Circular No. 130/2008/TT-BTC guides the implementation of certain provisions of the Law on Corporate Income Tax No. 14/2008/QH12 and provides guidance on implementing Decree No. 124/2008/NĐ-CP dated December 11, 2008 of the Government detailing the implementation of certain provisions of the Law on Corporate Income Tax.

CIRCULAR

Guidelines for implementing certain provisions of the Law on Corporate Income Tax No. 14/2008/QH12 and guidelines for implementing Decree No. 124/2008/NĐ-CP dated December 11, 2008 of the Government detailing certain provisions of the Law on Corporate Income Tax.

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Pursuant to the Law on Corporate Income Tax No. 14/2008/QH12 dated June 3, 2008;

Pursuant to the Law on Tax Administration No. 78/2006/QH11 dated November 29, 2006;

Pursuant to Decree No. 124/2008/NĐ-CP dated December 11, 2008 of the Government detailing certain provisions of the Law on Corporate Income Tax;

The Minister of Finance promulgates this Circular amending and supplementing Clause 1, Article 15 and the attached forms of Circular No. 86/2013/TT-BTC dated June 27, 2013 of the Ministry of Finance concerning the application of preferential treatment regimes in customs administration for enterprises meeting the required conditions as follows:

The Ministry of Finance hereby issues guidelines for the implementation of corporate income tax as follows:

Part A

SCOPE OF APPLICATION FOR CORPORATE INCOME TAX

1. The taxpayer of corporate income tax is an organization engaged in production and business activities generating taxable income (hereinafter referred to as a business entity), including:

1.1. Businesses established and operating in accordance with the Law on Enterprises, the Law on State Enterprises, the Law on Foreign Investment in Vietnam, the Investment Law, the Law on Credit Institutions, the Law on Insurance Business, the Securities Law, the Petroleum Law, the Commercial Law, and other legal documents under various forms: Joint-stock companies; Limited liability companies; Partnership companies; Private enterprises; State-owned enterprises; Private law firms, private notary offices; Parties in joint venture contracts; Parties in oil and gas product sharing contracts, joint oil and gas ventures, joint management companies.

1.2. Public and non-public institutions engaged in production and business activities generating income in all fields;

1.3. Organizations established and operating in accordance with the Law on Cooperatives;

1.4. Businesses established in accordance with foreign laws (hereinafter referred to as foreign businesses) having a permanent establishment in Vietnam.

A foreign business's permanent establishment in Vietnam is a place of production and business through which the foreign business conducts part or all of its production and business activities in Vietnam, generating income, including:

- Service provision bases, including consulting services provided through employees or other organizations and individuals;

- Agents for foreign enterprises;

- Representatives in Vietnam in cases where they are authorized representatives signing contracts on behalf of foreign enterprises or non-authorized representatives signing contracts on behalf of foreign enterprises but regularly engage in the delivery of goods or provision of services in Vietnam.

In cases where a Double Taxation Agreement signed by the Socialist Republic of Vietnam provides different rules regarding a permanent establishment, such agreements shall be followed.

- Representative office in Vietnam in cases where it is an authorized representative to sign contracts on behalf of the foreign business or an unauthorized representative to sign contracts on behalf of the foreign business but regularly engages in the delivery of goods or provision of services in Vietnam.

In cases where a Double Taxation Agreement signed by the Socialist Republic of Vietnam provides different rules regarding a permanent establishment, such agreements shall be followed.

1.5. Other organizations outside those mentioned in Points 1.1, 1.2, 1.3, and 1.4 of this Section that engage in production and business activities generating taxable income.

2. Foreign businesses and foreign organizations conducting business in Vietnam not in accordance with the Investment Law or the Enterprise Law, or generating income in Vietnam, shall pay corporate income tax according to separate guidelines issued by the Ministry of Finance. These businesses, if they engage in capital transfer activities, shall pay corporate income tax according to the guidelines set out in Part E of this Circular.

Part B

METHODS OF CALCULATING CORPORATE INCOME TAX

1. The amount of corporate income tax payable for a tax period equals taxable income multiplied by the tax rate.

Corporate income tax payable is determined according to the following formula:

In cases where a business has set aside funds for scientific and technological development, the corporate income tax payable shall be determined as follows:

If a business has already paid corporate income tax or a similar tax outside Vietnam, the business may deduct the amount of corporate income tax paid, but not exceeding the amount of corporate income tax payable as stipulated by the Law on Corporate Income Tax.

2. The tax period is determined based on the Gregorian calendar year. For businesses applying a fiscal year different from the Gregorian calendar year, the tax period is determined based on the fiscal year applied. The first tax period for newly established businesses and the last tax period for businesses changing their business form, ownership form, merger, consolidation, division, dissolution, or bankruptcy shall be determined in accordance with the accounting period as prescribed by the accounting law.

3. In cases where the first tax period of a newly established business from the date of issuance of the Business Registration Certificate and the last tax period of a business changing its business form, ownership form, merger, consolidation, division, dissolution, or bankruptcy is shorter than three months, these periods can be combined with the next tax period (for newly established businesses) or the previous tax period (for businesses changing their business form, ownership form, merger, consolidation, division, dissolution, or bankruptcy) to form a single tax period for corporate income tax. The first tax period or the last tax period for corporate income tax shall not exceed fifteen months.

4. Public institutions that generate business activities subject to corporate income tax (corresponding to a tax rate of 25%) after enjoying tax exemption or reduction benefits (if applicable), and which record revenue but cannot determine costs and income from such business activities, shall declare and pay corporate income tax calculated as a percentage of sales revenue from goods and services, specifically as follows:

- For services: 5%;

- For goods trading: 1%;

- For other activities: 2%.

5. Businesses with revenues, expenses, and taxable income in foreign currency must convert the foreign currency into Vietnamese Dong at the average exchange rate on the inter-bank foreign exchange market published by the State Bank of Vietnam at the time of occurrence of revenues, expenses, and taxable income in foreign currency, except where otherwise provided by law. For foreign currencies without an exchange rate against the Vietnamese Dong, conversion must be made through another foreign currency with an exchange rate against the Vietnamese Dong.

