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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. 134/2007/TT-BTC
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Hanoi, November 23, 2007
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CIRCULAR
GUIDING
THE IMPLEMENTATION OF THE GOVERNMENT’S DECREE No. 24/2007/ND-CP OF FEBRUARY 14,
2007, DETAILING THE IMPLEMENTATION OF THE LAW ON ENTERPRISE INCOME TAX
Pursuant
to the Law on Enterprise Income Tax passed on June 17, 2003, by the XIth National Assembly;
Pursuant to the Government’s Decree No. 24/2007/ND-CP of February 14, 2007,
detailing the implementation of the Law on Enterprise Income Tax;
Pursuant to the Government’s Decree No. 77/2003/ND-CP of July 1, 2003, defining
the functions, tasks, powers and organizational structure of the Ministry of
Finance;
The Ministry of Finance guides the imposition of enterprise income tax as
follows:
Part A
SCOPE OF APPLICATION
OF ENTERPRISE INCOME TAX
I. PAYERS OF ENTERPRISE INCOME TAX
The
following organizations and individuals that produce and trade in goods or
provide services (referred collectively to as business establishments) and have
taxable incomes shall pay enterprise income tax under the guidance in this
Circular.
1.
Organizations engaged in goods production and trading and service provision,
including:
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b/
Unions of cooperatives and cooperatives (below referred to as cooperatives for
short); cooperative groups (except for the case specified at Point 1, Section
II, Part A of this Circular).
c/
Economic organizations of political organizations, socio-political
organizations, social organizations, socio-professional organizations, people’s
armed forces units; administrative agencies, non-business units, and other
organizations.
2.
Vietnamese individuals engaged in goods production and trading and service
provision, including:
a/
Business individuals and groups of business individuals.
b/
Individual business households.
c/
Independent practitioners with or without fixed offices or practicing places
(except for wage earners), such as medical doctors, accountants, auditors,
painters, architects, musicians and other independent practitioners.
d/
Individuals who lease out such property as houses, land, means of transport,
machinery, equipment or other kinds of property.
3.
Foreign companies conducting goods production and trading and providing
services through permanent establishments in Vietnam.
Permanent
establishment is a business establishment through which a foreign company
conducts some or all of its income-generating business operations in Vietnam. Foreign companies’ permanent establishments may take one of the following
principal forms:
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b/
Building site; construction, installation or assembly project; activities of
supervision of construction and construction, installation or assembly
projects;
c/
Establishment providing services, including consultancy services provided by
its employees or other entities;
d/
Agent of an overseas company;
e/
Representative in Vietnam in the following cases:
-
Have competence to sign contracts in the name of an overseas company;
-
Having no competence to sign contracts in the name of an overseas company but
regularly conducting goods delivery or service provision in Vietnam.
In
case a double taxation avoidance agreement signed by the Socialist Republic of
Vietnam otherwise provides for permanent establishments, the provisions of that
agreement shall be applied.
4.
Foreign companies, foreign organizations or foreign individuals doing business
in Vietnam not under the Law on Investment and the Law on Enterprises or having
incomes generated in Vietnam shall pay enterprise income tax under separate
guidance of the Ministry of Finance.
II. NON-PAYERS OF ENTERPRISE INCOME TAX
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1.
Cooperatives and cooperative groups engaged in agricultural production and
earning incomes from cultivation, husbandry or aquaculture products.
2.
Households and individuals engaged in agricultural production and earning
incomes from cultivation, husbandry or aquaculture products, except for farming
households and individuals engaged in large-scale commodity production and
earning high incomes from cultivation, husbandry or aquaculture products.
Enterprise income tax is
temporarily not collected from farming households and individuals engaged in
large-scale commodity production and earning high incomes from cultivation,
husbandry or aquaculture products until otherwise stipulated by the Government.
Part B
ENTERPRISE INCOME TAX
CALCULATION BASES
The
bases for enterprise income tax calculation are taxable income arising in the
tax period and tax rate.
I. TAXABLE INCOMES
Taxable
incomes in the tax period include taxable income from goods production and
trading and service provision activities and other taxable incomes, including
taxable incomes from goods production and trading and service provision
activities conducted overseas.
Tax
period is determined according to the calendar year. When a business
establishment applies a fiscal year other than the calendar year, the tax
period shall be determined according to the applied fiscal year. The first tax
period for a newly set up business establishment and the final tax period for a
business establishment set up from transformation of type of enterprise or form
of ownership, merger, division, dissolution or bankruptcy shall be determined
to conform to the accounting period prescribed by the accounting law.
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Taxable
income in the tax period is determined according to the following formula:
Turnover
for
Taxable calculating Reasonable Other
taxable
income in the = taxable - in expenses + incomes
in
tax period income in the the tax period the
tax period
tax period
Business
establishments may subtract the losses carried forward from previous tax periods
from taxable incomes determined according to the above formula before
determining payable enterprise income tax amounts according to regulations.
When
a double taxation avoidance agreement which the Socialist Republic of Vietnam
has signed otherwise provides for the method of determining taxable income for
permanent establishments, the provisions of that agreement shall be applied.
II. TURNOVER FOR CALCULATING TAXABLE INCOME
1.
Turnover for calculating taxable income is determined as follows:
Turnover
for calculating taxable income is the total sum earned from goods sale or
service provision, including price subsidies, surcharges and additional amounts
earned by business establishments, regardless of whether or not such amounts
have been collected.
a/
For business establishments paying value added tax by the tax credit method, it
is turnover exclusive of value added tax.
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Selling
price: VND 100,000.
VAT
(10%): VND 10,000.
Payment
price: VND 110,000.
The
turnover for calculating taxable income is VND 100,000.
b/
For business establishments paying value-added tax calculated directly on the
basis of added value, it is turnover inclusive of value added tax.
Example:
Business establishment B pays value added tax calculated directly on the
basis of added value. Its goods sale invoice only indicates the selling price
of VND 110,000 (VAT-inclusive price).
The
turnover for calculating taxable income is VND 110,000.
2.
Time of determining turnover for calculating taxable income is as follows:
a/
For goods, it is the time of transferring the right to own goods or issuing an
invoice.
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3.
Turnover for calculating taxable income in some cases is determined as follows:
a/
For goods sold by installment payment, it is the proceeds from the sale of
goods at the price paid in lump sum, excluding installment interests.
b/
For goods and services sold by deferred payment, it is the proceeds from the
sale of goods at the price paid in lump sum, excluding deferred payment
interests.
For
a purchase and sale contract with an installment or deferred payment duration
lasting through many tax periods, turnover is the amount receivable from the
purchaser in the tax period excluding installment or deferred payment interests
payable in the time limit prescribed in the contract.
For
goods sold and purchased by installment or deferred payment, the determination
of expenses for determining taxable income complies with the principle that
expenses must be compatible with turnover.
c/
For goods and services made and used by business establishments for exchange;
as gifts or donations; provision or rewarding to laborers, turnover is
calculated according to the sale prices of goods and services of the same or
similar kinds on the market at the time of exchange; presentation or donation;
provision or rewarding to laborers.
d/
For goods and services made and used by business establishments in the process
of production or business, such as electricity, products used as fixed assets
and self-made capital construction products, turnover is the production cost of
such products.
e/
For goods processing, turnover is earnings from the processing, including
remuneration, fuel, power, auxiliary materials and other expenses paid for the
processing of goods.
f/
For business establishments acting as agents or consignees selling goods at
prices set by business establishments being principals or consignors, turnover
is commissions paid under agency or consignment contracts.
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If
the lessees pay rents in advance for many years, turnover for calculating
taxable income is determined in conformity with the determination of expenses
incurred by business establishments.
Depending
on the conditions for the determination of reasonable expenses, business
establishments may choose either of the following two methods of determining
turnover for calculating taxable income:
-
Turnover is the property rent determined for each year, which is equal to (=)
the advanced rent divided (:) by the number of years for which the rent is
advanced.
-
Turnover is the total rent advanced for many years.
In
case a business establishment currently enjoying tax incentives chooses to use
the total rent advanced by the lessee for many years as turnover for
calculating taxable income, the enterprise income tax amount for each year of
tax exemption or reduction is the total enterprise income tax payable for the
number of years for which the rent has been advanced divided (:) by the number
of years for which the rent has been advanced.
For
organizations and individuals that have not yet applied the prescribed
accounting, invoice and document regimes, if they lease property and receive rents
advanced by lessees for many years, turnover for calculating taxable income is
the total rent received.
h/
For credit activities, turnover is receivable interests in the tax period on
debts with their principals and interests determined to be recoverable on time:
-
For receivable interests on undue loans which have been accounted as income
but, when becoming due, are not paid (both principal and interest) by clients,
credit institutions shall account them as business expenses and monitor them
off-balance-sheet. After collecting these interests, they shall account them as
income.
-
For other receivable interests on debts in the tax period which, when becoming
due, are not paid by clients, credit institutions shall monitor them
off-balance-sheet, urge their payment and, after collecting them, account them
as income.
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i/
For air carriage, turnover is the total sum received from the transport of
passengers, luggage and cargos, regardless of whether such sum has been
collected or not. The time of determining turnover for calculating taxable
income is the time when the carriage service is completed.
j/
For electricity sale, turnover is the sum specified on added-value invoices.
The time of determining turnover for calculating taxable income is the day on
which electricity meter readings are certified and recorded on electricity
bills.
Example:
An electricity bill is recorded with an electricity meter reading for the
time from December 5 to January 5. Turnover recorded on the bill will be used
for January.
k/
For other activities, such as supply of clean water, turnover for calculating
taxable income is determined as for electricity sale.
l/
For insurance and reinsurance business, turnover is the receivable amounts,
namely, original premiums, agency service charge (damage survey, consideration
for payment of indemnity, claim for third party’s indemnity, handling of
cargoes eligible for 100% indemnity); reinsurance charges, reinsurance
commissions and other revenues from insurance business after subtracting
payable amounts for revenue reduction, such as refunded premiums, reduced
reinsurance charges; refunded reinsurance commissions and reduced reinsurance
commissions.
m/
For construction and installation activities, turnover is the value of a work
or work item already tested and taken over or the value of the construction or
installation volume already tested and taken over.
