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THE MINISTRY OF FINANCE
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SOCIALIST
REPUBLIC OF VIET NAM
Independence Freedom Happiness
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No. 18/2002/TT-BTC
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Hanoi,
February 20th, 2002
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CIRCULAR
ON CORPORATE INCOME TAX PROVIDING GUIDELINES FOR
IMPLEMENTATION OF DECREES OF THE GOVERNMENT 30/1998/ND-CP DATED 13 MAY 1998 AND
26/2001/ND-CP DATED 4 JUNE 2001
Pursuant to the Law on Corporate Income Tax passed by Legislature IX of the
National Assembly on 10 May
1997;
Pursuant to Decree 30/1998/ND-CP of the Government
dated 13 May 1998 making detailed provisions for implementation of the Law on Corporate Income Tax and
pursuant
to Decree 26/2001/ND-CP of the
Government dated 4 June 2001 amending above Decree 30;
The Ministry of Finance
hereby provides guidelines for
implementation as follows:
A. APPLICABILITY
OF CORPORATE INCOME TAX
I. PAYERS OF
CORPORATE INCOME TAX:
Pursuant to articles
1 and 3 of the Law on Corporate Income
Tax and article 1 of
Decree 30/1998/ND-CP dated 13 May 1998 of the Government making detailed provisions
for the implementation of the Law on Corporate
Income Tax, the following
organizations
and individuals producing and trading goods and services (hereinafter collectively referred to as business establishments)
and earning taxable income shall be liable
to pay corporate income
tax:
1. Organizations producing
and
trading goods and services:
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(b) Limited liability companies, shareholding companies;
(c) Enterprises with foreign
owned capital and foreign parties to business co-operation
contracts under the Law on Foreign Investment in
Vietnam;
(d)
Foreign companies and
foreign organizations conducting business activities in Vietnam beyond the scope of the Law on Foreign Investment in Vietnam;
(dd)
Political organizations, socio-political organizations,
socio- professional
organizations
and units of the people's
armed forces; administrative and professional bodies
engaged in production and trading
of goods
and
services;
(e) Co-operatives; co-operation
teams;
(f) Private enterprises;
(g)
Other organizations engaged in production and trading of goods
and services.
2. Individuals producing
and
trading goods and services:
(a) Business individuals and groups of
business individuals;
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(c) Freelancers (direct business): medical practitioners, lawyers, accountants, auditors, painters,
architects, music composers and other
freelancers;
(d) Individuals
leasing out assets, such as houses, land,
means
of transportation, machinery, equipment, and other types of assets.
3.
Foreign companies
conducting business
activities through resident establishments in Vietnam:
A foreign
company shall be considered
as conducting business activities
through resident
establishments in Vietnam in the following
cases:
(a) The company has in Vietnam
branches, operational
offices, offices (except for
commercial representative
offices not permitted to conduct business by the laws of Vietnam), plants,
workshops, warehouses for receipt and delivery of goods, means of transportation, mines, petroleum or gas fields and locations
where
natural
resources are explored
or exploited or equipment
and facilities serving
the exploration of natural resources;
(b)
The company has construction sites or construction, installation
and assembly works; or conducts supervision activities for construction or construction, installation or assembly works in
Vietnam;
(c) The company provides
services (including consultancy
services) in Vietnam through
its employees or authorizes
another entity
to provide
services for one or more
projects;
(d) The company has brokerage agents or commission-earning agents or any other agents in Vietnam;
(dd)
The
company authorizes a competent entity in Vietnam to enter into contracts in the name of the company, or an entity which is not
competent
to enter into contracts in the name of
the company but has the right
to represent the company on a regular basis, to deliver goods or provide services in Vietnam.
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4. Foreigners conducting business
in Vietnam or having income sourced in Vietnam, such as leasing out assets, providing
loans,
or transferring technology.
II. SUBJECTS NOT
LIABLE TO PAY CORPORATE INCOME TAX:
1. Co-operatives,
groups
and other collective economic organizations earning income
from activities of cultivation,
husbandry and aquaculture.
2. Rural family households and
individuals engaged in agricultural
production where the value
of their
commercial products is up to ninety (90) million
dong per year and they earn income
of up to thirty six (36)
million dong
per year.
III. SUBJECTS
TEMPORARILY NOT LIABLE TO PAY CORPORATE INCOME TAX:
Rural
family
households
and individuals engaged
in activities of cultivation, husbandry and
aquaculture where
the
value
of their commercial
products exceeds ninety (90) million dong per year and they
earn income exceeding thirty six
(36) million dong per
year.
B. BASES FOR TAX
CALCULATION AND TAX RATES
The
bases for calculation of corporate income tax as stipulated in article 6 of the
Law on Corporate
Income
Tax shall be taxable
income and
tax rates.
I. Taxable income
(calculated in accordance
with the Gregorian calendar year or the fiscal year) shall comprise income
earned
from
production, business and service activities, including income earned from production, trading
and service activities conducted overseas and other taxable income.
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Taxable income in the tax period shall equal (=) turnover used to calculate taxable income in the period less (-) reasonable expenses in the tax period plus (+) other taxable income in the tax
period.
II. TURNOVER
USED TO CALCULATE TAXABLE INCOME:
1.
Turnover used to calculate taxable
income:
Pursuant to article 3 of Decree 30/1998/ND-CP and
article 1 of Decree 26/2001/ND-CP of
the Government dated 4
June 2001 amending Decree 30/1998/ND-CP of the Government dated 13 May
1998 making detailed
provisions for implementation
of the Law on Corporate Income Tax, turnover
used to calculate taxable income
shall be total sales revenue, fees for provision of
services
(not including
value added tax),
including
price subsidies, additional charges or additional excesses earned by a business
establishment.
For example:
A sales invoice of Enterprise
A states:
-
Selling price:
100,000
dong
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Value added tax
(10%):
10,000 dong
-
Payment price:
110,000
dong
- Turnover earned by Enterprise
A to calculate taxable income is 100,000
dong.
If
a business establishment pays value added tax calculated directly on the basis of added value,
turnover used
to calculate taxable income
shall be the actual price paid
by the purchaser
including value added tax.
A similar example to above
is the case of Enterprise B in the category of those calculating tax directly
on the basis of added value and which must use a sales invoice. If
the payment price stated in such invoice is 110,000 dong (including VAT), that shall also be the turnover
used for calculation of taxable
income.
2.
Point of time
for fixing turnover
in order
to calculate taxable income: The
point
of time for fixing turnover
in order to calculate taxable
income is the date the goods or services
are consumed, irrespective of whether monies have been received, specifically:
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- When the goods
have,
or their ownership has, been
transferred;
- When there is a
VAT invoice or a sales invoice.
(b)
In respect of services satisfying one of the following conditions:
- When the
services are completed;
- When there is a
VAT invoice or a sales invoice.
Where
monies are paid for services which the
service provider is entitled
to on the basis of a percentage or level of work completed,
then it shall depend on the date of acceptance of such sum or when there is VAT invoice or
a sales invoice.
3. Turnover used to calculate taxable income shall
be determined in a
number of specific
industries
as follows:
(a) With respect
to goods sold by way of
instalment payments
or deferred payment (the purchaser is not yet the owner),
the turnover
used to calculate
taxable income
shall be
the
sums payable by the purchaser on the dates stipulated in the contract, and in such cases the principle that expenses must be consistent
with turnover shall
apply
when determining
turnover and
expenses.
Where
goods are sold by way of instalment payments
or deferred payment and the parties agree that the
purchaser becomes the owner, the
turnover on
goods sold shall
be calculated on a lump sum payment price as from the date when
the
goods are handed over or when a VAT or sales
invoice is produced,
excluding
any
interest payable on instalments or interest on deferred payment.
In such case, interest payable on instalments or interest on deferred payment shall be accounted for in income from financial operations.
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(c) With respect
to products used for
personal consumption, the
costs of production of such products.
(d)
With
respect
to processing of goods, the
turnover from processing, including fees, fuel, power, sub-materials and other expenses
required
for processing goods.
Turnover shall
be fixed when the processor prepares an invoice at the same time as the processed goods are transferred to the
supplier of materials.
(dd)
With respect to sales of goods via an agent, the turnover shall
be determined
when the agent delivers the
goods to
the purchaser or when:
- The
agent
transfers ownership to the purchaser;
- The agent produces an invoice.
In
such case, there must be a written
agency contract between
the
principal and agent, and if not, then delivery of goods to an
agent shall be deemed to
be a normal sale.
(e) With respect to leasing out housing or assets, the amount of rent collected for each zeriod under the lease contract. If a lessee pays rent in advance for a number of years, the turnover used to calculate taxable income shall be allocated
over the number of years for which payment has
been made in advance.
For example:
Enterprise A leases a house to
Enterprise B for 3 years; if
the house lease provides that the lessee must pay rent in advance for 3 years, being 150 million dong, with the lease
effective from 1 January 2001: A shall account for turnover
of 50 million in each of
the
years 2001 to 2003.
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- A credit institution
shall account as income any
interest collectible on current
debts. Interest on overdue debts shall not be accounted for as income, but should be monitored and followed up via the external accounts
and when collected accounted for as professional receipts income.
- Where collectible interest on current loans is accounted
for as income but the customer does not pay it after ninety (90) days or the loan is transferred
to overdue debts within
ninety (90) days, the credit institution shall record reduced
income in its accounts and monitor and follow up via the external accounts and
when collected account for it as professional
receipts income.
(g) Turnover from air
transportation means all sums that
an enterprise is entitled to from passenger transportation and from
luggage and cargo transportation after completion of
such transportation, irrespective
of whether payment is received or not. The date for determining
turnover is the date on
which transportation has been completed.
(h)
Turnover from sale of
electricity means the sum recorded
in VAT invoices. The date
for determining turnover
is the last date on the meter
index in the invoice
for electricity, irrespective of whether it is at the beginning or end of month,
and whatever month the last date on the meter index belongs to
shall be deemed to be the month such turnover
was received.
