THE NATIONAL ASSEMBLY
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SOCIALIST REPUBLIC OF VIET NAM
Independence - Freedom - Happiness
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No: 09/2003/QH11
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Hanoi, June 17, 2003
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LAW
ON ENTERPRISE INCOME TAX
(No. 09/2003/QH11 of June 17, 2003)
In order to
contribute to boosting the production and business development and mobilizing
part of income into the State budget; to ensure equitable and reasonable
contributions by organizations and individuals producing and/or trading in
goods and/or providing services with incomes;
Pursuant to the 1992 Constitution of the Socialist Republic of Vietnam, which
was amended and supplemented under Resolution No. 51/2001/QH10 of December 25,
2001 of the Xth National Assembly, its 10th session;
This Law prescribes the enterprise income tax,
Chapter
I
GENERAL
PROVISIONS
Article
1.- Payers of enterprise income tax
Organizations and
individuals engaged in goods production and trading and/or service provision
(hereinafter referred collectively to as business establishments) with incomes
shall all have to pay enterprise income tax, except for the subjects defined in
Article 2 of this Law.
Article
2.- Subjects not liable to enterprise
income tax
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Article
3.- Interpretation of terms
In this Law, the
following expressions shall be construed as follows:
1. Organizations
engaged in goods production and trading and/or service provision include State
enterprises, limited liability companies; joint stock companies; partnerships;
foreign-invested enterprises and foreign parties to business cooperation
contracts under the Law on Foreign Investment in Vietnam; foreign companies and
organizations doing business in Vietnam not under the Law on Foreign Investment
in Vietnam; private enterprises; cooperatives; cooperation groups; economic
establishments of political organizations, socio-political organizations,
social organizations, socio-professional organizations, peoples armed force
units; administrative agencies and non-business units engaged in goods
production and trading and/or service provision.
2. Individuals engaged
in goods production and trading and/or service provision include individual
business households and business groups; family households and individuals engaged
in agricultural production; businesspeople; independent practitioners;
individual property lessors; foreign businesspeople with incomes generated in
Vietnam.
3. Resident
establishments of foreign companies in Vietnam are business establishments through
which foreign companies conduct part or all of their income-generating business
operations, including:
a/ Branches, executive
offices, factories, workshops, transport means, mines, oil or gas fields and
any natural resource-exploiting places in Vietnam;
b/ Construction sites;
construction, installation and/or assembly projects;
c/ Establishments
providing services, including consultancy services, through their employees or
other subjects;
d/ Agents of foreign
companies;
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In cases where a
double taxation avoidance agreement which the Socialist Republic of Vietnam has
signed otherwise provides for resident establishments, the provisions of such
agreement shall apply.
Article
4.- Obligations and responsibilities to
implement the Law on Enterprise Income Tax
1. Business
establishments are obliged to pay tax fully and on time as prescribed by this
Law.
2. Tax offices shall,
within the ambit of their tasks and powers, have to strictly implement the
provisions of this Law.
3. State agencies,
political organizations, socio-political organizations, social organizations,
socio-professional organizations and peoples armed force units shall, within
the ambit of their respective functions, tasks and powers, have to supervise
the implementation of, and coordinate with the tax offices in implementing,
this Law.
4. Vietnamese citizens
shall have to assist tax offices and tax officials in implementing the
provisions of this Law.
Chapter
II
TAX
CALCULATION BASES AND TAX RATES
Article
5.- Tax calculation bases
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Article
6.- Taxable incomes
Taxable incomes
include incomes from goods production and trading and/or service provision
activities and other incomes, including those generated from goods production
and trading and/or service provision activities overseas.
Article
7.- Determination of taxable incomes
1. Taxable incomes
from goods production and trading and/or service provision activities equal the
turnovers therefrom minus the reasonable expenses related to taxable incomes.
2. Other taxable
incomes include incomes earned from securities trading margin, property
ownership and use rights; incomes from the transfer of land use right or land
rent right; profits from the transfer, lease or liquidation of property or deposits,
lending of capital, sale of foreign currencies; year-end balance of reserves;
recovered bad debts which had been written off from accounting records; payable
debts with creditors being unidentifiable; incomes from business activities in
the previous years which had been omitted but later discovered, and other
incomes.
