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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 CORPORATE INCOME TAX
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 4 years and pays a lump sum rent of VND 400 million. The
expense for fixed asset leasing recorded in annual expenses will be VND 100
million. Any expense for fixed asset leasing in excess of VND 100 million may
not be included in reasonable expenses when determining taxable income.
If the asset lease contract
specifies that the lessee is responsible for the repair of the leased assets
during the leasing period, the cost of repair of leased fixed assets may be
recorded in expenses all at once or gradually for a maximum period of 3 years.
In case enterprises have paid for
the procurement of assets other than fixed assets: costs of purchase and use of
technical materials, patents, technology transfer licenses, trademarks,
business advantages, brand use right, etc., these costs may be gradually
recorded as business expenses for a maximum period of 03 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 in deductible expenses when 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
LIST
OF FORMS ISSUED TOGETHER WITH CIRCULAR ON CORPORATE INCOME TAX
1. List of
purchased goods and services without invoices (Form No. 01).
2. List of
electricity and water bills (Form No. 02).
3. Certification
of education financing (Form No. 03).
4. Certification
of health financing (Form No. 04).
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6. Certification
of financing for building houses for the poor (Form No. 06).
7. Certification
of financing under the State’s program for severely disadvantaged areas (Form
No. 07).
8. Corporate
income tax declaration associated with the acquisition of a single-member
limited liability company owned by an organization (Form No. 08)
Form No. 01/TNDN
(Issued together with Circular No. 78/2014/TT-BTC of the Ministry of
Finance)
LIST
OF PURCHASED GOODS AND SERVICES WITHOUT INVOICES
[Date]………………………………
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…………………………………………………………………………….
TIN:
- Address: ..................................................................................................................
- Address of the purchasing
organization:
.....................................................................
..............................
- Person in charge of purchasing: .....................................................................................
Date
of purchase
Seller
Goods
purchased
Notes
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Address
ID
number
Description
Quantity
Unit
Price
Total
Payment
1
2
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4
5
6
7
8
9
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- Total value
of purchased goods: ……………………………………………………….
Prepared
by
(Signature, full name)
[Date]…………………..
Director
(Signature, seal)
Notes:
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- As for
companies that put purchasing stations in many places, each purchasing station
must make a separate list. The company shall make a consolidated list of
stations.
Form No. 02/TNDN
(Issued together with Circular No. 78/2014/TT-BTC of the Ministry of
Finance)
LIST
OF ELECTRICITY AND WATER BILLS
[Date]………………………………
- Company's name: ……………………………………………………
…………………………………………………………………………….
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- Address:
..................................................................................................................
- Name of the owner leasing the
place of production/business: .....................................
.................................................................................................................................
- Address of leased premises: ................................................................................
VAT
invoice for payment of electricity and water bill from supplier
Proof
of payment of bill of electricity and water actually used by the company
Invoice
No.
Date
Supplier
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Amount
No
of proof of payment
Date
Electricity
and Water Consumption
Amount
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- Total payment
(VAT inclusive): ………………………………………
Prepared
by
(Signature, full name)
[Date]…………………..
Director
(Signature, seal)
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SOCIALIST
REPUBLIC OF VIETNAM
Independence - Freedom - Happiness
---------------
CERTIFICATIONOF
EDUCATION FINANCING
We are:
Company’s name [sponsor]:
Address:
Phone number:
TIN:
Name of educational institution/Student/Agency,
organization (beneficiary):
Address:
Phone
number:
TIN (if any):
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- financing for
school □
- financing equipment
for teaching, learning and school activities □
- financing scholarships
□
- holding a
contest…. □
With the total value of the funding
being ………….
In money: ……………..
In kind: …………………… converted into VND: …………………
Valuable papers…………………… converted
into VND
(enclosed with other relevant
documents of the funding).
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This record is made at…[time] at…[place]
on…[date] and is made into ….identical copies, each party keeps 01 copy.
Beneficiary
(Signature, full name)
Director
(Signature and seal)
Form No. 04/TNDN
(Issued together with Circular No. 78/2014/TT-BTC of the Ministry of
Finance)
SOCIALIST
REPUBLIC OF VIETNAM
Independence - Freedom - Happiness
---------------
CERTIFICATION
OF HEALTH FINANCING
We are:
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Address:
Phone
number:
TIN:
Health facility/beneficiary:
Address:
Phone
number:
TIN (if any):
Co-certify that [company’s name] has
sponsored [health facility/beneficiary] the following:
- Financing for
the health facility □
- Sponsoring medical
equipment, medical goods, drugs □
- Funding in money
□
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In money: ………………….
In kind: …………………… converted into
VND: ……………………..
Valuable papers…………………… converted
into VND………………………………..
(Enclosed with other relevant
documents of the funding).
[Name of health
facility/beneficiary] commits to use the funding properly. If the funding is
improperly used, the undersigned beneficiary shall take legal liability.
This record is made at…[time]
at…[place] on…[date] and is made into ….identical copies, each party keeps 01
copy.
Beneficiary
Director
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Form No. 05/TNDN
(Issued together with Circular No. 78/2014/TT-BTC of the Ministry of
Finance)
SOCIALIST
REPUBLIC OF VIETNAM
Independence - Freedom - Happiness
---------------
CERTIFICATION
OF DISASTER RECOVERY FINANCING
We are:
Company (sponsor):
Address:
Phone
number:
TIN:
Beneficiary [Name of beneficiary or
agency/organization authorized to mobilize funding]:
Address:
Phone number:
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Co-certify that [company’s name] has
sponsored [beneficiary] for disaster recovery: …………….
