CORPORATE INCOME TAX

OVERVIEW

Basic Tax concepts

Legislation
In Vietnam, Corporate Income Tax (“CIT”) is governed the by
Law on Corporate Income Tax and its relevant guidance.
Other laws and regulations may also have impacts on CIT,
such as MOF’s regulation on (i) provisions, (ii) depreciation
and (iii) market price determination.
 OVERVIEW

Basic Tax concepts

Scope of CIT law
• Enterprises established and operating under the Enterprise Law, Investment Law, Law on Credit Institutions,
Insurance Business Law, Securities Law, Petroleum Law, Commercial Law and other legal normative documents
in the forms: Joint Stock Companies; Limited Liability Companies; Joint-Venture Companies; Private
Enterprises; State Enterprises, Lawyer Offices, Private Notary Public Offices; The parties in the contracts of
business cooperation; The parties in oil product sharing contract, Oil and Gas Joint Venture Enterprise and Joint
Operating Companies.
• Public services units, non-public services unit with production and business of goods and services having
income in all areas.
• Organizations established and operating under the Cooperative Law
• Foreign enterprises having permanent establishment (“PE”) in Vietnam: they will pay CIT on income sourced
from Vietnam, regardless of whether such income is attributable to the activities of the PE, plus income sourced
from overseas as long as such income is attributable to the PE in Vietnam.
 OVERVIEW

Basic Tax concepts

The Definition of PE

Branch, operational office,

plant, workshop,
transportation means, mine,
oil/gas field, and any location
where natural resources are
exploited;
Establishment providing
Construction site, construction services including consultancy
works, or installation and services provided through its
assembly works; employees or another entity;

Representative in Vietnam in
Agent for a foreign company; a case
 OVERVIEW

Basic Tax concepts

CIT calculation

Taxable Deductible Other

Turnover taxable
income expenses
income
 OVERVIEW

Basic Tax concepts

CIT calculation

Loss carried
forward
Assessable Taxable Exempt
from
income income income
previous
year
 OVERVIEW

Basic Tax concepts

CIT calculation

Science
Assessable Technology
Tax payble Tax rate
income fund
allocation
 OVERVIEW

Tax Period
Tax period is the Gregorian calendar year or the fiscal
year of the enterprises if it is different from calendar
year. If the first tax period or last tax period is 3 months
or less, business establishments are allowed to combine two
consecutive tax periods into one.

Example:
Company A established and registered its business on 10
July 2020. Its applicable fiscal year is 1 January to 31
December. The first tax period of Company A shall be the
period from 10 July 2020 to 31 December 2020.
If Company A registered its business on 1 November 2020, it
can choose to have the first tax period from 1 November
2020 to 31 December 2021.
 OVERVIEW

Tax Rate
• From 1 January 2016, standard CIT rate is 20%
• CIT rate for business in prospecting, exploration and exploitation of petroleum and gas and other rare and
precious natural resources will be from 32% to 50% depending on each project/business.
• Public-service units which have the activities of goods and services business subject to CIT but these units can
account the revenue but cannot account and determine the cost and income of the business operation shall
declare and pay CIT by the rate% on the revenue of sales of goods and services, as follows:
o For services: 5%
o For goods business: 1%
o For other activities (including activities of education, health, art performance): 2%

Example:
Non-business unit A has the activity of house letting, the revenue from the house letting in one (01) year is 200 million
dong, the unit does not account and determine the cost and income from the above house letting because the unit has
chosen to declare and pay CIT at the rate% on the revenue of sales of goods and services as follows:
Payable CIT amount = 200,000,000 dong x 5% = 10,000,000 dong
 OVERVIEW

Comprehensive tax Computation

Net profit before tax per accounts X
Less
Exempt income X
Ommitted expense X
Other adjustments that reduce net profit before tax X (X)

Add
Ommitted income X
Disallowed expenses X
Other adjustments that increase net profit before tax X X
Taxable income X
Tax liability @ 20% X
Less: tax credit X
Tax payable X
 TURNOVER

Basic
Turnover used to calculate taxable income is the total sales revenue, processing fee, services fee, surcharge,
regardless of whether money has been received or not.

Timing for recognizing turnover in order to calculate taxable income (Taxing time):
• In respect of goods, when the right to use or ownership of the goods is transferred to the buyer;
• In respect of services, when the services are completed or party completed per schedule.
In case the time of invoicing service supply occurs before the time of services completion, the time for determining
the taxable revenue shall be calculated according to the time of invoicing.

