Công văn 2967/TCT-CS

To: Departments of Taxation in central-affiliated cities and provinces

On July 17, 2012, the Ministry of Finance promulgated the Circular No. 123/2012/TT-BTC guiding a number of articles of the Law on Enterprise income tax No. 14/2008/QH12 and guiding the implementation of a number of articles of the Government's Decree No. 124/2008/NĐ-CP dated December 11, 2008, Decree No. 122/2011/NĐ-CP dated December 27, 2011, detailing the implementation of a number of articles of the Law on Enterprise income tax (superseding the Circular No. 130/2008/TT-BTC dated December 26, 2008, the Circular No. 177/2009/TT-BTC dated September 10, 2009, the Circular No. 40/2010/TT-BTC dated March 23, 2012, and the Circular No. 18/2011/TT-BTC dated February 10, 2011 of the Ministry of Finance)

In order to help tax officials and tax payers promptly grasp the changes and supplements in the enterprise income tax policy, the General Department of Taxation encloses with this Dispatch the document introducing the “New contents in the Circular No. 123/2012/TT-BTC compared to the Circular No. 130/2008/TT-BTC on enterprise income tax”.  The Departments of Taxation must disseminate this document to local tax payers and tax officials./.

NEW CONTENTS IN THE CIRCULAR NO. 123/2012/TT-BTC COMPARED TO THE CIRCULAR NO. 130/2008/TT-BTC ON ENTERPRISE INCOME TAX

(promulgated together with the Dispatch No. 2967/TCT-CS dated August 17, 2012 of the General Department of Taxation)

1. Converting enterprise income tax period:

In the Circular No. 130/2008/TT-BTC the tax period of an enterprise is determined in calendar year. If the fiscal year is different from the calendar year, the tax period is determined based on the applied fiscal year

The Circular No. 123/2012/TT-BTC specifies the tax period conversion as follows:

Where enterprises convert their tax period (including the conversion of tax period from calendar year to fiscal year or vice versa), the tax period converting year must not exceed 12 months.  If an enterprise enjoying enterprise income tax incentives converts its tax period, it may choose: enjoying incentives in the year of tax period conversion, or paying tax at the common rate in the year of tax period conversion and enjoy tax incentives in the succeeding year.

Example 1: For enterprise A, the tax period in 2011 is the calendar year. At the beginning of 2012,  it converts to the fiscal year from April 01 this year to March 31 of the following year, the tax period of the year of conversion ( 2012) from the January 01, 2012 by the end of March 31, 2012 (3 months). The tax period of the following year shall start from April 01, 2012 by the end of March 31, 2013.

Example 2: In the same case, but enterprise A enjoys the preferential enterprise income tax (2 years tax exemption of , 50% reduction of enterprise income tax in the next 3 years), and the tax exemption starts in 2009, then enterprise A shall enjoy the preferential tax as follows: tax exemption in 2009, 2010; 50% reduction in tax in 2011, 2012 and 2013.

If the enterprise chooses 50% reduction in enterprise income tax in the tax period of the year of conversion 2012, it shall continue the enjoy 50% reduction in enterprise income tax of the year of conversion and the subsequent tax year (fiscal year 2012 from April 01, 2012 to March 31, 2013).

If the enterprise does not choose 50% reduction in enterprise income tax in the tax period of the year of conversion 2012 (the tax is declared and paid at the common rate in the year of conversion 2012), the enterprise shall enjoy 50% reduction in enterprise income tax in the fiscal year 2012 (from April 01 to March 31, 2013) and the fiscal year 2013 (from April 01, 2013 to March 31, 2014).

Before: Not prescribed.

2. Determination of chargeable income:

The Circular No. 123/2012/TT-BTC adds the following contents: the incomes from real estate transfer, project transfer (not attached to the transfer of the right to use or to rent land); incomes from the transfer of the right to execute the project, the right to carry out mineral resources exploration, extraction and processing as prescribed by law, must be separately recorded to declare and pay enterprise income tax at the rate of 25%, and are not eligible for enterprise income tax incentives, and must not be offset against the income or losses of other business and production. When an enterprise engages in real estate transfer, project transfer (not attached to the transfer of the right to use or to rent land); incomes from the transfer of the right to execute the project, the right to carry out mineral resources exploration, extraction and processing as prescribed by law, it may offset their profits against their losses.