Part C

BASIS FOR CALCULATING CORPORATE INCOME TAX

I. TAXABLE INCOME

Taxable income for the tax period is determined by deducting exempted income and losses carried forward from previous years from taxable income according to regulations.

Taxable income is determined using the following formula:

II. TAXABLE INCOME SOURCES

Taxable income for the tax period includes income from production and business activities of goods and services and other income.

Taxable income for the tax period is determined as follows:

Income from business operations involving goods and services is calculated as the revenue from such operations minus deductible expenses for those operations. If a business engages in multiple activities subject to different tax rates, it must separately calculate the income from each activity and apply the corresponding tax rate.

Income from the transfer of real estate must be recorded separately for the purpose of declaring and paying corporate income tax and cannot be offset against income or losses from other business operations.

III. REVENUE

1. Revenue for calculating taxable income is determined as follows:

Revenue for calculating taxable income includes all money received from selling goods, processing fees, service charges, including subsidies, surcharges, and premiums that the enterprise receives, regardless of whether payment has been received.

1.1. For enterprises subject to value-added tax (VAT) under the deduction method, revenue does not include VAT.

Example: Enterprise A is subject to VAT under the deduction method. The VAT invoice includes the following items:

Selling price: 100,000 VND.

VAT (10%): 10,000 VND.

Payment amount: 110,000 VND.

Revenue for determining taxable income is 100,000 VND.

1.2. For enterprises subject to VAT under the direct method on the value added, revenue includes VAT.

Example: Enterprise B is subject to VAT under the direct method on the value added. The sales invoice only records the sale price at 110,000 VND (inclusive of VAT).

Revenue for determining taxable income is 110,000 VND.

2. The time of determining revenue for calculating taxable income is determined as follows:

2.1. For the sale of goods, it is the time when ownership or usage rights are transferred to the buyer.

2.2. For the provision of services, it is the time when the service is completed or the time when the service invoice is issued.

In cases where the issuance of the invoice occurs before the completion of the service, the determination of revenue is based on the time of invoice issuance.

2.3. Other cases are regulated by law.

3. Revenue for calculating taxable income in certain situations is determined as follows:

3.1. For goods and services sold on installment or deferred payment terms, revenue is the amount paid in one lump sum, excluding interest on installments or deferred payments.

3.2. For goods and services exchanged, given as gifts, donated, or consumed internally, revenue is determined based on the market price of similar products, goods, or services at the time of exchange, gift-giving, donation, or internal consumption.

Goods and services consumed internally are those provided by the enterprise for internal consumption, excluding goods and services used to continue the production and business process of the enterprise.

3.3. For processing activities, revenue includes the total amount received from processing activities, including labor costs, fuel, power, auxiliary materials, and other costs related to the processing activities.

3.4. For goods entrusted to agents or consignees and received by agents or consignees under agency or consignment contracts with commission, revenue is determined as follows:

- Enterprises entrusting goods to agents or consignees (including multi-level marketing) is the total sales proceeds from the goods.

- Enterprises receiving agency or consignment sales at fixed prices specified by the entrusting enterprise is the commission earned according to the agency or consignment contract.

3.5. For leasing activities, revenue is the amount paid periodically according to the lease contract. If the lessee pays rent in advance for several years, the revenue for calculating taxable income is allocated over the number of years for which the advance payment was made.

3.6. For credit and financial leasing activities, revenue includes interest income from loans and income from financial leasing transactions arising during the tax period.

3.7. For transportation activities, revenue includes the total income from passenger and cargo transportation, baggage transportation arising during the tax period.

3.8. For electricity and clean water supply activities, revenue is the amount recorded on the VAT invoice for electricity and clean water supply. The time of determining revenue for calculating taxable income is the date confirmed by the meter reading and recorded on the electricity and clean water supply invoice.

Example: The electricity invoice records the meter reading from December 5 to January 5. The revenue of this invoice is included in January.

3.9. For golf course operating activities, revenue includes the income from selling membership cards, golf play tickets, and other income during the tax period.

3.10. For insurance and reinsurance activities, revenue includes the amount receivable from original insurance premiums, service fees (loss assessment, claim settlement, third-party reimbursement, full compensation handling), reinsurance acceptance fees, reinsurance ceding commissions, and other income from insurance activities after deducting premium refunds or reductions, reinsurance acceptance fee refunds or reductions, and reinsurance ceding commission refunds or reductions.

In cases of joint insurance enterprises, the revenue for calculating taxable income of each party is the original insurance premium income allocated according to the proportion of joint insurance participation, excluding VAT.

For insurance contracts agreed to pay in installments, the revenue for calculating taxable income is the amount receivable generated in each installment period.

3.11. For construction and installation activities, revenue includes the value of the project, the value of the project component, or the value of the construction and installation work volume upon acceptance.

- In cases where construction and installation include the provision of raw materials, machinery, and equipment, revenue includes the total amount from construction and installation activities, including the value of raw materials, machinery, and equipment.

- In cases where construction and installation do not include material and equipment packages, the revenue is the amount from construction and installation activities excluding the value of materials and equipment.

3.12. For business activities conducted through joint venture contracts:

- In cases where the parties to the joint venture contract divide business results based on sales revenue of goods and services, the taxable revenue is the revenue of each party divided according to the contract.

- In cases where the parties to the joint venture contract divide business results based on products, the taxable revenue is the product revenue divided for each party according to the contract.

- In cases where the parties to the joint venture contract share the results of the business by pre-tax profit, the revenue for determining pre-tax profit is the amount from selling goods and services according to the contract. The parties to the joint venture contract must appoint one party to issue invoices, record revenue and expenses, and determine the pre-tax profit to be shared among the parties. Each party to the joint venture contract must independently fulfill its corporate income tax obligations according to current regulations.

- In cases where the parties to a business cooperation contract divide business results based on post-tax profit, the revenue for determining taxable income shall be the amount from selling goods and services under the contract. The parties to the business cooperation contract must appoint one party to act as the representative responsible for issuing invoices, recording revenue and expenses, and declaring and paying corporate income tax on behalf of the other participating parties.

