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THE MINISTRY OF
FINANCE
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SOCIALIST REPUBLIC
OF VIET NAM
Independence - Freedom - Happiness
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No. 130/2008/TT-BTC
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Hanoi,
December 26, 2008
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CIRCULAR
GUIDING
THE IMPLEMENTATION OF A NUMBER OF ARTICLES OF ENTERPRISE INCOME TAX LAW NO.
14/2008/QH12, AND GUIDING THE IMPLEMENTATION OF THE GOVERNMENT’S DECREE NO.
124/2008/ ND-CP OF DECEMBER 11, 2008, WHICH DETAILS THE IMPLEMENTATION OF A
NUMBER OF ARTICLES OF THE LAW ON ENTERPRISE INCOME TAX
Pursuant to June 3, 2008 Law No. 14/2008/QH12
on Enterprise Income Tax;
Pursuant to November 29, 2006 Law No. 78/2006/QH11 on Tax Administration;
Pursuant to the Government’s Decree No. 124/2008/ND-CP of December 11, 2008,
detailing the implementation of a number of articles of the Law on Enterprise
Income Tax;
Pursuant to the Government’s Decree No. 118/2003/ND-CP of November 27, 2003,
defining the functions, tasks, powers and organizational structure of the
Ministry of Finance,
The Ministry of Finance guides the implementation of enterprise income tax as
follows:
Part A
SCOPE OF
APPLICATION OF ENTERPRISE INCOME TAX
1. Enterprise income taxpayers are
organizations engaged in goods production and trading or service provision
which have taxable incomes (below referred to as enterprises), including:
1.1. Enterprises established and operating
under the Law on Enterprises, the Law on Slate Enterprises, the Law on Foreign
Investment in Vietnam, the Investment Law, the Law on Credit Institutions, the
Law on Insurance Business, the Securities Law, the Petroleum Law, and the
Commercial Law, and enterprises defined in other legal documents in the form of
joint-stock company; limited liability company; partnership; private
enterprise; state enterprise; law office and private notary public office;
party to business cooperation contract; party to oil and gas production sharing
contract, oil and gas joint-venture enterprise or jointly managed company;
1.2. Public or non-public non-business units
engaged in goods production and trading or service provision that have taxable
incomes in any domain;
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1.4. Enterprises established under foreign
laws (below referred to as foreign enterprises) with Vietnam-based permanent
establishments.
Foreign enterprises’ permanent establishments
are production and business establishments through which foreign enterprises
conduct some or all income-generating production and business activities in
Vietnam, including:
- Branches, executive offices, factories,
workshops, means of transport, mines, oil and gas fields, or other places for
extraction of natural resources in Vietnam;
- Construction sites and construction,
installation or assembly works;
- Providers of services, including
consultancy services through employees or other organizations or individuals;
- Agents for foreign enterprises;
- Vietnam-based representatives that are
competent to sign contracts in the name of foreign enterprises, or
representatives that are incompetent to sign contracts in the name of foreign
enterprises but regularly deliver goods or provide services in Vietnam.
In case a double taxation avoidance agreement
which the Socialist Republic of Vietnam has signed otherwise provides for
permanent establishments, the provisions of that agreement prevail.
1.5. Organizations other than those defined
at Points 1.1, 1.2, 1.3 and 1.4, Clause 1 of this Part, which conduct goods
production and trading or service provision activities and have taxable
incomes;
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Part B
ENTERPRISE
INCOME TAX CALCULATION METHOD
1. The payable enterprise income tax amount
in a tax period is the taxed income multiplied by the tax rate.
The payable enterprise income tax ii
determined according to the following formula
Payable enterprise
income tax = Taxed income x Enterprise income tax rate
For an enterprise making deductions for
setting up a scientific and technological development fund, the payable
enterprise income tax is determined as follows:
Payable enterprise income tax = (Taxed income
- Deduction for setting up a scientific and technological development fund) x
Enterprise income tax rate
An enterprise which has paid enterprise
income tax or similar tax outside Vietnam is entitled to subtraction of the
paid enterprise income tax amount which must not exceed the payable enterprise
income tax amount under the Law on Enterprise Income Tax.
2. A tax period is determined according to
the calendar year. If an enterprise applies a fiscal year other than the
calendar year, the tax period shall be determined according to the applied
fiscal year. The first tax period for a new enterprise and the final tax period
for an enterprise established as a result of type or ownership transformation,
merger, separation, split, dissolution or bankruptcy shall be determined to
conform to the accounting period under the accounting law.
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4. Non-business units trading in goods or providing
services liable to enterprise income tax (at the rate of 25%) that, after having
enjoyed enterprise income tax relief (if any), can account turnover but cannot
account and determine expenses for and incomes from business activities, shall
declare and pay enterprise income tax at a percentage of the goods sale or service
provision turnover, specifically:
- For service provision: 5%;
- For goods trading: 1%;
- For other activities: 2%.
5. Enterprises which have foreign-currency turnover,
expenditures, taxable incomes and taxed incomes shall convert these foreign-currency
amounts into Vietnam dong at the average exchange rate on the inter-bank
foreign currency market, announced by the State Bank of Vietnam at the time
such foreign-currency turnover, expenditures, taxable incomes and taxed incomes
arise, unless otherwise provided for by law. A foreign currency having no exchange
rate with Vietnam dong must be converted via another foreign currency having an
exchange rate with Vietnam dong.
Part C
ENTERPRISE
INCOME TAX BASES
I. TAXED INCOME
Taxed income in a tax period is taxable
income minus tax-exempt income and losses carried forward from preceding years
under regulations.
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Taxed income =
Taxable income - (Tax-exempt income + Losses carried forward under regulations)
II. TAXABLE INCOMES
Taxable incomes in a tax period include
income from goods production and trading and service provision and other
incomes.
Taxable income in a tax period is determined
as follows:
Taxable income =
(Turnover - Deductible expenses) + Other incomes
Income from goods production and trading or
service provision is the turnover from goods production and trading or service
provision activities minus deductible expenses for these activities. An
enterprise which conducts different business activities subject to different
tax rates shall separately calculate income from each activity, multiplied by
the corresponding tax rate.
Income from real estate transfer must be
separately accounted for enterprise income tax declaration and payment and may
not be cleared against incomes or losses from other production and business
activities.
III. TURNOVER
1. Turnover used for calculating taxable
income is determined as follows:
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1.1. For enterprises paying value-added tax according
to the tax credit method, turnover used for calculating taxable income is
exclusive of value-added tax.
Example: Enterprise A pays value-added tax
according to the tax credit method. Its value-added invoice indicates the
following details:
Selling price: VND 100,000.
Value-added tax (10%): VND 10,000.
Payment price: VND 110,000.
The turnover used for calculating taxable
income will be VND 100,000.
1.2. For enterprises paying value-added tax according
to the method of calculation of tax based directly on added value, turnover
used for calculating taxable income is inclusive of value-added tax.
Example: Enterprise B pays value-added tax
according to the method of calculation of tax based directly on added value.
Its sale invoice only indicates the selling price of VND 110,000 (inclusive of
value-added tax).
The turnover used for calculating taxable
income will be VND 110,000.
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2.1. For goods sale, it is the time of transferring
the right to own or use goods to the purchaser.
2.2. For service provision, it is the time of
completing the provision of a service to the purchaser or the time of billing
the service provision.
If the time of billing precedes the time of
completing the service provision, the time of determining turnover will be the
time of billing.
2.3. Other cases provided for by law.
3. Turnover used for calculating taxable income
in some cases is determined as follows:
3.1. For goods sold or services provided on
installment or deferred payment, it is the lump sum paid for the goods or
service, excluding installment or deferred payment interest.
3.2. For goods and services used for barter,
donation or internal consumption, it shall be determined based on the market
selling price of products, goods or services of the same or similar categories
at the time of barter, donation or internal consumption.
Goods and services used for internal
consumption are those delivered or supplied by enterprises for consumption,
excluding goods and services used for enterprises’ continued production and
business activities.
3.3. For goods processing, it is the proceeds
from processing activities, including remuneration, costs of fuel, power and
auxiliary materials, and other expenses.
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- For enterprises acting as principals or
consignors (including pyramid selling), it is the total sum of sales.
- For enterprises acting as agents or
consignees and selling goods at prices fixed by principals or consignors, it is
the commission earned under the agency or consignment contract.
3.5. For asset lease, it is the rent paid periodically
by the lessee under the lease contract. In case the lessee advances the rent
for many years, it shall be allocated to the number of years for which the rent
has been advanced.
3.6. For credit and financial leasing
activities, it is the receivable loan interest or financial lease turnover
arising in a tax period.
3.7. For transportation activities, it is the
whole turnover from passenger, cargo and luggage transportation arising in a
tax period.
3.8. For electricity and clean water supply, it
is the sum of money indicated on the value-added invoice. The time of
determining turnover used for calculating taxable income is the day on which
electricity meter readings are certified and recorded on electricity or clean
water bills.
Example: An electricity bill is recorded with
an electricity meter reading from December 5 to January 5. Turnover recorded on
this bill will be used for January.
3.9. For golf course business activities, it
is the proceeds from the sale of membership cards and golf playing tickets and
other revenues in a tax period.
3.10. For insurance and reinsurance business activities,
it is the receivable sum of principal insurance premiums, agency service
charges (loss survey, indemnity consideration, claim for a third party’s to pay
indemnity, disposal of cargo subject to 100% indemnity); re-insurance
undertaking charges, re-insurance ceding commissions and other revenues after
subtracting refunded or reduced premiums or re-insurance undertaking charges;
and refunded or reduced re-insurance ceding commissions.
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For insurance policies containing an
agreement on periodical payment of premiums, it is the receivable sum of money
arising in each period.
3.11. For construction and installation activities,
it is the value of the work, work item or work volume tested upon take over.
- For construction and installation
activities involving the contracted contracted supply of materials, raw
materials, machinery and equipment, it is the sum earned from these activities,
inclusive of the value of materials, raw materials, machinery and equipment.
- For construction and installation
activities not involving the contracted supply of materials, raw materials,
machinery and equipment, it is the sum earned from these activities, exclusive
of the value of materials, raw materials, machinery and equipment.
3.12. For business activities conducted under
business cooperation contracts:
- If parties to a business cooperation
contract divide business results based on the goods or service sales turnover,
it is the turnover divided to each party under the contract.
- If parties to a business cooperation
contract divide business results based on products, it is the turnover from
products divided to each party under the contract.
- If parties to a business cooperation
contract divide business results based on pre-tax profits, the turnover used
for determining pre-tax profits is the sum of goods or service sales under the
contract. The contracting parties shall appoint one of them as a representative
to issue invoices, record turnover and expenditures and determine pre-tax
profits divided to each party. Each party shall fulfill its enterprise income
tax obligation under current regulations.
- If parties to a business cooperation
contract divide business results based on after-tax profits, it is the sum of
goods or service sales under the contract. The contracting parties shall
appoint one of them as a representative to issue invoices, record turnover and
expenditures and declare and pay enterprise income tax on behalf of the other
parties.
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3.14. For securities trading, it is the
proceeds from securities brokerage, dealing, issuance underwriting, investment
portfolio management, financial consultancy and investment, investment fund
management, fund certificate issuance, market organization and other securities
services under law.