For example:
An invoice is issued calculating
electricity price on the meter index 5 December up to 5 January, turnover from this invoice shall be accounted for in January; if an invoice is issued calculating electricity price on the meter index 29 January to 29 February, turnover from this invoice shall be accounted for in February.
For other services, such
as water supply and post
office services, for
which this type of invoice is produced,
turnover shall
be
similarly calculated.
(i) With respect
to insurance and re-insurance operations, the
turnover shall be the amount receivable for primary premiums,
assessment fees as agent,
reinsurance ceding, commission
for re-insurance, and all other items.
(k) A business establishment receiving revenue in foreign
currency must convert it into Vietnamese dong at the average trading rate
on the inter-bank foreign currency market as announced by the
State Bank on the date when such revenue in foreign currency
arises. Foreign currencies
for which the State
Bank makes no announcement of exchange
rate must be first converted into United States dollars and then converted into Vietnamese dong at the rate stipulated in Circular
77-1998-TT-BTC of the Ministry of Finance dated 6 June 1998 on Exchange Rates To
Be Used in Enterprise Accounting.
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Pursuant to article 9 of the Law on Corporate Income Tax, article 4 of Decree 30/1998/ND-CP dated 13 May 1998 of the Government
making detailed provisions for implementation of the Law on
Corporate Income Tax, and article 1 of Decree 26/2001/ND-CP of the Government dated 4 June 2001 amending Decree 30/1998/ND-CP of the Government dated 13 May 1998, reasonable expenses relating to taxable income in a tax period shall
be
provided for in detail as
follows:
1.
Depreciation of fixed assets:
In
principle, an item for depreciation
of fixed assets may be included in reasonable expenses when calculating CIT if these two principles
are followed:
- The fixed assets must
have proper and complete
invoices and vouchers proving
ownership of the business
establishment;
- The fixed assets must
be used for production, business and service activities or must produce taxable income and they must
be depreciated in accordance with
the current regulations on management, use and
depreciation of fixed
assets issued with Decision 166-1999-QD-BTC of the Minister of Finance
dated 29 December 1999.
Where the Vietnamese party contributes the value of land use rights to legal capital or the capital of a business co-operation contract with a foreign party, the value of land use rights must be fully depreciated
from the time when
the foreign
invested enterprise or business co-
operation contract commences production, business or services to the
end of the project.
2. Costs of raw materials, fuel, power and goods used for production,
business and service activities
relating to the turnover
and taxable income of the relevant period, calculated on the basis of reasonable consumption levels and actual
ex-work prices:
(a) Reasonable material consumption levels:
- Directors of enterprises shall establish and approve material
consumption levels based on
the material
consumption levels issued
by the competent authority
and
the
specific situation of each enterprise. In respect
of enterprises with boards
of management, the
general director shall establish material consumption levels for submission to the board of management for approval;
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(b) Actual ex-work prices
shall include:
- Prices of materials purchased from outside shall include the
price stated in the invoice of the seller (not including value
added tax) plus costs
of purchase,
such
as costs of transportation,
loading and unloading, preservation, insurance premiums, wastage fees, rental of warehouses and
fees for selection and reprocessing; and in the case of imported goods,
when
goods are imported
they shall be accounted for in expenses
at the price actually paid consistent with the foreign trade contract plus import duties,
special sales tax or additional charges (if any):
- If a business establishment declares a price to calculate
import duty, namely the contract price, which is higher
than the price actually paid, then the price actually
paid shall be taken;
- If a business establishment declares a price to calculate
import duty,
namely
the contract price, which is
lower than the price actually paid, the
business establishment may
only include in expenses the price it declared to calculate import duty.
- In respect of materials
used to manufacture products which
are not subject to value added tax or on which value added tax calculated directly has been
paid,
the actual ex-work price shall include value added tax.
- In respect of self-produced materials, the actual ex-work price of materials
plus the actual costs incurred
during the self-production
process.
- In respect of materials
processed outside, the actual ex-work
price of materials to be processed plus the
costs of processing and
costs of transportation
and loading
and
unloading from the
warehouse of the enterprise to the
processing location and from the processing location to the warehouse of the enterprise.
The prices of materials and costs of processing,
transportation, loading, unloading, preservation and procurement listed above must be supported by invoices and
vouchers in accordance with regulations of the Ministry
of Finance.
- In respect of materials and goods being agricultural, forestry
or aquatic products, unprocessed
aquatic products, soil, stone, sand, gravel or scrap sold without invoices, enterprises shall prepare a list specifying
full names and addresses
of sellers, quantity of goods, unit price
and total costs; directors
shall approve the costs and shall be legally
liable for them.
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- If a business establishment pays
tax by the tax credit method, then its deductible expenses shall not include VAT.
For materials and goods for which the deductible input VAT
is zero (0) per cent of a sales invoice and list of goods
purchased, the business establishment may only account for
expenses of production and
business
in order to
calculate taxable income
by the purchased
turnover less (-)
VAT already deducted. If a business
establishment pays tax by
the direct method, then its expenses
shall include VAT.
3. Costs of salaries, wages, mid-shift meals, and payments in the nature
of salary:
Costs of salaries of enterprises shall include
salaries, wages and allowances in the nature of salary paid to employees who participate
in the business operations of enterprises.
Costs of salaries of enterprises, including salaries,
wages and allowances in the nature of salary and wages payable to employees,
in each type of enterprise shall
be determined as follows:
(a) In respect of State owned enterprises, salaries shall be determined based on:
- Circular 18-1998-TTLT-BLDTBXH-BTC of the Ministry of Labour, War Invalids and Social Affairs and the Ministry
of Finance dated 31 December 1998 providing guidelines on determining wages funds when State owned enterprises are
unable to guarantee payment
of taxes and profit;
- Circular 19-1999-TTLT-BLDTBXH-BTC of the Ministry of Labour, War Invalids and Social Affairs and the Ministry
of Finance dated 14 August 1999 amending Circular 18-1998- TTLT-BLDTBXH-BTC of the
Ministry of Labour, War Invalids and
Social Affairs and the Ministry of Finance dated 31 December 1998;
- Circular 05-2001-TT-BLDTBXH of the Ministry of Labour,
War Invalids and Social Affairs dated 29
January 2001 on
salary unit prices in State owned enterprises;
- Circular 06-2001-TT-BLDTBXH of the Ministry of Labour,
War Invalids and Social Affairs dated 29
January 2001 on
labour productivity
increase rates and average salary rise
rates in State owned enterprises;
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(b)
In respect of other business establishments: Salaries, wages and
payments
in the nature of salary and wages payable
to employees
shall be determined
in accordance with one of the following methods:
- Where
a business establishment
has established
salary unit prices on the basis of levels which are consistent with salary
unit prices and volumes of work completed as in the case of State
owned enterprises, they may pay salaries
according to
their own salary
unit
prices;
- Where
a business establishment
pays salaries pursuant
to labour contracts or a collective
labour agreement, then salaries
and wages shall be determined in
accordance with such labour contracts or collective labour
agreement;
- In the above cases of payment
of salaries, business establishments shall register with the tax office where they
register to pay CIT as well as lodging annual CIT declarations. Their declaration of registration must contain:
- For business establishments which have established their own
salary unit prices, they must use the
same form stipulated for State owned enterprises
in Circular 05-2001-TT-BLDTBXHX-BTC of the Ministry of Labour, War Invalids
and
Social Affairs dated
29
January 2001;
- For business establishments which pay salaries
pursuant to labour contracts or a collective labour agreement, they must register their wages plan specifying: actual number of employees
in the previous year; forecast
number in the year of the plan; actual
wages
fund in the previous year; forecast wages in the year of the plan; regulations
on payment
of salaries; minimum and
maximum wage;
when promotion is considered;
and other provisions in their
regulations on payment
of
salaries;
- Where business
establishments do not register
wages with the tax office, finalization of CIT shall be based on
the average income for each
trade
or industry
in the locality as decided by the
people's
committee of the province or city under central authority
in order to fix the
maximum expenses for wages
which can be accounted for
in reasonable expenses when calculating taxable income.
Taxation Departments shall, on the basis of the salary regime applicable to State owned enterprises and the cost of living in their
respective localities, discuss with
the provincial
or municipal
labour office the determination
of average salaries,
wages and allowances in the nature of salary and wages for each trade and industry, which
shall then be submitted to the provincial or municipal
people's committee
for decision for application in tax calculation in each
period.
The
following shall not be included
in costs of salaries and wages:
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- Salaries and wages of
founders of companies
who are not directly involved in the management of production, business
and service activities. Salaries and
wages of founders of
companies who are directly involved in the management of
production, business and service activities shall be included
in wages in expenses.
(c) Mid-shift meals for employees shall be decided by directors of
enterprises in accordance with production and business efficiency, but the expenses for each employee shall not exceed
the
minimum salary stipulated by the State for State employees.
4. Actual expenses paid for scientific and technological research, except
where funds are provided by the State or a superior managing body; innovations
and initiatives, environmental
protection; funding internal education, health care and
training of enterprises;
which shall not exceed one point three (1.3) times the expense levels
stipulated by the State. Expenses
for external education assistance, such as contributions
to study encouragement
funds
and contributions to schools
for handicapped children or children without support, shall depend on the production or business situation of each enterprise but
lawful source documents shall be required.
Expenses for innovations
and
initiatives are subject to the condition that they result in business
efficiency and that there is a system for
managing them.
5. Costs of hired services:
(a) Costs of electricity, water, telephone calls, office stationery, auditing, and insurance of assets shall be supported by invoices and vouchers as stipulated by the Ministry of Finance.
(b)
Costs of major repairs of
fixed assets in order to recover capacity
of assets shall be included in the
production and business
costs of the year. Where the costs of a single repair
are excessive, they
shall be allotted for the
following year. In respect of special
fixed assets which require periodical
repair, enterprises may
plan for costs
for major repairs in production
and business costs based on the
estimated budget for major repairs of enterprises.
