Thông tư 130/2008/TT-BTC

Circular No. 130/2008/TT-BTC of December 26, 2008, guiding the implementation of a number of articles of Enterprise Income Tax Law No. 14/2008/QH12, and guiding the implementation of the Governments Decree No. 124/2008/ ND-CP of December 11, 2008, which details the implementation of a number of articles of the Law on Enterprise Income Tax.

Circular No. 130/2008/TT-BTC of December 26, 2008, guiding the implementation of a number of articles of Enterprise Income Tax Law No. 14/2008/QH12, and guiding the implementation of the Governments Decree No. 124/2008/ ND-CP of December 11, 2008, which details the implementation of a number of articles of the Law on Enterprise Income Tax. đã được thay thế bởi Circular No. 123/2012/TT-BTC guidance Law on Enterprise Income Tax và được áp dụng kể từ ngày 10/09/2012.

Nội dung toàn văn Circular No. 130/2008/TT-BTC of December 26, 2008, guiding the implementation of a number of articles of Enterprise Income Tax Law No. 14/2008/QH12, and guiding the implementation of the Governments Decree No. 124/2008/ ND-CP of December 11, 2008, which details the implementation of a number of articles of the Law on Enterprise Income Tax.


THE MINISTRY OF FINANCE
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SOCIALIST REPUBLIC OF VIET NAM
Independence - Freedom - Happiness
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No. 130/2008/TT-BTC

Hanoi, December 26, 2008

 

CIRCULAR

GUIDING THE IMPLEMENTATION OF A NUMBER OF ARTICLES OF ENTERPRISE INCOME TAX LAW NO. 14/2008/QH12, AND GUIDING THE IMPLEMENTATION OF THE GOVERNMENT’S DECREE NO. 124/2008/ ND-CP OF DECEMBER 11, 2008, WHICH DETAILS THE IMPLEMENTATION OF A NUMBER OF ARTICLES OF THE LAW ON ENTERPRISE INCOME TAX

Pursuant to June 3, 2008 Law No. 14/2008/QH12 on Enterprise Income Tax;
Pursuant to November 29, 2006 Law No. 78/2006/QH11 on Tax Administration;
Pursuant to the Government’s Decree No. 124/2008/ND-CP of December 11, 2008, detailing the implementation of a number of articles of the Law on Enterprise Income Tax;
Pursuant to the Government’s Decree No. 118/2003/ND-CP of November 27, 2003, defining the functions, tasks, powers and organizational structure of the Ministry of Finance,
The Ministry of Finance guides the implementation of enterprise income tax as follows:

Part A

SCOPE OF APPLICATION OF ENTERPRISE INCOME TAX

1. Enterprise income taxpayers are organizations engaged in goods production and trading or service provision which have taxable incomes (below referred to as enterprises), including:

1.1. Enterprises established and operating under the Law on Enterprises, the Law on Slate Enterprises, the Law on Foreign Investment in Vietnam, the Investment Law, the Law on Credit Institutions, the Law on Insurance Business, the Securities Law, the Petroleum Law, and the Commercial Law, and enterprises defined in other legal documents in the form of joint-stock company; limited liability company; partnership; private enterprise; state enterprise; law office and private notary public office; party to business cooperation contract; party to oil and gas production sharing contract, oil and gas joint-venture enterprise or jointly managed company;

1.2. Public or non-public non-business units engaged in goods production and trading or service provision that have taxable incomes in any domain;

1.3. Organizations established and operating under the Law on Cooperatives;

1.4. Enterprises established under foreign laws (below referred to as foreign enterprises) with Vietnam-based permanent establishments.

Foreign enterprises’ permanent establishments are production and business establishments through which foreign enterprises conduct some or all income-generating production and business activities in Vietnam, including:

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

- Construction sites and construction, installation or assembly works;

- Providers of services, including consultancy services through employees or other organizations or individuals;

- Agents for foreign enterprises;

- Vietnam-based representatives that are competent to sign contracts in the name of foreign enterprises, or representatives that are incompetent to sign contracts in the name of foreign enterprises but regularly deliver goods or provide services in Vietnam.

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

1.5. Organizations other than those defined at Points 1.1, 1.2, 1.3 and 1.4, Clause 1 of this Part, which conduct goods production and trading or service provision activities and have taxable incomes;

2. Foreign enterprises or organizations that conduct production and business activities in Vietnam not under the Investment Law or Enterprise Law or have incomes generated in Vietnam shall pay enterprise income tax under the Finance Ministry’s specific guidance. When conducting capital transfer activities, these enterprises shall pay enterprise income tax under the guidance in Part E of this Circular.

Part B

ENTERPRISE INCOME TAX CALCULATION METHOD

1. The payable enterprise income tax amount in a tax period is the taxed income multiplied by the tax rate.

The payable enterprise income tax ii determined according to the following formula

Payable enterprise income tax = Taxed income x Enterprise income tax rate

For an enterprise making deductions for setting up a scientific and technological development fund, the payable enterprise income tax is determined as follows:

Payable enterprise income tax = (Taxed income - Deduction for setting up a scientific and technological development fund) x Enterprise income tax rate

An enterprise which has paid enterprise income tax or similar tax outside Vietnam is entitled to subtraction of the paid enterprise income tax amount which must not exceed the payable enterprise income tax amount under the Law on Enterprise Income Tax.

2. A tax period is determined according to the calendar year. If an enterprise applies a fiscal year other than the calendar year, the tax period shall be determined according to the applied fiscal year. The first tax period for a new enterprise and the final tax period for an enterprise established as a result of type or ownership transformation, merger, separation, split, dissolution or bankruptcy shall be determined to conform to the accounting period under the accounting law.

3. If the first year’s tax period of a new enterprise, counting from the time it is granted a business registration certificate, or the final year’s tax period of an enterprise established as a result of form conversion, ownership transformation, consolidation, merger, separation, split, dissolution or bankruptcy, is less than 3 months, it will be added to the subsequent year’s tax period (for new enterprises) or the preceding year’s tax period (for enterprises established as a result of type or ownership transformation, consolidation, merger, separation, split, dissolution or bankruptcy) to form an enterprise income tax period. The first or final year’s enterprise income tax period must not exceed 15 months.

4. Non-business units trading in goods or providing services liable to enterprise income tax (at the rate of 25%) that, after having enjoyed enterprise income tax relief (if any), can account turnover but cannot account and determine expenses for and incomes from business activities, shall declare and pay enterprise income tax at a percentage of the goods sale or service provision turnover, specifically:

- For service provision: 5%;

- For goods trading: 1%;

- For other activities: 2%.

5. Enterprises which have foreign-currency turnover, expenditures, taxable incomes and taxed incomes shall convert these foreign-currency amounts into Vietnam dong at the average exchange rate on the inter-bank foreign currency market, announced by the State Bank of Vietnam at the time such foreign-currency turnover, expenditures, taxable incomes and taxed incomes arise, unless otherwise provided for by law. A foreign currency having no exchange rate with Vietnam dong must be converted via another foreign currency having an exchange rate with Vietnam dong.

Part C

ENTERPRISE INCOME TAX BASES

I. TAXED INCOME

Taxed income in a tax period is taxable income minus tax-exempt income and losses carried forward from preceding years under regulations.

Taxed income is determined according to the following formula:

Taxed income = Taxable income - (Tax-exempt income + Losses carried forward under regulations)

II. TAXABLE INCOMES

Taxable incomes in a tax period include income from goods production and trading and service provision and other incomes.

Taxable income in a tax period is determined as follows:

Taxable income = (Turnover - Deductible expenses) + Other incomes

Income from goods production and trading or service provision is the turnover from goods production and trading or service provision activities minus deductible expenses for these activities. An enterprise which conducts different business activities subject to different tax rates shall separately calculate income from each activity, multiplied by the corresponding tax rate.

Income from real estate transfer must be separately accounted for enterprise income tax declaration and payment and may not be cleared against incomes or losses from other production and business activities.

III. TURNOVER

1. Turnover used for calculating taxable income is determined as follows:

Turnover used for calculating taxable income is the total of sales, processing remunerations or service provision charges, including price subsidies, surcharges and additional amounts enjoyed by enterprises, regardless of whether money has been collected or not.

1.1. For enterprises paying value-added tax according to the tax credit method, turnover used for calculating taxable income is exclusive of value-added tax.

Example: Enterprise A pays value-added tax according to the tax credit method. Its value-added invoice indicates the following details:

Selling price: VND 100,000.

Value-added tax (10%): VND 10,000.

Payment price: VND 110,000.

The turnover used for calculating taxable income will be VND 100,000.

1.2. For enterprises paying value-added tax according to the method of calculation of tax based directly on added value, turnover used for calculating taxable income is inclusive of value-added tax.

Example: Enterprise B pays value-added tax according to the method of calculation of tax based directly on added value. Its sale invoice only indicates the selling price of VND 110,000 (inclusive of value-added tax).

The turnover used for calculating taxable income will be VND 110,000.

2. The time of determining turnover used for calculating taxable income is as follows:

2.1. For goods sale, it is the time of transferring the right to own or use goods to the purchaser.

2.2. For service provision, it is the time of completing the provision of a service to the purchaser or the time of billing the service provision.

If the time of billing precedes the time of completing the service provision, the time of determining turnover will be the time of billing.

2.3. Other cases provided for by law.

3. Turnover used for calculating taxable income in some cases is determined as follows:

3.1. For goods sold or services provided on installment or deferred payment, it is the lump sum paid for the goods or service, excluding installment or deferred payment interest.

3.2. For goods and services used for barter, donation or internal consumption, it shall be determined based on the market selling price of products, goods or services of the same or similar categories at the time of barter, donation or internal consumption.

Goods and services used for internal consumption are those delivered or supplied by enterprises for consumption, excluding goods and services used for enterprises’ continued production and business activities.

3.3. For goods processing, it is the proceeds from processing activities, including remuneration, costs of fuel, power and auxiliary materials, and other expenses.

3.4. For goods consigned to agents or consignees for commissioned sale at prices fixed by principals or consignors under agency or consignment contracts, it shall be determined as follows:

- For enterprises acting as principals or consignors (including pyramid selling), it is the total sum of sales.

- For enterprises acting as agents or consignees and selling goods at prices fixed by principals or consignors, it is the commission earned under the agency or consignment contract.

3.5. For asset lease, it is the rent paid periodically by the lessee under the lease contract. In case the lessee advances the rent for many years, it shall be allocated to the number of years for which the rent has been advanced.

3.6. For credit and financial leasing activities, it is the receivable loan interest or financial lease turnover arising in a tax period.

3.7. For transportation activities, it is the whole turnover from passenger, cargo and luggage transportation arising in a tax period.

3.8. For electricity and clean water supply, it is the sum of money indicated on the value-added invoice. The time of determining turnover used for calculating taxable income is the day on which electricity meter readings are certified and recorded on electricity or clean water bills.

Example: An electricity bill is recorded with an electricity meter reading from December 5 to January 5. Turnover recorded on this bill will be used for January.

3.9. For golf course business activities, it is the proceeds from the sale of membership cards and golf playing tickets and other revenues in a tax period.

3.10. For insurance and reinsurance business activities, it is the receivable sum of principal insurance premiums, agency service charges (loss survey, indemnity consideration, claim for a third party’s to pay indemnity, disposal of cargo subject to 100% indemnity); re-insurance undertaking charges, re-insurance ceding commissions and other revenues after subtracting refunded or reduced premiums or re-insurance undertaking charges; and refunded or reduced re-insurance ceding commissions.

In case insurers provide co-insurance, turnover used for calculating taxable income of each insurer is the principal insurance premium allocated to each insurer based on the co-insurance ratio, exclusive of value-added tax.

For insurance policies containing an agreement on periodical payment of premiums, it is the receivable sum of money arising in each period.

3.11. For construction and installation activities, it is the value of the work, work item or work volume tested upon take over.

- For construction and installation activities involving the contracted contracted supply of materials, raw materials, machinery and equipment, it is the sum earned from these activities, inclusive of the value of materials, raw materials, machinery and equipment.

- For construction and installation activities not involving the contracted supply of materials, raw materials, machinery and equipment, it is the sum earned from these activities, exclusive of the value of materials, raw materials, machinery and equipment.

3.12. For business activities conducted under business cooperation contracts:

- If parties to a business cooperation contract divide business results based on the goods or service sales turnover, it is the turnover divided to each party under the contract.