3. Revenue for calculating chargeable income:

a/ Revenue for calculating taxable income from the lease of property that the lessee pays in advance for many years:

The Circular No. 123/2012/TT-BTC has amended the provisions on revenue for calculating taxable income from the lease of property that the lessee pays in advance for many years as follows:

For the lease of property, it is the rent paid by instalments under the lease contract. If the lessee  pays in advance for many years, the revenue for calculating taxable income shall be distributed to the number of years being paid in advance, or calculated according to the revenue from lump-sum payment.

The enterprise shall choose one of the two methods of calculating revenue for calculating taxable income based on the accounting regime, actual invoices and expenses as follows:

- The annual rental equal (=) the amount paid in advance divided by (:) number of years of advance payment.

- The entire rental of the number of years of advance payment

If an enterprise enjoying enterprise income tax incentives selects the method for determining revenue for calculating taxable income being the total rental paid in advance for many years by the lessee, the enterprise income tax amount eligible for tax exemption or tax reduction shall be determined based on the total enterprise income tax amount of the years being paid in advance divided by (:) the number of years of advance payment.

Before: The revenue for calculating taxable income is distributed to the number of years of advance payment.

b) The assessable revenue from the golf business being the money from selling memberships, golf tickets, and other receipts in a tax period is calculated as follows:

- For daily sale of golf tickets and memberships, the revenue for calculating chargeable income is the amount collected from the sale of tickets and membership in the tax period.

- For daily sale of golf tickets and memberships paid in advance for many years, the revenue for calculating chargeable income of each year is the amount collected divided by the number of years of the membership.

4. The deductible and non-deductible expenses when calculating taxable income:

a) The documents of assets and goods lost because of natural disaster, epidemics, or fire included in deductible expenses

The Circular No. 123/2012/TT-BTC prescribes: for enterprises in industrial zones, export processing zones, and economic zones, the written confirmation of local authority is replaced by the written confirmation of the management board of the industrial zone, export processing zone, or economic zone where such incidents happen

b) Damaged goods because of expiry, damage, or natural biological and chemical changes:

Damage goods because of expiry, damage, or natural biological and chemical changes that are not compensated shall be included in deductible expenses when calculating taxable income.

The Circular No. 123/2012/TT-BTC does not require that they must lie within the limit set by the enterprise to be included in deductible expenses when calculating taxable income. Damage goods because of expiry, damage, or natural biological and chemical changes that exceed the limit set by the enterprise, the proportion that exceed the limit shall not be included in deductible expenses when calculating taxable income”.

c) Depreciation of fixed assets:

- The Circular No. 123/2012/TT-BTC supplements that: For devices and furniture classified as fixed assets in recreation areas, canteens, locker rooms, bathrooms, or infirmaries, the vocational training facility may include the depreciation in deductible expenses when calculating taxable income

- The Circular No. 123/2012/TT-BTC has amended the provisions on conditions for depreciation of constructions on land such as office buildings, workshops, and stores serving the production and business built on the land rented or borrowed from organizations, individuals or households (not from the State of industrial zones), in particular:

“- Having the contract to rent or to borrow land between the enterprise and the land owner. The representative of the enterprise must be responsible before law for the accuracy on the contract.”

Before: The contract to rent or borrow land must be notarized at notarization agencies as prescribed by law. The period of renting or borrowing in the contract must not be shorter than the minimum depreciation period of the fixed assets.

- The Circular No. 123/2012/TT-BTC amends the fixed asset depreciation expenses in some cases of fixed assets being suspended from production and business. In particular:

“ In case the fixed assets under the ownership of the enterprise are being used for production and business, and suspended because of the seasonal production for less than 9 months, or for repair or relocation, for periodic maintenance for less than 12 months, then are brought back to operation, the enterprise may depreciate them, and the fixed asset depreciation expenses in the suspension shall be included in deductible expenses when calculating taxable income.

Enterprises must keep and provide the documents and explanation for the fixed asset suspension at the request of tax authorities.”

