Accounting for late payment interest on social insurance contributions is a crucial accounting task for businesses, especially when there is a delay in paying social insurance, health insurance, or unemployment insurance. This late payment interest not only increases financial obligations but also impacts expense recognition, profit determination, and corporate income tax settlement.
According to the new regulations, businesses that are late in paying social insurance contributions must not only pay the full amount owed but also pay an additional fee calculated at a rate of 0.031 TP3T/day on the amount and duration of the delay. Therefore, understanding how to calculate and properly account for late payment interest on social insurance contributions will help businesses minimize errors in preparing financial statements and settling taxes.
What is interest on late payments of social insurance contributions?
Late payment interest on social insurance contributions is an additional fee that businesses must pay when they fail to pay social insurance and unemployment insurance contributions on time as stipulated. This amount is calculated based on the amount of overdue social insurance and unemployment insurance contributions and the actual number of days of delay.
This is not a regular insurance contribution, but rather a financial obligation arising from the employer's failure to fulfill their insurance contribution obligations.
According to the regulations at Clause 1, Article 40 of the Social Insurance Law 2024When a business is late in paying mandatory social insurance contributions, in addition to paying the full amount owed, it must also pay an additional fee:
- Calculation rate: 0.03%/day
- Calculation basis: Amount of overdue social insurance and unemployment insurance contributions.
- Calculation period: Actual number of days of late payment
This amount is paid as supplementary funds to the social insurance fund and the unemployment insurance fund as prescribed.
Penalties for businesses that are late in paying social insurance contributions.
In addition to accrued interest, businesses that are late in paying social insurance contributions may also face administrative penalties depending on the severity of the violation.
Base Article 39 of Decree 12/2022/ND-CPThe penalties for violations of regulations regarding mandatory social insurance and unemployment insurance contributions are stipulated as follows:
| Violation | Penalty level |
| Late payment of social insurance and unemployment insurance; incorrect payment rates; underpayment for the number of participants; misappropriation of employees' insurance contributions. | Fines ranging from 12% to 15% will be imposed on the total amount payable at the time the report is drawn up, with a maximum of 75 million VND. |
| Failure to pay social insurance and unemployment insurance for all employees who are eligible to participate but whose actions do not warrant criminal prosecution. | Fines ranging from 18% to 20% will be imposed on the total amount payable, up to a maximum of 75 million VND. |
| Evading social insurance or unemployment insurance contributions, or falsifying records to receive lower contribution rates. | Fines ranging from 50 to 75 million VND. |
Therefore, businesses that are late in paying social insurance contributions not only have to bear the accrued interest but also risk administrative penalties. In addition, businesses are still required to pay the full amount of outstanding insurance contributions to ensure the rights of their employees.
The latest method for calculating interest on late social insurance payments.
To determine the amount to be paid, the company accountant can apply the following formula:
|
Interest on late payment of social insurance contributions = Amount of social insurance contributions overdue x 0.03% x Number of days overdue |
For example: Company A is 30 days late in paying social insurance contributions amounting to 100,000,000 VND.
Then, the amount of interest to be paid is:
|
Interest on late payment of social insurance contributions = 100,000,000 x 0.03% x 30 days = 900,000 VND |
Therefore, in addition to the outstanding social insurance contribution of 100 million VND, the company must also pay an extra 900,000 VND in late payment interest.
Accurately calculating this interest is crucial for accountants to properly record late payment interest on social insurance contributions in accordance with regulations.
Which account should interest on late social insurance payments be recorded in?
According to current accounting regulations, interest on late social insurance payments is considered an expense arising from a violation of insurance payment obligations, and does not directly serve the business operations of the enterprise.
Therefore, when accounting for late payment interest on social insurance contributions, the accountant records this amount in account 811 (Other expenses) to accurately reflect the nature of the expenditure.
Specifically, record the interest payable on late payments:
- Debit Account 811 – Other Expenses
- Account 3388 – Other payables and accruals.
When businesses pay interest on late social insurance contributions:
- Debit Account 3388 – Other payables and liabilities
- Accounts 111 and 112 exist – Cash and bank deposits.
Proper accounting helps businesses track separate expenses incurred due to late payment of social insurance contributions, avoiding confusion with monthly salary or insurance premiums.
See also: Accounting for social insurance tax and other insurance contributions deducted from salaries.
Example of accounting for actual late payment interest on social insurance contributions.