3.13. For gaming activities with rewards (casinos, electronic games with rewards, entertainment activities with wagers), it includes the total amount received from such activities including special consumption taxes, minus the amounts paid out as rewards to customers.

3.14. For securities trading activities, it includes revenues from brokerage services, proprietary trading, underwriting securities issuance, managing investment portfolios, financial and securities investment advisory services, managing investment funds, issuing fund certificates, organizing market services, and other securities services as prescribed by law.

3.15. For derivative financial services, it includes the total amount received from providing derivative financial services during the tax period.

IV. ALLOWED AND UNALLOWED EXPENSES WHEN DETERMINING TAXABLE INCOME

1. Except for the expenses listed in Clause 2 of this Section, enterprises are allowed to deduct all expenses if they meet the following conditions:

1.1. The expense is actually incurred in connection with the enterprise's production and business activities.

1.2. The expense is supported by valid invoices and receipts as prescribed by law.

2. Expenses not allowed when determining taxable income include:

2.1. Expenses that do not meet the conditions stipulated in Clause 1 of this Section, except for the value of losses due to natural disasters, epidemics, and other force majeure situations that cannot be compensated.

Enterprises must clearly determine the total value of losses due to natural disasters, epidemics, and other force majeure situations as prescribed by law.

The value of losses due to natural disasters, epidemics, and other force majeure situations that cannot be compensated is determined by subtracting the compensation paid by organizations or individuals responsible for payment according to the law from the total loss value.

2.2. Depreciation expenses for fixed assets in any of the following cases:

a) Depreciation expenses for fixed assets not used for producing and trading goods and services.

Fixed assets serving employees working at the enterprise, such as mid-shift rest rooms, mid-shift dining rooms, changing rooms, toilets, clean water tanks, parking lots, medical examination and treatment centers, employee transportation vehicles, training facilities, dormitories for employees built by the enterprise, can be depreciated and included in deductible costs when determining taxable income.

b) Depreciation expenses for fixed assets without proof of ownership by the enterprise (excluding leased financial fixed assets).

c) Depreciation expenses for fixed assets not managed, tracked, or recorded in the enterprise's accounting books according to current asset management and accounting regulations.

d) Excess depreciation beyond the current limits set by the Ministry of Finance regarding the management, use, and depreciation of fixed assets. If the enterprise has profits and needs to accelerate depreciation to update technology while using the straight-line method, the excess depreciation over the accelerated depreciation limit as prescribed shall be considered.

The enterprise must register the chosen depreciation method for fixed assets with the directly managing tax authority before implementing depreciation. Annually, the enterprise decides the depreciation rate for fixed assets according to the current regulations of the Ministry of Finance regarding the management, use, and depreciation of fixed assets, including accelerated depreciation. During the production and business operations, if the enterprise changes the depreciation rate but remains within the prescribed limits, the enterprise may adjust the depreciation rate, but the final adjustment deadline is the filing deadline for the annual corporate income tax return of the year in which depreciation was applied.

Fixed assets contributed as capital, transferred during division, merger, consolidation, conversion, and revaluation according to regulations, the enterprise receiving these fixed assets may deduct depreciation based on the revalued original cost. For other types of assets that do not meet the criteria for fixed assets contributed as capital, transferred during division, merger, consolidation, conversion, and revaluation, the enterprise receiving these assets may deduct them based on the revalued price.

For self-made fixed assets, the original cost of the fixed asset subject to depreciation and included in deductible expenses is the total production costs incurred to form such asset.

e) Depreciation corresponding to the original cost exceeding 1.6 billion VND per vehicle for passenger cars with up to 9 seats newly registered and recorded for depreciation from January 1, 2009 (excluding passenger transport, tourism, and hotel cars); depreciation for fixed assets being civil aircraft and yachts not used for commercial cargo and passenger transport.

Passenger cars with up to 9 seats dedicated to passenger transport, tourism, and hotel businesses are those registered under the enterprise name and have one of the following business sectors registered in the Business Registration Certificate: passenger transport, tourism, hotel business.

Civil aircraft and yachts not used for commercial cargo and passenger transport are those belonging to enterprises that have registered and recorded depreciation but do not have the passenger transport, cargo transport, or tourism sectors registered in their Business Registration Certificates.

g) Depreciation for fixed assets that have been fully depreciated.

h) Depreciation for construction on land that is used both for production and business activities and for other purposes shall not be included in the reasonable expenses for the value of the construction on land corresponding to the area not used for production and business activities.

In the case of constructions on land such as office headquarters, factories, retail stores serving production and business activities built on leased or borrowed land from organizations, individuals, or households (not directly leasing from the state or within industrial zones), enterprises may only deduct depreciation expenses for these constructions if they meet the following conditions:

- The lease or borrowing contract must be notarized at a notary public office in accordance with the provisions of the law; the lease or borrowing period specified in the contract must not be lower than the minimum depreciation period for fixed assets.

- The invoice for the quantity of construction works handed over along with the construction contract, settlement of the construction contract, and final settlement of the construction work value must bear the name, address, and tax code of the enterprise.

- The construction on land must be managed, monitored, and accounted for according to the current regulations on the management of fixed assets.

2.3. Expenditure on raw materials, materials, fuel, energy, goods exceeding reasonable consumption.

The level of reasonable consumption of raw materials, materials, fuel, energy, and goods used in production and business operations is established by the enterprise itself. The level of reasonable consumption is established at the beginning of the year or production period and must be reported to the direct tax authority within three months from the start of production based on the established consumption level. If the enterprise adjusts the consumption levels of raw materials, materials, fuel, energy, and goods during the production and business period, the enterprise must report this adjustment to the direct tax authority. The latest deadline for reporting adjustments to the tax authority is the deadline for filing the annual corporate income tax return. In cases where certain raw materials, materials, fuel, goods have national consumption standards, these standards must be followed.