• In respect of air transportation, upon the completion of the provision of the transportation service.
Taxable turnover does not include VAT if the taxpayer pays VAT under the deduction method. On the other hand,
direct-method VAT payer shall record turnover as the total invoice amount.
 TURNOVER

Basic
Example:
Company A is VAT deduction method tax payer. Its added value invoice is as follows:
Selling price: VND100,000

VAT @10%: VND10,000

Payment amount: VND110,000

Turnover for CIT purposes is VND100,000

If this Company is VAT direct method tax payer, its sales invoice states the payment amount of VND110,000
without any VAT portion. Turnover for CIT purposes is VND110,000.
 TURNOVER
Turnover for specific cases
For goods sold by way of instalment
Turnover for CIT purposes is the lump
sum payment price excluding interest on
instalment. Interest shall be classified as
“other income”.
Example:
Car Dealer Company sells 2 cars on 10 months
instalment basis. Total instalment payment is VND250
million/car. If lump sum payment price is VND200
million/car, turnover for CIT purposes is 2 x 200 million =
VND400 million.
This provision applies even if payment under the instalment
extends over a number of tax periods.
 TURNOVER
Turnover for specific cases
For goods, services used for exchange, internal consumption (except those serving business
operations)
Turnover is determined at the selling price
of products, goods or services of the same or
similar kind in the market at the time of use.
For goods and services produced by the
business that are internally used to continue
the business/production process,
recognition of turnover is not required
Example:
Company A produces automotive parts and assembles
automobiles. If company A uses the tires it produces for
display, product introduction, or assembling automobiles,
the value of such tires shall not be included in the assessable
income.
Company B produces computers. The value of computers
that Company B produces and provides for its employees to
work at that company shall not be included in assessable
income
 TURNOVER

Turnover for specific cases

For processing activities (“gia công” in Vietnamese)

Turnover is the processing fee, including Example:

fuel, sub-materials, and other expenses Processing company B provides processing service to an
required for processing goods. exporter. According to the processing contract, B will
provide the necessary sub-materials for the processing.
During the tax period B issued invoice to the exporter with
the details:
Processing fees: VND234,000,000
Sub-material costs: VND35,000,000
Taxable turnover is VND269,000,000
 TURNOVER

Turnover for specific cases

For agency or consignment activities (selling at the price fixed by the principal)

Turnover is the receivable commission Example:

Shop X acts as agent of Company A on the basis of selling A’s
products at the price fixed by A. Commission is 20% on
selling price. The revenue of A’s products during the tax
period is VND400,000,000. Turnover for CIT purposes is:
400,000,000 x 20% = VND80,000,000
The principal (i.e. Company A in the above example) shall
recognize the total sale price by the agent as its turnover, the
commission paid to the agent is its deductible expense.
 TURNOVER
Turnover for specific cases
For leasing assets
Turnover is the rent amount receivable for each
period under the lease contract.
If the lessee pays rent in advance for a
number of years the annual turnover will be
calculated by dividing the advance rent by the
number of years or determined by lump sum
payment
Example:
According to the machinery lease contract, the monthly rent
amount is VND15,000,000. The lessee prepaid the rent for a
period of 24 months starting from 1 March 2020 to the
lessor.
Taxable turnover for 2020 tax period: 15,000,000 * 10 =
VND150,000,000
Taxable turnover for 2021 tax period: 15,000,000 * 12 =
VND180,000,000
Taxable turnover for 2022 tax period: 15,000,000 * 2 =
VND30,000,000
Or total of tax turnover (VND 360,000,000) is assessed on
the year 2020 at tax payer wish
 TURNOVER

Turnover for specific cases

For golf course business
Turnover is the proceeds from the sale of membership cards and golf playing tickets and other revenues in the
tax period determined as follows:
For the form of daily golf ticket and card sales, the revenue of golf business as a basis for determining the CIT is
the proceeds from ticket and card sales, card sales arising in the tax period.
For the form of ticket and membership card sales of the prepaid cards for several years, the revenues as a basis
for determining the CIT each year is the actual proceeds from card selling divided by the number of years of card
using.
 TURNOVER

Turnover for specific cases

For lending activity, • Turnover is the receivable interest or rental receivable of the
finance leasing tax period.

For transport • Turnover is the total revenue of passenger, cargo and luggage
activities transportation arising in the tax period.

For activity of power • Turnover is the amount of electricity, clean water recorded on VAT
supply, water supply invoice.

For insurance and • Turnover is the receivable primary premium, service fee,
reinsurance premium, commission for reinsurance, and others
reinsurance activities income, after deducting certain payments like premium refund, etc.
 TURNOVER

Turnover for specific cases

For construction and installation activities
Turnover is the value of works, works items or the value of volume of construction works, installation and
acceptance.