Company B received a notice that it had to pay late payment interest on social insurance contributions of 5,000,000 VND. The accountant performed the following:
| Steps to take | Implementation content | Account accounting |
| Step 1 | Record the interest payable. | Debit Account 811: 5,000,000
Account 3388 has 5,000,000 |
| Step 2 | When making a bank transfer | Debit Account 3388: 5,000,000
Account 112 has 5,000,000 |
After the transaction is completed, the interest on late payment of social insurance contributions is fully reflected in the accounting records and related documents.
Is interest on late payment of social insurance contributions deductible as an expense when calculating corporate income tax?
One of the issues businesses often worry about when accounting for late payment interest on social insurance is whether this expense can be included as a deductible expense when settling corporate income tax.
According to corporate income tax regulations, interest on late social insurance payments is considered an expense due to administrative violations and does not meet the conditions for being a deductible expense when determining taxable income.
Therefore:
- The business continues to record transactions in its accounting books as required.
- When settling corporate income tax, this expense must be excluded from deductible expenses.
- Make adjustments to item B4 (Expenses not deductible when determining taxable income) on the corporate income tax return form 03/TNDN.
This helps businesses avoid misrecording expenses, which can lead to discrepancies in tax obligations.
Learn more: Accounting for social insurance for directors who do not receive a salary.
Points to note when accounting for interest on late payments of social insurance contributions.
When accounting for interest on late payments of social insurance contributions, accountants need to pay attention to several important points:
- Determine the exact time when the obligation to pay late payment interest arises.
- Track late payment interest separately from monthly social insurance contributions.
- Keep complete records of notices and decisions from the Social Insurance agency as a basis for accounting.
- Interest on late social insurance contributions is not included as a deductible expense when settling corporate income tax.
- Verify the discrepancies between accounting documents, the detailed ledger for account 3388, and payment receipts.
Good control over this process helps businesses minimize risks when tax authorities or social insurance agencies conduct audits.
To minimize the risk of errors during transaction recording, businesses can refer to the following: full accounting service Seek assistance from reputable and experienced organizations like MAN – Master Accountant Network to handle bookkeeping, documentation, financial reports, and other accounting tasks in accordance with regulations.
Conclude
Accounting for late payment interest on social insurance contributions is a crucial operation that helps businesses accurately reflect the costs incurred due to delayed fulfillment of insurance obligations. According to the new regulations, businesses not only have to pay the outstanding social insurance contributions but also an additional fee calculated at a rate of 0.031 TP3T/day based on the amount and duration of the late payment.
Accountants need to correctly record the transactions in accounts 811 and 3388, and exclude these expenses from deductible expenses when settling corporate income tax. Timely updating of regulations helps businesses proactively manage expenses, minimize legal risks, and ensure compliance with social insurance regulations.
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Responsible for production and professional content review by: Mr. Le Hoang Tuyen – Founder & CEO of MAN – Master Accountant NetworkHe is a CPA Vietnam auditor with over 30 years of in-depth experience in accounting, auditing, taxation, and corporate legal consulting.
Answers to frequently asked questions regarding the accounting of interest on late payments of social insurance contributions.
No. Accountants need to clearly distinguish between: Social insurance, health insurance, and unemployment insurance contributions that must be paid periodically by the business and employees, and interest accrued due to late payment of insurance premiums. Insurance premiums are usually tracked in accounts related to account 338 (Other payables and remittances), while interest on late social insurance payments should be recorded separately in account 811 to accurately reflect the nature of the incurred expense.
Interest on late social insurance contributions is calculated from the time the enterprise is late in fulfilling its insurance contribution obligations as stipulated until the date the enterprise actually pays the full amount owed.
No. Although incurred during business operations, interest on late payment of social insurance contributions is not an expense related to normal management, production, or business activities. Therefore, this amount is reflected in account 811 (Other expenses), not in account 642 (Business management expenses).
Yes. If a business has recorded late payment interest on social insurance contributions as an accounting expense but fails to adjust it during corporate income tax settlement, it may reduce taxable income, leading to an error in the amount of tax payable. When preparing the corporate income tax return, the business needs to exclude this expense in item B4 (Expenses not deductible when determining taxable income) on form 03/TNDN. Is interest on late payments of social insurance contributions accounted for together with the monthly social insurance contributions?
From what point in time is interest on late social insurance contributions calculated?
Can interest on late social insurance payments be included in business management expenses?
Will accounting for late payment interest on social insurance contributions but forgetting to exclude it when settling corporate income tax have any impact?