The Government shall
specify methods of determining taxable incomes for income amounts from the
transfer of land use right and land rent right as well as tax rates according
to the partially progressive tax table, which must not exceed 30% of remaining
income from the transfer of land use right and land rent right after the
enterprise income tax is paid.
In cases where a
double taxation avoidance agreement which the Socialist Republic of Vietnam has
signed otherwise provides for methods of determining taxable incomes for
resident establishments, the provisions of such agreement shall apply.
Article
8.- Turnover
Turnover used for the
calculation of taxable income is the total of money proceeds from the sale of
goods, processing remuneration and/or service provision charges, including
price subsidies, surcharges or extra-sums enjoyed by business establishments.
In cases where a turnover arises in a foreign currency, it must be converted into
Vietnam dong at the exchange rate announced by the State Bank of Vietnam at the
time when such foreign-currency turnover arises.
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1. Reasonable expenses
to be subtracted for the calculation of taxable income include:
a/ Depreciation of
fixed assets used for production and/or business activities. The depreciation
rate shall be based on the value of fixed assets and depreciation duration.
Establishments producing and/or dealing in goods and services with high
economic efficiency may apply quicker depreciation rates which, however, must
not exceed two times the prescribed depreciation rate, in order to quickly
renew their technologies.
The Finance Ministry
shall specify fixed asset standards and depreciation rates prescribed at this
Point;
b/ Costs of raw
materials, materials, fuel, energy and goods volume actually used in goods
production and trading and/or services related to turnover and taxable income
in a period, which are calculated according to a reasonable wastage rate and
actual ex-warehouse prices;
c/ Salaries, wages,
allowances provided for by the Labor Code, mid-shift meal allowance, except for
salaries or wages of owners of private enterprises, heads of individual
business households and incomes of the founding members of companies who do not
directly take part in production and business management;
d/ Expenses for
scientific and technological researches; innovations and improvements; health
care; training of laborers according to the prescribed regime; financial
donations for education;
e/ Expenses for
services purchased from outside: electricity, water, telephone; repair of fixed
assets; rent of fixed assets; audit; legal services; designing, establishment
and protection of trademarks; property insurance; payments for use of technical
materials, patents, technological licenses not belonging to fixed assets;
technical services and other services purchased from outside;
f/ Payments for female
laborers as provided for by law; expenses for labor protection devices or
outfits; expenses for protection of business establishments; working mission
allowances; deductions for payment of social insurance and medical insurance
premiums under the liability of employing business establishments; trade union
funding; support of the Partys and mass organizations activities at business
establishments; deductions for setting up the superior levels management funds
and associations funds according to the prescribed regime;
g/ Payment of
interests on loans for goods production and trading and/or service provision to
banks and other credit institutions as well as economic organizations at the
actual interest rates; payment of interests on borrowings from other subjects
at the actual interest rates at the time of signing borrowing contracts, which
must not exceed 1.2 times the lending interest rate of commercial banks at the
time of borrowing;
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i/ Severance
allowances for laborers;
j/ Expenses for the
sale of goods and/or services;
k/ Expenses for
advertisement, marketing and trade promotion directly related to goods
production and trading and service provision activities and other expenses,
which are controlled at no more than 10% of the total expenditure. For trading
activities, the total expense for determining the controlled level shall not
include purchasing prices of goods sold;
l/ Payable taxes,
charges, fees and land rents, which are related to goods production and trading
and/or service provision activities, and accounted into reasonable expenses;
m/ Business
administration expenses allocated by foreign companies to their resident
establishments in Vietnam as prescribed by the Government;
n/ Expenses for
purchase of goods and/or services of non-business organizations and/or
individuals without invoices and vouchers prescribed by the Government.
2. The following
expenses shall not be accounted into reasonable expenses:
a/ Deductions advanced
as expenses but actually not spent;
b/ Expenses without
vouchers or with invalid vouchers;
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d/ Expenses covered by
other capital sources.
3. The reasonable
expenses prescribed in Clause 1 of this Article shall all be recorded in accounting
books in Vietnam dong; for expenses in foreign currency(ies), they must be
converted into Vietnam dong at the exchange rate(s) announced by the State Bank
of Vietnam at the time when such foreign-currency expenses are effected.
Article
10.- Tax rates
1. The enterprise
income tax rate applicable to business establishments is 28%.