-
For construction and installation activities involving supply of materials, raw
materials, machinery and equipment, turnover is the sum earned from
construction and installation activities, including the value of materials, raw
materials, machinery and equipment.
-
For construction and installation activities not involving supply of materials,
raw materials, machinery and equipment, turnover is the sum earned from
construction and installation activities, excluding the value of materials, raw
materials, machinery and equipment.
n/
For real estate business, turnover is the sum to be collected from real estate
business. The time of determining turnover is the time of transfer of land use
rights or the right to own works or architectural objects attached to land or
the time of delivery of immovables from the transferor to the transferee or the
time of issuance of the invoice.
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-
If parties to a business cooperation contract share business results in the
form of turnover, turnover for calculating the enterprise income tax payable by
each party is the proceeds from goods or service sale divided to each party
under the contract.
-
If parties to a business cooperation contract share business results in the
form of products, turnover for calculating the enterprise income tax payable by
each party is the proceeds from the sale of those products.
-
If parties to a business cooperation contract share business results in the
form of profits, turnover for calculating the enterprise income tax payable by
each party is the proceeds from goods or service sale under the contract. The
parties shall appoint one of them as a representative to issue invoices, record
turnover, declare and pay enterprise income tax on behalf of the other parties.
III. EXPENSES TO BE EXCLUDED FROM REASONABLE EXPENSES FOR
DETERMINING TAXABLE INCOME
1.
Principles for determining expenses to be excluded from reasonable expenses:
1.1.
Expenses without sufficient invoices or documents as prescribed or with
unlawful invoices or documents.
1.2.
Expenses not related to the generation of turnover and taxable income in the
tax period.
1.3.
Expenses covered by other funding sources.
2.
The following expenses are excluded from reasonable expenses:
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a/
Depreciation of fixed assets not used in goods production and trading or
service provision.
Particularly
for fixed assets serving laborers working at business establishments, such as
mid-shift rest houses, mid-shift meal halls, change rooms, toilet facilities,
clean water tanks, roofed parking lots, health stations or clinics, cars for
the transport of laborers to and from workplaces, job training facilities and
laborers’ dwelling houses constructed by business establishments, their depreciations
are allowed to be accounted as reasonable expenses.
b/
Depreciation of fixed assets which have no papers evidencing that they belong
to business establishments (except for finance-leased ones).
c/
Depreciation of fixed assets which are not managed, monitored and reflected in
accounting books of business establishments under current fixed asset
management and cost accounting regulations.
d/
Depreciated amounts in excess of the depreciation level prescribed in the
Finance Ministry’s current regulations on fixed asset management, use and
depreciation. For business establishments which apply the straight-line
depreciation or rapid depreciation method for technology renewal purposes, they
are depreciated amounts in excess of two times the prescribed depreciation
level.
In
other special cases, depreciated amounts may be accounted as reasonable
expenses according to decisions of the Ministry of Finance.
e/
Depreciation of fixed assets which have been completely depreciated.
f/
Depreciation of works attached to land which are used concurrently for
production and business and other purposes, depreciation of the value of works
attached to land areas not used for production and business activities must not
be accounted as reasonable expenses.
2.2.
Expenses for raw materials, materials, fuels, energy and goods which have
been used in excess of reasonable wastage norms or which were lost or damaged
but have been compensated by organizations or individuals at fault.
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2.3.
Salaries and wages in one of the following cases:
a/
Salaries, wages and allowances payable to laborers which have not been paid yet
after the expiry of the time limit for submission of annual tax finalization
dossiers.
b/
Salaries and wages paid by business establishments outside labor contracts or
collective labor agreements. Salaries and wages paid without labor contracts or
collective labor agreements as prescribed by the labor law, except for those
paid to laborers hired on a seasonal or piecework basis.
c/
Cash amounts rewarded to laborers which are not of salary nature and not
indicated in labor contracts or collective labor agreements.
d/
Salaries and wages of owners of private enterprises, heads of individual
business households or business individuals. Remuneration paid to founders and
members of members’ councils or management boards not personally participating
in administering goods production and trading or service provision activities.
2.4.
Expenses paid by business establishments for purchasing goods and services
without invoices which business establishments are permitted to draw up lists
of purchased goods and services (according to Form No. 01/TNDN attached to this
Circular) but they fail to draw up such a list enclosed with payment documents
issued to goods sellers or service providers in the following cases: purchasing
products made of rattan, bamboo, rush, coconut fiber, palm leaves, etc., from
peasants who directly make them; purchasing handicraft and fine-art articles
from artisans who make them for non-commercial purposes; purchasing soil,
stone, sand and gravel from people who exploit such products by themselves;
purchasing farm, forest and aquatic products from producers, growers or
fishermen; purchasing discarded materials from direct collectors; purchasing
used utensils and furniture directly from families and individuals, and
purchasing a number of services from individuals who provide these services for
non-commercial purposes.
Lists
of purchased goods and services must be signed by representatives-at-law of
business establishments who shall take responsibility to law for the accuracy
and truthfulness of the lists. If the purchasing price of a goods item or
service on the list is higher than the market price at the time of purchase,
the tax agency may base itself on the market prices at the time of purchase of
the goods or services of the same or similar kind on the market to re-determine
the price for re-calculating reasonable expenses upon determination of taxable
income.
2.5.
Expenses for monthly mid-shift meals for each laborer in excess of the minimum
wage level prescribed by the State for state employees.
2.6.
Expenses for food rations for laborers working in some special branches in
excess of the level prescribed by the State.
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2.8.
Financial supports for education for persons other than those specified at
Point a of this Item or without dossiers proving that they are financial
supports specified at Point b below:
a/
Financial supports for education, including financial supports for the
establishment of schools, public, people-founded and private, within the
national education system in accordance with the Education Law; financial
supports in the form of physical facilities serving teaching, learning and
other school activities; scholarships for pupils and students in general
education establishments, vocational education institutions and higher
education institutions prescribed in the Education Law; financial supports for
contests on subject matters taught in schools for contestants who are learners.
b/
A dossier of certification of financial support for education comprises:
written certification of the financial support signed by a representative of
the donating business establishment and a representative of the lawful
education establishment that is provided with financial support (made according
to form No. 02/TNDN issued together with this Circular, not printed herein).
2.9.
Compensation and allowance amounts provided to labor accident victims or occupational
disease patients in excess of the prescribed level. Expenses for purchasing
life insurance for laborers.
2.10.
Expenses for electricity and water under electricity and water contracts
directly signed between owners of rented production and business sites and
water and electricity suppliers with insufficient documents in one of the
following cases:
a/
When a business establishment that rents a production and business site
directly pays electricity and water charges to the electricity and water suppliers
without making a list thereof (made according to form No. 03/TNDN issued
together with this Circular, not printed herein) attached with
electricity and water bills and the production and business site renting
contract.
b/
When a business establishment that rents a production and business site pays
electricity and water charges to the owner of the rented site without making a
list thereof (made according to form No. 03/TNDN issued together with this
Circular, not printed herein) attached with electricity and water bills
paid by the owner of the rented site which match the actually used electricity
and water volumes, and the production and business site renting contract.
2.11.
Rents for fixed assets in excess of the amount allocated according to the number
of years which the lessees have paid in advance.
Example:
Enterprise A rents a fixed asset for 4 years and pays a lump-sum rent of VND
400 million. The rent for the fixed asset accounted as annual expense is VND
100 million. If the annual rent for the fixed asset exceeds VND 100 million,
the amount in excess of VND 100 million must not be included in reasonable
expenses upon determination of taxable income.
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Expenses
for procuring non-fixed assets such as technical documents, patents, technology
transfer licenses, trademarks, commercial advantages etc., may be gradually
allocated to business expenses within 3 years at most.
2.12.
Travel allowances paid to laborers on leave not in accordance with the provisions
of the Labor Code; allowances paid to laborers on working mission (excluding
travel and accommodation expenses) in excess of two times the level prescribed
by the Ministry of Finance for state cadres, employees and servants.
2.13.
Amounts payable to female laborers which were paid to ineligible persons or in
excess of the levels prescribed below:
a/
Expenses for job re-training of female laborers in case their current jobs are
no longer suitable and they need to change their jobs according to the
development planning of business establishments.
These
expenses include training fee (if any) and rank and grade salary difference
(guaranteeing that trainees are paid 100% of their salaries).
b/
Salaries and allowances (if any) for teachers of nurseries and kindergartens
organized and run by business establishments. The number of teachers shall be
determined according to the limit prescribed by the education and training
sector.
c/
Expenses for organizing an additional health check per year, such as examination
of occupational, chronic or gynecological diseases for female employees and
workers.
d/
Allowances for female laborers after their first or second childbirth: The
allowance level must not be higher than 1.5 times the minimum wage level set by
the State to help female laborers partly overcome their postnatal hardship.
e/
Overtime allowances paid according to the current regime to female laborers
who, for objective reasons, cannot take leave according to the prescribed
regime but keep working for business establishments.
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2.15.
Amounts deducted and paid into social insurance and health insurance funds and
trade union funds in excess of the prescribed levels. Contributions to
management funds of superior levels and associations and societies in excess of
the levels prescribed by business establishments and associations and
societies.
2.16.
Interests on loans borrowed from credit institutions and financial institutions
for goods production and trading or service provision which were paid at rates
higher than actual interest rates indicated in loan contracts. Interests paid
on loans borrowed from other entities at rates higher than actual interest
rates indicated in loan contracts or interests paid on loans in excess of 1.2
times interests paid at the highest lending interest rate applied at the same
time by credit institutions with which business establishments have
transactions.
