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THE
MINISTRY OF FINANCE
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THE
SOCIALIST REPUBLIC OF VIETNAM
Independence - Freedom - Happiness
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No.
78/2014/TT-BTC
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Hanoi,
June 18, 2014
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CIRCULAR
GUIDING THE IMPLEMENTATION OF THE GOVERNMENT’S
DECREE NO. 218/2013/ND-CP OF DECEMBER 26, 2013, DETAILING AND GUIDING THE
IMPLEMENTATION OF THE LAW ON CIT
Pursuant to June
3, 2008 Law No. 14/2008/QH12 on CIT and June 19, 2013 Law No. 32/2013/QH13 Amending
and Supplementing a Number of Articles of the Law on CIT;
Pursuant to the
Government’s Decree No. 218/2013/ND-CP of December 26, 2013, detailing a number
of articles of the Law on CIT and the Law Amending and Supplementing a Number
of Articles of the Law on CIT;
Pursuant to the
Government’s Decree No. 118/2008/ND-CP of November 27, 2008, defining the
functions, duties, powers and organizational structure of the Ministry of
Finance;
At the proposal of
the Director General of Taxation, the Minister of Finance guides the
implementation of CIT as follows:
Chapter I
GENERAL
PROVISIONS
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This Circular guides
the implementation of the Government’s Decree No. 218/2013/ND-CP of December 26,
2013, detailing a number of articles of the Law on CIT and the Law Amending and
Supplementing a Number of Articles of the Law on CIT.
Article
2. Taxpayers
1. Payers of
corporate income tax (CIT) are organizations engaged in production and trading
of goods or provision of services with taxable income (below referred to as
enterprises), including:
a/ Enterprises
established and operating under the Enterprise Law, the Investment Law, the Law
on Credit Institutions, the Insurance Business Law, the Securities Law, the
Petroleum Law, the Commercial Law or other legal documents in the forms of
joint-stock company; limited liability company; partnership; private
enterprise; lawyer office, private notary public office; party to business
cooperation contract; party to petroleum product-sharing contract, oil and gas
joint-venture enterprise and joint operating company;
b/ Public or
non-public non-business units engaged in production and trading of goods or
provision of services with taxable income in all areas;
c/ Organizations
established and operating under the Cooperative Law;
d/ Enterprises
established under foreign law (below referred to as foreign enterprises) and
having permanent establishments in Vietnam;
Permanent
establishments of foreign enterprises are manufacturing and trading
establishments through which foreign enterprises carry out some or all of their
production and trading activities in Vietnam, including:
- Branches, executive
offices, factories, workshops, means of transport, mines, oil and gas fields or
other sites of exploitation of natural resources in Vietnam;
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- Establishments
providing services, including also consultancy services through employees or
other organizations or individuals;
- Agents for foreign
enterprises;
- Representatives in
Vietnam, for representatives authorized to sign contracts in the name of
foreign enterprises or representatives not authorized to sign contracts in the
name of foreign enterprises but regularly delivering goods or providing
services in Vietnam;
In case a double
taxation avoidance agreement which the Socialist Republic of Vietnam has signed
has different provisions on permanent establishments, the provisions of that
agreement prevail.
e/ Organizations
other than those referred to at Points a, b, c and d, Clause 1 of this Article
which are engaged in production and trading of goods or provision of services
and have taxable income.
2. Foreign
organizations engaged in production and business activities in Vietnam not
under the Investment Law or the Enterprise Law or earning income in Vietnam
shall pay CIT under separate guidance of the Ministry of Finance. These
organizations, if having capital transfer activities, shall pay CIT under the
guidance in Article 14, Chapter IV of this Circular.
Chapter II
METHOD AND BASES
OF TAX CALCULATION
Article
3. Method of tax calculation
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The payable CIT shall be determined by the following formula:
Payable
CIT
=
{
Taxed
income
-
Deduction
for setting up the science and technology fund (if any)
}
x
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An enterprise that
has paid CIT or a tax similar to CIT outside Vietnam may deduct the paid CIT amount
not exceeding the payable CIT amount in a period under the Law on CIT.
2. Tax period shall
be determined according to calendar year. For enterprises that apply a fiscal
year different from the calendar year, the tax period shall be determined
according to the applied fiscal year. The first tax period for a newly
established enterprise and the last tax period for an enterprise transforming
its type, changing its form of ownership, merged, separated, split, dissolved
or going bankrupt shall be determined in accordance with the accounting period
prescribed by the accounting law.
3. If the tax period
of the first year of a newly established enterprise counting from the time of
receiving an enterprise registration certificate or investment certificate, or if
the tax period of the last year for an enterprise transforming its type,
changing its form of ownership, merged, separated, split, dissolved or going
bankrupt, is shorter than 3 months, it may be added up to the tax period of the
subsequent year (for a newly established enterprise) or to the tax period of
the previous year (for an enterprise transforming its type, changing its form
of ownership, merged, separated, split, dissolved or going bankrupt) to form an
CIT period. The CIT period of the first year or the CIT period of the last year
must not exceed 15 months.
4. In case an
enterprise converts its CIT period (conversion from calendar year to fiscal
year or vice versa), the CIT period of the conversion year must not exceed 12
months. If an enterprise currently enjoying CIT incentives converts its tax
period, it may choose to enjoy incentives in the year of tax period conversion
or pay tax at the common rate in the year of tax period conversion and enjoy
tax incentives in the subsequent year.
Example 1: Enterprise
A applies the tax period of 2013 being the calendar year. At the beginning of
2014, it converts it to the fiscal year starting from April 1 to March 31 of
the following year. The tax period of the year of conversion (2014) shall be
counted from January 1, 2014, through March 31, 2014 (3 months), while the tax
period of the following year (fiscal year 2014) starts from April 1, 2014,
through March 31, 2015.
Example 2: The same
enterprise A enjoys CIT incentives (2 years’ tax exemption and 50% tax
reduction in the subsequent 4 years), with tax exemption starting in 2012. Then
it may enjoy the tax incentives as follows: tax exemption in 2012 and 2013; and
50% tax reduction in 2014, 2015, 2016 and 2017.
If the enterprise
chooses to enjoy 50% tax reduction in the tax period of the year of conversion
2014, it may enjoy such 50% tax reduction for three subsequent tax years, from
the fiscal year 2014 (from April 1, 2014 to March 31, 2015) to the end of the
fiscal year 2016.
If it does not choose
to enjoy 50% reduction of CIT in the tax period of the year of conversion 2014
(it declares and pays the tax at the common rate in the year of conversion
2014), it may enjoy 50% reduction of CIT from the fiscal year 2014 (from April
1, 2014, to March 31, 2015) to the end of the fiscal year 2017.
5. For non-business
units, other non-enterprise organizations established and operating under
Vietnamese law, and enterprises paying value-added tax by the direct method
which trade in goods or provide services liable to CIT and can determine the
turnover from but cannot determine the costs of and incomes from these business
activities, they shall declare and pay CIT at the following percentage of the
turnover from the sale of goods or services, specifically as follows:
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+ For goods trading:
1%;
+ For other
activities: 2%.
Example 3:
Non-business unit A leases a house and earns an annual turnover of VND 100
million. It cannot determine the cost of and income from this activity, so it
chooses to declare and pay CIT at a percentage of the turnover from the sale of
goods and services as follows:
Payable CIT amount =
VND 100,000,000 x 5% = VND 5,000,000.
6. Enterprises which
have turnover, expenses and other incomes in foreign currency shall convert
these amounts into Vietnam dong at the average interbank exchange rate
announced by the State Bank of Vietnam at the time of arising of these amounts,
unless otherwise provided by law. For a foreign currency without exchange rate
with Vietnam dong, conversion shall be carried out via a foreign currency with
an exchange rate with Vietnam dong.
Article
4. Determination of taxed
income
1. The taxed income
in a tax period shall be determined to be taxable income minus tax-exempted
income and losses carried forward from previous years under regulations.
Taxed income shall be
determined by the following formula:
Taxed
income
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Taxable
income
-
{
Tax-exempted
income
+
Losses
carried forward under regulations
}
2. Taxable income
Taxable income in a
tax period includes income from the production and trading of goods and
provision of services and other incomes.
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Income from the
production and trading of goods and provision of services is the turnover from
these activities minus deductible expenses for these activities. An enterprise
that has different production and trading activities subject to different tax
rates shall separately calculate the income from each activity and multiply it
by the corresponding tax rate.
Income from the
transfer of real estate or investment projects; income from the transfer of the
right to participate in investment projects or the right to explore, exploit
and process minerals as prescribed by law shall be separately accounted to
declare and pay CIT at the rate of 22% (or 20% from January 1, 2016), and are
ineligible for CIT incentives (except incomes of enterprises from implementing
investment projects on construction of social houses for sale, lease or
lease-purchase which enjoy the CIT rate of 10% under Point d, Clause 2, Article
20 of this Circular).
In a tax period, if
an enterprise engaged in the transfer of real estate, investment projects or
the right to participate in investment projects (excluding mineral exploration
and exploitation projects) suffers a loss, it may offset this loss against the
profit from its production and business activities (including also other
incomes prescribed in Article 7 of this Circular).
For the losses from
the transfer of real estate, transfer of investment projects or transfer of the
right to participate in investment projects (excluding mineral exploration and
exploitation projects) of 2013 and previous years which are still in the
loss-carry forward duration, enterprises shall carry them forward to incomes
from the transfer of real estate, investment projects or the right to
participate in investment projects; if they cannot fully carry forward these
losses, they may carry forward such losses to incomes from production and
business activities (including also other incomes) of 2014 and subsequent
years.
For an enterprise
carrying out dissolution procedures, after obtaining the dissolution decision,
if it transfers real estate being fixed assets, the income (profit) (if any)
from this transfer may be used to offset the loss from its production and
business activities (including also the losses carried forward from previous
years under regulations) in the tax period when such real estate transfer is
made.
Article
5. Turnover
1. Turnover for
calculating taxable income shall be determined as follows:
The turnover for
calculating taxable income is the total proceeds from the sale of goods,
remuneration for processing and charges for provided services, including price
subsidies, surcharges and extra fees that an enterprise may earn, regardless of
whether or not these amounts have been collected.
a/ For enterprises
paying value-added tax by the credit method, the turnover is 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 enterprises
paying value-added tax by the method of calculation directly based on added
value, the turnover is inclusive of value-added tax.
Example 5: Enterprise
B is liable to pay value-added tax by the method of calculation directly based
on added value. The sale invoice only indicates the selling price of VND
110,000 (VAT-inclusive price).
The turnover for
calculating taxable income is VND 110,000.
c/ For enterprises
providing services for which customers pay charges in advance for many years,
the turnover for calculating taxable income shall be distributed to the number
of years of advance payment or determined according to the lump-sum payment. If
such enterprises are enjoying tax incentives, the tax incentives shall be
determined based on the total payable CIT of the years of advance payment
divided by the number of years of advance payment.
2. The time for
determining turnover for calculating taxable income shall be determined as
follows:
a/ For the sale of
goods, it is the time of transfer of the right to own or use goods to the
buyer;
b/ For the provision
of services, it is the time of completion of the provision of services for the
buyer or the time of making out the service provision invoice;
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c/ For air carriage,
it is the time of completion of the provision of carriage service for the
buyer.
d/ Other cases as
prescribed by law.
3. The turnover for
calculating taxable income in a number of cases shall be determined as follows:
a/ For goods and
services sold on installment or deferred payment, it is the lump-sum selling
prices of goods or services, excluding installment or deferred payment
interests;
b/ For goods and
services used for exchange or internal consumption (excluding goods and
services used for sustaining production and business activities of
enterprises), it shall be determined based on the selling prices of products,
goods or services of the same or similar categories on the market at the time
of exchange or internal consumption;
c/ For goods
processing activities, it is the proceeds from processing activities, including
remuneration, expenses for fuel, power and auxiliary materials, and other
expenses for the processing;
d/ For units selling
their goods through agents or consignees and units operating as agents or
consignees under agency or consignment contracts selling goods at set prices to
enjoy commissions, the turnover shall be determined as follows:
- For enterprises
selling their goods through agents or consignees (including multi-level sales
agents), the turnover is the total amount of goods sales;
- For enterprises
acting as agents or consignees for goods sale at prices set by enterprises
delivering or consigning their goods, the turnover is the commission enjoyed
under goods agency or consignment contracts.
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Enterprises may,
based on the conditions for implementation of the accounting regime, actual
invoices and documents and the determination of costs, select either of the
following methods to determine turnover for calculating taxable income:
- The turnover is the
annual rental which is the paid rental divided by (:) the number of years of
advance payment;
- The turnover is the
total rental of the number of years of advance payment;
In case an enterprise
that is enjoying CIT incentives chooses the method of determining turnover for
calculating taxable income which is the total rental paid in advance by the
lessee for many years, the determination of the income tax amounts exempted and
reduced shall be based on the total CIT amount of the number of years of
advance payment divided by (:) the number of years of advance payment of the
rental by the lessee;
g/ For golf course
business, the turnover is the proceeds from the sale of membership cards and
golf playing tickets and other revenues in the tax period which shall be
determined as follows:
- For the form of
sale of daily golf tickets and cards, the turnover for determining taxed income
is proceeds from the sale of tickets and cards and other revenues arising in
the tax period.
- For the form of
sale of tickets and membership cards paid in advance for many years, the
turnover for determining taxed income of each year is the actually collected
proceeds from the sale and other revenues divided by the number of years of
card use or is the turnover paid in a lump sum.
h/ For credit
activities of credit institutions and foreign bank branches, the turnover is
interests from deposits and loans and turnover from financial leasing
activities to be collected in the tax period which are accounted as turnover
under current regulations on the financial mechanisms of credit institutions
and foreign bank branches.
i/ For transportation
activities, the turnover is the total turnover from passenger, cargo and
luggage transportation arising in the tax period.
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Example 6: On an
electricity bill, the meter reading is recorded for the days from December 5 to
January 5. The turnover recorded on this bill is calculated for January.
l/ For insurance
business, the turnover for calculating taxable income is total proceeds from
the provision of insurance services and other goods and services, including
VAT-exclusive surcharges and extra fees that insurance enterprises earn,
including:
- Turnover from
insurance business:
For insurance and
reinsurance business, the turnover includes collected original insurance
premiums; reinsurance premiums, commissions of reinsurance cession; fees for
insurance policy management; charges for agency services including loss
assessment, consideration for compensation, request for a third party to pay
indemnities and handling of 100% compensated goods (excluding authorized
assessment among internal- accounting member enterprises in the same
independent-accounting insurer) after deduction of all payables to reduce
revenues such as refunded insurance premiums; reduced insurance premiums;
refunded reinsurance premiums; reduced reinsurance premiums; refunded
commissions for reinsurance cession; and reduced commissions for reinsurance
cession.
For insurance
enterprises participating in co-insurance, the turnover for calculating taxable
income of each party is the collected original premiums distributed in
proportion to their co-insurance to each party excluding value- added tax.
For insurance
contracts with agreement on payment for each period, the turnover for
calculating taxable income is the receivable amount arising in each period.
In case there are
authorized collection operations between affiliated enterprises or between
dependent-accounting enterprises and the head office of the insurance
enterprise, the turnover for calculating taxable income excludes the turnover
from these authorized collection operations.
- Turnover from
insurance brokerage: Collected commissions for insurance brokerage after
deducting insurance brokerage commissions, reduced and refunded insurance
brokerage commissions.
m/ For construction
and installation activities, the turnover is the value of constructions or
construction items or the value of volume of constructions and installation
already tested and accepted.
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- In case of
construction and installation without contracted supply of materials, machinery
and equipment, the turnover is the money amount earned from construction and
installation activities, excluding the value of materials, machinery and
equipment.
n/ For business
activities under business cooperation contracts:
- In case the parties
to a business cooperation contract divide the business result being the
turnover from the sale of goods and services, the taxed turnover is the
turnover of each party divided under the contract.
- In case the parties
to a business cooperation contract divide their business result being products,
the taxed turnover is the turnover of products divided to each part under the
contract.
- In case the parties
to a business cooperation contract divide their business result being pre-CIT
profit, the turnover for determining the pre-tax income is the proceeds from
the sale of goods or provision of services under the contract. The parties to
the business cooperation contracts shall appoint a party as a representative to
produce invoices, record turnover and expenses and determine the pre-CIT profit
divided to each party. Each party shall perform its CIT obligation under
current regulations.