With the total value of the funding
being ………….
In money: ………………
In kind: …………………… converted into
VND: ………………..
Valuable papers…………………… converted
into VND………..
(enclosed with other relevant documents
of the funding).
[Name of beneficiary] commits to use
the funding properly. If the funding is improperly used, the undersigned
beneficiary shall take legal liability.
This record is made at…[time]
at…[place] on…[date] and is made into ….identical copies, each party keeps 01
copy.
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Director
(Signature, seal)
Form No. 06/TNDN
(Issued together with Circular No. 78/2014/TT-BTC of the Ministry of
Finance)
SOCIALIST
REPUBLIC OF VIETNAM
Independence - Freedom - Happiness
---------------
CERTIFICATION
OF FINANCING FOR BUILDING HOUSES FOR THE POOR
We are:
Company (sponsor):
Address:
Phone
number:
TIN:
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Address:
Phone
number:
Co-certify that [company’s name] has
sponsored [individual, organization] to build houses for the poor.
With the total value of the funding
being ………….
In money: …………………
In kind: …………………… converted into
VND: ……………………
Valuable papers…………………… converted
into VND………..
(enclosed with other relevant
documents regarding the financing).
[Name of individual or organization
authorized to mobilize funding] commit to use the funding properly. If the
funding is improperly used, the undersigned beneficiary shall take legal liability.
This record is made at…[time]
at…[place] on…[date] and is made into ….identical copies, each party keeps 01
copy.
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Beneficiary
(Signature, seal)
Director
(Signature, seal)
Form No. 07/TNDN
(Issued together with Circular No. 78/2014/TT-BTC of the Ministry of
Finance)
SOCIALIST
REPUBLIC OF VIETNAM
Independence - Freedom - Happiness
---------------
CERTIFICATION
OF FINANCING UNDER THE STATE’S PROGRAM FOR SEVERELY DISADVANTAGED AREAS
We are:
Company (sponsor):
Address:
Phone
number:
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Beneficiary: [Name of individual or
agency/organization authorized to mobilize funding]
Address:
Phone number:
Co-certify that [company’s name] has
sponsored [individual, organization] under the State’s program for severely
disadvantaged areas.
With the total value of the funding
being ………….
In money: ……………………..
In kind: …………………… converted into
VND: ……………………
Valuable papers…………………… converted
into VND………………………………..
(enclosed with other relevant
documents regarding the financing).
[Name of individual or organization
authorized to mobilize funding] commit to use the funding properly. If the
funding is improperly used, the undersigned beneficiary shall take legal
liability.
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Beneficiary
(Signature, seal)
Director
(Signature, seal)
Form No. 08/TNDN
(Issued together with Circular No. 78/2014/TT-BTC of the Ministry of
Finance)
SOCIALIST
REPUBLIC OF VIETNAM
Independence - Freedom - Happiness
---------------
CORPORATE
INCOME TAX DECLARATION
(To
be used for declaration of corporate income tax on the acquisition of a
single-member limited liability company owned by an organization in the form of
capital transfer associated with real estate)
[01] Tax period: □ Pay
tax every time the tax is incurred: [Date]…………………………………….
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1. Transferor:
[04] Taxpayer’s name ...........................................................................................
[05] TIN:
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[06] Head office address:
...................................................................................................
[07] District: ……………… [08]
Province/City: ................................
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2. Transferee:
[12] Name of transferee (organization/individual):
.....................................................
[13] TIN (for company) or ID number
(for individual):
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[14] Address:
..............................................................................................................
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[16] Tax agent's name (if any):
..............................................................................
[17] TIN:
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[18] Address:
...............................................................................................................
[19] District: ……………… [20]
Province/City: .................................
[21] Phone: ………………………… [22] Fax: …………………………
[23] Email: .............
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Currency:
VND
No.
Item
Item
code
Amount
(1)
(2)
(3)
(4)
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Revenue from the acquisition of
the Company associated with real estate transfer
[25]
2
Costs of the acquisition of the
Company associated with real estate transfer
[26]
In which:
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2.1
- Cost of land transferred
[27]
2.2
- Cost of compensation for land
damage
[28]
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- Compensation for damage to crops
[29]
2.4
- Cost of site improvement and
leveling
[30]
2.5
- Cost of infrastructure
construction
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2.6
- Other costs (including the
purchase price of the transferred capital)
[32]
3
Revenue from the acquisition of
the Company associated with real estate transfer ([33]=[25]-[26])
[33]
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Loss from real estate transfer
carried forward this period
[34]
5
Assessable corporate income (CIT)
from the acquisition of the Company associated with the transfer of real
estate ([35]=[33]-[34])
[35]
6
CIT rate (22%)
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7
CIT payable ([37]=[35] x [36])
[37]
I hereby certify that the above
declared data is correct and take legal lability for it./.
TAX AGENT EMPLOYEE
Full name: ………….Practicing certificate No………
[Place]…..[Date]…………………..
TAXPAYER or TAXPAYER’S LEGAL REPRESENTATIVE
(Signature, full name; position and seal (if any))
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