Interests
paid on loans borrowed for contribution of legal capital or on portions of
registered legal capital not yet paid in, even when business establishments
have commenced production and business operations.
2.17.
Deductions made for setting up scientific and technological research funds and
these funds’ amounts used in violation of regulations on deduction, setting up
and use of these funds.
2.18.
Deductions for setting up reserves for the price decrease of unsold goods,
lost financial investments, bad debts and warranty for products, goods and construction
and installation works in violation of the Finance Ministry’s guidance.
2.19.
Deductions made for setting up job-loss funds and severance allowances paid
to laborers in violation of the current regime.
2.20.
Advanced amounts but not spent in practice, such as amounts advanced for the
overhaul of fixed assets and other advanced amounts.
For
particular fixed assets with regular repairs, business establishments may
account in advance amounts for repair according to cost estimates as production
or business costs. If the actual repair expenses are larger than the deducted
amounts according to the cost estimate, the business establishment may
additionally account the difference as reasonable expense. If the actually paid
amount is smaller than the deducted amount according to the cost estimate, the
business establishment may account it as expense decrease.
2.21.
Expenses for advertisement, sales promotion, transactions and public relations
(excluding expenses for market research: surveys, interviews, collection,
analysis and assessment of information, expenses for market development and
research support; expenses for hiring consultants to conduct research and
development and support market research; expenses for product shows and trade
fairs and exhibitions; expenses for opening showrooms; expenses for supplies
and instruments to support product shows; expenses for the transportation of
products for display); expenses for guest reception, festivities, brokerage
commissions, expenses for meetings; support expenses for marketing, support
expenses and payment discounts (including payments in cash to agents and
purchasers of goods and services in large quantities); expenses for newspapers
given free-of-charge by newspaper agencies, and other types of expenses which
exceed by more than 10% of the total of reasonable expenses. For commercial
activities, reasonable expenses used for determining control levels do not
include the costs of goods sold.
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2.23.
Exchange rate difference-related losses resulting from the re-valuation of
monetary items of foreign-currency origin at the end of the fiscal year;
exchange rate difference-related losses arising in the course of capital
construction investment (in the period prior to commencement of production and
business activities).
2.24.
Business management expenses allocated by overseas companies to their permanent
establishments in Vietnam in excess of the expense level calculated according
to the following formula:
Business Total
management Turnover of the resident establishment business
expenses allocated in Vietnam in the tax period management
by the overseas = ———————————————— x expense of
the
company to its Total turnover of the overseas company, overseas
resident including turnovers of permanent company
in the
establishment establishments in other countries tax
period in Vietnam in the tax period
The
base for determining expenses and turnover of an overseas company is the
overseas company’s financial statements already audited by an independent audit
company, clearly indicating the turnover and expenses of the overseas company,
and management expenses allocated by the overseas parent company to its
permanent establishment in Vietnam.
Overseas
companies’ permanent establishments in Vietnam which have not yet applied the
prescribed accounting, invoice and voucher regimes and pay tax by the
declaration mode are not allowed to account as reasonable expenses business
management expenses allocated by their overseas companies.
2.25.
Fines for administrative violations such as: violations of traffic law,
violations of business registration regulations, violations of accounting and
statistical regimes, violations of the tax law, and other fines for
administrative violations as prescribed by law.
2.26.
Expenses for capital construction investment; financial supports for mass and
social organizations and localities; charities, excluding financial supports
for education stated at Point 2.8 of this Part; expenses for golf course
membership cards, and expenses for golf playing.
2.27.
Payable taxes:
a/
Value added tax paid by business establishments that pay VAT by the credit
method which has been credited or refunded;
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c/
Land use right transfer tax;
d/
Personal income tax.
2.28.
Other unreasonable expenses as prescribed by law.
IV. OTHER TAXABLE INCOMES
Other
taxable incomes in the tax period include:
1.
Income from securities trading.
2.
Income from activities related to industrial property rights or copyright.
3.
Other incomes from asset ownership or use right.
4.
Income from asset transfer or liquidation. This income is determined to be
equal to (=) turnover generated from the asset transfer or liquidation minus
(-) the residual book value of the transferred or liquidated asset and expenses
related to the asset transfer or liquidation.
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6.
Income from foreign-currency business.
7.
Income from exchange rate differences actually arising in the period from
production and business activities (excluding exchange rate difference-related
profits resulting from the re-valuation of monetary items of foreign-currency
origin at the end of the fiscal year; exchange rate difference-related profits
arising in the course of capital construction investment in the period before
conducting production and business activities).
8.
Year-end balances of the reserve for price decrease of goods left in stock,
reserve for lost financial investments, reserve for bad debts and the deducted
reserve amount for warranty of products, goods and construction and
installation works which remains unused or is not yet used up after the expiry
of the warranty duration.
9.
Bad debts recovered after having been written off from accounting books.
10.
Payable debts with unidentified creditors.
11.
Received fines for breaches of economic contracts.
12.
The previous years’ omitted incomes from goods production or service provision
activities, which are now discovered.
13.
Incomes received from overseas goods production and service provision
activities.
Vietnamese
enterprises that make offshore investment and earn incomes from offshore
production and business activities shall declare and pay enterprise income tax
under Vietnam’s Law on Enterprise Income Tax in force, including enterprises
that are enjoying enterprise income tax breaks under the regulations of the
host countries. The enterprise income tax rate used for calculating and
declaring incomes earned in foreign countries is 28%. The preferential tax rate
(if any) currently enjoyed by Vietnamese enterprises making offshore investment
under the Law on Enterprise Income Tax in force does not apply.
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In
case an income from offshore investment is already subject to enterprise income
tax (of a tax similar in nature to enterprise income tax) in a foreign country,
when calculating the enterprise income tax payable in Vietnam, the Vietnamese
enterprise making offshore investment is entitled to subtract the tax amount
already paid in the foreign country or paid on its behalf by its partner in the
host country (including dividend tax), provided that the subtracted amount must
not exceed the income tax amounted calculated under Vietnam’s Law on Enterprise
Income Tax. The income tax amount which the offshore investment-making
enterprise is exempted from or reduced on the profit it is shared from the
offshore investment project under the law of the host country is also
subtracted upon determination of the enterprise income tax amount payable in Vietnam.
Example
1: Enterprise A receives an income of VND 800 million from an offshore
investment project. Such income is the remainder after payment of an income tax
under the law of the host country. The payable income tax calculated under the
Law on Enterprise Income Tax of the host country is VND 200 million. The
enterprise income tax amount after it is reduced by 50% under the host
country’s Law on Enterprise Income Tax is VND 100 million.
The
income received from the offshore investment project subject to income tax
under Vietnam’s Law on Enterprise Income Tax is as follows:
[(VND
800 million + VND 200 million) x 28%] = VND 280 million.
The
payable enterprise income tax amount (after subtracting the tax amount already
paid in the host country) is:
VND
280 million - VND 200 million = VND 80 million.
Example
2: Enterprise A receives an income of VND 660 million from an offshore
investment project. This income is the remainder after payment of an income tax
amount in the host country. The income tax amount already paid under the host
country’s regulations is VND 340 million.
The
income from the offshore investment project of the enterprise which must be
declared for payment of income tax under Vietnam’s Enterprise Income Tax Law is
as follows:
[(VND
660 million + VND 340 million) x 28%] = VND 280 million.
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The
dossier to be submitted upon declaration and payment of income tax by a
Vietnamese enterprise making offshore investment on the income from its
offshore investment project comprises:
-
The enterprise’s decision on the sharing of profits of the offshore investment
project.
-
The enterprise’s financial statement audited by an independent audit
organization.
-
The enterprise’s income tax declaration for the offshore investment project
(copy certified by a competent representative of the offshore investment
project);
-
The written record of tax finalization for the enterprise (if any);
-
The host country’s tax agency’s certification of the payable tax amount and the
tax amount paid in the foreign country or the tax amount already paid by the
enterprise’s partner or the exempted or reduced tax amount.
In
case its offshore investment project has not generated any taxable income (or
is suffering losses), when making declaration for enterprise income tax
finalization every year, the Vietnamese enterprise making offshore investment
is only required to submit a financial statement certified by an independent
audit organization or a competent agency of the host country and the income tax
declaration of the offshore investment project (copy certified by a competent
representative of the offshore investment project). Losses incurred from the
offshore investment project must be handled or carried forwarded according to
the host country’s regulations and must not be subtracted from the incomes
earned by the domestic enterprise upon calculation of enterprise income tax.
Incomes
earned from an offshore investment project shall be declared in the enterprise
income tax finalization of the year following the financial year in which the
income is earned or of the fiscal year coinciding the year in which the income
is earned in the foreign country if the enterprise has sufficient grounds and
documents for determining the income amount and the paid income tax of the
offshore investment project.
Example
3: Vietnamese enterprise A has an income from overseas in the fiscal year 2001.
It must declare this income in the income tax finalization declaration of the
fiscal year 2002 under Vietnam’s Law on Enterprise Income Tax.
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14.
Incomes related to sale of goods and provision of services which are not
included in turnover, such as: rewards for quick release of ships, tips for
food and drink catering or hotel services, after subtracting expenses for
generation of such incomes.
15.
Incomes from activities of contribution of shares, contribution of capital to
joint ventures or economic cooperation at home. In case the received incomes
are incomes divided from after-tax income from activities of contribution of
shares, contribution of capital to joint ventures or economic cooperation,
business establishments receiving these incomes do not have to pay enterprise
income tax.
16.
Income from sale of discarded materials and faulty products after subtracting
their collection and sale expenses.
17.
Gifts and donations in kind or in cash; income received in cash or kind from
marketing supports, expense supports, payment discounts, sale promotion prizes
and other supports.
18.
Other incomes.
