1. The bases for calculating Corporate Income Tax
The bases for tax calculation are taxable income and tax rate.
Generally, the CIT rate applicable to all forms of enterprises in Vietnam shall be 28%
Taxable income in the tax period
Turnover used to calculate taxable income in the period
Reasonable expenses in the tax period
Other taxable income in the tax period.
Turnover used to calculate taxable income shall be total sales revenue, fees for provision of services, including price subsidies, additional charges or additional excesses earned by a business establishment, irrespective of whether or not the revenue is actually received.
3. Reasonable deductible expenses for purpose of calculation of taxable income
Reasonable expenses which are deductible for the purpose of calculation of taxable income shall comprise:
- Depreciation of fixed assets used for producing or trading in goods and services;
- Costs of raw materials, 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;
- Costs of salaries, wages, allowances and mid-shift meals in accordance with the provisions of the Labor Code. Monthly mid-shift meal allowances for each employee do not minimum salary level stipulated by the State for State employees.
- Expenses for scientific and technological research; expenses being rewards for innovations and improvements; health care; expenses for training employees pursuant to the stipulated regime; financial assistance to education;
- Costs of hired services: costs of electricity, water, telephones, cost of repairs of fixed asset; rent for fixed assets; cost of auditing and legal services, hire of design, determination and protection of trade marks; cost of insurance of assets; costs of purchase and charges for use of technical data, patents technology transfer licenses, trademarks not forming part of fixed assets and other costs of hired services;
- Other expenses: Payments made to female employees; costs of protective clothing or uniforms for staff (not exceeding VND500,000/ person/ year); costs of security of business establishments, travel expenses; costs being contributions to social and medical insurance funds and trade union expenses; funding for activities of the Party and mass organizations at business establishments; contributions to management costs of the higher level and contributions to funds of professional associations pursuant to the stipulated regime
- Payment of interest on loans for production and trading goods and services borrowed from banks, credit institutions, economic organization or other organizations;
- Contingency provisions for reduction of inventory prices, bad debts, reduction of securities prices, and for establishment of funds to pay allowances for loss of work as guided by the Ministry of Finance.
- Retrenchment benefits paid to employees in accordance with applicable regulations.
- 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
- Expenses for advertising, marketing, promotion, receptions and formal occasions, expenses for transactions and external relations, expenses for broker commissions, expenses for meetings and other expenses must not exceed ten (10) per cent of the total reasonable expenses listed above
- Taxes, fees, charges and land rent which are mandatory and related to production and trading of goods and services
4. Items to be exempted from Reasonable deductible expenses
- Costs of salaries where a business establishment fails to implement correctly the regime on labour contracts in accordance with the laws on labour, except where seasonal workers are hired;
- Salary and wages of owners of private enterprises, members of partnerships, heads of individual households and individual business persons; and remuneration paid to founding members and members of boards of management of limited liability companies and shareholding companies who are not directly involved in the management of production and trading of goods and services;
- Amounts advanced for expenses but not actually expended in full, such as expenses for repairs of fixed assets; warranty fees for goods and products, for construction works; and other amounts advanced;
- Expenses incurred without source documents as required by the regulations or with unlawful source documents;
- 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 the field of taxation and other fines;
- Expenses unrelated to turnover or taxable income, such as expenses of investment in capital construction, expenses for supporting mass organizations, social organizations and localities; charity expenses and other expenses unrelated to turnover or taxable income;
Expenses for illness and maternity cases;
Allowances for regular and irregular difficulties;
Other expenses covered by other sources of capital.
- Other unreasonable expenses.
4. Other taxable income in the tax period
Other taxable incomes in a tax period shall comprise:
- Difference between purchase and sale of securities;
- Income from activities relating to the ownership of intellectual property or copyright;
- Other income from the ownership of or right to use assets;
- Income from assignment of land use rights or land lease rights;
- Difference earned from the sale or exchange of foreign currency;
- Annual closing balance of contingency reserves for reduction of inventory prices, of bad debts and of prices of securities
- Income earned from bad debts which were written-off and are now repaid;
- Income from accounts payable the creditors of which are unidentified;
- Income from fines receivable for breaches of economic contracts after deduction of fines payable for breaches of contracts.
- Income from production, business or services omitted in previous years which has been newly discovered;
- Income earned from production and trading of goods and services overseas;
- Income relating to the sale of goods or provision of services not included in turnover, after all expenses for earning such income have been deducted in accordance with regulations of the Ministry of Finance;
- Income earned from capital contribution to a domestic economic partnership, joint venture or shareholding company;
- Other items of income.
5. Registration for CIT
Business establishments shall be responsible for registering for corporate income tax at the same time as registration for payment of value added tax
6. Declaration of CIT
Annually, basing on the results from production and trading in goods and services of the previous year and the business potential for the following year, business establishments shall be responsible for declaration and submission of CIT declarations to the tax office directly in charge no later than the twenty fifth day of January.
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 and 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 and for each quarter and shall notify the business establishment for implementation.
Determination of the amount of tax provisionally payable shall be implemented as follows:
- By fixing taxable income for the whole year based on estimated turnover for the year and the ratio of taxable income over turnover of the previous year;
- By fixing taxable income for the whole year based on taxable income of business establishments in the same industry which have a similar business scale.
7. Deadline for tax payment
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 their declaration of corporate income tax or the amount fixed by the Tax Authorities.
Business establishments which do not yet comply fully with the regulations on accounting, invoices and vouchers shall pay tax in accordance with the notice issued by the tax office and at the same as value added tax is paid.
8. CIT finalization
At the end of each tax period, business establishments shall finalize tax with the tax office except in cases where the tax office fixes a ratio of taxable income over turnover.
Business establishments shall submit tax finalization declarations to the tax office directly in charge within ninety (90) days from the last date of the Gregorian year or financial year.
The tax finalization shall state fully and accurately the following items: turnover, reasonable expenses, taxable income, tax payable, tax paid in foreign sources, overpaid or underpaid amount of tax.
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