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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 CORPORATE 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 Corporate income tax.
Chapter I
GENERAL PROVISIONS
Article 1.-
Governing scope
This Law provides for corporate
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/ Public service providers
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 corporate 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 workers. The Government shall specify
criteria and conditions for the determination of enterprises exclusively
reserved for disabled, detoxified and HIV-infected workers.
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 corporate 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. Separately incurred corporate
income tax shall be declared in accordance with Point c and Point d Clause 2 of
this Law.
Chapter II
TAX BASES AND TAX
CALCULATION METHODS
Article 6.- Tax
bases
Tax bases include assessable income
and tax rate.
Article 7.-
Determination of assessable income
1. Assessable 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 workers 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 corporate income tax rate is
25%, except the cases specified in Clause 2, this Article, and Article 13, of
this Law.
2. The corporate 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 tax authorities
of local areas where they are headquartered. In case an enterprise has a
dependent accounting unit operating in a province or centrally run city other
than the place of its headquarters, tax payable shall be calculated according
to the ratio of the unit's expenses to the headquarters' expenses. Revenues
from collected tax shall be managed and used in accordance with the Law on
State Budget.
The Government shall detail and
guide the implementation of this Article.
Chapter III
CORPORATE 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 having many female employees are entitled to a reduction
of corporate income tax which is equal to the additional expenses for female
workers.
2. Enterprises having many ethnic
minority employees are entitled to a reduction of corporate income tax which is
equal to the additional expenses for ethnic minority workers.
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 assessable 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 assessable 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 assessable 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 corporate 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 corporate income tax amount.
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The interest rate for calculating
the interest on the tax arrears on the unused fund is the interest rate for
one-year term treasury bonds applicable at the time of collection, and the
interest payment period is two years.
The interest rate for calculating
interest on the tax arrears on the fund improperly used shall be the late
payment interest rate under the provisions of the Tax Administration Law, and
the interest payment period begins from the time a fund is set up and ends when
tax arrears are collected.
3. Enterprises may not record
expenses of their scientific and technological development funds as deductible
expenses 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. Corporate 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. Corporate 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 Corporate
income tax Law No. 09/2003/QH11.
3. Enterprises which enjoy
corporate income tax incentives under Corporate income tax Law No. 09/2003/QH11
may continue enjoying those incentives for the remaining duration under
Corporate income tax Law No. 09/2003/QH11; in case corporate 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 Corporate 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