Decree No. 122/2011/ND-CP amends and supplements some articles of Decree No. 124/2008/ND-CP dated December 11, 2008, of the Government detailing and guiding the implementation of certain provisions of the Law on Corporate Income Tax.

DECREE DECREE

Amending and supplementing the list of narcotic substances and precursors promulgated TO AMEND AND SUPPLEMENT SOME ARTICLES OF DECREE NO. 124/2008/NĐ-CP DATED DECEMBER 11, 2008 OF THE GOVERNMENT ON DETAILING IMPLEMENTATION OF CERTAIN PROVISIONS OF THE ENTERPRISE INCOME TAX LAW

PROVIDING FOR DETAILS AND GUIDELINES FOR IMPLEMENTATION OF CERTAIN PROVISIONS OF THE ENTERPRISE INCOME TAX LAW

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FINANCE STATE

WHEREAS pursuant to the Government Organization Law dated December 25, 2001;

WHEREAS WHEREAS, the Enterprise Income Tax Law dated June 3, 2008;

Upon examination THIS DECREE REGULATES THE CONTENT OF EXPENSES FOR OPERATIONS OF THE MANAGEMENT BOARD OF VIETNAM SOCIAL INSURANCE, INCLUDING EXPENSES FOR COMPENSATION RATES, MEETING REGIMES, AND DOMESTIC TRAVEL ALLOWANCES.

DECREE DECIDES:

Article 1. TO AMEND AND SUPPLEMENT SOME ARTICLES OF DECREE NO. 124/2008/NĐ-CP DATED DECEMBER 11, 2008 OF THE GOVERNMENT PROVIDING FOR DETAILS OF IMPLEMENTATION OF CERTAIN PROVISIONS OF THE ENTERPRISE INCOME TAX LAW AS FOLLOWS:

1. AMENDING AND SUPPLEMENTING ARTICLE 3 AS FOLLOWS:

"ARTICLE 3. INCOME SUBJECT TO TAX

1. INCOME SUBJECT TO TAX INCLUDES INCOME FROM BUSINESS ACTIVITIES OF GOODS AND SERVICES PRODUCTION AND OTHER INCOME AS PROVIDED FOR IN SUB-CLAUSE 2 OF THIS ARTICLE. FOR BUSINESSES REGISTERED FOR BUSINESS AND HAVE INCOME AS PROVIDED FOR IN SUB-CLAUSE 2 OF THIS ARTICLE, SUCH INCOME IS DETERMINED AS INCOME FROM BUSINESS ACTIVITIES OF THE ESTABLISHMENT.

2. Other income includes:

a) INCOME FROM CAPITAL TRANSFER INCLUDES INCOME FROM THE TRANSFER OF PART OR ALL OF THE CAPITAL ALREADY INVESTED IN A BUSINESS, INCLUDING THE SALE OF A BUSINESS, TRANSFER OF SECURITIES, AND OTHER FORMS OF CAPITAL TRANSFER AS PROVIDED FOR BY LAW;

b) INCOME FROM PROJECT TRANSFER, INCOME FROM TRANSFER OF RIGHTS TO EXPLORE, EXTRACT, AND PROCESS MINERALS AS PROVIDED FOR BY LAW; INCOME FROM REAL ESTATE TRANSFER AS PROVIDED FOR IN SUB-CLAUSE 9 OF ARTICLE 1 OF THIS DECREE;

c) INCOME FROM OWNERSHIP AND USE RIGHTS OF ASSETS INCLUDING REVENUE FROM COPYRIGHTS IN ANY FORM, REVENUE FROM INTELLECTUAL PROPERTY OWNERSHIP RIGHTS; INCOME FROM TECHNOLOGY TRANSFER AS PROVIDED FOR BY LAW. LEASE OF ASSETS IN ANY FORM;

d) INCOME FROM ASSET TRANSFER AND LIQUIDATION (EXCEPT REAL ESTATE), OTHER TYPES OF VALUABLE PAPERS;

