Whether authorizing employees to make payments on behalf of others is tax-deductible is a question many corporate accountants have when actual expenses arise from projects or business trips. According to the latest regulations... Decree 181/2025/ND-CPThis form of payment is perfectly acceptable if the business meets all the requirements regarding documentation and internal regulations. This article will analyze in detail the necessary conditions for payments made through employees to be considered legitimate expenses and eligible for input value-added tax deduction.
What does it mean to authorize an employee to make payments on your behalf?
Authorization to disburse funds on behalf of another employee is when a company allows an employee to use personal funds or advances to pay for expenses incurred during the performance of assigned tasks. After the payment is completed, the company will reimburse the employee based on valid documentation. The question arises whether authorizing employees to disburse funds on behalf of another employee is tax deductible if the process is not standardized from the outset through legally binding authorization documents in accordance with Decree 181/2025/ND-CP.
Common scenarios that result in actual payments made on behalf of others.
In practice, authorizing staff to make payments on behalf of others usually arises in the following situations:
- Reimburse car rental costs, airfare, and taxi fares for business trips to distant locations or projects.
- Purchase small quantities of supplies, construction materials, or tools and equipment on-site for construction purposes in accordance with the list specified in Decree 181/2025/ND-CP.
- Paying for hospitality services, conference organization, or administrative fees at the project site.
Identifying these cases is crucial to answering the question of whether authorizing employees to make payments on behalf of others is tax-deductible when the tax authorities conduct an audit at the unit.
Benefits of the payment authorization method for businesses.
Implementing a payment authorization mechanism helps businesses reduce cumbersome administrative procedures at the time expenses are incurred. Simultaneously, this method empowers employees to proactively handle emergency situations. To ensure this benefit is not accompanied by legal risks, accountants need to understand the rules governing the authorization of employees to make payments on their behalf, and whether this authorization is tax-deductible according to Decree 181/2025/ND-CP.
Legal basis: Decree No. 181/2025/ND-CP
From July 1, 2025, regulations regarding the deduction of value-added tax for expenses paid on behalf of others have become clearer. Specifically, point i, clause 2, Article 26 of Government Decree 181/2025/ND-CP stipulates:
"In cases where goods and services purchased for production and business activities are paid for using non-cash methods by an individual employee, and then reimbursed by the business entity via bank transfer, the input value-added tax can be deducted."
This is the highest legal basis for confirming that authorizing employees to make payments on behalf of others is tax-deductible if the correct procedures are followed.
Conditions for goods and services used in production and business
To determine whether authorizing an employee to make payments on behalf of another party is tax-deductible, the prerequisite is that the goods or services must directly serve the taxable business activities of the entity, as stipulated in Decree 181/2025/ND-CP. If the expense is for personal consumption, this input VAT will be excluded during tax settlement, even with complete transfer documentation. Please refer to this information. tax settlement services To receive advice and support from accounting and tax experts.
Regulations on non-cash payment methods
This is a mandatory rule to ensure the transparency of cash flow according to Decree 181/2025/ND-CP. Employees must transfer funds from their personal accounts to the seller. Then, the company must issue a refund transfer from the company's account to the same account of the employee who made the payment. Strict adherence to Decree 181/2025/ND-CP helps businesses avoid the risk of expense separation.
In cases where an individual pays on behalf of another person for an amount exceeding 5 million VND.
Large payments made on behalf of others (over 5 million VND) often fall under the scrutiny of tax authorities due to risks regarding the authenticity of the transaction. To help businesses better understand these situations, the following provides detailed explanations regarding invoices and transfer methods to protect their right to deduct input tax.
Validity of invoices generated at the project.
In cases where a business rents vehicles for a large-scale project, whether authorizing an employee to make payments on its behalf qualifies for tax deductions requires careful review of the invoice. The VAT invoice must be issued to the business (including the company's name, address, and tax code) in accordance with the guidelines in Decree 181/2025/ND-CP. The business needs to refer to its financial regulations to determine the validity of this expenditure.