- In case the parties
to a business cooperation contract divide their business result being after-CIT
profit, the turnover for calculating taxable income is the proceeds from the
sale of goods or provision of services under the contract. The parties to the
business cooperation contract shall appoint a party as a representative to
produce invoices, record turnover and expenses and declare and pay CIT on
behalf of other parties.
o/ For prize-winning
game business (casino, prize-winning electronic games, and betting
entertainment business), the turnover is the proceeds from these activities
including excise tax but minus the prizes paid to customers;
p/ For securities
trading, its turnover is the proceeds from brokerage services, securities
dealing, securities issuance underwriting, investment portfolio management,
financial and securities investment consultancy, investment fund management,
issuance of fund certificates, market organization services and other
securities services as prescribed by law;
q/ For derivative
financial services, their turnover is the proceeds from the provision of
derivative financial services performed in the tax period.
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1. Except expenses
specified in Clause 2 of this Article, enterprises may deduct all expenses that
fully satisfy the following conditions:
a/ Actual expenses
arising in relation to production and business activities of enterprises;
b/ Expenses with
adequate lawful invoices and documents as required by law;
c/ For expenses for
purchase of goods or services with invoices valued at VND 20 million or more
(VAT-inclusive prices) each, there must be non- cash payment documents;
Non-cash payment
documents must comply with legal documents on value-added tax;
In case of purchase
of goods or services with invoices valued at VND 20 million or more each but at
the time of recording expenses, enterprises have not yet paid any money and
have no non-cash payment documents, enterprises may account such expenses as
deductible expenses for determination of taxable income. If enterprises have no
non-cash payment documents for such payment, they shall declare and reduce
expenses for the value of goods or services without non-cash payment documents
in the tax period in which they make the cash payment (even when tax agencies
and functional agencies have issued inspection or examination decisions regarding
the tax period in which such payment is made).
For goods or service
purchase invoices for which cash payment has been paid before the effective
date of this Circular, no adjustment is required under this Point.
Example 7: In August
2014, enterprise A purchased goods with an invoice valued at VND 30 million for
which it has not yet made any payment. In the tax period of 2014, enterprise A
has included the expense for this purchase in deductible expenses for
determination of taxable income. In 2015, enterprise A pays in cash for this
purchase. So it shall declare and reduce expenses for the value of such goods
or services in the tax period in which it makes the cash payment (the tax
period of 2015).
2. Non-deductible
expenses for determining taxable income include:
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In case an enterprise
has expenses related to the value of uncompensated losses caused by natural
disaster, epidemic, fire or other force majeure events, these expenses
may be regarded as deductible expenses for determining taxable income,
specifically as follows:
The enterprise shall
determine by itself the total value of losses caused by natural disaster,
epidemic, fire and other force majeure events as prescribed by law.
The value of
uncompensated losses caused by natural disaster, epidemic, fire and other force
majeure events shall be determined to be the total value of losses minus
compensations to be paid by insurers or other organizations and individuals in
accordance with law.
a/ For assets and
goods lost due to natural disaster, epidemic or fire which are included in
deductible expenses, a dossier must comprise:
- Document of the
enterprise addressed to the direct managing tax agency explaining the loss of
assets and goods due to natural disaster, epidemic or fire.
- The written record
of inventory of the value of lost assets and goods made by the enterprise.
The written record of
inventory of the value of lost assets and goods must specify the value of lost
assets and goods, the cause of loss, responsibilities of organizations and
individuals for losses; types, quantities and values of recoverable assets and
goods (if any), stock movement statement of the lost goods certified with the
signature of a legal representative of the enterprise who shall take
responsibility before law for the statement.
- Written
certification of the commune-level People’s Committee or the management board
of the industrial park, export processing zone or economic zone where the
disaster, epidemic or fire occurred, that a natural disaster, epidemic or fire
actually occurred during that time.
- The dossier of
compensation accepted by the insurer (if any).
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b/ Goods damaged due
to expiry or change of the natural biochemical process without compensation may
be included in deductible expenses for determining taxable income.
Dossiers for goods
damaged due to expiry or change of the natural biochemical process without
compensation allowed to be included in deductible expenses include:
- Document of the
enterprise addressed to the direct managing tax agency explaining the damage of
goods due to expiry or change of the natural biochemical process.
- Written record of
inventory of the value of damaged goods made by the enterprise.
The written record of
inventory of the value of damaged goods must specify the value of damaged
goods, causes of damage, types, quantities, value of recoverable goods (if any)
enclosed with the stock movement statement of the damaged goods certified with
the signature of a legal representative of the enterprise who shall take responsibility
before law for the statement.
- The dossier of
compensation accepted by the insurer (if any).
- The dossier
identifying responsibilities of organizations and individuals obliged to pay
compensation (if any).
c/ The enterprise
shall send to the direct managing tax agency the document explaining the loss
of assets and goods due to natural disaster, epidemic or fire, or the damage of
goods due to expiry or change of the natural biochemical process without any
compensation no later than the time it submits according to regulations a
dossier for CIT declaration and finalization of the year of occurrence of the
loss or damage of goods. Other dossiers (including the written record of
inventory of the value of assets and goods lost or damaged; the written
certification of the commune-level People’s Committee, the management board of
the industrial park, export processing zone or economic zone; dossier of
compensation for losses accepted by the insurer (if any); dossier identifying
responsibilities of organizations and individuals obliged to pay compensations
(if any) and other documents), shall be kept at the enterprise for production
to tax agencies upon request.
2.2. Depreciation
expense for fixed assets in one of the following cases:
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Particularly for
fixed assets serving workers of enterprises such as mid- shift rest houses and
canteens, locker rooms, toilets, infirmaries, and vocational and training
facilities and equipment and furniture qualified as fixed assets installed in
mid-shift rest houses and canteens, locker rooms, toilets, infirmaries, and
vocational and training facilities, clean water tanks, garages, commute cars,
and houses for workers, they may be depreciated and included in deductible
expenses for determining taxable income;
b/ Depreciation
expense of fixed assets without any papers proving that they are owned by
enterprises (except fixed assets from financial lease- purchase);
c/ Depreciation
expense of fixed assets that are not managed, monitored and accounted in
accounting books of enterprises under the current regime of management of fixed
assets and cost-accounting;
d/ The depreciated
amount exceeding the rate prescribed in the Ministry of Finance’s current
regulations on the management, use and depreciation of fixed assets;
Before depreciation,
enterprises shall notify the direct managing tax agencies of the method of
depreciation of fixed assets that enterprises have chosen to apply (e.g.,
notifying their choice of straight-line depreciation method...). Every year,
enterprises shall make depreciation of fixed assets according to the Ministry
of Finance’s current regulations on the management, use and depreciation of fixed
assets, including accelerated depreciation (if meeting conditions);
Enterprises operating
with high economic efficiency are entitled to apply accelerated depreciation
not exceeding twice the rate of depreciation determined by the straight-line
method for rapid technology renovation according to the Ministry of Finance’s
current regulations on the management, use and depreciation of fixed assets.
When applying accelerated depreciation, enterprises shall ensure profitable
business;
For fixed assets
contributed as capital or fixed assets transferred upon division, split,
separation, consolidation, merger or transformation with re- valuation as
prescribed, enterprises receiving these assets may include their depreciation
in deductible expenses based on their re-valued historical costs.
For other assets not
qualified as fixed assets contributed as capital or transferred upon division,
split, separation, consolidation, merger or transformation, which are re-valued
as prescribed, enterprises receiving these assets may include their
depreciation in deductible expenses based on their re-valued prices;
For fixed assets made
by enterprises themselves, their historical costs that are allowed to be
depreciated and included in deductible expenses are total production costs to
create those assets;
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e/ The depreciation
corresponding to the historical cost in excess of VND 1.6 billion/car for
passenger cars of 9 seats or under (except automobiles exclusively used for
passenger transport, travel and hotel business); the depreciation of fixed
assets being civil airplanes and yachts not used for cargo, passenger and
tourist transport;
Passenger cars of 9
seats or under exclusively used for passenger transport, travel and hotel
business are cars registered under the names of enterprises which, in their
enterprise or business registration certificates, have registered one of these
business lines: passenger transport, travel or hotel business, and have been
licensed for doing business as prescribed in legal documents on transport, travel
or hotel business.
Civil airplanes and
yachts not used for cargo, passenger and tourist transport are those of
enterprises having registered and accounted the depreciation of fixed assets
but not registered the passenger transport, travel or hotel business in their
business or enterprise registration certificates.
In case enterprises
transfer or liquidate cars of 9 seats or under, the residual value of such a
car shall be determined to be the actual historical cost minus (-) the
accumulated depreciation of the fixed asset already included in reasonable
expenses according to accounting standards and regulations by the time of the
car transfer or liquidation.
Example 8: Enterprise
A buys a car of under 9 seats with a historical cost of VND 6 billion. It liquidates
the car after making 1-year depreciation. The depreciation amount is VND 1
billion according to accounting standards and regulations (the depreciation
period is 6 years according to documents on fixed asset depreciation). The
depreciation amount to be included in deductible expenses under tax policy is
VND 1.6 billion/6 years = VND 267 million. Enterprise A liquidates the car for
VND 5 billion.
The income from the
car liquidation = VND 5 billion - (VND 6 billion - VND 1 billion) = 0
g/ Depreciation of
fixed assets that have been fully depreciated;
h/ Depreciation for
constructions on land used for production and business and other purposes may
not be included in deductible expenses with regard to the value of constructions
on land corresponding to the area not used for production and business;
For constructions on
land such as office buildings, workshops and business stores used for
production and business activities of enterprises, enterprises may include their
depreciation in deductible expenses for determining taxable income according to
the rate of depreciation and the period of use of fixed assets under the
Ministry of Finance’s current regulations for these constructions if they meet
the following conditions:
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- Having an invoice
of payment for the handed-over construction volume enclosed with the
construction contract, contract liquidation document and financial settlement
of the construction value bearing the name, address and tax identification
number of the enterprise.
- Being managed,
monitored and cost-accounted according to current regulations on management of
fixed assets.
i/ In case fixed
assets owned by enterprises and used for production and business have to be
temporarily left unused due to seasonal production for a period of less than 9
months, temporarily left unused for repair or relocation or periodic
maintenance for a period of less than 12 months, before being further used for
production and business activities, during that temporary non-operation,
enterprises may depreciate these assets and include the depreciation expenses
during the time of temporary non-operation in deductible expenses for
determining taxable income;
Enterprises shall
keep complete dossiers and provide them and the reason for the temporary
non-operation of fixed assets upon request of tax agencies;
k/ Long-term land use
rights may not be depreciated and distributed to deductible expenses for
determining taxable income; termed land use rights, if there are sufficient
invoices and documents and the procedures prescribed by law are complied with
and the land is used in business and production activities, may be amortized to
deductible expenses during the land use term indicated in the land use right
certificates (including the case of temporary non-operation for repair or new
construction);
In case an enterprise
purchases tangible fixed assets being houses or architectural objects
associated with long-term land use rights, the value of land use rights must be
separately calculated and recorded as intangible fixed assets. For tangible
fixed assets being houses or architectural objects, their historical cost is
the actual purchase price plus (+) expenses directly related to the putting of
tangible fixed assets into use. The value of land use rights is determined to
be the contractual purchase price of real estate matching the market price but
not lower than the land price set by the provincial-level People’s Committee at
the time of asset purchase. In case an enterprise purchases tangible fixed
assets being houses or architectural objects associated with long-term land use
rights and the value of these land use rights cannot be separated, then the
value of land use rights will be determined to be the price set by the
provincial-level People’s Committee at the time of asset purchase.
2.3. Expenses for raw
materials, materials, fuel, energy and goods in excess of reasonable
consumption norms.
Enterprises shall
themselves build and manage consumption norms of raw materials, materials,
fuel, energy and goods used in production and business. These norms must be
elaborated from the beginning of the year or the product manufacturing period
and kept at the enterprises.
For a number of raw
materials, materials, fuel and goods with consumption norms prescribed by the
State, enterprises shall apply these norms.
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- Purchase of
agricultural products and aquatic products directly from their producers or
catchers;
- Purchase of
handicrafts made of jute, rush, bamboo, leaves, rattan, straw, coconut husk,
coconut shell or raw materials from agricultural products directly from their
manual producers who do not do business;
- Purchase of soil,
rock, sand and gravel directly from households and individuals who exploit
them;
- Purchase of scraps
of people who directly collect them;
- Purchase of
articles, assets and services directly from households and individuals that do
not do business;
- Purchase of goods
and services of business households or individuals (not including the above
cases) that have a turnover below the value-added tax-liable turnover level
(VND 100 million/year).
Lists of purchased
goods and services shall be signed by legal representatives or authorized
persons of enterprises, who shall take responsibility before law for the
accuracy and truthfulness of these lists. Enterprises purchasing goods and
services allowed for making such lists for inclusion in deductible expenses are
not required to have non-cash payment documents. If the purchase prices of
goods and services on a list are higher than the market prices at the time of
goods purchase, tax agencies may base themselves on market prices at the time
of purchase of goods or services of the same or similar type available on the
market to re-determine the prices for re-calculating deductible expenses for
determining taxable income.
2.5. Salaries, wages
and bonuses payable to employees in one of the following cases:
a/ Salaries, wages
and other amounts payable to employees that enterprises have accounted as
production and business expenses in the period but have not made such payments
or have no payment documents as required by law;
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- In case the labor
contract signed between an enterprise and a foreigner specifies a schooling
expense for children of the foreigner to acquire general education in Vietnam
to be paid by the enterprise, which is of salary or wage nature and not
contrary to the law on salaries and wages and has adequate invoices and
documents according to regulations, this expense will be included in deductible
expenses for determining taxable income;
- In case the labor
contract signed between an enterprise and a laborer specifies a housing expense
to be paid by the enterprise, which is of salary or wage nature and not
contrary to the law on salaries and wages and has adequate invoices and
documents according to regulations, this expense will be included in deductible
expenses for determining taxable income;
c/ Salaries, wages
and allowances payable to laborers that enterprises have not yet paid by the deadline
for submission of annual tax finalization dossiers, unless enterprises have a
provision fund to supplement the wage fund of the subsequent year. The annual
level of provision is decided by enterprises but must not exceed 17% of the
implemented wage fund;
The implemented wage
fund is the total of actually paid wages of that finalization year to the
deadline for submission of finalization dossiers as prescribed (excluding the
amount deducted for the wage provision fund of the previous year spent in the
tax finalization year);
The wage provision
must ensure that enterprises do not suffer losses after making deductions for
setting up it; if suffering losses, enterprises are not allowed to fully make
deduction of 17% for this provision;
In case in a year an
enterprise deducted a wage provision fund, but after 6 months from the last day
of the fiscal year, it has not used or not used up this fund, the enterprise
shall record a decrease in the following year’s expenses;
Example 9: When submitting
the 2014 tax finalization dossier, enterprise A deducted a wage provision fund
of VND 10 billion. By June 30, 2015 (if the enterprise applies the tax period
according to calendar year), it has just spent VND 7 billion of the wage
provision fund of 2014. Enterprise A shall record a decrease of VND 3 billion
(10 billion - 7 billion) in wage expense of the following year (2015). When
preparing the tax finalization dossier of 2015, if enterprise A wishes to make
deduction, it may continue to deduct the wage provision fund as prescribed;
d/ Salaries and wages
of owners of private enterprises or single-member limited liability companies
(owned by an individual); remuneration paid to the founding members, members of
the Members’ Council or Board of Directors who are not directly involved in
directing production and business.
2.6. Expense for
outfits in kind for laborers without any invoices and documents; expenses for
outfits in cash and in kind to laborers which exceed 5 (five) VND
million/person/year.
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For particular business
lines, this expense must comply with specific regulations of the Ministry of
Finance.
2.7. Expenses for
rewarding innovations and improvements for which enterprises have no specific
regulations on rewarding innovations and improvements and have no council for
test and acceptance of innovations and improvements.
2.8. Travel
allowances for annual leaves not in accordance with the Labor Code; amounts of
allowances payable to employees going on business trips at home or abroad which
exceed 2 times the level prescribed by the Ministry of Finance for state
cadres, civil servants and public employees.