3.15. For derivative financial services, it
is proceeds from the provision of derivative financial services in a tax
period.
IV. DEDUCTIBLE AND
NON-DEDUCTIBLE EXPENSES UPON DETERMINATION OF TAXABLE INCOME
1. Except for expenses specified in Clause 2 of
this Section, enterprises may deduct any expenses which fully meet the
following conditions:
1.1. They are actually paid for production
and business activities;
1.2. They are evidenced with adequate lawful
invoices and documents as prescribed by law.
2. Non-deductible expenses upon determination
of taxable income include:
2.1. Expenses not fully satisfying the conditions
specified in Clause 1 ol this Section, except the uncompensated value of losses
caused by natural disasters, epidemics or other force majeure circumstances;
Enterprises shall themselves determine the
total value of losses caused by natural disasters, epidemics or other force
majeure circumstances in accordance with law.
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2.2. Fixed asset depreciation expense in one of
the following cases:
a/ Expense for depreciation of fixed assets
not used for goods production and trading or service provision activities.
Particularly for fixed assets serving
laborers at enterprises, such as mid-shift rest houses, mid-shift eateries,
locker rooms, toilet facilities, clean water tanks, roofed parking lots, health
stations or clinics, cars for the transport of laborers to and from workplaces,
job training facilities and laborers’ houses constructed by enterprises, their
depreciations are allowed to be accounted as deductible expenses upon
determination of taxable income.
b/ Expense for depreciation of fixed assets
without papers evidencing that they belong to enterprises (except for
finance-leased ones).
c/ Expense for depreciation of fixed assets
which are not managed, monitored and reflected in enterprises’ accounting books
under current regulations on fixed asset management and cost accounting.
d/ Depreciation in excess of the level
prescribed in the Finance Ministry’s current regulations on fixed asset
management, use and depreciation. For profit-earning enterprises which wish to
apply a rapid depreciation method for renewing technologies for which the
straight-line depreciation is applicable, it is the depreciation in excess of
the prescribed rapid depreciation level.
Before making depreciation, enterprises shall
register the fixed asset depreciation method with their managing tax agencies.
Annually, enterprises shall themselves decide on the ratio of fixed asset
depreciation under the Finance Ministry’s current regulations on fixed asset
management, use and depreciation, including the case of rapid depreciation. In
the course of conducting production and business activities, enterprises which
change depreciation ratios not exceeding the prescribed ones may adjust them
before the deadline for submitting enterprise income tax finalization
declarations of the year of depreciation.
Enterprises receiving fixed assets used as
contributed capital or transferred upon separation, split, consolidation,
merger or transformation, which are re-valuated under regulations, may include
their depreciations in deductible expenses according to their re-valuated
historical costs. Enterprises receiving other assets not qualified as fixed
assets used as contributed capital or transferred upon separation, split,
consolidation, merger or transformation, which are re-valuated under
regulations, may include their depreciations in deductible expenses according
to their re-valuated prices.
For fixed assets created by enterprises
themselves, their historical costs, of which depreciations are allowed to be
included in deductible expenses, are the total of all production expenses for
their creation.
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Passenger cars of 9 seats or less exclusively
used for commercial passenger transportation or for tourism and hotel business
include cars registered under the names of enterprises which register the
passenger transportation, tourism or hotel business line in their business
registration certificates.
Civil aircraft and yachts not used for
commercial cargo, passenger or tourist transportation include civil aircraft
and yachts of enterprises which register and account fixed asset depreciation
but do not register cargo, passenger or tourist transportation in their
business registration certificates.
g/ Depreciation of fixed assets which have
been wholly depreciated.
h/ For works on land used for both production
and business and other purposes, depreciations of the value of works on land
corresponding to the area of land not used for production and business
activities must not be included in reasonable expenses.
For works, such as offices, workshops ot
shops for production and business activities, built on land leased or borrowed
from organizations, individuals or households (not leased directly from the
State or in industrial parks), enterprises may include their depreciations in
deductible expenses if the following conditions are satisfied:
- The land lease or borrowing contract has
been notarized at a notary public office under law; the lease or borrowing
duration indicated in the contract must not be shorter than the minimum
depreciation duration of fixed assets.
- Invoices of payment for the construction
volumes, enclosed with the work construction contract and the documents on
contract liquidation and finalization of the value of the works, bear the name,
address and tax identification number of the enterprise.
- The works on land are managed, monitored
and accounted under current regulations on fixed asset management.
2.3. Expense for raw materials, materials,
fuel, energy and goods in excess of reasonable consumption limits.
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2.4. Expenses for the purchase of goods or
services without invoices, for which lists of purchased goods and services
(according to form No. 01/TNDN to this Circular, not printed herein) are
allowed to be made, without such lists enclosed with payment documents for
goods sellers or service providers in the following cases: purchase of
agricultural, forest or fishery products from producers or fishermen; purchase
of handicraft products made of jute, rush, bamboo, leaf, rattan, straw, coconut
husk or shell, or raw materials taken from agricultural products, from
non-business craftsmen; purchase of soil, rock, sand or gravel from local
mining inhabitants; purchase of scraps from individual collectors; purchase of
used domestic appliances from households or individuals, and purchase of some
services from non-business individuals.
Enterprises’ at-law representatives or
authorized persons shall sign lists of purchased goods and services and take
responsibility for their accuracy and truthfulness. If listed goods or service
purchasing prices are higher than market prices at the time of goods purchase,
tax agencies shall, based on market prices of goods or services of the same or
similar kinds at the time of purchase, re-determine these prices so as to
re-calculate reasonable expenses upon determination of taxable income.
2.5. Salaries and wages in one of the
following cases:
a/ Salaries, wages and other accounted
amounts payable to laborers which have actually not been paid or have been paid
without invoices or documents as prescribed by law.
b/ Bonuses to laborers which are not of salary
nature, and bonuses for which the payment conditions are not specified in labor
contracts or collective labor agreements.
c/ Salaries, wages and allowances payable to
laborers which, upon the expiration of the time limit for submission of annual
tax finalization dossiers, have actually not been paid, unless enterprises make
deductions for setting up provision funds for addition to the subsequent year’s
salary funds to ensure uninterrupted payment of salaries and not for any other
purposes. Enterprises may decide on annual provision levels not exceeding 17%
of their realized salary funds.
d/ Salaries and wages of owners of private
enterprises or one-member limited liability companies (owned by a single
individual); remunerations paid to founders and members of members’ councils or
boards of directors who do not personally participate in administering goods
production and trading or service provision activities.
2.6. In-kind expense for laborers’ clothing
without invoice; in-kind expense for laborers’ clothing in excess of VND 1.5
million/person/ year; in-cash expense for laborers’ clothing in excess of VND 1
million/person/year.
2.7. Rewards for initiatives and innovations
on which enterprises have no specific regulations or when councils for test of
initiatives and innovations are not set up.
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2.9. Travel allowances paid for annual leave
in contravention of the Labor Code; allowances paid to laborers on domestic and
overseas work-trips (excluding travel and accommodation expenses) in excess of
twice the limit set by the Ministry of Finance for state cadres,
public-servants and employees.
2.10. The following expenses paid for ineligible
beneficiaries or improper purposes or in excess of prescribed limits:
a/ Additional expenses paid for female
laborers which are allowed to be included in deductible expenses, including:
- Expense for job re-training for female
laborers when their current jobs are no longer suitable and they must change to
other jobs under enterprises’ development plannings.
This expense covers training fee (if any) +
salary rank- or grade-based difference (covering 100% of trainees’ salaries).
- Salaries and allowances (if any) paid to
teachers in crèches and kindergartens organized and managed by enterprises.
- Expense for additional medical check-ups in
a year, such as examination of occupational and chronic diseases, or
gynecological diseases for female laborers.
- Allowances paid to female laborers after
the first or second delivery.
- Extra-time allowances paid under current
regulations to female laborers who, for objective reasons, return to work
during their post-natal or breastfeeding leave, including the case of payment
of salaries in the form of products.
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2.11. Deductions for contributing to social
insurance funds, health insurance funds and trade union funds in excess of
prescribed limits. Contributions to higher-level management funds and
contributions to associations’ funds in excess of limits set by the
associations.
2.12. Electricity or water charges paid under
electricity or water contracts signed between owners of rented production and
business places and electricity or water suppliers, without payment documents
in one of the following cases:
a/ The renting enterprise paid electricity or
water charges directly to the electricity or water supplier without making a
list thereof (according to form No. 02/TNDN attached to this Circular, not
printed herein) enclosed with electricity or water bills and the rent
contract.
b/ The renting enterprise paid electricity or
water charges directly to the owner of the rented place without making a list
thereof (according to form No. 02/TNDN attached to this Circular, not
printed herein) enclosed with electricity or water bills which match the
actually consumed electricity and water volume, and the rent contract.
2.13. Rents for fixed assets in excess of the
limits allocated according to the number of years for which the lessee has
advanced rents.
Example: Enterprise A rents a fixed asset for
4 years and pays a lump-sum rent of VND 400 million. The fixed asset rent
accounted as an annual expense is VND 100 million. The annual rent for fixed
assets in excess of VND 100 million is not allowed to be included in reasonable
expenses upon determination of taxable income.
Expenses for repair of rented fixed assets
are allowed to be accounted as expenses or gradually allocated into expenses
within 3 years, if it is indicated in the asset rent contract that the lessee
is responsible for repairing the assets during the rent term.
Expenses for procuring assets other than
fixed assets, such as expense for purchase and use of technical documents,
patents, technology transfer licenses, trademarks, commercial advantages, etc.,
are allowed to be gradually allocated to business expenses within 3 years.
2.14. Interests on loans for production and business
activities borrowed from entities other than credit institutions or economic
organizations, in excess of 150% of the prime interest rate announced by the
State Bank of Vietnam at the time of loan provision.
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2.16. Deductions made for setting up of
provisions for price decreases of goods left in stock, lost financial
investments, bad debts and warranty for products, goods and construction and
installation works, and such provisions used in contravention of the Finance
Ministry’s guidance on deductions for setting up provisions.
2.17. Deductions made for setting up of
job-loss allowance provision funds and severance allowances paid to laborers in
contravention of current regulations.
2.18. Expenses pre-deducted for a certain
period which have not yet been paid or have not been fully paid by the end of
the period.
Pre-deducted expenses include those for
regular overhaul of fixed assets and for activities of which turnover has been
accounted but contractual obligations have not yet been fulfilled, and other
pre-deducted expenses.
For fixed assets requiring regular overhaul,
business establishments may pre-deduct estimated repair expenses in their
annual expenses. If actual repair expenses are larger than pre-deducted
estimated ones, business establishments may include the difference in
reasonable expenses.