Before: The enterprise must send notification to the tax authorities, specifying the reason for suspension of fixed asset when submitting the enterprise income tax finalization declaration of the year when the assets are suspended at the latest.

- The Circular No. 123/2012/TT-BTC guides the determination of the value of long-term land tenancy that is not depreciable when purchasing tangible fixed assets being houses or constructions attached to the long-term land tenancy. In particular:

When an enterprise purchases tangible fixed assets being houses or constructions attached to the long-term land tenancy, the value of land tenancy must be separately calculated and recorded as intangible fixed assets. The input value of tangible fixed assets being houses and constructions is the actual purchase price plus (+) the expenses on putting the  tangible fixed assets into use.

The land tenancy value shall be determined according to the contractual purchase price of the assets in accordance with the market price but not be lower than the price of land set by the People's Committees of central-run provinces and cities at the time of asset purchase. When an enterprise purchases tangible fixed assets being houses or constructions attached to the long-term land tenancy, and fails to separately calculate the land tenancy value, the land tenancy value shall be determined according to the price set by People’s Committees of central-affiliated cities and provinces at the purchase time.

Before: When an enterprise purchases tangible fixed assets being houses or constructions attached to the long-term land tenancy, the value of land tenancy must be separately calculated and recorded as intangible fixed assets. The input value of tangible fixed assets being houses and constructions is the actual purchase price plus (+) the expenses on putting the tangible fixed assets into use.

+ If the land tenancy value of the assets purchased with VAT invoices is separable, the land tenancy value written on the invoice is an intangible fixed asset, and the depreciation must not be included in deductible expenses.

+ If the assets are purchased without VAT invoices, the land tenancy is an intangible fixed asset, and the depreciation must not be included in deductible expenses. The land tenancy value is determined market price, but must not be lower than the price set by People’s Committees of central-affiliated cities and provinces at the time of purchase.

d) The formulation and management of the consumption norm of material, fuel, energy, and goods serving production and business:

The Circular No. 123/2012/TT-BTC only requires enterprises to notify the tax authority in charge within 3 months as from the commencement of their business of the main norm of the primary products of the enterprise without notifying all the norms of the products they provide. The main norm of the primary products shall be decided by the enterprise themselves, in particular:

Enterprises shall formulate and manage the consumption norms of material, fuel, energy, and goods serving production and business. Such norms are formulated at the beginning of the year or the production period, and kept at the enterprise, and presented at the request of the tax authority.

The enterprise must notify the main norm of primary products to the tax authority in charge within the first 3 months of the year or within 3 months as from the commencement of their business (applicable to newly established enterprises or enterprises that add new products, and the norms of such products must be notified). The List of main norms of the primary products shall be decided by the enterprise themselves.

If a enterprises adjusts the consumption norm of raw material notified to tax authority, it must notify the tax authority again. The deadline of the notification is the deadline of submitting the enterprise income tax finalization declaration.

If the norms of some materials, fuel, or goods are already set by the State, the norms set by the State shall apply. If the enterprise fails to notify the norms to the tax authority on time, the tax authority is entitled to fix the expense on materials and goods during the inspection.. The expenses on materials and goods must comply with law provisions on tax administration.

Supplement: Enterprises must notify the main norms of their primary products to the tax authority in charge within the first 3 months of the year. If an enterprise fails to notify the norms to the tax authority on time, the tax authority is entitled to fix the expense on materials and goods during the inspection. The expenses on materials and goods must comply with law provisions on tax administration.

e) Expenses on salaries:

 - The Circular No. 123/2012/TT-BTC adds the following contents: if the conditions for and the rates of bonuses and life insurance for employees are not specified in the labor contract; collective labor agreement, financial charter of the enterprise; the bonus regulation prescribed by the President of the Board of Directors, General Director, Director in accordance with the financial charter f the enterprise, such bonuses and payments for life insurance must not be included in deductible expenses when calculating taxable income.

Before: no payments for life insurance for employees.

