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MINISTRY OF FINANCE OF VIETNAM
GENERAL DEPARTMENT OF TAXATION
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SOCIALIST REPUBLIC OF VIETNAM
Independence – Freedom – Happiness
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No. 4083/TCT-CS
Re: Tax policies
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Hanoi, September 15, 2023
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To: Customs Department
of Hai Phong City
Below is the response of
General Department of Taxation to Official Dispatch No. 3594/CTHPH-TTHT dated
04/11/2022 of Department of Taxation of Hai Phong City enquiring about
corporate income tax (CIT) of Haengsung Electronics Vietnam Co. Ltd. (HSEVN)
- The 2005's Law on
Commerce stipulates that:
"Article 3.
Interpretation of terms
1. Commercial activities
mean activities for the purpose of generating profits, including: sale and
purchase of goods, provision of services, investment, commercial promotion and
other activities for the profit purpose."
…
Article 178. Commercial
processing
Commercial processing
means a commercial activity whereby a processor uses part or whole of raw
materials and materials supplied by the processee to perform one or several
stages of the production process at the latter’s request in order to receive
remuneration."
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"Article 19.
Conditions for application of incentives of corporate income tax
The conditions for
application of incentives of corporate income tax shall comply with the provisions
in Clause 12, Article 1 of the Law on amending and supplementing a number of
articles of the Law on corporate income tax.
1. Enterprise must
separately account the income from the business and production entitled to the
incentives of corporate income tax (including the incentive tax rate or tax
exemption or reduction); where there are incomes or expenses deducted which
cannot be accounted separately, then these incomes or expenses deducted are
determined at the rate between the expenses deducted or revenue of business and
production activities entitled to tax incentives on total expenses deducted or
enterprise’s revenue.
2. No application of
incentives of corporate income tax specified in Clause 1, 4, Article 4 and
Article 15, 16 of this Decree and no application of tax rate of 20% specified
in Clause 2, Article 10 of this Decree for the following incomes:
dd) Concessional
corporate income tax prescribed in Clause 1, Clause 4 of Article 4, Article 15,
and Article 16 hereof shall not apply to incomes of enterprises from projects
of investment in trading, services outside economic zones, hi-tech zones,
industrial parks, and regions eligible for tax incentives.”
- Clause 4 Article 18 of
Circular No. 78/2014/TT-BTC dated 18/6/2014 of the Ministry of Finance (amended
by Clause 2 Article 10 of Circular No. 96/2015/TT-BTC dated 22/6/2015 of the
Ministry of Finance):
"4. Incentives for
enterprises whose projects of investment are given CIT incentives because their
fields or areas are eligible for investment incentives (hereinafter referred to
as favored fields and favored areas) are determined as follows:
…
b) In case of an
enterprise whose project of investment is given CIT incentives because it is
located in a favored area (including industrial parks, economic zones, hi-tech
zones), incomes given CIT incentives are those derived from business activities
within such area, except for the incomes mentioned in Points a, b, c Clause 1
of this Article.
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- If an enterprise whose
project of investment is given CIT incentives because it is located in a
favored area earns incomes outside the area in which the project is located:
(i) If the area in which
the income is earned is not a favored area, the income will not be given CIT
incentives.
(ii) If the area in which
the income is earned is a favored area, the income will be given CIT
incentives. CIT incentives for such income shall be determined according to the
time and level of incentives in the area."
Pursuant to the
aforementioned regulations, in case HSEVN has a investment project in Trang Due
Industrial Park within Dinh Vu – Cat Hai Economic Zone (which is an area
eligible for CIT incentives according to the Law on Corporate Income Tax) and
hires a processor that is not located in the area eligible for investment
incentives, this income of HSEVN is not eligible for CIT incentives for favored
areas.
HSEVN must separate
incomes from business operations that are eligible for CIT incentives and
incomes from business operations that are not eligible for CIT incentives, on
which tax shall be declared and paid separately. In case these incomes cannot
be separated, regulations of Clause 1 Article 19 of the Government’s Decree No.
218/2013/ND-CP dated 26/12/2013 shall be complied with.
Pursuant to the aforementioned
regulations, Customs Department of Hai Phong City shall determine whether
HSEVN's manufacture process "takes place within a favored area" in
order to correctly, uniformly and conformably determine CIT incentives for
which HSEVN are eligible.
For your information./.
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