- If parties to a business cooperation contract divide business results based on products, it is the turnover from products divided to each party under the contract.

- If parties to a business cooperation contract divide business results based on pre-tax profits, the turnover used for determining pre-tax profits is the sum of goods or service sales under the contract. The contracting parties shall appoint one of them as a representative to issue invoices, record turnover and expenditures and determine pre-tax profits divided to each party. Each party shall fulfill its enterprise income tax obligation under current regulations.

- If parties to a business cooperation contract divide business results based on after-tax profits, it is the sum of goods or service sales under the contract. The contracting parties shall appoint one of them as a representative to issue invoices, record turnover and expenditures and declare and pay enterprise income tax on behalf of the other parties.

3.13. For prize-winning game business activities (casinos, prize-winning video games and betting entertainment), it is the excise lax-inclusive proceeds from these activities, excluding prizes paid to customers.

3.14. For securities trading, it is the proceeds from securities brokerage, dealing, issuance underwriting, investment portfolio management, financial consultancy and investment, investment fund management, fund certificate issuance, market organization and other securities services under law.

3.15. For derivative financial services, it is proceeds from the provision of derivative financial services in a tax period.

IV. DEDUCTIBLE AND NON-DEDUCTIBLE EXPENSES UPON DETERMINATION OF TAXABLE INCOME

1. Except for expenses specified in Clause 2 of this Section, enterprises may deduct any expenses which fully meet the following conditions:

1.1. They are actually paid for production and business activities;

1.2. They are evidenced with adequate lawful invoices and documents as prescribed by law.

2. Non-deductible expenses upon determination of taxable income include:

2.1. Expenses not fully satisfying the conditions specified in Clause 1 ol this Section, except the uncompensated value of losses caused by natural disasters, epidemics or other force majeure circumstances;

Enterprises shall themselves determine the total value of losses caused by natural disasters, epidemics or other force majeure circumstances in accordance with law.

Uncompensated value of losses caused by natural disasters, epidemics or other force majeure circumstances is the total value of losses minus the value which must be compensated by organizations or individuals responsible under law.

2.2. Fixed asset depreciation expense in one of the following cases:

a/ Expense for depreciation of fixed assets not used for goods production and trading or service provision activities.

Particularly for fixed assets serving laborers at enterprises, such as mid-shift rest houses, mid-shift eateries, locker rooms, toilet facilities, clean water tanks, roofed parking lots, health stations or clinics, cars for the transport of laborers to and from workplaces, job training facilities and laborers’ houses constructed by enterprises, their depreciations are allowed to be accounted as deductible expenses upon determination of taxable income.

b/ Expense for depreciation of fixed assets without papers evidencing that they belong to enterprises (except for finance-leased ones).

c/ Expense for depreciation of fixed assets which are not managed, monitored and reflected in enterprises’ accounting books under current regulations on fixed asset management and cost accounting.

d/ Depreciation in excess of the level prescribed in the Finance Ministry’s current regulations on fixed asset management, use and depreciation. For profit-earning enterprises which wish to apply a rapid depreciation method for renewing technologies for which the straight-line depreciation is applicable, it is the depreciation in excess of the prescribed rapid depreciation level.

Before making depreciation, enterprises shall register the fixed asset depreciation method with their managing tax agencies. Annually, enterprises shall themselves decide on the ratio of fixed asset depreciation under the Finance Ministry’s current regulations on fixed asset management, use and depreciation, including the case of rapid depreciation. In the course of conducting production and business activities, enterprises which change depreciation ratios not exceeding the prescribed ones may adjust them before the deadline for submitting enterprise income tax finalization declarations of the year of depreciation.

Enterprises receiving fixed assets used as contributed capital or transferred upon separation, split, consolidation, merger or transformation, which are re-valuated under regulations, may include their depreciations in deductible expenses according to their re-valuated historical costs. Enterprises receiving other assets not qualified as fixed assets used as contributed capital or transferred upon separation, split, consolidation, merger or transformation, which are re-valuated under regulations, may include their depreciations in deductible expenses according to their re-valuated prices.

For fixed assets created by enterprises themselves, their historical costs, of which depreciations are allowed to be included in deductible expenses, are the total of all production expenses for their creation.

e/ Depreciation corresponding to part of the historical cost in excess of VND 1.6 billion/car, for passenger cars of 9 seats or less for which use registration and Fixed asset depreciation accounting are made on or after January 1, 2009 (except cars exclusively used for the commercial passenger transportation or for tourism and hotel business); depreciation of fixed assets which are civil aircraft and yachts not used for commercial cargo, passenger or tourist transportation.

Passenger cars of 9 seats or less exclusively used for commercial passenger transportation or for tourism and hotel business include cars registered under the names of enterprises which register the passenger transportation, tourism or hotel business line in their business registration certificates.

Civil aircraft and yachts not used for commercial cargo, passenger or tourist transportation include civil aircraft and yachts of enterprises which register and account fixed asset depreciation but do not register cargo, passenger or tourist transportation in their business registration certificates.

g/ Depreciation of fixed assets which have been wholly depreciated.

h/ For works on land used for both production and business and other purposes, depreciations of the value of works on land corresponding to the area of land not used for production and business activities must not be included in reasonable expenses.

For works, such as offices, workshops ot shops for production and business activities, built on land leased or borrowed from organizations, individuals or households (not leased directly from the State or in industrial parks), enterprises may include their depreciations in deductible expenses if the following conditions are satisfied:

- The land lease or borrowing contract has been notarized at a notary public office under law; the lease or borrowing duration indicated in the contract must not be shorter than the minimum depreciation duration of fixed assets.

- Invoices of payment for the construction volumes, enclosed with the work construction contract and the documents on contract liquidation and finalization of the value of the works, bear the name, address and tax identification number of the enterprise.

- The works on land are managed, monitored and accounted under current regulations on fixed asset management.

2.3. Expense for raw materials, materials, fuel, energy and goods in excess of reasonable consumption limits.

Enterprises shall themselves set reasonable consumption limits for raw materials, materials, fuel, energy or goods used for production and business activities from the beginning of a year or a period of product manufacture and notify these limits to their managing tax agencies within 3 months after commencement of production using these consumption limits. In the course of production and business, if enterprises adjust and add these consumption limits, they shall notify such adjustment and addition to their managing tax agencies by the deadline for submitting enterprise income tax finalization declarations. If the State has set consumption limits for some raw materials, materials, fuels or goods, those limits shall be applied.

2.4. Expenses for the purchase of goods or services without invoices, for which lists of purchased goods and services (according to form No. 01/TNDN to this Circular, not printed herein) are allowed to be made, without such lists enclosed with payment documents for goods sellers or service providers in the following cases: purchase of agricultural, forest or fishery products from producers or fishermen; purchase of handicraft products made of jute, rush, bamboo, leaf, rattan, straw, coconut husk or shell, or raw materials taken from agricultural products, from non-business craftsmen; purchase of soil, rock, sand or gravel from local mining inhabitants; purchase of scraps from individual collectors; purchase of used domestic appliances from households or individuals, and purchase of some services from non-business individuals.

Enterprises’ at-law representatives or authorized persons shall sign lists of purchased goods and services and take responsibility for their accuracy and truthfulness. If listed goods or service purchasing prices are higher than market prices at the time of goods purchase, tax agencies shall, based on market prices of goods or services of the same or similar kinds at the time of purchase, re-determine these prices so as to re-calculate reasonable expenses upon determination of taxable income.

2.5. Salaries and wages in one of the following cases:

a/ Salaries, wages and other accounted amounts payable to laborers which have actually not been paid or have been paid without invoices or documents as prescribed by law.

b/ Bonuses to laborers which are not of salary nature, and bonuses for which the payment conditions are not specified in labor contracts or collective labor agreements.

c/ Salaries, wages and allowances payable to laborers which, upon the expiration of the time limit for submission of annual tax finalization dossiers, have actually not been paid, unless enterprises make deductions for setting up provision funds for addition to the subsequent year’s salary funds to ensure uninterrupted payment of salaries and not for any other purposes. Enterprises may decide on annual provision levels not exceeding 17% of their realized salary funds.

d/ Salaries and wages of owners of private enterprises or one-member limited liability companies (owned by a single individual); remunerations paid to founders and members of members’ councils or boards of directors who do not personally participate in administering goods production and trading or service provision activities.

2.6. In-kind expense for laborers’ clothing without invoice; in-kind expense for laborers’ clothing in excess of VND 1.5 million/person/ year; in-cash expense for laborers’ clothing in excess of VND 1 million/person/year.

2.7. Rewards for initiatives and innovations on which enterprises have no specific regulations or when councils for test of initiatives and innovations are not set up.

2.8. Expense for purchase of life insurance for laborers.

2.9. Travel allowances paid for annual leave in contravention of the Labor Code; allowances paid to laborers on domestic and overseas work-trips (excluding travel and accommodation expenses) in excess of twice the limit set by the Ministry of Finance for state cadres, public-servants and employees.

2.10. The following expenses paid for ineligible beneficiaries or improper purposes or in excess of prescribed limits:

a/ Additional expenses paid for female laborers which are allowed to be included in deductible expenses, including:

- Expense for job re-training for female laborers when their current jobs are no longer suitable and they must change to other jobs under enterprises’ development plannings.

This expense covers training fee (if any) + salary rank- or grade-based difference (covering 100% of trainees’ salaries).

- Salaries and allowances (if any) paid to teachers in crèches and kindergartens organized and managed by enterprises.

- Expense for additional medical check-ups in a year, such as examination of occupational and chronic diseases, or gynecological diseases for female laborers.

- Allowances paid to female laborers after the first or second delivery.

- Extra-time allowances paid under current regulations to female laborers who, for objective reasons, return to work during their post-natal or breastfeeding leave, including the case of payment of salaries in the form of products.

b/ Additional expenses for ethnic minority laborers which are allowed to be included in deductible expenses, including training fee (if any) plus salary rank- or grade-based difference (covering 100% salaries for trainees); housing subsidies, social insurance and health insurance premiums for ethnic minority laborers, if they have not yet received the State’s supports under regulations.

2.11. Deductions for contributing to social insurance funds, health insurance funds and trade union funds in excess of prescribed limits. Contributions to higher-level management funds and contributions to associations’ funds in excess of limits set by the associations.

2.12. Electricity or water charges paid under electricity or water contracts signed between owners of rented production and business places and electricity or water suppliers, without payment documents in one of the following cases:

a/ The renting enterprise paid electricity or water charges directly to the electricity or water supplier without making a list thereof (according to form No. 02/TNDN attached to this Circular, not printed herein) enclosed with electricity or water bills and the rent contract.

b/ The renting enterprise paid electricity or water charges directly to the owner of the rented place without making a list thereof (according to form No. 02/TNDN attached to this Circular, not printed herein) enclosed with electricity or water bills which match the actually consumed electricity and water volume, and the rent contract.

2.13. Rents for fixed assets in excess of the limits allocated according to the number of years for which the lessee has advanced rents.

Example: Enterprise A rents a fixed asset for 4 years and pays a lump-sum rent of VND 400 million. The fixed asset rent accounted as an annual expense is VND 100 million. The annual rent for fixed assets in excess of VND 100 million is not allowed to be included in reasonable expenses upon determination of taxable income.

Expenses for repair of rented fixed assets are allowed to be accounted as expenses or gradually allocated into expenses within 3 years, if it is indicated in the asset rent contract that the lessee is responsible for repairing the assets during the rent term.

Expenses for procuring assets other than fixed assets, such as expense for purchase and use of technical documents, patents, technology transfer licenses, trademarks, commercial advantages, etc., are allowed to be gradually allocated to business expenses within 3 years.

2.14. Interests on loans for production and business activities borrowed from entities other than credit institutions or economic organizations, in excess of 150% of the prime interest rate announced by the State Bank of Vietnam at the time of loan provision.

2.15. Interests on loans contributed to the charter capital or interests on loans paid corresponding to the insufficient charter capital amount to be contributed according to the schedule indicated in the enterprise’s charter, even when the enterprise has commenced production and business activities.

2.16. Deductions made for setting up of provisions for price decreases of goods left in stock, lost financial investments, bad debts and warranty for products, goods and construction and installation works, and such provisions used in contravention of the Finance Ministry’s guidance on deductions for setting up provisions.

2.17. Deductions made for setting up of job-loss allowance provision funds and severance allowances paid to laborers in contravention of current regulations.