For a business co-operation contract:

• If revenue sharing: turnover is the revenue each party is entitled to;
• If product sharing: turnover is the sale price of the products shared to each party;
• Profit sharing: turnover is the total sale proceeds under the BCC; one party will be responsible for accounting
work and business result determination:
o pre-tax profit sharing BCCs: each party shall self-manage its CIT obligation
o After-tax profit sharing BCCs: the representative shall be obliged for CIT declaration on behalf of other
parties.
 TURNOVER

Turnover for specific cases

For activities of • Turnover is the proceeds from these activities including

bonus games special consumption tax minus the amount paid to
business customer for bonus.
• Turnover is the proceed from brokerage services,
securities dealing, securities underwriting, portfolio
For securities management, financial advisory and securities
trading activities investment, investment fund management, issue of fund
certificate, market organization services and other
securities services under regulations of the law.

For derivative • Turnover is the proceeds from the provision of

derivative financial services performed in the tax
financial services
period.
 DEDUCTIBLE EXPENSES

General rule

The expenses are actually incurred and

relevant to the production and business
activities of the enterprises
An expense item should
be deductible if:

The expenses have legitimate

supporting invoices or documents

For payments of goods, services procurement with

invoice amounting to VND20 million or more (VAT
inclusive), must have non-cash payment vouchers
(further reference to VAT regulations).
 DEDUCTIBLE EXPENSES

List of non-deductible expenses

Expenses which do not meet the three general deductibility conditions
However, the losses (of goods, materials, assets, etc)
resulting from natural calamities, diseases or other force
majeure events are still deductible for CIT purposes, even
though they do not meet the above conditions, provided that
the portion of these losses are not compensated by any third
parties
Also, Goods damaged due to expiry and changes in natural
biochemical process without compensation shall be included
in deductible expenses when determining the taxable
income.
 DEDUCTIBLE EXPENSES

List of non-deductible expenses

Depreciation of fixed assets is not deductible for CIT purposes if:
The depreciation expenses
There are no document of the fixed assets are not
The fixed assets are not recorded and monitored in The excess of depreciation
supporting that the fixed
used for business the company accounting expenses over the limit
assets are owned by the
activities; books under accounting provided by the MoF.
business
regulations

Depreciation for works on

Depreciation of fully
land not used for Temporary not use Land use right
depreciated fixed assets
production and business

Other intangible assets Upgrading vs. Repair

can be amortised for 20
expenses
years longest
 DEDUCTIBLE EXPENSES

List of non-deductible expenses

Method of Depreciation – Straight-line method

Historical cost of the fixed assets

Level of depreciation =
Duration of use of the fixed assets

Example:
Company A buys a power generator at the invoice amount of VND210 mil. Transportation cost VND10
mil. Installation, commissioning, tests cost totals VND20 mil. The economic life of the machinery is 12 years. The
duration of use is expected to be 10 years which is in accordance with the stipulated duration of use in
Circular (8-10 years). The generator is put into use from 1 July 2012. Depreciation expenses for CIT purpose is
calculated as follow:
Historical cost: 210 + 10 + 20 = 240 mil Annual depreciation: 240 / 10 = 24 mil
First year depreciation: 24/12*6 = 12 mil
If the Company is profitable and would like to depreciate the generator as fast as possible to upgrade to a
more advanced generator, the allowed period would be 4 years (i.e. 2 times faster than the 8-year period).
 DEDUCTIBLE EXPENSES

List of non-deductible expenses

Method of Depreciation – Adjusted reducing balance method (rarely applied)

Accelerated depreciation rate = Straight line method depreciation rate x Adjusted ratio
1
Straight line method depreciation rate = x 100
Duration of use

Duration of use (t) Adjusted ratio

t ≤ 4 years 1.5
4 years < t ≤ 6 years 2.0
t > 6 years 2.5

For the final years, if the annual depreciation level based on the reducing balance method is less than the average
depreciation calculated based on the residual value of the fixed assets divided by the residual duration of use,
depreciation level of such year will be equal to the residual value of the fixed assets divided by the residual
duration of use.
 DEDUCTIBLE EXPENSES

List of non-deductible expenses

Method of Depreciation – Adjusted reducing balance method (rarely applied)
Company A buys a brand new machinery for producing electronic chips at a historical cost of VND2,000 mil. The
duration of use is determined to be 5 years which is within the time frame in Circular 45. The machinery and
equipment is put into use from 1 January 2021. Depreciation expenses for CIT purpose is calculated as follow:
Straight line method depreciation rate = 1/5 x 100 = 20%"

Accelerated depreciation rate = 20% x 2 = 40%

Reducing Annual Accumulated

Year Calculation
Balance depreciation depreciation
2021 2,000,000 2,000,000 x 40% 800,000 800,000
2022 1,200,000 1,200,000 x 40% 480,000 1,280,000
2023 720,000 720,000 x 40% 288,000 1,568,000
2024 432,000 432,000/2 216,000 1,784,000
2025 216,000 432,000/2 216,000 2,000,000
 DEDUCTIBLE EXPENSES

List of non-deductible expenses

The excess of costs of materials, fuel, power and goods over the reasonable consumption level
The reasonable consumption level is determined by the business at the beginning of the year or before
production, and kept at the enterprise. If the consumption level is subject to Government’s levels, then the
Government level applies.