2. The enterprise
income tax rate applicable to business establishments conducting activities of
prospection, exploration and exploitation of oil and gas and other precious and
rare natural resources is between 28% and 50%, depending on each project or
business establishment.
The Government shall
specify this Article.
Chapter
III
TAX
DECLARATION, PAYMENT AND SETTLEMENT
Article
11.- Responsibilities of business
establishments
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1. To strictly abide
by the regimes on accounting, invoices and vouchers according to the provisions
of law;
2. To fully declare
their turnovers, expenses and incomes strictly according to the regimes
prescribed by the Finance Ministry;
3. To pay fully and on
time payable tax amounts and fines into the State budget according to the
notices of tax offices;
4. To supply
documents, accounting books, accounting statements, invoices and vouchers
related to the tax calculation at the requests of tax offices;
5. To purchase, sell,
exchange, and account the values of, goods and services at market prices.
Article
12.- Tax declaration
1. Every year,
business establishments shall base themselves on the results of goods
production and trading and/or service provision of the previous year and the
result projection for the subsequent year to declare their turnovers, expenses
and taxable incomes as well as the whole years payable tax amounts divided for
each quarter, according to the form set by the tax offices and submit the
declarations to the tax offices directly managing them on January 25 at the
latest; in case of big changes in the production and business situation during
the year, the business establishments shall have to report such to their
managing tax offices for adjustment of the tax amounts to be temporarily paid
for the whole year and each quarter. If the tax offices examine and detect that
the tax declarations by the business establishments are improper, they may fix
the tax amounts to be temporarily paid for the whole year and each quarter.
2. For business
establishments which have not yet applied the prescribed regime of accounting,
invoices and vouchers, the tax amounts to be paid monthly shall be calculated
according to the presumptive turnover and the taxable income percentage
suitable to each branch or trade, which are set by competent tax offices.
Article
13.- Tax payment
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The Government
prescribes simple and convenient procedures for tax payment, thus raising the
business establishments sense of responsibility before law, and at the same
time enhances the work of inspection, examination and handling of law
violations committed by tax offices, ensuring the tight and effective tax
collection management.
2. The business
establishments defined in Clause 2, Article 12 of this Law shall have to pay
tax into the State budget every month according to the notices of tax offices.
The deadline for the monthly tax payment stated in such notices is the 25th day
of the following month at the latest.
3. Business
establishments engaged in consignment trading shall have to declare and pay tax
upon each consignment to the tax offices of the localities where the goods are
purchased before transporting such goods.
4. For foreign
organizations or individuals doing business without resident establishments in
Vietnam but having incomes generated in Vietnam, the organizations or
individuals that pay such incomes shall have to deduct the tax amounts at the
rates prescribed by the Finance Ministry from the total paid incomes and remit
them into the State budget concurrently with the transfer of payment money to
the foreign organizations or individuals.
Article
14.- Tax settlement
1. Business
establishments shall have to make annual tax settlements with the tax offices.
A tax settlement must reflect fully and accurately the following:
a/ Turnover;
b/ Reasonable
expenses;
c/ Taxable income;
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e/ Income tax amount
already temporarily paid in the year;
f/ Income tax amount
already paid abroad for incomes received therefrom;
g/ Underpaid or
overpaid income tax amount.
2. The tax-settlement
year is calculated according to the solar year. In cases where business
establishments are allowed to apply a fiscal year other than the solar year,
the tax settlement shall be made according to that fiscal year. Within 90 days
as from the end of a solar year or a fiscal year, business establishments shall
have to submit their tax settlement reports to the tax offices, and fully pay
the outstanding tax amounts into the State budget within 10 days thereafter.
Overpaid tax amounts shall be cleared against the payable tax amounts of the subsequent
period.
In case of enterprise
transformation, merger, consolidation, division, separation, dissolution or
bankruptcy, business establishments shall have to make tax settlements with the
tax offices and submit tax settlement reports within 45 days after the date of
issuance of decisions on the enterprise transformation, merger, consolidation,
division, separation, dissolution or bankruptcy.
The Finance Ministry
shall guide the settlement of enterprise income tax prescribed in this Article.
