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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. 11684/BTC-TCT
Guiding the business income tax
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Hanoi,
September 16, 2005
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To:
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Proceeding from the problems
reported by localities and enterprises in the course of implementation of the
Finance Ministry’s Circular No. 128/2003/TT-BTC of December 22, 2003 and
Circular No. 88/2004/TT-BTC of September 1, 2004, guiding the implementation of
enterprise income tax, the Finance Ministry hereby provides additional specific
guidance on a number of contents on business income tax as follows:
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The expenses for land use right
transfer, land lease right transfer shall be determined under the guidance at
Point 2.1, Section IV, Part C of the above-said Circular No. 128/2003/TT-BTC ,
which is now guided in detail regarding the distribution of expenses for land
use right transfer, land lease right transfer according to square meters of the
transferred land for investment projects to be completed part by part as follows:
The common expenses for the
entire projects of establishments dealing in houses or infrastructures shall be
distributed according to square meters of the transferred land in order to
determine the taxable incomes from activities of transferring the land use
rights, transferring the land lease rights, which include expenses for traffic
roads, greenery premises; expenses for investment in construction of water
supply and drainage systems, transformer stations; expenses for land damage
compensation. The above expense distribution shall be determined in the
following formula:
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=
Total
investment expense for infrastructure construction
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Transferred
land area
Total
land area assigned for project execution
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Organization dealing in houses,
land, infrastructures, architectures on land shall declare, pay and settle tax
on incomes from land use right transfer, land lease right transfer under the
guidance at Point 2.2, Section VII, Part C of Circular No. 128/2003/TT-BTC ,
which is now guided in detail as follows:
a. In cases where business
organizations transfer the land use rights or land lease rights before the
annual tax finalization while the purchasers demand the completion of
procedures for grant of land use right certificates, the tax offices shall
carry out procedures to notify, inspect and certify the payable tax amounts on
declaration form No. 02C/TNDN under the guidance at Point 2.1, Section VII,
Part C of the above-said Circular No. 128/2003/TT-BTC. The business
organizations shall pay the tax amounts determined in the tax declaration forms
and provide tax payment vouchers to the land use right registration offices for
carrying out the procedures to grant the land use right certificates.
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b. In cases where business
organizations transfer the land use rights or land lease rights in localities
(provinces, centrally run cities) other than the localities where their
head-offices are based (including organizations with land use right transfer
activities arising not frequently), they must carry out procedures to declare
tax on incomes from land use right transfer, land lease right transfer. If
business organizations fail to set up their management sections in localities
where exist the transferred land, they must declare tax with tax offices and
pay tax at localities where exist the transferred land.
The dossiers on tax declaration
and payment and vouchers on payment of tax on incomes from land use right
transfer, land lease right transfer arising in localities where exist the
transferred land shall serve as bases for finalization of tax at the
head-offices.
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At point 3 of Circular No.
88/2004/TT-BTC and Official Letter No. 13692/TC-TCT of November 23, 2004 on
income tax of individuals acting as agents, the following guidance was provided:
Business establishments assigning agency to individual business households with
business registration certificates but failing to fully comply with the regime
of accounting, invoices, sale of goods or provision of services at the set
prices must pay business income tax at the fixed rate of 5% of the enjoyed
agency commission, including support amounts from the principals. The business
establishments being principals shall have to declare and withhold business
income tax of the above-said business households being agents and pay them into
the state budget together with the annual declaration and payment of value
added tax of the establishments and shall enjoy royalties being equal to 0.8%
of the actually collected tax amount of the agents for payment into the state
budget. Such royalty amounts shall be subtracted from the business income tax
amounts collected from the agents before remittance into the budget.
To unify the criteria upon
declaration and payment of business income tax according to the contents guided
above, the Finance Ministry promulgates declaration form (Form No. 02/TNDN-KT)
together with this Official Letter to facilitate the tax declaration and
monitoring of tax collection, payment, accounting and statistics.
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Business establishments that
suffer losses after tax settlement shall be entitled to subtract their loss
amounts from their taxable incomes of the subsequent years under the guidance
at Point 8, Section III, Part C of the above-said Circular No. 128/2003/TT-BTC ,
which is now further guided in detail as follows:
a. The loss amount subtracted
from the taxable income of the tax settlement year shall be determined as equal
to the negative difference of the turnover calculated according to enterprise
income tax minus (-) reasonable expenses plus (+) amounts of damage caused to
goods by objective reasons in the tax calculation period.