2.4. Expenses for purchasing goods and services without invoices, enterprises are allowed to prepare a Purchase List (according to Form No. 01/TNDN attached hereto) but not attach it to payment vouchers for suppliers or service providers in the following cases: purchasing agricultural, forestry, aquatic products directly from producers or harvesters; purchasing handcrafted products made from rattan, straw, bamboo, palm leaves, reed, coconut shells, coir, or recycled agricultural products from non-commercial producers; purchasing soil, stone, sand, gravel directly from individuals who extract them; purchasing scrap materials from individuals who collect them; purchasing used household items or personal property directly from individuals who sell them; and some services purchased from individuals who do not engage in business.

The Purchase List must be signed by the legal representative or authorized person of the enterprise and they are responsible for its accuracy and truthfulness under the law. If the purchase price listed on the Purchase List is higher than the market price at the time of purchase, the tax authority will determine the price based on the market price of similar goods or services at the time of purchase to recalculate the reasonable expenses when determining taxable income.

2.5. Wages and salaries expenses falling into one of the following cases:

a) Expenses for wages, salaries, and other accounting entries paid to employees but not actually paid or without valid invoices or supporting documents as required by law.

b) Bonuses given to employees that do not constitute part of their wages, bonuses not specifically stipulated in the labor contract or collective labor agreement.

c) Wages, salaries, and allowances payable to employees but not deducted from the tax settlement documents by the end of the tax settlement period for the year, except when the enterprise has set up a reserve fund to supplement the next year's wage fund to ensure uninterrupted salary payments and not used for other purposes. The annual reserve amount is determined by the enterprise but should not exceed 17% of the actual wage fund.

d) Wages and salaries of individual business owners, sole members of limited liability companies (owned by an individual); remuneration paid to founders, members of the board of directors, or management board who do not directly participate in managing production and business operations.

2.6. Expenditures on uniforms provided in kind to employees without invoices; expenditures on uniforms provided in kind to employees exceeding VND 1,500,000 per person per year; expenditures on uniforms provided in cash to employees exceeding VND 1,000,000 per person per year.

2.7. Expenditures on rewards for inventions and improvements without specific regulations on reward distribution or a review committee for inventions and improvements.

2.8. Expenditures on purchasing life insurance for employees.

2.9. Allowances for travel during leave not in accordance with the Labor Code; allowances for employees traveling domestically and internationally (excluding transportation and accommodation costs) exceeding twice the prescribed limit for civil servants and state officials as directed by the Ministry of Finance.

2.10. Expenditures not in accordance with the designated recipients, purposes, or exceeding the prescribed limits.

a) Additional expenses for female workers that can be included in deductible costs include:

- Costs for retraining female workers in new occupations when their previous jobs are no longer suitable and they need to switch to other occupations according to the enterprise’s development plan.

This cost includes: tuition fees (if applicable) + salary grade difference (ensuring 100% of the salary for those attending training).

- Salaries and allowances (if any) for teachers working at kindergartens organized and managed by the enterprise.

- Costs for additional health check-ups during the year, such as occupational diseases, chronic illnesses, or gynecological examinations for female workers.

- Postnatal benefits for female workers after giving birth for the first or second time.

- Allowance for overtime work for female workers due to objective reasons where female workers do not take post-natal leave or breastfeeding leave and continue working for the enterprise according to the current regulations; including cases where wages are paid in kind while female workers still work during the post-natal leave period.

b) Additional expenses for ethnic minorities shall be included in deductible costs, including tuition fees (if applicable) plus the difference in salary grade (ensuring 100% salary for those studying); housing support, social insurance, and health insurance funds for ethnic minorities in cases where they have not been supported by the State according to prescribed regulations.

2.11. The portion of contributions to the social insurance fund, health insurance fund, and union dues exceeding the prescribed limits. The portion of expenditures contributing to management costs for higher levels and contributions to association funds exceeding the prescribed limits of the association.

2.12. Payment for electricity and water charges under contracts for electricity and water directly signed between the owner and the production and business location lessee with the supplier of electricity and water without sufficient supporting documents in any of the following cases:

a) In the case where the enterprise directly pays electricity and water charges to the supplier of electricity and water without an itemized list (according to Form No. 02/TNDN issued together with this Circular) attached to the payment invoices for electricity and water and the lease contract for the production and business location.

b) In the case where the enterprise pays electricity and water charges to the lessor of the business location without an itemized list (according to Form No. 02/TNDN issued together with this Circular) attached to the payment vouchers for electricity and water provided by the lessor of the production and business location corresponding to the actual amount of electricity and water consumed and the lease contract for the production and business location.

2.13. The portion of rental costs for fixed assets exceeding the allocation based on the number of years for which the lessee has prepaid rent.

Example: Enterprise A leases fixed assets for 4 years at a total rental cost of 400 million VND, paid in full. The annual rental cost recorded as an expense is 100 million VND. Any rental cost exceeding 100 million VND annually will not be considered a reasonable expense when determining taxable income.

For repair costs of leased fixed assets where the lease agreement stipulates that the lessee is responsible for repairs during the lease period, such repair costs may be recorded as expenses or gradually allocated to expenses over a maximum period of 3 years.

In the case of costs for non-fixed assets: costs for purchasing and using technical documents, patents, technology transfer licenses, trademarks, business advantages... shall be gradually allocated to operating expenses but not more than 3 years.

2.14. The portion of interest payments on loans for production and business activities from entities other than credit organizations or economic organizations exceeding 150% of the basic interest rate published by the State Bank of Vietnam at the time of borrowing.

2.15. Interest payments for capital contributions to the registered charter capital or interest payments corresponding to the shortfall of the registered charter capital according to the contribution schedule recorded in the company's articles of association, even if the enterprise has commenced production and business operations.

2.16. Provisioning and utilization of reserve funds for inventory write-downs, loss provisions for financial investments, bad debt provisions, and warranty provisions for products, goods, and construction projects not in accordance with the guidelines of the Ministry of Finance on provisioning.

2.17. Provisioning and utilization of reserve funds for severance pay and termination benefits for employees not in accordance with current regulations.

