I. Legal Grounds

• - Law On Enterprise Income Tax No. 14/2008/QH12 dated June 03, 2008
• - Decree No 218/2013/ND-CP on detailing and guiding the implementation of the law on corporate income tax
• - Decree No 12/2015/ND-CP on the elaboration of the law on amendments to tax laws and amendments to some articles of decrees on taxation
• - Circular no 78/2014/TT-BTC on 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/ND-CP dated February 12, 2015, on guidelines for the law on amendments to laws on taxation and amendments to degrees on taxation; amendments to some articles of circular no. 78/2014/TT-BTC dated June 18, 2014, circular no. 119/2014/TT-BT dated August 25, 2014, and circular no. 151/2014/TT-BTC dated October 10, 2014, of the Ministry of Finance

II. Concepts:

Corporate Income Tax (CIT) is a direct tax, levied on the taxable income of businesses including income from production and trading of goods, services and other income according to the provisions of law

III. CIT Taxpayers

1. Payers of corporate income tax (CIT) are organizations engaged in production and trading of goods or provision of services with taxable income (below referred to as enterprises), including:

a/ Enterprises established and operating under the Enterprise Law, the Investment Law, the Law on Credit Institutions, the Insurance Business Law, the Securities Law, the Petroleum Law, the Commercial Law or other legal documents in the forms of joint-stock company; limited liability company; partnership; private enterprise; lawyer office, private notary public office; party to business cooperation contract; party to petroleum product-sharing contract, oil and gas joint-venture enterprise and joint operating company;

b/ Public or non-public non-business units engaged in production and trading of goods or provision of services with taxable income in all areas;

c/ Organizations established and operating under the Cooperative Law;

d/ Enterprises established under foreign law (below referred to as foreign enterprises) and having permanent establishments in Vietnam;

Permanent establishments of foreign enterprises are manufacturing and trading establishments through which foreign enterprises carry out some or all of their production and trading activities in Vietnam, including:

- Branches, executive offices, factories, workshops, means of transport, mines, oil and gas fields or other sites of exploitation of natural resources in Vietnam;

- Construction sites and construction, installation or assembly works;

- Establishments providing services, including also consultancy services through employees or other organizations or individuals;

- Agents for foreign enterprises;

- Representatives in Vietnam, for representatives authorized to sign contracts in the name of foreign enterprises or representatives not authorized to sign contracts in the name of foreign enterprises but regularly delivering goods or providing services in Vietnam;

In case a double taxation avoidance agreement which the Socialist Republic of Vietnam has signed has different provisions on permanent establishments, the provisions of that agreement prevail.

e/ Organizations other than those referred to at Points a, b, c and d, Clause 1 of this Article which are engaged in production and trading of goods or provision of services and have taxable income.

2. Foreign organizations engaged in production and business activities in Vietnam not under the Investment Law or the Enterprise Law or earning income in Vietnam shall pay CIT under separate guidance of the Ministry of Finance. These organizations, if having capital transfer activities, shall pay CIT under the guidance in Article 14, Chapter IV of Circular 78/2014/TT-BTC.

IV. Calculation of CIT Tax

IV.1. Method

The payable CIT amount in a tax period is taxed income multiplied by tax rate.

The payable CIT shall be determined by the following formula:

Payable CIT

=

{

Taxed income

-

Deduction for setting up the science and technology fund­ (if any)

}

x

CIT rate

An enterprise that has paid CIT or a tax similar to CIT outside Vietnam may deduct the paid CIT amount not exceeding the payable CIT amount in a period under the Law on CIT.

IV.2 Determination of taxed income

The taxed income in a tax period shall be determined to be taxable income minus tax-exempted income and losses carried forward from previous years under regulations.

Taxed income shall be determined by the following formula:

Taxed income

=

Taxable income

-

{

Tax-exempted income­

+

Losses carried forward under regulations

}

IV.3 Taxable Income

Taxable income in a tax period includes income from the production and trading of goods and provision of services and other incomes.

Taxable income in a tax period shall be determined as follows: '

Taxable income­ = {Turnover - Deductible expenses ­} + Other incomes­

Income from the production and trading of goods and provision of services is the turnover from these activities minus deductible expenses for these activities. An enterprise that has different production and trading activities subject to different tax rates shall separately calculate the income from each activity and multiply it by the corresponding tax rate.

VI.4 Turnover:

1. Turnover for calculating taxable income shall be determined as follows:

The turnover for calculating taxable income is the total proceeds from the sale of goods, remuneration for processing and charges for provided services, including price subsidies, surcharges and extra fees that an enterprise may earn, regardless of whether or not these amounts have been collected.

a/ For enterprises paying value-added tax by the credit method, the turnover is exclusive of value-added tax.

b/ For enterprises paying value-added tax by the method of calculation directly based on added value, the turnover is inclusive of value-added tax.

c/ For enterprises providing services for which customers pay charges in advance for many years, the turnover for calculating taxable income shall be distributed to the number of years of advance payment or determined according to the lump-sum payment. If such enterprises are enjoying tax incentives, the tax incentives shall be determined based on the total payable CIT of the years of advance payment divided by the number of years of advance payment.

2. The time for determining turnover for calculating taxable income shall be determined as follows:

a/ For the sale of goods, it is the time of transfer of the right to own or use goods to the buyer;

b/ For the provision of services, it is the time of completion of the provision of services for the buyer or the time of making out the service provision invoice;

In case the time of invoicing precedes the time of service completion, the time for determining taxed turnover is the time of invoicing;

c/ For air carriage, it is the time of completion of the provision of carriage service for the buyer.

d/ Other cases as prescribed by law.

IV.5 CIT Rate

- The current CIT Rate: 20% except for cases where businesses are eligible for preferential tax rate

The CIT rate applicable to petroleum prospecting, exploration and exploitation in Vietnam is between 32% and 50%. Based on the exploitation locations and conditions and petroleum reserves, enterprises having investment projects on petroleum prospecting, exploration and exploitation shall send investment projects’ dossiers to the Ministry of Finance for further submission to the Prime Minister to decide on a specific tax rate applicable to each project or business establishment.

The CIT rate applicable to the prospecting, exploration and extraction of precious and rare natural resources (including platinum, gold, silver, tin, tungsten, antimony, gemstones and rare earth other than petroleum) is 50%. For mines of precious and rare natural resources with 70% or more of their allocated areas located in geographical areas with particularly difficult socio-economic conditions on the list of geographical areas eligible for CIT incentives promulgated together with the Government’s Decree No. 218/2013/ND-CP , the applicable CIT rate is 40%

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