2.18. Expenses pre-deducted for a certain period which have not yet been paid or have not been fully paid by the end of the period.

Pre-deducted expenses include those for regular overhaul of fixed assets and for activities of which turnover has been accounted but contractual obligations have not yet been fulfilled, and other pre-deducted expenses.

For fixed assets requiring regular overhaul, business establishments may pre-deduct estimated repair expenses in their annual expenses. If actual repair expenses are larger than pre-deducted estimated ones, business establishments may include the difference in reasonable expenses.

2.19. Expenses for advertisement, marketing, sales promotion and brokerage commission; expenses for reception, protocol and conferences; expense in support of marketing and payment discount; expense for press agencies’ newspapers given as presents or gifts directly related to production and business activities, in excess of 10% of total deductible expenses; for a new enterprise, such expenses in excess of 15% of deductible expenses for the first 3 years from the date of establishment. Total deductible expenses exclude restricted expenses specified at this Point; for commercial activities, total deductible expenses exclude costs of goods sold;

The above restricted expenses for advertisement, marketing, sales promotion and brokerage commissions exclude insurance brokerage commissions under the law on insurance business; commissions paid to agents selling goods at fixed prices; and the following expenses arising at home or abroad (if any): expense for market research, such as survey, exploration, interview, and information collection, analysis and assessment; expense for market development and survey; expense for consultants to conduct research and development and assist with market survey; expense for product display and introduction and organization of trade fairs and exhibitions, such as expense for opening showrooms or stalls for product display and introduction; expense for hiring places for product display and introduction; expense for raw materials and instruments to support product display and introduction; and expense for the transportation of products for display and introduction.

The restricted level of 15% for the first 3 years is applicable only to new enterprises that are granted business registration certificates on or after January 1, 2009, but not to new enterprises established as a result of consolidation, separation, split, merger, type or ownership transformation.

Example: Company A was established in 2008. In 2009, it made an enterprise income tax finalization report containing the following expense data:

- Expense for advertisement, marketing, sales promotion and brokerage commissions; expense for reception, protocol and conferences; expense in support of marketing and payment discount; expense for press agencies’ newspapers given as presents or gifts directly related to production and business activities, with adequate lawful invoices and documents: VND 250 million.

- Total expenses allowed to be included in expenses (excluding expenses for advertisement, marketing, sales promotion and brokerage commissions; expenses for reception, protocol and conferences; expense in support of marketing and payment discount; expense for press agencies’ newspapers given as presents or gifts directly related to production and business activities): VND 2 billion.

So, the maximum deductible expenses for advertisement, marketing, sales promotion and brokerage commissions; reception, protocol and conferences; expense in support of marketing and payment discount; expense for press agencies’ newspapers given as presents or gifts directly related to production and business activities, which are allowed to be included in expenses, will be:

VND 2 billion multiplied by (x) 10% equals (=) VND 200 million

Therefore, total deductible expenses included in the 2009 expenses will be:

VND 2 billion plus (+) VND 200 million equals (=) VND 2.2 billion

2.20. Foreign exchange rate difference loss resulting from the re-valuation of monetary items of foreign currency origin at the end of a fiscal year; exchange rate difference loss arising in the course of capital construction investment (in the stage before production and business activities are carried out).

2.21. Education aid granted to entities other than those defined in Clause a of this Section or paid without aid certification dossiers specified at Clause b below:

a/ Education aid covers aid for public, people-founded and private schools in the national education system under the education law, which is used for purposes other than contribution of capital to, or purchase of shares from, schools; material foundations for teaching, learning and other activities in schools; aid for regular school activities; scholarships granted directly or via agencies or organizations with the aid-mobilizing function under law to pupils and students in general education, vocational education and tertiary education institutions under the Education Law; aid for contests in subjects taught at schools with contestants being learners; aid for setting up study promotion funds under the law on education and training.

b/ An aid certification dossier comprises an aid certification record signed by the aid-granting business establishment’s representative, the aid-receiving lawful established education institution’s representative, and aid-receiving pupils and students (or agencies or organizations with the aid-mobilizing function) (made according to form No. 03/TNDN attached to this Circular, not printed herein), enclosed with goods purchase invoices and documents (if aid is in kind) or payment documents (if aid is in cash).

2.22. Healthcare aid granted to entities other than those defined in Clause a of this Section or granted without aid certification dossiers specified in Clause b below:

a/ Healthcare aid covers aid granted to healthcare establishments set up under the health law, which is used for purposes other than contribution of capital to, or purchase of shares from, those establishments; aid for medical equipment and instruments and medicines; aid for regular activities of hospitals and health centers; aid in cash for patients via agencies or organizations with the aid-mobilizing function under law.

b/ An aid certification dossier comprises an aid certification record signed by the aid-granting enterprise’s representative, the representative of aid recipient (or agency or organization with the aid-mobilizing function), made according to form No. 04/TNDN attached to this Circular (not printed herein), enclosed with goods purchase invoices and documents (for aid in kind) or payment documents (for aid in cash).

2.23. Aid for surmounting consequences of natural disaster to entities other than those defined in Clause a of this Section or provided without aid certification dossiers specified at Clause b below:

a/ Aid for surmounting consequences of natural disaster covers aid in cash or in kind for surmounting consequences of natural disaster provided directly to organizations established and operating under law; or provided to individuals suffering damage caused by natural disaster via agencies or organizations with the aid-mobilizing function under law.

b/ An aid certification dossier comprises an aid certification record signed by the aid-granting enterprise’s representative, the representative of the aid-receiving organization suffering damage caused by natural disaster (or agency or organization with the aid-mobilizing function) (made according to form No. 05/TNDN attached to this Circular, not printed herein), enclosed with goods purchase invoices and documents (for aid in kind) or payment documents (for aid in cash).

2.24. Aid for building houses of gratitude for the poor to entities other than those defined in Clause a of this Section or provided without aid certification dossiers specified in Clause b below:

a/ Eligible aid recipients include poor households as prescribed by the Prime Minister. Aid may be granted in cash or in kind directly or via agencies or organizations with the aid-mobilizing function under law for building houses for poor households.

b/ An aid certification dossier comprises an aid certification record signed by the aid-granting enterprise’s representative, the aid recipient (or agency or organization with the aid-mobilizing function) (made according to form No. 06/TNDN attached to this Circular, not primed herein); and the poor household certification document of the local administration, enclosed with goods purchase invoices and documents (for aid in kind) or payment documents (for aid in cash).

2.25. Business administration expenses allocated by an overseas company to its Vietnam-based permanent establishment in excess of the level calculated according to the following formula:

Business administration expense allocated by an overseas company to its Vietnam-based permanent establishment in a tax period

 

=

Taxed turnover of the Vietnam-based permanent establishment in a tax period

 

x

Total business administration expenses of the overseas company in a tax period

Total turnover of the overseas company, including turnovers of permanent establishments based in other countries in a tax period

Business administration expenses allocated by an overseas company to its Vietnam-based permanent establishment shall be counted from the time such Vietnam-based permanent establishment is set up.

The base for determining expenses and turnover of an overseas company is the overseas company’s financial statement audited by an independent audit company, indicating the overseas company’s turnover and management expenses, and management expenses allocated by the overseas company to its Vietnam-based permanent establishment.

Overseas companies’ Vietnam-based permanent establishments which do not yet implement accounting, invoice and voucher regulations and do not yet pay tax according to the declaration method may not account business administration expenses allocated by their overseas companies as reasonable expenses.

2.26. Expenses offset with other funding sources; expenses already paid from enterprises’ scientific and technological development funds.

2.27. Expenses not corresponding with taxed turnover.

2.28. Expenses for insurance business, lottery business and securities trading and other specific business activities in contravention of the Finance Ministry’s relevant guidance.

2.29. Fines for administrative violations, including violations of traffic law. violations of business registration or accounting and statistics regulations and violations of the tax law, and other fines for administrative violations as prescribed by law.

2.30. Expenses for capital construction investment at the investment stage for the formation of fixed assets; contributions to localities; contributions to mass and social organizations outside enterprises; charity aid, excluding aid for education, healthcare, surmounting consequences of natural disaster and building houses of gratitude for the poor as specified at Points 2.21, 2.22, 2.23 and 2.24 of this Part; expenses for purchase of golf course membership cards, and expense for golf playing.

2.31. Credited or refunded input value-added tax; enterprise income tax; personal income tax.

V. OTHER INCOMES

Other incomes are taxable incomes in a tax period which arise not from the business lines indicated in enterprises’ business registration certificates. Other incomes include:

1. Income from capital or securities transfer as guided in Part E of this Circular.

2. Income from real estate transfer as guided in Part G of this Circular.

3. Income from asset ownership or use right, including copyright royalties in any form paid for asset ownership or use right; royalties from intellectual property rights; and income from technology transfer under law. Asset lease in any form.

Income from intellectual property copyright royalties or technology transfer is the total collected sum of money minus (-) the prime cost or expense for the creation of the transferred intellectual property right or technology, minus (-) the expense for maintaining, upgrading or developing the transferred intellectual property right or technology and other deductible expenses.

Income from asset lease is the lease turnover minus (-) expenses for asset depreciation, renovation, repair and maintenance, expense for the lease of assets for sublease (if any) and other deductible expenses related to the asset lease.

4. Income from transfer or liquidation of assets (except real estate) and other valuable papers. This income is equals (=) turnover from asset transfer or liquidation minus (-) the residual book value of the transferred or liquidated asset at the time of transfer or liquidation, and deductible expenses related to the asset transfer or liquidation.

5. Income from savings and loan interests, including interests on savings deposited at credit institutions, interests on loans in any form under law, credit guarantee charges and other charges under loan provision contracts.

6. Income from foreign currency trading; foreign exchange rate difference profits actually arising from production and business activities in a period (excluding foreign exchange rate difference profits resulting from the re-valuation of monetary items of foreign currency origin at the end of a fiscal year and exchange rate difference profits arising at the stage of capital construction investment before production and business activities are carried out).

Income from foreign currency trading is the total sales of foreign currency minus (-) the total purchasing price of sold foreign currencies.

7. Refunded provisions for price decreases of goods in stock, lost financial investments, bad debts and warranty for products, goods and construction and installation works, which were previously deducted but are left unused or have not been used up in the period of their deduction.

8. Recovered bad debts which have been written off.

9. Payable debts with unidentifiable creditors.

10. Previous years’ omitted incomes from production and business activities, which are discovered by enterprises.

11. Difference between the amount of fines or compensations received from violators of economic contracts and the amount of fines or compensations paid for contract breaches under law.

12. Difference resulting from the re-valuation of assets under law for capital contribution or asset transfer upon enterprise separation, split, consolidation, merger or transformation, except the case of re-valuation of fixed assets upon transformation of state enterprises into joint-stock companies.

- For a fixed asset re-valuated upon capital contribution, it is the difference between the re-valuated price and the residual value of the fixed asset and shall be allocated to the years during which the fixed asset can still be depreciated at the enterprise receiving the contributed capital;

- For a fixed asset transferred upon enterprise separation, split, consolidation, merger or transformation (except the case of transformation of state enterprises into joint-stock companies), it is the difference between the re-valuated price and the residual book value of the fixed asset;

- For assets other than fixed asset, it is the difference between the re-valuated price and the book value.

13. Donations and gifts in cash or in kind; income in cash or in kind received from marketing or payment discounts, sales promotion prizes and other supports.

14. Compensations for fixed assets on land and monetary supports for relocation after subtracting related expenses, such as expense for relocation (transportation and installation expense), residual value of fixed assets and other expenses (if any). Particularly, after subtracting related expenses (if any), enterprises may use in accordance with relevant laws the remainder of compensations for fixed assets on land and monetary supports for enterprises to be relocated under competent state agencies’ plannings,.

15. Incomes related to goods sale or service provision which are not included in turnover, such as rewards for quick release of ships, tips for food and drink catering or hotel services, after subtracting expenses for generating such incomes.

16. Income from the sale of scraps and discarded products, after subtracting recovery and sale expenses.

17. Incomes from the contribution of equity capital, contribution of capital to joint ventures or economic cooperation at home, which are divided from pre-enterprise income tax incomes.