- The Circular No. 123/2012/TT-BTC amends the provisions on making a provision fund equal 17% of the salary fund to supplement the salary fund of the succeeding year, in particular:

Explain the salary fund. The salary fund is the total amount paid in that fiscal year by the deadline of submitting the finalization as prescribed (March 31 every year), excluding the salary provision fund of the previous year spent in the fiscal year).

f) Other expenses

* The Circular No. 123/2012/TT-BTC adds some deductible expenses when calculating taxable income, including:

- The expenses on purchasing assets being tools, circulating packages… that are not classified as fixed assets shall be gradually distributed to the business expense in the period but must not exceed 2 years.

- If an enterprise purchases air tickets vie e-commerce websites for employees to go on business trips serving their business, the documents as the basis for including in deductible expenses are the e-tickets and boarding passes, and the payment invoices of the enterprise.

- The commissions payable to the distributors of network marketing companies are included in deductible expenses. The organization that receive the commission must include it in taxable income. The individual that receive the commission must pay personal income tax.

Before: Limited to 10% of the total expense.

- The expenses on donating newspapers to the contributors to the revolution, the invalids, soldiers and officers on islands, in remote areas, or impoverished areas are included in deductible expenses without limitation.

Before: Limited to 10% of the total expense.

- Enterprises that have expenses on HIV/AIDS prevention and control at the workplace as prescribed by the Ministry of Health, including: training HIV/AIDS specialists, disseminating HIV/AIDS prevention and control to employees, providing consultancy, examination and test for HIV, supports for HIV sufferers being employees of the enterprise, are included in deductible expenses when calculating taxable income.

Before: not included in deductible expenses when calculating enterprise income tax.

* The Circular No. 123/2012/TT-BTC adds some non-deductible expenses when calculating taxable income, including:

- The amount of the provision fund for redundancy pay (unless the enterprise not obligated to participate in unemployment insurance as prescribed by law is allowed to make the provision fund for redundancy pay.

Before: Enterprises may make provision funds for redundancy pay as prescribed in the Circular No. 82/2003/TT-BTC dated 14, 2003 of the Ministry of Finance on the making, management, use and recording of provision funds for redundancy pay of enterprises.

- The contribution to the managerial budget.

Before: The contribution to the managerial budget being the contributions of enterprises belonging to State corporation, State-owned one-member limited companies, established by competent State agencies; the contributions of enterprises belonging to General companies established under the Prime Minister’s Decision No. 90 and Decision No.91; the contributions of enterprises affiliated to Ministers, are included in deductible expenses when calculating enterprise income tax.

- The periodic accrued expenses that are not used or completely used.

The accrued expenses include: accrued expenses on the periodic major repairs of fixed assets, accrued expenses on the activities of which the revenue has been recorded, but the contractual obligation is not completely fulfilled (even the enterprise leases its assets for many years and collect money in advance, and record it in the revenue of the collecting year) and other accrued expenses.

If the income for calculating enterprise income tax is recorded but the expenses do not completely arise, the enterprise may accrue the expenses on deductible expenses corresponding to the recorded revenue when calculating taxable income. When the contract expires, the enterprise must calculate the exact actual expenses based on the valid invoices to increase (if the actual amount is bigger than the accrued expense) or decrease (if the actual amount is smaller than the accrued expense) the expense in the tax period when the contract expires.

The enterprise may accrue on the expense on periodic repair of fixed assets according to the estimate to annual expense. If the actual expense is bigger than the accrued amount under the estimate, the enterprise may add the difference to deductible expenses.

- The loss on exchange rate differences during the fundamental construction investment in fixed assets must comply with the Circular of the Ministry of Finance on handling exchange rate differences.

- Input value-added tax on fixed assets being cars with 9 seats or less that exceed the limit may be deducted as prescribed in legal documents on value-added tax.

5. Recalculating incomes:

a) Differences due to reassessment of assets:

The Circular No. 123/2012/TT-BTC amends and supplements as follows:

The increase due to reassessing assets (excluding land tenancy) is the difference between the reassessed value and the residual value of the asset in accounting books that is included in other incomes in the tax period when calculating taxable income of the enterprise that has the reassessed assets.

The increase due to reassessing land tenancy in order to transfer when dividing, splitting, consolidating, merging, or converting enterprises; in order to contribute capital in investment project of building houses and infrastructures for sales that is included in other incomes in the tax period when calculating taxable income of the enterprise that has the reassessed land tenancy.