2.19. Expenses for advertisement, marketing,
sales promotion and brokerage commission; expenses for reception, protocol and
conferences; expense in support of marketing and payment discount; expense for
press agencies’ newspapers given as presents or gifts directly related to
production and business activities, in excess of 10% of total deductible
expenses; for a new enterprise, such expenses in excess of 15% of deductible
expenses for the first 3 years from the date of establishment. Total deductible
expenses exclude restricted expenses specified at this Point; for commercial
activities, total deductible expenses exclude costs of goods sold;
The above restricted expenses for
advertisement, marketing, sales promotion and brokerage commissions exclude
insurance brokerage commissions under the law on insurance business;
commissions paid to agents selling goods at fixed prices; and the following
expenses arising at home or abroad (if any): expense for market research, such
as survey, exploration, interview, and information collection, analysis and
assessment; expense for market development and survey; expense for consultants
to conduct research and development and assist with market survey; expense for
product display and introduction and organization of trade fairs and
exhibitions, such as expense for opening showrooms or stalls for product
display and introduction; expense for hiring places for product display and
introduction; expense for raw materials and instruments to support product
display and introduction; and expense for the transportation of products for
display and introduction.
The restricted level of 15% for the first 3
years is applicable only to new enterprises that are granted business registration
certificates on or after January 1, 2009, but not to new enterprises
established as a result of consolidation, separation, split, merger, type or
ownership transformation.
Example: Company A was established in 2008.
In 2009, it made an enterprise income tax finalization report containing the
following expense data:
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- Total expenses allowed to be included in
expenses (excluding expenses for advertisement, marketing, sales promotion and
brokerage commissions; expenses for reception, protocol and conferences;
expense in support of marketing and payment discount; expense for press
agencies’ newspapers given as presents or gifts directly related to production
and business activities): VND 2 billion.
So, the maximum deductible expenses for
advertisement, marketing, sales promotion and brokerage commissions; reception,
protocol and conferences; expense in support of marketing and payment discount;
expense for press agencies’ newspapers given as presents or gifts directly
related to production and business activities, which are allowed to be included
in expenses, will be:
VND 2 billion multiplied by (x) 10% equals
(=) VND 200 million
Therefore, total deductible expenses included
in the 2009 expenses will be:
VND 2 billion plus (+) VND 200 million equals
(=) VND 2.2 billion
2.20. Foreign exchange rate difference loss
resulting from the re-valuation of monetary items of foreign currency origin at
the end of a fiscal year; exchange rate difference loss arising in the course
of capital construction investment (in the stage before production and business
activities are carried out).
2.21. Education aid granted to entities other
than those defined in Clause a of this Section or paid without aid
certification dossiers specified at Clause b below:
a/ Education aid covers aid for public,
people-founded and private schools in the national education system under the
education law, which is used for purposes other than contribution of capital
to, or purchase of shares from, schools; material foundations for teaching,
learning and other activities in schools; aid for regular school activities;
scholarships granted directly or via agencies or organizations with the
aid-mobilizing function under law to pupils and students in general education,
vocational education and tertiary education institutions under the Education
Law; aid for contests in subjects taught at schools with contestants being
learners; aid for setting up study promotion funds under the law on education
and training.
b/ An aid certification dossier comprises an
aid certification record signed by the aid-granting business establishment’s
representative, the aid-receiving lawful established education institution’s
representative, and aid-receiving pupils and students (or agencies or
organizations with the aid-mobilizing function) (made according to form No.
03/TNDN attached to this Circular, not printed herein), enclosed with
goods purchase invoices and documents (if aid is in kind) or payment documents
(if aid is in cash).
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a/ Healthcare aid covers aid granted to
healthcare establishments set up under the health law, which is used for
purposes other than contribution of capital to, or purchase of shares from,
those establishments; aid for medical equipment and instruments and medicines;
aid for regular activities of hospitals and health centers; aid in cash for
patients via agencies or organizations with the aid-mobilizing function under
law.
b/ An aid certification dossier comprises an
aid certification record signed by the aid-granting enterprise’s
representative, the representative of aid recipient (or agency or organization
with the aid-mobilizing function), made according to form No. 04/TNDN attached
to this Circular (not printed herein), enclosed with goods purchase
invoices and documents (for aid in kind) or payment documents (for aid in
cash).
2.23. Aid for surmounting consequences of natural
disaster to entities other than those defined in Clause a of this Section or
provided without aid certification dossiers specified at Clause b below:
a/ Aid for surmounting consequences of
natural disaster covers aid in cash or in kind for surmounting consequences of
natural disaster provided directly to organizations established and operating
under law; or provided to individuals suffering damage caused by natural
disaster via agencies or organizations with the aid-mobilizing function under
law.
b/ An aid certification dossier comprises an
aid certification record signed by the aid-granting enterprise’s
representative, the representative of the aid-receiving organization suffering
damage caused by natural disaster (or agency or organization with the
aid-mobilizing function) (made according to form No. 05/TNDN attached to this
Circular, not printed herein), enclosed with goods purchase invoices and
documents (for aid in kind) or payment documents (for aid in cash).
2.24. Aid for building houses of gratitude
for the poor to entities other than those defined in Clause a of this Section
or provided without aid certification dossiers specified in Clause b below:
a/ Eligible aid recipients include poor
households as prescribed by the Prime Minister. Aid may be granted in cash or
in kind directly or via agencies or organizations with the aid-mobilizing
function under law for building houses for poor households.
b/ An aid certification dossier comprises an
aid certification record signed by the aid-granting enterprise’s
representative, the aid recipient (or agency or organization with the
aid-mobilizing function) (made according to form No. 06/TNDN attached to this
Circular, not primed herein); and the poor household certification
document of the local administration, enclosed with goods purchase invoices and
documents (for aid in kind) or payment documents (for aid in cash).
2.25. Business administration expenses
allocated by an overseas company to its Vietnam-based permanent establishment in
excess of the level calculated according to the following formula:
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=
Taxed turnover of
the Vietnam-based permanent establishment in a tax period
x
Total business
administration expenses of the overseas company in a tax period
Total turnover of
the overseas company, including turnovers of permanent establishments based
in other countries in a tax period
Business administration expenses allocated by
an overseas company to its Vietnam-based permanent establishment shall be
counted from the time such Vietnam-based permanent establishment is set up.
The base for determining expenses and
turnover of an overseas company is the overseas company’s financial statement
audited by an independent audit company, indicating the overseas company’s
turnover and management expenses, and management expenses allocated by the
overseas company to its Vietnam-based permanent establishment.
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2.26. Expenses offset with other funding
sources; expenses already paid from enterprises’ scientific and technological
development funds.
2.27. Expenses not corresponding with taxed
turnover.
2.28. Expenses for insurance business,
lottery business and securities trading and other specific business activities
in contravention of the Finance Ministry’s relevant guidance.
2.29. Fines for administrative violations,
including violations of traffic law. violations of business registration or
accounting and statistics regulations and violations of the tax law, and other
fines for administrative violations as prescribed by law.
2.30. Expenses for capital construction investment
at the investment stage for the formation of fixed assets; contributions to localities;
contributions to mass and social organizations outside enterprises; charity
aid, excluding aid for education, healthcare, surmounting consequences of
natural disaster and building houses of gratitude for the poor as specified at
Points 2.21, 2.22, 2.23 and 2.24 of this Part; expenses for purchase of golf
course membership cards, and expense for golf playing.
2.31. Credited or refunded input value-added tax;
enterprise income tax; personal income tax.
V. OTHER INCOMES
Other incomes are taxable incomes in a tax
period which arise not from the business lines indicated in enterprises’
business registration certificates. Other incomes include:
1. Income from capital or securities transfer
as guided in Part E of this Circular.
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3. Income from asset ownership or use right,
including copyright royalties in any form paid for asset ownership or use
right; royalties from intellectual property rights; and income from technology
transfer under law. Asset lease in any form.
Income from intellectual property copyright
royalties or technology transfer is the total collected sum of money minus (-)
the prime cost or expense for the creation of the transferred intellectual
property right or technology, minus (-) the expense for maintaining, upgrading
or developing the transferred intellectual property right or technology and
other deductible expenses.
Income from asset lease is the lease turnover
minus (-) expenses for asset depreciation, renovation, repair and maintenance,
expense for the lease of assets for sublease (if any) and other deductible
expenses related to the asset lease.
4. Income from transfer or liquidation of
assets (except real estate) and other valuable papers. This income is equals
(=) turnover from asset transfer or liquidation minus (-) the residual book
value of the transferred or liquidated asset at the time of transfer or
liquidation, and deductible expenses related to the asset transfer or
liquidation.
5. Income from savings and loan interests,
including interests on savings deposited at credit institutions, interests on
loans in any form under law, credit guarantee charges and other charges under
loan provision contracts.
6. Income from foreign currency trading;
foreign exchange rate difference profits actually arising from production and
business activities in a period (excluding foreign exchange rate difference
profits resulting from the re-valuation of monetary items of foreign currency
origin at the end of a fiscal year and exchange rate difference profits arising
at the stage of capital construction investment before production and business
activities are carried out).
Income from foreign currency trading is the
total sales of foreign currency minus (-) the total purchasing price of sold
foreign currencies.
7. Refunded provisions for price decreases of
goods in stock, lost financial investments, bad debts and warranty for
products, goods and construction and installation works, which were previously
deducted but are left unused or have not been used up in the period of their
deduction.
8. Recovered bad debts which have been
written off.
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10. Previous years’ omitted incomes from
production and business activities, which are discovered by enterprises.
11. Difference between the amount of fines or
compensations received from violators of economic contracts and the amount of
fines or compensations paid for contract breaches under law.
12. Difference resulting from the
re-valuation of assets under law for capital contribution or asset transfer
upon enterprise separation, split, consolidation, merger or transformation,
except the case of re-valuation of fixed assets upon transformation of state
enterprises into joint-stock companies.
- For a fixed asset re-valuated upon capital
contribution, it is the difference between the re-valuated price and the
residual value of the fixed asset and shall be allocated to the years during
which the fixed asset can still be depreciated at the enterprise receiving the
contributed capital;
- For a fixed asset transferred upon
enterprise separation, split, consolidation, merger or transformation (except
the case of transformation of state enterprises into joint-stock companies), it
is the difference between the re-valuated price and the residual book value of
the fixed asset;
- For assets other than fixed asset, it is
the difference between the re-valuated price and the book value.
13. Donations and gifts in cash or in kind;
income in cash or in kind received from marketing or payment discounts, sales
promotion prizes and other supports.
14. Compensations for fixed assets on land
and monetary supports for relocation after subtracting related expenses, such
as expense for relocation (transportation and installation expense), residual
value of fixed assets and other expenses (if any). Particularly, after
subtracting related expenses (if any), enterprises may use in accordance with
relevant laws the remainder of compensations for fixed assets on land and
monetary supports for enterprises to be relocated under competent state
agencies’ plannings,.
15. Incomes related to goods sale or service
provision which are not included in turnover, such as rewards for quick release
of ships, tips for food and drink catering or hotel services, after subtracting
expenses for generating such incomes.
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17. Incomes from the contribution of equity
capital, contribution of capital to joint ventures or economic cooperation at
home, which are divided from pre-enterprise income tax incomes.
18. Income received from overseas goods
production and trading or service provision activities.