Business
establishments which have turnovers, expenses and taxable incomes in foreign
currencies shall convert them into Vietnam dong at the average transaction
exchange rates on the inter-bank foreign currency market announced by the State
Bank of Vietnam at the time such turnovers and taxable incomes are generated
and expenses arise, unless otherwise provided for by law. Foreign currencies
having no exchange rate with Vietnam dong may be converted through a foreign
currency having an exchange rate with Vietnam dong.
V. ENTERPRISE INCOME TAX RATES
1.
The enterprise income tax rate is 28%.
For
lottery business activities, enterprise income tax shall be paid at the rate of
28%, and the income remainder must be remitted into the state budget after
subtraction of amounts allowed to be deducted for setting up funds prescribed
by the Finance Ministry.
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Business
establishments having investment projects for prospection, exploration and
exploitation of oil, gas and other precious and rare natural resources shall
send their investment projects’ dossiers to the Finance Ministry for the latter
to consider and consult concerned ministries and branches, then submit them to
the Prime Minister for decision on the specific tax rate for each project.
3.
Investment projects entitled to investment incentives are subject to enterprise
income tax rates guided in Section III, Part E of this Circular.
PART C
TAXATION OF INCOMES
FROM LAND USE OR LAND LEASE RIGHT TRANSFERS
I. TAXPAYERS
Liable
to pay income tax on incomes from land use right or land lease right transfers
are production and trading and service provision organizations (referred to as
business organizations for short) that earn incomes from land use or land lease
right transfers.
Non-business
organizations, business households and individuals that transfer land use or
land lease rights do not fall into the category of those liable to pay income
tax on land use or land lease right transfers as guided in this Circular. They
shall pay land use right transfer tax under the Law on Land Use Right Transfer
Tax and legal documents providing guidance on land use right transfer tax in
force.
II. SCOPE OF TAXATION OF INCOME FROM LAND USE OR LAND
LEASE RIGHT TRANSFERS
1.
Cases of land use right transfer subject to tax on income from land use right
transfer:
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b/
Transfer of the right to use land with infrastructures or architectural works
thereon.
2.
Cases of land lease right transfer subject to tax on income from land lease
right transfer:
a/
Transfer of the right to lease land without infrastructures or architectural
works thereon.
b/
Transfer of the right to lease land with infrastructures and architectural
works thereon (including sale of assets attached to leased land in the form of
annual land rent payment in which the asset purchaser is required to carry out
procedures for leasing land from the State in accordance with the Land Law).
Any
incomes earned by entities liable to pay tax on incomes from land use right or
lease right transfers specified at Points 1 and 2 of this Part are all taxable,
regardless of the form of and procedures for right transfer, such as
sub-leasing land leased from the State; re-transfer of capital portions
contributed in the form of land use or land lease right; transferring the right
in the form whereby a state agency issues a decision on recovery and allocation
of land to the transferee.
III. CASES OF LAND USE OR LAND LEASE RIGHT TRANSFER NOT
SUBJECT TO TAX ON INCOME FROM LAND USE OR LAND LEASE RIGHT TRANSFERS
1.
Competent state agencies allocate or lease land to business organizations in
accordance with the Land Law.
2.
Business organizations return land to the State or have their land recovered by
the State according to the provisions of law, excluding the case in which a
business organization transfers the land use or land lease right to another
subject then carries out procedures for the land to be recovered and
transferred by the State to the transferee.
3.
Business organizations sell their workshops together with the transfer of the
land use or land lease right before they are relocated according to state
planning.
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5.
Business organizations transfer their land use or land lease right due to
division, splitting, merger or bankruptcy or transformation of type of
enterprise in accordance with the Law on Enterprises and the Law on Bankruptcy.
6.
Owners of private enterprises transfer their land use right in case of
inheritance or divorce according to law; transfer the land use right between
husband and wife, parent and child, grandparent and paternal or maternal
grandchild; or between blood siblings.
7.
Business organizations donate their land use right to the State or other
charity organizations for construction of cultural, medical, physical training
or sport facilities for public interests; transfer the land use right for
charity purposes to social policy beneficiaries.
8.
Transfer of the land use or land lease right of business establishments making
investment in the construction and commercial operation of infrastructures in
industrial parks, export-processing zones, economic zones, industrial clusters,
industrial spots and important projects decided by the Prime Minister. Transfer
of the land use right in conjunction with the sale of apartments of high-rise
apartment buildings.
IV. BASES FOR CALCULATION OF TAX ON INCOME FROM LAND USE
OR LAND LEASE RIGHT TRANSFERS
The
bases for calculation of tax on income from land use or land lease right
transfer include taxable income and tax rate.
1.
Taxable income
Taxable
income from land use or land lease right transfer is determined to be equal to
turnover from the land use or land lease right transfer minus transfer
expenses.
1.1.
Turnover from land use or land lease right transfer.
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The
time of determining taxable turnover is the time when the seller transfers the
land use or land lease right to the purchaser, regardless of whether or not the
purchaser has registered the property ownership or land use right or
established the land lease right at a competent state agency.
The
actual transfer price is determined to be:
-
The invoiced price.
In
case the invoiced price is lower than the amount actually received by the land
use or land lease right transferor, taxable turnover shall be determined to be
the actual price of the transfer.
In
case the invoiced price or the actual price of the land use right transfer is
lower than the price prescribed by the People’s Committee of the province or
centrally run city, taxable turnover shall be determined according to the price
prescribed by the People’s Committee of the province or centrally run city at
the time of the transfer.
-
The successful bid, in case of auction of the land use or land lease right.
b/
Turnover for calculating taxable income in some cases is determined as follows:
-
In case of transfer of the land use or land lease right together with
infrastructures on land, taxable turnover is the total amount which the
transferee accepts to pay, including the amount paid for transfer of
infrastructure and rent of infrastructure on land.
-
In case of transfer of the land use or land rent right together with
infrastructures or architectural works on land, if it is possible to separate
the amount paid for the sale of architectural works on land, taxable turnover
is the amount which the transferee accepts to pay, excluding the money earned
from the sale of architectural works on land. If it is impossible to separate
the amount paid for the sale of architectural works on land, taxable turnover
is the total amount which the transferee of the land use or land lease right
accepts to pay, including the money paid for the sale of architectural works on
land.
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*
If it is possible to separate turnover from the sale of works and
infrastructures on land from turnover from the land use or land lease right
transfer, turnovers from these operations must be specified on the invoice and
value-added tax and income tax shall be declared and paid for each operation,
specifically:
-
Turnover from the sale of works and infrastructures on land is the
VAT-exclusive price, which must be written on a separate line in the
added-value invoice according to regulations;
-
Turnover from the land use or land lease right transfer must be recorded
separately in the following order:
+
Total turnover from the land use or land lease right transfer;
+
Land use levy, successful bid at the auction of the land use right or land rent
already paid into the state budget;
+
VAT-liable turnover (minus the land use levy, successful bid at the auction of
the land use right or land rent already paid into the state budget).
Turnover
from the sale of works and infrastructures on land must be comparable with
market prices. In case the unit in which the selling price is indicated is
inconsistent with market prices, turnover shall be re-determined on the
principle that turnover from the sale of works and infrastructures on land with
respect to construction works must ensure that the value of works and
infrastructures on land be not higher than the settled value of works plus (+)
the interest amount in capital construction prescribed by the State.
*
If it is impossible to separate turnover from the sale of works and
infrastructures on land from turnover from the land use or land lease right
transfer, turnover for calculating income from the land use or land lease right
transfer is total turnover (including turnover from the sale of works and
infrastructures on land and turnover from the land use or land lease right
transfer).
-
In case of sale of assets attached to leased land in the form of annual rent
payment, taxable income is the total amount the transferee accepts to pay
(including the value of assets on land and compensation support in cash (if
any).
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-
In case a credit institution has accepted the land use right value as security
for a loan in replacement of the performance of the secured obligation, if the
land use right used as a mortgage to secure a loan is transferred, turnover for
calculating taxable income is the price of the land use right transfer agreed
upon by the concerned parties.
-
In case of transfer of the right to use a land area which has been distrained
to secure judgment enforcement, turnover for calculating taxable income is the
price of the land use right transfer agreed upon by the concerned parties or
the price determined by the valuation council.
Determination
of turnovers in the cases specified at Item b must abide by the principles
stated at Item a of this Point.
1.2. Land use or land lease
right transfer expenses
a/
Principles for determination of expenses:
-
Expenses accounted as reasonable expenses for calculating taxable incomes from
land use or land lease right transfers in the tax period must correspond to
turnovers used for calculating taxable incomes.
In
case turnover for calculating taxable income covers also works and
infrastructures on land, land use or land lease right transfer expenses must
include also the cost of such works or infrastructures.
In
case of sale of assets attached to leased land, expenses also cover the book
value of assets attached to land.
-
For an investment project which is completed part by part and gradually
transferred according to its completion progress, common expenses used for the
whole project and expenses used for its completed part shall be allocated per
square meter of the land area to which the use right has been transferred for
determining taxable income with respect to that land area, covering expenses
for building internal roads; growing trees; building water supply and drainage
systems; power transformer stations; compensation for assets on land;
compensation, support and resettlement expenses and expenses for organization of
compensation, support and resettlement work, which have not yet subtracted from
land use levies or land rents paid into the budget; land use levies payable
into the state budget and other expenses for investment in the land area
involved in the land use or land lease right transfer. The allocation of these
expenses is effected according to the following formula:
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In
case the project has a land area, to which with the use right is not
transferred, used for other business activities, the above-said common expenses
must be also allocated to this land area for monitoring, accounting,
declaration and payment of enterprise income tax for other business activities.