Where the planned amount is lower than
the amount actually paid for a repair,
enterprises
shall be permitted to add the excessive amount to their costs; where it is higher, the costs of the year
shall be reduced accordingly.
(c) Costs of purchase
and use of technical documents,
patents, technology transfer licences, trademarks, and so forth, not forming part of the fixed assets shall be allocated gradually to
business costs.
(d) Rent for fixed assets shall be accounted
for in production and business expenses and shall be the amount actually
paid under the lease.
If it is paid once in advance for a number of years, it shall be allocated gradually to
production and business expenses over the number of years of
use
of the fixed assets.
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(e) Travel allowances for leave:
- For staff of enterprises working in mountainous regions or
on islands who are granted annual leave in accordance with regulations upon issuance of a certificate by the head of the
office,
workshop or entity to visit loved
ones
(including parents,
spouse or children);
- For staff of enterprises satisfying the conditions for annual leave in accordance with regulations
upon issuance of a certificate by the
head of the office, workshop or entity
to visit loved ones (including parents, spouse or children) who are ill, have been involved in an accident and require treatment,
or where there is a death
in
the family.
(f)
Other costs of hired services.
6. Payments made to female
employees in accordance
with law; expenses for occupational
safety protection; expenses for maintenance of security of business establishments, contributions to social and medical insurance funds and
trade union expenses in accordance with applicable regulations.
Contributions to management
funds
of corporations shall be approved and notified by boards of management
of corporations upon approval in writing of the competent
financial body.
Expenses for uniforms
for staff of establishments
where the staff wear a standard uniform shall not exceed a
maximum of five hundred thousand (500,000) dong per
person per year, and any excess must be paid from after-tax profits.
7.
Payment of
interest on loans borrowed from credit institutions
and others
at the actual interest rate when a loan contract was signed, which must not exceed the ceiling interest
rate of local commercial
banks at the time the loan monies are used (received) under the loan
contracts.
Payment
of interest
on loans for contribution
to legal capital or charter capital of foreign invested enterprises shall not be included in
reasonable expenses for the purpose
of determination of taxable income.
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9. Retrenchment benefits paid to employees in accordance with applicable
regulations.
10. Expenses relating to sales of goods and services, including costs of preservation, packaging, transportation, loading, unloading, rental of
warehouses and warranty of goods and products.
11. Expenses for
advertising, marketing, promotion, receptions and
formal occasions, expenses
for transactions and external
relations, expenses for broker's commissions, expenses for meetings,
and other expenses must be supported by source documents
in accordance with provisions of the
Ministry of Finance, must be
directly related to business activities and
must not exceed the following limits:
(a) In respect of newly-established
and newly-operating
production, construction
and transportation establishments, seven per cent of the total expenses listed above in the first two years
of operations and five per cent of the total expenses listed above in subsequent years;
(b) In respect of commercial trading, catering and service activities,
seven per cent of the total expenses listed above (not including purchase price of goods sold);
(c) In respect of a number
of encouraged industries, such as production
of curative medicines, fertilizer and pesticide, and the press
(including newspapers,
television and radio), seven
per cent of the total
expenses listed
above.
In a number of special
cases where these expenses
require higher limits
than those stipulated above, the
agreement in writing of the Minister of Finance shall be required but such limits shall not exceed seven
per cent of total expenses.
12. Taxes, fees, charges and
land rent payable related to production,
business
and service activities (except
for corporate income
tax) including:
(a) Export duties;
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(c) Value added tax (in
respect of business establishments
paying value added tax calculated
directly on the basis of added value, and
establishments producing goods not subject
to VAT);
(d)
Business registration fees;
(dd)
Royalties;
(e) Agricultural land use
tax;
(f)
Land and housing tax;
(g)
Road
tolls, bridge or ferry tolls, airport tax, stamp duty, and so
forth;
(h)
Land rent, and so forth.
13. Business operational expenses allocated by
foreign companies to their resident establishments in Vietnam in accordance with the ratio
of the
turnover earned in Vietnam and the
total turnover
of the foreign company. The
formula for allocation shall be as follows:
Business operational expenses allocated
by foreign company to resident establishment in Vietnam in tax period = (Total turnover
of resident establishment in Vietnam in tax period : Total turnover of foreign company in tax period) x Total costs of management and business of parent foreign
company.
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(a) Where a lessee of assets pays rent in advance for a number of years, expenses shall be
allocated to each year;
(b) For special business operations, such as insurance and lotteries,
the Ministry of Finance
shall provide
specific regulations on what
constitute reasonable
expenses when
calculating CIT taxable income.
15. The following shall not be considered to be reasonable expenses of
enterprises for the
purpose of calculation of
taxable income:
(a) Amounts advanced for
expenses
but
not actually expended in full, such as expenses for major repairs of fixed assets,
warranty fees for goods and products, construction works, and so forth,
except in the case
of the written agreement
of
the Minister of Finance;
(b)
Expenses incurred without source documents or with unlawful source documents (except where there is a list as stipulated in
clause 2 of this Section);
(c) Fines for breaches of traffic laws, breaches of business registration regulations,
fines on overdue debts,
fines
for breaches of accounting-statistics regulations, fines for administrative offences in relation
to taxation and other fines. In respect of fines for
breaches of economic contracts, any positive difference after set-off of fines receivable
and fines payable shall be included in taxable income; and any negative result
shall be charged to/deducted
from
after-tax income;
(d)
Expenses
unrelated
to turnover
or taxable income, such
as expenses of investment
in capital construction, expenses for supporting social organizations and localities
(except where the Government
provides
for
such
expenses
to be included in business
expenses), charity expenses
and other expenses unrelated
to turnover or taxable income;
(dd)
Expenses covered by
other sources of capital:
- Overhead expenses;
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- Allowances for regular
and irregular difficulties;
- Other expenses covered by other
sources of capital;
(e) Other unreasonable expenses.
IV. OTHER
TAXABLE INCOME SHALL INCLUDE:
1.
Difference between purchase and
sale of securities.
2. Income from the ownership
of or right to use assets:
(a) Income from leasing
out assets;
(b) Income from
licensing or from the right
to use intellectual property;
(c) Other income
from the ownership
of or right to use
assets.
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In respect of income
from assignment
or liquidation of assets, the taxable income shall be the net income after deducting the value (or remaining
value) of
assets and the expenses relating to
the assignment or liquidation.
4. Any interest on deposits,
loans, or sales of goods with deferred payment.
5. Difference earned from the sale of foreign
currency.
6. Closing balance of allocated funds
which were not fully expended;
closing balance of contingency
reserves for reduction of
inventory prices, bad debts and reduction of prices of securities in enterprises
at the end of the year.
7. Income earned from bad debts which were covered by reserve funds
and are now repaid.
8. Income from fines receivable for breaches
of economic contracts after deduction
of
fines payable for breaches of
contracts.
9. Income from accounts payable the creditors of which are unidentified.
10. Income from production, business or services omitted in the previous
years which have been newly discovered.
11. Income
earned
from production,
business or service activities overseas.
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Where
the income arises in a country
without such a treaty and where income tax has been paid overseas,
the amount of income tax paid in
the foreign
country shall be deducted
provided that
the deducted amount of tax shall not exceed the amount of income tax calculated in accordance with the
tax scales of Vietnam.
Example 1: Enterprise A receives 800 million dong of income from overseas. This is the remaining income after having paid
200
million dong of income tax in accordance with the law of
the foreign country.
The amount of corporate income tax payable on the income
received by Enterprise A from overseas in accordance with the
Law on Corporate Income Tax of Vietnam shall be: (800 million dong + 200 million dong) x 32% = 320 million
dong.
Since Enterprise A has already paid 200 million dong
of income tax overseas,
the remaining amount payable shall be: 320 million dong - 200 million dong = 120 million dong.
Example 2: Enterprise A in the above example receives
800 million dong of income from
overseas.
This is the remaining
income after having paid 540 million dong of income tax in accordance with the law of the foreign country. The amount of corporate income tax payable on the income received
by Enterprise A from
overseas in accordance with the Law on Corporate Income Tax of Vietnam shall be: (800 million
dong + 540 million dong)
x 32%
= 428.8 million dong. Enterprise A shall only be allowed
to deduct the amount
of corporate income
tax paid overseas which is equal to the amount of corporate income
tax calculated in accordance with the Law on Corporate Income Tax of Vietnam, being 428.8 million
dong.
In
other words, Enterprise A does not have to pay corporate income tax on the above income received from
overseas.
12.
Income relating to the sale of goods or provision of services which is
not included in turnover, such as despatch money, service bonuses in
catering and hotel services, and so forth, after all expenses for earning such income
have been deducted.
13.
Other income,
such as income from sales of waste materials and scraps after deduction
of the costs for collection and
sales; gifts or donations in kind or in cash given to enterprises by organizations and
individuals, and so forth.
14.
Business establishments earning income being dividends distributed
because they have made a capital contribution to a domestic
economic partnership,
joint venture
or shareholding company shall not
be required to pay corporate income tax at a fixed rate but shall
include
such income in after-tax income for determination of
additional income tax (if any).
V. CORPORATE
INCOME TAX RATES:
1.
The rate of corporate income tax applicable to domestic business establishments and foreign organizations and individuals conducting
business activities in Vietnam beyond the scope
of the Law on Foreign Investment in Vietnam shall be thirty two (32) per cent.
Application in a number
of cases shall be as follows:
(a) The rate of twenty
five
(25) per cent shall
apply to the following production or
business
establishments for a duration of three years from 1 January 1999:
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- Enterprises engaged in metallurgy;
-
Enterprises engaged in mechanical
manufacture;
- Enterprises manufacturing
basic chemicals fertilizers, insecticides;
enterprises processing fresh
rubber
latex into dry latex;
- Enterprises manufacturing
building
materials (except for cement);
- Enterprises engaged
in construction (except for survey, design, consultancy
and
supervision);
- Enterprises engaged
in transportation (except
for transportation by
air and by taxi).