18. Income received from overseas goods production and trading or service provision activities.

Offshore-investing Vietnamese enterprises earning incomes from overseas production and business activities shall declare and pay enterprise income tax under Vietnam’s Law on Enterprise Income Tax currently in force, even when they are enjoying enterprise income tax exemption or reduction under the regulations of the host countries. The enterprise income tax rate used for calculating and declaring tax on incomes earned overseas is 25%. The incentive tax rate (if any) enjoyed by offshore-investing Vietnamese enterprises under the current Law on Enterprise Income Tax is not applicable.

Tax agencies may fix taxable income from overseas production and business activities of offshore-investing Vietnamese enterprises that violate regulations on tax declaration and payment.

When an income from an overseas investment project is already subject to enterprise income tax (or a similar tax) overseas, when calculating enterprise income tax payable in Vietnam, the offshore-investing Vietnamese enterprise is entitled to subtract the tax amount already paid overseas or paid on its behalf by its partner in the host country (including dividend tax), provided that the to-be-subtracted amount must not exceed the income tax amount calculated under Vietnam’s Law on Enterprise Income Tax. The exempt or reduced income tax amount of the offshore-investing Vietnamese enterprise for the profit earned from its overseas investment project under the law of the host country may also be subtracted upon determining the enterprise income tax amount payable in Vietnam.

Example 1: Vietnamese enterprise A receives an income of VND 800 million from an overseas investment project. This income is the remainder after an income tax is paid under the law of the host country. The payable income tax amount calculated under the host country’s Law on Enterprise Income Tax is VND 200 million. The paid enterprise income tax amount, after reduced by 50% under the host country’s Law on Enterprise Income Tax, is VND 100 million.

Tax on income from the overseas investment project under Vietnam’s Law on Enterprise Income Tax will be:

[(VND 800 million + VND 200 million) x 25%] = VND 250 million

The payable enterprise income tax amount (after subtracting the tax amount already paid in the host country) will be:

VND 250 million - VND 200 million = VND 50 million.

Example 2: Vietnamese enterprise A receives an income of VND 660 million from an overseas investment project. This income is the remainder after an income tax is paid in the host country. The enterprise income tax amount already paid under the host country’s regulations is VND 340 million.

Income tax declaration and payment will be made for the income from the enterprise’s overseas investment project under Vietnam’s Enterprise Income Tax Law as follows:

[(VND 660 million + VND 340 million) x 25%] = VND 250 million.

Enterprise A is entitled to subtract the tax amount already paid in the host country equivalent to the tax amount calculated under Vietnam’s Law on Enterprise Income Tax, which is VND 250 million. The tax amount already paid in the host country in excess of the tax amount calculated under Vietnam’s Law on Enterprise Income Tax, which is VND 90 million (340 - 250) is not allowed to be subtracted from the payable tax amount upon enterprise income tax declaration and payment in Vietnam.

The dossier to be submitted upon tax declaration and payment by an offshore-investing Vietnamese enterprise for the income from its overseas investment project comprises:

- The enterprise’s document on dividing the project’s profit.

- The enterprise’s financial statement certified by an independent audit organization.

- The enterprise’s income tax return for the project (copy certified by the project’s competent representative);

- The enterprise’s tax finalization record (if any);

- Certification of the tax amount paid overseas or document evidencing the tax amount paid overseas.

If an overseas investment project has not generated any taxable income (or is suffering losses), upon annual enterprise income tax declaration and finalization, the offshore-investing Vietnamese enterprise is only required to submit a financial statement certified by an independent audit organization or a competent agency of the host country and the project’s income tax return (copy certified by the project’s competent representative). Upon enterprise income tax calculation, losses arising from the overseas investment project are not allowed to be offset against incomes earned in Vietnam by the enterprise.

Income earned from an overseas investment project shall be declared in the enterprise income tax finalization of the year following the fiscal year when such income is earned or of the fiscal year coinciding the year when such income is earned if the enterprise has sufficient grounds and documents for determining the project’s income and paid income tax amount.

Example 3: Vietnamese enterprise A has an income from an overseas investment project in the 2009 fiscal year. It must declare this income in the income tax finalization declaration of the 2009 or 2010 fiscal year under Vietnam’s Law on Enterprise Income Tax.

For income from production and business activities of an investment project implemented in a country which has signed a double taxation avoidance agreement with Vietnam, Vietnamese enterprises investing in this country shall declare and pay tax in accordance with this agreement.

19. Incomes in cash or in kind received from aid sources, except aid specified in Clause 7, Section VI of this Part.

20. Other incomes provided for by law.

VI. TAX-EXEMPT INCOMES

1. Incomes from cultivation, husbandry and aquaculture of organizations established under the Law on Cooperatives.

2. Incomes from the provision of technical services directly for agriculture, including income from such services as irrigation and water drainage; soil ploughing and harrowing, and dredging of intra-field canals and ditches; prevention and control of crop and animal pests and diseases; and harvest of agricultural products.

3. For incomes from the performance of scientific research and technological development contracts; sale of products turned out from trial production and production with technologies applied for the first time in Vietnam, the maximum tax exemption duration is one (01) year from the date of commencing performance of the contracts or commencing trial production or production with technologies applied for the first time in Vietnam.

3.1. For tax-exempt income from the performance of scientific research and technological development contracts, the following conditions must be satisfied:

- The scientific research activity registration is certified;

- Such performance is certified by a competent science state management agency;

3.2. To be eligible for tax exemption for income from the sale of products turned out with technologies applied for the first time in Vietnam, such technologies must be certified by a competent science state management agency.

4. Income from goods production and trading or service provision activities of enterprises employing disabled, detoxified and HIV-infected laborers who account for at least 51% of the average number of laborers in a year.

Example: Enterprise A has 290 salaried laborers in January 2009; in April 2009. it employs other 12 laborers; in October, 2 laborers quit their jobs; in December, 3 other laborers quit their jobs. So, the average number of laborers in 2009 will be:

290

+

(12 laborers x 9 months) - (2 laborers x 3 months) - (3 laborers x 1 month)

= 290 laborers + 8 laborers = 298 laborers

12

Therefore, enterprise A’s average number of laborers in 2009 is 298; in case enterprise A employs 151 or more disabled laborers (298 x 51%), its income from goods production and trading or service provision activities will be exempt from tax.

- Tax-exempt incomes specified in this Clause exclude other incomes referred to in Section V, Part C of this Circular.

- For tax-exempt income specified at this Point, the following conditions must be fully satisfied:

4.1. For enterprises employing disabled laborers (including war invalids and diseased soldiers), a competent heath agency’s certification of the number of disabled laborers is required.

4.2. For enterprises employing detoxified laborers, detoxification establishments’ certification of the complete detoxification or a concerned competent agency’s certification is required.

4.3. For enterprises employing HIV-infected laborers, a competent heath agency’s certification of the number of HIV-infected laborers is required.

5. Income from job training activities exclusively reserved for ethnic minority people, the disabled, children in extremely disadvantaged circumstances and people involved in social evils. If an establishment also provides job training for other categories of people, tax-exempt income shall be determined based on the ratio between the number of ethnic minority people, the disabled, children in extremely disadvantaged circumstances and persons involved in social evils and the total number of trainees.

For tax-exempt income from job training activities specified at this Point, the following conditions must be fully satisfied:

- Job training establishments are set up and operate under regulations on job training.

- Lists of trainees being ethnic minority people, the disabled, children in extremely disadvantaged circumstances and persons involved in social evils are required.

6. Incomes divided from capital contribution, share purchase, joint venture or association with domestic enterprises, after contributed capital recipients, bond issuers or joint venture or association parties have paid enterprise income tax under the Law on Enterprise Income Tax, including those entitled to tax exemption or reduction.

Example: Enterprise B received contributed capital from enterprise A. Pre-tax income corresponding to enterprise A’s contributed capital in enterprise B is VND 100 million.

- Case 1: Enterprise B is not entitled to enterprise income tax incentives and has fully paid enterprise income tax, including enterprise A’s income, then the income enterprise A receives from capital contribution is VND 75 million [(VND 100 million - (VND 100 million x 25%)], and enterprise A will be exempt from enterprise income tax on this amount.

- Case 2: Enterprise B is entitled to a 50% reduction of the payable enterprise income tax amount and has fully paid enterprise income tax, including enterprise A’s income according to the reduced enterprise income tax amount, then the income enterprise A receives from capital contribution is VND 87.5 million [(VND 100 million - (VND 100 million x 25% x 50%)], and enterprise A will be exempt from enterprise income tax on this amount.

- Case 3: Enterprise B is entitled to enterprise income tax exemption, then the income enterprise A receives from capital contribution is VND 100 million, and enterprise A will be exempt from enterprise income tax on this amount.

7. Aid used for educational, scientific research, cultural, artistic, charitable, humanitarian and other social activities in Vietnam.

Aid beneficiaries that improperly use the aid shall calculate and pay enterprise income tax at 25% of the improperly used aid amount.

Aid beneficiaries defined in this Clause must be those established and operating under law and strictly observing the laws on accounting and statistics.

VII. DETERMINATION AND CARRYFORWARD OF LOSSES

1. Loss arising in a tax period is the negative taxable income amount.

2. After making tax finalization, loss-suffering enterprises may carry forward losses of the year of tax finalization to subsequent years’ taxable incomes. The maximum duration for loss carry forward is 5 consecutive years, counting from the year following the year the losses arise.

Enterprises shall determine by themselves losses to be offset against taxable incomes on the above principle. In the loss carry forward duration, newly arising losses (excluding losses carried forward from the previous period) are allowed to be carried forward for not more than 5 consecutive years, counting from the year following the year the losses arise.

When an agency competent to examine and inspect enterprise income tax finalization finds out a loss amount which an enterprise is allowed to carry forward is different from the loss amount determined by the enterprise itself, the loss amount allowed to be carried forward shall be determined based on the competent agency’s conclusion, and carried forward for not more than 5 consecutive years, counting from the year following the year the losses arise.

Past the 5-year duration, arising losses not yet fully offset are not allowed to be further offset against subsequent years’ incomes.

3. Enterprises subject to type or ownership transformation (including assignment or sale of state enterprises), merger, consolidation, separation, split, dissolution or bankruptcy shall finalize with tax agencies enterprise income tax amounts up to the time of issuance of decisions on form conversion, ownership transformation, merger, consolidation, separation, split, dissolution or bankruptcy. The old enterprises’ losses may be further carried forward to the new enterprises’ taxable incomes and must be monitored in detail according to the years they arise to ensure that they are carried forward for not more than 5 consecutive years, counting from the year following the year they arise.

4. Upon issuance of a dissolution decision of a joint-venture enterprise set up by different enterprises, any loss of the joint-venture enterprise shall be allocated to every enterprise to the joint venture. The enterprises to the joint venture may incorporate the loss amount allocated from the joint venture into their business results upon tax finalization while ensuring that such loss is carried forward for not more than consecutive 5 years, counting from the year following the year the loss arises.

VIII. DEDUCTION FOR SETTING UP OF ENTERPRISES’ SCIENTIFIC AND TECHNOLOGICAL DEVELOPMENT FUNDS

1. Enterprises established and operating under Vietnamese law may deduct up to 10% of their annual taxed income before calculating enterprise income tax for setting up their scientific and technological development funds. Before calculating enterprise income tax. enterprises may determine by themselves the level of deduction for setting up their scientific and technological development funds under regulations. Annually, enterprises which make deductions for setting up their scientific and technological development funds shall make reports on the setting up and use of these funds, and declare the level of deduction and deducted amounts in their enterprise income tax finalization declarations. Reports on the use of scientific and technological development funds shall be submitted together with enterprise income tax finalization declarations.

2. Past 5 years after being set up, if a scientific and technological development fund is left unused, has been improperly used or only less than 70% of this fund has been used, the enterprise shall remit into the state budget the enterprise income tax amount imposed on the deducted income which is left unused or has been improperly used and the interest accrued thereon.

The improperly used sum of money is not allowed to be included in the total sum of money used for the scientific and technological development purpose.

- The enterprise income tax rate used for calculating the recoverable tax amount is the tax rate applicable to an enterprise in the deduction duration.

- The interest rate used for calculating the interest on the recoverable tax amount imposed on the unused fund amount is the interest rate applicable to treasury bonds of a term of one year at the time of recovery, and the interest payment duration is two years.