2.18. Prepaid expenses within a specified period that have not been utilized or fully utilized by the due date.

Prepaid expenses include: prepayment for major repairs of fixed assets according to cycles, prepayments for activities that have been recorded as revenue but still require continued performance of obligations under contracts, and other prepayments.

For fixed assets subject to periodic major repairs, businesses may prepay repair costs according to estimates into annual expenses. If the actual repair costs exceed the estimated prepayment, the business may add the difference to reasonable expenses.

2.19. The portion of advertising, marketing, promotional, and brokerage commission expenses; hospitality, ceremonial, and conference expenses; marketing support expenses, cost support expenses, and discount payment expenses; and gift and donation expenses to media outlets related to production and business activities exceeding 10% of total deductible expenses; for newly established enterprises, the excess portion exceeds 15% in the first three years from the date of establishment. Total deductible expenses do not include controlled expenses as stipulated herein; for trading activities, total deductible expenses do not include the purchase price of goods sold.

The controlled advertising, marketing, promotional, and brokerage commission expenses mentioned above do not include brokerage commissions for insurance in accordance with laws on insurance business; commissions paid to sales agents at the correct price; expenses incurred domestically or internationally (if any): Market research expenses: surveys, interviews, data collection, analysis, and evaluation of information; expenses for developing and supporting market research; expenses for hiring consultants to conduct market research, development, and support; Exhibition and product introduction expenses and organizing trade fairs and exhibitions: expenses for opening exhibition rooms or booths; expenses for renting space for exhibitions and introductions; expenses for materials and tools to support exhibitions and introductions; transportation expenses for exhibited and introduced products.

The limit of 15% in the first three years only applies to newly established enterprises that obtained a business registration certificate from January 1, 2009, and does not apply to enterprises newly established through mergers, divisions, spin-offs, consolidations, or changes in business form or ownership.

Example: Company A was established in 2008, in its 2009 final tax report for corporate income tax, the recorded expense figures are as follows:

- Portion for advertising, marketing, promotion, brokerage commissions; hospitality, ceremonial, conference expenses; marketing support costs, cost support discounts; newspaper donations and gifts related directly to production and business activities with full legal invoices and receipts: VND 250 million

- Total deductible expenses (excluding: portion for advertising, marketing, promotion, brokerage commissions; hospitality, ceremonial, conference expenses; marketing support costs, cost support discounts; newspaper donations and gifts related directly to production and business activities): VND 2 billion

Therefore, the maximum allowable deduction for advertising, marketing, promotion, brokerage commissions; hospitality, ceremonial, conference expenses; marketing support costs, cost support discounts; newspaper donations and gifts related directly to production and business activities is:

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

Therefore, the total deductible expenses included in the cost for the year 2009 is:

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

2.20. Losses from exchange rate fluctuations due to revaluation of monetary items denominated in foreign currencies at the end of the fiscal year; losses from exchange rate fluctuations arising during the construction phase before the commencement of production and business operations.

2.21. Expenses for educational sponsorship not in accordance with the provisions of sub-item a of this item or without documentation confirming the sponsorship as specified in point b below:

a) Educational sponsorship includes: sponsorship for public, private, and private non-profit schools under the national education system as prescribed by laws on education where such sponsorship is not intended to contribute capital or purchase shares in these schools; sponsorship for facilities serving teaching, learning, and school activities; sponsorship for regular school activities; scholarship sponsorship for students in general education institutions, vocational training institutions, and higher education institutions as stipulated by the Education Law, either directly to students or through organizations authorized to solicit sponsorships under the law; sponsorship for academic contests open to students; sponsorship to establish educational scholarship funds in accordance with laws on education and training.

b) Documentation confirming educational sponsorship includes: A confirmation record of the sponsorship signed by the representative of the business entity acting as the sponsor and the representative of the legitimate educational institution receiving the sponsorship, students, or organizations authorized to solicit sponsorships (in accordance with Form No. 03/TNDN issued together with this Circular), accompanied by invoices and receipts for goods purchased (if the sponsorship is in kind) or payment vouchers (if the sponsorship is in cash).

2.22. Expenses for health sponsorship not in accordance with the provisions of sub-item a of this item or without documentation confirming the sponsorship as specified in point b below:

a) Health sponsorship includes: sponsorship for healthcare establishments established in accordance with laws on health care where such sponsorship is not intended to contribute capital or purchase shares in these healthcare establishments; sponsorship for medical equipment, medical supplies, and medicines; sponsorship for regular hospital and healthcare center activities; sponsorship in cash provided to patients through organizations authorized to solicit sponsorships under the law.

b) Documentation confirming health sponsorship includes: A confirmation record of the sponsorship signed by the representative of the enterprise acting as the sponsor and the representative of the recipient organization (or organizations authorized to solicit sponsorships) according to Form No. 04/TNDN issued together with this Circular, accompanied by invoices and receipts for goods purchased (if the sponsorship is in kind) or payment vouchers (if the sponsorship is in cash).

2.23. Expenses for disaster relief sponsorship not in accordance with the provisions of sub-item a of this item or without documentation confirming the sponsorship as specified in point b below:

a) Disaster relief sponsorship includes: sponsorship in cash or in kind to directly assist organizations established and operating in accordance with the law and individuals affected by disasters through organizations authorized to solicit sponsorships under the law.

b) Documentation confirming disaster relief sponsorship includes: A confirmation record of the sponsorship signed by the representative of the enterprise acting as the sponsor and the representative of the disaster-affected organization (or organizations authorized to solicit sponsorships) as the recipient organization (according to Form No. 05/TNDN issued together with this Circular), accompanied by invoices and receipts for goods purchased (if the sponsorship is in kind) or payment vouchers (if the sponsorship is in cash).

