A single-member limited liability company (LLC) is a type of business owned by a single individual, so when calculating taxes on the director's (owner's) salary, there are some differences compared to other types of businesses.
Regarding personal income tax
Is the "Director's salary" of a single-member limited liability company subject to personal income tax?
First, let's reiterate the definition of "Salary of the director of a single-member limited liability company." Are these considered salaries or wages under current law?
According to the Article 90 of the Labor Code No. 10/2012/QH13 Then the salary is stipulated as follows:
"1. Wages are the amount of money that an employer pays to an employee for performing work as agreed upon.
Salary includes the base wage based on the job or position, salary allowances, and other additional payments."
Furthermore, points a and d, clause 2, Article 2 of Circular No. 111/2013/TT-BTC guiding the Law on Personal Income Tax on income from salaries and wages clearly state:
"2. Income from salaries and wages
Income from salaries and wages is the income that employees receive from their employers, including:
a) Salaries, wages, and other payments of a similar nature, whether in monetary or non-monetary form.
...
d) Money received from membership in business associations, corporate boards of directors, corporate supervisory boards, project management boards, management councils, professional associations, and other organizations.".
Therefore, the monthly income received by the owner of a single-member limited liability company is paid by the owner to themselves and is not considered a salary or wage as defined by law. Consequently, The "salary" of the director of a single-member limited liability company is not subject to personal income tax.
Regarding corporate income tax
Is the "Director's salary" of a single-member limited liability company subject to corporate income tax?
According to the Article 4, Circular 96/2015/TT-BTC (Amendments and additions to Circular No. 78/2014/TT-BTC) on the salary of directors of single-member limited liability companies stipulate:
"2. Expenses that are not deductible when determining taxable income include:
...
2.6. Payment of salaries, wages, and bonuses to employees in one of the following cases:
...
d) Salaries and wages of private enterprise owners and single-member limited liability company owners; remuneration paid to founders, members of the board of members, and board of directors who do not directly participate in the management of production and business."
SoThe expenses for salaries, insurance, rent, and other related services paid to the Director of a single-member limited liability company (whether directly managing the business or not) are all non-deductible expenses when determining taxable corporate income.
Conclusion
Payments to the Director of a Limited Liability Company. (Salary) is not subject to personal income tax but cannot be included as a deductible expense, or in other words, it cannot be deducted when calculating corporate income tax.
See more:
Director and accountant who falsified tax declarations will be severely punished.