(b)
In addition to payment of corporate income
tax at the rate of thirty two (32) per cent, business
establishments earning high income
due to objective advantages, such as convenient
location of business, low competition in trade or industry, and so forth, shall pay additional corporate income tax at the rate of
twenty five (25) per cent in respect of the remaining portion of income
which exceeds twenty (20) per cent
of the
capital of owners. Taxable income subject to additional
corporate income
tax shall be determined by taking remaining income
(after payment of CIT at thirty two (32) per cent) less (-) twenty (20) per
cent
of the existing
capital of owners.
(b.1) The method of determining the existing capital of owners shall
be
as follows:
1) With respect to enterprises applying an accounting regime in accordance with Decision 1141-TC-QD- CDKT of the Minister
of Finance dated 1 November
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- Business capital sources;
- Difference on re-evaluation
of assets;
- Exchange rates
difference;
- Undistributed profits;
- Funds formed from after-tax profits (excluding the reward
and welfare funds).
2) With respect to enterprises applying an accounting regime in accordance with Decision 1171-TC-QD- CDKT of the Minister
of Finance dated 23 December 1996 promulgating the accounting regime applicable to small and
medium sized enterprises, the
value
of the capital of owners shall be determined comprising:
- Business capital sources;
- Exchange rates difference
and
difference on re- evaluation
of assets;
- Undistributed profits;
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3)
With
respect to credit institutions
applying the accounting system
stipulated by the State
Bank of Vietnam, the value
of the
capital of owners shall be determined comprising:
- Capital of the credit
institution;
- Funds formed from after-tax profits (excluding the reward
and welfare funds);
- Difference on re-evaluation
of assets;
- Undistributed profits.
4) The method for determining each of the items set out
in clauses 1, 2 and 3 above
shall be based on the annual financial
reports and calculated according to the following average method:
(Balance at beginning of
period + Balance at end of period) : 2
If
the balance is a negative value, the total sources of capital of owners must
be reduced accordingly. If there is no opening or end balance, it must still be
determined on the above formula. In the case of a business establishment newly established in the year of
tax finalization without an
opening balance at the beginning of
the year,
the
closing or end of year
balance shall be used as the basis for determining the capital of owners, and the above average method shall not
be used for the purpose
of calculation.
For example:
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Unit: million dong
Item
Opening Balance
Closing Balance
Calculate OC
1. Business capital sources
6,262
7,342
6,802
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1,510
850
1,180
3. Financial reserves
448
530
489
4. Retrenchment
payments fund
170
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191
5. Undistributed profits
132
468
300
6. Invested capital
4
4
4
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8,966
20% of capital of owners:
1,793 million dong;
Additional CIT payable: (1,860 1,793) x 25% =
16.75 million dong.
5)
Where a business establishment has
a joint venture operation,
when calculating taxable income for additional CIT, the
capital of the owners
shall not include the capital contribution of the other party to the
joint venture and the capital of the
owners shall include
the
part of capital
contributed by the establishment to
the joint venture.
(b.2) Additional CIT shall temporarily not be collected from the
following business establishments:
- Business
and production establishments
to which the CIT rate of twenty five (25) per cent is applicable
for three years from 1 January 1999;
- Investment projects
in fields, industries and localities in which investment
is encouraged and which
are entitled to preferential CIT rates;
- Production establishments which
export more than fifty
(50) per cent of manufactured products or which
have turnover from exports accounting for
more
than fifty (50) per
cent
of
total turnover;
- Family business households;
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(b.3) Where a business establishment has
both operations subject to payment of additional CIT and also operations
either temporarily not subject to or exempt from additional CIT, the enterprise must first determine the amount of CIT payable in accordance with regulations and then determine
the amount of additional CIT payable based on the ratio of income
subject
to additional CIT and the total
taxable
income.
For example:
Enterprise A has CIT taxable income (at 32% rate) of 2,000 million dong, taxable
income
(at 25% rate) of 500 million dong, and owner's capital of 5,000 million dong:
CIT payable at 32%: 2,000 x 32%
or 640 million dong. CIT
payable at 25%: 500
x 25% or 125 million dong.
Total CIT payable: 640
+ 125 = 765
million dong.
Ratio of income subject to additional CIT over
total taxable income:
2,000 : (2,000 + 500) =
80%
20% owner's
capital in enterprise: 5,000
x 20% = 1,000 million dong.
Amount
of additional CIT payable: [(2,500 - 765 - 1,000)
x 25%] x 80% = 147 million dong.
(c) The following corporate
income tax rates shall apply to new investment projects in the fields, trades, industries or locations in
which investment is encouraged:
- Twenty five (25) per cent in respect of fields, trades
or industries in which
investment is encouraged
as stipulated by the Government;
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- Fifteen (15) per cent in respect
of investment projects in fields, trades or industries in which
investment is encouraged which are implemented in ethnic minority districts of
high mountainous
regions
as stipulated by the Government.
Investment projects entitled to preferential corporate income tax rates
as stipulated in this clause must satisfy all of the following
conditions:
- Having business
registration certificate and operating in
accordance with such business
registration;
- Having a certificate of
investment incentives issued by a competent authority which
specifies incentive entitlements;
- Complying strictly with the regulations
on accounting, invoices and
vouchers, registration
and declaration for tax
payment.
When
the conditions for preferential
treatment no longer
exist due to changes to business duties or business location,
business establishments shall not be entitled to preferential tax rates for
the whole year where the
conditions for preferential treatment terminate within the first six months of the year. Where such
conditions terminate within the second six months of the year, business establishments shall not be entitled to preferential tax rates as from the following year.
Business establishments which do not comply strictly with the regulations on accounting, invoices and
vouchers and tax declaration or which fail to declare correctly the basis for tax calculation shall not
be entitled
to preferential tax rates. Instead, they shall pay tax monthly in accordance
with a determined turnover and percentage
of taxable income and shall also be subject to administrative penalties
in relation to taxation.
2. The corporate income
tax rates applied to
foreign invested enterprises and parties to business
co-operation
contracts shall be twenty
five (25) per cent.
Application of tax rates in a number
of cases shall be as follows:
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- Exporting at least fifty (50) per cent of products;
- Employing five
hundred (500)
or more employees;
- Being engaged
in cultivation or processing
of agricultural products, forestry products or marine products;
- Using advanced technology
and investing in research
for
development;
- Using raw materials and supplies available in Vietnam; efficiently processing or exploiting
natural resources in
Vietnam; manufacturing products which have a localization
value of forty
(40) per cent or more.
(b)
Fifteen (15) per cent tax rate shall be applied for a duration of twelve (12) years from the
year of production or
business operation in the case of investment projects satisfying one of the
following conditions:
- Exporting
at least eighty (80) per
cent of products;
- Investing in the fields of
metallurgy, basic chemicals, mechanical manufacture,
petro-chemicals, fertilizers, manufacture
of electronic components or
components of automobiles and
motorbikes;
- Constructing
and operating infrastructure
works (bridges, roads,
water supply and drainage,
electricity, ports);
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- Investing in other
regions with difficult
conditions
as stipulated by the Government
(including hotel projects);
- Transferring assets without compensation
to the State of Vietnam after expiry of the period
of operation (including hotel
projects);
- Projects satisfying two of the conditions stated in sub-clause
(a) above.
(c) Ten (10) per
cent tax rate shall be applied for a duration of
fifteen (15) years from the year of production or business
operation in the case of projects satisfying one of the following conditions:
- Constructing
infrastructure in regions
with difficult conditions;
- Investing in mountainous regions, offshore islands
or remote and distant regions;
- Afforestation;
- Other projects in which
investment is specially encouraged.
(d) The preferential tax rates of twenty (20), fifteen (15)
and ten (10) per cent shall be applied in the case of investment projects on the basis of
BOT, BTO, or BT contracts and projects for
construction of infrastructure in industrial zones and export
processing zones
for the whole duration of implementation
of such projects.
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(e) Income earned by foreign investors from
investment in accordance with
the Law on Foreign Investment
in Vietnam (including income tax refunds and income earned
from capital assignments) shall,
upon being remitted overseas
(or retained outside Vietnam) or retained in Vietnam for
the
purpose of payment of debts for
parent companies or expenses
of representative offices
of parent companies
in Vietnam, and so forth, shall
be subject to withholding tax.
Withholding tax on profits remitted overseas shall be applied as
follows:
- Three
per
cent
shall apply to:
- Overseas Vietnamese investing in Vietnam under the Law on Foreign Investment
in Vietnam;
- Foreign investors investing in industrial
zones, export processing zones or high-tech zones;
- Foreign investors contributing ten (10)
million USD or more to legal capital or capital to business co-operation
contracts;
- Foreign
investors investing in regions with specially
difficult socio-economic conditions on the list of regions in which investment
is encouraged.
- Five per cent shall
apply
to:
- Foreign investors contributing from
five up ten (10) million
USD or more to legal capital
or capital to business co-operation contracts;
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- Seven per cent shall
apply
to other foreign investors contributing legal capital or capital to business co-operation
contracts (not in the three and five
per cent groups above).
(f) Corporate income tax rates and withholding
tax rates shall be stated in the
investment licence issued by the competent
authority
upon
agreement in writing of the Ministry
of Finance.
Foreign invested enterprises and foreign parties to business co- operation contracts
established and operating under the Law on Foreign Investment
in Vietnam prior to the date of effectiveness
of the Law on Corporate Income Tax shall apply the tax rates
stated in their investment licences as issued prior to the date of effectiveness of
the
Law on Corporate Income Tax.
3. The corporate income tax rate applied to foreign and
domestic organizations and individuals prospecting
and exploring for
and exploiting petroleum shall be fifty (50) per cent. The rate applicable to exploitation of other rare and valuable resources may range from
thirty two (32) to fifty (50) per
cent of the taxable income
as stipulated in detail by the Ministry of Finance in respect of investment projects of domestic organizations and individuals; or by the competent authority in respect of foreign invested
enterprises upon agreement
in writing of the Ministry of Finance.