Offshore-investing Vietnamese enterprises
earning incomes from overseas production and business activities shall declare
and pay enterprise income tax under Vietnam’s Law on Enterprise Income Tax currently
in force, even when they are enjoying enterprise income tax exemption or
reduction under the regulations of the host countries. The enterprise income
tax rate used for calculating and declaring tax on incomes earned overseas is
25%. The incentive tax rate (if any) enjoyed by offshore-investing Vietnamese
enterprises under the current Law on Enterprise Income Tax is not applicable.
Tax agencies may fix taxable income from
overseas production and business activities of offshore-investing Vietnamese
enterprises that violate regulations on tax declaration and payment.
When an income from an overseas investment
project is already subject to enterprise income tax (or a similar tax)
overseas, when calculating enterprise income tax payable in Vietnam, the offshore-investing
Vietnamese enterprise is entitled to subtract the tax amount already paid
overseas or paid on its behalf by its partner in the host country (including
dividend tax), provided that the to-be-subtracted amount must not exceed the
income tax amount calculated under Vietnam’s Law on Enterprise Income Tax. The
exempt or reduced income tax amount of the offshore-investing Vietnamese
enterprise for the profit earned from its overseas investment project under the
law of the host country may also be subtracted upon determining the enterprise
income tax amount payable in Vietnam.
Example 1: Vietnamese enterprise A receives
an income of VND 800 million from an overseas investment project. This income
is the remainder after an income tax is paid under the law of the host country.
The payable income tax amount calculated under the host country’s Law on
Enterprise Income Tax is VND 200 million. The paid enterprise income tax
amount, after reduced by 50% under the host country’s Law on Enterprise Income
Tax, is VND 100 million.
Tax on income from the overseas investment
project under Vietnam’s Law on Enterprise Income Tax will be:
[(VND 800 million + VND 200 million) x 25%] =
VND 250 million
The payable enterprise income tax amount
(after subtracting the tax amount already paid in the host country) will be:
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Example 2: Vietnamese enterprise A receives
an income of VND 660 million from an overseas investment project. This income
is the remainder after an income tax is paid in the host country. The
enterprise income tax amount already paid under the host country’s regulations
is VND 340 million.
Income tax declaration and payment will be
made for the income from the enterprise’s overseas investment project under Vietnam’s
Enterprise Income Tax Law as follows:
[(VND 660 million + VND 340 million) x 25%] =
VND 250 million.
Enterprise A is entitled to subtract the tax
amount already paid in the host country equivalent to the tax amount calculated
under Vietnam’s Law on Enterprise Income Tax, which is VND 250 million. The tax
amount already paid in the host country in excess of the tax amount calculated
under Vietnam’s Law on Enterprise Income Tax, which is VND 90 million (340 -
250) is not allowed to be subtracted from the payable tax amount upon
enterprise income tax declaration and payment in Vietnam.
The dossier to be submitted upon tax
declaration and payment by an offshore-investing Vietnamese enterprise for the
income from its overseas investment project comprises:
- The enterprise’s document on dividing the
project’s profit.
- The enterprise’s financial statement
certified by an independent audit organization.
- The enterprise’s income tax return for the
project (copy certified by the project’s competent representative);
- The enterprise’s tax finalization record
(if any);
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If an overseas investment project has not
generated any taxable income (or is suffering losses), upon annual enterprise
income tax declaration and finalization, the offshore-investing Vietnamese
enterprise is only required to submit a financial statement certified by an
independent audit organization or a competent agency of the host country and the
project’s income tax return (copy certified by the project’s competent
representative). Upon enterprise income tax calculation, losses arising from
the overseas investment project are not allowed to be offset against incomes
earned in Vietnam by the enterprise.
Income earned from an overseas investment
project shall be declared in the enterprise income tax finalization of the year
following the fiscal year when such income is earned or of the fiscal year
coinciding the year when such income is earned if the enterprise has sufficient
grounds and documents for determining the project’s income and paid income tax
amount.
Example 3: Vietnamese enterprise A has an
income from an overseas investment project in the 2009 fiscal year. It must
declare this income in the income tax finalization declaration of the 2009 or
2010 fiscal year under Vietnam’s Law on Enterprise Income Tax.
For income from production and business
activities of an investment project implemented in a country which has signed a
double taxation avoidance agreement with Vietnam, Vietnamese enterprises
investing in this country shall declare and pay tax in accordance with this
agreement.
19. Incomes in cash or in kind received from
aid sources, except aid specified in Clause 7, Section VI of this Part.
20. Other incomes provided for by law.
VI. TAX-EXEMPT
INCOMES
1. Incomes from cultivation, husbandry and aquaculture
of organizations established under the Law on Cooperatives.
2. Incomes from the provision of technical
services directly for agriculture, including income from such services as
irrigation and water drainage; soil ploughing and harrowing, and dredging of
intra-field canals and ditches; prevention and control of crop and animal pests
and diseases; and harvest of agricultural products.
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3.1. For tax-exempt income from the performance
of scientific research and technological development contracts, the following
conditions must be satisfied:
- The scientific research activity
registration is certified;
- Such performance is certified by a
competent science state management agency;
3.2. To be eligible for tax exemption for income
from the sale of products turned out with technologies applied for the first
time in Vietnam, such technologies must be certified by a competent science
state management agency.
4. Income from goods production and trading or
service provision activities of enterprises employing disabled, detoxified and
HIV-infected laborers who account for at least 51% of the average number of
laborers in a year.
Example: Enterprise A has 290 salaried
laborers in January 2009; in April 2009. it employs other 12 laborers; in
October, 2 laborers quit their jobs; in December, 3 other laborers quit their
jobs. So, the average number of laborers in 2009 will be:
290
+
(12 laborers x 9
months) - (2 laborers x 3 months) - (3 laborers x 1 month)
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12
Therefore, enterprise A’s average number of
laborers in 2009 is 298; in case enterprise A employs 151 or more disabled
laborers (298 x 51%), its income from goods production and trading or service
provision activities will be exempt from tax.
- Tax-exempt incomes specified in this Clause
exclude other incomes referred to in Section V, Part C of this Circular.
- For tax-exempt income specified at this
Point, the following conditions must be fully satisfied:
4.1. For enterprises employing disabled
laborers (including war invalids and diseased soldiers), a competent heath
agency’s certification of the number of disabled laborers is required.
4.2. For enterprises employing detoxified
laborers, detoxification establishments’ certification of the complete
detoxification or a concerned competent agency’s certification is required.
4.3. For enterprises employing HIV-infected
laborers, a competent heath agency’s certification of the number of
HIV-infected laborers is required.
5. Income from job training activities exclusively
reserved for ethnic minority people, the disabled, children in extremely disadvantaged
circumstances and people involved in social evils. If an establishment also provides
job training for other categories of people, tax-exempt income shall be
determined based on the ratio between the number of ethnic minority people, the
disabled, children in extremely disadvantaged circumstances and persons involved
in social evils and the total number of trainees.
For tax-exempt income from job training
activities specified at this Point, the following conditions must be fully
satisfied:
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- Lists of trainees being ethnic minority
people, the disabled, children in extremely disadvantaged circumstances and
persons involved in social evils are required.
6. Incomes divided from capital contribution,
share purchase, joint venture or association with domestic enterprises, after
contributed capital recipients, bond issuers or joint venture or association
parties have paid enterprise income tax under the Law on Enterprise Income Tax,
including those entitled to tax exemption or reduction.
Example: Enterprise B received contributed
capital from enterprise A. Pre-tax income corresponding to enterprise A’s
contributed capital in enterprise B is VND 100 million.
- Case 1: Enterprise B is not entitled to
enterprise income tax incentives and has fully paid enterprise income tax,
including enterprise A’s income, then the income enterprise A receives from
capital contribution is VND 75 million [(VND 100 million - (VND 100 million x
25%)], and enterprise A will be exempt from enterprise income tax on this
amount.
- Case 2: Enterprise B is entitled to a 50%
reduction of the payable enterprise income tax amount and has fully paid
enterprise income tax, including enterprise A’s income according to the reduced
enterprise income tax amount, then the income enterprise A receives from
capital contribution is VND 87.5 million [(VND 100 million - (VND 100 million x
25% x 50%)], and enterprise A will be exempt from enterprise income tax on this
amount.
- Case 3: Enterprise B is entitled to
enterprise income tax exemption, then the income enterprise A receives from
capital contribution is VND 100 million, and enterprise A will be exempt from
enterprise income tax on this amount.
7. Aid used for educational, scientific
research, cultural, artistic, charitable, humanitarian and other social
activities in Vietnam.
Aid beneficiaries that improperly use the aid
shall calculate and pay enterprise income tax at 25% of the improperly used aid
amount.
Aid beneficiaries defined in this Clause must
be those established and operating under law and strictly observing the laws on
accounting and statistics.
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1. Loss arising in a tax period is the
negative taxable income amount.
2. After making tax finalization,
loss-suffering enterprises may carry forward losses of the year of tax
finalization to subsequent years’ taxable incomes. The maximum duration for
loss carry forward is 5 consecutive years, counting from the year following the
year the losses arise.
Enterprises shall determine by themselves
losses to be offset against taxable incomes on the above principle. In the loss
carry forward duration, newly arising losses (excluding losses carried forward
from the previous period) are allowed to be carried forward for not more than 5
consecutive years, counting from the year following the year the losses arise.
When an agency competent to examine and
inspect enterprise income tax finalization finds out a loss amount which an
enterprise is allowed to carry forward is different from the loss amount
determined by the enterprise itself, the loss amount allowed to be carried
forward shall be determined based on the competent agency’s conclusion, and
carried forward for not more than 5 consecutive years, counting from the year
following the year the losses arise.
Past the 5-year duration, arising losses not
yet fully offset are not allowed to be further offset against subsequent years’
incomes.
3. Enterprises subject to type or ownership
transformation (including assignment or sale of state enterprises), merger,
consolidation, separation, split, dissolution or bankruptcy shall finalize with
tax agencies enterprise income tax amounts up to the time of issuance of
decisions on form conversion, ownership transformation, merger, consolidation,
separation, split, dissolution or bankruptcy. The old enterprises’ losses may
be further carried forward to the new enterprises’ taxable incomes and must be
monitored in detail according to the years they arise to ensure that they are
carried forward for not more than 5 consecutive years, counting from the year
following the year they arise.
4. Upon issuance of a dissolution decision of
a joint-venture enterprise set up by different enterprises, any loss of the
joint-venture enterprise shall be allocated to every enterprise to the joint
venture. The enterprises to the joint venture may incorporate the loss amount
allocated from the joint venture into their business results upon tax
finalization while ensuring that such loss is carried forward for not more than
consecutive 5 years, counting from the year following the year the loss arises.
VIII. DEDUCTION FOR
SETTING UP OF ENTERPRISES’ SCIENTIFIC AND TECHNOLOGICAL DEVELOPMENT FUNDS
1. Enterprises established and operating
under Vietnamese law may deduct up to 10% of their annual taxed income before
calculating enterprise income tax for setting up their scientific and
technological development funds. Before calculating enterprise income tax.
enterprises may determine by themselves the level of deduction for setting up
their scientific and technological development funds under regulations. Annually,
enterprises which make deductions for setting up their scientific and
technological development funds shall make reports on the setting up and use of
these funds, and declare the level of deduction and deducted amounts in their
enterprise income tax finalization declarations. Reports on the use of
scientific and technological development funds shall be submitted together with
enterprise income tax finalization declarations.