Example: In 2009, Company A makes deductions for setting up its scientific and technological development fund during 2009-2013 at the level of 10% of the taxed income. At the beginning of 2014, when making the enterprise income tax finalization report for 2013, the company makes a 5-year report on the fund setting-up and use based on the annual reports on the fund setting-up and use as follows:

The deducted amount is VND 2 billion in 2009. By the end of 2013, the company has used only VND 1.2 billion for scientific research, accounting for only 60% of the deducted amount (1.2/2 x 100). The company shall pay an enterprise income tax retrospectively and be sanctioned as follows:

+ The enterprise income tax amount to be retrospectively collected because less than 70% of the fund has been used (presuming that the enterprise income tax rate applicable in the deduction duration is 25%):

(VND 2 billion - VND 1.2. billion) x 25% = VND 200 million

+ Interest on the enterprise income tax amount to be retrospectively collected (presuming that the interest rate applicable to treasury bonds of a term of one year is 12%):

VND 200 million x 12% x 2 years = VND 48 million

For the years following 2009, the level of deduction for setting up and use of the scientific and technological development fund shall be calculated on the principle that the fund amount deducted first must be used first as described above.

- The interest rate used for calculating the interest on the recoverable tax amount imposed on the improperly used fund amount is the level of fine for late payment under the Tax Administration Law, and the interest payment duration is counted from the time of fund setting-up to the time of recovery. The date of recoveiy is the date a violation is detected and recorded (unless a record is not required).

The determination of the time of fund setting-up for the improperly used sum of money as a basis for calculating the interest on the recovered tax amount imposed on the improperly used fund amount must adhere to the principle that the fund amount deducted first will be used first.

Example: Company B makes deductions for setting up its scientific and technological development fund as follows: VND 200 million, 300 million, 300 million, 500 million and 700 million in the 2009, 2010, 2011, 2012 and 2013 tax periods, respectively. In 2010, the company uses VND 200 million of this fund, including VND 40 million for improper purposes. Annually, the company makes a report on the fund setting-up and use. As of May 5, 2011, the tax agency, through inspection, delects this improperly used VND 40-million amount and makes a sanctioning record. The interest on the fine for late payment is 0.05%/day under the current Tax Administration Law.

Case 1: In 2009, the company uses VND 150 million for a scientific and technological scheme, then:

- The improperly used VND 40-million amount is determined to be taken from the deduction for the fund setting-up in the 2009 tax period.

- The enterprise income tax amount to be retrospectively collected due to the improper use of the fund will be:

VND 40 million x 25% = VND 10 million

- The number of days for calculating the late payment fine: 400, from April 1, 2010, to the end of May 5, 2011.

Interest payable as the late payment fine: VND 10 million x 0.05%/day x 400 days = VND 2 million

Case 2: In 2009, the company uses VND 200 million for a scientific and technological scheme, then:

- The improperly used VND 40-million amount is determined to be taken from the deduction for the fund setting-up in the 2010 tax period.

- The enterprise income tax amount to be retrospectively collected due to the improper use of the fund will be:

VND 40 million x 25% = VND 10 million

- The number of days for calculating the late payment fine: 35, from April 1, 2011, to the end of May 5, 2011.

Interest payable as the late payment fine: VND 10 million x 0.05%/day x 35 days = VND 175,000

3. Enterprises’ scientific and technological development funds must be used only for scientific and technological investment in Vietnam. These funds’ expenses must be evidenced with adequate lawful invoices and documents as prescribed by law.

4. Enterprises may not account their scientific and technological development funds’ expenses as deductible expenses upon determination of taxable income in a tax period.

5. For an operating enterprise which undergoes ownership transformation, is consolidated or merged, the new enterprise established as a result of such ownership transformation, consolidation or merger may take over the old enterprise’s scientific and technological development fund and shall take responsibility for the management and use of this fund.

If an enterprise still has an unused scientific and technological development fund upon its separation or split, the new enterprise established as a result of such separation or split may take over the old enterprise’s scientific and technological development fund and shall take responsibility for the management and use of this fund. The enterprises shall decide on and register with the tax agency the division of the scientific and technological development fund.

IX. ENTERPRISE INCOME TAX RATES

1. The enterprise income tax rate is 25%, except the cases specified in Clause 2 of this Part and cases eligible for preferential tax rates.

2. The enterprise income tax rate applicable to activities of prospecting, exploring and extracting oil and gas and other precious and rare natural resources in Vietnam is between 32% and 50%. Based on the location, mining conditions and reserves of mines, enterprises having investment projects on prospecting, exploration and extraction of oil and gas and other precious and rare natural resources shall send investment projects’ dossiers to the Ministry of Finance for further submission to the Prime Minister to decide on a specific tax rate on a case-by-case basis.

Other precious and rare natural resources mentioned in this Clause include platinum, gold, silver, tin, tungsten, antimony, gems and rare earths.

Part D

PLACES FOR TAX PAYMENT

1. Principles for determination

Enterprises shall pay tax in localities where they are headquartered. For an enterprise that has a dependent cost-accounting production establishment (including a processing and assembly establishment) operating in a province or centrally run city other than the locality where it is headquartered, the tax amount shall be calculated and paid in both the locality where the enterprise is headquartered and the locality where its production establishment is based.

The tax payment referred to in this Clause is not applicable to works, work items or dependent cost-accounting construction establishments.

2. Determination of tax amounts and procedures for tax declaration and payment

2.1. The enterprise income tax amount calculated and paid in a province or centrally run city where a dependent cost-accounting production establishment is based is the payable enterprise income tax amount in a period multiplied by (x) the ratio between expenses incurred by the production establishment and total expenses incurred by the enterprise.

The ratio of expenses is that between total expenses incurred by the dependent cost-accounting production establishment and total expenses incurred by the enterprise. The ratio of expenses is determined as follows:

Ratio of expenses incurred by the dependent cost-accounting production establishment

=

Total expenses incurred by the dependent cost-accounting production establishment

Total expenses incurred by the enterprise

Data used for determining the ratio of expenses are the enterprise’s income tax finalization data in the year preceding the tax year, which shall be determined by the enterprise itself as a basis for determining the payable amount and used for the enterprise income tax declaration and payment for subsequent years.

An operating enterprise which has different dependent cost-accounting production establishments in different localities shall determine by itself data used for determining the ratio of expenses incurred by the enterprise in the locality where it is headquartered and expenses incurred by its dependent cost-accounting production establishments, based on the 2008 enterprise income tax finalization data. This ratio will be used stably from 2009 onwards.

A new enterprise or an operating enterprise which increases or reduces its dependent cost-accounting production establishments in localities shall determine by itself the ratio of expenses in the first tax period in this case. From the subsequent tax period, the ratio of expenses shall be determined on the above principle.

2.2. Enterprises shall declare and pay enterprise income tax amounts arising in the localities where they are headquartered and the localities where their dependent cost-accounting production establishments arc based according to form No. 07/TNDN attached to this Circular (not printed herein). Based on enterprise income tax amounts calculated and paid on a quarterly basis and the ratio of expenses incurred by dependent cost-accounting production establishments, enterprises shall determine enterprise income tax amounts to be temporarily paid on a quarterly basis in the localities where they are headquartered and the localities where their dependent cost-accounting production establishments are based.

Example: Enterprise A is headquartered in Hanoi city and has its dependent cost-accounting production establishments in Hai Duong, Hai Phong and Bac Ninh. The ratio of expenses based on the total expenses incurred by the enterprise in 2008 was 0.2, 0.3, 0.3 and 0.2 in Hanoi, Hai Duong, Hai Phong and Bac Ninh. respectively. Enterprise A’s total payable enterprise income tax amount in the first quarter is VND 1 billion. From 2009, the above ratio of expenses will be stably applied if the enterprise does not increase or reduce its dependent cost-accounting production establishments in localities. The payable enterprise income tax amount in the first quarter is VND 200 million (VND 1 billion x 0.2) in Hanoi; VND 300 million in Hai Duong; VND 300 million in Hai Phong; and VND 200 million in Bac Ninh.

3. Procedures for transferring documents between state treasuries and tax agencies

Enterprises shall pay enterprise income tax arising in localities where they are headquartered to state treasury offices of the same level with tax agencies with which they register tax declaration and, at the same time, pay payable tax amounts for their dependent cost-accounting production establishments in other localities. Tax payment documents shall be made separately for each state treasury office collecting tax amounts into the state budget.

When an enterprise pays tax amounts in cash into the state treasury office in the locality where it is headquartered, such state treasury shall transfer such amounts and state budget collection documents to the concerned state treasury office for accounting its dependent cost-accounting production establishment’s tax amount as state budget revenue.

4. Tax finalization

An enterprise shall declare its enterprise income tax finalization in the locality where it is headquartered; the enterprise income tax amount the enterprise shall further pay is the finalized payable enterprise income tax amounts minus the amount temporarily paid in the locality where it is headquartered and in localities where its dependent cost-accounting production establishments are based. The enterprise income tax amount to be further paid or refunded upon tax finalization shall also be allocated according to the ratio applicable to the locality where the enterprise is headquartered and localities where its dependent cost-accounting production establishments are based.

The decentralization, management and use of tax revenues must comply with the State Budget Law.

5. Dependent cost-accounting units of enterprises practicing cost-accounting in the whole system that have incomes from activities other than their major business activities shall pay tax in provinces or centrally run cities where other activities are carried out.

Part E

DETERMINATION OF TAXED INCOMES FROM AND ENTERPRISE INCOME TAX ON CAPITAL OR SECURITIES TRANSFER

1. Taxable incomes

1.1. An enterprise’s income from capital transfer is income earned from the transfer of part or the whole of its capital amount invested in one or many other organizations or individuals (including the sale of the whole enterprise).

1.2. An enterprise’s income from securities transfer is income earned from the transfer of some or all of its securities invested in one or many other organizations or individuals.

Income from securities transfer covers income from the transfer of shares, bonds, fund certificates and securities of other kinds under regulations.

1.3. Enterprises having incomes from capital or securities transfer shall declare and pay enterprise income tax under the guidance in Part E of this Circular.

2. Tax bases

2.1. Taxed income:

a/ Taxed income from capital transfer is determined as follows:

Taxed income = Transfer price - Purchasing price of the transferred capital - Transfer expenses

Of which:

- The transfer price is the total actual value earned by the transferor under the transfer contract.

If installment or deferred payment is made under the capital transfer contract, the contract’s turnover excludes installment or deferred payment interests in the contractual term.

If the payment price is not stated in the transfer contract or when the tax agency has grounds to determine that the payment price does not match the market price, it may conduct inspection and fix the transfer price on the basis of its investigation documents or capital transfer prices in other cases at the same time applicable to the same economic organization or under similar transfer contracts.

- The purchasing price of the transferred capital amount is determined on a case-by-case basis as follows:

+ In case of transfer of contributed capital for enterprise establishment, it is the value of the capital amount at the time of capital contribution. Such capital value is determined on the basis of the transferor’s accounting books, invoices and documents at the time of capital contribution, and certified by parties to the enterprise or the business cooperation contract.

+ In case of capital redemption, it is the value of the capital amount at the time of redemption. The purchasing price shall be determined based on the contract on redemption of the contributed capital amount and payment documents.

If an enterprise making cost-accounting in foreign currency (approved by the Ministry of Finance) transfers the contributed capital in a foreign currency, the transfer price and purchasing price of the transferred capital amount shall be determined in foreign currency. If an enterprise making cost-accounting in Vietnam dong transfers the contributed capital in a foreign currency, the transfer price must be determined in Vietnam dong at the exchange rate applicable at the time of transfer, and the purchasing price of the transferred capital amount shall be determined in Vietnam dong at the exchange rate applicable at the time of capital contribution or redemption of the contributed capital amount.

- Transfer expenses are actual expenses directly related to the transfer with lawful evidence documents and invoices. If transfer expenses are incurred overseas, their original documents must be certified by a notary office or an independent audit organization of the country where such expenses are incurred, and translated into Vietnamese (with the certification of a duly authorized representative).

Transfer expenses include expense for carrying out legal formalities necessary for the transfer; charges and fees paid for carrying out transfer procedures; expenses for transaction, negotiation and signing of transfer contracts; and other expenses with evidence documents.

Example: Enterprise A contributes VND 400 billion, including VND 320 billion in the value of workshops and VND 80 billion in cash, for establishing a joint-venture enterprise to produce tissue papers. Then it transfers this contributed capital amount to enterprise B at the price of VND 550 billion. The book value of enterprise A’s contributed capital at the time of transfer is VND 400 billion and the capital transfer-related expense is VND 70 billion. In this case, income used for calculating enterprise income tax on this capital transfer is VND 80 billion (550 - 400 - 70).

b/ Taxed income from securities transfer in a period is the securities selling price minus (-) the purchasing price of the transferred securities and minus (-) expenses related to the transfer.