If having adequate
lawful invoices and documents as prescribed, traveling and accommodation
expenses for laborers going on business trips may be included in deductible
expenses for determining taxable income. In case an enterprise has package
traveling and accommodation expenses for laborers, these expenses may be
included in deductible expenses in accordance with regulations of the Ministry
of Finance applicable to state cadres, civil servants and public employees.
In case an enterprise
has purchased air tickets through e-commerce websites for its employees to go
on business trips to serve its production and business activities, documents
used as the basis for calculating deductible expenses are electronic air
tickets, boarding passes and non-cash payment documents of enterprises having
individuals making the trips. If enterprises cannot recover boarding passes of
employees, documents used as the basis for calculating deductible expenses are
electronic air tickets, mission trip assignment papers and non-cash payment
documents of enterprises having individuals making the trips.
2.9. The following
deductible expenses, if paid to wrong subjects, for improper purposes or in
excess of prescribed levels:
a/ Additional
expenses for female laborers which are allowed to be included in deductible
expenses, including:
- Expenses for
vocational retraining for female laborers in case their current jobs are no
longer suitable and they need to switch to other jobs according to the
development planning of enterprises.
These expenses
include training fees (if any) + the difference in salary grade (guaranteeing
100% salary for trainees).
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- Expenses for extra
medical check-up in the year, such as examination of occupational, chronic and
gynecological diseases for female laborers.
- Allowances for
female laborers after the first- or second-time birth.
- Overtime allowances
for female laborers in the case for objective reasons these female laborers do
not take leave after childbirth or have breaks for breastfeeding their babies
but continue to work for enterprises, which are paid under current regulations,
including the case of payment of product-based wages in which female workers
still work without taking leave as prescribed.
b/ Additional
expenses for ethnic minority laborers which are included in deductible
expenses, including school fees (if any) plus the difference in salary grade
(guaranteeing 100% salary for trainees), housing, social insurance and health
insurance allowances for ethnic minority people in case they have not yet
received any support from the State as prescribed.
2.10. Deductions for
compulsory insurance funds for laborers in excess of the prescribed level;
deductions for payment of trade union dues for laborers in excess of the
prescribed level.
2.11. Deductions in
excess of VND 1 million/month/person for the voluntary pension fund, fund of
social security nature, purchase of voluntary pension insurance and life
insurance for laborers.
Deductions for the
voluntary pension fund, fund of social security nature, purchase of voluntary
pension insurance and life insurance for laborers allowed to be included in
deductible expenses, besides not exceeding the level prescribed at this Point,
must satisfy the enjoyment conditions and levels written in one of the
following dossiers: labor contract; collective labor agreement; financial
regulation of company, corporation or group; reward regulation issued by the
chairman of board of directors, director general or director according to
financial regulation of company or corporation.
Enterprises shall
fulfill all the obligations related to compulsory insurance amounts for
laborers in accordance with law before including in deductible expenses
voluntary insurance amounts if fully meeting the prescribed conditions. They
may not include in expenses payments for the above voluntary programs if they
fail to fulfill all the obligations related to compulsory insurance for
laborers (even owing compulsory insurance premiums).
2.12. Expenses for
payment of unemployment allowances for laborers not in accordance with current
regulations.
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2.14. Contributions
to various funds of the associations (these associations are lawfully
established) in excess of the limits set by the associations.
2.15. Electricity and
water charges for electricity and water contracts which are directly signed by
owners being households or individuals who lease out production and business
locations with electricity and water suppliers without adequate documents in
one of the following cases:
a/ Enterprises
leasing production and business locations directly pay electricity and water
charges to electricity and water suppliers without any list (made according to
form No. 02/TNDN issued together with this Circular) enclosed with electricity
and water bills and the lease contracts of production and business locations;
b/ Enterprises
leasing production and business locations pay electricity and water charges to
the owners who lease out production and business locations without any list
(made according to form No. 02/TNDN issued together with this Circular)
enclosed with electricity and water bills paid to the lessors consistent with
the actually used volumes of electricity and water and the lease contracts of
production and business locations.
2.16. Expense for
fixed asset leasing in excess of the rate of allocation by the number of years
that the lessee has paid in advance the rental.
Example 10:
Enterprise A leases fixed assets for four years with the rental of VND 400 million
and pays the rental in a lump sum. The expense for fixed asset leasing
accounted in annual expenses is VND 100 million. If the expense for fixed asset
leasing exceeds VND 100 million, the excess over VND 100 million may not be
included in reasonable expenses for determining taxable income.
For expense for
repair of leased fixed assets, if the asset lease contract specifies that the
lessee is responsible for the repair of the assets during the leasing period,
the expense for repair of leased fixed assets may be accounted in expenses or
amortized to expenses for the maximum period of 3 years.
In case enterprises
have paid for the procurement of assets other than fixed assets: expenses for
the purchase and use of technical materials, patents, technology transfer
licenses, trademarks, business advantages, brand use right, etc., such expenses
may be amortized to business expenses for the maximum period of 3 years.
In case enterprises
contribute as capital the value of business advantage or the brand use right,
the value of business advantage or the brand use right contributed as capital
may not be included as deductible expenses for determining taxable income.
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2.18. Interests paid
for loans corresponding to the deficit of registered charter capital (or
investment capital for private enterprises) according to the capital
contribution schedule specified in the charter of the enterprise, even when the
enterprise has commenced its production and business activities. Interests paid
for loans shall be included in the value of assets or constructions invested.
2.19. Deduction and
use of provisions for inventory price decrease, losses in financial
investments, bad receivables and warranty of products, goods, construction and
installation works and professional risk provisions of value appraisal
enterprises and independent audit service enterprises not in accordance with
the guidance of the Ministry of Finance on deduction of provisions.
2.20. Periodic or
cyclic pre-deducted expenses that are not used or completely used at the end of
the period or cycle.
Pre-deducted expenses
include pre-deducted expenses for periodic overhaul of fixed assets,
pre-deducted expenses for activities of which turnover has been accounted but
the contractual obligation has not yet been fulfilled (even for enterprises
leasing their assets or proving services for many years and collecting money in
advance, and having recorded all of such money in the turnover of the
collection year) and other pre-deducted expenses.
If the turnover for calculating
CIT has been recorded but all expenses have not yet fully arisen, production
and business enterprises may pre-deduct according to regulations from
deductible expenses the expenses corresponding to the recorded turnover for
determining taxable income. Upon completing the contract, enterprises shall
calculate the exact actual expenses based on lawful invoices and documents to
increase (if the actual expenses are higher than the pre-deducted expenses) or
decrease (if the actual expenses are lower than the pre-deducted expenses)
expenses in the tax period when the contract is completed.
For cyclic repair of
fixed assets, enterprises may pre-deduct repair expenses according to
estimation from annual expenses. If the actual repair expense is higher than
the pre-deducted amount according to estimation, the enterprise may additional
include the difference in deductible expenses.
2.21. Expenses in
excess of 15% of total deductible expenses, including expenses for advertising,
marketing, sales promotion, brokerage commissions; guest reception, ceremonies
and conferences; marketing support, expense support; free presentation or
donation of goods or services for customers.
Total deductible
expenses must not include controlled expenses mentioned at this Point; for
commercial activities, total deductible expenses do not include the purchase
price of goods sold. For imported goods, the purchase prices of goods sold
include import duty, excise tax and environmental protection tax (if any). For
particular businesses like lottery, prize-winning electronic games, betting and
casino, total deductible expenses do not include paid prizes.
Controlled expenses
for advertising, marketing, sales promotion and brokerage commissions mentioned
above do not include:
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- Commissions paid to
distributors of multi-level marketing companies. Organizations receiving the
commissions shall declare and include them in their taxable income; individuals
receiving the commissions shall have personal income tax withheld from their
incomes.
- Expenses incurred
in the country or abroad (if any) such as expenses for market research:
exploration, survey, interviews, collection, analysis and evaluation of
information; expenses for market development and market research support;
expenses for hiring consultants to conduct market research and development and
support market research; expenses for display and introduction of products and
organization of trade fairs and exhibitions: expenses for opening product
showrooms or booths, expenses for hiring space for product display and
introduction, expenses of materials and support tools for product display and introduction,
expenses for transportation of products for display and introduction.
2.22. Losses due to
exchange rate differences resulted from re-valuation of monetary items of
foreign currency origin at the end of the tax period, including exchange rate
differences due to re-valuation of year-end balance, include cash, deposits,
money in transfer and receivables of foreign currency origin (except losses due
to exchange rate differences resulted from re- valuation of payables of foreign
currency origin at the end of the tax period).
In the period of
construction investment to form fixed assets of newly established enterprises
which are not yet put into operation, exchange rate differences arising upon
payment of monetary items of foreign currency origin for construction
investment and exchange rate differences resulted from re-valuation of payables
of foreign currency origin at the end of the fiscal year shall be reflected
accumulatively and separately in the balance sheet. The fixed assets are
completed and put into use, exchange rate differences arising in the period of
construction investment (after clearing between positive and negative
differences) shall be gradually distributed to the turnover from financial
activities or expenses for no more than 5 years from the time construction
works are put into operation.
In the period of
production and business, including construction investment to form fixed assets
of operating enterprises, exchange rate differences arising from
foreign-currency transactions of monetary items of foreign currency origin
shall be accounted in the turnover from financial activities or expenses in the
fiscal year.
For receivables and
loans of foreign currency origin arising in the period, exchange rate
difference allowed to be included in deductible expenses is the difference
between the exchange rate at the time of debt or loan recovery and the exchange
rate at the time of recording the receivable or initial loan.
2.23. Expenses for
education funding not for the subjects specified at Item a of this Point or
without dossiers to identify the funding mentioned at Item b below:
a/ Funding for
education includes funding for public, people-founded and private schools
within the national education system in accordance with the education law, which
is not for contributing capital to or purchasing shares in the schools;
financing facilities for teaching, learning and school activities; financing
regular school activities; financing scholarships for pupils and students of
general education institutions, vocational education institutions and higher
education institutions defined in the Education Law, which are directly granted
to pupils and students or through other agencies and organizations with the
fund raising function as prescribed by; financing contests on subjects taught
in schools for contestants who are learners; financing the establishment of
education promotion funds in accordance with the education and training law;
b/ Dossiers to
identify education financing include written records of financing certification
signed by representatives of sponsoring business establishments,
representatives of lawful education institutions as financed units, pupils and
students (or agencies and organizations with the fund raising function) who are
recipients according to form No. 03/TNDN issued together with this Circular,
enclosed with invoices and documents of goods purchase (for in-kind funding) or
payment documents (for cash financing).
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a/ Funding for health
care includes funding for health facilities established in accordance with the
health law which is not for contributing capital to or purchasing shares of
those hospitals or health centers; funding for medical equipment, medical
instruments and medicines; funding for regular activities of hospitals and
health centers; financing in cash for patients through agencies and
organizations with the fund raising function as prescribed by law;
b/ Dossiers to
identify health funding comprise written records of financing certification
signed by representatives of sponsoring business establishments, representative
of financed units (or agencies and organizations with the fund raising
function) according to form No. 04/TNDN issued together with this Circular,
enclosed with invoices and documents of goods purchase (for in-kind funding) or
payment documents (for cash financing).
2.25. Expenses of
funding for remedying consequences of natural disasters not for the subjects
specified at Item a of this Point or without dossiers to identify the funding
mentioned at Item b below:
a/ Funding for
remedying consequences of natural disasters includes funding in cash or in kind
to overcome consequences of natural disasters provided directly to
organizations established and operating in accordance with law and individuals
affected by natural disasters through agencies and organizations with the fund
raising function as prescribed by law;
b/ Dossiers to
identify funding for remedying consequences of natural disasters comprise
written records of financing certification signed by representatives of
sponsoring business establishments, representatives of financed units which are
affected by natural disasters (or agencies and organizations with the fund
raising function) according to form No. 05/TNDN issued with this Circular,
enclosed with invoices and documents of goods purchase (for in-kind funding) or
payment documents (for cash financing).
2.26. Expenses of
financing for building houses for the poor not for the subjects specified at
Item a of this Point; expenses of financing for building houses for the poor or
houses of great solidarity in accordance with law without dossiers to identify
the funding mentioned at Item b below:
a/ Recipients of
financing are poor households as prescribed by the Prime Minister. Forms of
financing include financing in cash or in kind to build houses of gratitude for
poor households directly or through an agency or organization having the fund
raising function as prescribed by law;
b/ A dossier for
identifying financing for building houses for the poor comprises a written
record of financing certification signed by a representative of the financing enterprise
and beneficiary (or agency or organization with the fund raising function)
according to form No. 06/TNDN issued together with this Circular); written
certification of poor household issued by local administration (for financing
for building houses for the poor); invoices and documents on goods purchase
(for in-kind financing) or payment documents (for cash financing).
2.27. Expenses for
financing scientific research not in accordance with regulations; expenses for
financing not under the State’s program for localities in areas with extremely
difficult socio-economic conditions.
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A dossier for identifying
financing under the State’s program for localities in areas with extremely
difficult socio-economic conditions comprises a written record of financing
certification signed by a representative of the financing enterprise and
beneficiary (or agency or organization with the fund raising function)
according to form No. 07/TNDN issued together with this Circular); invoices and
documents on goods purchase (for in-kind financing) or payment documents (for
cash financing).
Scientific research
and procedures and dossiers for financing scientific research must comply with
the Law on Science and Technology and relevant guiding legal documents.
2.28. Business
management expenses allocated by overseas companies to their permanent
establishments in Vietnam in excess of the expense level calculated by the
following formula:
Business
management expenses allocated by overseas company to permanent establishment
in Vietnam in the tax period
=
Turnover
for tax calculation of permanent establishment in Vietnam
x
Total
business management expenses of overseas company in the tax period
Total
turnover of overseas company including turnover of permanent establishments
in other countries in the tax period
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The basis for
determining expenses and turnover of the overseas company is the financial
statement of the company audited by an independent auditing firm which
specifies the overseas company’s turnover and management expenses and the
management expenses allocated by the overseas company to its permanent
establishment in Vietnam.
If the permanent
establishment of an overseas company in Vietnam has neither implemented
regulations on accounting, invoices and documents nor paid tax by the method of
declaration, it may not include in reasonable expenses its business management
expense allocated by the overseas company.
2.29. Expenses which
are offset by other funding sources; expenses which have been paid from the
science and technology development funds of enterprises; expenses for buying
golf membership cards and for golf playing.
2.30. Expenses
related to the hiring of management for the business of prize-winning
electronic games or casino in excess of 4% of the turnover from such business.
2.31. Expenses not
corresponding to turnover for tax calculation, excluding the following
expenses:
- Expenses for
HIV/AIDS prevention and control at the enterprises’ workplace, including
expenses for training HIV/AIDS prevention and control officers of enterprises,
expenses for HIV/AIDS prevention and control communication among enterprises’
laborers, expenses for counseling, examination and testing for HIV and expenses
in support of enterprises’ laborers who are HIV-infected.
- Actual expenses for
the performance of national defense and security education tasks, training and activities
of militia and self-defense forces and other national defense and security
tasks as prescribed by law.
- Actual expenses in
support of Party and socio-political organizations in enterprises.
- Other particular
expenses suitable to each sector or field as guided by the Ministry of Finance.
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Upon commencing
business and production, enterprises that have not yet generated any turnover but
have to regularly incur expenses to maintain their production and business
activities (other than expenses for construction to form fixed assets) and meet
the prescribed conditions may include these expenses in deductible expenses for
determining taxable income.
If, in the stage of
investment, enterprises incur expenses for payment of loans, they may include
these expenses in the investment value. If, in the stage of investment,
enterprises incur both expenses for payment of loans and revenues from interests
on deposits, they may offset these expenses against these revenues and record
the remaining difference as decrease in the investment value.
2.33. Expenses in
support of localities, mass organizations and social organizations; expenses
for charity (except expenses of funding for education, healthcare, remedy of
consequences of natural disasters and building of houses for the poor and
houses of great solidarity; financing of scientific research and financing
under the State’s program for localities in areas with particularly difficult
socio-economic conditions mentioned at Points 2.23, 2.24, 2.25, 2.26 and 2.27,
Clause 2 of this Article).