đ) INCOME FROM INTEREST ON DEPOSITS, INTEREST ON LOANS, FOREIGN CURRENCY SALES INCLUDING: INTEREST ON DEPOSITS AT FINANCIAL INSTITUTIONS, INTEREST ON LOANS IN ANY FORM AS PROVIDED FOR BY LAW, FEES FOR CREDIT GUARANTEE AND OTHER FEES IN LOAN CONTRACTS. INCOME FROM FOREIGN CURRENCY SALES; THE DIFFERENCE IN EXCHANGE RATES ARISING FROM THE END-OF-YEAR REVIEW OF FOREIGN CURRENCY DENOMINATED LIABILITIES (EXCEPT EXCHANGE RATE DIFFERENCES ARISING DURING THE CONSTRUCTION PERIOD FOR FIXED ASSETS THAT HAVE NOT BEEN PUT INTO BUSINESS OPERATIONS);

e) REVERSAL OF PROVISIONS (EXCEPT REVERSAL OF INVENTORY WRITE-DOWN PROVISIONS, LOSS PROVISIONS ON FINANCIAL INVESTMENTS, BAD DEBT PROVISIONS, AND WARRANTY PROVISIONS ON PRODUCTS AND GOODS AT BUSINESSES; REVERSAL OF PROVISIONS FOR WAGES FUNDS), PRE-EXPENSES DRAWN BUT NOT USED OR NOT FULLY USED WITHIN THE DRAWING PERIOD;

g) Previously written-off bad debts now recovered;

h) Unidentifiable creditors' debts;

i) Previously omitted income from business operations in previous years discovered later;

k) DIFFERENCE BETWEEN REVENUE FROM PENALTIES AND COMPENSATION FOR VIOLATION OF ECONOMIC CONTRACTS MINUS (-) THE AMOUNT OF PENALTIES AND COMPENSATION PAID FOR VIOLATION OF CONTRACTS AS PROVIDED FOR BY LAW;

l) FINANCIAL OR IN-KIND GRANTS RECEIVED, EXCEPT GRANTS AS PROVIDED FOR IN SUB-CLAUSE 6 OF ARTICLE 4 OF DECREE NO. 124/2008/NĐ-CP DATED DECEMBER 11, 2008 OF THE GOVERNMENT (HEREINAFTER REFERRED TO AS DECREE NO. 124/2008/NĐ-CP);

m) Differences arising from revaluation of assets as prescribed by law for capital contributions, transfers when dividing, splitting, merging, consolidating, or changing the type of enterprise;

ENTERPRISES RECEIVING ASSETS SHALL BE ACCOUNTED FOR AT REVALUED VALUE WHEN DETERMINING ALLOWABLE EXPENSES AS PROVIDED FOR IN SUB-CLAUSES 5 AND 6 OF ARTICLE 1 OF THIS DECREE;

n) Income received from production and business activities outside Vietnam;

o) INCOME FROM THE SALE OF WASTE MATERIALS AND BYPRODUCTS UNRELATED TO BUSINESS OPERATIONS ENJOYING TAX BENEFITS AND OTHER INCOME AS PROVIDED FOR BY LAW.

3. INCOME SUBJECT TO TAX GENERATED IN VIETNAM OF ENTERPRISES AS PROVIDED FOR IN POINT c, d SUB-CLAUSE 2 OF ARTICLE 2 OF THE ENTERPRISE INCOME TAX LAW IS INCOME RECEIVED FROM VIETNAM FROM ACTIVITIES OF PROVIDING SERVICES, LENDING CAPITAL, AND COPYRIGHT MONEY TO DOMESTIC ORGANIZATIONS AND INDIVIDUALS OR FOREIGN ORGANIZATIONS DOING BUSINESS IN VIETNAM, WITHOUT REGARD TO THE LOCATION OF BUSINESS ACTIVITY.

INCOME SUBJECT TO TAX AS PROVIDED FOR IN THIS SUB-CLAUSE DOES NOT INCLUDE INCOME FROM SERVICES PERFORMED OUTSIDE VIETNAMESE TERRITORY SUCH AS: MAINTENANCE OF TRANSPORT MEANS, MACHINERY, AND EQUIPMENT ABROAD; ADVERTISING, MARKETING, AND PROMOTION OF INVESTMENT AND TRADE ABROAD; BROKERAGE OF GOODS AND SERVICE SALES ABROAD; TRAINING ABROAD; SHARING OF INTERNATIONAL POSTAL AND TELECOMMUNICATION SERVICES FEES WITH FOREIGN PARTIES.