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The improperly used sum of money is not
allowed to be included in the total sum of money used for the scientific and
technological development purpose.
- The enterprise income tax rate used for
calculating the recoverable tax amount is the tax rate applicable to an
enterprise in the deduction duration.
- The interest rate used for calculating the
interest on the recoverable tax amount imposed on the unused fund amount is the
interest rate applicable to treasury bonds of a term of one year at the time of
recovery, and the interest payment duration is two years.
Example: In 2009, Company A makes deductions
for setting up its scientific and technological development fund during
2009-2013 at the level of 10% of the taxed income. At the beginning of 2014,
when making the enterprise income tax finalization report for 2013, the company
makes a 5-year report on the fund setting-up and use based on the annual
reports on the fund setting-up and use as follows:
The deducted amount is VND 2 billion in 2009.
By the end of 2013, the company has used only VND 1.2 billion for scientific
research, accounting for only 60% of the deducted amount (1.2/2 x 100). The
company shall pay an enterprise income tax retrospectively and be sanctioned as
follows:
+ The enterprise income tax amount to be
retrospectively collected because less than 70% of the fund has been used
(presuming that the enterprise income tax rate applicable in the deduction
duration is 25%):
(VND 2 billion - VND 1.2. billion) x 25% =
VND 200 million
+ Interest on the enterprise income tax
amount to be retrospectively collected (presuming that the interest rate
applicable to treasury bonds of a term of one year is 12%):
VND 200 million x 12% x 2 years = VND 48
million
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- The interest rate used for calculating the
interest on the recoverable tax amount imposed on the improperly used fund
amount is the level of fine for late payment under the Tax Administration Law,
and the interest payment duration is counted from the time of fund setting-up
to the time of recovery. The date of recoveiy is the date a violation is
detected and recorded (unless a record is not required).
The determination of the time of fund
setting-up for the improperly used sum of money as a basis for calculating the
interest on the recovered tax amount imposed on the improperly used fund amount
must adhere to the principle that the fund amount deducted first will be used
first.
Example: Company B makes deductions for
setting up its scientific and technological development fund as follows: VND
200 million, 300 million, 300 million, 500 million and 700 million in the 2009,
2010, 2011, 2012 and 2013 tax periods, respectively. In 2010, the company uses
VND 200 million of this fund, including VND 40 million for improper purposes.
Annually, the company makes a report on the fund setting-up and use. As of May
5, 2011, the tax agency, through inspection, delects this improperly used VND
40-million amount and makes a sanctioning record. The interest on the fine for
late payment is 0.05%/day under the current Tax Administration Law.
Case 1: In 2009, the company uses VND 150
million for a scientific and technological scheme, then:
- The improperly used VND 40-million amount
is determined to be taken from the deduction for the fund setting-up in the
2009 tax period.
- The enterprise income tax amount to be
retrospectively collected due to the improper use of the fund will be:
VND 40 million x 25% = VND 10 million
- The number of days for calculating the late
payment fine: 400, from April 1, 2010, to the end of May 5, 2011.
Interest payable as the late payment fine:
VND 10 million x 0.05%/day x 400 days = VND 2 million
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- The improperly used VND 40-million amount
is determined to be taken from the deduction for the fund setting-up in the
2010 tax period.
- The enterprise income tax amount to be
retrospectively collected due to the improper use of the fund will be:
VND 40 million x 25% = VND 10 million
- The number of days for calculating the late
payment fine: 35, from April 1, 2011, to the end of May 5, 2011.
Interest payable as the late payment fine:
VND 10 million x 0.05%/day x 35 days = VND 175,000
3. Enterprises’ scientific and technological
development funds must be used only for scientific and technological investment
in Vietnam. These funds’ expenses must be evidenced with adequate lawful
invoices and documents as prescribed by law.
4. Enterprises may not account their
scientific and technological development funds’ expenses as deductible expenses
upon determination of taxable income in a tax period.
5. For an operating enterprise which
undergoes ownership transformation, is consolidated or merged, the new
enterprise established as a result of such ownership transformation,
consolidation or merger may take over the old enterprise’s scientific and
technological development fund and shall take responsibility for the management
and use of this fund.
If an enterprise still has an unused
scientific and technological development fund upon its separation or split, the
new enterprise established as a result of such separation or split may take
over the old enterprise’s scientific and technological development fund and
shall take responsibility for the management and use of this fund. The
enterprises shall decide on and register with the tax agency the division of
the scientific and technological development fund.
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1. The enterprise income tax rate is 25%,
except the cases specified in Clause 2 of this Part and cases eligible for
preferential tax rates.
2. The enterprise income tax rate applicable
to activities of prospecting, exploring and extracting oil and gas and other
precious and rare natural resources in Vietnam is between 32% and 50%. Based on
the location, mining conditions and reserves of mines, enterprises having
investment projects on prospecting, exploration and extraction of oil and gas
and other precious and rare natural resources shall send investment projects’
dossiers to the Ministry of Finance for further submission to the Prime
Minister to decide on a specific tax rate on a case-by-case basis.
Other precious and rare natural resources
mentioned in this Clause include platinum, gold, silver, tin, tungsten,
antimony, gems and rare earths.
Part D
PLACES
FOR TAX PAYMENT
1. Principles for determination
Enterprises shall pay tax in localities where
they are headquartered. For an enterprise that has a dependent cost-accounting
production establishment (including a processing and assembly establishment)
operating in a province or centrally run city other than the locality where it
is headquartered, the tax amount shall be calculated and paid in both the
locality where the enterprise is headquartered and the locality where its production
establishment is based.
The tax payment referred to in this Clause is
not applicable to works, work items or dependent cost-accounting construction
establishments.
2. Determination of tax amounts and
procedures for tax declaration and payment
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The ratio of expenses is that between total
expenses incurred by the dependent cost-accounting production establishment and
total expenses incurred by the enterprise. The ratio of expenses is determined
as follows:
Ratio of expenses
incurred by the dependent cost-accounting production establishment
=
Total expenses
incurred by the dependent cost-accounting production establishment
Total expenses
incurred by the enterprise
Data used for determining the ratio of
expenses are the enterprise’s income tax finalization data in the year
preceding the tax year, which shall be determined by the enterprise itself as a
basis for determining the payable amount and used for the enterprise income tax
declaration and payment for subsequent years.
An operating enterprise which has different
dependent cost-accounting production establishments in different localities
shall determine by itself data used for determining the ratio of expenses
incurred by the enterprise in the locality where it is headquartered and
expenses incurred by its dependent cost-accounting production establishments,
based on the 2008 enterprise income tax finalization data. This ratio will be
used stably from 2009 onwards.
A new enterprise or an operating enterprise
which increases or reduces its dependent cost-accounting production
establishments in localities shall determine by itself the ratio of expenses in
the first tax period in this case. From the subsequent tax period, the ratio of
expenses shall be determined on the above principle.
2.2. Enterprises shall declare and pay
enterprise income tax amounts arising in the localities where they are
headquartered and the localities where their dependent cost-accounting
production establishments arc based according to form No. 07/TNDN attached to
this Circular (not printed herein). Based on enterprise income tax
amounts calculated and paid on a quarterly basis and the ratio of expenses
incurred by dependent cost-accounting production establishments, enterprises
shall determine enterprise income tax amounts to be temporarily paid on a
quarterly basis in the localities where they are headquartered and the
localities where their dependent cost-accounting production establishments are
based.
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3. Procedures for transferring documents between
state treasuries and tax agencies
Enterprises shall pay enterprise income tax
arising in localities where they are headquartered to state treasury offices of
the same level with tax agencies with which they register tax declaration and,
at the same time, pay payable tax amounts for their dependent cost-accounting
production establishments in other localities. Tax payment documents shall be
made separately for each state treasury office collecting tax amounts into the
state budget.
When an enterprise pays tax amounts in cash
into the state treasury office in the locality where it is headquartered, such
state treasury shall transfer such amounts and state budget collection
documents to the concerned state treasury office for accounting its dependent
cost-accounting production establishment’s tax amount as state budget revenue.
4. Tax finalization
An enterprise shall declare its enterprise
income tax finalization in the locality where it is headquartered; the
enterprise income tax amount the enterprise shall further pay is the finalized
payable enterprise income tax amounts minus the amount temporarily paid in the
locality where it is headquartered and in localities where its dependent
cost-accounting production establishments are based. The enterprise income tax
amount to be further paid or refunded upon tax finalization shall also be
allocated according to the ratio applicable to the locality where the enterprise
is headquartered and localities where its dependent cost-accounting production
establishments are based.
The decentralization, management and use of
tax revenues must comply with the State Budget Law.
5. Dependent cost-accounting units of enterprises
practicing cost-accounting in the whole system that have incomes from
activities other than their major business activities shall pay tax in
provinces or centrally run cities where other activities are carried out.
Part E
DETERMINATION
OF TAXED INCOMES FROM AND ENTERPRISE INCOME TAX ON CAPITAL OR SECURITIES
TRANSFER
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1.1. An enterprise’s income from capital transfer
is income earned from the transfer of part or the whole of its capital amount
invested in one or many other organizations or individuals (including the sale
of the whole enterprise).
1.2. An enterprise’s income from securities transfer
is income earned from the transfer of some or all of its securities invested in
one or many other organizations or individuals.
Income from securities transfer covers income
from the transfer of shares, bonds, fund certificates and securities of other
kinds under regulations.
1.3. Enterprises having incomes from capital
or securities transfer shall declare and pay enterprise income tax under the
guidance in Part E of this Circular.
2. Tax bases
2.1. Taxed income:
a/ Taxed income from capital transfer is
determined as follows:
Taxed income = Transfer price - Purchasing
price of the transferred capital - Transfer expenses
Of which:
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If installment or deferred payment is made
under the capital transfer contract, the contract’s turnover excludes
installment or deferred payment interests in the contractual term.
If the payment price is not stated in the
transfer contract or when the tax agency has grounds to determine that the
payment price does not match the market price, it may conduct inspection and
fix the transfer price on the basis of its investigation documents or capital
transfer prices in other cases at the same time applicable to the same economic
organization or under similar transfer contracts.
- The purchasing price of the transferred
capital amount is determined on a case-by-case basis as follows:
+ In case of transfer of contributed capital
for enterprise establishment, it is the value of the capital amount at the time
of capital contribution. Such capital value is determined on the basis of the
transferor’s accounting books, invoices and documents at the time of capital
contribution, and certified by parties to the enterprise or the business
cooperation contract.
+ In case of capital redemption, it is the
value of the capital amount at the time of redemption. The purchasing price
shall be determined based on the contract on redemption of the contributed
capital amount and payment documents.
If an enterprise making cost-accounting in
foreign currency (approved by the Ministry of Finance) transfers the
contributed capital in a foreign currency, the transfer price and purchasing
price of the transferred capital amount shall be determined in foreign
currency. If an enterprise making cost-accounting in Vietnam dong transfers the
contributed capital in a foreign currency, the transfer price must be
determined in Vietnam dong at the exchange rate applicable at the time of
transfer, and the purchasing price of the transferred capital amount shall be
determined in Vietnam dong at the exchange rate applicable at the time of
capital contribution or redemption of the contributed capital amount.