In
case a business establishment carries out an infrastructure building
construction lasting for between over 1 year and 5 years and may finalize the
value of the infrastructure only when the whole construction activity is
completed, when summing up expenses for the transfer of the right to use the
land area, the business establishment may temporarily allocate expenses
actually invested in the infrastructure, using the percentage of the
transferred land area according to the above formula. After completing
investment and construction work, the business establishment may readjust
infrastructure investment expenses temporarily allocated to the transferred
land area in a way suitable to the total value of the infrastructure. Upon
readjustment, if there arises some overpaid tax amount compared with the
payable tax on income from the land use right transfer, the business
establishment may have it subtracted from the tax amount payable in the
subsequent tax period or have it refunded according to current regulations; if
the paid tax amount is still insufficient, the business establishment shall pay
the deficit according to regulations.
b/
Land use or land lease right transfer expenses which are allowed to be
accounted as reasonable expenses for calculating taxable income include:
-
Cost of land with the transferred use right, which is determined as follows:
+
For land allocated by the State with collection of land use levy or land rent,
it is the amount of land use levy or land rent to be paid into the state
budget.
+
For land with the use or lease right transferred from another organization or
individual, it is the price the land use right transferee accepts to pay.
+
For land which the State has exchanged for construction works, it is the value
of exchanged works.
+
For land which is acquired from an auction, it is the amount payable at the
successfully bid price.
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+
For land of a business establishment with the use right received without lawful
papers; inherited under the civil law; given as gift or donated with its cost
unidentifiable, its cost shall be determined according to the price of the
relevant land category prescribed by the People’s Committee of the province or
centrally run city at the time of receipt of the land use right. In the above
case, if the time of receipt of the land use right is before the date the
People’s Committee of provinces or centrally run city promulgates the prices of
land categories applicable in its locality according to the Government’s Decree
No. 87/CP of August 17, 1994, on the price brackets of land of different
categories, the cost of the land with the transferred use right shall be
determined according to the prices of land categories promulgated by the
People’s Committee of the province or centrally run city under Decree No. 87/CP
of August 17, 1994.
+
For land mortgaged to secure loans and land distrained for judgment
enforcement, its cost shall be determined on a case-by-case basis as guided at
the points above.
-
Compensations, support and resettlement expenses and expenses for organization
of compensation, support and resettlement work as prescribed by law, which have
not yet been subtracted from the payable land use levies or land rents.
-
Expenses for compensation for cash crop and vegetable damage.
The
above-mentioned compensation, support and resettlement expenses and expenses
for organization of compensation, support and resettlement work, if not
accompanied with invoices, shall be put on a list with the names and addresses
of recipients; compensation or support amounts; signatures of recipients and
certifications of the administrations of the wards and communes where exist
land areas for which compensations and supports are provided in accordance with
the provisions of law on compensation, support and resettlement upon land
recovery by the State.
-
Charges and fees related to the grant of land use rights as prescribed by law.
-
Expenses for soil rehabilitation and ground leveling.
-
Expenses for investment in the construction of infrastructures such as roads,
power lines, water supply and drainage systems, post and telecommunications
facilities, etc.
-
Other expenses directly related to the land use or land lease right transfer.
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Expenses
which have been paid by the State or from other funding sources must not be
included into land use or land lease right transfer expenses.
2.
Rates of tax on incomes from land use or land lease right transfers
a/
The tax rate applicable to incomes from land use or land lease right transfers
is 28%.
b/
After paying income tax at the rate of 28%, the remaining income is subject to
income surtax according to the following partially progressive tax bracket:
Partially
progressive tax bracket
Grade
Ratio of remaining income to expenses
Tax rate
1
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0%
2
Between over 15% and 30%
10%
3
Between over 30% and 45%
15%
4
Between over 45% and 60%
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5
Over 60%
25%
Example:
Turnover used for tax calculation for land with the transferred use right
is VND 170 million; total expense for the land use right transfer is VND 50
million. Taxable income is (=) VND 120 million (VND 170 million - VND 50
million). Tax on income from the land use right transfer shall be determined as
follows:
-
Enterprise income tax at the ordinary tax rate: VND 120 million x 28% = VND
33.6 million.
-
The remaining income, VND 86.4 million (VND 120 million - VND 33.6 million) is
subject to surtax according to the partially progressive tax bracket.
-
The ratio of the remaining income to total expense is 172.8% (VND 86.4 million
(:) VND 50 million x 100 = 172.8%). So, the additional enterprise income tax on
the land use right transfer is determined as follows:
Unit
of calculation: VND million
Grade
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Tax
Tax rate amount
1
50 x 15% = 7.5
0%
0
2
(50 x 30%) - (50 x 15%) = 7.5
10%
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3
(50 x 45%) - (50 x 30%) = 7.5
15%
1.125
4
(50 x 60%) - (50 x 45%) = 7.5
20%
1.5
5
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25%
14.1
Total
17.475
The
total payable tax on income from the land use right transfer is VND 33.6
million + VND 17.475 million = VND 51.075 million.
3.
Preferential tax rates and tax exemption and reduction periods guided in Part E
of this Circular are not applied to incomes from land use or land lease right
transfers. In case land use or land lease right transfers suffer losses, these
losses are not allowed to be offset with incomes from production and business activities
but may be carried forward into taxable incomes from land use right or land
lease right transfers (if any) in subsequent years according to regulations.
4.
When business organizations (including lawfully authorized organizations) that
are allowed to transfer land use rights or land lease right transfer land use
rights or land lease right or sell assets attached to land in the form of
payment of annual rents while the asset purchasers are required to carry out
procedures for leasing land from the State in accordance with the Land Law,
they shall declare and pay tax on income from land use or land lease right
transfers under the guidance in Circular No. 60/2007/TT-BTC of June 14, 2007,
guiding the implementation of a number of articles of the Tax Administration
Law and guiding the implementation of the Government’s Decree No. 85/2007/ND-CP
of May 25, 2007, detailing the implementation of a number of articles of the
Tax Administration Law.
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b/
In case of auction of the land use or land lease right which is used as
security for a loan, the proceeds from the auction may be paid according to the
Government’s regulations on loan security of credit institutions and for which
tax shall be declared and paid according to regulations. After these payments
are made, the remaining amount shall be returned to the business organization
which has mortgaged the land use right as loan security. The credit institution
or an organization authorized by the credit institution to auction the property
shall declare and withhold the tax on income from the land use right transfer
and remit it into the state budget according to its name, address, tax
identification number and invoices. It must be indicated on relevant documents
that the tax is declared and paid on behalf for the sale of property used as
loan security.
c/
In case a business organization in favor of which a judgment is enforced
receives the right to use or lease the land which has been distrained to secure
judgment enforcement as part of the sum of money for which the judgment is
enforced, upon transfer of the land use or land lease right, it shall declare
and pay the tax on income from the land use or land lease right transfer into
the state budget.
d/
In case the judgment enforcement agency auctions the land use right or land
lease right used as property to secure judgment enforcement, the proceeds from
the auction will be handled according to Article 27 of the Government’s Decree
No. 164/2004/ND-CP of September 14, 2004, on distraint and auction of land use
rights used as property to secure judgment enforcement. The organization
authorized to conduct the property auction shall declare and withhold the tax
on income from the land use right transfer and remit it into the state budget
according to its name, address, tax identification number and invoices. It must
be indicated on relevant documents that the tax is declared and paid on behalf
for the sale of property used to secure judgment enforcement.
Part D
DETERMINATION OF
TAXABLE INCOMES FROM AND ENTERPRISE INCOME TAX WITH
REGARD TO TRANSFER OF CAPITAL INVESTED IN BUSINESS ESTABLISHMENTS
I. SCOPE OF APPLICATION
1.
Transfer of capital invested in a production or business establishment is
that an organization or individual transfers part or the whole of its capital
invested in a business establishment to another organization or individual or
several other ones (including also sale of whole enterprises). Organizations
and individuals that receive transferred capital have obligations and interests
of contributors of investment capital to business establishments.
2.
Organizations and individuals having incomes from capital transfers shall pay
enterprise income tax under the guidance in Part D of this Circular. In case an
organization transfers capital associated with the land use or land lease
right, it shall declare and pay tax on income from the land use or land lease
right transfer under the guidance in Part C of this Circular.
3.
For organizations and individuals having incomes from share transfers, they
shall declare and pay tax on incomes from share transfers under a separate
guidance of the Ministry of Finance.
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1.
Taxable income:
Taxable
income from the transfer of capital invested in a business establishment is
determined as follows:
Taxable
income = Transfer price - Cost of transferred capital portion - Transfer
expenses
In
which:
+
Transfer price is the total actual value according to the market price received
by the transferor under the transfer contract, including undivided profits and
other benefits or losses arising in the course of conducting business (if any).
If
the transfer contract does not specify the payment price or the tax agency has
grounds to believe that the payment price has not been determined according to
the market price, the tax agency may examine and fix the payment value of the
contract on the basis of reference to the market price or the price saleable to
a third party and to similar transfer contracts.
+
Cost of transferred capital portion is determined on the basis of accounting
books and documents on the business establishment’s capital amount invested by
the transferring organization or individual at the time of capital transfer and
certified by the parties to the enterprise or the business cooperation
contract, or audit results of an independent audit company, for enterprises
with 100% foreign capital.
+
Transfer expenses are actual expenses directly related to the transfer,
evidenced by valid documents and invoices. For transfer expenses arising
overseas, these original documents must be certified by a public notary or
independent audit firm in the country where these expenses arise, and these
documents must be translated into Vietnamese (with the certification of a
competent representative).
Transfer
expenses include expenses for carrying out necessary legal procedures for the
transfer; charges and fees to be paid when carrying out transfer procedures;
expenses for transactions, negotiations and conclusion of the transfer
contract, and other expenses evidenced by documents.
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2.
Enterprise income tax rate:
The
enterprise income tax rate for income from the transfer of capital invested in
a business establishment is 28%.
3.