The increase due to reassessing the land tenancy contributed to enterprises for production and business is included in other incomes of the enterprise that has the reassessed land tenancy within 10 years as from the contribution. The must notify the number of years of distributing to other incomes when submitting the enterprise income tax settlement declaration of the year when such income is first declared. If the contributor transfers the contributed capital before the 10-year period expires, the income from the transfer of contributed capital being the land tenancy must be included in the income from real estate business in the period.

Enterprises that receive contributed assets and transferred assets when dividing, splitting, consolidating, merging, or converting enterprises may depreciate or gradually distribute to expense according to the reassessment (unless the non-depreciable land tenancy as prescribed).

Before:

According to the Circular No. 40/2010/TT-BTC dated March 23, 2010 of the Ministry of Finance, guiding the calculation of taxable income from the difference due to reassessing assets:

- The difference due to reassessing fixed assets for capital contribution is gradually distributed to other incomes when calculating the taxable income of the enterprise that has the contributed reassessed assets. The gradual distribution of the difference due to the reassessment of fixed assets to other incomes of the enterprise that have the contributed reassessed assets is calculated according to the residual year of fixed asset depreciation of the enterprise that receives the contribution.

- The difference due to the reassessment of long-term land tenancy for contribution or transfer when dividing, splitting, consolidating, merging, or converting enterprises. If the receiver put the land tenancy received into production and business but is not allowed to depreciate the land tenancy value, the difference due to the reassessment of land tenancy is temporarily not subject to enterprise income tax. If the enterprise continues to transfer the land tenancy or contribute the land tenancy to another unit after the contribution, the contribution receiver must declare and pay enterprise income tax.

b) The Circular No. 123/2012/TT-BTC adds some other incomes, including:

- The incomes from project transfer (not attached to the transfer of the right to use or to rent land); incomes from the transfer of the right to execute the project, the right to carry out mineral resources exploration, extraction and processing as prescribed by law: in the group of incomes from real estate transfer, must not be offset against the income from other business and other incomes of the enterprise.

- The restoration of the provisions (except for the restoration of the provision against devaluation of goods in stock, provisions against the loss of financial investments, provisions for bad debts; the restoration of the provisions for warranty that have been made but the provision period has expired or the provision is not used or not completely used; the restoration of the provisions for salary fund, 

6. Tax-free income:

a/ Adding incomes from the transfer of Certified Emissions Reductions (CERs). The tax exemption period does not exceed 01 year as from the date of issue of the CER.

Investment projects under Clean Development Mechanism (CMD) are investment projects the employ new, advanced, and eco-friendly technology, of which the emission reduction of glass-house gases is accepted by the CDM Board (an organization established and authorized to supervise CDM projects by the countries participating in the Climate Convention), and issued with CERs.

b/ Adding more subjects regarding tax-free income from vocational training:

Incomes from vocational training provided for ethnic minorities, the disabled, impoverished children, offenders, detoxifying people, detoxified people, HIV/AIDS sufferers.

Before: not including detoxifying people, detoxified people, HIV/AIDS sufferers.

c/ the Circular No. 130/2008/TT-BTC prescribes:

The income from the business of enterprises that employ disabled, detoxified people, HIV sufferers, that make up at least 51% of the average number of workers in a year of the enterprise, is tax-free income.

The Circular No. 123/2012/TT-BTC amends and supplements as follows:

Income from the production and business of enterprises that employ disabled, detoxified people, HIV sufferers, that make up at least 30% of the average number of workers in a year of the enterprise.

Enterprises eligible for tax exemption as prescribed in this Clause are enterprises of which the average number of workers in a year is 20 people or more, excluding enterprises engaged in financial or real estate business.

7. Calculating and transferring losses:

The Circular No. 123/2012/TT-BTC specifies the transfer of losses as follows:

a/ An enterprise that suffers losses after the tax settlement must continuously transfer all the losses to the taxable income of the succeeding years. The continuous loss transfer period must not exceed 5 years as from the year succeeding the loss-making year.