- Transfer expenses are actual expenses
directly related to the transfer with lawful evidence documents and invoices.
If transfer expenses are incurred overseas, their original documents must be
certified by a notary office or an independent audit organization of the
country where such expenses are incurred, and translated into Vietnamese (with
the certification of a duly authorized representative).
Transfer expenses include expense for
carrying out legal formalities necessary for the transfer; charges and fees
paid for carrying out transfer procedures; expenses for transaction,
negotiation and signing of transfer contracts; and other expenses with evidence
documents.
Example: Enterprise A contributes VND 400
billion, including VND 320 billion in the value of workshops and VND 80 billion
in cash, for establishing a joint-venture enterprise to produce tissue papers.
Then it transfers this contributed capital amount to enterprise B at the price
of VND 550 billion. The book value of enterprise A’s contributed capital at the
time of transfer is VND 400 billion and the capital transfer-related expense is
VND 70 billion. In this case, income used for calculating enterprise income tax
on this capital transfer is VND 80 billion (550 - 400 - 70).
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- The securities selling price is determined
as follows:
+ For listed securities and public companies’
unlisted securities registered for trading at a securities trading center, it
is the actual securities selling price (the order-matching price or
agreement-based price) announced by the stock exchange or securities trading
center.
+ For securities of companies other than
those mentioned above, it is the transfer price indicated in the transfer
contract.
- The securities purchasing price is
determined as follows:
+ For listed securities and public companies’
unlisted securities registered for trading at a securities trading center, it
is the actual securities purchasing price (the order-matching price or
agreement-based price) announced by the stock exchange or securities trading
center.
+ For securities purchased through auction,
it is the price indicated in the notice of share auction-winning results of the
share-auctioning organization and in the money receipt.
+ For securities other than those mentioned
above, it is the transfer price indicated in the transfer contract.
- Transfer expenses are actual expenses
directly related to the transfer with lawful evidence documents and invoices.
Transfer expenses include expense for
carrying out legal formalities necessary for the transfer; charges and fees
paid for carrying out transfer procedures; securities depository charge as
prescribed by the State Securities Commission and indicated in receipts of the
securities company; securities entrustment charge based on the trustee’s
receipts; expenses for transaction, negotiation and signing of transfer
contracts; and other expenses with evidence documents.
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The enterprise income tax rate applicable to
income from capital or securities transfer is 25%.
2.3. Determination of the payable enterprise
income tax amount:
Payable enterprise income tax = Taxed income
x Enterprise income tax rate
3. Tax declaration and payment
3.1. For capital- or securities-transferring Vietnamese
enterprises and foreign enterprises
Enterprises’ income earned from capital or
securities transfer will be determined as other income and declared as a
taxable income upon enterprise income tax calculation.
3.2. For capital-transferring foreign enterprises
and organizations conducting production and business activities in Vietnam not
under the Investment Law or Enterprise Law
Capital transferees shall determine, declare,
deduct and pay on behalf of foreign organizations the payable enterprise income
tax amount
The deadline for submitting a tax declaration
dossier is the 10th day counting from the date a competent agency
approves the capital transfer, or from the date the parties agree to transfer
capital under a capital transfer contract, in case capital transfer approval is
not required.
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- A declaration of enterprise income tax on
capital transfer (made according to form No, 08/TNDN attached to this Circular,
not printed herein);
- A copy of the transfer contract. A
foreign-language transfer contract must be translated into Vietnamese with the
following principal details: transferor; transferee; time of transfer; contents
of transfer; rights and obligations of each contractual party; contractual
value; and payment deadline, method and currency.
- A copy of a competent agency’s decision
approving the capital transfer (if any);
- A copy of the contributed capital
certification;
- Original documents of expenses.
In case a dossier is to be supplemented, the
tax agency shall notify the required supplementation to the capital transferee
right on the date of dossier receipt if it directly receives the dossier, or
within 3 working days after receiving the dossier by post or email.
Tax declaration dossiers shall be submitted
to tax agencies with which enterprises of capital-transferring foreign
organizations or individuals register lax payment.
The tax payment deadline is the deadline for
submitting tax declaration dossiers.
Part F
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I. TAXABLE INCOMES
1. Incomes from real estate transfer include
income from the transfer of land use or lease rights; income from sublease of
land of real estate-trading enterprises under the land law, regardless of
whether there are infrastructure facilities or architectural works on such
land.
Incomes from real estate transfer include:
- Income from the transfer of land use or
lease rights; income from sublease of land of real estate-trading enterprises;
- Income from the transfer of land use or lease
rights; income from sublease of land with assets thereon of real estate-trading
enterprises, including:
+ Houses;
+ Infrastructure;
+ Architectural works;
+ Other assets, including agricultural,
forest and fishery products (plants and animals);
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Income from the sublease of land of real
estate-trading enterprises excludes the case in which enterprises lease only
houses, infrastructure facilities or architectural works on land.
2. Enterprises earning incomes from real
estate transfer shall declare and pay enterprise income tax under the guidance
in Part F of this Circular.
II. TAX BASES
Bases for calculating income tax on real
estate transfer include taxed income and tax rate.
Taxed income equals (=) taxable income minus
(-) previous years’ losses from real estate transfer (if any).
1. Taxable income
Taxable income from real estate transfer is
the turnover from real estate transfer minus the cost of the real estate and
deductible expenses related to the real estate transfer.
1.1. Turnover from real estate transfer
a/ Turnover from real estate transfer is
determined based on the actual transfer price (including surcharges and
additional charges, if any) at the time of transfer.
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The time of determining taxed turnover is the
time the seller hands the real estate to the purchaser, regardless of whether
the purchaser has registered asset ownership or land use right or has land use
rights established at a competent state agency.
When an enterprise that is allocated or
leased by the State land for implementing investment projects to build
infrastructure or houses for transfer or lease collects money advanced in any
form by customers according to schedule, the time of determining turnover used
for calculating the enterprise income tax amount to be temporarily paid is the
time of money collection.
- If the enterprise collecting money from
customers has determined expenses corresponding with turnover, it shall declare
and temporarily pay an enterprise income tax amount based on turnover minus
these expenses.
- If the enterprise collecting money from
customers has not yet been able to determine expenses corresponding with
turnover, it shall declare and temporarily pay an enterprise income tax amount
equal to 2% of the collected sum of money which is not required to be included
in the turnover used for calculating enterprise income tax in the year.
For enterprises which, prior to 2009,
collected money from customers according to the schedule but did not yet
declare and pay enterprise income tax on this sum of money, they shall declare
this sum of money in 2009 for determining the enterprise income lax amount to
be temporarily paid on the above principle.
When delivering real estate, the enterprise
shall finalize the payable enterprise income lax amount. If the temporarily
paid enterprise income tax amount is smaller than the payable enterprise income
tax amount, the enterprise shall fully remit the deficit into the stale budget.
If the temporarily paid enterprise income tax amount is larger than the payable
enterprise income tax amount, the enterprise may either have the overpaid tax
amount subtracted from the subsequent period’s payable enterprise income tax
amount or have it refunded.
b/ Turnover used for calculating taxable income
in some cases is determined as follows:
- When an enterprise that leases land from
the State and pays annual land rents subleases such land with or without
infrastructure or architectural works thereon, it is the rent paid periodically
by the lessor under such lease contract. If the lessor advances rents for many
years, turnover used for calculating taxable income shall be divided to the
number of years for which rents have been advanced.
- When a credit institution receiving the
value of land use rights used as loan security in substitution of the
performance of the secured obligations transfers land use rights mortgaged as
loan security, it is the transfer price of land use rights agreed by the
involved parties.
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The determination of turnover in the cases
cases specified in this Item b must follow the principles referred to in Item a
of this Point.
1.2. Real estate transfer expenses:
a/ Principles for determination:
- Deductible expenses upon determination of
taxable income from real estate transfer in a tax period must correspond with
turnover used for calculating taxable income.
- If an investment project is partially
completed and gradually transferred according to the completion progress,
overhead expenses for the project and direct expenses for the completed part of
the project shall be divided by square meter of the transferred land for
determining taxable income from the transferred land area, including expenses
for internal roads and greenery; construction of water supply and drainage
systems and transformer stations; compensations for assets on land;
compensation, support and resettlement and organization of compensation,
support and resettlement work, which are not yet subtracted from land use
levies or land rents remittable into the state budget; land use levies
remittable into the state budget and other expenses invested on land which are
related to the land use or lease right transfer. The above expenses are
allocated according to the following formula:
Expense allocated
to the transferred land area
=
Total expenses for
infrastructure investment
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x
Transferred area
land
Total land area
allocated for the project (excluding the land area used for public purposes
under the land law)
When part of the project’s non-transferred
land area is used for other business activities, the above overhead expenses
shall also be allocated to this land area for monitoring, accounting,
declaration and payment of enterprise income tax for other business activities.
When an enterprise invests in building an
infrastructure facility lasting for between over 1 year and 5 years and may
finalize the value of the infrastructure facility only when the whole work is
completed, when summing up real estate transfer expenses for the transferred
land area, the enterprise may temporarily allocate actual infrastructure investment
expenses based on the ratio of the transferred land area according to the above
formula. After completing construction investment work, the enterprise may
readjust infrastructure investment expenses temporarily allocated to the
transferred land area to accord with the total value of the infrastructure
facility. Upon adjustment, if the paid tax amount is higher than the payable
tax amount on the real estate transfer, the enterprise may have the overpaid
amount subtracted from the subsequent tax period’s payable tax amount or have
it refunded under current regulations; if the paid tax amount is insufficient,
the enterprise shall fully pay the deficit under regulations.
b/ Deductible expenses for real estate
transfer include:
- Cost of the transferred land, determined
according to the land use right origin, specifically:
+ For land allocated by the State with
collection of land use levy or land rent, its cost is the land use levy or land
rent actually remitted into the state budget.
+ For land transferred from another
organization or individual, its cost shall be determined based on the contract
and lawful payment document upon the receipt of its use or lease rights; if the
contract and payment document are unavailable, such cost shall be calculated based
on the price prescribed by the provincial-level People’s Committee at the time
the enterprise receives the real estate transferred;
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If the cost of land indicated in the capital
contribution record is higher than the market price at the time of capital
contribution, the tax agency shall, based on the market land price at the time
of capital contribution, re-determine the land price upon determination of
taxable income.
+ If the enterprise has exchanged a
construction work for state land, the cost of such land shall be determined
based on the value of the exchanged work, unless competent state agencies’
separate regulations are applied.
+ The auction-winning price, in case of
auction of land use or lease rights;
+ For inherited land under the civil law or
donated land with unidentifiable cost, its cost shall be determined based on
the land price decided by the provincial-level People’s Committee on the basis
of the land price bracket prescribed by the Government at the time of
inheritance or donation.
For land inherited or donated before 1994,
its cost shall be determined based on the land price decided by the provincial-level
People’s Committee in 1994 on the basis of the land price bracket specified in
the Government’s Decree No. 87/CP of August 17, 1994.
+ For land mortgaged to secure loans or land
distrained to secure judgment enforcement, its cost shall be determined on a
case-by-case basis under the above guidance.