Example
Cost of sale charged to P&L for the tax period is VND250,000,000, of which cost of raw materials, fuel, power
and goods used for production, services or trading of goods that exceeds the reasonable consumption level
determined by the business is VND15,000,000.

Deductible cost of sale is: 250,000,000 – 15,000,000 = VND235,000,000

 DEDUCTIBLE EXPENSES

List of non-deductible expenses

Expenses paid to certain suppliers without proper Declaration/Summary of Expenses under
prescribed form 01/TNDN and payment vouchers.
In case an enterprise leases assets from an individual, documents for determining
deductible expenses is the lease contract and proof of rent payment.

In case an enterprise leases assets In case an enterprise leases assets

from an individual and the lease from an individual where the lease
contracts allow the enterprise to contracts states that the rent is
exclusive of tax (VAT, personal
pay tax on such individual’s behalf,
income tax) and allows the
documents for determining enterprise to pay tax on such
deductible expenses are the lease individual’s behalf, the enterprise
contract, proof of rent payment, may include the total amount of
and proof of tax payment on the rent in deductible expenses,
including the tax paid on such
individual’s behalf.
individual’s behalf.
 DEDUCTIBLE EXPENSES
List of non-deductible expenses
Salaries, wages in following cases
Salaries, wages not actually paid or not
supported by proper payment vouchers and
other documents.
Example
According to the labour contracts, the company has to pay a
total of VND2,000,000,000 to its staff for December 2020.
However, due to cash follow problem, the company only paid
the December salary in April 2020. This amount is not
deductible for 2020 CIT purposes.
However, if the enterprises accrue the employment costs
under the form of provision to a fund to cover additional
employment costs of the following year, which a limit of 17%
of the current year’s salary fund, the expenses are still
deductible to the current year, even if they are paid after the
CIT return submission.
 DEDUCTIBLE EXPENSES

List of non-deductible expenses

Salaries, wages in following cases
Salaries and bonuses for employees for which the
conditions for entitlement and rates of entitlement are not Example
specified in one of the following documents: employment In the above example, the Company made a
contract; collective labor agreement; financial regulations of provision to the additional salary fund to
the company, corporation or group; reward regulations cover the December salary to be paid in 2021
issued by the President of the Board of Directors, general and this amount is lower than 17% of its 2020
director or director under the financial regulations of the salary fund, the Company is still entitled to claim
company or corporation. tax deduction of this amount to 2020.
Schooling fees for expatriate’s children (kindergarten to
high school) and/ or housing fee provided to expatriates
pursuant to the labour contracts, provided that such items
are in line with regulations on salaries and wages and
supported by proper documents shall also be deductible.
 DEDUCTIBLE EXPENSES
List of non-deductible expenses
Salaries, wages in following cases
Salaries, wages, allowance payable to employees which are
not actually paid before the deadline for submission of the
CIT return, unless the entity makes salary fund provision for
the next year, which is not more than 17% the actual salary
fund (and must make sure that the entity is still not in-loss
position, otherwise 17% should not be reached).
The actual salary fund is the total amount paid out up to
finalisation deadline, excluding payments during the year
that is associated with last year’s salary fund.
The salary fund must be used up within 06 months from
end of the financial year, otherwise the unused portion
would be adjusted to the deductible expenses of the next
year.
Example
When submitting the 2020 tax settlement
dossier, enterprise has set aside salary provision
fund of 10 billion dong. By June 30, 2021,
enterprise A spends the amount from the salary
provision fund of the year 2020 including 7
billion dong. enterprise A must record reduction
of salary expense of the next year (2015)
including 3 billion dong (10 billion minus 3
billion). When preparing the settlement dossier
of the year 2021, if enterprise A has a need of
deduction, it shall continue to set aside deduction
of salary provision fund as prescribed.
 DEDUCTIBLE EXPENSES
List of non-deductible expenses
Salaries, wages in following cases
Salary of the private business owner, owner of one-
member limited liability company; remuneration paid to
founders, members of the board of management, council
who are not directly involved in management of production,
business
Example
During the tax period, the company paid to
members of its BOM a remuneration amount of
VND 205,000,000 for attending BOM meetings
and recorded this as a salary expenses item. This
amount is not deductible for CIT purposes
and must be added back to the taxable
income.
If the BOM members are also directors of the
company who manage the business, their
remuneration shall be deductible.
 DEDUCTIBLE EXPENSES

List of non-deductible expenses

Expenses for bonus of initiatives and renovation but the enterprises do

not have specific regulations on bonus of initiatives and renovation
without the acceptance Council of the initiatives and improvements.