- The enterprise shall temporarily transfer the loss to the taxable income of the quarters after making the tentative tax declaration and officially transfer the loss to the succeeding year after making the annual tax settlement declaration.

- Enterprises making losses between the quarters in the same fiscal year are allowed to offset the loss of the previous year against the next quarter of that fiscal year. When making enterprise income tax settlement, the enterprise shall calculate and continuously transfer all the loss of the year to the taxable income of the succeeding years as prescribed.

b/ Enterprises converting the enterprise forms, ownership forms (including handing over or selling enterprises to the State), or divide, split, merge, consolidate, or dissolve their enterprises must carry out tax settlement with the tax authorities when obtaining the decisions on converting the enterprise forms, ownership forms, declaring bankruptcy, dividing, separating, consolidating, or dissolving their enterprises from competent agencies. The loss of an enterprise arising before converting, merging, or consolidating must be closely monitored in the loss-making year, and shall be offset against the taxable income in the same year after converting, merging, or consolidating, or shall continue to be transferred to the taxable incomes of the succeeding years after converting, merging, or consolidating in order to ensure that the loss is not continuously transferred for more than 5 consecutive years as from the year succeeding the loss-making year.

c/ Discarding: If an enterprise being a joint-venture of other enterprises suffer losses upon the decision on dissolution, the losses shall be distributed to each enterprise in the joint-venture. The enterprises participating in the joint-venture may include the losses distributed from the joint-venture to their income statement when finalizing tax. The losses must not be continuously transfer for more than 5 years as from the year succeeding the loss-making year of the joint-venture enterprise.

8. Enterprise income tax rates

c/ the Circular No. 123/2012/TT-BTC adds the following content:

The enterprise income tax rate on the exploration and extraction of rare and valuable resources (except for petroleum) is 50%; In case 70% or more of the rare and valuable resources mine lies in localities with extreme socio-economic difficulties on the list of localities enjoying enterprise income tax incentives promulgated together with the Government's Decree No. 124/2008/NĐ-CP dated December 11, 2008, the tax rate of 40% shall apply.

9. Enterprise income tax on income from capital and securities transfer

The Circular No. 123/2012/TT-BTC adds the following contents:

a/ In case a joint-stock company issues more shares to mobilize capital, the difference between the issue price and the face value is not subject to enterprise income tax.

b/ If a joint-stock company earns income by swapping their shares while dividing, separating, merging and consolidating, such income is subject to enterprise income tax.

C? The enterprise transferring securities and receiving assets or other financial interests (shares, fund certificates…) in stead of cash, and earning income, is subject to enterprise income tax. The value of assets, shares, fund certificates… is calculated based on their sale prices on the market at the receiving time.

10. Enterprise income tax on income from real estate transfer:

The Circular No. 123/2012/TT-BTC adds the following contents:

a) Taxable objects

Enterprises subject to tax on income from real estate transfer include: enterprises from all economic sectors and business lines earning income from real estate transfer, real estate companies earning income from land lease.

Income from real estate transfer includes: income from the transfer of the right to use or to rent land (including the transfer of the project attached to the transfer of the right to use, rent land as prescribed by law); income from the lease of land granted by real estate companies as prescribed by law provisions on land, regardless of the existence of the infrastructures or constructions attached to the land; income from the transfer of houses and constructions attached to the land, including the property attached to such houses or constructions if the value of the property is not separated when transferring, whether or not the right to use or to rent land is transferred; the income from the transfer of property attached to land, income from the transfer of the house tenancy or ownership.

Before: the Circular No. 130/2008/TT-BTC only prescribes:

- Income from the transfer of the right to use or to rent land: does not specify the inclusion of the transfer of the project attached to the transfer of the right to use, rent land as prescribed by law.

- Adding: income from the transfer of houses and constructions attached to land, including the property attach to such houses and constructions if the value of property is not separated, whether or not the right to use, to rent land is transferred.

b) Basis for tax calculation

- The revenue from real estate transfer is calculated based on the actual prices of real estate transfer under the real estate sale or transfer contract in accordance with law (including the surcharges, if any).