2.24. Expenses for building benevolent houses for the poor not in accordance with the provisions of sub-item a of this item or without documentation confirming the sponsorship as specified in point b below:

a) The recipients of sponsorship are households classified as poor according to the Prime Minister's regulations. Forms of sponsorship include providing financial or material assistance to build benevolent houses for poor households either directly or through organizations authorized to solicit sponsorships under the law.

b) Documentation confirming sponsorship for building benevolent houses for the poor includes: A confirmation record of the sponsorship signed by the representative of the enterprise acting as the sponsor and the beneficiary (or organizations authorized to solicit sponsorships) as the recipient organization (according to Form No. 06/TNDN issued together with this Circular); a certificate of poverty from local authorities; accompanied by invoices and receipts for goods purchased (if the sponsorship is in kind) or payment vouchers (if the sponsorship is in cash).

2.25. The portion of business management expenses allocated by a foreign company to its permanent establishment in Vietnam exceeding the amount calculated according to the following formula:

Foreign company's business management expenses allocated to their permanent establishments in Vietnam can only be counted from the date of establishment of the permanent establishment in Vietnam.

The basis for determining the costs and revenue of foreign companies is the financial report of the foreign company audited by an independent auditing firm which clearly shows the revenue of the foreign company, management expenses of the foreign company, and the portion of management expenses allocated to the permanent establishment in Vietnam.

If the permanent establishment of the foreign company in Vietnam has not implemented accounting records, invoices, and supporting documents, and has not paid taxes according to the declaration method, then the reasonable business management expenses allocated by the foreign company shall not be included in the deductible costs.

2.26. Expenses reimbursed from other sources of funding; expenses already paid from the enterprise's science and technology development fund.

2.27. Expenses that do not correspond to taxable revenue.

2.28. Expenses of insurance business operations, lottery business operations, securities business operations, and other special business operations that do not comply with the specific guidelines issued by the Ministry of Finance.

2.29. Administrative fines including traffic law violations, business registration system violations, accounting and statistics system violations, tax law violations, and other administrative fines as stipulated by law.

2.30. Basic construction investment expenditures during the investment phase to form fixed assets; local support expenditures; expenditures supporting social organizations outside the enterprise; charitable expenditures except for educational, healthcare, disaster relief, and building homes for the poor as specified in points 2.21, 2.22, 2.23, 2.24 of this section; membership card purchase fees for golf courses, and golf playing fees.

2.31. Input value-added tax that has been deducted or refunded; corporate income tax; personal income tax.

V. OTHER INCOME

Other income includes taxable income within the tax period that does not belong to the business activities listed in the enterprise’s business registration. Other income includes the following items:

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

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

3. Income from ownership and usage rights of property including all forms of income received for ownership and usage rights of property; income from intellectual property rights; income from technology transfer as prescribed by law. Rental income from property under all forms.

Intellectual property royalty income and technology transfer income is determined by the total amount received minus (-) the cost of creating intellectual property rights or transferred technology, minus (-) maintenance, upgrade, and development costs of intellectual property rights or transferred technology, and other allowable deductions.

Rental income is determined by rental activity revenue minus (-) expenses: depreciation costs, maintenance, repair, and preservation costs of the asset, leasing costs of the asset for re-leasing (if applicable), and other related allowable deductions.

4. Income from asset transfer, liquidation (excluding real estate), and other negotiable instruments. This income is determined by (=) the revenue from transferring or liquidating the asset minus (-) the remaining value of the transferred or liquidated asset recorded in the accounting books at the time of transfer or liquidation, and related allowable deduction expenses.

5. Interest income from deposits, interest income from loans including: interest income from deposits at credit institutions, interest income from loans under all forms as prescribed by law, loan guarantee fees, and other fees in loan contracts.

6. Foreign exchange trading income; profit from actual exchange rate differences arising during the production and business operation period (excluding profit from exchange rate differences due to revaluation of monetary items denominated in foreign currency at year-end, and profit from exchange rate differences arising during basic construction investment phases before production and business operations).

Foreign exchange trading income is the total amount received from selling foreign currency minus (-) the total purchase price of the sold foreign currency.

7. Reimbursement of provisions for inventory write-downs, provisions for investment losses, bad debt provisions, and warranty provisions for products, goods, and construction projects that have been established but are no longer used or fully utilized.

8. Previously written-off uncollectible debts now recovered.

9. Unidentifiable creditor debts.

10. Production and business income from previous years that were overlooked and discovered by the enterprise.

11. Difference between income from penalties and compensation received from economic contract breaches by counterparties after deducting penalties and compensation paid due to contract breaches as prescribed by law.

12. Differences arising from asset revaluation as prescribed by law for capital contribution, asset transfer when splitting, merging, consolidating, converting business types, excluding cases of fixed asset revaluation when state-owned enterprises are converted into joint-stock companies.

- For fixed assets revalued for capital contribution, it is the difference between the revaluation price and the remaining value of the fixed asset, and is allocated over the remaining useful life of the fixed asset at the receiving enterprise.

- For fixed assets transferred when splitting, merging, consolidating, or converting business types (excluding cases where state-owned enterprises are converted into joint-stock companies), it is the difference between the revaluation price and the remaining value of the fixed asset recorded in the accounting books.

- For non-fixed assets, it is the difference between the revaluation price and the book value recorded in the accounting books.

13. Gifts, cash gifts, and gifts in kind; income received in cash or in kind from marketing support, cost reimbursement, payment discounts, promotional awards, and other forms of support.

14. Compensation for fixed assets on land and relocation assistance funds after deducting related expenses such as relocation costs (transportation and installation costs), residual value of fixed assets, and other costs (if any). For enterprises relocating according to the planning of authorized state agencies, the remaining amount after deducting related expenses (if any) shall be used in accordance with relevant laws.

15. Income related to the sale of goods and provision of services not included in revenue, such as quick-release vessel bonuses, service awards in the food and hotel industry, after deducting costs incurred to generate such income.

16. Income from the sale of waste and by-products after deducting recovery and disposal costs.

17. Income from domestic joint stock investments, joint ventures, and economic associations distributed before corporate income tax.