Article
15.- Tasks, powers and responsibilities
of tax offices
Tax offices have the
following tasks, powers and responsibilities:
1. To guide business
establishments in declaring and paying tax in strict accordance with the
provisions of this Law;
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3. To inspect and
examine the tax declaration, payment and settlement by business establishments,
ensuring their compliance with the provisions of law. In cases where purchasing
prices, selling prices, business expenses and other factors are found
unreasonable, the tax offices have the right to re-determine them so as to
ensure the accurate and full collection of enterprise income tax;
4. To handle
tax-related administrative violations and settle tax-related complaints;
5. To request business
establishments to provide accounting books, invoices, vouchers and other
dossiers and documents related to the tax calculation and payment; to request
banks, other credit institutions, and concerned organizations and individuals
to provide documents related to the tax calculation and payment;
6. To keep and use
data and documents provided by business establishments and other subjects
according to the prescribed regime.
Article
16.- Right to fix taxable incomes
1. The tax offices
shall fix taxable income for tax calculation for business establishments in the
following cases:
a/ Failing to observe
or improperly observing the regime of accounting, invoices and vouchers;
b/ Failing to declare
or improperly declaring bases for tax calculation or failing to prove the bases
already stated in their declarations at the requests of tax offices;
c/ Refusing to produce
accounting books, invoices, vouchers and necessary documents related to the
calculation of enterprise income tax;
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2. Tax offices shall
base themselves on the investigation documents on the situation of goods
production and trading and/or service provision activities of the business
establishments or on taxable incomes of business establishments engaged in the
same business line, with the similar business scale, to fix the taxable income.
If the business establishments disagree with such fixed taxable income level,
they may lodge complaints to the immediate superior tax offices according to
the provisions of law; pending the settlement thereof, the business
establishments shall still have to pay tax at the fixed tax level.
Chapter
IV
ENTERPRISE
INCOME TAX EXEMPTION AND REDUCTION
Article
17.- Tax exemption and reduction for
investment projects on setting up business establishments, cooperatives,
relocated business establishments
1. Investment projects
on setting up new production establishments in branches, trades, fields or
geographical areas in which the investment is encouraged, or cooperatives shall
enjoy the tax rates of 20%, 15% and 10%.
2. Investment projects
on setting up new production establishments in branches, trades, fields or
geographical areas in which the investment is encouraged, business
establishments relocated under the planning and business establishments
relocated to geographical areas in which the investment is encouraged shall be
entitled to the tax exemption for 4 years at most after their taxable incomes
are generated, and a 50% reduction of payable tax amounts for 9 subsequent
years at most.
The Government shall
specify branches, trades, fields and geographical areas in which the investment
is encouraged; tax rates and application duration for each branch, trade, field
or geographical area in which the investment in encouraged; tax exemption
duration, tax reduction levels and duration as prescribed in this Article.
Article
18.- Tax exemption and/or reduction for
business establishments investing in building new production lines, expanding
their production, renewing technology, improving the ecological environment or
raising their production capacity
Production
establishments investing in building new production lines, expanding their
production, renewing technology, improving the ecological environment and
raising their production capacity shall be exempt from enterprise income tax on
their increased incomes brought about by such investment for 4 years at most
and a 50% reduction of payable tax amounts for 7 subsequent years at most.
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Article
19.- Tax exemption and reduction for
other cases
1. The following
incomes of business establishments shall be exempt from enterprise income tax:
a/ Income from the
performance of contracts on scientific research and development of
technologies, products being in the stage of trial production, or products
turned out from new technologies applied for the first time in Vietnam;
b/ Income from the
performance of technical service contracts in direct service of agriculture;
c/ Income from
business establishments goods production and trading and/or service provision
activities reserved for laborers being disabled people;
d/ Income from job
training reserved for disabled people, children in exceptionally difficult
plights and social-evils doers;
e/ Income of
cooperatives and individual households engaged in goods production and trading
and/or service provision with low incomes under the regulations of the
Government.
2. Enterprise income
tax shall be exempt for investors contributing capital with patents, technical
know-hows, technological processes or technical services; enterprise income tax
shall be reduced for income from the transfer of the value of capital portions
of foreign investors to Vietnamese enterprises under the Governments
regulations.
3. Enterprise income
tax shall be reduced for business establishments engaged in production,
construction or transport activities and employing a large number of female
laborers under the Governments regulations.