- The securities selling price is determined as follows:

+ For listed securities and public companies’ unlisted securities registered for trading at a securities trading center, it is the actual securities selling price (the order-matching price or agreement-based price) announced by the stock exchange or securities trading center.

+ For securities of companies other than those mentioned above, it is the transfer price indicated in the transfer contract.

- The securities purchasing price is determined as follows:

+ For listed securities and public companies’ unlisted securities registered for trading at a securities trading center, it is the actual securities purchasing price (the order-matching price or agreement-based price) announced by the stock exchange or securities trading center.

+ For securities purchased through auction, it is the price indicated in the notice of share auction-winning results of the share-auctioning organization and in the money receipt.

+ For securities other than those mentioned above, it is the transfer price indicated in the transfer contract.

- Transfer expenses are actual expenses directly related to the transfer with lawful evidence documents and invoices.

Transfer expenses include expense for carrying out legal formalities necessary for the transfer; charges and fees paid for carrying out transfer procedures; securities depository charge as prescribed by the State Securities Commission and indicated in receipts of the securities company; securities entrustment charge based on the trustee’s receipts; expenses for transaction, negotiation and signing of transfer contracts; and other expenses with evidence documents.

2.2. Enterprise income tax rate:

The enterprise income tax rate applicable to income from capital or securities transfer is 25%.

2.3. Determination of the payable enterprise income tax amount:

Payable enterprise income tax = Taxed income x Enterprise income tax rate

3. Tax declaration and payment

3.1. For capital- or securities-transferring Vietnamese enterprises and foreign enterprises

Enterprises’ income earned from capital or securities transfer will be determined as other income and declared as a taxable income upon enterprise income tax calculation.

3.2. For capital-transferring foreign enterprises and organizations conducting production and business activities in Vietnam not under the Investment Law or Enterprise Law

Capital transferees shall determine, declare, deduct and pay on behalf of foreign organizations the payable enterprise income tax amount

The deadline for submitting a tax declaration dossier is the 10th day counting from the date a competent agency approves the capital transfer, or from the date the parties agree to transfer capital under a capital transfer contract, in case capital transfer approval is not required.

A tax declaration dossier for income from capital transfer comprises:

- A declaration of enterprise income tax on capital transfer (made according to form No, 08/TNDN attached to this Circular, not printed herein);

- A copy of the transfer contract. A foreign-language transfer contract must be translated into Vietnamese with the following principal details: transferor; transferee; time of transfer; contents of transfer; rights and obligations of each contractual party; contractual value; and payment deadline, method and currency.

- A copy of a competent agency’s decision approving the capital transfer (if any);

- A copy of the contributed capital certification;

- Original documents of expenses.

In case a dossier is to be supplemented, the tax agency shall notify the required supplementation to the capital transferee right on the date of dossier receipt if it directly receives the dossier, or within 3 working days after receiving the dossier by post or email.

Tax declaration dossiers shall be submitted to tax agencies with which enterprises of capital-transferring foreign organizations or individuals register lax payment.

The tax payment deadline is the deadline for submitting tax declaration dossiers.

Part F

DETERMINATION OF TAXED INCOMES FROM AND ENTERPRISE INCOME TAX ON REAL ESTATE TRANSFER

I. TAXABLE INCOMES

1. Incomes from real estate transfer include income from the transfer of land use or lease rights; income from sublease of land of real estate-trading enterprises under the land law, regardless of whether there are infrastructure facilities or architectural works on such land.

Incomes from real estate transfer include:

- Income from the transfer of land use or lease rights; income from sublease of land of real estate-trading enterprises;

- Income from the transfer of land use or lease rights; income from sublease of land with assets thereon of real estate-trading enterprises, including:

+ Houses;

+ Infrastructure;

+ Architectural works;

+ Other assets, including agricultural, forest and fishery products (plants and animals);

- Income from the transfer of the house ownership or use right.

Income from the sublease of land of real estate-trading enterprises excludes the case in which enterprises lease only houses, infrastructure facilities or architectural works on land.

2. Enterprises earning incomes from real estate transfer shall declare and pay enterprise income tax under the guidance in Part F of this Circular.

II. TAX BASES

Bases for calculating income tax on real estate transfer include taxed income and tax rate.

Taxed income equals (=) taxable income minus (-) previous years’ losses from real estate transfer (if any).

1. Taxable income

Taxable income from real estate transfer is the turnover from real estate transfer minus the cost of the real estate and deductible expenses related to the real estate transfer.

1.1. Turnover from real estate transfer

a/ Turnover from real estate transfer is determined based on the actual transfer price (including surcharges and additional charges, if any) at the time of transfer.

If the transfer price of land use rights is lower than the land price prescribed by the provincial-level People’s Committee, the price prescribed by the provincial-level People’s Committee at the time of real estate transfer will be applied.

The time of determining taxed turnover is the time the seller hands the real estate to the purchaser, regardless of whether the purchaser has registered asset ownership or land use right or has land use rights established at a competent state agency.

When an enterprise that is allocated or leased by the State land for implementing investment projects to build infrastructure or houses for transfer or lease collects money advanced in any form by customers according to schedule, the time of determining turnover used for calculating the enterprise income tax amount to be temporarily paid is the time of money collection.

- If the enterprise collecting money from customers has determined expenses corresponding with turnover, it shall declare and temporarily pay an enterprise income tax amount based on turnover minus these expenses.

- If the enterprise collecting money from customers has not yet been able to determine expenses corresponding with turnover, it shall declare and temporarily pay an enterprise income tax amount equal to 2% of the collected sum of money which is not required to be included in the turnover used for calculating enterprise income tax in the year.

For enterprises which, prior to 2009, collected money from customers according to the schedule but did not yet declare and pay enterprise income tax on this sum of money, they shall declare this sum of money in 2009 for determining the enterprise income lax amount to be temporarily paid on the above principle.

When delivering real estate, the enterprise shall finalize the payable enterprise income lax amount. If the temporarily paid enterprise income tax amount is smaller than the payable enterprise income tax amount, the enterprise shall fully remit the deficit into the stale budget. If the temporarily paid enterprise income tax amount is larger than the payable enterprise income tax amount, the enterprise may either have the overpaid tax amount subtracted from the subsequent period’s payable enterprise income tax amount or have it refunded.

b/ Turnover used for calculating taxable income in some cases is determined as follows:

- When an enterprise that leases land from the State and pays annual land rents subleases such land with or without infrastructure or architectural works thereon, it is the rent paid periodically by the lessor under such lease contract. If the lessor advances rents for many years, turnover used for calculating taxable income shall be divided to the number of years for which rents have been advanced.

- When a credit institution receiving the value of land use rights used as loan security in substitution of the performance of the secured obligations transfers land use rights mortgaged as loan security, it is the transfer price of land use rights agreed by the involved parties.

- In case of transfer of land use rights distrained to secure judgment enforcement, it is the transfer price of land use rights agreed by the involved parties or the price determined by the valuation council.

The determination of turnover in the cases cases specified in this Item b must follow the principles referred to in Item a of this Point.

1.2. Real estate transfer expenses:

a/ Principles for determination:

- Deductible expenses upon determination of taxable income from real estate transfer in a tax period must correspond with turnover used for calculating taxable income.

- If an investment project is partially completed and gradually transferred according to the completion progress, overhead expenses for the project and direct expenses for the completed part of the project shall be divided by square meter of the transferred land for determining taxable income from the transferred land area, including expenses for internal roads and greenery; construction of water supply and drainage systems and transformer stations; compensations for assets on land; compensation, support and resettlement and organization of compensation, support and resettlement work, which are not yet subtracted from land use levies or land rents remittable into the state budget; land use levies remittable into the state budget and other expenses invested on land which are related to the land use or lease right transfer. The above expenses are allocated according to the following formula:

Expense allocated to the transferred land area

 

=

Total expenses for infrastructure investment

 

x

Transferred area land

Total land area allocated for the project (excluding the land area used for public purposes under the land law)

When part of the project’s non-transferred land area is used for other business activities, the above overhead expenses shall also be allocated to this land area for monitoring, accounting, declaration and payment of enterprise income tax for other business activities.

When an enterprise invests in building an infrastructure facility lasting for between over 1 year and 5 years and may finalize the value of the infrastructure facility only when the whole work is completed, when summing up real estate transfer expenses for the transferred land area, the enterprise may temporarily allocate actual infrastructure investment expenses based on the ratio of the transferred land area according to the above formula. After completing construction investment work, the enterprise may readjust infrastructure investment expenses temporarily allocated to the transferred land area to accord with the total value of the infrastructure facility. Upon adjustment, if the paid tax amount is higher than the payable tax amount on the real estate transfer, the enterprise may have the overpaid amount subtracted from the subsequent tax period’s payable tax amount or have it refunded under current regulations; if the paid tax amount is insufficient, the enterprise shall fully pay the deficit under regulations.

b/ Deductible expenses for real estate transfer include:

- Cost of the transferred land, determined according to the land use right origin, specifically:

+ For land allocated by the State with collection of land use levy or land rent, its cost is the land use levy or land rent actually remitted into the state budget.

+ For land transferred from another organization or individual, its cost shall be determined based on the contract and lawful payment document upon the receipt of its use or lease rights; if the contract and payment document are unavailable, such cost shall be calculated based on the price prescribed by the provincial-level People’s Committee at the time the enterprise receives the real estate transferred;

+ For land contributed as capital, its cost is the value of its use or lease rights indicated in the asset valuation record upon capital contribution;

If the cost of land indicated in the capital contribution record is higher than the market price at the time of capital contribution, the tax agency shall, based on the market land price at the time of capital contribution, re-determine the land price upon determination of taxable income.

+ If the enterprise has exchanged a construction work for state land, the cost of such land shall be determined based on the value of the exchanged work, unless competent state agencies’ separate regulations are applied.

+ The auction-winning price, in case of auction of land use or lease rights;

+ For inherited land under the civil law or donated land with unidentifiable cost, its cost shall be determined based on the land price decided by the provincial-level People’s Committee on the basis of the land price bracket prescribed by the Government at the time of inheritance or donation.

For land inherited or donated before 1994, its cost shall be determined based on the land price decided by the provincial-level People’s Committee in 1994 on the basis of the land price bracket specified in the Government’s Decree No. 87/CP of August 17, 1994.

+ For land mortgaged to secure loans or land distrained to secure judgment enforcement, its cost shall be determined on a case-by-case basis under the above guidance.

- Expense for land damage compensation.

- Expense for crop damage compensation.

- Compensation, support and resettlement expenses and expenses for organization of compensation, support and resettlement work under law.

For the above compensation, support and resettlement expenses and expenses for organization of compensation, support and resettlement work, which do not have evidence invoices, a list thereof shall be made, indicating the names and addresses of recipients; compensation or support amounts; signatures of recipients and certification of the administrations of the wards or communes where exist land areas eligible for compensation or support in accordance with the law on compensation, support and resettlement upon land recovery by the State.

- Charges and fees related to the grant of land use rights as prescribed by law.

- Expense for soil revamp and ground leveling.

- Expense for the construction of infrastructure, such as roads, power lines, water supply and drainage systems, post and telecommunications facilities, etc.

- The value of infrastructure and architectural works on land.

- Other expenses related to the transferred real estate.

An enterprise that conducts different business lines shall separately account expenses for each business line. If separate accounting cannot be conducted, overhead expenses shall be allocated based on the ratio between real estate transfer turnover and the total turnover of the enterprise.

Expenses already paid by the State or with capital of other sources may not be accounted as real estate transfer expenses.0

2. The enterprise income tax rate for real estate transfer is 25%.

3. Determination of payable enterprise income tax amounts:

The amount of enterprise income tax on real estate transfer in a tax period is the taxed income from real estate transfer multiplied by (x) the tax rate of 25%.

Income from real estate transfer must be separately determined for tax payment declaration. The incentive tax rates and the tax exemption and reduction duration guided in Part H of this Circular are not applicable to income from real estate transfer. Losses from real estate transfer, if any, are not allowed to be offset against income from production and business activities and other incomes but may be carried forward to subsequent years’ taxable income from real estate transfer (if any). The maximum loss carry forward duration is 5 consecutive years, counting from the year following the year the losses arise.