Determination of the payable enterprise income tax amount:
Payable
enterprise income tax amount = Taxable income x Enterprise income tax rate
Preferential
tax rates and tax exemption and reduction periods guided in Part E of this
Circular are not applied to incomes from transfers of capital invested in
business establishments. In case a capital transfer suffers losses, these
losses are not allowed to be cleared against incomes from production and
business activities.
III. TAX DECLARATION AND PAYMENT
1.
For foreign organizations and individuals that transfer their capital invested
in business establishments:
Organizations
and individuals that receive the transferred capital shall determine, declare,
withhold and pay on behalf of foreign organizations or individuals payable
enterprise income tax amounts.
The
deadline for submitting a tax declaration dossier is the 10th day from the date a competent
agency approves the capital transfer or, if the capital transfer is not subject
to approval, from the date the parties reach agreement on capital transfer in a
capital transfer contract.
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-
Enterprise income tax declaration for capital transfer (made according to a
set form);
-
Copy of the transfer contract. For a foreign-language transfer contract, its
Vietnamese translation is required, with the following major details:
transferor; transferee; time of transfer; transfer contents; rights and
obligations of each party; contractual value; payment deadline, method and
currency.
-
Copy of the competent agency’s decision approving the capital transfer (if
any);
-
Copy of the certificate of contributed capital, attached with certifications of
capital contributors;
-
Original documents of expenses.
When
finding that a dossier is insufficient, the tax agency shall notify the capital
transferee on the date of receipt of the dossier, if directly receiving the
dossier, or within three working days from the date of receipt of the dossier
sent by post or electronically.
Tax
declaration dossiers shall be submitted to the tax agency with which the
business establishments of foreign organizations or individuals have made
registration for tax payment.
The
tax payment deadline coincides with the deadline for submission of tax
declaration dossiers.
2.
For Vietnamese organizations and individuals that transfer their capital
invested in business establishments
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A
tax declaration dossier for income from capital transfer comprises:
-
Enterprise income tax declaration for capital transfer (made according to form
No. 04/TNDN issued together with this Circular, not printed herein);
-
Copy of the transfer contract. For a foreign-language transfer contract, its
Vietnamese translation is required, with the following major details: transferor;
transferee; time of transfer; transfer contents; rights and obligations of each
party; contractual value; payment deadline, method and currency.
-
Copy of the competent agency’s decision approving the capital transfer (if
any);
-
Copy of the certificate of contributed capital, attached with certifications of
capital-contributing parties;
-
Original documents of expenses.
When
finding that a dossier is insufficient, the tax agency shall notify the capital
transferee on the date of receipt of the dossier, if directly receiving the
dossier, or within three working days from the date of receipt of the dossier
sent by post or electronically.
Vietnamese
organizations and individuals shall separately account incomes from capital
transfers for tax declaration and payment under the guidance in Part D of this
Circular.
Part E
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I. CONDITIONS FOR ENJOYING ENTERPRISE INCOME TAX
INCENTIVES
1.
Investing in business lines and domains on the list of domains eligible for
investment incentives promulgated by the Government in accordance with the Law
on Investment.
2.
Investing in business lines and domains on the list of domains eligible for
special investment incentives promulgated by the Government in accordance with
the Law on Investment.
3.
Investing in geographical areas on the list of geographical areas with
difficult socio-economic conditions promulgated by the Government in accordance
with the Law on Investment.
4.
Investing in geographical areas on the list of geographical areas with
exceptionally difficult socio-economic conditions promulgated by the Government
in accordance with the Law on Investment.
II. PRINCIPLES FOR GRANTING ENTERPRISE INCOME TAX
INCENTIVES
1.
Enterprise income tax incentives specified in Section III and Section IV, Part
E, may only be granted to business establishments meeting one of the conditions
for enjoying tax incentives specified in Section I of Part E or newly
established production establishments; business establishments which are
relocated from urban centers according to plannings approved by competent
agencies; operating business establishments executing investment projects on
installation of new production chains, and several other specific cases.
2.
Business establishments shall observe the prescribed accounting, invoice and
document regimes, and register and pay tax according to their declarations.
3.
In the same tax period, if having an income eligible for a preferential
enterprise income tax rate and tax exemption or reduction in different cases,
business establishments may choose by themselves the most beneficial tax
incentive according to regulations.
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In
the tax finalization year, if a business establishment conducts different
production and business activities, some at a profit and some at a loss (other
than activities of land use right and land lease right transfer, capital
transfer, and offshore investment), its taxable income shall be determined as
follows:
-
If production and business activities eligible for enterprise income tax
exemption or reduction are conducted at a profit, the business establishment
may choose:
+
To separately account profits from these activities for enjoying tax exemption
or reduction according to regulations and carry forward losses from other
activities according to regulations;
+
To clear losses from other activities against profits from activities eligible
for tax incentives; any remaining profits will enjoy incentives; and any
remaining losses are allowed to be carried forward;
-
If business activities eligible for tax exemption or reduction are conducted at
a loss, such losses can be cleared against profits from production and business
activities conducted at a profit.
After
clearing, any remaining incomes are subject to enterprise income tax at the
rate applied to income-generating business activities.
5.
During the period of enjoying enterprise income tax incentives, if a business
establishment is reorganized (divided, split, merged or consolidated) or has
its ownership transformed according to law, the new business establishment,
which is resulted from the above change, will continue enjoy enterprise income
tax incentives as before for the remaining period of these incentives, provided
that it still satisfies the conditions for enjoying investment incentives.
6.
The tax exemption or reduction year is determined to coincide with the tax
period. The period of tax exemption or reduction is counted continuously from
the first tax period when the business establishment earns taxable incomes (not
yet cleared against losses carried forward from previous tax periods). If the
business establishment has conducted goods production and service provision activities
for less than 12 months in the first tax period of tax exemption or reduction,
it may register with the tax agency the time of enjoying tax exemption or
reduction right in the first tax period or from the subsequent tax period. If
the business establishment registers the time of tax exemption or reduction
from the subsequent tax period, it shall determine the payable tax amount of
the first tax period and pay it into the state budget according to regulations.
III. PREFERENTIAL ENTERPRISE INCOME TAX RATES AND
PERIODS OF APPLICATION OF PREFERENTIAL ENTERPRISE INCOME TAX RATES
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a/
Cooperatives established in geographical areas not on the list of geographical
areas with difficult socio-economic conditions and the list of geographical
areas with exceptionally difficult socio-economic conditions;
b/
Business establishments newly set up under investment projects in business
lines or domains on the list of domains eligible for investment incentives;
c/
Business establishments newly set up under investment projects executed in
geographical areas on the list of geographical areas with difficult
socio-economic conditions.
2.
The tax rate of 15% is applied for 12 years counting from the time of
commencement of business activities to:
a/
Cooperatives established in geographical areas on the list of geographical
areas with difficult socio-economic conditions;
b/
Business establishments newly set up under investment projects in business
lines or domains on the list of domains eligible for investment incentives and
executed in geographical areas on the list of geographical areas with difficult
socio-economic conditions.
3.
The tax rate of 10% is applied for 15 years counting from the time of
commencement of business activities to:
a/
Cooperatives established in geographical areas on the list of geographical
areas with exceptionally difficult socio-economic conditions;
b/
Business establishments newly set up under investment projects in business
lines or domains on the list of domains eligible for special investment
incentives.
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A
business establishment which is newly established under an investment project
in a business line or a domain on the list of domains eligible for special
investment incentives and has great economic and social impact should be
granted higher incentives. It may enjoy the preferential tax rate of 10%
throughout the project execution period under a Prime Minister decision issued
at the proposal of the Ministry of Finance.
4.
The year of commencement of business activities used to determine the period of
application of a preferential tax rate is the first turnover-generating year of
a business establishment.
5.
After the period of enjoying the preferential tax rate specified at Point 1, 2
or 3 of this Section, cooperatives and business establishments newly set up
under investment projects shall pay enterprise income tax at the tax rate of
28%.
IV. LEVELS AND DURATIONS OF ENTERPRISE INCOME TAX EXEMPTION
AND REDUCTION
1.
Business establishments newly set up under investment projects, newly set up
production establishments and relocated business establishments may enjoy tax
exemption and reduction as follows:
a/
Tax exemption for 02 years after taxable income is generated and a 50%
reduction of the payable tax amount for the subsequent 02 years for:
-
Newly established business establishments.
-
Business establishments relocated from urban areas according to plannings
already approved by competent agencies.
b/
Tax exemption for 02 years after taxable income is generated and a 50%
reduction of the payable tax amount for the subsequent 03 years for: business
establishments newly set up under investment projects in business lines and
domains on the list of domains eligible for investment incentives.
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-
Business establishments newly set up under investment projects in geographical
areas on the list of geographical areas with difficult socio-economic
conditions.
-
Business establishments relocated to geographical areas on the list of
geographical areas with difficult socio-economic conditions (except for the
case of relocation from geographical areas with difficult socio-economic
conditions or exceptionally difficult socio-economic conditions).
d/
Tax exemption for 03 years after taxable income is generated and a 50%
reduction of the payable tax amount for the subsequent 07 years for business
establishments newly set up under investment projects in business lines or
domains on the list of domains eligible for investment incentives and executed
in geographical areas on the list of geographical areas with difficult
socio-economic conditions.
e/
Tax exemption for 04 years after taxable income is generated and a 50%
reduction of the payable tax amount for the subsequent 09 years for:
-
Business establishments newly set up under investment projects in business
lines and domains on the list of domains eligible for special investment
incentives.
-
Business establishments newly set up under investment projects in geographical
areas on the list of geographical areas with exceptionally difficult
socio-economic conditions.
-
Business establishments relocated to geographical areas on the list of geographical
areas with exceptionally difficult socio-economic conditions.
For
a business establishment newly established under an investment project executed
in a geographical area where the business establishment is not headquartered,
income from the investment project is eligible for the preferential tax rate
and the duration of tax exemption or reduction applicable in the geographical
area where the investment project is executed.