Is direct bank transfer to the driver accepted?
According to Decree 181/2025/ND-CP, if the service provider has a written authorization to collect payments or is a registered business entity, direct bank transfers can still allow the authorized employee to make payments on behalf of the service provider to be considered a valid tax deduction. However, according to experts on this matter... Tax accountingTherefore, careful review of economic contracts is mandatory to ensure the entitlement to benefits as stipulated in Decree 181/2025/ND-CP.
The role of internal financial regulations in cost verification.
Financial regulations are the most important document to prove the legality of a transaction according to Decree 181/2025/ND-CP. If a business does not clearly stipulate that employees are authorized to make payments on behalf of the company, the tax authorities may reject the authorization for employee payments as a tax deduction on the grounds that the transaction does not comply with the correct financial management procedures.
The necessary documentation to protect expense claims.
To ensure that authorizing employees to make payments on behalf of others results in safe and optimal tax deductions in accordance with Decree 181/2025/ND-CP, the company's accountant needs to prepare a complete set of documents including:
- VAT invoices contain accurate business information.
- The authorization document for payment or the decision to send someone on business trip must include details of expenses, following the mẫu prescribed in Decree 181/2025/NĐ-CP.
- A copy of the internal financial regulations specifying the method of payment processing.
- Employee's bank transfer receipt to the supplier.
- Business documents showing the transfer of employee reimbursements via the banking system as required by Decree 181/2025/ND-CP.
To help accountants easily manage, reconcile, and explain payments to regulatory authorities, the following is a summary table of specific conditions and documents to protect tax deduction rights in accordance with the spirit of Decree 181/2025/ND-CP:
| group of conditions | Supporting documents |
| Cost ownership | The VAT invoice bears the company's name and tax identification number. |
| Legal authorization | Employment contract, Decision assigning payment duties. |
| Cash flow transparency | Payment authorization by employees and businesses according to Decree 181/2025/ND-CP. |
| Transaction practicality | Service contract, Project acceptance report |
Note: Businesses should retain original payment authorization forms to facilitate explanations when asked whether authorizing employees to make payments on their behalf is tax-deductible, based on the criteria of Decree 181/2025/ND-CP.
Common risks and considerations for business accountants.
Although the process of authorizing employees to make payments on behalf of others optimizes operations, without strict control over limits and payment methods, businesses risk having expenses disallowed. Below are common mistakes and key considerations to ensure the validity of employee payment authorizations for tax deduction purposes, in accordance with Decree 181/2025/ND-CP.
Risks of paying large bills in cash
Although the law allows for payments made on behalf of others, if employees use cash to pay bills worth 20 million VND or more, the business will violate the non-cash payment requirement. This will result in the complete rejection of tax deductions for authorization granted to employees to make payments on behalf of others.
Deficiencies in internal regulations led to the disallowance of expenses.
Making payments on behalf of others without a written regulation in the financial rules is a common mistake. Accountants need to ensure that all authorized payments made by employees that are tax-deductible are based on officially approved regulations in accordance with Decree 181/2025/ND-CP before the actual transaction occurs.
Note regarding employee bank account identification.
The bank account used by the employee for payment must be a registered account in the employee's name. Transferring refunds to the wrong recipient undermines transparency and may affect the tax deduction eligibility for employee payment authorization under Decree 181/2025/ND-CP.
Conclude
In summary, authorizing employees to make payments on behalf of others is entirely tax-deductible if the business complies with Decree 181/2025/ND-CP. The key to protecting these expenses lies in a combination of cashless payment documents, invoices in the correct business name, and strict financial regulations. Accountants can refer to the Government's online policy or specialized websites for more detailed guidance on practical handling situations under Decree 181/2025/ND-CP.
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Content production by: Mr. Le Hoang Tuyen – Founder & CEO MAN – Master Accountant Network, Vietnamese CPA Auditor with over 30 years of experience in Accounting, Auditing and Financial Consulting.