4. Business establishments with production and business
operations with different
taxable income must
separately account for each operation,
failing which the highest rate applicable to any one
operation
during the
year shall apply to all.
C. REGISTRATION,
DECLARATION, PAYMENT AND FINALIZATION OF TAX
I. REGISTRATION
OF CORPORATE INCOME TAX:
1.
Business
establishments shall be
responsible for registering for corporate income tax at the same time as registration for payment of value added
tax.
2.
Corporations and companies shall, upon tax registration, specify their
affiliated units which practise independent cost accounting and affiliated units
which practise dependent cost accounting.
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3. Independent cost accounting units of corporations or companies shall
have the obligation to declare, pay and finalize tax separately. Dependent cost accounting units of corporations or companies shall only carry out tax registration in their localities and shall not have the obligation of
tax declaration and payment in their
localities. Corporations and companies shall have the obligation of tax
declaration, payment and finalization in respect of their own business and
the business of their affiliated units which practise dependent
cost accounting.
II. DECLARATION
OF CORPORATE INCOME TAX:
1.
Annually, business establishments shall
be responsible for
declaration and submission of CIT Declaration Form 1a issued with
this Circular to the tax office directly
in charge no later than the twenty fifth day of January.
The basis for declaration shall
be the production, business
and service results of the previous year and the business potential for the following year.
2. Upon receipt of declaration forms,
the tax office shall verify and determine the amount of tax provisionally payable for the whole year and
as divided for each quarter
and shall notify business
establishments thereof.
Where profit and loss statements for production and business record fluctuations, consideration shall be given to adjustment on the basis of
the business results of the first six months of the year. Business establishments should prepare the following complete application file
for adjustment of provisional tax paid and forward it to the tax office by
30 July
at the
latest:
- Request for adjustment to provisional tax payable for the whole year specifying reasons, amount paid for the first six months of
the
year, and amount payable in the second six months;
- Financial statements
for the first six months
of the
year, including balance sheets,
profit and loss statements, and explanatory statements of financial accounts, enclosing Declaration Form 1c issued
with this Circular;
- After consideration of the above reports, the tax office directly managing the
business establishment
shall notify it by 25 September at the latest of provisional tax payable for the whole year (adjusted or not) and the amounts payable in the two final quarters.
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3.
Where a business establishment fails to declare, or declare in detail,
the
basis for calculation of the amount of tax provisionally payable for
the whole year in its declaration form, the tax office shall have the right to request that the business establishment explain the basis for calculation of the amount of
tax provisionally
payable for the whole year. Where the business establishment fails to explain or to
justify the basis stated in the declaration form at
the request of the
tax office, the tax office shall have the right to determine the amount of tax provisionally
payable for the whole year.
4.
In the case of business
establishments which do
not yet maintain books
of account, receipts
and other source documents in accordance
with applicable regulations, declaration
for tax payment shall
be based on the rate of taxable income over a fixed turnover
and tax rates as follows:
(a) Business establishments which
do not
yet comply fully and strictly with the accounting regulations but which have sold goods
and provided
services
with invoices and vouchers
shall declare turnover and calculate monthly tax in accordance with the following
formula:
Turnover x Percentage (%) of
x Corporate income taxable income
tax rate
Tax
declaration forms shall be submitted to the tax office prior to
the fifth day of the
following
month.
(b)
In respect of business households which do not yet comply with the regulations on accounting, invoices
and vouchers for
sale and purchase of goods and services, the tax office shall, based
on the business situation of each
household,
determine a turnover to
calculate taxable income
and calculate tax in accordance with
the following formula:
Turnover x Percentage (%) of
x Corporate income taxable income
tax rate
The
determination of turnover for the purpose of calculation of
taxable income must be ensured to be carried out publicly
and democratically in accordance with applicable procedures.
The General Department of Taxation shall guide Taxation
Departments to determine the
appropriate percentage (%)
of taxable income over
turnover as the basis
for calculation of income tax for each line of business
and each locality in the country.
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III. PAYMENT OF
CORPORATE INCOME TAX:
1.
Business establishments shall pay in full and in a timely manner the amounts of tax provisionally payable for each quarter into the State Budget in accordance with the tax payment notice issued by the tax
office. The time-limit for tax payment for each quarter stated in the
notice shall be no later than the last day of the quarter.
If a
business establishment has
not yet received a tax notice
upon expiry
of the above time-limit, it
shall pay quarterly CIT in accordance with the data
it declared.
2. In respect of business establishments which do not yet comply fully
and strictly with the regulations on accounting,
invoices and vouchers and in respect of which tax payable is calculated by the percentage
of taxable income
over
turnover, the
time-limit for tax payment shall
be as follows:
(a) Business establishments which
sell goods or provide services
with invoices and vouchers shall declare tax on a monthly basis
and pay tax in full in accordance with the monthly notice issued by the tax office. The
time-limit for tax payment for each month stated in the notice shall be no later than the twenty fifth day of the following month;
(b)
Business households
which do
not
yet comply with
the regulations on accounting, invoices and
vouchers for sale and purchase
of goods and
services shall calculate tax based on a fixed turnover
and the time-limit
for tax payment shall
be in accordance with the
notice for value added tax.
3. Organizations and individuals in Vietnam paying income to foreign business organizations and individuals having no resident establishments in Vietnam shall be responsible for withholding CIT and paying it into the State Budget prior to making payments to such
foreign organizations and individuals.
If
a Vietnamese organization or individual
does not deduct CIT, it shall
be liable to pay such amount on behalf of the foreign
party as well as fines under current
regulations on administrative offences.
4.
Business establishments trading in lots must declare and pay tax in respect of each lot of goods to the local tax office where the goods are purchased prior to the goods being taken away and at the same as
value added tax is declared and paid.
IV. CORPORATE
INCOME TAX FINALIZATION:
1.
Business establishments must finalize tax with the tax office (except in cases of monthly
tax payment in accordance with the percentage
of taxable income calculated based on turnover and tax rate). The tax finalization statement must contain
the
following
items: turnover used to calculate tax; reasonable expenses; taxable income; amount of income
tax payable; amount of income
tax provisionally paid during the year;
amount of income
tax paid overseas in
respect of income received
from overseas; any excessive amount or shortfall of income tax paid, and so forth,
in accordance with Forms 2a and 2b attached to this Circular.
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In
case of merger, amalgamation, division, demerger, dissolution or
bankruptcy, the business
establishment must finalize
tax as at the date on which
the decision on merger, amalgamation,
division, demerger, dissolution
or bankruptcy of the competent authority is issued.
(a) In the case of dissolution
or bankruptcy of a joint
venture enterprise between
a number of business establishments, its losses must be allocated to each business establishment and the
total losses reported in general business results
when a business establishment conducts CIT finalization.
(b) Where a business establishment suffers
losses from its production
and business activities
but a profit from its joint
venture, it may choose to account for all losses as they are and carry
forward the losses under the regulations or use
the joint venture profits to distribute to cover the losses of its production
and business activities.
(c) Where a business establishment
has both loss-making operations and
profit-making operations
in the year
of CIT finalization:
- If the profit-making operations are CIT exempt or subject to
CIT reduction, it may:
- Account separately for
the profit of
the
preferential operations
in order to reduce its tax and carry forward
the losses;
- Take the profit from the preferential operations in order to cover losses and receive preferential treatment for any
remaining profit
or carry forward
any remaining loss.
- If, on the other hand, the loss-making
operations are CIT
exempt or subject to CIT reduction,
it may cover losses from
the
profit-making operations.
(d) If after a business establishment submits its CIT finalization to
the tax office there is found to be a CIT
overpayment, the
excess shall be deducted from the amount payable in the next
period and the tax office
shall be responsible to adjust this
in the tax notice for such following
period.
If after the tax office checks
CIT finalization a business
establishment is found to
owe
any sum, the business establishment shall be liable to abide
by the minutes of inspection of CIT finalization as prepared by the tax office.
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Upon tax finalization for year 2000, business establishment A determines that it paid 200 million dong more than it was required
to have paid in accordance with
law, and has submitted tax finalization as stipulated. The tax office shall send a tax notice for provisional CIT for the first quarter of
2001 at 300 million dong and A may deduct its overpayment of 200 million, so there is 100 million remaining to be paid.
The
tax office shall be responsible to notify the sum of tax payable,
the sum overpaid
from the previous period to be carried forward, and the remaining amount payable for the
first quarter of 2001,
namely 100 million
dong.
2. Business establishments shall prepare tax finalization reports and
shall be liable for their truthfulness
and accuracy. Where, upon examination, the tax office discovers incorrect
information in a tax finalization report which reduces the amount of tax payable, tax shall
be
paid in full together with any
fine
for tax fraud or tax evasion.
Where
the
tax finalization statement of a business establishment which
is merged, consolidated
or demerged is incorrect, the
new business
establishment taking
over the assets of such merged, consolidated or demerged business establishment shall be responsible for paying in full the shortfall of tax and any fine payable to the State
Budget.
3. Business establishments shall submit financial reports
and tax finalization reports
to the tax office directly in charge within sixty
(60) days from the last date of the fiscal year. In
case of merger, demerger, dissolution or bankruptcy, the time-limit for submission of tax finalization reports shall be forty five (45) days after issuance of
the decision on merger, consolidation,
demerger, dissolution or bankruptcy
by
the competent authority.
4. Business establishments shall pay any outstanding
amount
of tax within ten
(10)
days
from
the
stipulated date of submission
of finalization reports.
In cases of failure to do so, in addition to the full amount of the shortfall,
a fine for late payment shall be paid.
5. Examination of tax finalization reports shall be decided by the head
of the tax office directly in charge or the head of the
superior tax office.
Where incorrect sale prices, purchase prices or business expenses of business establishments are discovered during the examination of tax finalization, the tax office shall have
the right to re-determine
in accordance with the prices at the time of sale or purchase of goods in
order to ensure correct and full
payment
of corporate income tax.