If the price of transferring the right to use land under the real estate sale or transfer contract is lower than the land price set by People’s Committees of central-affiliated cities and provinces (hereinafter referred to as provincial People’s Committees) at the contract-signing time, the land price set by provincial People’s Committees at the contract-signing time shall apply.

Before: If the price of transferring the right to use land is lower than the land price set by People’s Committees of central-affiliated cities and provinces, the price set by People’s Committees of central-affiliated cities and provinces at the contract-signing time shall apply.

- For enterprises being allocated land by, or renting land from, the State to execute projects of investment in infrastructure or houses to transfer or to lease out, that receive deposits from their customers in all forms, the time for calculating the revenue for calculating tentative enterprise income tax is the time of collecting money from their customers. In particular:

…..

+ If the enterprise takes deposits from their customers and can calculate the cost corresponding to the revenue, the enterprise shall declare and pay enterprise income tax at 1% on the income collected, and such income must not be included in the income for calculating enterprise income tax in the year.

Before: according to the Circular No. 130/2008/TT-BTC the proportion of preliminary enterprise income tax payment is 2% of the revenue from the deposits.

- The taxable income of an enterprise that leases out land is the rent paid by the renter by installments according to the lease contract. If the renter pays in advance for many years, the revenue for calculating taxable income shall be distributed to the number of years being paid in advance, or calculated according to the revenue from lump-sum payment. The selection of revenue from lump-sum payment is only determined after the enterprise has fulfilled every financial responsibility with the State, ensuring the duties with the renter until the land lease period expires.

If an enterprise enjoying enterprise income tax incentives selects the method for determining revenue for calculating taxable income being the total rent paid in advance for many years by the renter, the enterprise income tax amount eligible for tax exemption or tax reduction shall be determined based on the total enterprise income tax amount of the years being paid in advance divided by (:) the number of years being paid in advance by the renter.

If before 2012, an enterprise leases out land (paid in advance for many years) and has determined the revenue for tax calculation by distributed to the number of years being paid in advance, and the land lease period is still unexpired in 2012, such enterprise may determine the revenue for tax calculation distributed annually or the revenue from lump-sum payment for the remaining years in the land lease period.

Before: according to the Circular No. 130/2008/TT-BTC if a enterprise leases out its land for many years, it may only choose one of the method of calculating assessable revenue distributed to each year.

11. Enterprise income tax incentives:

a) The principles for applying enterprise income tax incentives are amended and supplemented as follows:

- Enterprises newly established from the investment projects eligible for enterprise income tax incentives are enterprises that apply for business registration for the first time, excluding the following cases:

....

+ Enterprises established from the enterprise form conversion, ownership conversion (including the newly-established enterprises that inherit the property, places, business line… of the old enterprises to carry on the production and business activities).

Adding: the newly-established enterprises that inherit the property, places, business line… of the old enterprises to carry on the production and business activities are not eligible for enterprise income tax incentives.

.....

+ Private enterprises, partnership companies, limited liability companies, joint-stock company or cooperatives newly established of which the legal representatives are the biggest contributors that have participated in the business activities as legal representatives, partners, or biggest contributors of the enterprises that have been dissolved within less than 12 months ago as from the time of dissolving the old enterprises until the new enterprises are established.

Adding: Joint-stock companies in the above case are also ineligible for enterprise income tax.

- The enterprise income tax incentives for enterprises newly established from investment projects are only applicable to the income from production and business activities that satisfy the conditions for investment incentives specified in the first Certificate of business registration of the enterprises. When an enterprise changes its Certificate of business registration without affecting the fulfillment of the conditions for tax incentives, such enterprise shall continue enjoying the tax incentives for the remaining time. If an enterprise adds more business lines or expand its business scale (such as installing new production lines...), the income from the additional business activities are not eligible for enterprise income tax incentives.

- When an enterprise newly established from an investment project in the locality enjoying investment incentives, the income earned from the business within such locality is eligible for enterprise income tax incentives. If its incomes are earned from production and business activities in both the investment incentive locality and a non-incentive locality, it must separately calculate the income earned within the investment incentive locality to enjoy enterprise income tax incentives.

- The enterprise income tax incentives are not applicable to:

+ Other incomes prescribed in Article 7 of the Circular No. 123/2012/TT-BTC.

