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THE
NATIONAL ASSEMBLY
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SOCIALIST
REPUBLIC OF VIET NAM
Independence - Freedom - Happiness
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No.
14/2008/QH12
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Hanoi,
June 3, 2008
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LAW
ON ENTERPRISE INCOME TAX
Pursuant to the 1992
Constitution of the Socialist Republic of Vietnam, which was amended and
supplemented under Resolution No. 51/2001/QH10;
The National Assembly
promulgates the Law on Enterprise Income Tax.
Chapter I
GENERAL PROVISIONS
Article 1.-
Governing scope
This Law provides for enterprise
income taxpayers, taxable incomes, tax-exempt incomes, tax bases, tax
calculation methods, and tax incentives.
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1. Taxpayers are goods and
service production and business organizations which have taxable incomes under
the provisions of this Law (below referred to as enterprises), including:
a/ Enterprises established under
Vietnamese law;
b/ Enterprises established under
foreign laws (below referred to as foreign enterprises) with or without
Vietnam-based permanent establishments;
c/ Organizations established
under the Law on Cooperatives;
d/ Non-business units
established under Vietnamese law;
e/ Other organizations engaged
in income-generating production and business activities.
2. Enterprises having taxable
incomes under Article 3 of this Law shall pay enterprise income tax as follows:
a/ Enterprises established under
Vietnamese law shall pay tax on taxable incomes generated in and outside
Vietnam;
b/ Foreign enterprises with
Vietnam-based permanent establishments shall pay tax on taxable incomes generated
in Vietnam and taxable incomes generated outside Vietnam which are related to
the operation of such establishments;
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d/ Foreign enterprises without
Vietnam-based permanent establishments shall pay tax on taxable incomes
generated in Vietnam.
3. Foreign enterprises permanent
establishments are production and business establishment through which foreign
enterprises conduct some or all income-generating production and business
activities in Vietnam, including:
a/ Branches, executive offices,
factories, workshops, means of transport, mines, oil and gas fields, or other
places of extraction of natural resources in Vietnam;
b/ Construction sites,
construction works, installation and assembly projects;
c/ Establishments providing
services, including consultancy services through employees or other
organizations or individuals;
d/ Agents for foreign
enterprises;
e/ Vietnam-based
representatives, in case of representatives which are competent to conclude
contracts in the name of foreign enterprises or representatives which are
incompetent to conclude contracts in the name of foreign enterprises but
regularly deliver goods or provide services in Vietnam.
Article 3.-
Taxable incomes
1. Taxable incomes include
income from goods and service production and business activities and other
incomes specified in Clause 2 of this Article.
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Article 4.-
Tax-exempt incomes
1. Income from cultivation,
husbandry and aquaculture of organizations established under the Law on
Cooperatives.
2. Income from the application
of technical services directly for agriculture.
3. Income from the performance
of contracts on scientific research and technological development, trial
products and products turned out with technologies applied for the first time
in Vietnam.
4. Income from enterprises goods
and service production and business activities exclusively reserved for
disabled, detoxified and HIV-infected laborers. The Government shall specify
criteria and conditions for the determination of enterprises exclusively
reserved for disabled, detoxified and HIV-infected laborers.
5. Income from job-training
activities exclusively reserved for ethnic minority people, the disabled,
children in extremely disadvantaged circumstances and persons involved in
social evils.
6. Incomes divided for capital
contribution, joint venture or association with domestic enterprises, after
enterprise income tax has been paid under the provisions of this Law.
7. Received financial supports
used for educational, scientific research, cultural, artistic, charitable,
humanitarian and other social activities in Vietnam.
Article 5.-
Tax period
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2. The enterprise income tax
period upon each time of income generation applies to foreign enterprises
specified at Points c and d, Clause 2, Article 2 of this Law.
Chapter II
TAX BASES AND TAX
CALCULATION METHODS
Article 6.-
Tax bases
Tax bases include taxed income
and tax rate.
Article 7.-
Determination of taxed income
1. Taxed income in a tax period
is the taxable income minus tax-exempt incomes and losses carried forward from
previous years.
2. Taxable income is turnover
minus deductible expenses for production and business activities plus other
incomes, including income received outside Vietnam.
3. Income from real estate
transfer must be separately determined for tax declaration and payment.
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Article 8.-
Turnover
Turnover is the total sales,
processing remuneration, service provision charges, subsidies and surcharges
enjoyed by enterprises. Turnover is calculated in Vietnam dong; foreign
currency turnover, if any, must be converted 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 foreign-currency turnover is generated.
The Government shall detail and
guide the implementation of this Article.