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Article
20.- Transfer of losses
If business
establishments, after making the tax settlements with the tax offices, suffer
from losses, they shall be entitled to transfer such losses to the following
year, which shall be offset against their taxable incomes. The duration
eligible for the loss transfer shall not exceed 5 years.
Article
21.- Procedures for effecting tax
exemption, tax reduction and loss transfer
The tax exemption, tax
reduction and loss transfer prescribed in Articles 17, 18, 19 and 20 of this
Law shall apply only to the business establishments which have strictly
observed the regime of accounting, invoices and vouchers and paid tax according
to their declarations, except for individual households engaged in goods
production and trading and/or service provision with low incomes. Business
establishments shall determine by themselves the conditions for enjoying tax
preferences, tax exemption, and tax reduction and loss transfer levels for
registering them with the tax offices and for implementation upon making tax
settlements.
The tax offices are
tasked to examine the conditions for enjoying tax preferences, determine tax
exemption or reduction amounts which the business establishments are entitled
to, loss amounts which the business establishments are allowed to offset
against their taxable incomes.
In cases where
business establishments incorrectly determine the conditions for tax
preferences, tax exemption or reduction amounts, loss amounts to be offset
against their taxable incomes, they shall be sanctioned for tax-related
administrative violations.
Chapter
V
COMMENDATION,
REWARD AND HANDLING OF VIOLATIONS
Article
22.- Commendation and reward
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The Government shall
specify the commendation and reward.
Article
23.- Handling of tax-related violations
committed by tax payers
Tax payers that
violate the provisions of this Law shall be handled as follows:
1. If failing to
strictly observe the provisions on the regime of accounting, invoices and
vouchers, tax declaration, payment and settlement, as prescribed in Articles
11, 12, 13, 14 and 21 of this Law, they shall, depending on the nature and
seriousness of their violations, be sanctioned for tax-related administrative
violations;
2. If delaying the
payment of tax and/or fines as compared with the prescribed payment date or the
deadline stated in tax handling decisions, they shall, apart from paying fully
the tax and/or fine amounts, have to pay an amount equal to 0.1% (one thousandth)
of the delayed payment amount for each day of delayed payment;
3. If falsely
declaring or evading tax, they shall, apart from having to fully pay the tax
amount according to the provisions of this Law, be imposed a fine being one to
five times the frauded tax amount, depending on the nature and seriousness of
their violations; if evading tax in large amounts, relapsing into already
administratively sanctioned tax-related violations or committing other serious
violations, they shall be examined for penal liability according to the
provisions of law;
4. If failing to pay
tax and/or fine according to tax notices or under tax-handling decisions, they
shall be handled as follows:
a/ Deductions from the
business establishments deposits at banks, other credit institutions or
treasuries to pay tax and/or fines.
The concerned banks,
other credit institutions or treasuries shall have to make deductions from
deposit accounts of the business establishments to pay tax and/or fines into
the State budget under tax-handling decisions of tax offices or competent
agencies before collecting debts;
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c/ Inventory of assets
according to the provisions of law to ensure the full collection of tax and/or
fine arrears.
Article
24.- Competence of tax offices in
handling tax-related violations
1. The heads of the
tax offices directly managing the tax collection are competent to handle
violations committed by tax payers prescribed in Clauses 1 and 2, and impose
fines being one to five times the frauded tax amount according to the
provisions in Clause 3, Article 23 of this Law.
2. The directors of
the tax departments and the directors of the tax sub-departments directly
managing the tax collection may apply the handling measures prescribed in
Clause 4, Article 23 of this Law and forward dossiers of violations to the
competent agencies for handling violations prescribed in Clause 3, Article 23
of this Law according to the provisions of law.
Article
25.- Handling violations committed by
tax officials and other individuals
1. Tax officials and
other individuals who abuse their positions and powers to illegally seize or
appropriate tax and/or fine amounts, shall have to refund to the State the
whole tax and/or fine amount already illegally used, and shall, depending on
the nature and seriousness of their violations, be disciplined or examined for
penal liability according to the provisions of law.
2. Tax officials and
other individuals who show signs of irresponsibility or mishandle violations,
thus causing damage to tax payers, shall have to pay compensation therefor
according to the provisions of law and shall, depending on the nature and
seriousness of their violations, be disciplined or examined for penal liability
according to the provisions of law.