III. TAX DECLARATION, PAYMENT AND FINALIZATION

1. Enterprises shall submit tax declaration dossiers and pay enterprise income tax on income from real estate transfer to tax agencies of localities where exists the transferred real estate.

Declaration and payment dossiers and payment documents for income tax on real estate transfer arising in localities where exist the transferred real estates serve as bases for carrying out tax finalization procedures in localities where enterprises are headquartered.

2. For enterprises with irregular real estate transfer activities:

These enterprises shall declare the temporarily calculated enterprise income tax amount upon each real estate transfer.

An enterprise income tax declaration dossier upon each real estate transfer is the declaration of income tax on real estate transfer, made according to form No. 09/TNDN attached to this Circular (not printed herein).

Based on the declaration dossier of enterprise income tax on real estate transfer, the tax agency shall acknowledge the payable tax amount or adjust it and directly notify the taxpayer thereof within 3 working days after receiving the dossier.

At the end of a tax year, when making enterprise income tax finalization declarations, the income tax amount on real estate transfer must be separately accounted. If the tax amount paid as notified upon carrying out procedures for the grant of a land use right certificate is smaller than the payable tax amount under the enterprise income tax finalization declaration, the enterprise shall remit the deficit into the state budget. If the paid tax amount is higher than the payable tax amount under the tax finalization declaration, the overpaid tax amount is allowed to be subtracted (-) from the deficient amount of enterprise income tax on other business activities or subtracted (-) from the subsequent period’s payable enterprise income tax amount. Losses from real estate transfer, if any, must be separately monitored and may be carried forward to subsequent years’ taxable income from real estate transfer under regulations.

3. For enterprises with regular real estate transfer activities:

These enterprises shall declare, pay and finalize tax under the guidance in the Finance Ministry’s Circular No. 60/2007/TT-BTC of June 14, 2007.

If these enterprises favor tax payment upon each real estate transfer, they shall declare tax like enterprises with irregular real estate transfer activities.

At the end of a tax year, enterprises shall carry out procedures for enterprise income tax finalization for all real estate trading activities under declarations upon each real estate transfer and quarterly declarations of temporary payment of enterprise income tax. If the tax amount temporarily paid in the year is smaller than the payable tax amount under the enterprise income tax finalization declaration, the enterprise shall remit the deficit into the state budget. If the temporarily paid tax amount is higher than the payable tax amount under the tax finalization declaration, the overpaid tax amount is allowed to be subtracted (-) from the subsequent period’s payable enterprise income tax amount. Losses from real estate transfer, if any, may be carried forward to subsequent years’ taxable income from real estate transfer under regulations.

4. Enterprises shall declare enterprise income tax on real estate transfer according to declaration No. 09/TNDN attached to this Circular (not printed herein). Enterprise income tax temporarily paid from sums of money advanced by customers according to schedule shall be paid at tax agencies of localities where exists the transferred real estate, and declared in Part II of declaration No. 09/TNDN. When handing over real estate, enterprises shall officially finalize enterprise income tax on real estate transfer and declare it in Part I of declaration No. 09/TNDN.

5. Credit institutions which receive the value of real estate used as loan security in substitution of the performance of the secured obligation shall, when transferring such real estate, declare and remit income tax on real estate transfer into the state budget. In case of auction of real estate mortgaged as loan security, the proceeds from such auction shall be paid under the Government’s regulations on securing credit institutions’ loans, and tax shall be declared and paid under regulations. After paying these amounts, the remainder shall be returned to business organizations that have mortgaged fixed assets to secure loans. Credit institutions or organizations authorized by credit institutions to auction assets shall declare and deduct income tax on real estate transfer, and remit it into the state budget under their names, addresses, tax identification numbers and invoices. Such documents must clearly indicate the tax declaration and payment for the owners of auctioned assets used as loan security.

6. When a judgment enforcement agency auctions real estate used to secure judgment enforcement, the proceeds from such auction shall be used under the Government’s Decree on distraint and auction of land use rights to secure judgment enforcement. Organizations authorized to auction real estate shall declare and deduct income tax on real estate transfer and remit it into the state budget under their names, addresses, tax identification numbers and invoices. Such documents must clearly indicate the tax declaration and payment for the owners of auctioned assets used as judgment enforcement security.

Part G

ENTERPRISE INCOME TAX INCENTIVES

I. CONDITIONS AND PRINCIPLES FOR APPLICATION OF ENTERPRISE INCOME TAX INCENTIVES

1. Conditions for application of enterprise income tax incentives: Enterprise income tax incentives are applicable only to enterprises which observe accounting, invoice and document regulations and register and pay enterprise income tax as declared.

2. Principles for application of enterprise income tax incentives

2.1. In the duration of enjoying enterprise income tax incentives, enterprises which carry out different production and business activities shall separately account income from production and business activities eligible for enterprise income tax incentives (including preferential tax rates or tax exemption or reduction).

In a tax period, if an enterprise fails to separately account incomes from production and business activities eligible and ineligible for tax incentives, the income from production and business activities eligible for tax incentives equals (=) the total taxable income from production and business activities (excluding other incomes) multiplied by (x) the ratio (%) between the turnover from production and business activities eligible for tax incentives and the total turnover of the enterprise in the tax period.

2.2. New enterprises under investment projects eligible for enterprise income tax incentives are enterprises making business registration for the first time, excluding:

a/ Enterprises established as a result of separation, split, merger or consolidation under law;

b/ Enterprises established as a result of form conversion or ownership transformation, except the case of assignment, contracting or lease of state enterprises;

c/ New private enterprises or one-member limited liability companies whose owners were heads of individual business households which conduct the same production and business lines;

d/ New private enterprises, partnerships, limited liability companies or cooperatives with their at-law representatives (unless at-law representatives are other than capital contributors), partners or biggest capital contributors having participated in business activities in the capacity as at-law representatives, partners or biggest capital contributors in operating enterprises or enterprises dissolved within less than 12 months counting from the time of dissolution of old enterprises to the time of establishment of new enterprises.

An investment project is a combination of proposals to contribute medium- and long-term capital for conducting investment activities under the investment law.

2.3. In the same tax period, if having an income eligible for different preferential enterprise income tax rates and tax exemption and reduction durations, the enterprise may choose to apply the most beneficial incentive.

2.4. In a tax year within the duration of enjoying enterprise income tax incentives, if an enterprise fails to satisfy one of the conditions for enjoying lax incentives specified in this Circular, it is not entitled to tax incentives in that tax year and is subject to the tax rate of 25%.

2.5. In a tax period, an enterprise which conducts business activities eligible and ineligible for tax incentives shall account income from business activities eligible for tax incentives separately from income from those ineligible for tax incentives for separate payment declaration.

If business activities eligible for tax incentives sustain losses, while business activities ineligible for tax incentives (except real estate transfer activities) generate incomes (or vice versa), the enterprise may choose to offset such losses against taxable incomes from income-earning business activities. After offsetting, the remaining income is subject to the enterprise income tax rate of income-generating business activities.

2.6. Enterprise income tax incentives are not applicable to:

a/ Other incomes specified in Section V. Part C of this Circular.

b/ Income from activities of prospecting, exploring and extracting oil. gas and other precious and rare natural resources.

c/ Income from prize-winning game and betting business activities under law.

d/ Income from mineral extraction activities.

2.7. Enterprises established as a result of type or ownership transformation, separation, split, merger or consolidation shall pay enterprise income tax arrears and fines of the old enterprises and may take over enterprise income tax incentives for the remaining duration if still eligible for enjoyment of those incentives.

2.8. In the enterprise income tax exemption or reduction duration under regulations, if a competent examination and inspection agency detects a higher enterprise income tax amount, the enterprise will be entitled to enterprise income tax exemption or reduction under regulations. Depending on the severity of the enterprise’s violations, the competent examination and inspection agency shall apply sanctions on tax-related violations under regulations.

- In the enterprise income tax exemption or reduction duration under regulations, if a competent tax-finalization examination and inspection agency detects that the enterprise income tax amount eligible for tax exemption or reduction is smaller than the tax amount declared by the enterprise itself, the enterprise is entitled to exemption from or reduction of the enterprise income tax amount detected through examination or inspection. Depending on the severity of the enterprise’s violations, the competent examination and inspection agency shall apply sanctions on tax-related violations under regulations.

II. TAX RATE INCENTIVES

1. The preferential tax rate of 10% for fifteen (15) years is applicable to:

1.1. New enterprises under investment projects in geographical areas with extreme socio-economic difficulties specified in the Appendix to the Government’s Decree No. 124/2008/ND-CP of December 11, 2008.

1.2. New enterprises under investment projects in economic zones or hi-tech parks established under the Prime Minister’s decisions.

1.3. New enterprises under investment projects in the domains of:

- High technology under law; scientific research and technological development;

- Development of water plants, power plants, water supply and drainage systems; bridges, roads, railways; airports, seaports, river ports; airfields, stations and other infrastructure works of special importance as decided by the Prime Minister;

- Manufacture of software products.

2. For new large-scale and hi- or new-tech enterprises under investment projects in the domains specified at Point 1.3, Clause 1 of this Part in which investment should be particularly attracted, the duration of application of the preferential tax rate of 10% may be extended but must not exceed 30 years as decided by the Prime Minister at the proposal of the Minister of Finance.

3. The tax rate of 10% throughout the operation duration is applicable to incomes of enterprises operating in education-training, vocational training, healthcare, cultural, sports and environmental domains (below collectively referred to as socialized domains).

The Prime Minister shall promulgate a list of socialized domains.

4. The preferential tax rate of 20% for ten (10) years is applicable to new enterprises under investment projects in geographical areas with socio-economic difficulties specified in the Appendix to the Government’s Decree No. 124/2008/ND-CP of December 11, 2008.

5. The incentive tax rate of 20% is applicable throughout the operation duration for agricultural service cooperatives and people’s credit funds.

After the expiration of the duration of application of the tax rate of 10% specified at Point 1.1, Clause 1 of this Part, new agricultural service cooperatives and people’s credit funds in geographical areas with extreme socio-economic difficulties specified in the Appendix to the Government’s Decree No. 124/2008/ND-CPof December 11, 2008, shall switch to apply the tax rate of 20%.

6. The duration of application of preferential tax rates specified in this Part is counted consecutively from the first year an enterprise has turnover from activities eligible for tax incentive.

7. Upon the expiration of the duration of application of the preferential tax rates specified at Points 1, 2 and 4 of this Part, enterprises shall switch to apply the tax rate of 25%.

III. TAX EXEMPTION AND REDUCTION DURATIONS

1. Tax exemption for 4 years and a 50% reduction of payable tax amounts for 9 subsequent years are applicable to:

1.1. New enterprises under investment projects in geographical areas with extreme socio-economic difficulties specified in the Appendix to the Government’s Decree No. 124/2008/ND-CP of December 11, 2008;

1.2. New enterprises under investment projects in economic zones or hi-tech parks established under the Prime Minister’s decisions;

1.3. New enterprises under investment projects in the domains of:

- High technology under law; scientific research and technological development;

- Development of water plants, power plants, water supply and drainage systems; bridges, roads, railways; airports, seaports, river ports: airfields, stations and other infrastructure works of special importance as decided by the Prime Minister;

- Manufacture of software products.

1.4. New enterprises engaged in socialized domains in geographical areas with socio-economic difficulties or extreme socio-economic difficulties specified in the Appendix to the Government’s Decree No. 124/2008/ND-CP of December 11, 2008.

2. Tax exemption for 4 years and a 50% reduction of payable tax amounts for 5 subsequent years are applicable to new enterprises operating in socialized domains in geographical areas outside the list of those with socio-economic difficulties or extreme socio-economic difficulties specified in the Appendix to the Government’s Decree No. 124/2008/ND-CP of December 11, 2008.

3. Tax exemption for 2 years and a 50% reduction of payable tax amounts for 4 subsequent years are applicable to new enterprises under investment projects in geographical areas with socio-economic difficulties specified in the Appendix to the Government’s Decree No. 124/2008/ND-CP of December 11, 2008.

4. The tax exemption or reduction duration specified in this Section is counted consecutively from the first year an enterprise has taxable income from an investment project eligible for tax incentive; if an enterprise has no taxable income for the first 3 years, counting from the first year it has turnover from an investment project, the tax exemption or reduction duration is counted from the fourth year.