Article 9.-
Deductible and non-deductible expenses upon determination of taxable incomes
1. Except the expenses specified
in Clause 2 of this Article, enterprises are entitled to deduction of all
expenses which fully meet the following conditions:
a/ They are actually paid
expenses related to production and business activities;
b/ They are accompanied with
adequate invoices and documents as prescribed by law.
2. Non-deductible expenses upon
determination of taxable incomes include:
a/ Expense not fully satisfying
the conditions specified in Clause 1 of this Article, except the uncompensated
value of losses caused by natural disasters, epidemics or other force majeure
circumstances;
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c/ Expense already covered by
other funding sources;
d/ Business administration
expense allocated by foreign enterprises to their Vietnam-based permanent
establishments in excess of the level calculated according to the allocation
method prescribed by Vietnamese law;
e/ Expense in excess of the
law-prescribed norm for the deduction and setting up of provisions;
f/ Expense for raw materials,
materials, fuel, energy or goods in excess of the wastage rate set by
enterprises and notified to tax offices and the actual ex-warehousing price;
g/ Payment for interests on
loans for production and business activities of entities other than credit
institutions or economic organizations in excess of 150% of the basic interest
rate announced by the State Bank of Vietnam at the time of loaning;
h/ Fixed asset depreciation made
in contravention of law;
i/ Expenses advanced in
contravention of law;
j/ Salaries and wages of owners
of private enterprises; remuneration paid to enterprise founders who do not
personally administer production and business activities; salaries, wages and
other accounted amounts payable to laborers which have actually not been paid
to them or paid without invoices or documents as prescribed by law;
k/ Loan interests paid
corresponding to the insufficient amount of the charter capital;
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m/ Expense for advertisement,
marketing, sales promotion and brokerage commissions; expense 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 newly set up enterprises, such expense in excess of
15% of total deductible expenses for the first 3 years from the date of setting
up. Total deductible expenses exclude the expenses specified at this Point; for
trade activities, total deductible expenses exclude purchasing prices of sold
goods;
n/ Financial supports, excluding
those for educational and healthcare activities and for mitigating natural
disaster consequences and building houses of gratitude for the poor as
prescribed by law.
3. Deductible foreign currency
expenses upon the determination of taxable incomes must be converted 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 foreign currency
expenses arise.
The Government shall detail and
guide the implementation of this Article.
Article
10.- Tax rates
1. The enterprise income tax
rate is 25%, except the cases specified in Clause 2, this Article, and Article
13, of this Law.
2. The enterprise income tax
rate applicable to activities of prospecting, exploring and exploiting oil and
gas and other precious and rare natural resources is between 32% and 50%,
depending on each project or business establishment.
The Government shall detail and
guide the implementation of this Article.
Article
11.- Tax calculation method
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2. The tax calculation method
applicable to enterprises listed at Points c and d, Clause 2, Article 2 of this
Law complies with the Governments regulations.
Article
12.- Places for tax payment
Enterprises shall pay tax at
places where they are headquartered. In case an enterprise has a dependent
cost-accounting production establishment operating in a province or centrally
run city other than the place of its headquarters, the payable tax amount shall
be calculated based on the ratio of expenses between the place where the production
establishment is located and the place where the enterprise is headquartered.
The decentralization, management and use of tax revenues comply with the State
Budget Law.
The Government shall detail and
guide the implementation of this Article.
Chapter III
ENTERPRISE INCOME TAX
INCENTIVES
Article
13.- Tax rate incentives
1. Newly set up enterprises
under investment projects in geographical areas with extreme socio-economic
difficulties, economic zones or hi-tech parks; newly set up enterprises under
investment projects in the domains of high technology, scientific research and
technological development, development of the States infrastructure works of
special importance, or manufacture of software products are entitled to the tax
rate of 10% for fifteen years.
2. Enterprises operating in
education-training, vocational training, healthcare, cultural, sports and
environmental domains are entitled to the tax rate of 10%.
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4. Agricultural service
cooperatives and peoples credit funds are entitled to the tax rate of 20%.
5. For large-scale and hi-tech
projects in which investment should be particularly attracted, the duration for
application of tax rate incentives may be extended but must not exceed the
duration specified in Clause 1 of this Article.
6. The duration for application
of tax rate incentives specified in this Article is counted from the first year
an enterprise has turnover.
The Government shall detail and
guide the implementation of this Article.
Article
14.- Tax exemption and reduction duration incentives
1. Newly set up enterprises
under investment projects in geographical areas with extreme socio-economic
difficulties, economic zones or hi-tech parks; newly set up enterprises under
investment projects in the domains of high technology, scientific research and
technological development, development of the States infrastructure works of
special importance or manufacture of software products; newly set up
enterprises operating in education-training, vocational training, healthcare,
cultural, sports and environmental domains are entitled to tax exemption for no
more than four years and a 50% reduction of payable tax amounts for no more
than nine subsequent years.