18. Income from production and business activities abroad.

Vietnamese enterprises investing abroad that have income from production and business activities outside Vietnam shall declare and pay corporate income tax according to the current Corporate Income Tax Law of Vietnam, including cases where the enterprise is enjoying tax exemption or reduction benefits under the laws of the country where it invests. The corporate income tax rate applicable to foreign income for calculation and declaration purposes is 25%, without applying any preferential tax rates (if any) enjoyed by Vietnamese enterprises investing abroad under the current Corporate Income Tax Law.

The tax authority has the right to determine taxable income from overseas production and business activities of Vietnamese enterprises investing abroad in cases of non-compliance with tax declaration and payment regulations.

In cases where income from investment projects abroad has already been subject to corporate income tax (or a similar tax) in the foreign country, when calculating the corporate income tax payable in Vietnam, Vietnamese enterprises investing abroad may deduct the tax paid in the foreign country or paid on their behalf by the receiving country's partner (including taxes on dividends), but the deductible tax amount shall not exceed the corporate income tax calculated according to Vietnam’s Corporate Income Tax Law. The corporate income tax exemptions and reductions granted to the portion of profits derived from foreign investment projects under the laws of the investing country shall also be deducted when determining the corporate income tax payable in Vietnam.

Example 1: Enterprise A of Vietnam has an income of 800 million VND from an investment project abroad. This income is post-tax income according to the law of the investing country. The corporate income tax payable according to the law of the investing country is 200 million VND. After a 50% reduction according to the law of the investing country, the corporate income tax is 100 million VND.

Part on income from foreign investment projects subject to corporate income tax according to the Law on Corporate Income Tax of Vietnam shall be as follows:

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

The amount of corporate income tax still payable (after deducting the tax already paid in the country where the enterprise invests) is:

250 million VND - 200 million VND = 50 million VND

Example 2: Vietnamese Enterprise A has a revenue of 660 million VND from a foreign investment project. This revenue is the remaining income after paying corporate income tax in the country where the enterprise invests. The amount of corporate income tax paid according to the regulations of the country where the enterprise invests is 340 million VND.

The income from foreign investment projects of enterprises must be declared and taxed according to the provisions of the Law on Corporate Income Tax of Vietnam as follows:

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

Vietnamese Enterprise A can only deduct the tax paid in the country where the enterprise invests equivalent to the tax calculated under the Law on Corporate Income Tax of Vietnam, which is 250 million VND. The excess tax paid in the country where the enterprise invests over the tax calculated under the Law on Corporate Income Tax of Vietnam, which is 90 million VND (340 - 250 = 90), cannot be deducted from the tax payable when declaring and paying corporate income tax in Vietnam.

The attached documents when declaring and paying tax for Vietnamese enterprises investing abroad for income from foreign investment projects include:

- A document from the enterprise regarding the profit distribution of the foreign investment project.

- Financial statements of the enterprise confirmed by an independent auditing organization.

- The corporate income tax declaration form of the enterprise belonging to the foreign investment project (a certified copy by an authorized representative of the foreign investment project).

- Settlement record of corporate income tax for the enterprise (if any);

- Confirmation of taxes paid abroad or proof of taxes paid abroad.

In case the foreign investment project has not yet generated taxable income (or is currently generating losses), when declaring annual corporate income tax settlement, Vietnamese enterprises investing abroad only need to submit financial statements confirmed by an independent auditing organization or by an authorized agency of the country where the enterprise invests and the corporate income tax declaration form of the foreign investment project (a certified copy by an authorized representative of the foreign investment project). Losses arising from the foreign investment project cannot be deducted from the domestic income of the enterprise when calculating corporate income tax.

The income from the foreign investment project should be declared in the corporate income tax settlement of the following fiscal year after the income is generated abroad or declared in the corporate income tax settlement of the same fiscal year with the year the income is generated abroad if the enterprise has sufficient basis and evidence to determine the income and corporate income tax paid from the foreign investment project.

Example 3: Vietnamese Enterprise A has income from a foreign investment project in the 2009 fiscal year. Vietnamese Enterprise A must declare the aforementioned income in the corporate income tax declaration of the 2009 fiscal year or 2010 fiscal year according to the Law on Corporate Income Tax of Vietnam.

For income from production and business activities of the foreign investment project in countries that have signed Double Taxation Avoidance Agreements with Vietnam, Vietnamese enterprises investing abroad shall declare and pay tax according to the provisions of the Agreement.

19. Income received in cash or in kind from sources of sponsorship except for the sponsorship mentioned in Clause 7 Section VI Part this.

20. Other income as prescribed by law.

VI. INCOME EXEMPT FROM TAX

1. Income from agriculture, animal husbandry, and aquaculture of organizations established under the Law on Cooperatives.

2. Income from providing technical services directly serving agriculture including: income from irrigation and drainage services; plowing and harrowing services; dredging of internal canal services; pest and disease control services for crops and livestock; harvesting services for agricultural products.

3. Income from implementing scientific research and technological development contracts; Income from sales revenue during the trial production period and income from sales revenue from products made using new technology first applied in Vietnam. The maximum exemption period does not exceed one (01) year, starting from the date of implementation of the scientific research and technological development contract; the start date of trial production; the start date of applying new technology first used in Vietnam to produce products.

3.1. Income from implementing scientific research and technological development contracts exempted from tax must meet the following conditions:

- Having a registration certificate for scientific research activities;

- Confirmed by the competent state management agency for science and technology;

3.2. Income from sales revenue from products made using new technology first applied in Vietnam exempted from tax must ensure that the new technology first applied in Vietnam is recognized by the competent state management agency on science and technology.

4. Income from production and business activities of enterprises employing disabled persons, former drug addicts, and HIV-infected persons, whose average number constitutes 51% or more of the total average number of employees of the enterprise in a year.

Example: Enterprise A had 290 employees on the payroll in January 2009; hired 12 additional employees in April 2008; had 2 employees leave in October; and had 3 employees leave in December. Therefore, the average number of employees in 2009 is determined as follows:

= 290 employees + 8 employees = 298 employees

Thus, the average number of employees in 2009 at Enterprise A is 298 employees, if Enterprise A employs 151 or more disabled employees (298 x 51%), then the income from production and business activities of goods and services of Enterprise A will be exempt from tax.