+ Incomes from the exploration and extraction of petroleum and other rare and valuable natural resources.

+ Incomes from the business of prized games or gambling as prescribed by law.

+ Incomes from mineral extraction.

+ Incomes from the services provision subject to special excise duty as prescribed by the Law on special excise duty.

Before: No income from the business of enterprises subject to special excise duty.

- During the period of enterprise income tax incentives as prescribed, if competent agencies discover that:

The enterprise income tax eligible for tax incentives is increased compared to that declared by the enterprise (even when the enterprise has not declared to enjoy tax incentives), the enterprise shall enjoy the enterprise income tax incentives applicable to the enterprise income tax amount discovered during the inspection (including the increased enterprise income tax amount and the enterprise income tax amount eligible for tax incentives declared without determining the preferential tax amount).

b) The Circular No. 123/2012/TT-BTC guides the offsetting of profits and losses between activities eligible for tax incentives and other business activities, other incomes. In particular:

In case in the same tax period, an enterprise engages in business activities eligible for tax incentives that make losses, business activities ineligible for tax incentives, or earns other incomes from business activities (excluding the incomes from real estate transfer, project transfer (not attached to the transfer of the right to use or to rent land); incomes from the transfer of the right to execute the project, the right to carry out mineral resources exploration, extraction and processing as prescribed by law), the enterprise shall offset them against the taxable income from the profitable activities selected by the enterprise.

If an enterprise is making losses in previous tax period (during the loss transfer period), it must transfer the loss proportionally to the profitable activities. If an enterprise fails to separate the loss of each activities, it shall first transfer the loss to the income from the activities eligible for enterprise income tax incentives, then transfer the remaining loss (if any) to the income from activities ineligible for enterprise income tax incentives (excluding the incomes from real estate transfer, project transfer (not attached to the transfer of the right to use or to rent land); incomes from the transfer of the right to execute the project, the right to carry out mineral resources exploration, extraction and processing as prescribed by law). After transferring the loss on the above principles, if various business activities still generate profits or make losses (excluding the incomes from real estate transfer, project transfer (not attached to the transfer of the right to use or to rent land); incomes from the transfer of the right to execute the project, the right to carry out mineral resources exploration, extraction and processing as prescribed by law), the enterprise may offset them against the taxable income from the profitable activities. The remaining income after offsetting shall be subject to the enterprise income tax rate based on the tax rate on the profitable activities.

c) The Circular No. 123/2012/TT-BTC adds the following contents:

- The preferential tax rate of 10% during the entire operation is applicable to:

The income from the publishing activities as prescribed by the Law on Publishing.

The publishing activities include: publishing, printing and issuing the publications as prescribed by the Law on Publishing.

The publications must comply with Article 4 of the Law on Publishing and Article 2 of the Government's Decree No. 111/2005/NĐ-CP on August 26, 2005. In case the provisions of the Law on Publishing or the Decree No. 111/2005/NĐ-CP and the legal documents related to publishing are changed, the new provisions shall apply.

- The preferential tax rate of 20% during the entire operation is applicable to: Micro financial institutions.

Micro financial institutions prescribed in this Clause are organizations established and operated under the Law on credit institutions.

12/ Effects

a. This Circular takes effect on September 10, 2012 and applies to the enterprise income tax period in 2012 and later.

b. This Circular supersedes the Circular No. 130/2008/TT-BTC on December 26, 2008, the Circular No. 177/2009/TT-BTC on September 10, 2009, the Circular No. 40/2010/TT-BTC on March 23, 2010, the Circular No. 18/2011/TT-BTC on February 10, 2011 of the Ministry of Finance.

c. The contents guiding the enterprise income tax promulgated by the Ministry of Finance and the Departments at variance with the guidance in this Circular are annulled.

d. The tax arrears, tax settlement, tax exemption, tax reduction and the handling of violations of law provisions on enterprise income tax before the tax period 2012 must comply with the corresponding provisions on enterprise income tax promulgated before 2012.

The above is new contents in the Circular No. 123/2012/TT-BTC compared to the Circular No. 130/2008/TT-BTC on enterprise income tax./.