Upon completion of examination, the tax office
shall prepare minutes and make recommendations on resolution. Business establishments
shall be responsible for complying with the examination minutes of
the tax office.
6. Adjustment of data in finalization reports:
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- If the tax office
has not yet issued a tax notice (step 1 check), the business establishment should send an amended finalization report in replacement with a covering letter explaining the reasons for the replacement
and the date of the initial report, and so forth;
- If the tax office has issued a tax notice
(step 1 check), the business
establishment should send
an additional finalization report on the items
which have been adjusted.
- In cases of exemption or reduction following CIT finalization, any decision on tax exemption or reduction shall be based on the amount of taxable
income arising in a year, on the principle that
the amount of any exemption or reduction must be deducted from
the sum payable in the year of exemption or reduction. If a business establishment has already paid tax for
the year of exemption
or reduction, it shall determine
the amount of excess paid in such year and then it shall be deducted from the amount payable in the
following year.
V. PROCEDURES FOR
DECLARATION, PAYMENT AND REFUND OF WITHHOLDING TAX:
1. Withholding
tax shall be declared and paid in respect of each
remittance of
profits overseas.
Where an enterprise retains
profits overseas, pays debts for its parent company, or pays for expenses of the
representative office(s) of its parent company in Vietnam, tax shall be declared and
paid on a monthly basis.
2.
Prior to remittance of any profits overseas or no later than the fifth day of the following
month
(in the case of tax
declaration and payment on a monthly
basis), a foreign investor shall prepare a tax
declaration form and submit it to the tax office directly in charge of the enterprise and pay the declared amount of
tax to the State Treasury. A foreign investor may only carry out the procedures for
remittance of profits overseas after the State Treasury has provided a tax payment
receipt.
3. Where tax has been paid but profits have not been remitted overseas or
where an excessive
amount of tax has been paid, the State Budget
shall refund the amount of tax
paid. A file for tax refund to
be sent
to the Ministry of Finance shall comprise:
(a) Written request for refund of the excessive amount of tax paid, specifying the reason for excessive payment; name, address and
account number of the foreign
investor requesting tax refund;
(b)
Statement of the amount of tax paid supported by copies of source documents relating to the payment
made to the State Treasury and certification by the State Treasury of the amount of tax paid (specifying the chapter, type, clause and item of the
budget
contents to which the payment is made);
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4. Annually, no
later than ninety (90)
days after the end of the
fiscal year, foreign investors shall report to the tax office directly in charge
of their enterprises
on the use of distributed profits and payment of withholding
tax on profits for the previous fiscal
year.
D. DUTIES,
POWERS AND RESPONSIBILITIES OF TAX OFFICES
Tax offices shall:
1.
Be liable to guide business
establishments to fulfil
the regime for registration, declaration and payment of tax in accordance with applicable
provisions.
Registration of corporate income tax shall be made at the same time
as registration of value added
tax.
Tax
offices shall send written
reminders to business establishments which
fail to comply with the provisions on registration, declaration and payment of
tax; and shall impose
administrative
tax penalties where business
establishments continue such failure
after reminder.
2.
Issue notices to business establishments within stipulated time-limits.
Tax payment notices must be sent to taxpayers at least three days prior to the date on
which tax payment is to
be made (as stated
in notices).
Where a business establishment fails to pay tax after the time-limit stated in
the notice, the tax office shall issue a second notice.
The
second notice shall state the amount
of tax and fines payable for
delayed payment in accordance with 24.2 of the Law on Corporate Income Tax. Where the business establishment fails to pay the tax and fines stated in such notice,
the
tax office shall have the right to take action as provided for in article
24.4 of the Law on
Corporate Income Tax.
Where the business establishment continues to fail to pay in full the tax and fines after such action
has been taken, the tax office shall forward the relevant
documents to judicial
bodies for resolution in accordance with law.
3. Examine and inspect
the declaration, payment and finalization
of tax by business establishments in order to ensure
strict compliance with
law.
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5. Demand business establishments
to provide books of account, receipts, source
documents and other documents relating to calculation and payment
of tax; and demand credit organizations,
banks and other relevant organizations and individuals to provide documents relating to calculation and
payment of tax.
6. Maintain and use data and documents provided by business establishments and
others in accordance with
applicable regulations.
7.
The tax office shall determine taxable income
for the purpose of
calculation of the amounts of tax payable by
business establishments in
the following cases:
(a) Failure to maintain,
or maintain adequately, books of
account, receipts and
source documents
as required by the regulations;
(b) Failure to declare, or declare accurately, the bases for tax calculation
or failure to substantiate the
contents of declaration forms
as required by the tax office;
(c) Refusal to provide
books of account,
receipts, source documents
and other necessary documents
relating to calculation of corporate
income tax;
(d) Discovery of business activities conducted without business
registration.
The
tax office shall determine taxable income by taking into account the business situation
of the business establishment or according to the taxable
income of
other business establishments of
similar size operating in the same
line of business.
Apart from the method of determination stated above, the tax office may determine taxable income of resident establishments of foreign companies on the basis
of turnover as follows:
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=
(Total turnover of resident
establishment
in Vietnam during
period
x
Total turnover of foreign company during period
Total income of foreign company during period)
In order for the method of
determination of taxable income to be implemented with respect to a resident establishment, the foreign
company shall be responsible for providing to the tax office the books of account and accounting
statements of the company which have been
certified by an independent
auditing organization
as the basis for allocation
of taxable income
for the resident establishment
in Vietnam.
Where a business establishment is not satisfied with its taxable income as
determined, it may lodge a complaint to the superior tax office. Pending
resolution
of the complaint,
the business establishment
must
pay the amount of tax as determined.
DD. EXEMPTION FROM, REDUCTION AND REFUND OF
CORPORATE INCOME TAX
I. CORPORATE
INCOME TAX SHALL BE REDUCED OR EXEMPTED IN THE FOLLOWING CASES:
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(a) Newly-established production establishments shall be exempted
from
corporate income tax for the first two years from the time when taxable income arises and shall be entitled to a fifty (50) per cent reduction of the amount of income tax payable for two subsequent
years. In particular, production establishments established in mountainous regions,
islands and other regions with difficult conditions shall be entitled to a further two year
period of tax reduction.
(b) Newly-established
production establishments in fields, trades and industries in
which investment
is encouraged
shall be exempted from income tax for the first two years from the time when taxable income arises and shall be entitled to a fifty (50) per cent reduction of income tax payable for three subsequent
years.
(c) Newly-established
production establishments
in fields, trades and industries in which investment
is encouraged in ethnic minority districts of mountainous
regions shall be exempted from income
tax for the first four
years from the time when taxable income
arises and shall be entitled
to a fifty (50) per
cent
reduction of the amount of income tax reduction for nine subsequent years.
(d) Newly-established
production establishments in fields, trades and industries
in which investment is encouraged in ethnic minority districts, in mountainous regions and on islands shall
be exempted from income tax for the first four years from the time when taxable income arises and shall be entitled to a fifty (50) per cent reduction of the amount of income tax payable for
seven subsequent
years.
(dd)
Newly-established production establishments
in fields, trades and industries
in which investment is encouraged
in other regions with difficult
conditions shall be exempted from income
tax for the first three years from the time when taxable income
arises and shall be entitled to a fifty (50) per cent reduction of the amount of income tax payable for five subsequent
years.
2. Tax exemptions and reductions for newly-established trading and service business establishments in fields, trades and industries which are entitled to investment incentives:
(a) Newly-established trading and service establishments in fields,
trades and industries which are entitled to investment incentives shall be entitled to a fifty (50) per cent reduction of income tax for an initial period of two years from the time when
taxable income arises.
(b) Newly-established trading and service establishments in fields,
trades and industries which are entitled to investment incentives in ethnic minority districts of mountainous
regions shall be exempted from income tax for the first two years from the time when taxable income arises and shall be entitled to a fifty (50) per cent
reduction of
income
tax payable for five subsequent
years.
(c) Newly-established trading and service establishments in fields,
trades and industries which are entitled to investment incentives in districts in ethnic minority regions, mountainous regions and
islands shall be exempted
from income tax
for the first two years from the time when taxable income
arises and shall be entitled to a fifty (50) per cent reduction of income tax payable for
four subsequent years.
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Newly-established trading and
service establishments which are entitled
to corporate
income tax
reductions
or exemptions
as stipulated in clauses 1 and 2 of this
Section I shall be new establishments established and issued business licences after the date of effectiveness of the Law on Corporate
Income Tax. Establishments which
were previously established
and are now divided, demerged,
merged or consolidated, have
changed
their
names or the type of enterprise, have
invested in new production
lines, business expansion, technology
renewal, improvement of
ecological environment or improvement of
production capacity, or
have added types of goods or trades or industries to their business
licences hall not be
considered for
tax reductions
or exemptions as newly-established
production, trading or
service establishments.
3. Domestic production establishments investing
in new production lines, business
expansion, technology
renewal, improvement of
ecological environment or improvement of production capacity shall
be exempted from corporate income tax in
respect of the increased
portion of income in the first year and shall be entitled to a fifty (50)
per cent reduction of the portion of increased corporate income tax payable
due to new investments in the two subsequent
years.
The amount of increased
income due to new investments shall be equal to the
difference between the taxable
income of the year in which the investment
is completed and the taxable income of the
year prior to the investment.
For example:
In
1998, the taxable income of Company A is 500 million dong. In early 1999, Company A completes and commissions a project
of expansion of production scale. The total taxable income
of each year of 1999, 2000 and 2001 is 800 million dong.
Company
A shall be entitled to the following
tax exemption and reduction:
- In 1999, Company A is exempted from the taxable income of:
800 million dong - 500 million dong = 300
million dong
- Company A is entitled to the following corporate income tax reduction in each of
the years 2000 and
2001: 50% x (800 million dong
- 500 million dong)
x 32% = 48 million dong.