Transporation (i.e. car, train) allowances for staff on leave not in

accordance with the provisions of the Labour Code; and

Payments made to female or minority ethnic employees if made to the

incorrect or inappropriate person, and in excess of the stipulated levels

Payment for compulsory insurance funds/trade union fee for labours

exceeding the prescribed level.
 DEDUCTIBLE EXPENSES

List of non-deductible expenses

The expenses of
Utilities expenses unemployment
(Water and allowance.
electricity)

Contribution to the Contribution to

funds of the form the fund of
Association in superior
excess of limits set management
by the Association. expense.
 DEDUCTIBLE EXPENSES

List of non-deductible expenses

The excess portion of costs of
hiring fixed assets over the
annual allocated amount based
on the prepayment
Payment of interest on loans corresponding to
the uncontributed charter capital according to
Payment of interest on the contribution schedule in the charter of the
loans company. Payments of interest which has been
capitalised to the assets/investments.

In June 202 the Company

Enterprise A leases fixed assets in
borrowed from its
four years with the rent of 400 The Company has a registered charter
individual shareholders
million dong and makes one-time capital of VND100,000,000 which the
VND1,000,000,000 at the
payment. The expense of fixed shareholders committed to contribute
interest rate of
assets leasing is accounted in the fully in 2020. By end of 2020 the
1.7%/month. At that time
annual expense that is 100 shareholders only contribute
the SBV’s prime rate was
million. If the expense of fixed VND50,000,000 and in 2021 the Company
1%.
assets leasing exceeds 100 borrowed VND200,000,000 at the rate of
The deductible interest for
million then the excess over 100 12%/year from a bank.
the Company is
million dong shall not be included The non-deductible interest shall be:
VND15,000,000/month (i.e.
in reasonable expenses when (200,000,000 – 50,000,000) x12%
1.5%).
determining taxable income
 DEDUCTIBLE EXPENSES

List of non-deductible expenses

• Making and using provisions, those are not in accordance with the MoF regulations relating to inventory
devaluation, financial investment loss, bad debts, warranty of goods/ construction works, professional risk
provisions of value appraisal enterprises and independent audit service enterprises.

• Periodic or cyclic pre-deducted expenses that are not used or completely used at the end of the period or cycle..
• Loss due to foreign exchange rate differences due to revaluation of monetary items denominated in foreign
currencies at the end of tax period.
• Support to (i) education, (ii) medical entities, (iii) victims of natural calamities and for (iv) building houses for the
poor where the recipients/activities are not eligible or when no supporting documents are available.

• Support for scientific research not in accordance with regulations; support not in accordance with State programs
for areas with special difficult socio-economic conditions.
 DEDUCTIBLE EXPENSES

List of non-deductible expenses

The excess portion over the allowed limit of business management expenses allocated
by foreign companies to their permanent establishments in Vietnam

A: Business management expenses allocated by the foreign company

to its permanent establishment in Vietnam for the tax period.

B: Total turnover of the permanent establishment in Vietnam of the tax period. 𝐁
𝐀= 𝐱𝐃
C: Total turnover of the foreign company, including turnover of its 𝐂
permanent establishments in other countries of the tax period.

D: Total business management expenses of the foreign company of the tax

period.
 DEDUCTIBLE EXPENSES

List of non-deductible expenses

The excess portion over the allowed limit of business management expenses allocated
by foreign companies to their permanent establishments in Vietnam
Branch B in Vietnam of the Singaporean company F has a total turnover of VND2.5 billion in this tax year.
Company F has total turnover VND50 billion (including turnover of its other permanent establishments). During
the tax year, Company F allocated a business management expenses to B totalling VND74 million. According to
the audited accounts of F, total business management expenses of the business as a whole is VND500 million.
Determine the level of deductible business management expenses for B in respect of this tax period.

VND million
Actual business management expenses allocated by 74
Company F
Deductible business management expense for 500 x 2.500/50.000 (25)
Branch B
Disallowed business management expenses that is to be added back 49
to the taxable income
If B is a company owned by F then the allocated management expenses are not deductible to B.
 OTHER TAXABLE INCOME

Income from Transfer of Capital or Securities

General
Transfer of capital is defined as the transfer of a part or all of

the capital that the enterprises have invested to another

investor, including the case of transferring the entire

enterprise they own.

Securities include stocks, bonds, fund certificates and other

securities under the laws.