2.34. Expenses
directly related to the issuance of stocks (excluding stocks being payable
debts) and payment of dividends (excluding dividends of stocks being payable
debts), and purchase and sale of treasury shares, and other expenses directly
related to the increase and decrease of equity of enterprises.
2.35. Expenses for
insurance business, lottery business, securities business and a number of other
specific business activities which do not comply with separate written
guidelines of the Ministry of Finance.
2.36. Fines paid for
administrative violations, including traffic violations, violations of
regulations on business registration, violations of regulations on accounting
and statistics, violations of tax laws, including late tax payment interests in
accordance with the Law on Tax Administration, and fines for other
administrative violations as prescribed by law.
2.37. Input
value-added tax which has been credited or refunded; input value-added tax on
fixed assets which are cars with 9 seats or under in excess of the credit level
specified in legal documents on value-added tax; CIT, except the cases in which
enterprises pay CIT for foreign contractors as agreed in the contracts with
foreign contractors or foreign subcontractors that revenues received by foreign
contractors or foreign subcontractors are exclusive of CIT; personal income
tax, except the case in which enterprises sign labor contracts which stipulate
that salaries or wages payable to laborers are exclusive of personal income
tax.
Article
7. Other incomes
Other incomes are
taxable incomes in a tax period which arise not from the sectors and business
lines indicated in enterprises’ business registration certificates. Other
incomes include:
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2. Income from the
transfer of real estate as guided in Chapter V of this Circular.
3. Income from the
transfer of investment projects; transfer of the right to participate in
investment projects; transfer of the right to explore, exploit and process
minerals as prescribed by law.
4. Income from asset
ownership or use rights, including also copyright royalties in any form paid
for asset ownership or use rights; royalties from intellectual property rights;
and income from technology transfer in accordance with law.
Income from
intellectual property right royalties or technology transfer is the total
collected sum of money minus (-) the cost price or expense for the creation of
the transferred intellectual property rights or technology, minus (-) the
expense for maintaining, upgrading or developing the transferred intellectual
property rights or technology and other deductible expenses.
5. Income from asset
lease in any form.
Income from asset
lease is the turnover from the asset lease minus (-) expenses for asset
depreciation, renovation, repair and maintenance, expense for the lease of
assets for sublease (if any) and other deductible expenses related to the asset
lease.
6. Income from
transfer or liquidation of assets (excluding real estate) and other valuable
papers.
This income equals
(=) turnover from asset transfer or liquidation minus (-) the residual book
value of the transferred or liquidated asset at the time of transfer or
liquidation, and deductible expenses related to the asset transfer or
liquidation.
7. Income from
deposit or loan interests, including also interests on deferred and installment
payments, credit guarantee charges and other charges under loan provision
contracts.
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- In case income from
deposit or loan interests is lower than expenses for payment of loan interests
as prescribed, the remainder after the income- expense clearing may be cleared
against income from main production and business activities for determining
taxable income.
8. Income from the
sale of foreign currency, which equals total proceeds from the sale of foreign
currency minus (-) total buying price of the sold foreign currency amount.
9. Income from
exchange rate difference, which shall be determined specifically as follows:
In a year of CIT
calculation, if an exchange rate difference arises in a period or from the
re-valuation of payables of foreign currency origin at the end of the fiscal
year, then:
- The exchange rate
difference arising in a period and directly related to the turnover of and
expenses for main production and business activities of enterprises shall be
accounted as an expense for or income from these production and business
activities. The exchange rate difference arising in a period not directly
related to the turnover of and expenses for main production and business
activities of enterprises shall be accounted as an expense for such production
and business activities if it is a loss, or as other income if it is a profit.
- Exchange rate
difference profits earned from the re-valuation of foreign-currency payables at
the end of the fiscal year may be cleared against exchange rate difference
losses resulting from such re-valuation. After the clearing, exchange rate
difference profits or losses directly related to the turnover from or expenses
for main production and business activities of enterprises shall be accounted
as income from or expense for such production and business activities. Exchange
rate difference profits or losses not directly related to the turnover from or
expenses for main production and business activities of enterprises shall be
accounted as other income or expense for main production and business
activities for determining taxable income.
For receivables and
provided loans of foreign currency origin arising in a period, the exchange
rate difference which may be accounted as deductible expense or income is the
difference between the exchange rates at the time of recovery of the receivable
or provided loan and at the time of recognition of the receivable or initial
loan.
The above-mentioned
exchange rate differences exclude foreign exchange rate differences resulting
from the re-valuation of the year-end balance in cash, deposit, in-transfer
money and receivables of foreign currency origin.
10. Recovered bad
debts which have been written off.
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12. Previous years’ omitted
incomes from production and business activities, which are now discovered.
13. If fines or
compensations received by enterprises from their partners for contract breaches
or rewards for good realization of commitments under contracts are higher than
those paid by these enterprises for their contract breaches (these fines are
other than those paid for administrative violations in accordance with the law
on handling of administrative violations), the remainder after the clearing may
be included in other income.
If fines or
compensations received by enterprises from their partners for contract breaches
or rewards for good realization of commitments under contracts are lower than
those paid by these enterprises for their contract breaches (these fines are
other than those paid for administrative violations in accordance with the law
on handling of administrative violations), the remainder after the clearing may
be deducted from other income. If there is no other income in a year, the
remainder may be deducted from income from production and business activities.
Revenues from the
above-said fines and compensations exclude fines and compensations already
recorded as decrease in the construction value in the stage of investment.
14. Difference
resulting from the re-valuation of assets in accordance with law for capital
contribution or asset transfer upon enterprise split, separation,
consolidation, merger or transformation shall be determined specifically as
follows:
a/ Positive or
negative difference resulting from the re-valuation of assets is the difference
between the re-valuated value and the residual book value of assets and shall
be included once in other income (for positive difference) or deducted from
other income (for negative difference) in a tax period for determining taxable
incomes of enterprises having their assets re- valuated;
b/ Positive or
negative difference resulting from the re-valuation of land use rights for
capital contribution (in which enterprises receiving the value of land use
rights may gradually allocate this value to deductible expenses), transfer upon
enterprise split, separation, consolidation, merger or transformation; or for
capital contribution to investment projects to build houses and infrastructure
facilities for sale shall be included once in other income (for positive
difference) or deducted from other income (for negative difference) in a tax
period for determining taxable incomes of enterprises having their land use
rights re-valuated;
Particularly,
positive difference resulting from the re-valuation of land use rights for the
creation of fixed assets used in production and business activities in which
enterprises receiving the value of land use rights may neither depreciate nor
gradually allocate this value to deductible expenses, may be gradually
allocated to other income of enterprises having their land use rights
re-valuated for no more than 10 years from the year the value of land use
rights is contributed as capital. Enterprises shall notify the number of years
they will allocate to other income when submitting dossiers of declaration for
CIT finalization of the starting year of declaration of this income (the year
when land use rights to be contributed as capital are re-valuated);
In case after capital
contribution, enterprises continue to transfer the value of land use rights
contributed as capital (including also the case of capital contribution ahead
of the 10-year time limit), income from the transfer of the value of land use
rights contributed as capital shall be calculated and declared for tax payment
as income from real estate business;
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c/ Enterprises that
receive assets contributed as capital or assets transferred upon enterprise
split, separation, consolidation, merger or transformation may make
depreciation or amortization to expenses according to the re-valuation (unless
the value of land use rights is ineligible for depreciation or amortization
into expenses under regulations).
15. Donations and
gifts in cash or in kind; income received in cash or in kind from financing
sources; income received from marketing support, expense support, payment
discount, promotional prizes and other supports. For incomes received in kind,
the value of these incomes shall be determined according to the value of
similar goods or services at the time of receipt.
16. Sums of money,
property and material benefits received by enterprises from organizations and
individuals as agreed or contracted in accordance with the civil law when
enterprises had over their land areas for relocation of their production and
business facilities, after subtracting related expenses, such as expenses for
relocation (transportation and installation costs), the residual value of fixed
assets and other expenses (if any).
Sums of money,
property and material benefits received by enterprises under the State policy
and approved by competent state agencies for relocation of their production
facilities, shall be managed and used in accordance with relevant laws.
17. Amounts
pre-deducted as expenses but left unused or not fully used in the deduction
period which are not accounted by enterprises as decrease in expenses; refunded
provisions for warranty of construction works.
18. Incomes related to
goods sale or service provision which are not included in turnover, such as
bonus for quick clearance of ships, tips for food and drink catering or hotel
services, after subtracting expenses for generating such incomes.
19. Income from the
sale of scraps and discarded products, after subtracting recovery and sale
expenses, which shall be determined specifically as follows:
- In case enterprises
generate the income from the sale of scraps and discarded products generated in
the production of products eligible for CIT incentives, such income is eligible
for CIT incentives.
- In case enterprises
generate the income from the sale of scraps and discarded products generated in
the production of products ineligible for CIT incentives, such income shall be
accounted as other income.
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21. Incomes from the
contribution of equity capital, contribution of capital to joint ventures or
economic associations at home which are divided from pre-CIT incomes.
22. Income received
from overseas goods production and trading or service provision.
- Offshore-investing
Vietnamese enterprises earning incomes from overseas production and business
activities shall declare and pay CIT under Vietnam’s Law on CIT currently in
force, even when they are enjoying CIT exemption and reduction under the
regulations of the host countries. The CIT rate used for calculating and
declaring tax on incomes earned overseas is 22% (or 20% from January 1, 2016).
The preferential tax rate (if any) enjoyed by offshore-investing Vietnamese
enterprises under the current Law on CIT is not applicable.
Tax agencies may
assess taxable income from overseas production and business activities of
offshore-investing Vietnamese enterprises that violate regulations on tax
declaration and payment.
- When an income from
an offshore investment project has been subjected to CIT (or a similar tax)
overseas, when calculating CIT payable in Vietnam, the offshore-investing
Vietnamese enterprise may subtract the tax amount already paid by itself
overseas or paid on its behalf by its partner in the host country (including
dividend tax), which must not exceed the income tax amount calculated under
Vietnam’s Law on CIT. The exempted or reduced income tax amount of the
offshore-investing Vietnamese enterprise for the profit earned from its
offshore investment project under the law of the host country may also be
subtracted upon determination of its income tax amount payable in Vietnam.
The dossier to be
submitted upon tax declaration and payment by an offshore-investing Vietnamese
enterprise for the income from its offshore investment project must comprise:
+ The enterprise’s
document on the division of the offshore investment project’s profit.
+ The enterprise’s
financial statement certified by an independent audit organization.
+ The enterprise’s
income tax return for the offshore investment project (copy certified by the project’s
competent representative);
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+ Document certifying
or proving the tax amount paid overseas.
- If the offshore
investment project has not generated any taxable income (or is suffering losses),
upon annual CIT declaration and finalization, the offshore-investing Vietnamese
enterprise is only required to submit a financial statement certified by an
independent audit organization or a competent agency of the host country and
the project’s income tax return (copy certified by the project’s competent
representative and bearing the enterprise’s seal). Upon CIT calculation, any
loss arising from the offshore investment project is not allowed to be cleared
against the income earned by the enterprise in Vietnam.
- Income earned from
the offshore investment project shall be declared in the CIT finalization of
the year following the fiscal year when such income is earned or of the fiscal
year coinciding with the year when such income is earned overseas if the
enterprise has sufficient grounds and documents for determining the project’s
income and paid income tax amount.
For income from
production and business activities of an investment project implemented in a
country which has signed a double taxation avoidance agreement with Vietnam,
Vietnamese enterprises investing in this country shall declare and pay tax in
accordance with this agreement.
23. Other incomes as
provided by law.
Article
8. Tax-exempt incomes
1. Incomes from
cultivation, husbandry, aquaculture and salt production of cooperatives;
incomes of cooperatives engaged in agriculture, forestry, fisheries and salt
production in geographical areas with difficult socio- economic conditions or
geographical areas with particularly difficult socio- economic conditions;
incomes of enterprises from cultivation, husbandry and aquaculture in
geographical areas with particularly difficult socio-economic conditions;
incomes from fishing activities.
a/ Tax-exempt incomes
from cultivation (including also products from planted forests), husbandry and
aquaculture of cooperatives and enterprises are incomes from products of
cultivation, husbandry, aquaculture and fishing of enterprises and cooperatives
which are not yet processed into other products or preliminarily processed
(excluding those purchased by cooperatives and enterprises). Preliminarily
processed products are guided in legal documents on value-added tax;
Enterprises and
cooperatives shall separately account tax-exempt incomes specified in this
Clause. In case they cannot separately account tax - exempt incomes from
cultivation, husbandry and aquaculture, such incomes shall be allocated
according to the ratio of their production expenses in the stages of
cultivation, exploitation and preliminary processing of ordinary products to
their total expenses (including also management and sale expenses) in a tax
period;
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Tax-exempt incomes
specified in this Clause include also incomes from the liquidation of products
of cultivation, husbandry and aquaculture (except liquidation of rubber
plantations) and incomes from the sale of waste materials and scraps related to
such products;
Cultivation,
husbandry and aquaculture products of cooperatives and enterprises shall be
identified based on the level-1 economic sector codes of agriculture, forestry
and fisheries in Vietnam’s system of economic sectors;
b/ Tax-exempt incomes
of cooperatives engaged in agriculture, forestry, fisheries and salt production
in geographical areas with difficult socio- economic conditions or geographical
areas with particularly difficult socio- economic conditions are all incomes
earned from production and business activities in geographical areas eligible
for incentives, except the incomes specified at Points a, b and c, Clause 3,
Article 18 of this Circular;
Cooperatives engaged
in agriculture, forestry, fisheries and salt production as specified in this
Clause and at Point f, Clause 3, Article 19 of this Circular are those
satisfying the condition of ratio of products and services provided to their
members being individuals, households and legal entities engaged in agriculture,
forestry, fisheries and salt production in accordance with the Law on
Cooperatives and the Government’s Decree No. 193/2013/ND-CP of November 21,
2013, detailing a number of articles of the Law on Cooperatives.
2. Incomes from the
provision of technical services directly for agriculture, including income from
such services as irrigation and water drainage; soil plowing and harrowing, and
dredging of intra-field canals and ditches; prevention and control of crop and
animal pests and diseases; and harvest of agricultural products.
3. For incomes from
the performance of scientific research and technological development contracts;
the sale of products turned out from trial production and production with
technologies applied for the first time in Vietnam. The maximum tax exemption
duration is one (1) year from the date of commencing the performance of the
contracts or commencing trial production or production with technologies
applied for the first time in Vietnam.
a/ Tax-exempt income
from the performance of scientific research and technological development
contracts must satisfy the following conditions:
- The scientific
research activity registration is certified;
- Such scientific
research and technological development contract is certified by a competent state
management agency in charge of science.
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4. Income from goods
production and trading or service provision activities of enterprises employing
disabled, drug-detoxified and HIV- infected laborers, who account for at least
30% of the average number of laborers of these enterprises in a year.
Tax-exempt incomes
specified in this Clause exclude other incomes referred to in Article 7 of this
Circular.
Enterprises eligible
for tax exemption specified in this Clause are those having an average number
of laborers in a year of at least 20, excluding those engaged in finance and
real estate business.
Enterprises having
tax-exempt income specified at this Point must satisfy the following
conditions:
a/ For enterprises
employing disabled laborers (including war invalids and diseased soldiers), a
competent heath agency’s certification of the number of disabled laborers is
required.
b/ For enterprises
employing drug-detoxified laborers, detoxification establishments’
certification of the complete detoxification or a concerned competent agency’s
certification is required.
c/ For enterprises
employing HIV-infected laborers, a competent heath agency’s certification of
the number of HIV-infected laborers is required.
5. Income from job training
exclusively provided for ethnic minority people, the disabled, extremely
disadvantaged children and people involved in social evils, people undergoing
detoxification, detoxified people and HIV/AIDS-infected people. If an
establishment also provides job training for people of other categories,
tax-exempt income must be determined based on the ratio of the number of ethnic
minority people, the disabled, extremely disadvantaged children, people
involved in social evils, detoxified people and HIV/AIDS-infected people to the
total number of trainees.