THE MINISTRY OF FINANCE SHALL ISSUE GUIDELINES SPECIFICALLY ON INCOME SUBJECT TO TAX AS PROVIDED FOR IN THIS SUB-CLAUSE."

2. TO AMEND AND SUPPLEMENT SUB-CLAUSE 2, SUB-CLAUSE 3, AND SUB-CLAUSE 4 OF ARTICLE 4 AS FOLLOWS:

"2. FOR INCOME FROM THE IMPLEMENTATION OF SCIENTIFIC RESEARCH AND TECHNOLOGICAL DEVELOPMENT CONTRACTS, INCOME FROM THE SALE OF EXPERIMENTAL PRODUCTS, AND INCOME FROM THE PRODUCTION OF PRODUCTS USING NEW TECHNOLOGY APPLIED FOR THE FIRST TIME IN VIETNAM, INCLUDING INCOME FROM THE TRANSFER OF CERTIFIED EMISSION REDUCTION (CERs), THE MAXIMUM TAX EXEMPTION PERIOD SHALL NOT EXCEED ONE YEAR, COUNTING FROM THE DATE OF STARTING PRODUCT PRODUCTION ACCORDING TO THE SCIENTIFIC RESEARCH AND TECHNOLOGY APPLICATION CONTRACT, EXPERIMENTAL PRODUCTION, OR NEW TECHNOLOGY PRODUCTION, OR FROM THE DATE OF OBTAINING THE CERTIFIED EMISSION REDUCTION (CERs).

THE MINISTRY OF FINANCE SHALL ISSUE GUIDELINES SPECIFICALLY ON THE PROVISIONS OF THIS SUB-CLAUSE.

3. INCOME FROM BUSINESS ACTIVITIES OF GOODS AND SERVICES OF BUSINESSES HAVING AT LEAST 30% OF THE AVERAGE NUMBER OF WORKERS IN THE YEAR AS PERSONS WITH DISABILITIES, EX-DRUG ADDICTS, OR HIV/AIDS PATIENTS.

ENTERPRISES ELIGIBLE FOR TAX EXEMPTION AS PROVIDED FOR IN THIS SUB-CLAUSE ARE THOSE WITH AN AVERAGE NUMBER OF WORKERS IN THE YEAR OF 20 OR MORE, EXCLUDING FINANCIAL AND REAL ESTATE TRADING BUSINESSES.

INCOME ELIGIBLE FOR TAX EXEMPTION AS PROVIDED FOR IN THIS SUB-CLAUSE DOES NOT INCLUDE OTHER INCOME AS PROVIDED FOR IN POINT 2 SUB-CLAUSE 1 OF ARTICLE 1 OF THIS DECREE.

4. INCOME FROM VOCATIONAL TRAINING ACTIVITIES SPECIFICALLY FOR ETHNIC MINORITY PEOPLE, PERSONS WITH DISABILITIES, CHILDREN IN SPECIAL DIFFICULT CIRCUMSTANCES, SOCIAL EVILS TARGET GROUPS, CURRENT DRUG ADDICTS, EX-DRUG ADDICTS, AND HIV/AIDS PATIENTS. IF THE VOCATIONAL TRAINING INSTITUTION ALSO SERVES OTHER GROUPS, THE AMOUNT OF INCOME ELIGIBLE FOR TAX EXEMPTION SHALL BE DETERMINED BASED ON THE RATIO OF ETHNIC MINORITY PEOPLE, PERSONS WITH DISABILITIES, CHILDREN IN SPECIAL DIFFICULT CIRCUMSTANCES, SOCIAL EVILS TARGET GROUPS, CURRENT DRUG ADDICTS, EX-DRUG ADDICTS, AND HIV/AIDS PATIENTS TO THE TOTAL NUMBER OF STUDENTS AT THE INSTITUTION."

3. Amending and supplementing Clause 2 and Clause 3 of Article 6 as follows:

"2. INCOME SUBJECT TO TAX SHALL BE DETERMINED AS FOLLOWS:

For businesses with multiple business activities, the taxable income from production and business operations is the total income from all business activities. In cases where there are business activities that incur losses, such losses may be offset against the taxable income of other business activities with profits as selected by the enterprise. The remaining income after offsetting shall be subject to the corporate income tax rate applicable to the business activities generating income.