 OTHER TAXABLE INCOME

Income from Transfer of Capital or Securities

Taxable income

Taxable Transfer Purchase Transfer

income price price expense
 OTHER TAXABLE INCOME

Income from Transfer of Capital or Securities

Taxable income
Company A holds 20,000 shares of a listed company. During the tax period, Company A sold 50% of this investment
at VND50,000 per share. These shares were purchased at VND30,000 per share last year, with total other cost of
purchase amounting to VND50,000,000. A was also paid with dividend of VND60,000,000. Calculate taxable income
for the tax period.
VND
Total purchased price (20,000 x 30,000) 600,000,000
Other costs 50,000,000
Total costs 650,000,000
Purchased cost per share (650,000/20,000) 32,500
Consideration on sale of 10,000 shares 500,000,000
Purchased costs (10,000 x 32,500) (325,000,000)
Taxable gain 175,000,000
Dividend is exempt because it has been taxed at the investee company.
 OTHER TAXABLE INCOME

Income from Transfer of Capital or Securities

Tax declaration
Enterprises set up in Vietnam shall aggregate
the taxable income from transfer of
securities/capital with other taxable income of the tax
period to calculate the total tax payable.
Foreign companies and organizations shall pay CIT on
transfer of capital under the withholding method by
the transferees within 10 days after the transfer.

It should be noted that foreign companies and

organizations transferring securities shall be subject
to CIT on the deemed basis under the FCT regulations.
 OTHER TAXABLE INCOME

Income from transfer of real estate

General

Liable to pay CIT on incomes from real estate transfer are enterprises of all economic
sectors and business lines having incomes from real estate transfer; and real estate
enterprises having incomes from land sublease.

Incomes from real estate transfer

Real estate enterprises that have income from the sublease of land do not include
those that only lease houses, infrastructure facilities or architectural works on land.
 OTHER TAXABLE INCOME

Income from transfer of real estate

Tax base

Taxable Transfer
Turnover Cost
income expense
 OTHER TAXABLE INCOME

Income from transfer of real estate

Tax declaration
Enterprises which do not have regular transfers of real
estates shall declare and pay provisional CIT on
transfer of real estate on every transfer, finalization of
all transfer activities is required at year-end.
Enterprises having regular transfer of real estate shall
declare and pay taxes in a similar manner to primary
income, however they can register to provisionally pay
CIT on each transfer similar to the above requirement.
 OTHER TAXABLE INCOME

Other items
Income from transfer of
project, income from
assignment of project Net income from
implementation, Income related to
Income from asset lease transfer or disposal of
assignment of the right ownership or right to
in any form assets (excluding real-
of exploration, use assets
estate)
extraction and
processing of mineral

Gain from realized

foreign exchange
Interest and charges on Gain from trading difference or from
deposit foreign currencies, revaluation of account
payables,.
 OTHER TAXABLE INCOME

Other items

Reversion of provisions Bad debts written-off Account payables of Income which was
which are not fully used which are now collected which creditors are omitted in previous
by due date unidentified years

Gifts, gifts in cash and in

Difference in kind income received in
Receipts of fines for revaluation of assets cash or in kind from
economic breaches for capital marketing assistance,
(after deducting contribution, transfer cost assistance,
payable fines) upon split, merger, payment discount,
consolidation promotional bonus and
other allowances.
 OTHER TAXABLE INCOME

Other items

The earnings related to

The compensation for the consumption of Income from disposal of
Reversion of unused
fixed assets on the land goods and services not scraps and discarded
provision or not fully
and relocation included in revenue, products after
used; reversed
assistance money after after subtracting the deducting the expenses
provisions for warranty
deducting the related costs to generate such of recovery and
of construction works
expenses income. consumption

Incomes from capital

contribution for joint
Import and export tax stock, local economic Incomes received in
refund of goods actually joint venture and cash or in kind from
exported and imported association divided funding sources; Other
arising in the from income before income as prescribed
settlement year of CIT payment of corporate by the law
income tax.
 INCOME FROM OVERSEAS BUSINESS

Taxable income
• Taxable income from overseas business activities will be the income prior to payment of the associated
corporate income tax in such country. Similarly to income from transfer of real estate, overseas income is
subject to tax at 20%, without any reduction or exemption even if the company is currently subject to some
CIT incentives in Vietnam. Overseas income is declared in the year incurred or the following year,
depending on the availability of information and documentation
• The CIT paid in the foreign country (including CIT which is exempt or reduced by the foreign country and/or
dividend tax) will be credited when calculating Vietnam CIT payable, provided that the credited amount does
not exceed the Vietnam CIT payable for this income
 INCOME FROM OVERSEAS BUSINESS

Example
VND

Income earned from an investment project at country X 800,000,000

Tax rate at country X 20%

Tax paid at country X after a 50% reduction as investment incentive (80,000,000)

Net income remitted back to Vietnam 720,000,000

Taxable income declared for Vietnam CIT purposes 800,000,000

CIT payable @ 20% 160,000,000

Less: tax paid and tax reduced in country X (160,000,000)

