Accounting & Tax Treatment of Office Interior and Furniture Costs in Vietnam

~ How costs are spread over time, and key points for confident budget planning ~

When opening or renovating an office in Vietnam, interior renovation costs and furniture purchases can amount to significant sums. However, by properly understanding how these costs are treated from an accounting and tax perspective, you can spread costs appropriately over time and reduce the impact on near-term profit and loss. This column explains — assuming a leased office — how interior renovation costs and furniture costs are treated in an easy-to-understand manner.

1. Treatment of Renovation Costs

General Rule: Recorded as Prepaid Expenses (Cost Spreading)

Interior renovation costs for a leased office do not qualify as fixed assets, since the building is not owned. As a general rule, they are recorded as “prepaid expenses (deferred assets)” and spread over the lease term or expected useful life.

Exception: Recording as Fixed Assets

Work that meets all of the following conditions may be recorded as a fixed asset and depreciated over its useful life.

• ◆ Constitutes an upgrade (improvement in productivity, quality, utility, etc.)
• ◆ Can be identified as an independent asset (machinery, equipment, etc.)
• ◆ Meets the 3 conditions for fixed assets (see below)

When recorded as a fixed asset, depreciation is applied within the following useful life ranges (per Circular 45/2013/TT-BTC). Note that interior finishes such as partitions, ceilings, and floors generally cannot be independently recorded as fixed assets.

Note: Recording as a fixed asset requires itemized invoices or contracts. If an invoice states “interior renovation (lump sum),” the prepaid expense / cost-spreading treatment applies.

2. Treatment of Furniture Costs

Three Conditions for Fixed Asset Classification

Furniture such as desks and chairs may be recorded as fixed assets if all three of the following conditions are met.

• ◆ Future economic benefits are expected
• ◆ The asset will be used for more than one year
• ◆ Acquisition cost is 30 million VND (approx. ¥180,000) or more per item

Furniture that does not meet all three conditions is treated as a prepaid expense (max. 3 years for tax). The assessment is made per item — totals cannot be aggregated. Most ordinary office chairs and desks fall below the per-unit threshold, so prepaid expense or immediate expensing is most common in practice.

Spreading Period When Treated as Prepaid Expense

The spreading period may be set freely based on a “reasonable expected useful life.” In practice, most companies use the 3-year tax maximum for simplicity. While periods of up to 5–7 years are theoretically permissible, 3–5 years is the realistic range.

Reference: Typical Useful Lives for Furniture

3. Summary

With a 5-year lease, both renovation and furniture costs can generally be spread over 5 years for accounting purposes. Even with a large upfront investment, the annual accounting expense is smaller than expected. Since tax deductions are allowed over a maximum of 3 years, the tax benefit arrives sooner — an added advantage.

We hope this gives you the confidence to create your ideal office. If you are uncertain about how to treat any costs, please feel free to consult a specialist.