Tax-exempt income
from job training specified in this Clause must satisfy the following
conditions:
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- Having the lists of
trainees being ethnic minority people, the disabled, extremely disadvantaged
children, people involved in social evils, people undergoing detoxification,
detoxified people and HIV/AIDS-infected people.
6. Incomes divided from
capital contribution, share purchase, joint venture or economic association
with domestic enterprises, after contributed capital recipients, share issuers
or joint venture or association parties have paid CIT under the Law on CIT,
including those eligible for CIT incentives.
Example 11:
Enterprise B receives contributed capital from enterprise A. Pre-tax income
corresponding to enterprise A’s contributed capital in enterprise B is VND 100
million.
- Case 1: Enterprise
B is ineligible for CIT incentives and has fully paid CIT, including enterprise
A’s income, then the income enterprise A receives from capital contribution is
VND 78 million [(VND 100 million - (VND 100 million x 22%)], and enterprise A
will be exempt from CIT on this amount.
- Case 2: Enterprise
B is eligible for 50% reduction of the payable CIT amount and has fully paid
CIT, including enterprise A’s income according to the reduced CIT amount, then
the income enterprise A receives from capital contribution is VND 89 million
[(VND 100 million - (VND 100 million x 22% x 50%)], and enterprise A will be
exempt from CIT on this amount.
- Case 3: Enterprise
B is eligible for CIT exemption, then the income enterprise A receives from
capital contribution is VND 100 million, and enterprise A will be exempt from
CIT on this amount.
7. Aid received for
educational, scientific research, cultural, artistic, charitable, humanitarian
and other social activities in Vietnam.
Aid beneficiaries
that improperly use the aid shall calculate and pay CIT on the improperly used
aid amount in a tax period during which the aid is improperly used.
Aid beneficiaries
defined in this Clause must be those lawfully established and operating and
strictly observing the laws on accounting and statistics.
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Tax-exempt incomes
from transfer of CERs must satisfy the condition that the sale or transfer of
emission reduction certificates is certified by the competent agency in charge
of environment.
9. Incomes from the
performance of state-assigned tasks of the Vietnam Development Bank in
development investment and export credit activities; incomes from the provision
of loans to the poor and other policy beneficiaries by the Social Policy Bank;
incomes of the single-member limited liability company managing assets of
Vietnamese credit institutions; incomes from revenue-earning activities in the
performance of state-assigned tasks of state- owned financial funds: Vietnam
Social Security Fund, Deposit Insurance, Health Insurance Fund, Job Training
Support Fund, Overseas Employment Support Fund of the Ministry of Labor, War
Invalids and Social Affairs, Vietnam Legal Aid Fund, Public-Utility
Telecommunications Fund, Local Development Investment Fund, Vietnam
Environmental Protection Fund, Fund for Credit Guarantee for Small- and
Medium-Sized Enterprises, Cooperative Development Support Fund, Poor Women
Support Fund, Overseas Citizen and Legal Entity Protection Fund, Housing
Development Fund, Small- and Medium-Sized Enterprise Development Fund, Land
Development Fund, Farmer Support Fund, Fund for Capital Support for Self-
Employed Workers and Poor Laborers, and other state funds operating for
not-for-profit purposes in accordance with law. These funds are established and
operate under mechanisms and policies prescribed by the Government or the Prime
Minister.
Units that earn
incomes other than those from revenue-earning activities in the performance of
state-assigned tasks shall calculate and pay tax for such incomes under
regulations.
10. Undivided
incomes:
a/ Undivided incomes
of establishments engaged in socialized education-training, health and other
socialized activities (including judicial examination offices) may be retained
by the establishments for investment in their development in accordance with
specialized laws on education-training, health and other socialized fields.
Tax-exempt undivided incomes of socialized establishments specified in this
Clause exclude incomes retained for investment in other sectors and other
business lines not in the fields of education-training, health and other
socialized fields.
Establishments
engaged in socialized activities include:
- Non-public
establishments founded and satisfying the operation conditions prescribed by
competent state agencies in charge of socialized fields.
- Enterprises
established to operate in the socialized fields and satisfying the operation
conditions prescribed by competent state agencies.
- Public non-business
establishments that contribute capital, raise capital, enter into joint
ventures or associations in accordance with law and establish independent
accounting subsidiaries or enterprises to operate in the socialized fields
under decisions of competent state agencies.
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b/ Undivided incomes
retained by cooperatives for creation of their assets;
c/ In case undivided
incomes which are retained under this Clause are divided or used for improper
purposes by units, these units shall be subject to retrospective collection of
CIT at the tax rate at the time of division or improper use of undivided
incomes and by sanctioned for tax- related violations under regulations.
11. Incomes from
technology transfer in the prioritized fields of transfer of technology to
organizations and individuals in geographical areas with particularly difficult
socio-economic conditions.
The procedures for
technology transfer must comply with the Law on Technology Transfer, the
Government’s Decree No. 133/2008/ND-CP of December 31, 2008, detailing and
guiding the implementation of a number of articles of the Law on Technology
Transfer, and legal documents guiding the Law on Technology Transfer.
The prioritized
fields of technology transfer are those on the list of technologies encouraged
for transfer (promulgated together with Decree No. 133/2008/ND-CP and legal
documents amending and supplementing this Decree (if any)).
Article
9. Determination and
carry-forward of losses
1. Loss arising in a
tax period is the negative difference of taxable income exclusive of losses
carried forward from previous years.
2. Enterprises that
suffer a loss after making tax finalization may carry forward continuously the
whole loss to subsequent years’ taxable incomes (taxable incomes exclusive of
tax-exempt incomes). The maximum duration for loss carry-forward is 5 consecutive
years, counting from the year following the year the losses arise.
Enterprises may
temporarily clear their losses of a year against taxable incomes of the
quarters of the following year upon making quarterly declarations for temporary
tax payment and officially carry forward these losses in the following year
after making annual tax finalization declarations.
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Example 13: In 2013,
enterprise B suffers a loss of VND 20 billion. In 2014, it generates an income
of VND 15 billion. It shall:
+ Clear the whole
loss of VND 15 billion against the income in 2014;
+ Monitor and carry
forward continuously the whole remaining loss amount of VND 5 billion of 2013
on the above principle of loss carry- forward to not more than consecutive 5
years, counting from the year following the year the loss arises.
- Enterprises that
have a loss arising in a certain quarter of a fiscal year may carry forward
such loss from this quarter to the following quarters of that fiscal year. When
making CIT finalization, enterprises shall determine the loss of the whole year
and continuously clear the whole loss against their taxable incomes of the
years following the year when the loss arises in accordance with the above
regulations.
- Enterprises shall
determine by themselves losses to be cleared against taxable incomes on the
above principle. In the loss carry-forward duration, newly arising losses
(excluding losses carried forward from the previous period) may be fully
carried forward for not more than 5 consecutive years, counting from the year
following the year the losses arise.
When an agency competent
to examine and inspect CIT finalization detects a loss amount which an
enterprise is allowed to carry forward is different from the loss amount
determined by the enterprise itself, the loss amount allowed to be carried
forward shall be determined based on the competent agency’s conclusion, and
fully carried forward for not more than 5 consecutive years, counting from the
year following the year the losses arise.
Past the 5-year time
limit, arising losses not yet fully carried forward are not allowed to be
cleared against the following years’ incomes.
3. Enterprises
undergoing transformation, merger, consolidation, separation, split,
dissolution or bankruptcy shall finalize with tax agencies CIT amounts up to
the time of issuance by competent agencies of decisions on transformation
ownership conversion, merger, consolidation, separation, split, dissolution or
bankruptcy. The old enterprises’ losses must be monitored in detail by the
years they arise and cleared against the new enterprises’ taxable incomes in
the same year or further cleared against the new enterprises’ taxable incomes
of following year, provided that they are carried forward for not more than 5
consecutive years, counting from the year following the year they arise.
Article
10. Deduction for setting up enterprises’ scientific and technological
development funds
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In addition to making
deductions for setting up their scientific and technological development funds
under this Article, enterprises with more than 50% of charter capital held by
the State shall ensure the minimum fund- setting deduction level prescribed in
the Science and Technology Law.
2. Within 5 years
after being set up, if a scientific and technological development fund is left
unused or has been improperly used, or if only less than 70% of this fund has
been used, the enterprise shall remit into the state budget the CIT amount on
the deducted income which is left unused or has been improperly used and the
interest accrued on such tax amount.
The improperly used
sum of money shall not be included in the total sum of money used for
scientific and technological development.
- The CIT rate for
calculating the tax amount to be recovered is the tax rate applicable to an
enterprise in the deduction duration.
- The interest rate
used for calculating the interest on the recoverable tax amount imposed on the
unused fund amount is the interest rate applicable to treasury bonds of a
one-year term (or the interest rate of treasury bills of a one-year term) at
the time of recovery, and the interest payment duration is two years.
3. Enterprises’
scientific and technological development funds must be used only for scientific
research and technology development investment of enterprises in Vietnam. These
funds’ expenses must have adequate lawful invoices and documents as provided by
law.
4. Enterprises may
not account expenses from their science and technology development funds as
production or business expenses upon determination of their taxable incomes in
a tax period. In case enterprises use these funds for scientific research and
technology development but these funds are insufficient, they may account the
difference between actual expenses and deducted amounts as their production or
business expenses upon determination of their taxable incomes.
5. For an operating
enterprise which undergoes ownership transformation, is consolidated or merged,
the new enterprise established from such ownership transformation,
consolidation or merger may take over the old enterprise’s science and
technology development fund and shall take responsibility for the management
and use of this fund.
If an enterprise
still has an unused science and technology development fund upon its separation
or split, the new enterprise established from such separation or split may take
over the old enterprise’s science and technology development fund and shall
take responsibility for the management and use of this fund. The enterprises
shall decide on and register with the tax agency the distribution of the
science and technology development fund.
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Article
11. CIT rates
1. From January 1,
2014, the CIT rate is 22%, except the cases specified in Clauses 2 and 3 of
this Article and cases eligible for preferential tax rates.
For example:
Enterprises apply the fiscal year from April 1, 2013, to March 31, 2014. When
making CIT finalization, enterprises that are currently subject to the common
tax rate and ineligible for preferential tax rates shall calculate and allocate
payable CIT amounts as follows:
Payable
CIT
=
Taxable
income in the tax period
x
9
months
x
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+
Taxable
income in the tax period
x
3
months
x
22%
12
months
12
months
From January 1, 2016,
the cases subject to the tax rate of 22% shall shift to apply the tax rate of
20%.
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The annual total
turnover used as a basis for determining whether an enterprise is subject to
the tax rate of 20% prescribed in this Clause is the total goods sales or
service provision revenue of the preceding year determined based on the code
indicators [01] and [08] in the Appendix on production and business results of
the preceding year’s tax period according to form No. 03-1A/TNDN attached to
CIT return No. 03/TNDN promulgated together the Ministry of Finance’s Circular
No. 156/2013/TT-BTC of November 6, 2013, on tax administration.
Example 14: Company A
that applies a tax period according to the fiscal year from April 1 of a year
to the end of March 31 of the subsequent year, has turnover from goods sales
and service provision revenue coded [01] and turnover from financial operations
under coded [08] in Appendix No. 03-1A/TNDN attached to CIT return No. 03/TNDN
of the fiscal year of 2013 (from April 1, 2013, to the end of March 31, 2014)
not exceeding VND 20 billion, from the fiscal year of 2014 (from April 1, 2014,
to the end of March 31, 2015) may apply the CIT rate of 20% for the fiscal year
of 2014. If its total turnover of the fiscal year of 2014 determined according
to the above guidance is more than VND 20 billion, it may apply the CIT rate of
22% for the fiscal year of 2015 (from April 1, 2015, to the end of March 31,
2016).
If an enterprise’s
preceding year is not full 12 months, its annual total turnover used as a basis
for determining whether it is eligible for the tax rate of 20% under this
Clause is the total turnover from goods sales and service provision in the
preceding year determined based on the code indicators [01] and [08] in the Appendix
on production and business results of the preceding year’s tax period according
to form No. 03-1A/TNDN attached to CIT return No. 03/TNDN divided by the actual
number of months of production and business operation in the year. If the
average monthly turnover in the year does not exceed VND 1.67 billion, the
enterprise may apply the CIT rate of 20% for the subsequent year.
Example 15: Company A
that applies a tax period according to the calendar year, temporarily suspends
its business operation for 3 months of the calendar year until April 1, 2014,
then conducts its business operation until the end of December 31, 2014, and
has turnover from goods sales and service provision revenue coded [01] and
turnover from financial operations coded [08] in Appendix No. 03-1A/TNDN
attached to CIT return No. 03/TNDN of 2014 of VND 18 billion and an average
monthly turnover in 2014 of VND 2 billion (VND 18 billion divided by (:) 9
months) may not apply the CIT rate of 20% and shall be subject to the tax rate
of 22%. If the average monthly turnover in 2014 does not exceed VND 1.67
billion, it may apply the CIT rate of 20% for the subsequent year.
An enterprise that
has just been established for less than 12 months in a calendar year shall make
declaration for temporary calculation of CIT at the rate of 22% (except the
cases eligible for the tax incentives). At the end of the fiscal year, if its
average monthly turnover in the year does not exceed VND 1.67 billion, it shall
finalize the payable CIT amount of the fiscal year at the tax rate of 20%
(except incomes specified in Clause 3, Article 18 of this Circular). Turnover
shall be determined based on the indicator of total turnover from goods sales
and service provision coded [01] and the indicator coded [08] in the Appendix
on production and business operation results according to form No. 03-1A/TNDN
attached to CIT return No. 03/TNDN promulgated together with the Ministry of
Finance’s Circular No. 156/2013/TT-BTC of November 6, 2013, on tax
administration. If the average monthly turnover in the first year does not
exceed VND 1.67 billion, the enterprise may apply the CIT rate of 20% for the
subsequent year.
3. The CIT rate
applicable to petroleum prospecting, exploration and exploitation in Vietnam is
between 32% and 50%. Based on the exploitation locations and conditions and
petroleum reserves, enterprises having investment projects on petroleum
prospecting, exploration and exploitation shall send investment projects’
dossiers to the Ministry of Finance for further submission to the Prime
Minister to decide on a specific tax rate applicable to each project or
business establishment.
The CIT rate
applicable to the prospecting, exploration and extraction of precious and rare
natural resources (including platinum, gold, silver, tin, tungsten, antimony,
gemstones and rare earth other than petroleum) is 50%. For mines of precious
and rare natural resources with 70% or more of their allocated areas located in
geographical areas with particularly difficult socio-economic conditions on the
list of geographical areas eligible for CIT incentives promulgated together
with the Government’s Decree No. 218/2013/ND-CP, the applicable CIT rate is
40%.
Chapter III
PLACES FOR TAX
PAYMENT
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Enterprises shall pay
tax in geographical areas where they are headquartered. For an enterprise that
has dependent cost-accounting production establishments (including processing
and assembly establishments) operating in provinces or centrally run cities
other than the locality where it is headquartered, the tax must be calculated
and paid in both the locality where the enterprise is headquartered and the
geographical areas where its production establishments are based.
The distribution of payable
tax amounts referred to in this Clause is not applicable to enterprises having
works, work items or dependent cost- accounting construction establishments.
Article
13. Determination of
payable tax amounts
An CIT amount calculated
and paid in a province or centrally run city where a dependent cost-accounting
production establishment is based is the payable CIT amount in a period
multiplied by (x) the ratio between expenses incurred by such production
establishment and total expenses incurred by the enterprise.
The ratio of expenses
is that between total expenses incurred by the dependent cost-accounting
production establishment and total expenses incurred by the enterprise. The
ratio of expenses shall be determined as follows:
Ratio
of expenses incurred by the dependent cost-accounting production
establishment
=
Total
expenses incurred by the dependent cost-accounting production establishment
Total
expenses incurred by the enterprise
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An operating
enterprise which has different dependent cost-accounting production
establishments in different geographical areas shall determine by itself data
used for determining the ratio of expenses incurred by the enterprise in the locality
where it is headquartered and expenses incurred by its dependent
cost-accounting production establishments, based on the 2008 CIT finalization
data. This ratio will be used stably from 2009 onwards.