Outstanding CIT liability 0

 RELIEF FOR LOSSES

Loss carry forward

• The loss arising in a tax period is the negative difference of taxable income.
• The 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 CIT settlement, the enterprise shall calculate and
continuously transfer all the loss of the year to the taxable income of the succeeding years as prescribed.
• The enterprises shall independently calculate the loss deducted from taxable incomes according the above principle. In
case other losses keep arising while the previous loss is being transferred, the newly arising losses (excluding the loss
transferred from the previous period) shall be completely transferred within 5 consecutive succeeding years.
• In case the competent agency discover that the loss transferred by the enterprise is different from the loss determined
by the enterprise while carrying out CIT inspection, the loss shall be transferred under the conclusion from the
inspection agencies, ensuring that the loss is completely and continuously transferred within 5 years as from the year
succeeding the loss-making year as prescribed.
• After 5 years as from the loss-making year, the loss not yet transferred shall not be transferred to the incomes in the
succeeding years
 TAX INCENTIVES

General

Reduced tax rates (or “preferential tax rate”) for a

certain period of time, and/or

Full exemption followed by 50% reduction of the tax

liability for a number of tax periods (“tax holiday”).
 TAX INCENTIVES

General
Tax incentives shall not apply to
Income from capital or capital contribution
right transfer; income from real estate transfer
(except income from investment and trading Income from the prospecting, exploration and
in social houses); income from transfer of exploitation of petroleum and other precious
investment projects, right to participate in and rare natural resources and income from
investment projects or right to explore and mining activities;
exploit minerals; income from production or
business activities outside Vietnam;

Income from the provision of services liable to Other taxable income which is not related to
excise tax in accordance with the Excise Tax incentive activity.
Law.
 TAX INCENTIVES

General
Tax incentives could also be applied the below which is directly related to incentives business:

incomes from the liquidation of waste materials and scraps of

products,

exchange rate differences

demand deposit interests

 TAX INCENTIVES

Application scope

Preferential location

Preferential business field

(activities)

Large-scale production project

(except one to produce product
subject to excise tax
 TAX INCENTIVES

Incentives duration
Preferential tax rates shall be counted consecutively:
• From the first year when enterprises generating turnover from new investment projects eligible for tax incentives.
• For hi-tech enterprises and agricultural enterprises applying high technologies, this duration shall be counted from
the year when they are recognized as hi-tech enterprises or agricultural enterprises applying high technologies. For
projects applying high technologies, this duration shall be counted from the year when they are granted certificates of
projects applying high technologies.
Tax holiday starts continuously from:
• the first year of making profit, without taking into account losses carried forward from previous years; or
• If the enterprises have no taxable income within the first 3 years upon having revenue, the tax holiday shall apply
from the 4th year.
• If an enterprise has taxable income in the first tax period but its new investment project has a production or business
operation duration eligible for tax incentives of under 12 (twelve) months, the enterprise may choose to enjoy tax
incentives for the new investment project right in that tax period or register with the tax agency a tax incentive
duration counted from the subsequent tax period. If the enterprise registers a tax incentive duration in the
subsequent tax period, the first tax period’s payable tax amount shall be determined for remission into the state
budget under regulations.
These provisions may effectively render the tax holiday useless in many cases.
 TAX INCENTIVES

Investment on expansion
Criteria The increase in cost of fixed assets when the project is finished
and put into operation is at least VND 20 billion (if the expansion
project is of a favored field) or VND 10 billion (if the expansion
project is located in a avored area)

Ratio of increase in cost of fixed assets is at least 20% of total cost

of fixed assets before investment.

Designed capacity after expansion increases by at least 20%

compared to the designed capacity mentioned in the technical
and economic feasibility study done before initial investment.
 TAX INCENTIVES

Other deduction
There are certain cases whereby enterprises may enjoy a
double deduction, i.e. Expenses are deducted from (i)
turnover for taxable income determination and then (ii)
deducted again from the tax payable, including Specific
expenses to minority ethnic employees
Enterprises that transfer technologies in the prioritized
fields to organizations and individuals in geographical areas
with difficult socio- economic conditions are entitled to 50%
reduction of payable CIT calculated on incomes from

technology transfer.
 SCIENCE AND TECHNOLOGY FUND ALLOCATION

Form of fund organisation

No fund body is set up,

Set up a fund body having
instead staff of the
no legal entity and
company manage the
operate as a dependent
operation
unit
 SCIENCE AND TECHNOLOGY FUND ALLOCATION

Level of fund allocation

For SOE:

from 3- up to 10%

For other type of businesses:

10% of of total
total assessable
assessable income
income
 SCIENCE AND TECHNOLOGY FUND ALLOCATION

Timing of usage and interest rate applied

Within 5 years after extracting, if the scientific and technological development fund is not used or improperly
used, or less than 70% thereof is used, the enterprise must pay the CIT on the income used to establish the fund
that is not used of improperly used, and the on profit generated from such CIT amount.
The money improperly used must not be included in the total amount used for scientific and technological
development.