- Expense for land damage compensation.
- Expense for crop damage compensation.
- Compensation, support and resettlement
expenses and expenses for organization of compensation, support and resettlement
work under law.
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- Charges and fees related to the grant of
land use rights as prescribed by law.
- Expense for soil revamp and ground
leveling.
- Expense for the construction of
infrastructure, such as roads, power lines, water supply and drainage systems,
post and telecommunications facilities, etc.
- The value of infrastructure and
architectural works on land.
- Other expenses related to the transferred
real estate.
An enterprise that conducts different
business lines shall separately account expenses for each business line. If
separate accounting cannot be conducted, overhead expenses shall be allocated
based on the ratio between real estate transfer turnover and the total turnover
of the enterprise.
Expenses already paid by the State or with
capital of other sources may not be accounted as real estate transfer expenses.0
2. The enterprise income tax rate for real
estate transfer is 25%.
3. Determination of payable enterprise income
tax amounts:
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Income from real estate transfer must be
separately determined for tax payment declaration. The incentive tax rates and
the tax exemption and reduction duration guided in Part H of this Circular are
not applicable to income from real estate transfer. Losses from real estate
transfer, if any, are not allowed to be offset against income from production
and business activities and other incomes but may be carried forward to
subsequent years’ taxable income from real estate transfer (if any). The
maximum loss carry forward duration is 5 consecutive years, counting from the
year following the year the losses arise.
III. TAX DECLARATION,
PAYMENT AND FINALIZATION
1. Enterprises shall submit tax declaration dossiers
and pay enterprise income tax on income from real estate transfer to tax
agencies of localities where exists the transferred real estate.
Declaration and payment dossiers and payment
documents for income tax on real estate transfer arising in localities where
exist the transferred real estates serve as bases for carrying out tax
finalization procedures in localities where enterprises are headquartered.
2. For enterprises with irregular real estate
transfer activities:
These enterprises shall declare the
temporarily calculated enterprise income tax amount upon each real estate
transfer.
An enterprise income tax declaration dossier
upon each real estate transfer is the declaration of income tax on real estate
transfer, made according to form No. 09/TNDN attached to this Circular (not
printed herein).
Based on the declaration dossier of
enterprise income tax on real estate transfer, the tax agency shall acknowledge
the payable tax amount or adjust it and directly notify the taxpayer thereof
within 3 working days after receiving the dossier.
At the end of a tax year, when making
enterprise income tax finalization declarations, the income tax amount on real
estate transfer must be separately accounted. If the tax amount paid as
notified upon carrying out procedures for the grant of a land use right
certificate is smaller than the payable tax amount under the enterprise income
tax finalization declaration, the enterprise shall remit the deficit into the
state budget. If the paid tax amount is higher than the payable tax amount
under the tax finalization declaration, the overpaid tax amount is allowed to
be subtracted (-) from the deficient amount of enterprise income tax on other business
activities or subtracted (-) from the subsequent period’s payable enterprise
income tax amount. Losses from real estate transfer, if any, must be separately
monitored and may be carried forward to subsequent years’ taxable income from
real estate transfer under regulations.
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These enterprises shall declare, pay and
finalize tax under the guidance in the Finance Ministry’s Circular No.
60/2007/TT-BTC of June 14, 2007.
If these enterprises favor tax payment upon
each real estate transfer, they shall declare tax like enterprises with
irregular real estate transfer activities.
At the end of a tax year, enterprises shall
carry out procedures for enterprise income tax finalization for all real estate
trading activities under declarations upon each real estate transfer and
quarterly declarations of temporary payment of enterprise income tax. If the
tax amount temporarily paid in the year is smaller than the payable tax amount
under the enterprise income tax finalization declaration, the enterprise shall
remit the deficit into the state budget. If the temporarily paid tax amount is
higher than the payable tax amount under the tax finalization declaration, the
overpaid tax amount is allowed to be subtracted (-) from the subsequent period’s
payable enterprise income tax amount. Losses from real estate transfer, if any,
may be carried forward to subsequent years’ taxable income from real estate
transfer under regulations.
4. Enterprises shall declare enterprise
income tax on real estate transfer according to declaration No. 09/TNDN
attached to this Circular (not printed herein). Enterprise income tax
temporarily paid from sums of money advanced by customers according to schedule
shall be paid at tax agencies of localities where exists the transferred real
estate, and declared in Part II of declaration No. 09/TNDN. When handing over
real estate, enterprises shall officially finalize enterprise income tax on
real estate transfer and declare it in Part I of declaration No. 09/TNDN.
5. Credit institutions which receive the
value of real estate used as loan security in substitution of the performance
of the secured obligation shall, when transferring such real estate, declare
and remit income tax on real estate transfer into the state budget. In case of
auction of real estate mortgaged as loan security, the proceeds from such
auction shall be paid under the Government’s regulations on securing credit
institutions’ loans, and tax shall be declared and paid under regulations.
After paying these amounts, the remainder shall be returned to business
organizations that have mortgaged fixed assets to secure loans. Credit
institutions or organizations authorized by credit institutions to auction
assets shall declare and deduct income tax on real estate transfer, and remit
it into the state budget under their names, addresses, tax identification
numbers and invoices. Such documents must clearly indicate the tax declaration
and payment for the owners of auctioned assets used as loan security.
6. When a judgment enforcement agency
auctions real estate used to secure judgment enforcement, the proceeds from
such auction shall be used under the Government’s Decree on distraint and
auction of land use rights to secure judgment enforcement. Organizations
authorized to auction real estate shall declare and deduct income tax on real
estate transfer and remit it into the state budget under their names,
addresses, tax identification numbers and invoices. Such documents must clearly
indicate the tax declaration and payment for the owners of auctioned assets
used as judgment enforcement security.
Part G
ENTERPRISE
INCOME TAX INCENTIVES
I. CONDITIONS AND
PRINCIPLES FOR APPLICATION OF ENTERPRISE INCOME TAX INCENTIVES
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2. Principles for application of enterprise
income tax incentives
2.1. In the duration of enjoying enterprise
income tax incentives, enterprises which carry out different production and
business activities shall separately account income from production and
business activities eligible for enterprise income tax incentives (including
preferential tax rates or tax exemption or reduction).
In a tax period, if an enterprise fails to
separately account incomes from production and business activities eligible and
ineligible for tax incentives, the income from production and business
activities eligible for tax incentives equals (=) the total taxable income from
production and business activities (excluding other incomes) multiplied by (x)
the ratio (%) between the turnover from production and business activities
eligible for tax incentives and the total turnover of the enterprise in the tax
period.
2.2. New enterprises under investment projects
eligible for enterprise income tax incentives are enterprises making business registration
for the first time, excluding:
a/ Enterprises established as a result of
separation, split, merger or consolidation under law;
b/ Enterprises established as a result of
form conversion or ownership transformation, except the case of assignment,
contracting or lease of state enterprises;
c/ New private enterprises or one-member
limited liability companies whose owners were heads of individual business
households which conduct the same production and business lines;
d/ New private enterprises, partnerships,
limited liability companies or cooperatives with their at-law representatives
(unless at-law representatives are other than capital contributors), partners
or biggest capital contributors having participated in business activities in
the capacity as at-law representatives, partners or biggest capital
contributors in operating enterprises or enterprises dissolved within less than
12 months counting from the time of dissolution of old enterprises to the time
of establishment of new enterprises.
An investment project is a combination of
proposals to contribute medium- and long-term capital for conducting investment
activities under the investment law.
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2.4. In a tax year within the duration of
enjoying enterprise income tax incentives, if an enterprise fails to satisfy
one of the conditions for enjoying lax incentives specified in this Circular,
it is not entitled to tax incentives in that tax year and is subject to the tax
rate of 25%.
2.5. In a tax period, an enterprise which
conducts business activities eligible and ineligible for tax incentives shall account
income from business activities eligible for tax incentives separately from
income from those ineligible for tax incentives for separate payment
declaration.
If business activities eligible for tax
incentives sustain losses, while business activities ineligible for tax
incentives (except real estate transfer activities) generate incomes (or vice
versa), the enterprise may choose to offset such losses against taxable incomes
from income-earning business activities. After offsetting, the remaining income
is subject to the enterprise income tax rate of income-generating business
activities.
2.6. Enterprise income tax incentives are not
applicable to:
a/ Other incomes specified in Section V. Part
C of this Circular.
b/ Income from activities of prospecting,
exploring and extracting oil. gas and other precious and rare natural
resources.
c/ Income from prize-winning game and betting
business activities under law.
d/ Income from mineral extraction activities.
2.7. Enterprises established as a result of
type or ownership transformation, separation, split, merger or consolidation
shall pay enterprise income tax arrears and fines of the old enterprises and
may take over enterprise income tax incentives for the remaining duration if
still eligible for enjoyment of those incentives.
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- In the enterprise income tax exemption or
reduction duration under regulations, if a competent tax-finalization
examination and inspection agency detects that the enterprise income tax amount
eligible for tax exemption or reduction is smaller than the tax amount declared
by the enterprise itself, the enterprise is entitled to exemption from or
reduction of the enterprise income tax amount detected through examination or
inspection. Depending on the severity of the enterprise’s violations, the
competent examination and inspection agency shall apply sanctions on
tax-related violations under regulations.
II. TAX RATE
INCENTIVES
1. The preferential tax rate of 10% for
fifteen (15) years is applicable to:
1.1. New enterprises under investment
projects in geographical areas with extreme socio-economic difficulties
specified in the Appendix to the Government’s Decree No. 124/2008/ND-CP of
December 11, 2008.
1.2. New enterprises under investment
projects in economic zones or hi-tech parks established under the Prime
Minister’s decisions.
1.3. New enterprises under investment
projects in the domains of:
- High technology under law; scientific
research and technological development;
- Development of water plants, power plants,
water supply and drainage systems; bridges, roads, railways; airports, seaports,
river ports; airfields, stations and other infrastructure works of special
importance as decided by the Prime Minister;
- Manufacture of software products.
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3. The tax rate of 10% throughout the operation
duration is applicable to incomes of enterprises operating in
education-training, vocational training, healthcare, cultural, sports and
environmental domains (below collectively referred to as socialized domains).
The Prime Minister shall promulgate a list of
socialized domains.
4. The preferential tax rate of 20% for ten
(10) years is applicable to new enterprises under investment projects in
geographical areas with socio-economic difficulties specified in the Appendix
to the Government’s Decree No. 124/2008/ND-CP of December 11, 2008.
5. The incentive tax rate of 20% is
applicable throughout the operation duration for agricultural service
cooperatives and people’s credit funds.
After the expiration of the duration of
application of the tax rate of 10% specified at Point 1.1, Clause 1 of this
Part, new agricultural service cooperatives and people’s credit funds in
geographical areas with extreme socio-economic difficulties specified in the
Appendix to the Government’s Decree No. 124/2008/ND-CPof December 11, 2008,
shall switch to apply the tax rate of 20%.
6. The duration of application of preferential
tax rates specified in this Part is counted consecutively from the first year
an enterprise has turnover from activities eligible for tax incentive.
