i. What is corporate income tax in Vietnam?
Corporate income tax is the type of tax levied on the income of business organizations and governed by The 2008 Law on Corporate Income Tax (amended in 2013 and 2014).
ii. Taxable incomes
As mentioned in the Article “Taxable And Tax-Exempt Incomes In Corporate Income Tax”, taxable incomes include: (i) incomes from goods and service production and business activities and (ii) other taxable incomes.
Other taxable incomes comprise all types of income derived by business entities not being income from activities of production and business in goods and services. For example, income from real estate transfer, transfer of construction projects, transfer of the right to participate in construction projects, transfer of the right to mineral exploration, mineral extraction, and mineral processing; income from the right to enjoyment of property, right to ownership of property….
Any organization conducting activities of production, business in goods and services that earns taxable income as above must pay corporate income tax to the Vietnamese State.
iii. Tax-exempt incomes
Tax-exempt incomes are currently stipulated at Article 8 of Circular No. 78/2014/TT-BTC and supplemented by Clause 3, Article 6 of Circular 96/2015/TT-BTC, Circular 151/2014/TT-BTC. Accordingly, tax-exempt incomes can be income earned from cultivation, husbandry, agricultural and aquaculture processing, salt production; income earned from technical services directly serving agricultural production; income earned from: performance of contracts for scientific research and technological development, sale of products during their test production, products made from new technology applied in Vietnam for the first time; income earned from activities of business and production by enterprises having an average number of 30% or more employees being disabled, reformed drug addicts or infected with HIV; income from the transfer of technology if prior technology transferred to organizations/individuals in areas with special socio-economic conditions….
For detailed information on tax-exempt incomes, you can find the Article “Taxable And Tax-Exempt Incomes In Corporate Income Tax”.
iv. Tax assessment period
The tax assessment period shall be in accordance either with the calendar year or the fiscal year of business. Enterprises are allowed to switch their tax assessment period from the calendar year to the fiscal year or vice versa, however, the regular tax assessment period has to equal twelve months.
v. Tax rates
The most current standard corporate income tax (CIT) rate is 20% (as specified in Article 11 of Circular 78/2014/TT-BTC). Under the prevailing laws, there are preferential tax rates of 10% and 17%. Such preferential rates will apply when certain criteria are met.
For more information on preferential tax rates, you can read our Article “Incentives on Corporate Income Tax When Investing In Vietnam”
vi. Tax incentives
Some specific enterprises can enjoy tax incentives under the tax laws & regulations.
vii. Deductible and non-deductible expenses
Deductible and non-deductible expenses are important types of expenses which require the accounting department/accountant of an enterprise’s careful attention, as such expenses will affect the amount of tax payable by such enterprise. The tax laws and regulations specify a list of non-deductible expenses, and all expenses not mentioned to be non-deductible can be considered deductible expenses, if:
– The expenses are actual expenses related to business activities.
– Expenses evidenced with VAT invoice and other supporting documents.
viii. Laws and regulations
The following pieces of legislation, regulations, and documents are the grounds mainly governing the tax imposed on corporate income tax:
– The 2008 Law on Corporate Income Tax (amended in 2013 and 2014);
– Decree 92/2013/ND-CP on detailing implementation of a number of articles that take effect on July 01, 2013 of the law amending and supplementing a number of articles of the law on enterprise income tax and law amending and supplementing a number of articles of law on value added tax;
– Decree No. 218/2013/ND-CP on detailing and guiding the implementation of law on corporate income tax;
– Circular No. 78/2014/TT-BTC guiding the implementation of the Government’s Decree No. 218/2013/ND-CP of December 26, 2013, detailing and guiding the implementation of the law on corporate income tax;
– Circular No. 96/2015/TT-BTC on guidelines for corporate income tax in the Government’s Decree No. 12/2015/NĐ-CP dated February 12, 2015 on guidelines for the law on amendments to laws on taxation and amendments to decrees on taxation; amendments to some articles of Circular No. 78/2014/TT-BTC dated June 18, 2014, Circular No. 119/2014/TT-BTC dated August 25, 2014, and Circular No. 151/2014/TT-BTC dated October 10, 2014 of the Ministry of Finance.
– Circular No. 119/2014/TT-BTC on amendments to some articles of Circular No. 156/2013/TT-BTC dated November 06, 2013, Circular No. 111/2013/TT-BTC dated August 15, 2013, Circular No. 219/2013/TT-BTC dated December 31, 2013, Circular No. 08/2013/TT-BTC dated January 10, 2013, Circular No. 85/2011/TT-BTC dated June 17, 2011, Circular No. 39/2014/TT-BTC dated March 31, 2014, and Circular No. 78/2014/TT-BYC dated June 18, 2014 of the Ministry of Finance in order to simplify tax formalities.
– Circular No. 151/2014/TT-BTC on providing guidance on Decree No. 91/2014/ND-CP dated October 1, 2014 of the Government on amendments to decrees on taxation.