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b. Business establishments
suffering losses must draw up plans on loss carried forward immediately after
the year when the losses arose and inscribe them in Section I of Appendix No. 1
promulgated together with the declaration on self-finalization of business
income tax and send them to the tax offices for registration of the loss
carried forward plans in any fiscal year in the prescribed loss carrying
period. In cases where business establishments suffer losses in land use right
or land lease right transfer activities, they must register separate loss
carried forward plans.
Business establishments are not
allowed to carry forward losses if they fail to register their loss carried
forward plans with tax offices or transfer losses outside the loss carried
forward plans already registered with tax offices.
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d. The loss amounts carried
forward from 2003 backward but within the five- year time limit shall be
handled as follows:
- The business establishments
are entitled to continue carrying forward losses to the remaining years of the
loss transfer time limit without having to re-register their loss carried
forward plans with tax offices. Where the loss carried forward have been
registered, the registered loss carried forward plans and the above-mentioned
guidances shall be complied with.
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5. On business income tax
preference:
Point 3, Part I of Circular No.
128/TT-BTC (amended at Point 8 of Circular No. 88/2004/TT-BTC) guided
preferences for cases already granted investment licenses, investment
preference certificates before February 1, 2004, is now additionally guided in
detail as follows:
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a. Domestic business
establishments currently applying the preferential business income tax rates
under the investment preference certificates granted before January 1, 2004 and
still satisfying the investment preference conditions stated in the investment
preference certificates shall be entitled to shift to apply the preferential
business income tax rates for the remaining preference duration as follows:
- The tax rate of 25% under the
investment preference certificates is, as from January 1, 2004, changed to the
tax rate of 20% for the remaining preference duration.
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- The tax rate of 15% under the
investment preference certificates is, as from January 1, 2004, changed the tax
rate of 10% for the remaining preference duration.
b. Domestic business
establishments currently enjoying the preferential business income tax rates
under the investment preference certificates granted before January 1, 2004 and
now satisfying additional preference conditions guided in Section I, Part
E of Circular No. 128/2003/TT-BTC as compared with the investment preference
certificates already granted shall, as from January 1, 2004, be entitled to
enjoy the preferential business income tax rates guided in Section II, Part E
of Circular No. 128/2003/TT-BTC for the remaining preference duration,
depending on the extent of satisfying the investment preference conditions.
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The remaining preference
duration stated in Items a and b of this Point shall be determined as equal to
the duration of enjoying the preferential tax rates as guided at Point 2,
Section II, Part E of Circular No. 128/2003/TT-BTC minus (-) the duration from
the time the business establishments commenced their production and/or business
operations to January 1, 2004.
5.2. Foreign-invested
enterprises and foreign parties to business cooperation contracts, that had
been granted the investment licenses before January 1, 2004 and satisfy the
conditions inscribed in the investment licenses, shall continue to enjoy the
preferential business income tax rates until the end of the period of enjoying
the preferential tax rates under the investment licenses; after the period of
enjoying the preferential tax rates under the investment licenses, they shall
shift to apply the enterprise income tax rate of 25%; in cases where they are
paying the business income tax at the tax rate of 25%, they shall continue
applying the tax rate of 25% till the expiry of the investment licenses. For
foreign-invested enterprises and foreign parties to business cooperation
contracts, that have applied for extension of investment licenses as from
January 1, 2004 on, the applicable preferential enterprise income tax rates
shall comply with the guidance in Sections I and II, Part E of Circular No.
128/2003/TT-BTC .
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a. Business establishments with
incomes arising from activities of transferring contributed capital, stock
capital, which have been already invested in other business establishments
(income is equal (=) to the revenue from transfer of contributed capital, stock
capital minus (-) the contributed capital amount, stock capital amount), shall
have to pay business income tax for the incomes from activities of transferring
the contributed capital, stock capital at the tax rate applicable to their
principal business activities.
b. Foreign investors or foreign parties
to business cooperation contracts, that transfer their contributed capital
portions or stock capital portions within the foreign-invested enterprises or
the business cooperation contracts shall have to pay enterprise income tax at
the tax rate of 28% for the income from the transfer of contributed capital or
stock capital.
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5.4.1. Where the enterprise
income tax preference levels inscribed in the granted investment licenses or investment
preference certificates granted to business establishments before January 1,
2004 are lower than the enterprise income tax preference levels guided in
Circular No. 128/2003/TT-BTC and Circular No. 88/2004/TT-BTC (with the same
enterprise income tax preference conditions inscribed in the investment
licenses or investment preference certificates), the business establishments
shall be entitled to enjoy the enterprise income tax preference levels under
the guidance in the above-said Circulars for the remaining preference duration
counting from the 2004 tax calculation period.
The tax preference levels for
comparison in this case shall be determined on the basis of tax preference
percentages (tax exemption; 50% reduction of payable tax amounts) and the tax
exemption or reduction duration (the number of years of tax exemption or tax
reduction according to the prescribed regime).