4. Domestic business establishments relocated to mountainous regions, islands and other regions with difficult conditions shall be exempted from corporate income tax for the first three years from the
time when taxable income arises.
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(a) Income earned from performance of scientific research contracts.
(b)
Income earned from performance of technical service
contracts directly serving agricultural production.
(c) Income earned from production, business and service activities
conducted by business establishments specially
employing disabled
people.
To
be defined as specially
employing disabled people, business
establishments shall
satisfy all of the following
conditions:
- To be recognized by the people's committee of the province or city under central authority
as a production or business establishment which employs only disabled
people
(including war invalids
and sick soldiers);
- To comply strictly
with the establishment of books of
account and use of source documents for sale and purchase of goods and provision of
services in accordance
with applicable regulations;
- To have a business licence issued by a competent State authority;
- To employ at least ten (10) labourers, fifty one (51) per cent of whom are disabled people
as certified by a competent medical body.
The remaining labourers shall principally be relatives
of disabled people, shareholders and people with management, professional
and scientific-technical qualifications;
- To have operational regulations which
are appropriate to employees being disabled
people.
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- Being vocational training
establishments of enterprises, of
employment service centres and
of organizations and
individuals as stipulated in article 17 of Decree 72-CP dated
31 October 1995, articles 10 and 13 of Decree 81-CP dated 23 November 1995 and article 10 of Decree 90-CP dated 15 December
1995 of the Government;
- To operate in the line of business
stated in the practising licence or the line of business registered for operation with the competent body of labour, war invalids and social affairs;
- To register for tax payment in accordance with
law;
- To comply strictly
with the establishment of books of
account and use of invoices and source
documents in accordance with
applicable regulations.
6. Production, trading or
service
individual households shall be considered for tax exemptions and
reductions in the
following cases:
(a) Medium and small production, trading
or service individual households
which
do not
yet implement
the regulations
on accounting, invoices and source documents
for sale and purchase of goods and services and which calculate and pay tax on the basis of a fixed turnover shall be considered for a fifty
(50) per cent reduction
of the
amount of tax payable for
any month during which they
suspend business for fifteen (15) or more consecutive days and for exemption from the amount of
tax payable for any month in which they suspend business for the whole month.
(b)
Production, trading
or service individual
households earning
monthly income
in a year which is lower than the
minimum
wage stipulated by the State for State employees shall be exempted from income tax
for the whole year.
7. Corporate
income
tax reductions and exemptions in the case of foreign invested enterprises and
foreign parties to business
co-
operation contracts shall
be
as follows:
(a) Projects to which the tax
rate of twenty (20) per
cent is applicable for a duration of
ten (10) years from the commencement
of production or business
shall be exempted from tax for the first year from the time when taxable income
arises and shall be entitled to a fifty (50) per cent reduction of the amount of income tax payable for two subsequent
years.
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(c) Projects to which the tax rate of ten (10) per cent is applicable
for
a duration of fifteen
(15) years from the commencement of production or business shall be exempted from income tax for the
first four years from the
time
when taxable income
arises and shall be entitled to a fifty (50) per cent reduction
of the amount of income tax
payable for four subsequent
years.
(d)
Afforestation
projects,
infrastructure construction
projects in mountainous regions
and islands and other projects
in which investment is specially encouraged shall be exempted from income
tax for a duration of eight years
from the time when
taxable income arises.
Tax
exemptions and reductions as stated in the above sub-clauses (a),
(b), (c) and (d) shall
not apply to hotel
projects (except in cases
of investment in mountainous
regions, islands and
other regions with difficult conditions or transfer of assets
to the
State of Vietnam without
compensation upon expiry of the period of operation),
projects
for
investment in finance, banking, insurance, provision of services and commerce.
8.
Foreign investors shall be
entitled to corporate income
tax exemptions or reductions in the following
cases:
(a) Vietnamese residing overseas investing in Vietnam in accordance with
the Law on Foreign Investment
in Vietnam shall be entitled to a twenty (20) per cent
reduction of the amount of income tax payable,
except where the
income
tax rate applicable is
ten (10) per cent.
(b) Corporate income tax shall be exempted with respect to the contributions of foreign investors to legal capital in the form of the
value
of patents, technical know-how, technological processes and technical services.
(c) Corporate income tax shall be
exempted in respect of foreign investors which assign their capital contribution to State owned
enterprises or enterprises in
which the State holds
controlling shares.
(d)
A fifty (50) per
cent
reduction
of corporate income
tax shall apply to foreign investors
which assign their capital contribution
to other Vietnamese
enterprises, such as limited liability
companies,
shareholding companies, private
companies,
co-operatives, and so forth.
9. Reductions of income tax shall be granted to domestic
business establishments and enterprises
with foreign owned capital conducting production, construction and transportation activities and employing
a large number of female employees.
The reduction rate shall correspond to the actual amount of expenses for female employees as follows:
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(b)
Salaries and allowances (if any) for teachers at kindergartens and nurseries
established and managed by enterprises. The number of teachers shall be determined in accordance with the
standards stipulated
by the training and education sector.
(c) Expenses for one additional medical examination each year (in addition to the number of examinations stipulated),
mainly for the purpose of examination of occupational diseases, chronic diseases or
gynaecological diseases contracted
by female employees.
(d) Once-off additional allowance for female employees after their first
or second delivery. The allowance
shall not exceed three hundred
thousand (300,000) Vietnamese
dong in respect of enterprises
in cities, towns and townships and
not exceed five hundred thousand
(500,000)
Vietnamese dong in respect of enterprises in remote and distant regions and islands in order to
provide
partial
assistance to mothers in overcoming childbirth difficulties.
(dd)
During the period of
breastfeeding, if for objective reasons a female employee does not go home to feed her baby but stays
and works for the enterprise, she shall be paid for such time at
the rate of overtime allowance in accordance with applicable
regulations.
Corporate income
tax with respect to the above expenses
for female employees shall be
reduced provided that there are source documents of actual payment
and signature of payees.
(e) An enterprise conducting
production, construction or
transportation activities shall
be considered as employing
a large number of female employees upon satisfaction of one of the
following conditions:
- The enterprise
employs ten (10) to one hundred
(100)
female employees on a regular basis and the
female
employees
of the enterprise account for fifty
(50) or more per cent of the total
regularly
present employees of the
enterprise;
- The enterprise
employs over one
hundred
(100)
female employees on a regular basis and the female employees of the enterprise
account for thirty (30) or more per cent of the total
regularly present employees of the
enterprise.
Administrative units and offices of State corporations which satisfy the above conditions but which are not directly involved in business shall
not
be entitled to tax reduction in accordance with this
clause.
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(a) Conditions for tax refund:
- Re-investment in projects in which investment is
encouraged;
- Re-invested capital
is used for three years or more;
- The legal capital stated in the investment licence has been
fully contributed.
(b)
The rate of tax refund for re-investment shall be as follows:
- One hundred (100) per cent of the amount of tax paid in
respect of investment in projects entitled to the corporate
income
tax rate of ten (10) per cent
for a duration of fifteen (15) years;
- Seventy five (75)
per cent of the amount of tax paid in respect of investment in projects entitled to the corporate
income
tax rate of fifteen (15) per cent for a duration of twelve (12) years;
- Fifty (50) per cent of the amount of tax paid in respect of investment in projects entitled to the corporate income tax
rate of twenty (20)
per cent for a duration
of ten (10) years.
(c) The amount of income tax to be refunded in respect of the re- invested income shall be determined as follows:
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Of
which:
Th is the amount of tax refunded;
L is the income received after payment of income tax which is used for re-investment;
S is the corporate income tax rate stated in
the investment licence;
T is the rate of income tax refund.
11. Domestic business establishments and
foreign invested enterprises which suffer losses after tax finalization with the tax office shall be entitled to carry forward such losses to the following years and such losses
shall
be deducted from taxable income. Losses shall be carried forward
for
a maximum period
of five years.
II. PROCEDURES
FOR CONSIDERATION OF TAX EXEMPTIONS AND REDUCTIONS:
Business establishments which
are entitled to tax exemptions and
reductions shall submit files to the competent tax authority on a case-by-
case basis as follows:
1. In the case of tax exemptions and reductions as stipulated in clauses 1, 2 and 4 of Section I of Part DD, business establishments shall only
be required to submit a written request for tax exemption or
reduction (which specifies the reason for tax exemption or reduction) to the tax
office directly in charge of tax collection.
Every
year, after examination of the
conditions
for tax exemption and reduction, the tax office directly in charge of
tax collection shall inform those
business establishments which
satisfy all conditions
for tax exemption or reduction.
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(a) Written request of the business establishment to the tax office
directly in charge of tax collection which
specifies the reason for tax exemption
or reduction and the
following
attached documents:
- In respect of State owned enterprises, the investment
feasibility study approved by
the competent authority, the finalization statement
of the project and the
sources of capital for construction and
purchase;
- In respect of limited liability
companies
and shareholding
companies, the investment feasibility study approved by the board
of management, the
finalization statement of the
project and the sources of capital for construction
and purchase;
- In respect of private enterprises, the contract
and finalization
of contracts for construction
and installation of machinery and equipment; in the case of self-construction, invoices for
purchase
of materials,
machinery and equipment
and for actual installation and use of machinery
and equipment shall be presented;
(b)
Financial finalization statement and corporate income
tax finalization statement of the business establishment of the years
prior to investment and of the year after investment for which tax exemption or
reduction is applied for.
3. In the case of consideration for tax exemption as stipulated
in clause 5(a) of Section I of Part DD, a file shall
comprise:
(a) Written request of the business establishment to the tax office
directly in charge of tax collection which
specifies the reason for tax exemption;
(b) Decision on establishment issued by the competent authority
or, in the case of individuals
or collectives, a certificate of registration of scientific research activities of the municipal or
provincial science managing body;
(c) Business licence;
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(dd) Minutes of acceptance of contract;
(e) Financial finalization statement and corporate income tax finalization statement
of the
business establishment in which
details of the scientific research results are reflected.