A newly established
enterprise or an operating enterprise which increases or reduces its dependent
cost-accounting production establishments in geographical areas shall determine
by itself the ratio of expenses in the first tax period in this case. From the
subsequent tax period, the ratio of expenses shall be determined on the above
principle.
Dependent
cost-accounting units of enterprises applying entire-sector accounting and
earning incomes outside their main business lines shall pay tax in provinces or
centrally run cities where such business activities are conducted.
Chapter IV
INCOMES FROM
CAPITAL TRANSFER OR SECURITIES TRANSFER
Article
14. Incomes from capital transfer
1. Scope of
application:
An enterprise’s
income from capital transfer is income earned from the transfer of part or the
whole of the capital amount the enterprise has invested in one or many other
organizations or individuals (including the sale of the whole enterprise). The
time of capital transfer is the time of transfer of capital ownership.
In case an enterprise
sells the whole single-number limited liability company which it owns in the
form of capital transfer together with real estate, it shall declare and pay
CIT for transfer of real estate and fill in the CIT return (form No. 08)
promulgated together with this Circular.
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2. Tax bases:
a/ Taxed income from
capital transfer shall be determined as follows: Taxed income = Transfer price
- Purchasing price of the transferred capital - Transfer expenses
Of which:
- The transfer price
is the total actual value earned by the transferor under the transfer contract.
If installment or
deferred payment is made under the capital transfer contract, the contract’s
turnover excludes installment or deferred payment interests in the contractual
term.
If the payment price
is not stated in the transfer contract or when the tax agency has grounds to
determine that the payment price does not match the market price, it may
inspect and fix the transfer price. For an enterprise that transfers part of
its contributed capital at a transfer price not matching the market price, the
tax agency may re-valuate the whole enterprise at the time of transfer for
re-determining the transfer price in proportion to the transferred contributed
capital amount.
The transfer price
shall be fixed on the basis of investigation documents of the tax agency or
capital transfer prices in other cases at the same time, of the same economic
organization or under similar transfer contracts at the time of transfer. In
case the transfer price fixed by the tax agency is inappropriate, it shall be
based on the valuation by a professional valuation organization competent to
determine transfer prices at the time of transfer.
If an enterprise
transfers capital to an organization or individual, the capital amount
transferred under the transfer contract valued at VND 20 million must have
non-cash payment documents. In case the capital transfer has no non-cash
payment documents, the tax agency may fix the transfer price.
- The purchasing
price of the transferred capital amount is determined on a case-by-case basis
as follows:
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+ In case of capital
redemption, it is the value of the capital amount at the time of redemption.
The purchasing price shall be determined based on the contract on redemption of
the contributed capital amount and payment documents.
If a capital amount
contributed or redeemed by an enterprise originates partially from loans, the
purchasing price of the transferred capital amount is inclusive of expenses for
payment of loan interests.
If an enterprise
conducting cost-accounting in a foreign currency (approved by the Ministry of
Finance) transfers the contributed capital in such foreign currency, the
transfer price and purchasing price of the transferred capital amount shall be
determined in such foreign currency. If an enterprise conducting
cost-accounting in Vietnam dong transfers the contributed capital in a foreign
currency, the transfer price shall be determined in Vietnam dong at the average
exchange rate applicable on the inter-bank foreign currency market announced by
the State Bank at the time of transfer.
- Transfer expenses
are actual expenses directly related to the transfer with lawful documents and
invoices. If transfer expenses are incurred overseas, their original documents
shall be certified by a notary office or an independent audit organization of
the country where such expenses are incurred, and translated into Vietnamese
(with the certification of a competent representative).
Transfer expenses
include expense for carrying out legal procedures necessary for the transfer;
charges and fees paid for carrying out transfer procedures; expenses for
transaction, negotiation and signing of the transfer contract; and other
expenses with evidencing documents.
Example 16:
Enterprise A contributes VND 400 billion, including VND 320 billion as the
value of workshops and VND 80 billion in cash, for establishing a joint-venture
enterprise to produce tissue papers. Then it transfers this contributed capital
amount to enterprise B at the price of VND 550 billion. The book value of
enterprise A’s contributed capital at the time of transfer is VND 400 billion
and the capital transfer-related expense is VND 70 billion. In this case,
income used for calculating CIT on this capital transfer is VND 80 billion (550
- 400 - 70).
b/ Incomes from
capital transfer shall be regarded as other incomes and included in taxable
income upon calculation of CIT.
c/ Foreign
organizations doing business in Vietnam or having incomes in Vietnam but not
operating under the Investment Law or the Enterprise Law (collectively referred
to as foreign contractors) and transferring capital shall declare and pay tax
as follows:
Capital transferees
shall determine, declare, withhold and pay payable CIT amounts on behalf of
such foreign organizations. In case capital transferees are also foreign
organizations not operating under the Investment Law or the Enterprise Law,
enterprises established under Vietnamese law invested by these foreign
organizations shall declare and pay payable CIT amounts of such foreign
organizations on their behalf.
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Article
15. Incomes from securities transfer
1. Scope of
application:
An enterprise’s income
from securities transfer is income earned from the transfer of its stocks,
bonds, fund certificates and securities of other kinds under regulations.
In case an enterprise
issues additional stocks for raising capital, the difference between the issuance
price and the par value of these stocks shall not be accounted as a taxable
income for calculation of CIT.
In case an enterprise
undergoes separation, split, consolidation or merger and, therefore, swaps its
stocks at the time of separation, split, consolidation or merger, any income
from the stock swap is liable to CIT.
In case an enterprise
transfers securities and receives in return property or other material benefits
(stocks, fund certificates, etc.) instead of cash and earns income from the
transfer, such income is liable to CIT. The value of property, stocks or fund
certificates shall be determined based on their market selling prices at the
time of their receipt.
2. Tax bases:
Taxed income from
securities transfer in a period is equal to the securities selling price minus
(-) the purchasing price of the transferred capital minus (-) transfer
expenses.
- The securities
selling price shall be determined as follows:
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+ For securities of
companies other than those mentioned above, it is the transfer price indicated
in the transfer contract.
- The securities
purchasing price shall be determined as follows:
+ For listed
securities and public companies’ unlisted securities registered for trading at
a securities trading center, it is the actual securities purchasing price
(order-matching price or agreed price) announced by the stock exchange or
securities trading center.
+ For securities
purchased through auction, it is the price indicated in the notice of share
auction-winning results issued by the share-auctioning organization, and in the
money receipt.
+ For securities
other than those mentioned above, it is the transfer price indicated in the
transfer contract.
- Transfer expenses
are actual expenses directly related to the transfer with lawful evidencing
documents and invoices.
Transfer expenses
include expense for carrying out legal procedures necessary for the transfer;
charges and fees paid for carrying out transfer procedures; securities
depository charge as prescribed by the State Securities Commission and
indicated in receipts of the securities company; securities entrustment charge
based on the trustee’s receipts; expenses for transaction, negotiation and
signing of the transfer contract; and other expenses with evidencing documents.
Incomes from
securities transfer shall be regarded as other incomes and included in taxable
incomes upon calculation of CIT.
Chapter V
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Article
16. Taxpayers
1. Liable to pay CIT
on incomes from real estate transfer are enterprises of all economic sectors
and business lines having incomes from real estate transfer; and real estate
enterprises having incomes from land sublease.
2. Incomes from real
estate transfer include income from the transfer of land use rights, or land
lease right (including also the transfer of projects associated with the
transfer of land use rights or land lease right in accordance with law); income
from the sublease of land of real estate enterprises in accordance with the
land law regardless of whether there is an infrastructure facility or
architectural work attached to land; income from the transfer of houses or
construction works attached to land, including their appurtenances, in case the
value of such appurtenances is inseparable upon the transfer, regardless of
whether land use rights or land lease right are/is transferred; and income from
the transfer of house ownership or use right.
Real estate
enterprises that have income from the sublease of land do not include those
that only lease houses, infrastructure facilities or architectural works on
land.
Article
17. Tax bases
Bases for calculating
income tax on real estate transfer include taxed income and tax rate.
Taxed income equals (=)
taxable income minus (-) previous years’ losses from real estate transfer (if
any).
1. Taxable income
Taxable income from
real estate transfer is the turnover from real estate transfer minus the cost
of the real estate and deductible expenses related to the real estate transfer.
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a.1/ Turnover from
real estate transfer shall be determined based on the actual transfer price
under the real estate transfer or purchase and sale contract in accordance with
law (including surcharges and extra fees, if any).
If the transfer price
of land use rights under the real estate transfer or purchase and sale contract
is lower than the land price prescribed by the provincial-level People’s
Committee at the time of signing the contract, the price prescribed by the
provincial-level People’s Committee at the time of signing the contract shall
be applied.
- The time of
determining taxed turnover is the time the seller hands over the real estate to
the purchaser, regardless of whether the purchaser has registered the property
ownership or land use rights or has its land use rights established at a
competent state agency.
- If an enterprise
that is allocated or leased by the State land for implementing investment
projects to build infrastructure facilities or houses for transfer or lease
collects advanced money in any form by customers according to schedule, the
time of determining turnover used for calculating the temporary CIT amount is
the time of money collection, specifically as follows:
+ If the enterprise
collecting money from customers can determine expenses corresponding to
recorded turnover (including also pre-deducted expenses in the estimated costs
of uncompleted work items corresponding to recorded turnover), it shall declare
and temporarily pay an CIT amount based on turnover minus these expenses.
+ If the enterprise
collecting money from customers cannot determine expenses corresponding to
turnover, it shall declare and temporarily pay an CIT amount equal to 1% of the
collected sum of money which is not required to be included in the turnover
used for calculating CIT in the year.
When handing over
real estate, the enterprise shall finalize CIT and re-finalize the payable CIT
amount. If the temporarily paid CIT amount is smaller than the payable CIT
amount, the enterprise shall fully remit the deficit into the state budget. If
the temporarily paid CIT amount is higher than the payable CIT amount, the
enterprise may either have the overpaid tax amount cleared against the
subsequent period’s payable CIT amount or have it refunded.
For a real estate
enterprise that collects advanced money amounts from customers according to the
schedule, declares and temporarily pays tax according to the percentage (%) of
its turnover not yet accounted as turnover for calculating CIT in the year, and
has expenses for advertising, marketing, sales promotion or brokerage
commissions upon starting the offering in the year of money collection
according to schedule, such expenses are not accounted in the year when
expenses arise. Expenses for advertising, marketing, sales promotion or
brokerage commissions may be accounted as deductible expenses at the limit
level prescribed in the first year of handover of real estate and arising of
turnover for calculating CIT.
a.2/ Turnover for
calculating taxable income in some cases is determined as follows:
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If an enterprise
enjoying CIT incentives selects the method of determining the turnover for
calculating taxable income to be the whole rental paid in advance by the lessee
for many years, the CIT amount to be exempted or reduced for each year will be
the total CIT amount of the years for which the rental has been paid in advance
divided by (:) the number of years for which the rental has been paid in
advance.
- When a credit
institution receiving the value of land use rights as the mortgaged loan
security in substitution of the performance of the secured obligations transfers
land use rights, the turnover for calculating its taxable income is the
transfer price of land use rights agreed by the involved parties.
- In case of transfer
of land use rights distrained to secure judgment enforcement, the turnover for
calculating taxable income is the transfer price of land use rights agreed by
the involved parties or the price determined by the valuation council.
The determination of
turnover in the cases specified in Item a2 must adhere to the principles referred
to in Item a1 of this Point.
b/ Real estate
transfer expenses:
b.1/ Principles of
determination of expenses:
- Deductible expenses
for determining taxable income from real estate transfer in a tax period must
correspond to turnover for calculating taxable income and satisfy the
conditions for being accounted as deductible expenses or as non-deductible
expenses prescribed in Article 6 of this Circular.
- If an investment
project is partially completed and gradually transferred according to the completion
progress, general expenses for the project and direct expenses for the
completed part of the project may be distributed by square meter of the
transferred land for determining taxable income from the transferred land area,
including expenses for internal roads and tree planting; construction of water
supply and drainage systems and transformer stations; compensations for assets
on land; compensation, support and resettlement and organization of
compensation and ground clearance work, which have been approved by competent
authorities but not yet cleared against land use levies or rentals in
accordance with regulations on collection of land use levies or rentals; land
use levies or rentals remittable into the state budget and other investments in
land which are related to the land use or lease right transfer.
The above expenses
are allocated according to the following formula:
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=
Total
expenses for infrastructure investment
x
Transferred
area land
Total
land area allocated for the project (excluding land area used for public
purposes in accordance with the land law)
When part of the
project’s non-transferred land area is used for other business activities, the above
general expenses must also be allocated to this land area for monitoring,
accounting, declaration and payment of CIT for other business activities.
When an enterprise
invests in building an infrastructure facility over many years and can finalize
the value of the infrastructure facility only when the whole work is completed,
when summing up real estate transfer expenses for the transferred land area,
the enterprise may temporarily allocate actual infrastructure investment
expenses based on the ratio of the transferred land area according to the above
formula and pre-deduct infrastructure investment expenses corresponding to the
turnover recorded upon the determination of taxable income. After completing
the construction investment, the enterprise may readjust infrastructure
investment expenses temporarily allocated to and pre-deducted for the
transferred land area to match the total value of the infrastructure facility.
Upon the adjustment, if the paid tax amount is higher than the payable tax
amount on the real estate transfer, the enterprise may have the overpaid amount
cleared against the subsequent tax period’s payable tax amount or have it
refunded under current regulations; if the paid tax amount is insufficient, the
enterprise shall fully pay the deficit under regulations.
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- The cost of the
transferred land, determined according to the land use right origin,
specifically as follows:
+ For land allocated
or leased by the State with collection of land use levy or land rental, its
cost is the land use levy or land rental actually remitted into the state
budget;
+ For land with use
rights transferred from another organization or individual, its cost shall be
determined based on the contract and lawful payment document upon receiving its
lease right or use rights; if the contract and payment document are
unavailable, such cost shall be calculated based on the price set by the
provincial-level People’s Committee at the time the enterprise receives the
real estate transferred;
+ For land
contributed as capital, its cost is the value of its lease right or use rights
indicated in the asset valuation record upon capital contribution;
+ If the enterprise
has exchanged a construction work for state land, the cost of such land is
determined based on the value of the exchanged work, unless competent state
agencies’ separate regulations are applied;
+ The auction-winning
price, in case of auction of land use or lease rights;
+ For land inherited
under the civil law or donated land with unidentifiable cost, its cost shall be
determined based on the land price decided by the provincial-level People’s
Committee on the basis of the land price bracket prescribed by the Government
at the time of inheritance or donation.
For land inherited or
donated before 1994, its cost shall be determined based on the land price
decided by the provincial-level People’s Committee in 1994 on the basis of the
land price brackets for different land categories specified in the Government’s
Decree No. 87/CP of August 17, 1994.
+ For land mortgaged
to secure loans or land distrained to secure judgment enforcement, its cost
shall be determined on a case-by-case basis under the above guidance.
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- Expense for crop
damage compensation.
- Compensation,
support and resettlement expenses and expenses for organization of
compensation, support and resettlement in accordance with law.
If the above
compensation, support and resettlement expenses and expenses for organization
of compensation, support and resettlement have no supporting invoice, a list
shall be made, specifying the names and addresses of recipients; compensation
or support amounts; signatures of recipients. This list shall be certified by
the administrations of the wards or communes where are located land areas
eligible for compensation or support in accordance with the law on
compensation, support and resettlement when the State recovers land.
- Charges and fees
related to the grant of land use rights as provided by law.
- Expense for soil
improvement and ground leveling.
- Expense for the
construction of infrastructure, such as roads, power lines, water supply and
drainage systems, post and telecommunications facilities, etc.
- The value of infrastructure
facilities and architectural works on land.
- Other expenses
related to the transferred real estate.
An enterprise that
conducts different business lines shall separately account expenses for each
business line. If separate accounting cannot be conducted, general expenses
shall be allocated based on the ratio of turnover from real estate transfer to
the total turnover of the enterprise.
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2. The CIT rate for
real estate transfer is 22% (or 20% from January 1, 2016).
3. Determination of
payable CIT amounts:
The amount of CIT on
real estate transfer in a tax period is the taxed income from real estate
transfer multiplied by (x) the tax rate of 22%.