7. Upon the expiration of the duration of application
of the preferential tax rates specified at Points 1, 2 and 4 of this Part,
enterprises shall switch to apply the tax rate of 25%.
III. TAX EXEMPTION
AND REDUCTION DURATIONS
1. Tax exemption for 4 years and a 50%
reduction of payable tax amounts for 9 subsequent years are applicable to:
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1.2. New enterprises under investment
projects in economic zones or hi-tech parks established under the Prime
Minister’s decisions;
1.3. New enterprises under investment
projects in the domains of:
- High technology under law; scientific
research and technological development;
- Development of water plants, power plants,
water supply and drainage systems; bridges, roads, railways; airports,
seaports, river ports: airfields, stations and other infrastructure works of
special importance as decided by the Prime Minister;
- Manufacture of software products.
1.4. New enterprises engaged in socialized domains
in geographical areas with socio-economic difficulties or extreme socio-economic
difficulties specified in the Appendix to the Government’s Decree No. 124/2008/ND-CP
of December 11, 2008.
2. Tax exemption for 4 years and a 50%
reduction of payable tax amounts for 5 subsequent years are applicable to new
enterprises operating in socialized domains in geographical areas outside the
list of those with socio-economic difficulties or extreme socio-economic
difficulties specified in the Appendix to the Government’s Decree No. 124/2008/ND-CP
of December 11, 2008.
3. Tax exemption for 2 years and a 50%
reduction of payable tax amounts for 4 subsequent years are applicable to new
enterprises under investment projects in geographical areas with socio-economic
difficulties specified in the Appendix to the Government’s Decree No. 124/2008/ND-CP
of December 11, 2008.
4. The tax exemption or reduction duration
specified in this Section is counted consecutively from the first year an
enterprise has taxable income from an investment project eligible for tax
incentive; if an enterprise has no taxable income for the first 3 years,
counting from the first year it has turnover from an investment project, the
tax exemption or reduction duration is counted from the fourth year.
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5. The tax exemption or reduction year is
determined according to the tax period. The tax exemption or reduction duration
is counted consecutively from the first tax period an enterprise has taxable
income (excluding losses carried forward from previous tax periods). In the
first tax period, if an enterprise has taxable income but the goods production
and trading or service provision duration is less than 12 months, the
enterprise may register with the tax agency to count the tax exemption or
reduction duration right in that tax period or from the subsequent tax period.
If the enterprise registers the tax exemption or reduction duration in the
subsequent tax period, the first tax period’s payable tax amount must be
determined for remission into the state budget under regulations. The tax
period guided at Point 3 of Part B is not counted for determining tax exemption
or reduction incentives specified at this Point.
IV. TAX REDUCTION IN
OTHER CASES
1. Production, construction or transport
enterprises are entitled to reduction of enterprise income tax amounts
equivalent to actual additional expenses for female laborers as guided in Item
a. Point 2.10, Section IV, Part C of this Circular if they can separately
account these expenses.
Non-business units and offices of
corporations not directly engaged in production and business activities are not
entitled to tax reduction under this Point.
2. Enterprises which employ ethnic minority
laborers are entitled to reduction of payable enterprise income tax amounts
equivalent to actual additional expenses for ethnic minority laborers as guided
in Item b. Point 2.10, Section IV, Part C of this Circular if they can
separately account these expenses.
V. PROCEDURES FOR
APPLICATION OF ENTERPRISE INCOME TAX INCENTIVES
Enterprises shall determine by themselves
conditions for enjoyment of tax incentives, incentive tax rates, the tax
exemption or reduction duration, and losses allowed to be subtracted (-) from
taxed incomes in order to declare and finalize tax with tax agencies.
When conducting examination and inspection at
enterprises, tax agencies shall examine conditions for enjoyment of tax
incentives, enterprise income tax amounts eligible for exemption or reduction,
and losses allowed to be subtracted from their taxable incomes which
enterprises actually satisfy. If enterprises fail to satisfy conditions for
enjoyment of incentive tax rates and tax exemption or reduction duration, tax
agencies shall retrospectively collect tax and sanction tax-related
administrative violation under regulations.
Part H
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1. This Circular takes effect 15 days after
its publication in “CONG BAO” and applies from the 2009 tax period.
Enterprises which apply a fiscal year other
than the calendar year and are ineligible for incentive enterprise income tax
rates shall pay enterprise income tax at the rate of 25% from the 2009 tax
period.
2. Enterprises which are eligible for enterprise
income tax incentives (including incentive tax rates and tax exemption or reduction
duration) under previous legal documents on enterprise income tax or under granted
investment licenses or investment incentive certificates may continue to enjoy these
incentives for the remaining duration. When their current enterprise income tax
incentives, including incentive tax rates and tax exemption and reduction
duration, are less beneficial than the incentives specified in this Circular,
they will enjoy the tax incentives under this Circular for the remaining
duration, counting from the 2009 tax period.
The remaining duration for enjoyment of tax
incentives shall be determined by counting consecutively from the time of
implementation of tax incentive regulations under previous legal documents on
enterprise income tax or under granted investment licenses or investment
incentive certificates.
The remaining incentive duration is the
number of years during which an enterprise is still entitled to tax incentives
(preferential tax rate and tax exemption or reduction duration) guided in this
Circular minus (-) the number of years during which the enterprise has enjoyed
tax incentives (preferential tax rate and tax exemption or reduction duration)
under previous legal documents on enterprise income tax or under the investment
license or investment incentive certificate granted by the end of 2008. The
determination of the above remaining incentive duration must adhere to the
principles below:
- By the end of the 2008 tax period, upon the
expiration of the duration of enjoying tax rate incentives under previous legal
documents on enterprise income tax or under the granted investment license or
investment incentive certificate, an enterprise may not switch to apply tax
incentives (preferential tax rate and tax exemption and reduction duration) for
the remaining duration guided in this Circular.
- By the end of the 2008 tax period, if still
in the duration of enjoying tax incentives (preferential tax rate and tax
exemption and reduction duration) under previous legal documents on enterprise
income tax or under the granted investment license or investment incentive
certificate, an enterprise will continue to enjoy the preferential tax rate and
tax exemption and reduction for the remaining duration as guided in this
Circular.
- By the end of the 2008 tax period, if still
being entitled to a preferential tax rate but no longer entitled to tax
exemption duration because the tax exemption duration under previous legal
documents on enterprise income tax or under the granted investment license or
investment incentive certificate has just expired, an enterprise will not be
entitled to tax exemption but only to tax reduction for the whole number of
years guided in this Circular, and will apply the preferential tax rate for the
remaining duration guided in this Circular.
- By the end of the 2008 tax period, if still
being entitled to a preferential tax rate and tax reduction under previous
legal documents on enterprise income tax or under the granted investment
license or investment incentive certificate, an enterprise will have the
remaining number of years eligible for tax reduction equal to the number of
years eligible for tax reduction guided in this Circular minus (-) the number
of years during which the enterprise has enjoyed tax reduction, counting to the
end of the 2008 tax period, and will continue to apply the preferential tax
rate for the remaining duration guided in this Circular.
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3. An enterprise currently enjoying
enterprise income tax exemption or reduction under previous legal documents on
enterprise income tax or under the granted investment license or investment
incentive certificate, but not an incentive tax rate, may continue to enjoy tax
exemption or reduction for the remaining duration, and shall switch to apply
the tax rate of 25% from the 2009 tax period.
4. For an enterprise entitled to tax
exemption or reduction under previous legal documents on enterprise income tax
or under the granted investment license or investment incentive certificate
which, by the end of the 2008 tax period:
4.1. Has no turnover yet, its tax exemption
or reduction duration shall be counted from the first year of generation of
taxable income; if no taxable income is generated during the first 3 years,
counting from the first year of generation of turnover, its tax exemption or
reduction duration will be counted from the fourth year;
4.2. Has turnover for less than 3 years,
counting from the time turnover is earned, its tax exemption and reduction
duration will be counted from the first year of generation of taxable income;
if no taxable income is generated during the first 3 years, counting from the
first year of generation of turnover, its tax exemption and reduction duration
will be counted from the fourth year, specifically:
For an enterprise with the first tax period
from 2007 and having turnover, its tax exemption and reduction duration will be
counted consecutively from the first year of generation of taxable income. If,
by the end of 2009, no taxable income is generated, its tax exemption or
reduction duration will be counted from 2010.
4.3. Has turnover for 3 years or more, its
tax exemption and reduction duration will be counted from the 2009 tax year,
specifically:
For an enterprise with the first tax period
prior to 2007 and having turnover but no taxable income yet and for which the
tax exemption or reduction duration is not counted yet, its tax exemption or
reduction duration will be counted from the 2009 tax period.
5. Enterprises operating in socialized domains
prior to January 1, 2009, which apply a tax rate higher than 10%, may switch to
apply the tax rate of 10% for their operations in these domains from January 1,
2009.
6. For operating enterprises which have from 2009
investment projects on building new production chains, expanding production
scales, renewing technologies, improving the eco-environment or raising the
production capacity, incomes from these projects will be ineligible for
enterprise income tax incentive. Prior-to- 2009 investment projects currently
enjoying enterprise income tax incentives (for expanded investment) will
continue to enjoy these incentives for the remaining duration, and increased incomes
from expanded investment projects which are currently subject to the tax rate
of 28% will be switched to be subject to the tax rate of 25%.
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Upon submitting enterprise income tax finalization
declarations of the 2008 tax period, enterprises shall notify tax agencies of
investment projects on expanded production which are under construction
investment.
7. Enterprises having investment license,
business registration certificate or investment certificate granted before the
Socialist Republic of Vietnam became a full-fledged member of the World Trade
Organization (i.e., January 11, 2007) which have incomes from business
activities (except textile and garment-related activities) and are enjoying
enterprise income tax incentives for their satisfaction of the export rate
conditions under legal documents on foreign investment in Vietnam, domestic
investment promotion and enterprise income tax, will continue enjoying
enterprise income tax incentives under these legal documents until 2011.
This Circular replaces:
- The Finance Ministry’s Circular No. 134/2007/TT-BTC
of November 23, 2007, guiding the implementation of the Government’s Decree No.
24/2007/ND-CP of February 14, 2007, which details the implementation of the Law
on Enterprise Income Tax.
- Enterprise income tax declaration No.
02/TNDN (attached to Circular No. 60/2007/TT-BTC) applicable to business
organizations which declare enterprise income tax from land use or lease right
transfer.
9. To annul enterprise income tax-guiding provisions
promulgated by the Ministry of Finance and other branches which are contrary to
this Circular.
10. The settlement of tax-related problems,
tax finalization, exemption and reduction, and the handling of violations of
the law on enterprise income tax before the 2009 tax period comply with
relevant enterprise income tax-guiding regulations promulgated before the 2009
tax period.
11. In case the Socialist Republic of Vietnam
has acceded to or signed a treaty or international agreement which provides for
enterprise income tax payment differently from the guidance in this Circular,
the provisions of that treaty or international agreement prevail.
Organizations and enterprises should promptly
report problems arising in the course of implementation to the Ministry of
Finance for timely settlement.
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FOR THE MINISTER OF
FINANCE
VICE MINISTER
Do Hoang Anh Tuan