Income from the transfer of real estate, projects, exploration, exploitation, and processing rights of mineral resources must be accounted for separately for tax declaration and payment purposes and cannot be offset against the income or losses of other business activities, but can be offset among themselves.

3. The determination of taxable income for certain production and business activities is specified as follows:

a) For income from the transfer of capital (excluding income from the transfer of securities as provided in point b of this clause), it is determined by subtracting the purchase price of the transferred capital portion from the total contract transfer amount, and then subtracting any directly related transfer costs.

In cases where a business transfers capital without receiving money but instead receives assets or material benefits (such as shares, fund certificates) resulting in income, such income must be subject to corporate income tax.

b) For income from the transfer of securities, it is determined by subtracting the purchase price of the transferred securities from the selling price, and then subtracting any directly related transfer costs.

In cases where a joint-stock company issues shares, the difference between the issue price and the par value is not subject to corporate income tax.

In cases where a joint-stock company undergoes division, merger, or consolidation and exchanges shares at the time of division, merger, or consolidation resulting in income, such income must be subject to corporate income tax.

In cases where a business transfers securities without receiving money but instead receives assets or material benefits (such as shares, fund certificates) resulting in income, such income must be subject to corporate income tax.

c) For income from intellectual property rights and technology transfer, it is determined by subtracting the cost of creating the intellectual property rights or technology being transferred, maintenance, upgrade, and development costs of the intellectual property rights or technology being transferred, and other deductible expenses from the total revenue received.

d) For income from leasing assets, it is determined by subtracting basic depreciation provisions, maintenance, repair, and preservation costs of the leased asset, rental costs for assets leased out again (if any), and other deductible expenses related to the leasing activity from the lease revenue.

f) Income from the transfer or liquidation of assets (excluding real estate) is determined by subtracting the remaining book value of the asset at the time of transfer or liquidation and any directly related transfer or liquidation costs from the proceeds received from the transfer or liquidation.

g) Income from foreign currency sales is the total revenue from foreign currency sales minus the purchase price of the sold foreign currency (excluding exchange rate differences arising from revaluation of monetary items denominated in foreign currencies at year-end, and exchange rate differences occurring during pre-operational construction investment phases).

h) The difference arising from asset revaluation is the difference between the revalued value and the remaining book value recorded in the accounting books of the asset; for fixed assets contributed as capital, it is the difference between the revalued value and the remaining book value of the fixed assets recorded in the accounting books; for fixed assets transferred upon division, merger, consolidation, conversion of business form, it is the difference between the revalued value and the remaining book value of the fixed assets recorded in the accounting books.

Differences arising from the revaluation of fixed assets contributed as capital, and fixed assets transferred upon division, merger, consolidation, conversion of business form are included in other income for tax purposes in the relevant period; specifically, differences arising from the revaluation of land use rights contributed as capital are gradually included in other income over a maximum period of 10 years starting from the year the asset was contributed as capital.

h) Income received from production, business, and service activities abroad is the total pre-tax income from such activities.

4. Amend and supplement point d of Clause 3, Article 8 as follows:

“d) For leasing activities, it is the amount paid by the lessee according to the lease contract on a periodic basis. If the lessee pays rent in advance for several years, the revenue for calculating taxable income is recognized gradually over the number of years for which payment is made in advance or determined based on a lump sum payment. If the enterprise is currently enjoying tax incentives, the determination of the amount of tax benefit must be based on the total corporate income tax of the number of years for which payment is made in advance divided by the number of years for which the lessee pays in advance.”

5. Amend and supplement Clause 1 of Article 9 as follows:

“1. Except for the expenses specified in points a, b, c, d, e, h, i, and k of Clause 2, Article 9 of Decree No. 124/2008/ND-CP and Clause 6, Article 1 of this Decree, enterprises are allowed to deduct all expenses if they meet the following conditions:

a) The expense is actually incurred and relates to the production and business activities of the enterprise.

b) Expenses supported by invoices and receipts in accordance with the law.