Example: In 2009, enterprise A is established under an investment project on software manufacture and earns taxable income, then the tax exemption or reduction duration is counted consecutively from 2009. If such project generates turnover in 2009 but the enterprise still has no taxable income by 2012, the tax exemption or reduction duration will be counted consecutively from 2012.

5. The tax exemption or reduction year is determined according to the tax period. The tax exemption or reduction duration is counted consecutively from the first tax period an enterprise has taxable income (excluding losses carried forward from previous tax periods). In the first tax period, if an enterprise has taxable income but the goods production and trading or service provision duration is less than 12 months, the enterprise may register with the tax agency to count the tax exemption or reduction duration right in that tax period or from the subsequent tax period. If the enterprise registers the tax exemption or reduction duration in the subsequent tax period, the first tax period’s payable tax amount must be determined for remission into the state budget under regulations. The tax period guided at Point 3 of Part B is not counted for determining tax exemption or reduction incentives specified at this Point.

IV. TAX REDUCTION IN OTHER CASES

1. Production, construction or transport enterprises are entitled to reduction of enterprise income tax amounts equivalent to actual additional expenses for female laborers as guided in Item a. Point 2.10, Section IV, Part C of this Circular if they can separately account these expenses.

Non-business units and offices of corporations not directly engaged in production and business activities are not entitled to tax reduction under this Point.

2. Enterprises which employ ethnic minority laborers are entitled to reduction of payable enterprise income tax amounts equivalent to actual additional expenses for ethnic minority laborers as guided in Item b. Point 2.10, Section IV, Part C of this Circular if they can separately account these expenses.

V. PROCEDURES FOR APPLICATION OF ENTERPRISE INCOME TAX INCENTIVES

Enterprises shall determine by themselves conditions for enjoyment of tax incentives, incentive tax rates, the tax exemption or reduction duration, and losses allowed to be subtracted (-) from taxed incomes in order to declare and finalize tax with tax agencies.

When conducting examination and inspection at enterprises, tax agencies shall examine conditions for enjoyment of tax incentives, enterprise income tax amounts eligible for exemption or reduction, and losses allowed to be subtracted from their taxable incomes which enterprises actually satisfy. If enterprises fail to satisfy conditions for enjoyment of incentive tax rates and tax exemption or reduction duration, tax agencies shall retrospectively collect tax and sanction tax-related administrative violation under regulations.

Part H

ORGANIZATION OF IMPLEMENTATION

1. This Circular takes effect 15 days after its publication in “CONG BAO” and applies from the 2009 tax period.

Enterprises which apply a fiscal year other than the calendar year and are ineligible for incentive enterprise income tax rates shall pay enterprise income tax at the rate of 25% from the 2009 tax period.

2. Enterprises which are eligible for enterprise income tax incentives (including incentive tax rates and tax exemption or reduction duration) under previous legal documents on enterprise income tax or under granted investment licenses or investment incentive certificates may continue to enjoy these incentives for the remaining duration. When their current enterprise income tax incentives, including incentive tax rates and tax exemption and reduction duration, are less beneficial than the incentives specified in this Circular, they will enjoy the tax incentives under this Circular for the remaining duration, counting from the 2009 tax period.

The remaining duration for enjoyment of tax incentives shall be determined by counting consecutively from the time of implementation of tax incentive regulations under previous legal documents on enterprise income tax or under granted investment licenses or investment incentive certificates.

The remaining incentive duration is the number of years during which an enterprise is still entitled to tax incentives (preferential tax rate and tax exemption or reduction duration) guided in this Circular minus (-) the number of years during which the enterprise has enjoyed tax incentives (preferential tax rate and tax exemption or reduction duration) under previous legal documents on enterprise income tax or under the investment license or investment incentive certificate granted by the end of 2008. The determination of the above remaining incentive duration must adhere to the principles below:

- By the end of the 2008 tax period, upon the expiration of the duration of enjoying tax rate incentives under previous legal documents on enterprise income tax or under the granted investment license or investment incentive certificate, an enterprise may not switch to apply tax incentives (preferential tax rate and tax exemption and reduction duration) for the remaining duration guided in this Circular.

- By the end of the 2008 tax period, if still in the duration of enjoying tax incentives (preferential tax rate and tax exemption and reduction duration) under previous legal documents on enterprise income tax or under the granted investment license or investment incentive certificate, an enterprise will continue to enjoy the preferential tax rate and tax exemption and reduction for the remaining duration as guided in this Circular.

- By the end of the 2008 tax period, if still being entitled to a preferential tax rate but no longer entitled to tax exemption duration because the tax exemption duration under previous legal documents on enterprise income tax or under the granted investment license or investment incentive certificate has just expired, an enterprise will not be entitled to tax exemption but only to tax reduction for the whole number of years guided in this Circular, and will apply the preferential tax rate for the remaining duration guided in this Circular.

- By the end of the 2008 tax period, if still being entitled to a preferential tax rate and tax reduction under previous legal documents on enterprise income tax or under the granted investment license or investment incentive certificate, an enterprise will have the remaining number of years eligible for tax reduction equal to the number of years eligible for tax reduction guided in this Circular minus (-) the number of years during which the enterprise has enjoyed tax reduction, counting to the end of the 2008 tax period, and will continue to apply the preferential tax rate for the remaining duration guided in this Circular.

- By the end of the 2008 tax period, an enterprise that is no longer entitled to tax exemption or reduction duration under previous legal documents on enterprise income tax or under the granted investment license or investment incentive certificate, will not be entitled to tax incentives (preferential tax rate and tax exemption or reduction duration) guided in this Circular.

3. An enterprise currently enjoying enterprise income tax exemption or reduction under previous legal documents on enterprise income tax or under the granted investment license or investment incentive certificate, but not an incentive tax rate, may continue to enjoy tax exemption or reduction for the remaining duration, and shall switch to apply the tax rate of 25% from the 2009 tax period.

4. For an enterprise entitled to tax exemption or reduction under previous legal documents on enterprise income tax or under the granted investment license or investment incentive certificate which, by the end of the 2008 tax period:

4.1. Has no turnover yet, its tax exemption or reduction duration shall be counted from the first year of generation of taxable income; if no taxable income is generated during the first 3 years, counting from the first year of generation of turnover, its tax exemption or reduction duration will be counted from the fourth year;

4.2. Has turnover for less than 3 years, counting from the time turnover is earned, its tax exemption and reduction duration will be counted from the first year of generation of taxable income; if no taxable income is generated during the first 3 years, counting from the first year of generation of turnover, its tax exemption and reduction duration will be counted from the fourth year, specifically:

For an enterprise with the first tax period from 2007 and having turnover, its tax exemption and reduction duration will be counted consecutively from the first year of generation of taxable income. If, by the end of 2009, no taxable income is generated, its tax exemption or reduction duration will be counted from 2010.

4.3. Has turnover for 3 years or more, its tax exemption and reduction duration will be counted from the 2009 tax year, specifically:

For an enterprise with the first tax period prior to 2007 and having turnover but no taxable income yet and for which the tax exemption or reduction duration is not counted yet, its tax exemption or reduction duration will be counted from the 2009 tax period.

5. Enterprises operating in socialized domains prior to January 1, 2009, which apply a tax rate higher than 10%, may switch to apply the tax rate of 10% for their operations in these domains from January 1, 2009.

6. For operating enterprises which have from 2009 investment projects on building new production chains, expanding production scales, renewing technologies, improving the eco-environment or raising the production capacity, incomes from these projects will be ineligible for enterprise income tax incentive. Prior-to- 2009 investment projects currently enjoying enterprise income tax incentives (for expanded investment) will continue to enjoy these incentives for the remaining duration, and increased incomes from expanded investment projects which are currently subject to the tax rate of 28% will be switched to be subject to the tax rate of 25%.

Enterprises with investment projects on expanded production which, by December 31, 2008, are under construction investment and will be completed and put into production and business in 2009, may continue to enjoy the enterprise income tax exemption and reduction duration for the increased incomes from these projects under Circular No. 134/2007/TT-BTC; such increased incomes are subject to the tax rate of 25% and the enterprise income tax exemption and reduction duration will be counted from 2009 when these projects are put into production and business.

Upon submitting enterprise income tax finalization declarations of the 2008 tax period, enterprises shall notify tax agencies of investment projects on expanded production which are under construction investment.

7. Enterprises having investment license, business registration certificate or investment certificate granted before the Socialist Republic of Vietnam became a full-fledged member of the World Trade Organization (i.e., January 11, 2007) which have incomes from business activities (except textile and garment-related activities) and are enjoying enterprise income tax incentives for their satisfaction of the export rate conditions under legal documents on foreign investment in Vietnam, domestic investment promotion and enterprise income tax, will continue enjoying enterprise income tax incentives under these legal documents until 2011.

This Circular replaces:

- The Finance Ministry’s Circular No. 134/2007/TT-BTC of November 23, 2007, guiding the implementation of the Government’s Decree No. 24/2007/ND-CP of February 14, 2007, which details the implementation of the Law on Enterprise Income Tax.

- Enterprise income tax declaration No. 02/TNDN (attached to Circular No. 60/2007/TT-BTC) applicable to business organizations which declare enterprise income tax from land use or lease right transfer.

9. To annul enterprise income tax-guiding provisions promulgated by the Ministry of Finance and other branches which are contrary to this Circular.

10. The settlement of tax-related problems, tax finalization, exemption and reduction, and the handling of violations of the law on enterprise income tax before the 2009 tax period comply with relevant enterprise income tax-guiding regulations promulgated before the 2009 tax period.

11. In case the Socialist Republic of Vietnam has acceded to or signed a treaty or international agreement which provides for enterprise income tax payment differently from the guidance in this Circular, the provisions of that treaty or international agreement prevail.

Organizations and enterprises should promptly report problems arising in the course of implementation to the Ministry of Finance for timely settlement.

 

 

FOR THE MINISTER OF FINANCE
VICE MINISTER




Do Hoang Anh Tuan

 

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Thuộc tính Văn bản pháp luật 130/2008/TT-BTC

Loại văn bảnThông tư
Số hiệu130/2008/TT-BTC
Cơ quan ban hành
Người ký
Ngày ban hành26/12/2008
Ngày hiệu lực18/01/2009
Ngày công báo...
Số công báo
Lĩnh vựcDoanh nghiệp, Thuế - Phí - Lệ Phí
Tình trạng hiệu lựcHết hiệu lực 10/09/2012
Cập nhật4 năm trước
Yêu cầu cập nhật văn bản này

Download Văn bản pháp luật 130/2008/TT-BTC

Lược đồ Circular No. 130/2008/TT-BTC of December 26, 2008, guiding the implementation of a number of articles of Enterprise Income Tax Law No. 14/2008/QH12, and guiding the implementation of the Governments Decree No. 124/2008/ ND-CP of December 11, 2008, which details the implementation of a number of articles of the Law on Enterprise Income Tax.


Văn bản hiện thời

Circular No. 130/2008/TT-BTC of December 26, 2008, guiding the implementation of a number of articles of Enterprise Income Tax Law No. 14/2008/QH12, and guiding the implementation of the Governments Decree No. 124/2008/ ND-CP of December 11, 2008, which details the implementation of a number of articles of the Law on Enterprise Income Tax.
Loại văn bảnThông tư
Số hiệu130/2008/TT-BTC
Cơ quan ban hànhBộ Tài chính
Người kýĐỗ Hoàng Anh Tuấn
Ngày ban hành26/12/2008
Ngày hiệu lực18/01/2009
Ngày công báo...
Số công báo
Lĩnh vựcDoanh nghiệp, Thuế - Phí - Lệ Phí
Tình trạng hiệu lựcHết hiệu lực 10/09/2012
Cập nhật4 năm trước

Văn bản gốc Circular No. 130/2008/TT-BTC of December 26, 2008, guiding the implementation of a number of articles of Enterprise Income Tax Law No. 14/2008/QH12, and guiding the implementation of the Governments Decree No. 124/2008/ ND-CP of December 11, 2008, which details the implementation of a number of articles of the Law on Enterprise Income Tax.

Lịch sử hiệu lực Circular No. 130/2008/TT-BTC of December 26, 2008, guiding the implementation of a number of articles of Enterprise Income Tax Law No. 14/2008/QH12, and guiding the implementation of the Governments Decree No. 124/2008/ ND-CP of December 11, 2008, which details the implementation of a number of articles of the Law on Enterprise Income Tax.