Taxable And Tax-Exempt Incomes In Corporate Income Tax

Corporate Income Tax is levied on the income of business organizations and governed by the 2008 Law on Corporate Income Tax (amended in 2013 and 2014). The current tax rate applicable to corporate income is 20%.

I. Taxable incomes

The Law on Corporate Income Tax stipulates that taxable incomes include income from goods and service production and business activities and other incomes including income from transfer of capital, transfer of the right to capital contribution; 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, including income from intellectual property rights defined by law; income from transfer, lease, liquidation of assets, including valuable papers; income from deposit interest, loan interest, sale of foreign exchange; collection of debts that were cancelled; receipts from debts without creditors; incomes from business operation in previous years that were committed, and other incomes.

Accordingly, 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.

Ii. 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. Under such legislations on corporate income tax, the following types of income are considered to be tax-exempt:

– 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 earned from occupational training for ethnic minorities, disabled people, children living in particularly difficult conditions and reformed offenders.

– Income distributed from activities being capital contribution, purchase of shareholding, joint venture or co-operation, distributed by a domestic company after paying tax in accordance with the Law on Corporate Income Tax on that income (dividends).

– Aid funds receivable for use for educational, scientific research, cultural, artistic, charitable, humanitarian and other social activities in Vietnam.

– Income from transfer of certified emission reductions (CERS) of enterprises issued with certificates of emission reduction.

– Incomes from performing the tasks assigned by the State of the Vietnam Development Bank in the development investment credit activities, credit export.

– Undivided income.

– Income from the transfer of technology if prior technology transferred to organizations/individuals in areas with special socio-economic conditions.

– Income of the bailiff office (except income from activities other than bailiff activities) during the pilot implementation in accordance with the law on civil judgment enforcement.

III. 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.