In cases where goods are purchased directly from producers or harvesters of agricultural, forestry, and aquatic products; handicraft products made from rattan, straw, bamboo, reed, palm leaves, bamboo strips, rice straw, coconut shells, coir, or raw materials recycled from agricultural products produced directly by artisans; sand, gravel, soil, and pebbles directly sold by individuals who extract them; scrap materials collected directly by individuals; household goods and personal assets already in use directly sold by individuals; and services purchased from individuals who do not engage in business, there must be payment receipts issued by the seller and a Purchase List of Goods and Services signed and responsible by the legal representative or authorized person of the enterprise.

Actual expenditures for workplace HIV/AIDS prevention and control activities of enterprises in accordance with the guidelines of the Ministry of Health (including: costs for training enterprise staff on HIV/AIDS prevention and control, costs for organizing HIV/AIDS prevention and communication for enterprise employees, fees for HIV counseling, examination, and testing, costs for supporting HIV-infected workers who are employees of business establishments) shall also be deductible when determining taxable income.

6. Amend Points d, g, l and supplement Point m, Point n of Clause 2 Article 9 as follows:

a) Amend and supplement Point d of Clause 2 Article 9 as follows:

“d) Pre-deducted amounts not in accordance with the provisions of the law

Pre-deducted amounts include: pre-deductions for major repairs of fixed assets according to cycles, pre-deductions for activities that have been recorded as revenue but still require continued performance of obligations under contracts including cases where the lessor records the entire amount as revenue of the year of receipt for lease transactions with advance payments for multiple years, other pre-deductions as prescribed by the Ministry of Finance.”

b) Amend and supplement Point g of Clause 2 Article 9 as follows:

“g) Advertising, marketing, promotional expenses, brokerage commissions (excluding insurance brokerage commissions as prescribed by the law on insurance business, agency sales commissions at the correct price, commissions paid to multi-level marketing distributors); hospitality, ceremonial, conference expenses; marketing support expenses, cost support expenses, payment discounts; newspaper subscription and gift expenses (except for subscriptions and gifts to individuals who have rendered meritorious service to the revolution, war invalids, disabled veterans; military officers stationed in islands, remote areas, extremely difficult regions) directly related to production and business operations exceeding 10% of total deductible expenses. For newly established enterprises from January 1, 2009, the excess over 15% applies for the first three years from the date of establishment.

The total deductible expenses do not include the above-mentioned expenses; for trading activities, they do not include the purchase price of goods sold.”

c) Amend and supplement Point l of Clause 2 Article 9 as follows:

“l) Exchange rate differences arising from revaluation of monetary items denominated in foreign currencies at the end of the tax period, excluding exchange rate differences arising from revaluation of foreign currency payable at the end of the tax period; exchange rate differences arising during the construction process.”

d) Supplement Points m, n of Clause 2 Article 9 as follows:

“m) Provisions for unemployment assistance funds (except in cases where the enterprise is not required to participate in unemployment insurance as prescribed by law).

n) Wages and salaries of individual business owners; remuneration paid to founding members of enterprises who do not directly manage production and business operations; wages and salaries, and other accounting expenses paid to employees but not actually paid or without invoices and receipts as prescribed by law; bonuses, life insurance purchases for employees not specified in any of the following documents: Labor Contracts; Collective Labor Agreements; Financial Regulations of Companies, Holding Companies, Groups; Bonus Regulations stipulated by the Chairman of the Board of Directors, General Director, Director in accordance with the company's financial regulations.”

7. Amend and supplement Clause 2 Article 10 as follows:

“2. Corporate income tax rate for oil and gas exploration, development, and rare mineral resource exploitation activities in Vietnam ranges from 32% to 50%. For oil and gas fields, the tax rate is implemented in accordance with the Oil Law; for rare mineral resources (excluding oil and gas), the tax rate is 50%, except for fields where 70% or more of the area is located in particularly difficult economic and social conditions as listed in the preferential corporate income tax zone directory issued together with Decree No. 124/2008/ND-CP, which applies a corporate income tax rate of 40%.

Other rare minerals referred to in this clause include platinum, gold, silver, tin, tungsten, antimony, precious stones, rare earths.”