3. Tax officials and
other individuals who abuse their positions and powers to act in complicity
with or cover violators, or commit other acts in violation of the provisions of
this Law shall, depending on the nature and seriousness of their violations, be
disciplined or examined for penal liability according to the provisions of law.
4. Persons who
obstruct or incite others to obstruct the implementation of this Law shall,
depending on the nature and seriousness of their violations, be
administratively sanctioned or examined for penal liability according to the
provisions of law.
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COMPLAINTS
AND STATUTE OF LIMITATIONS
Article
26.- Rights and responsibilities of tax
payers in making tax-related complaints
1. Tax payers have the
right to complain about the improper implementation of the provisions of this
Law by tax officials and/or tax offices.
Complaints must be
sent to the tax offices directly managing the tax collection within 30 days
after the receipt of notices or handling decisions of the tax officials and/or
tax offices.
Pending the settlement
thereof, tax payers shall still have to abide by notices or handling decisions
of the tax offices.
2. In cases where
complainants disagree with decisions of agencies settling their complaints or
upon the expiry of the time limit prescribed by the legislation on complaints
and denunciations, their complaints remain unsettled, they have the right to
lodge their complaints to the immediate superior tax offices or initiate
lawsuits according to the provisions of law.
Article
27.- Responsibilities and powers of tax
offices in settling tax-related complaints
1. Tax offices, upon
receiving tax-related complaints, shall have to consider and settle them within
the time limit prescribed by the legislation on complaints and denunciations.
2. Tax offices which
receive complaints have the right to request complainants to supply dossiers
and documents related to the complaints; if the complainants refuse to provide
the requested dossiers and documents, the tax offices shall be entitled to
refuse to consider and settle their complaints.
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4. Upon detecting or
concluding on false tax declaration, tax evasion or tax-related errors, tax
offices shall have to collect the tax and/or fine arrears or reimburse tax
amounts overpaid within the latest five years as from the date of inspection
and detection of the false tax declaration, tax evasion or tax-related errors.
In cases where business establishments fail to make tax registration,
declaration or payment, the time limit for collecting tax and/or fine arrears
shall be counted from the date the business establishments commence their
operation.
5. Heads of superior
tax offices shall have to settle tax-related complaints of tax payers against
their subordinate tax offices. The Finance Ministers decisions on settling
tax-related complaints shall be final ones.
Chapter
VII
ORGANIZATION
OF IMPLEMENTATION
Article
28.- The Government shall direct the
organization of the implementation of this Law throughout the country.
Article
29.- The Finance Minister shall have to
organize and inspect the implementation of this Law throughout the country.
Article
30.- The Peoples Committees of all
levels shall, within the ambit of their tasks and powers, direct the
implementation and inspect the observance of this Law in their respective
localities.
Chapter
VIII
IMPLEMENTATION
PROVISIONS
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1.
This Law takes effect as from January 1, 2004.
2. The May 10, 1997
Law on Enterprise Income Tax shall cease to be effective as from the effective
date of this Law.
To annul regulations
on the reimbursement of enterprise income tax already paid for income amounts
reinvested or tax on incomes transferred abroad prescribed in Articles 42 and
43 of the Law on Foreign Investment in Vietnam.
To annul regulations
on land use right transfer tax applicable to business establishments prescribed
in the Law on Land Use Right Transfer Tax. Incomes earned from the land use
right transfer by business establishments shall be subject to enterprise income
tax according to the provisions of this Law. Incomes earned from the land use
right transfer by non-business individuals shall be subject to tax on personal
incomes according to the provisions of law.
All previous
prescriptions on enterprise income tax contrary to this Law are hereby
annulled.
3. Foreign-invested
enterprises, foreign parties to business cooperation contracts already granted
investment licenses, domestic enterprises already granted certificates of
investment preferences shall continue enjoying the tax preferences provided for
in their investment licenses or certificates of investment preferences. In
cases where their investment licenses or certificates of investment preferences
provide for preferential levels lower than the tax preference levels provided
for in this Law, they shall enjoy the preferential levels provided for in this
Law for the remaining preferential duration.
Article
32.- The Government shall detail and
guide the implementation of this Law.
This Law was passed on
June 17, 2003 by the XIth National Assembly of the Socialist Republic of
Vietnam, at its 3rd session.
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CHAIRMAN
OF THE NATIONAL ASSEMBLY
Nguyen Van An