Income from real
estate transfer shall be separately determined for tax payment declaration. The
preferential tax rates and tax exemption and reduction duration guided in
Chapter VI of this Circular are not applicable to income from real estate
transfer.
Losses from real
estate transfer, if any, shall be handled under the guidance in Clause 3,
Article 9 of this Circular.
Dossiers for
declaration and payment and documents of payment of CIT on incomes from real
estate transfer in geographical areas where the transferred real estates are
located serve as a basis for carrying out procedures for tax finalization in
geographical areas where enterprises are headquartered.
4. Credit
institutions that receive the value of real estate used as loan security in
substitution of the performance of secured obligations shall, when transferring
such real estate in accordance with law, declare and remit tax on the income
from real estate transfer into the state budget. In case real estate mortgaged
as loan security is put up for auction, the proceeds from such auction must be
paid under the Government’s regulations on securing credit institutions’ loans,
and tax shall be declared and paid under regulations. After paying these
amounts, the remaining money shall be returned to business organizations that
have mortgaged their real estate to secure loans.
If credit
institutions that are allowed by law to transfer the mortgaged real estate for recovering
capital cannot determine the cost of such real estate, such cost equals (=)
payable loans under the real estate mortgage contract plus (+) unpaid loan
interests at the time of public sale of the mortgaged real estate under the
credit contract plus (+) expenses arising during the real estate transfer with
lawful invoices or evidencing documents.
5. When a judgment
enforcement agency auctions real estate used to secure judgment enforcement,
the proceeds from such auction shall be used under the Government’s Decree on
distraint and auction of land use rights to secure judgment enforcement.
Organizations authorized to auction real estate shall declare and deduct tax on
income from real estate transfer and remit it into the state budget. Such
documents must specify the tax declaration and payment for the auction of real
estate for judgment enforcement.
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Chapter VI
CIT INCENTIVES
Article
18. Conditions for application of CIT incentives
1. CIT incentives are
applicable only to enterprises which observe accounting, invoice and document
regulations and register and pay CIT as declared.
2. While enjoying CIT
incentives, enterprises that carry out different production and business
activities shall separately account income from production and business
activities eligible for CIT incentives (including preferential tax rates or tax
exemption or reduction) from income from those ineligible for CIT incentives
for separate tax declaration and payment.
During a tax period,
if an enterprise fails to separately account incomes from production and
business activities eligible and ineligible for tax incentives, the income from
production and business activities eligible for tax incentives equals (=) the
total taxed income multiplied by (x) the ratio (%) of the turnover from or
deductible expenses for production and business activities eligible for tax
incentives to the total turnover or total deductible expenses of the enterprise
in the tax period.
If an enterprise has
an income or a deductible expense which cannot be separately accounted, such
income or expense shall be determined according to the ratio of the turnover
from or deductible expenses for production and business activities eligible for
tax incentives to the total turnover or total deductible expenses of the
enterprise.
3. CIT incentives are
not applied and the tax rate of 20% is applied to enterprises (including also
enterprises subject to the tax rate of 20% under Clause 2, Article 11 of this
Circular) that have the following incomes:
a/ Income from
capital or capital contribution right transfer; income from real estate
transfer (except income from investment and trading in social houses specified
at Point d, Clause 3, Article 19 of this Circular); income from transfer of
investment projects, right to participate in investment projects or right to
explore and exploit minerals; income from production or business activities
outside Vietnam;
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c/ Income from the
provision of services liable to excise tax in accordance with the Excise Tax
Law.
4. For enterprises
having investment projects eligible for CIT incentives for being engaged in the
fields eligible for investment incentives, incomes from these fields and
incomes from the liquidation of waste materials and scraps of products in these
fields, exchange rate differences directly related to turnover from and
expenses for these fields, demand deposit interests and other directly related
incomes are also eligible for CIT incentives.
For enterprises
having investment projects eligible for CIT incentives for being located in geographical
areas eligible for investment incentives (including also industrial parks,
economic zones and hi-tech parks), incomes eligible for CIT incentives are all
incomes from their production and business activities in such geographical
areas, except those specified at Points a, b and c, Clause 3 of this Article.
Enterprises subject
to the tax rate of 20% may apply the tax rate of 20% to all of their incomes,
except those specified at Points a, b and c, Clause 3 of this Article.
5. New investment
projects:
a/ New investment
projects eligible for CIT incentives provided in Articles 15 and 16 of Decree
No. 218/2013/ND-CP are:
- Projects which are
granted first-time investment certificates from January 1, 2014, and generate
turnover from the date of grant of such certificates.
- Domestic investment
projects associated with the establishment of new enterprises which have
investment capital of under VND 15 billion, are outside the list of conditional
investment fields and are granted enterprise registration certificates from
January 1, 2014.
- Investment projects
which were granted investment licenses or investment certificates before
January 1, 2014, are under construction, not yet commissioned, have generated
no turnover and are granted certificates of modification of investment licenses
or modified investment certificates from January 1, 2014.
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b/ For enterprises
that modify or supplement investment licenses or investment certificates of
their operating projects without changing conditions for enjoyment of
incentives, incomes from modified or supplemented activities may continue to
enjoy incentives given to these projects before the modification or
supplementation for the remaining duration or enjoy incentives for expanded
investment in case of satisfying the prescribed conditions for incentives.
c/ New investment
projects eligible for CIT incentives do not include the following:
- Investment projects
formed from the splitting, separation, merger or transformation of enterprises
in accordance with law;
- Investment projects
formed from ownership conversion (including also implementation of new
investment projects with assets, business locations and lines of old
enterprises for continued production and business activities, and acquisition
of operating investment projects).
Enterprises
established or having investment projects from transformation, ownership
conversion, splitting, separation, merger or consolidation may continue
enjoying CIT incentives given to enterprises or investment projects before the
transformation, conversion, splitting, separation, merger or consolidation for
the remaining duration if they still satisfy the conditions for CIT incentives.
d/ For enterprises
enjoying CIT incentives as enterprises newly established from investment
projects, only incomes from production and business activities satisfying the
conditions for investment incentives stated in their first-time business
registration certificates are eligible for such incentives. Enterprises
currently engaged in production and business activities may continue enjoying
tax incentives for the remaining duration if they have a change in their
business registration certificates which does not affect the satisfaction of
the prescribed conditions for tax incentives.
6. Incentives for
expansion investment
a/ If satisfying one
of the three conditions prescribed at this Point, enterprises having investment
projects to develop operating investment projects such as expansion of production
scale, increase of capacity and renewal of production technology (commonly
referred to as expanded investment projects) in the fields or geographical
areas eligible for CIT incentives under Decree No. 218/2013/ND-CP (including
also economic zones, hi-tech parks, industrial parks other than those located
in urban districts of special-grade cities, centrally run grade-I cities and
grade-I provincial cities) may be chosen to enjoy CIT incentives for their
operating projects for the remaining duration (if any) or to be entitled to a
duration of tax exemption or reduction for additional incomes brought about by
expansion investment (not eligible for preferential tax rates) equal to the tax
exemption or reduction duration applicable to new investment projects in the
same geographical area or field eligible for CIT incentives. If enterprises
choose to enjoy CIT incentives for their operating projects for the remaining
duration, expanded investment projects must be in the fields or geographical
areas eligible for CIT incentives under Decree No. 218/2013/ND-CP and in the
same field or geographical area with operating projects.
An expanded
investment project mentioned at this Point must satisfy one of the following
conditions:
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- The historical cost
of additional fixed assets accounts for at least 20% of the total historical
cost of fixed assets before investment.
- The design capacity
after expansion investment is at least 20% higher than the design capacity
stated in the techno-economic study report prior to the initial investment.
In case enterprises
choose to enjoy incentives for expansion investment, additional incomes brought
about by expansion investment shall be separately accounted. In case
enterprises cannot separately account additional incomes, such incomes shall be
determined according to the ratio of historical cost of fixed assets newly
invested for use for production and business activities to the total historical
cost of fixed assets of enterprises.
The tax exemption or
reduction duration mentioned in this Clause shall be counted from the year when
the commissioned complete expanded investment project generates income. If no
income is generated in the first three years from the first year of generating
turnover from the expanded investment project, the tax exemption or reduction
shall be counted from the fourth year of turnover generation.
In case operating
enterprises invest in upgrading, replacement or renewal of technology of
operating projects in the fields or geographical areas eligible for tax
incentives under Decree No. 218/2013/ND-CP which fail to satisfy one of the
three conditions prescribed at this Point, tax incentives shall be given to
operating projects for the remaining duration (if any).
Tax incentives
mentioned in this Clause are not applicable to cases of expanded investment due
to splitting, separation, merger or ownership conversion (including also cases
of implementation of new investment projects with assets and business locations
and lines of old enterprises for continued production and business activities),
acquisition of operating enterprises or investment projects.
Enterprises having
investment projects formed from ownership conversion, splitting, separation,
merger or consolidation may continue enjoying CIT incentives of enterprises or
investment projects before such ownership conversion, splitting, separation,
merger or consolidation for the remaining duration if they still satisfy the
conditions for CIT incentives.
b/ Operating
enterprises that enjoy tax incentives and invest in building new production
lines, expanding production scale, adding production and business lines or
raising productivity (commonly referred to as expanded investment) not in the
fields or geographical areas eligible for tax incentives under Decree No.
218/2013/ND-CP, on CIT, are not entitled to CIT incentives for additional
incomes brought about expanded investment.
If in a tax period,
an enterprise cannot separately account additional incomes brought about by
expanded investment, such additional incomes ineligible for CIT incentives may
be determined by either of the following methods
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Additional
income from expanded investment ineligible for CIT incentives
=
Total
taxable income in the year (excluding other income ineligible for incentives)
x
Value
of fixed assets formed from expanded investment and used for production and
business
Total
historical cost of fixed assets actually used for production and business
The total historical
cost of fixed assets actually used for production and business includes the
value of fixed assets formed from expanded investment, completed and commissioned
and the historical cost of existing fixed assets used for production and
business according to period-end figures in the annual accounting balance
sheet.
Method 2:
Additional
income from expanded investment ineligible for CIT incentives
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Total
taxable income in the year (excluding other income ineligible for incentives)
x
Value
of expanded investment in production and business
Total
actual investment in production and business
The total actual investment
in production and business is the total equity capital and loan capital
invested by the enterprise in production and business according to period-end
figures in the annual accounting balance sheet.
Enterprises may apply
only one method of allocation of income from one expanded investment activity.
Example 16: Company A
is an enterprise manufacturing plastic products in an industrial park in Ho Chi
Minh City (a geographical area ineligible for incentives) and enjoying CIT
incentives. The tax rate of 15% shall be applied for 12 years from the year of
turnover generation, CIT exemption shall be given for 3 years from the year of
generation of taxable income, and 50% CIT shall be given for 7 subsequent
years. In 2014, it makes an expanded investment with a total value of machinery
and equipment procured with new investment in the year being VND 5 billion. If
the total value of fixed assets at the end of 2014 is VND 20 billion, total
taxed income generated in 2014 is VND 1.2 billion, including other income of
VND 200 million ineligible for incentives, then:
Income from expanded
investment ineligible for incentives:
Additional income
from expanded investment ineligible for CIT incentives = (VND 1.2 billion - VND
200 million) x VND 5 billion : VND 20 billion = VND 250 million.
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Taxed income eligible
for CIT incentives in 2014: VND 1.2 billion - VND 450 million = VND 750 million
7. In the same tax
period, if having an income eligible for different preferential CIT rates and
tax exemption and reduction durations, an enterprise may choose to apply the
most beneficial incentive.
8. During the CIT
incentive period, if an enterprise fails to satisfy any of the conditions for
enjoying tax incentives in a tax year specified in Clauses 7, 8 and 12, Article
1 of the Law Amending and Supplementing a Number of Articles of the Law on CIT
and Article 19 of Decree No. 218/2013/ND-CP, it is not entitled to tax
incentives in that tax year and shall pay CIT at the common rate and that year
shall be counted in its incentive enjoyment period.
9. In the same tax
period, if an enterprise’s business activities eligible for tax incentives
sustain losses, while business activities ineligible for tax incentives and
other incomes from business activities (excluding income from real estate
transfer and project transfer activities; income from transfer of the right to
implement projects or the right to explore, exploit and process minerals in
accordance with law) generate incomes (or vice versa), the enterprise may
choose to clear such losses against its taxable incomes from income-generating
business activities. The remaining income after clearing is subject to the CIT
rate applicable to income-generating activities.
If an enterprise has
been suffering losses from previous tax periods (the time limit for carrying
forward losses has not expired), it may clear such losses against incomes from
income-generating activities. If the enterprise cannot separately account loss
from each activity, it may clear its losses against incomes from activities
eligible for CIT incentives and, clear remaining losses, if any, against
incomes from activities ineligible for CIT incentives (excluding income from real
estate transfer and project transfer activities; income from the transfer of
the right to implement projects or the right to explore, exploit and process
minerals in accordance with law).
Example 17: In the
tax period of 2014, enterprise A has:
- A loss of VND 1
billion from software production eligible for tax incentives.
- A profit of VND 1
billion from computer trading ineligible to tax incentives.
- A profit of VND 2
billion from securities transfer (another income from business activities).
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Specifically: After
clearing the loss of VND 1 billion from software production against the profit
of VND 1 billion from computer trading or securities transfer, the enterprise
has a remaining profit of VND 2 billion and has to pay CIT at the tax rate of 22%:
VND 2 billion x 22%.
Example 18: In the
tax period of 2014, enterprise B has:
- A profit of VND 2
billion from software production eligible for tax incentives (this activity is
currently subject to the CIT rate of 10%).
- A profit of VND 2
billion from computer trading ineligible to tax incentives.
- A loss of VND 1
billion from securities transfer (another income from business activities).
If in the tax period
of 2013, enterprise B had a loss of VND 1 billion from computer trading, it
shall carry forward such loss upon determining taxable income of 2014 as
follows:
Specifically:
- Clearing the loss
against profit of 2014: It may choose to clear the loss from securities trading
against the profit from computer trading. The remaining profit from computer trading
is (2 billion - 1 billion) = VND 1 billion.
- Carrying forward
and clearing the loss from computer trading in 2013 against the profit from
this activity in 2014: (1 billion - 1 billion) = VND 0 billion.
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So, the payable CIT
amount is VND 200 million. Example 19: In the tax period of 2014, enterprise C
has:
- A profit of VND 2 billion
from software production eligible for tax incentives (these activities are
currently subject to the CIT rate of 10%).
- A profit of VND 2
billion from computer trading ineligible for tax incentives.
- A loss of VND 1
billion from securities transfer (another income from business activities).
In the tax period of
2013, enterprise C had a loss of VND 2 billion but it could not identify the
activity which made such loss. As a result, it shall first of all clear such
loss against the income from activities eligible for tax incentives (software
production).
Specifically:
- Clearing the loss
against profit of 2014: It may choose to clear the loss from securities trading
against the profit from computer trading. The remaining profit from computer
trading is (2 billion - 1 billion) = VND 1 billion.
- Carrying forward
and clearing the loss of 2013 against the profit from software production in
2014: (2 billion - 2 billion) = VND 0 billion.
- Declaring and
paying CIT at the tax rate of 22% on business activities ineligible for tax
incentives: VND 1 billion x 22% = VND 220 million.
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- A higher CIT amount
eligible to tax incentives compared to that declared by the enterprise itself
(including the case where the enterprise has not made declaration to enjoy tax
incentives), the enterprise may enjoy provided CIT incentives for CIT amounts
detected through examination or inspection (including the added CIT amount and
the CIT amount eligible for tax incentives which has been declared without any
specified tax incentive amount).
- A lower CIT amount
eligible for tax incentives compared to that declared by the enterprise itself,
the enterprise may only enjoy CIT incentives applicable to the CIT amount
detected through examination or inspection.
- Depending on the
severity of the enterprise’s violations, the competent examination or
inspection agency shall apply sanctions on tax-related violations under
regulations.
