prove employees stayed 12+ months post-training

Risk: Tax authorities may disallow or reduce deduction

Fix: Maintain simple spreadsheet: Employee name, training date, departure date (if applicable), status (retained/departed)

Mistake 5: Combining Subsidy and Full Deduction

Problem: Claiming 150% CIT deduction on subsidized training expenses

Rule: Only deduct amounts you actually paid (after subsidy)

Example:

• Training cost: VND 100M
• Decree 80 subsidy: VND 70M (70%)
• You paid: VND 30M
• Correct CIT deduction: VND 45M (150% of VND 30M paid)
• Wrong CIT deduction: VND 150M (150% of VND 100M total) - this is fraud

Tax Audit Considerations

What Tax Authorities Check

During CIT Audit:

• Training expenses are moderate scrutiny item (not highest risk)
• Auditors verify:
  1. Expenses are properly documented (invoices, receipts)
  2. Training relates to business operations
  3. Amounts are reasonable (not excessive)
  4. Employee retention compliance (sample check, not exhaustive)

Red Flags:

• Training expenses >5% of total salary costs (unusual, may trigger questions)
• High-end resort locations for training (appears recreational)
• Training for non-employees (family members, contractors)
• Same employees receiving very frequent/expensive training

Audit Defense Strategy

Prepare Documentation Package: For each major training program, maintain one folder with:

• Business justification document
• Training provider info and curriculum
• Participant list with job titles
• Attendance records
• Invoices and payment proof
• Post-training evaluation or impact measurement

Sample Justification Template:

Training Program: AWS Solutions Architect Certification
Date: March 2026
Participants: 8 cloud engineers
Cost: VND 280M (VND 35M per person)

Business Justification:
- Company migrating infrastructure to AWS cloud (project budget: VND 12B)
- Need in-house AWS expertise to reduce consultant costs (currently VND 180M annually)
- Training enables team to design, deploy, and manage AWS infrastructure
- Expected savings: VND 150M annually in reduced consultant fees
- Expected timeline: Team capable of independent AWS management by Q3 2026

Outcomes (post-training):
- All 8 engineers achieved AWS Solutions Architect certification
- Team successfully migrated 3 applications to AWS without consultants (Q2-Q3 2026)
- Consultant expenses reduced by VND 95M in H2 2026

Real Company Examples

Case Study 1: E-commerce Company (500 employees)

Profile:

• Retail e-commerce platform
• 500 employees (too large for Decree 80, not high-tech certified)
• Annual revenue: VND 450B
• CIT rate: 20%

Training Strategy: Use 150% CIT deduction as primary training funding mechanism:

Annual Training Budget: VND 1,500M

• Customer service training: VND 400M (80 staff)
• Digital marketing skills: VND 300M (25 staff)
• Data analytics: VND 350M (15 staff)
• Leadership development: VND 250M (30 managers)
• Compliance and safety: VND 200M (all staff)

Tax Benefit:

• CIT deduction: VND 2,250M (150% of VND 1,500M)
• Tax savings: VND 450M (20% of VND 2,250M)
• Effective training cost: VND 1,050M
• Savings: 30% (VND 450M)

Outcome:

• No subsidy complexity, full flexibility in training selection
• Tax savings realized at annual CIT filing
• Simple documentation process (maintained invoices + business justifications)
• Audited once in 3 years, no adjustments (documentation sufficient)

Case Study 2: Manufacturing SME Using Both Subsidy + CIT Deduction

Profile:

• Electronics assembly, 140 employees
• Qualified for Decree 80 (SME)
• CIT rate: 20%

Training Strategy: Maximize Decree 80 subsidy, supplement with CIT deduction:

Annual Training Budget: VND 800M

• Quality control and Six Sigma: VND 500M (25 staff) - Decree 80 eligible
• Executive MBA program: VND 200M (2 executives) - Not eligible (degree program)
• Soft skills training: VND 100M (20 staff) - Decree 80 eligible but low priority

Decree 80 Subsidy (applied for eligible training only):

• Eligible expenses: VND 600M (quality + soft skills)
• Subsidy rate: 80%
• Recovery: VND 480M
• Company paid: VND 120M (for subsidized training) + VND 200M (for MBA)

CIT Deduction (for amounts paid):

• Total company paid: VND 320M (VND 120M + VND 200M)
• Wait - MBA (VND 200M) is NOT deductible (degree program)
• Correct deductible amount: VND 120M (only the portion paid for Decree 80 training)
• CIT deduction: VND 180M (150% of VND 120M)
• Tax savings: VND 36M (20% of VND 180M)

Total Benefit:

• Decree 80 subsidy: VND 480M
• CIT tax savings: VND 36M
• Total benefit: VND 516M
• Total cost: VND 800M
• Net cost: VND 284M
• Total recovery: 64.5%

Note: The MBA expenses (VND 200M) provided zero tax benefit (not deductible). Better strategy: use professional certificates instead of degree programs.

Case Study 3: Technology Startup (35 employees)

Profile:

• Software development startup
• 35 employees (qualifies for Decree 80 but chose not to pursue)
• High-growth, prioritizing speed over subsidy bureaucracy
• CIT rate: 20% (not yet profitable, carrying forward losses)

Training Strategy: Invest heavily in training using 150% CIT deduction (benefit realized when profitable):

Annual Training Budget: VND 450M

• AWS/cloud certifications: VND 180M (12 engineers)
• React/TypeScript training: VND 120M (15 engineers)
• Product management: VND 80M (4 PMs)
• Leadership and OKRs: VND 70M (8 managers)

Current Year (loss-making):

• Company has net loss: (VND 2B)
• Training creates additional VND 675M deduction (150% of VND 450M)
• Net operating loss increases to (VND 2.675B)
• Carried forward to future profitable years

Year 3 (profitable):

• Company now profitable: VND 8B taxable income (before NOL carryforward)
• Uses accumulated NOLs from prior years (includes training deductions)
• Tax benefit realized: VND 450M × 150% × 20% = VND 135M saved when profitable

Insight: Even loss-making companies benefit from 150% deduction, just deferred until profitable.

Working with Pertama Partners

Pertama Partners helps companies maximize training tax deductions:

Tax Planning:

• Calculate optimal training budget for tax efficiency
• Time training investments around profitability cycles
• Integrate with overall tax strategy (R&D, investment incentives)

Compliance Support:

• Prepare documentation packages for CIT filing
• Maintain training expense records for audit defense
• Structure training programs to maximize deductibility

Subsidy Integration:

• Determine when to use subsidies vs. CIT deductions vs. both
• Calculate total recovery across all programs
• Optimize mix for maximum benefit with minimum administrative burden

Audit Support:

• Defend training deductions during tax audits
• Prepare business justification documentation
• Represent company in discussions with tax authorities

Typical Results:

• 25-30% effective savings on training costs through CIT deduction
• 60-80% total recovery when combining subsidies + CIT deduction
• Zero audit adjustments with proper documentation
• Streamlined tax filing process for training expenses

Contact Pertama Partners to optimize your training tax strategy.