Payment of Vehicle Rental Expenses Exceeding 5 Million VND via Driver's Personal Bank Account: VAT Input Deduction Conditions Under Decree 181/2025/NĐ-CP
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Based on:Nghị định số 181/2025/NĐ-CP, điểm i khoản 2 Điều 26 - Ministry of Finance
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Under Article 26(2)(i) of Decree No. 181/2025/NĐ-CP, when goods or services purchased for taxable business activities are paid for by an authorized employee of the business using non-cash payment methods in accordance with the enterprise's financial or internal regulations, and the enterprise subsequently reimburses the employee by non-cash means, the input VAT on such purchases is deductible. The Ministry of Finance directed the inquirer to study the provisions of Article 26(2)(i) of Decree 181/2025/NĐ-CP to assess the validity of the payment arrangement through the driver's personal bank account. For this to be valid, the authorization to pay must be consistent with the enterprise's financial or internal regulations, and the reimbursement to the employee must also be made by non-cash transfer. This is an important clarification for enterprises incurring project-site expenses that need to be paid through an authorized employee rather than directly transferred to the service provider.
Payment via Employee's Personal Account: VAT Deductibility Conditions
Case Background
A business authorized an employee to pay vehicle rental costs exceeding 5 million VND at a project site (comprising 2 invoices), but the payment was made directly into the driver's personal bank account rather than the service provider's corporate account.
Applicable Regulation
Article 26(2)(i) of Decree No. 181/2025/NĐ-CP:
Where goods or services purchased for VAT-taxable business activities are authorized to be paid by an employee of the business via non-cash payment in accordance with the enterprise's financial or internal regulations, and the enterprise subsequently reimburses the employee by non-cash means, the input VAT on such purchases is deductible.
Conditions for VAT Deductibility
- The payment authorization to the employee must be grounded in the enterprise's financial regulations or internal rules.
- The employee must make the payment by non-cash transfer.
- The enterprise must reimburse the employee by non-cash transfer.
Practical Notes
- The enterprise should have in place formal financial or internal regulations explicitly covering the employee payment-on-behalf mechanism.
- Both transactions (payment to the driver and reimbursement to the employee) must be non-cash bank transfers.
- Payment to the driver's personal account rather than the service provider's corporate account may raise questions about the validity of the invoice - the enterprise should also verify that the underlying tax invoice meets all formal validity requirements.