• The CIT rate for calculating the tax amount reclaimed is the tax rate applicable to the enterprise during the
establishment of the fund.
• The interest rate for calculating the profit of the tax amount reclaimed from the unused part of the fund, is
the interest rate of 1-year treasury bonds at the reclaiming time, and the period for interest calculating is
two years.
 SCIENCE AND TECHNOLOGY FUND ALLOCATION

Not included in the expenses

In case, the actual payment exceeding the provided

amount, the excessive amount could be recorded into
business result for tax purpose. The scientific and
technological development funds of enterprises are
only used for investment in scientific research and
technology development of enterprises in Vietnam.
 SCIENCE AND TECHNOLOGY FUND ALLOCATION

Change of ownership

The distribution of scientific and

technological development funds are
decided by enterprises and registered at
the tax authorities.
 TAX EXEMPT INCOME

Tax exempt income

Income earned from products of Income from technical service

Income from implementing R&D
cultivation, husbandry by provision directly to agricultural
organization established activities contracts is exempted for 3 years

Income from vocational training

Income from sales of products Income of enterprises where more services specially for ethnic
resulting from new technology in than 30% of their employees are minority people, disabled people,
Vietnam is exempted in 5 year disabled, HIV-infected persons special difficulty children, HIV
effected, social effected people

After tax income from capital

contribution to a Vietnamese
enterprise
 TAX EXEMPT INCOME

Tax exempt income

Aid fund received used for

education, scientific research, Income from transfer of CERs
cultural, charity with certain for the first time
condition met.

Income from implementing of Undistributable income for

government assignment of reinvestment of socialisation
several organisations organisations, cooperative

Income of technology transfer

in priority industry to the Income from bailiff office
organisation/individual in during the pilot period
special difficult areas
 TAX ADMINISTRATION APPLICABLE TO CORPORATE INCOME
TAX
Responsibility to submit CIT returns to tax agencies
• Tax payers shall submit CIT returns to tax agencies directly managing them;
• If taxpayers have dependent unit with independent accounting records, the unit files tax return at its tax local office;
• If taxpayers have dependent unit (including dependent production unit) with dependent accounting records, the unit
does not require filing the return separately. The taxpayer shall file & pay the tax for this unit also.
• If the production unit is located at the location different to its head office, the enterprise shall files the returns for that
unit at the head office but allocate the amount attributable to the unit to the same level treasury office of the unit
o The CIT attributable of the unit = CIT payable in the period (x) the proportion of expenses of the unit to the total
expenses of the enterprise.
• For economic groups and corporations that have member with dependent accounting record, if this member can
separately accounted for its taxable turnover, expense and income, the unit shall file the return and pay tax at the local
tax office.
• If member conduct business operations different from its of groups or corporations and can separately account
incomes from these business operations, it shall file the return and pay tax at the local tax office
 TAX ADMINISTRATION APPLICABLE TO CORPORATE INCOME
TAX
Timing for Declaration
CIT provisional calculated on a quarterly basis

CIT finalisation on yearly basis or by the time of termination of business operations or contracts, transformation
of enterprise ownership or enterprise reorganization.

Tax payers are required to pay late payment interest if the finalized amount is at least 20% higher than the
quarterly paid amounts, calculated from deadline for Quarter IV tax liability’s payment to actual payment date of
the difference.

Tax declaration in On occasion applicable to real estate transfer activities;

some specific cases:

On occasion applicable to foreign contractors having income from capital transfer.

On percentage of sales applicable to government services body having income but

cannot determine relevant expenditures.
 TAX ADMINISTRATION APPLICABLE TO CORPORATE INCOME
TAX
Declaration of CIT on real estate transfer

in the provinces or cities of head quarter : their managing tax agencies.

in provinces or cities other than the localities of head quarter the tax return: tax office determine by the Director of
Tax Department at the location of real estate transfer;

on an irregular basis: on occasion of each transfer.

on a regular basis: on a quarterly basis.

Enterprises which are allocated or leased land by the State for the implementation of investment projects on building
infrastructure or houses for transfer or lease with the collection of advances from customers based on the construction
progress in any form
 TAX ADMINISTRATION APPLICABLE TO CORPORATE INCOME
TAX
CIT on the proportion (%) of turnover

The unit having

irregularly trade in
goods or services
The unit having subject to CIT shall
regularly trade in declare CIT on
goods or services occasion basic
Applies to government subject to CIT may
services unit having make monthly tax
income but cannot declaration and are
determine relevant not required to make
expenditures. annual tax finalization.