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- At the end of the 2003 tax
period, the business establishments that are being in the tax exemption period under
the granted investment licenses or investment preference certificates shall
continue to enjoy the remaining tax exemption or reduction years under the
guidance in Circular No. 128/2003/TT-BTC and Circular No. 88/2004/TT-BTC .
- At the end of the 2003 tax
period, the business establishments that have just gone through the tax
exemption period under their granted investment licenses or investment
preference certificates shall only be entitled to enjoy the complete number of
tax reduction years under the guidance in Circular No. 128/2003/TT-BTC and
Circular No. 88/2004/TT-BTC .
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- At the end of the 2003 tax
period, the business establishments that have just gone through the tax
exemption period and the tax reduction period under their granted investment
licenses or investment preference certificates shall not be entitled to enjoy
tax exemption and/or tax reduction under the guidance in Circular No.
128/2003/TT-BTC , Circular No. 88/2004/TT-BTC .
5.4.2. For a number of specific
cases, the remaining preference duration shall be determined as follows:
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Example 1: Under investment
licenses granted before January 1, 2004, a production enterprise set up from a
project on investment in an industrial park shall enjoy business income tax
exemption for two years and 50% business income tax reduction for three
subsequent years counting from the time the taxable income is generated. At the
end of 2003, this enterprise had enjoyed tax exemption for only one year. Under
the guidance in Circular No. 88/2004/TT-BTC , production enterprises set up from
projects on investment in industrial parks shall enjoy business income tax for
three years and 50% business income tax reduction for seven subsequent years.
Compared with the above guidance, as from the 2004 tax calculation period, such
enterprise shall still be entitled to enjoy tax exemption for two more years
and the 50% business income tax reduction for seven subsequent years.
Example 2: According to the
above-cited example 1, if by the end of the 2003 tax period, an
enterprise had already enjoy tax exemption for two years under the granted
license, as from the 2004 tax period, the enterprise shall still be entitled to
enjoy tax reduction for seven years.
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Example 4: According to the
above-cited example 1, if by the end of the 2003 tax period, the enterprise had
fully enjoyed the tax exemption duration and the tax reduction duration under
the granted license, as from the 2004 tax period, the enterprise shall not be
entitled to enjoy the tax reduction under the guidance in Circular No.
128/2003/TT-BTC and Circular No. 88/2004/TT-BTC .
b. Where the business income tax
exemption duration inscribed in the investment licenses or investment
preference certificates granted before January 1, 2004 is longer than that
under the guidance in Circular No. 128/2003/TT-BTC and Circular No.
88/2004/TT-BTC , while the tax reduction duration is shorter, the tax exemption
or reduction for the remaining preference duration shall be determined as
follows:
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If by the end of 2003, the
enterprise had enjoyed the business income tax exemption for two years, as from
the 2004 tax calculation period, the enterprise may opt to enjoy the tax
exemption and reduction under the granted license or to follow the guidance in
Circular No. 128/2003/TT-BTC and Circular No. 88/2004/TT-BTC:
- Under the granted license: tax
exemption for two years and 50% reduction of the payable tax amount for 4
subsequent years.
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Example 2: For the same case
mentioned in Example 1 above, but by the end of the 2003 tax period, the
enterprise had enjoyed tax exemption for 4 years, it is entitled to tax
reduction under the granted investment license, specifically: as from the 2004
tax period, the enterprise shall still be entitled to 50% reduction of the
payable tax amount for 4 subsequent years.
Example 3: For the same case
mentioned in Example 1 above, by the end of the 2003 tax period, the enterprise
had fully enjoyed the four-year tax exemption duration and the four-year tax
reduction duration under the granted license, so as from the 2004 tax period,
the enterprise shall not be entitled to tax reduction under the guidance in
Circular No. 128/2003/TT-BTC and Circular No. 88/2004/TT-BTC .
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BUSINESS INCOME TAX DECLARATION FORM
To be used by business
establishments being agency principals and submitting them on behalf of individual
business households with business registration, that do not fully implement the
accounting, invoice and voucher regime
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Month..............
year..............
Tax identification
number:................................................................................................................
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Address:........................................................................................................................................
Urban district/Rural
district:..................................... Province, city:..................................................
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Main business
lines:.......................................................................................................................
Calculation
unit: VNdong
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Name
of individual business household
Tax
identification number
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Commission
and other revenues to be taxed under contract
Set
percentage
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1
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2
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Total
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The total BIT amount
Percentage of remuneration to be
enjoyed by entrusted collecting organizations (if any)
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The total BIT payable in this
period:
(In words:..........)
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