8. Amend and supplement Clause 3 Article 11 as follows:

“3. For enterprises as specified in Point c, d Clause 2 Article 2 of the Corporate Income Tax Law, the corporate income tax payable is calculated as a percentage of revenue from selling goods and services in Vietnam, specifically as follows:

a) Services: 5%, except for hotel, restaurant, casino management services: 10%; for services provided with attached goods, the rate is 1%;

b) Royalty fees: 10%;

c) Aircraft leasing (including aircraft engine and parts leasing), ship leasing: 2%;

d) Drilling rig, machinery, equipment, transportation vehicle leasing (excluding the provisions in Point c of this Clause): 5%;

đ) Interest expense: 5%;

e) Securities transfer, overseas reinsurance: 0.1%;

g) Financial service income: 2%;

h) Construction, transportation, and other activities: 2%.”

9. Amend and supplement Article 13 as follows:

“Article 13. Income from real estate transfers includes income from land use right transfers, land rental right transfers; income from subleasing land by real estate businesses in accordance with the law on land, regardless of whether there is infrastructure or architectural works attached to the land; income from transferring houses, buildings constructed on land, including attached assets to those houses and buildings, regardless of whether there is a land use right transfer or land rental right transfer; income from transferring other assets attached to land.”

10. Amend and supplement Clause 1 Article 14 as follows:

“1. Revenue for calculating taxable income is determined based on the actual transaction price of real estate transfers in accordance with real estate purchase and sale contracts in compliance with the law.

If the land use right transfer price in the real estate purchase and sale contract is lower than the land price set by the provincial or centrally-administered municipal People's Committee at the time of signing the contract, it shall be calculated based on the land price set by the provincial or centrally-administered municipal People's Committee.”

11. Amend and supplement Clause 3, Clause 5 Article 15 as follows:

"3. The tax rate of 10% shall apply throughout the period of operation to the income portion of businesses operating in the fields of education-training, vocational training, healthcare, culture, sports, and environment (hereinafter collectively referred to as socialized fields) and the income portion from publishing activities as prescribed by the Law on Publishing.

The list of activities in the socialized fields specified in this clause shall be prescribed by the Prime Minister.

5. A preferential tax rate of 20% shall apply throughout the period of operation for agricultural service cooperatives, people's credit funds, and microfinance organizations.

Group For agricultural service cooperatives, people's credit funds, and microfinance organizations, after the expiration of the application period of the 10% tax rate prescribed in point a, Clause 1, Article 15 of Decree No. 124/2008/NĐ-CP, they shall switch to applying the 20% tax rate.

Microfinance organizations as stipulated in this clause are organizations established and operating in accordance with the provisions of the Law on Credit Organizations.

12. Amend and supplement Clause 2 of Article 19 as follows:

"2. Income not subject to the provisions on preferential corporate income tax includes: income items prescribed in points a, b, and c, Clause 3, Article 18 of the Corporate Income Tax Law, income from business services subject to special consumption tax as prescribed by the Special Consumption Tax Law, and income from mineral exploitation activities."

Article 2. Implementation clause

1. This Decree takes effect from March 1, 2012, and applies to tax periods starting from 2012 onwards.

2. Businesses that were enjoying preferential corporate income tax due to meeting conditions for preferential treatment based on export ratio and whose preferential corporate income tax was terminated as of January 1, 2012, due to implementing WTO commitments may choose to continue enjoying tax preferences for the remaining preferential period corresponding to actual conditions met by the business for investment incentives (excluding preferential conditions based on export ratio and domestic material usage) as prescribed in legal regulatory documents on corporate income tax from the date of issuance of the business establishment permit until the day before the effective date of Government Decree No. 24/2007/NĐ-CP dated February 14, 2007, detailing the implementation of the Corporate Income Tax Law, or as prescribed in legal regulatory documents on corporate income at the time of adjustment of tax preferences due to implementing WTO commitments (ending December 31, 2011).

Businesses are responsible for notifying the Tax Authority of their choice to enjoy the tax preferences prescribed in this clause.

The Ministry of Finance shall provide guidance on the implementation of this Decree.

4. The ministers, heads of ministerial-level agencies, heads of government agencies, chairpersons of provincial people's committees under the central government shall be responsible for implementing this Decree./.