4. In the case of consideration for tax exemption as stipulated
in clause 5(b) of Section I of Part DD, a file shall comprise:
(a) Written request of the business establishment to the tax office
directly in charge of tax collection which
specifies the reason for tax exemption;
(b) Technical service contracts directly
serving agricultural production and minutes
of liquidation
of contracts;
(c) Financial finalization statement and corporate income tax finalization statement
of the
business
establishment, including detailed data on the results
of performance of technical
service contracts
directly
serving agricultural production.
5. In the case of consideration for
tax exemption for
business
establishments specially employing
disabled people (clause 5(c)
of Section I of Part DD), a file shall comprise:
(a) Written request of the business establishment to the tax office directly in charge of tax collection
which specifies the reason for tax
exemption;
(b) Decision of the
people's committee of the province
or city under central authority
certifying that the establishment
specially employs disabled people;
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6. In the case of consideration for tax exemption as stipulated
in clause 5(d) of Section I of Part DD, a file shall comprise:
(a) Written request of the business establishment to the tax office
directly in charge of tax collection which
specifies the reason for tax exemption;
(b) Licence of registration
of vocational training issued
by the Department of Labour, War Invalids and
Social Affairs;
(c) Certificate of the Department
of Labour, War Invalids and
Social Affairs that the
vocational training
establishment is specially for disabled people, ethnic minority people, children
living in particularly difficult conditions and people involved in social evils;
(d)
List of trainees being disabled
people, ethnic minority people, children living in particularly
difficult conditions
and people involved in social
evils;
(dd)
Financial finalization statement and corporate income
tax finalization statement of the vocational training
establishment.
7. In the cases of tax exemptions and reductions
as stipulated in clause 6
of Section I of Part DD, a file shall comprise only a written request
from the production, trading
or service individual
households certified by the authorities at the ward or commune level. The tax office directly in charge shall, upon approval by the tax consultancy council at the
same
level, issue a notice of tax exemption or
reduction for production, trading
or
service individual households.
8. Tax exemptions and reductions
for foreign invested
enterprises, foreign parties
to business co-operation contracts
and foreign investors as stipulated in clauses 7 and 8 of Section I of Part DD
shall be stated in the investment licence issued by the competent authority
upon
agreement with the
Ministry
of Finance.
9. In respect of tax reductions as stipulated in clause 9 of Section
I of Part DD, a file shall
comprise:
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(b)
List of regularly present employees of the
business establishment, including female employees, certified by the competent labour
managing body;
(c) List of additional expenses for female
employees as verified and
examined by the tax office directly
in charge;
(d)
Financial finalization statement and corporate income
tax finalization statement
of
the business
establishment.
10.
A file for corporate
income
tax refund for foreign investors
using distributed income for re-investment in projects
in which investment
is encouraged as stipulated in clause 10 of Section
I of Part DD shall
comprise:
(a) Written request or
application for refund of corporate income tax for re-investment
by the
foreign investor or its authorized person. The name, address and account number of the investor
or the
authorized
person must be
clearly stated therein;
(b)
An undertaking to use income for re-investment for three years or more from the investor;
(c) Investment licence (notarized copy) or amended licence
issued by the investment
licence-issuing body,
which specifically permits the investor to use distributed income for re-investment
and
states that the investor satisfies all conditions for tax refund due
to re-investment;
(d) Written document certifying full contribution
of legal capital issued by the board of management in the case of a joint venture enterprise or a certificate of an auditing body in the case of an enterprise with one hundred
(100)
per cent foreign
owned
capital or a foreign party to a
business
co-operation contract (original
or notarized copy);
(dd) Declaration of re-invested income in accordance with the form attached to this Circular;
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Upon receipt of a complete file, the tax office directly in charge shall
examine and verify the amount of tax paid, calculate the amount of tax to be refunded to the investor, and send the file to the Ministry of Finance
(Department of State Budget) for consideration and decision
on tax refund to the investor.
Within a time-limit of thirty (30) days from the date of receipt of a file, the
Ministry
of Finance shall notify
its decision to the
investor.
Upon receipt of a complete file, the tax office directly in charge shall
examine and verify the amount of tax paid, calculate the amount of tax to be refunded to the investor, and send the file to the Ministry of Finance
(Department of State Budget) for consideration and decision
on tax refund to the investor.
III. PROCEDURES
AND AUTHORITY TO CONSIDER TAX EXEMPTIONS AND REDUCTIONS:
1. Tax exemptions and
reductions
shall
be considered annually upon
submission of financial finalization statements and corporate income tax finalization statements by business
establishments. In order to reduce the difficulties that business establishments have to cope with,
the
tax office may grant provisional
tax exemptions and reductions in the
year under consideration for
tax exemption
or reduction.
2. Within
thirty
(30) days of receipt of application
files for tax exemptions and reductions, the competent tax authority shall decide
on provisional tax exemptions or
reductions
or official tax exemptions or reductions, or
inform
business
establishments of the
reasons for not, or
not
yet, dealing with applications.
3. Authority to decide on tax exemptions and reductions:
(a) Heads of tax offices shall make decisions on corporate
income tax exemptions and reductions in respect of production, trading and service individual households under the tax management of such
office which earn an average
monthly income in a year lower than the minimum wage stipulated
by the State for State employees or which suspend
business in a month.
(b)
Directors of Taxation Departments
shall make decisions on corporate
income
tax exemptions and reductions in respect of production, trading
and service establishments
within their respective localities, except for the cases under the authority of
heads of tax offices as stipulated above.
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IV. PRINCIPLES
FOR TAX EXEMPTIONS AND REDUCTIONS:
Where business establishments are entitled to CIT incentives pursuant to various
laws, such as pursuant
to the Law on Promotion of Domestic
Investment and the Law on Corporate Income Tax, incentives pursuant to
only one such law shall be considered and enterprises shall have the right to select
which one.
E. DEALING WITH
BREACHES
I. DEALING WITH
TAXATION OFFENCES:
Taxpayers in breach of the Law on Corporate Income Tax shall be dealt with
as follows:
1.
Where they fail to comply strictly
with regulations on accounting systems, maintaining accounting records, and
declaration, payment and finalization
of tax, they shall, depending on
the nature and
seriousness of the breach, be subject
to
a warning
or fine.
2. Where taxes or fines are paid after the time-limit stipulated in a tax notice, tax payment order or penalty
decision, they shall be liable to pay,
in addition to the full amount
of taxes and fines, one
tenth of one (0.1) per cent
of the late amount for each day of delay.
3. Where they
declare falsely or evade tax, they shall
be
liable to pay, in
addition to the full amount of tax as
stipulated by the Law on Corporate Income Tax, a
fine equal to between one and
five times the amount evaded.
Where taxpayers evade large amounts of tax, commit tax offences after being subject to an administrative tax penalty, or commit other
serious breaches, they shall
be prosecuted for criminal liability in accordance with law.
4. Where taxpayers fail to pay taxes
or fines in accordance with a notice
or tax decision, the following action
may be taken:
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(b)
Temporary seizure of goods and material evidence in order to
recover the full amount
of
taxes or fines payable;
(c) Confiscation of assets in accordance with law for the purpose of recovery of any outstanding amount of taxes and fines.
The procedures and
order of sub-clauses
(a), (b) and (c) shall be carried out in accordance with applicable legislation.
II. AUTHORITY
TO DEAL WITH TAXATION OFFENCES:
Tax
offices at all levels shall, upon discovery
of business establishments in breach of the Law on Corporate Income Tax, examine and determine the
breaches and prepare files as stipulated. Based on the
regulations
on administrative penalties for
taxation offences,
tax offices shall, within their
authority to apply penalties of each level, issue a penalty decision
or make recommendations to the superior tax body or a judicial body for resolution in
accordance with their delegated powers,
in particular:
1. The heads of tax offices directly in charge of tax collection may take action
against offences by taxpayers as stipulated in clauses 1 and 2
of,
and apply administrative
penalties
for taxation offences as
stipulated in clause 3 of,
Section I of Part E of this Circular.
2. The heads of Taxation
Departments and tax offices directly in charge of tax collection
may take action as stipulated in clause 4 of Section I
of Part E of this Circular
and may, in the case of breaches referred to in clause 3 of Section I of Part E of this Circular,
forward documents
to an authorized
body for resolution in accordance with law.
F. COMPLAINTS
AND LIMITATION PERIODS
1.
Rights and obligations of taxpayers with respect to tax complaints:
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Taxpayers must comply with the procedures and order for complaints and court
proceedings in accordance with
applicable provisions of the
law.
2.
Responsibilities and powers of tax offices
with respect to resolution of tax complaints:
Pursuant to article 29 of the Law on Corporate Income Tax, tax offices at
all levels must resolve tax complaints of taxpayers within fifteen
(15) days from the date of receipt. This time-limit may be extended for complicated
matters which require
time-consuming investigation
and verification but shall not exceed thirty (30) days.
Where a tax office receives a complaint which is beyond its authority, it must forward the documents and report to the authorized body for resolution and shall notify the complainant thereof within
ten (10) days from the date of receipt of the complaint. Where a false tax declaration, tax evasion
or tax error is discovered, tax offices shall be responsible for recovering taxes or fines or for refunding taxes in
respect of five years prior
to the
date of discovery of the
false tax declaration, tax evasion or tax error. Where a business establishment does
not register, declare and pay
tax, taxes and fines may be recovered retrospectively from the date when the business establishment commenced its operations.
G. ORGANIZATION
OF IMPLEMENTATION
This Circular shall be of full force and effect after fifteen (15) days from the date
of signing and shall replace Circular 99/1998/TT-BTC of the Ministry
of Finance dated 14
July 1999 and shall
apply to CIT finalizations as from the
year 2001.
FOR
THE MINISTER OF FINANCE
DEPUTY MINISTER
Vu Van Ninh