Business
establishments established in the following cases are not entitled to enterprise
income tax incentives like those newly established under investment projects:
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-
Business establishments established as a result of transformation of type of
enterprise or form or ownership (except for the case of assignment or sale of
state enterprises stipulated in the Government’s Decree No. 80/2005/ND-CP of
June 22, 2005, on assignment, sale, business contracting and lease of state
companies).
-
Private enterprises newly established from individual business households in
the same business line.
2.
Operating business establishments that invest in the installation of new
production chains, expansion of production scale, renewal of technologies,
improvement of ecological environment or raising of production capacity are
entitled to enterprise income tax exemption or reduction for additional incomes
brought about by such investment as follows:
a/
Tax exemption for 01 year and a 50% reduction of the payable tax amount for
subsequent 02 years for investment projects on installation of new production
chains not in domains or geographical areas eligible for investment incentives
on the list of domains eligible for investment incentives, the list of domains
eligible for special investment incentives, the list of geographical areas with
difficult socio-economic conditions and the list of geographical areas with
exceptionally difficult socio-economic conditions.
b/
Tax exemption for 01 year and a 50% reduction of the payable tax amount for
subsequent 04 years for investment projects on the list of domains eligible for
investment incentives or executed in geographical areas on the list of
geographical areas with difficult socio-economic conditions.
c/
Tax exemption for 02 years and a 50% reduction of the payable tax amount for
subsequent 03 years for investment projects on domains on the list of domains
eligible for special investment incentives or executed in geographical areas on
the list of geographical areas with exceptionally difficult socio-economic
conditions.
d/
Tax exemption for 03 years and a 50% reduction of the payable tax amount for
subsequent 05 years for investment projects in domains on the list of domains
eligible for investment incentives and executed in geographical areas on the
list of geographical areas with difficult socio-economic conditions.
e/
Tax exemption for 03 years and a 50% reduction of the payable tax amount for
subsequent 07 years for investment projects in domains on the list of domains
eligible for special investment incentives and executed in geographical areas
on the list of geographical areas with difficult socio-economic conditions.
f/
Tax exemption for 04 years and a 50% reduction of the payable tax amount for subsequent
07 years for investment projects in domains on the list of domains eligible for
investment incentives and executed in geographical areas on the list of
geographical areas with exceptionally difficult socio-economic conditions, and
investment projects in domains on the list of domains eligible for special
investment incentives and executed in geographical areas on the list of
geographical areas with exceptionally difficult socio-economic conditions.
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Business
establishments shall separately account additional incomes brought about by the
above investment to determine the exempted or reduced enterprise income tax
amount. If business establishments cannot separately account these additional
incomes, additional incomes eligible for tax exemption or reduction shall be
determined as follows:
Additional Value
of fixed assets
income Taxable newly
invested for use
eligible income in
production and business
for tax = in the x ———————————
exemption year Total
historical cost of fixed
or reduction assets
actually used
in
production and business
Total
historical cost of fixed assets actually used in production and business
includes the value of newly invested fixed assets which have been completed,
taken over and put into use and the historical cost of existing fixed assets
currently used in production and business according to the period-end data of
the annual balance sheet.
For
investment projects with an execution duration of over one year and divided
into many investment items, if business establishments have registered with the
tax agencies the tax exemption or reduction duration for each investment item
completed and put into production and business, the value of newly invested
fixed assets shall be determined according to the accumulated value of
investment items completed and put into use as of the time of tax finalization
of the tax exemption or reduction year.
Example:
At the end of 2006, company A’s total historical cost of fixed assets
actually used in production and business activities is VND 30 billion. The
company has a long-term investment project, of which an item valued at VND 10
billion will be put into use in 2007 and another item valued at VND 15 billion
in 2008. The company cannot separately account the additional income from each
of these investment items. The company’s business result is VND 12 billion as
its taxable income in 2007 and VND 20 billion in 2008
The
additional income brought about by the investment and eligible for tax
exemption or reduction shall be determined as follows:
+
In 2007:
Additional
income VND 10
billion
eligible for = VND 12 billion x ——————— = VND
3 billion
tax exemption VND 30 billion
+
or reduction VND 10
billion
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Additional VND
10 billion +
income eligible VND 15
billion
for tax = VND 20 billion x ———————— =
VND 9 billion
exemption VND 40
billion +
or reduction VND 15
billion
For
an investment project of which each item has been completed but not yet put
into production or business to raise business capacity and efficiency in the
year, the value of the investment item is not allowed to be included in the
value of newly invested fixed assets for calculating the additional income
eligible for tax exemption or reduction.
3.
Business establishments are exempt from enterprise income tax in their incomes
earned in the following cases:
a/
Income from the performance of contracts for scientific research and
technological development, scientific and technological information services.
b/
Income from turnover from the sale of products turned out in the period of
trial production in strict compliance with production procedures, which must
not exceed 6 months counting from the date of starting the trial production.
c/
Income from turnover from the sale of products turned out by new technologies
applied for the first time in Vietnam, which must not exceed 01 year counting
from the date of application of such technologies to the manufacture of
products.
d/
Income from the performance of contracts on technical services in direct
service of agriculture.
e/
Income from job-training activities exclusively for ethnic minority people.
f/
Income from goods production and service provision activities of business
establishments exclusively employing disabled people.
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-
Being so certified by the People’s Committee of the province or centrally run
city.
-
Fully observing the accounting, invoice and document regimes.
-
Having a business license granted by a competent state agency.
-
Employing 10 laborers or more, of whom 51% are people with disabilities
certified by competent health agencies. The remaining laborers are mainly
relatives of these disabled people, equity capital contributors and persons
with managerial, professional, scientific-technical skills.
-
Having operation regulations or charter suitable to disabled laborers.
g/
Income from job-training activities exclusively for the disabled, especially
disadvantaged children and former social-evil doers.
Job-training
activities eligible for tax exemption under the guidance at this Point must
fully meet the following conditions:
-
Job-training establishments are set up and operate under the provisions of the
Government’s Decree No. 139/2006/ND-CP of November 20, 2006, detailing and
guiding the implementation of a number of articles of the Education Law and the
Labor Code regarding job training, and guiding documents.
-
Operating in business lines stated in their practicing licenses or business
lines already registered with the competent labor, war invalids and social
affairs agency.
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4.
Cooperatives; business individuals and individual business households with low
incomes are eligible for tax exemption or reduction, specifically as follows:
a/
Cooperatives in which each laborer has an average monthly income in the year
below the minimum wage level prescribed by the State for state employees are
exempt from enterprise income tax.
b/
Business individuals and individual business households with an average monthly
income per laborer in the year below the minimum wage level prescribed by the
State for state employees are exempt from tax.
c/
If business individuals and individual business households that have not yet
fully observed the accounting, invoice and document regimes, calculated and
paid tax based on a fixed turnover cease business operations for 15 consecutive
days or more, they may be considered for a 50% reduction of the payable tax
amount; if they cease their operations for a whole month, they may be
considered for tax exemption for that month.
5.
Enterprise income tax exemption or reduction for the following cases:
a/
Tax exemption for incomes received by investors from their capital
contributions in the form of invention patents, technical know-hows, technical
processes or technical services.
b/
Business establishments engaged in production, construction or transport and
employing a number of between 10 and 100 female laborers accounting for over
50% of the total number of regular laborers; or employing regularly over 100
female laborers accounting for over 30% of the total number of their regular
laborers are entitled to reduction of payable enterprise income tax amounts
corresponding to the amounts actually paid for female laborers as guided at
Point 2.13, Section III, Part B of this Circular if these amounts can
separately be accounted.
Non-business
units and offices of state corporations which fully meet the conditions on the
number of female laborers but are not directly engaged in business activities
are not entitled to tax reduction according to this Item.
6.
For business establishments that are enjoying enterprise income tax incentives,
if agencies competent to examine and inspect tax finalization detect increased
enterprise income tax amounts in the tax exemption or reduction period, these
business establishments are not entitled to tax exemption or reduction for
these increased tax amounts detected. They shall declare and pay these
increased tax amounts in the state budget at current or preferential (if any)
tax rates they are enjoying. If agencies competent to examine and inspect tax
finalization detect any exempted or reduced enterprise income tax amounts which
are smaller than those declared by business establishments, business
establishments are only entitled to exempted or reduced enterprise tax amounts
detected through examination or inspection. They shall also be fined for
violations of tax law according to regulations.
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1.
Business establishments shall determine by themselves their satisfaction of
conditions for tax incentives, preferential tax rates, the period of tax
exemption or reduction, and losses allowed to be subtracted (-) from taxable
incomes.
When
examining and inspecting business establishments, tax agencies shall examine
conditions for enjoying tax incentives, tax amounts exempted or reduced for
business establishments and losses to be subtracted by business establishments
from their taxable incomes strictly according to the actual conditions which
business establishments meet. If a business establishment fails to ensure
conditions for enjoying the preferential tax rate and the tax exemption or
reduction period, it shall declare and pay an adjusted tax amount and a fine
for violation of the tax law according to current regulations.
2.
For cases of tax exemption and reduction guided at Point 4, Section IV of this
Part, cooperatives, business individuals and private business households shall
send an application for tax exemption or reduction, with the certification of
the ward of commune administration, to the tax agency. The managing tax agency,
after obtaining the consent of the tax advisory board of the same level, issue
a notice of tax exemption or reduction or the reason for refusal of the request
for tax exemption or reduction.
VI. CARRYING FORWARD OF LOSSES
1.
Business establishments which, after making tax finalization, suffer from
losses may carry forward losses of the tax finalization year for clearing
against taxable incomes of subsequent years. The duration of carrying forward
losses must not exceed five years counting from the year following the year
when losses arise.