2. Newly set up enterprises
newly set up under investment projects in geographical areas with
socio-economic difficulties are entitled to tax exemption for no more than two
years and a 50% reduction of payable tax amounts for no more than four
subsequent years.
3. The tax exemption or
reduction duration specified in this Article is counted from the first year an
enterprise has taxable income; in case an enterprise has no taxable income for
the first three years from the first year it has turnover, the tax exemption or
reduction duration is counted from the fourth year.
The Government shall detail and
guide the implementation of this Article.
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1. Production, construction or
transport enterprises which employ many female laborers are entitled to
reduction of enterprise income tax amounts equal to additional expenses for
female laborers.
2. Enterprises which employ many
ethnic minority laborers are entitled to reduction of enterprise income tax
amounts equal to additional expenses for ethnic minority laborers.
The Government shall detail and
guide the implementation of this Article.
Article
16.- Carrying forward of losses
1. Loss-suffering enterprises
may carry forward their losses to the subsequent year; those losses may be
included in taxed income. The time limit for carrying forward losses is five
years, counting from the year following the year the losses arise.
2. Enterprises suffering losses
from real estate transfer activities may only carry forward losses into those
activities taxed income.
Article
17.- 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 taxed income for setting
up their scientific and technological development funds.
2. Within five years after being
set up, if a scientific and technological development fund is not used, has
been used below 70% or used for improper purposes, the enterprise shall remit
into the state budget the enterprise income tax amount calculated on the income
already deducted for setting up the fund but not used or used for improper
purposes and the interest on that enterprise income tax amount.
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The interest rate for
calculating the interest on the to-be- recovered tax amount calculated on the
unused fund amount is the interest rate for one-year term treasury bonds
applicable at the time of recovery, and the interest payment period is two
years.
The interest rate for
calculating the interest on the to-be- recovered tax amount calculated on the
fund amount used for improper purposes is the interest used for late payment
fines under the provisions of the Tax Administration Law, and the interest
payment period is counted from the time a fund is set up to the time of
recovery.
3. Enterprises may not account
expenses covered by their scientific and technological development funds as
deductible ones upon the determination of taxable incomes in a tax period.
4. Enterprises scientific and technological
development funds may be used only for scientific and technological investment
in Vietnam.
Article
18.- Conditions for application of tax incentives
1. Enterprise income tax
incentives specified in Articles 13, 14, 15, 16 and 17 of this Law apply only
to enterprises which implement regulations on accounting, invoices and
documents and pay tax according to declaration.
2. Enterprises shall account
separately income from production and business activities eligible for tax
incentives specified in Articles 13 and 14 of this Law from income from
production and business activities ineligible for tax incentives; if those
incomes cannot be separately accounted, income from production and business
activities eligible for tax incentives shall be determined based on the ratio
between turnover from production and business activities eligible for tax
incentives and total turnover.
3. Enterprise income tax
incentives specified in Articles 13 and 14 of this Law do not apply to:
a/ Incomes specified in Clause
2, Article 3 of this Law;
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c/ Income from prize-winning
game or betting business as prescribed by law;
d/ Other cases specified by the
Government.
Chapter IV
IMPLEMENTATION
PROVISIONS
Article
19.- Implementation effect
1. This Law takes effect on
January 1, 2009.
2. This Law replaces Enterprise
Income Tax Law No. 09/2003/QH11.
3. Enterprises which enjoy
enterprise income tax incentives under Enterprise Income Tax Law No.
09/2003/QH11 may continue enjoying those incentives for the remaining duration
under Enterprise Income Tax Law No. 09/2003/QH11; in case enterprise income tax
incentives, including tax rate incentives and tax exemption and reduction
duration, are lower than the tax incentives specified in this Law, the tax
incentives under this Law apply for the remaining duration.
4. Enterprises which are
entitled to tax exemption or reduction duration under Enterprise Income Tax Law
No. 09/2003/QH11 but have no taxable income yet, the tax exemption or reduction
duration will be counted under this Law and from the date this Law takes
effect.
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The Government shall detail and
guide the implementation of Articles 4, 7, 8, 9, 10, 11, 12, 13, 14, 15 and 18
and other necessary contents of this Law to meet management requirements.
This Law was passed on June 3,
2008, by the XIIth National Assembly of the Socialist Republic of Vietnam at
its third session.
CHAIRMAN OF THE
NATIONAL ASSEMBLY
Nguyen Phu Trong