Article
19. Preferential tax rates
1. The preferential
tax rate of 10% for fifteen (15) years is applicable to:
a/ Incomes of
enterprises from the implementation of new investment projects in geographical
areas with particularly difficult socio-economic conditions specified in the
Appendix to Decree No. 218/2013/ND-CP, economic zones and hi-tech zones,
including information technology parks established under the Prime Minister’s
decisions.
b/ Incomes of enterprises
from the implementation of new investment projects in the fields of scientific
research and technological development; application of high technologies on the
list of high technologies prioritized for development investment in accordance
with the Law on High Technologies; nursery of high technologies and hi-tech
enterprises; venture investment in development of high technologies on the list
of high technologies prioritized for development in accordance with the Law on
High Technologies; construction investment and commercial operation of
establishments nursing high technologies and hi-tech enterprises; investment in
development water plants, power plants, water supply and drainage systems;
bridges, roads, railways; airports, seaports, river ports; air fields, stations
and other particularly important infrastructure facilities decided by the Prime
Minister; production of software products; manufacture of composite materials,
light building materials, rare and precious materials; generation of renewable
energies, clean energy and energy from the waste disposal; development of
biotechnology;
c/ Incomes of
enterprises from the implementation of new investment projects in the field of
environmental protection, covering manufacture of equipment for treating
environmental pollution, equipment for environmental observation and analysis;
environmental pollution treatment and protection; collection and treatment of
wastewater, exhaust and solid wastes; recycling and reuse of wastes;
d/ Hi-tech
enterprises and agricultural enterprises applying high technologies defined in
the Law on High Technologies;
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Hi-tech enterprises
and agricultural enterprises applying high technologies may enjoy CIT
incentives calculated on their total incomes, except incomes specified at
Points a, b and c, Clause 3, Article 18 of this Circular.
In case enterprises
that are enjoying CIT incentives or have fully enjoyed CIT incentives provided
in legal documents on CIT are granted certificates of hi-tech enterprises or
agricultural enterprises applying high technologies, the incentive level for
hi-tech enterprises and agricultural enterprises applying high technologies is
equal to that applicable to hi-tech enterprises and agricultural enterprises
applying high technologies defined in Clause 1, Article 15 and Clause 1,
Article 16 of Decree No. 218/2013/ND-CP minus the enjoyed incentives (in terms
of tax rates and tax exemption and reduction duration), for newly established
enterprises and new investment projects.
dd/ Incomes of enterprises
from the implementation of new investment projects in the fields of production
(except projects producing goods items liable to excise tax and mineral mining
projects) which satisfy either of the following conditions:
- A project has an
initial registered investment capital of at least VND 6 (six) trillion, fully
disburses the capital within 3 years after being granted an investment license,
and has a total turnover of at least VND 10 (ten) trillion/year from the 4th
year after the year when turnover is first generated.
- A project has an
initial registered investment capital of at least VND 6 (six) trillion, fully
disburses the capital within 3 years after being granted an investment license,
and regularly employs an average of over 3,000 laborers/year from the 4th
year after the year when turnover is first generated.
Laborers mentioned at
this Point are employees having labor contracts to work on a full-time basis.
Part-time employees and employees with labor contracts of short term of under 1
year shall not be included.
The annual average
number of regular employees shall be determined under the guidance in the
Ministry of Labor, War Invalids and Social Affairs’ Circular No.
40/2009/TT-BLDTBXH of December 3, 2009.
In case their
investment projects fail to satisfy the conditions prescribed at this Point
(except those with behind-schedule progress due to objective reasons in the
stages of ground clearance, completion of administrative procedures by state
agencies, natural disasters, enemy sabotage or fire and consent of the
investment-licensing agency which shall be reported to the Prime Minister for
approval) enterprises are not entitled to CIT incentives and shall declare and
pay CIT amounts declared for enjoyment of incentives in the last year (if any)
and a late tax payment interest as prescribed. However, they will not be
sanctioned for false declaration in accordance with the law on tax
administration.
2. For investment
projects mentioned at Points b and c, Clause 1 of this Article which are of large
size and furnished with high or new technologies which need special investment
attraction, the duration of application of the tax rate of 10% may be longer
but must not exceed 30 years under the Prime Minister’s decisions based on the
Minister of Finance’s proposals.
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a/ Incomes of
enterprises from socialized education and training, job training, health care,
culture, sports and environmental protection activities (below referred to as
socialized fields);
The list of types,
sizes and standards of enterprises engaged in socialized fields is that
promulgated by the Prime Minister;
b/ Incomes of
publishing houses from publication activities in accordance with the Law on Publication;
Publication
activities include publishing, printing and distribution of publications in
accordance with the Law on Publication;
Publications are
defined in Article 4 of the Law on Publication and Article 2 of the
Government’s Decree No. 111/2005/ND-CP of August 26, 2005. In case the
provisions of the Law on Publication, Decree No. 111/2005/ND-CP and legal
documents relevant to the field of publication are amended, amended provisions
shall be complied with;
c/ Incomes of press
agencies from printed newspapers (including advertisements on printed
newspapers) in accordance with the Law on Publication;
d/ Incomes of
enterprises from the implementation of projects on investment and trading in
social houses for sale or lease to or hire-purchase by the subjects specified
in Article 53 of the Housing Law;
Social houses
mentioned at this Point are houses built by the State or organizations or
individuals of all economic sectors and satisfying the housing criteria and
conditions of sale prices, lease or hire-purchase prices, subjects eligible for
purchase, rent or hire-purchase of social houses prescribed by the housing law.
The determination of incomes subject to the tax rate of 10% under this Point
does not depend on the time of signing the contracts on sale, lease or
hire-purchase of social houses.
In case enterprises
that invest and trade in social houses sign contracts on house transfer with
advance payment from customers according to the construction progress before
January 1, 2014, and continue collecting money from January 1, 2014
(enterprises have declared for temporary payment of CIT on incomes or according
to a percentage of generated turnover) and hand over houses from January 1,
2014 onward, incomes from house transfer is subject to the tax rate of 10%.
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e/ Incomes of
enterprises from the forest planting, tending and protection; agricultural
cultivation, planting of forest trees and aquaculture in geographical areas
with difficult socio-economic conditions; production, propagation and
hybridization of plant varieties and animal breeds; salt production,
exploitation and refinery, except salt production mentioned in Clause 1,
Article 4 of Decree No. 218/2013/ND-CP, investment in the preservation of
post-harvest farm produce, aquatic products and foodstuffs;
f/ Incomes of
cooperatives engaged in agriculture, forestry, fisheries or salt production and
not located in geographical areas with difficult or particularly difficult
socio-economic conditions.
4. The preferential
tax rate of 20% for ten (10) years is applicable to:
a/ Incomes of
enterprises from the implementation of new investment projects in geographical
areas with difficult socio-economic conditions specified in the Appendix to the
Government’s Decree No. 218/2013/ND-CP;
b/ Incomes from enterprises
from the implementation of new investment projects on production of hi-class
steel, energy-conserving products, machinery and equipment for agriculture,
forestry, fisheries and salt production, irrigation and drainage equipment,
livestock and aquatic animal feed; and development of traditional crafts and
trades (including building and development of traditional handicraft
production, farm produce and food processing and production of cultural
products);
Enterprises implementing
new investment projects in the fields or geographical areas eligible for the
tax incentives specified in this Clause will enjoy the tax rate of 17% from
January 1, 2016.
5. The preferential
tax rate of 20% (or 17% from January 1, 2016) is applicable throughout the
operation duration to people’s credit funds, cooperative banks and
micro-finance institutions.
Upon the expiration
of the duration of application of the tax rate of 10% specified at Point a,
Clause 1 of this Article, people’s credit funds, cooperative banks and
micro-finance institutions newly established in geographical areas with
particularly difficult socio-economic conditions specified in the Appendix to
the Government’s Decree No. 218/2013/ND-CP, may switch to apply the tax rate of
20%. From January 1, 2016, they may switch to the tax rate of 17%.
Micro-finance
institutions mentioned in this Clause are those established and operating in
accordance with the Law on Credit Institutions.
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Article
20. Tax exemption and
reduction durations
1. Tax exemption for
4 years and 50% reduction of payable tax amounts for 9 subsequent years are
applicable to:
a/ Incomes of
enterprises from the implementation of new investment projects specified in
Clause 1, Article 19 of this Circular;
b/ Incomes of
enterprises from the implementation of new investment projects in the
socialized fields in geographical areas with difficult or particularly difficult
socio-economic conditions specified in the Appendix to Decree No.
218/2013/ND-CP.
2. Tax exemption for
4 years and 50% reduction of payable tax amounts for 5 subsequent years are
applicable to incomes of enterprises from the implementation of new investment
projects in the socialized fields in geographical areas outside the list of
those with difficult or particularly difficult socio-economic conditions
specified in the Appendix to Decree No. 218/2013/ND-CP.
3. Tax exemption for
2 years and 50% reduction of payable tax amounts for 4 subsequent years are
applicable to incomes from the implementation of new investment projects
specified in Clause 4, Article 19 of this Circular and incomes of enterprises
from the implementation of new investment projects in industrial parks (except
industrial parks in urban districts of special-grade or centrally run grade-I
urban centers and those in provincial grade-I cities). For an industrial park
located in both geographical area with favorable conditions and geographical
area with difficult conditions, the determination of tax incentives to be given
to the industrial park shall be based on the geographical area in which the
larger part of the industrial park is located.
The determination of
special-grade and grade-I urban centers mentioned in this Clause complies with
the Government’s Decree No. 42/2009/ND-CP of May 7, 2009, on classification of
urban centers and legal documents amending this Decree (if any).
4. The tax exemption
or reduction duration specified in this Article shall be counted consecutively
from the first year an enterprise has taxable income from a new investment
project eligible for tax incentives. If an enterprise has no taxable income for
the first 3 years, counting from the first year it has turnover from a new
investment project, the tax exemption or reduction duration shall be counted
from the fourth year.
Example 20: In 2014,
enterprise A has a new investment project on software production. If it earns
in 2014 taxable income from such project, the tax exemption or reduction
duration shall be counted consecutively from 2014. If such project generates
turnover in 2014 but still has no taxable income in 2016, the tax exemption or
reduction duration shall be counted consecutively from 2017.
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If an enterprise has
taxable income in the first tax period but its new investment project has a
production or business operation duration eligible for tax incentives of under
12 (twelve) months, the enterprise may choose to enjoy tax incentives for the
new investment project right in that tax period or register with the tax agency
a tax incentive duration counted from the subsequent tax period. If the
enterprise registers a tax incentive duration in the subsequent tax period, the
first tax period’s payable tax amount shall be determined for remission into
the state budget under regulations.
Article
21. Other cases of tax reduction
1. A production,
construction or transportation enterprise that employs between 10 and 100
female laborers who account for more than 50% of its total regular employees or
regularly employs over 100 female laborers who account for more than 30% of its
total regular employees is entitled to a reduction of payable CIT equivalent to
actual additional expenses for female laborers as guided in Item a, Point 2.9,
Clause 2, Article 6 of this Circular if they can separately account such
expenses.
Non-business units
and offices of corporations not directly engaged in production and business
operation are not entitled to tax reduction under this Point.
2. Enterprises that
employ ethnic minority laborers are entitled to a reduction of payable CIT
equivalent to actual additional expenses for ethnic minority laborers as guided
in Item b, Point 2.9, Clause 2, Article 6 of this Circular if they can
separately account such expenses.
3. Enterprises that
transfer technologies in the prioritized fields to organizations and
individuals in geographical areas with difficult socio- economic conditions are
entitled to 50% reduction of payable CIT calculated on incomes from technology
transfer.
Article
22. Procedures for application of CIT incentives
Enterprises shall
determine by themselves conditions for enjoyment of tax incentives,
preferential tax rates, the tax exemption or reduction duration, and losses
allowed to be cleared against taxed incomes in order to declare and finalize
tax with tax agencies.
When conducting
examination and inspection at enterprises, tax agencies shall examine
conditions actually satisfied by enterprises for enjoyment of tax incentives,
CIT amounts eligible for exemption or reduction, and losses allowed to be
cleared against taxable incomes. If enterprises fail to satisfy conditions for
enjoyment of preferential tax rates and tax exemption or reduction duration,
tax agencies shall retrospectively collect tax and sanction tax-related
administrative violations under regulations.
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ORGANIZATION OF
IMPLEMENTATION
Article
23. Effect
1. This Circular
takes effect on August 2, 2014, and applies from the CIT period of 2014 on.
2. Enterprises that
have investment projects which, by the end of the tax period of 2013, remain
eligible for CIT incentives (including those having been enjoying and those
having not yet enjoyed incentives) under previous legal documents on CIT may
continue to enjoy these incentives for the remaining duration under such legal
documents. If they satisfy the conditions for enjoyment of tax incentives under
Decree No. 218/2013/ND-CP on CIT, they may choose to enjoy current incentives
or incentives provided in Decree No. 218/2013/ND-CP which are applicable to new
investment projects (including preferential tax rates and tax exemption and
reduction duration) for the remaining duration if they are eligible for CIT
incentives as enterprises newly established under investment projects or to
expanded investment projects for the remaining duration if they are eligible
for incentives as expanded investment projects. Expanded investment projects
which may choose to enjoy other incentives mentioned in this Clause are those
starting to be implemented on or before December 31, 2008, and those
commissioned for production and business operation in or before 2009.
The remaining
duration for enjoyment of tax incentives shall be counted consecutively from
the time of implementation of the tax incentive provisions of the legal
documents on foreign investment in Vietnam, domestic investment promotion and
CIT issued before the effective date of this Circular.
The remaining
duration for enjoyment of tax incentives is the number of years during which an
enterprise is still entitled to tax incentives (preferential tax rates and tax
exemption or reduction duration) guided in this Circular minus (-) the number
of years during which the enterprise has enjoyed tax incentives (preferential
tax rates and tax exemption or reduction duration) under previous legal
documents on CIT. The determination of the remaining duration for enjoyment of
tax incentives must adhere to the following principles:
- By the end of the
tax period of 2013, upon the expiration of the duration of enjoying tax rate
incentives under previous legal documents on CIT, an enterprise may not switch
to apply tax incentives (preferential tax rates and tax exemption and reduction
duration) for the remaining duration guided in this Circular.
- By the end of the
tax period of 2013, if still in the duration of enjoying tax incentives
(preferential tax rates and tax exemption and reduction duration) under
previous legal documents on CIT, an enterprise will continue to enjoy the
preferential tax rate and tax exemption and reduction for the remaining
duration as guided in this Circular.
- By the end of the
tax period of 2013, if still entitled to a preferential tax rate but no longer
entitled to tax exemption because the tax exemption duration under previous
legal documents on CIT has just expired, an enterprise will not be entitled to
tax exemption but only to tax reduction for the number of years guided in this
Circular, and will apply the preferential tax rate for the remaining duration
guided in this Circular.
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- By the end of the
tax period of 2013, when its tax exemption or reduction duration under previous
legal documents on CIT expires, an enterprise will not be entitled to tax
incentives (preferential tax rates and tax exemption or reduction duration)
guided in this Circular.
3. Enterprises that
started to implement their expanded investment projects in the fields or
geographical areas eligible for CIT incentives under Decree No. 218/2013/ND-CP
(including economic zones, hi-tech parks, industrial parks other than those
located in urban districts of special-grade or centrally run grade-I cities and
industrial parks in provincial grade-I cities) before January 1, 2014, and
commissioned such projects for production and business operation and have
generated turnover since January 1, 2014, are entitled to CIT incentives for
their additional incomes brought about by expanded investment as guided in this
Circular.
4. This Circular
replaces the Ministry of Finance’s Circular No. 123/2012/TT-BTC of July 27,
2012.
5. To annul all CIT
guidelines provided by the Ministry of Finance and other sectors which are
contrary to this Circular.
6. The settlement of
problems in taxation, tax finalization, tax exemption or reduction and the
handling of violations of the CIT law arising before the tax period of 2014
must comply with relevant regulations guiding CIT issued before the tax period
of 2014.
7. In case the
Socialist Republic of Vietnam signs a treaty or international agreement which
provides for CIT payment differently from the guidance in this Circular, the
provisions of that treaty or international agreement prevail.
Article
24. Implementation responsibility
1. Tax agencies at all
levels shall disseminate this Circular to enterprises and guide them in
complying with this Circular.
2. Enterprises
subject to this Circular shall comply with the guidance provided in this
Circular.
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FOR
THE MINISTER OF FINANCE
DEPUTY MINISTER
Do Hoang Anh Tuan
(All appendices to this Circular are not translated)