Business
establishments shall determine by themselves losses to be subtracted from
taxable incomes on the above principle. If, in the duration of carrying forward
losses, new losses arise, these losses may be carried forward to not more than
five subsequent years, counting from the year following the year when losses
arise.
When
the agency competent to examine and inspect the finalization of enterprise
income tax finds out that the loss amount which a business establishment is
allowed to carry forward is different from that determined by the business
establishment itself, the loss amount allowed to be carried forward will be
that determined by the competent agency and it may be also carried forward for
not more than 5 years, counting from the year following the year when losses
arise.
Business
establishments which have registered their plans for carrying forward losses
before the enterprise income tax period of 2007 may continue carrying forward
losses according to the registered plans or to subsequent tax periods but the
duration of carrying forward losses must not exceed 5 years, counting from the
year following the year when losses arise.
Upon
the expiration of the 5-year duration counting from the year following the year
when losses arise, if the losses have not yet been fully cleared, the remaining
loss is not allowed to be further subtracted from subsequent years’ incomes.
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3.
If enterprises suffer losses before their merger, these losses must be
monitored according to each year of arising and may be subtracted from taxable
incomes of enterprises after their merger in order to ensure the principle that
losses must not be carried forward for over 5 years, counting from the year
following the year when losses arise.
4.
For a joint-venture business establishment set up by different business
establishments, if it suffers losses upon issuance of the decision on its
dissolution, these losses will be allocated to every business establishment to
the joint venture. These business establishments may incorporate the allocated
loss amount into their business results for tax finalization while ensuring the
principle that losses must not be carried forward for over 5 years, counting
from the year following the year when losses arise.
5.
Business establishments that take over assets of business establishments that
have been transformed in type of enterprise or form of ownership (including
assignment, sale, business contracting or lease of state enterprise), divided,
split, merged or consolidated, shall fully pay outstanding tax amounts and
fines (if any) of the latter.
Part F
ORGANIZATION OF
IMPLEMENTATION
1.
This Circular takes effect 15 days after its publication in “CONG BAO” and
applies to tax periods from 2007 on.
2.
Business establishments newly set up from investment projects that are granted
business registration certificates or investment certificates from the
effective date (October 25, 2006) of the Government’s Decree No. 108/2006/ND-CP
of September 22, 2006, detailing and guiding the implementation of a number of
articles of the Investment Law, may enjoy enterprise income tax incentives
under the guidance in this Circular.
3.
Securities companies and securities investment fund management companies which
are newly set up under business registration certificates granted from the
effective date of the Government’s Decree No. 108/2006/ND-CP of September 22,
2006, detailing and guiding the implementation of a number of articles of the
Investment Law, are not allowed to enjoy enterprise income tax incentives
though they satisfy the condition on domains eligible for investment
incentives. Securities companies and securities investment fund management
companies set up before the effective date of the Government’s Decree No.
108/2006/ND-CP of September 22, 2006, are allowed to continue enjoying
enterprise income tax incentives in the remaining period.
4.
Joint-stock companies formed as a result of equitization of state enterprises
which are granted business registration certificates from the effective date
(March 21, 2007) of the Government’s Decree No. 24/2007/ND-CP of February 14,
2007, detailing the implementation of the Law on Enterprise Income Tax, are not
allowed to enjoy enterprise income tax incentives like newly set up business
establishments.
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Joint-stock
companies formed as a result of equitization of state enterprises which are
granted business registration certificates before the effective date of the
Government’s Decree No. 108/2006/ND-CP of September 22, 2006, are allowed to
continue enjoying enterprise income tax incentives in the remaining period.
5.
Business establishments that are enjoying enterprise income tax incentives
under 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, under their investment
licenses or investment incentive certificates may continue enjoying these
incentives for the remaining period. In case Circular No. 128/2003/TT-BTC,
Circular No. 88/2004/TT-BTC, investment licenses or investment incentive
certificates stipulate tax rates higher than preferential tax rates guided in
this Circular, the preferential tax rates guided in this Circular will be
applied in the remaining period, starting from the tax period of 2007. If a
business establishment no longer enjoys the preferential tax rate by the end of
the tax period of 2006, it is not entitled to a preferential tax rate in the
remaining period as guided in this Circular.
6.
Business establishments that are enjoying enterprise income tax exemption or
reduction under the Finance Ministry’s Circular No. 128/2003/TT-BTC and
Circular No. 88/2004/TT-BTC and under their investment licenses or investment
incentive certificates may continue enjoying such tax exemption or reduction in
the remaining duration. If the enterprise income tax exemption or reduction
period they are enjoying is shorter than that stipulated in this Circular,
business establishments may enjoy the tax exemption or reduction period
stipulated in this Circular in the remaining period, staring from the tax
period of 2007.
The
remaining tax exemption or reduction period is the number of years in which a
business establishment still enjoys tax exemption or reduction under the
guidance of this Circular minus the number of years in which it has enjoyed tax
exemption or reduction under Circular No. 128/2003/TT-BTC, Circular No.
88/2004/TT-BTC, the granted investment license or investment incentive
certificate till the end of 2006. The determination of the above remaining
period must ensure the following principles:
-
By the end of the tax period of 2006, the business establishment that is
enjoying tax exemption or reduction under Circular No. 128/2003/TT-BTC,
Circular No. 88/2004/TT-BTC, the granted investment license or investment
incentive certificate, will continue enjoying tax exemption or reduction for
the remaining number of years under the guidance in this Circular.
-
By the end of the tax period of 2006, if the business establishment no longer
enjoys tax exemption under Circular No. 128/2003/TT-BTC, Circular No.
88/2004/TT-BTC, the granted investment license or investment incentive
certificate, it is not allowed to enjoy the tax exemption period but may enjoy
the whole tax reduction period under the guidance in this Circular.
-
By the end of the tax period of 2006, if the business establishment is still
enjoying tax reduction under Circular No. 128/2003/TT-BTC, Circular No.
88/2004/TT-BTC, the granted investment license or investment incentive
certificate, it will enjoy the remaining years of tax reduction equal to the
number of years of tax reduction guided in this Circular minus the number of
years it enjoyed tax reduction by the end of the tax period of 2006.
-
By the end of the tax period of 2006, if the business establishment no longer
enjoys tax exemption under Circular No. 128/2003/TT-BTC, Circular No.
88/2004/TT-BTC, the granted investment license or investment incentive
certificate, it is not entitled to tax exemption or reduction under the
guidance in this Circular.
In
case the enterprise income tax exemption period under Circular No.
128/2003/TT-BTC, Circular No. 88/2004/TT-BTC, the investment license or
investment incentive certificate granted before January 1, 2007, is longer than
that guided in this Circular while the tax reduction period is shorter, the
business establishment may choose to apply the tax exemption or reduction
period under Circular No. 128/2003/TT-BTC, Circular No. 88/2004/TT-BTC, the
granted investment license or investment incentive certificate or apply the tax
exemption or reduction period guided in this Circular.
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8.
For foreign-invested enterprises and foreign parties to business cooperation
contracts which were granted investment licenses before January 1, 2004, if
meeting the conditions specified in their investment licenses, they will
continue enjoying the preferential enterprise income tax rates till the end of
the period of enjoying preferential tax rates according to their investment
licenses. At the expiry of the period of enjoying preferential tax rates under
their investment licenses, they will shift to apply the enterprise income tax
rate of 25%; if they have been paying enterprise income tax at the tax rate of
25%, they will continue paying the tax at the tax rate of 25% until the expiry
of their investment licenses. For foreign-invested enterprises and foreign
parties to business cooperation contracts which apply for extension of
investment licenses from January 1, 2007, on, they are entitled to preferential
enterprise income tax rates under the guidance in Section II, Part E of this
Circular.
9.
For business establishments which were granted investment licenses, business
registration certificates or investment certificates before the date on which
the Socialist Republic of Vietnam officially became a member of the World Trade
Organization (January 11, 2007), if having incomes from business activities
(excluding textile and garment-related activities) and enjoying enterprise
income tax incentives because they meet all conditions on export percentages
stipulated in legal documents on foreign investment in Vietnam, domestic
investment promotion and enterprise income tax and legal documents on
investment, they will continue enjoying these incentives according to these
legal documents until 2011.
From
the tax period of 2007, to annul the contents in documents of the Ministry of
Finance and other branches guiding enterprise income tax incentives for
compliance with the condition on use of domestic raw materials and enterprise
income tax incentives for compliance with the export condition on textile and
garment activities.
Business
establishments operating in the domain of textile and garment, if meeting the
conditions for enjoying enterprise income tax incentives (in addition to the
condition on export percentage), will continue enjoying enterprise income tax
incentives corresponding to conditions which they meet in the remaining
incentive period.
10.
This Circular replaces the following Circulars:
-
The Finance Ministry’s Circular No. 128/2003/TT-BTC of December 22, 2003,
guiding the implementation of the Government’s Decree No. 164/2003/ND-CP of
December 22, 2003, detailing the implementation of the Law on Enterprise Income
Tax.
-
The Finance Ministry’s Circular No. 88/2004/TT-BTC of September 1, 2004,
amending and supplementing the Finance Ministry’s Circular No. 128/2003/TT-BTC
of December 22, 2003, guiding the implementation of the Government’s Decree No.
164/2003/ND-CP of December 22, 2003, detailing the implementation of the Law on
Enterprise Income Tax.
To
annual the contents guiding enterprise income tax promulgated by the Ministry
of Finance and other branches which are contrary to the guidance in this
Circular.
11.
Settlement of tax-related problems, tax finalization, tax exemption and
reduction and the handling of enterprise income tax-related administrative
violations before the tax period of 2007 shall be carried out in accordance
with relevant regulations guiding enterprise income tax promulgated before the
tax period of 2007.
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Any
problems arising in the course of implementation should be promptly reported by
units and business establishments to the Ministry of Finance for study and
additional guidance
FOR THE MINISTER OF FINANCE
VICE MINISTER
Truong
Chi Trung