- Income exempted from tax as specified in this clause does not include other income stipulated in Section V Part C of this Circular.

- For enterprises to be eligible for tax-exempt income under this point, they must satisfy the following conditions:

4.1. For enterprises employing persons with disabilities (including war invalids and disabled veterans), there must be a confirmation from a competent health authority regarding the number of employees who are persons with disabilities.

4.2. For enterprises employing persons who have completed drug rehabilitation, there must be a certificate of successful rehabilitation from drug rehabilitation facilities or a confirmation from a competent authority.

4.3. For enterprises employing persons infected with HIV, there must be a confirmation from a competent health authority regarding the number of employees infected with HIV.

5. Income from vocational training activities exclusively for ethnic minorities, persons with disabilities, children in particularly difficult circumstances, and social delinquents. In cases where the training institution also serves other groups, the amount of tax-exempt income shall be determined proportionally to the number of trainees who are ethnic minorities, persons with disabilities, children in particularly difficult circumstances, and social delinquents relative to the total number of trainees.

Income from vocational training activities exempted from tax at this point must meet the following conditions:

- The vocational training institution must be established and operate in accordance with the provisions of guiding documents on vocational training.

- There must be a list of trainees who are ethnic minorities, persons with disabilities, children in particularly difficult circumstances, and social delinquents.

6. Income distributed from capital contribution, share purchase, joint venture, and economic cooperation activities with domestic enterprises, after the receiving enterprise has paid corporate income tax according to the Corporate Income Tax Law, including cases where the receiving enterprise is exempted or granted tax reduction.

Example: Enterprise B receives capital contribution from Enterprise A. The pre-tax income corresponding to Enterprise A's capital contribution in Enterprise B is 100 million VND.

- Case 1: Enterprise B is not entitled to corporate income tax incentives and has fully paid corporate income tax including the income received from Enterprise A, then the income that Enterprise A receives from the capital contribution activity is 75 million VND [(100 million - (100 million x 25%)], Enterprise A is exempted from corporate income tax on this 75 million VND.

- Case 2: Enterprise B is granted a 50% reduction in corporate income tax payable and has fully paid corporate income tax including the income received from Enterprise A based on the reduced tax amount, then the income that Enterprise A receives from the capital contribution activity is 87.5 million VND [100 million - (100 million x 25% x 50%)], Enterprise A is exempted from corporate income tax on this 87.5 million VND.

- Case 3: If Enterprise B is exempted from corporate income tax, then the income that Enterprise A receives from the capital contribution activity is 100 million VND, Enterprise A is exempted from corporate income tax on this 100 million VND.

7. Grants received for use in educational, scientific research, cultural, artistic, charitable, humanitarian, and other social activities in Vietnam.

In cases where the recipient organization uses the above grants for purposes other than those intended, the recipient organization must pay corporate income tax at a rate of 25% on the amount of grants used for unintended purposes.

The recipient organizations as specified in this clause must be established and operate in accordance with the law, and comply with legal regulations on accounting and statistics.

VII. DETERMINATION OF LOSSES AND LOSS CARRYFORWARDS

1. Losses arising during the tax year are the negative difference in taxable income.

2. After finalizing the tax payment, if an enterprise incurs a loss, it may carry forward the loss of the tax year to offset against taxable income in subsequent years. The carryforward period is continuous and does not exceed five years, starting from the year immediately following the year in which the loss was incurred.

Enterprises shall determine the amount of loss to be carried forward to offset against taxable income according to the principle above. If additional losses occur during the carryforward period, these new losses (excluding losses carried over from previous periods) will be carried forward continuously for up to five years, starting from the year immediately following the year in which the new losses were incurred.

If the competent authority determines the amount of loss carryforward differently from the amount self-determined by the enterprise, the amount of loss carryforward shall be determined according to the conclusion of the competent authority but must ensure continuous carryforward for no more than five years, starting from the year immediately following the year in which the loss was incurred.

Beyond the five-year period from the year immediately following the year in which the loss was incurred, any remaining unoffset losses will not be further deductible against income in subsequent years.

3. When enterprises change their business form, ownership structure (including transferring or selling state-owned enterprises), merge, consolidate, split, dissolve, or go bankrupt, they must settle taxes with the tax authority up to the date of the decision to change the business form, ownership structure, merge, consolidate, split, dissolve, or bankruptcy issued by the competent authority. Losses incurred before the change in ownership, merger, consolidation, or split must be tracked in detail by year and continued to be carried forward to offset against the taxable income of the enterprise after the change in ownership, merger, consolidation, or split to ensure continuous loss carryforward for no more than five years, starting from the year immediately following the year in which the loss was incurred.

4. When a joint venture enterprise dissolves and incurs a loss, the loss shall be allocated among the participating enterprises. Participating enterprises may aggregate the allocated loss from the joint venture into their own business results when settling taxes, but must ensure continuous loss carryforward for no more than five years, starting from the year immediately following the year in which the loss was incurred by the joint venture enterprise.

VIII. ESTABLISHMENT OF THE ENTERPRISE SCIENCE AND TECHNOLOGY DEVELOPMENT FUND

1. An enterprise established and operating in accordance with Vietnamese law may allocate up to 10% of its annual taxable income before calculating corporate income tax to establish a Science and Technology Development Fund. The enterprise shall determine the allocation level for the Science and Technology Development Fund in accordance with regulations prior to calculating corporate income tax. Annually, if the enterprise has allocated to the Science and Technology Development Fund, it must prepare a report on the allocation and use of the Science and Technology Development Fund and declare the allocation level and amount allocated on the corporate income tax return. The report on the use of the Science and Technology Development Fund must be submitted together with the corporate income tax return.

2. Within five years from the date of allocation, if the Science and Technology Development Fund is not used or is not used up to 70% or is used for purposes other than those intended, the enterprise must pay to the state budget the corporate income tax calculated on the portion of income that was allocated to the fund but not used or used for purposes other than those intended, along with the interest generated from such tax.

The amount used for purposes other than intended shall not be included in the total amount used for the purpose of developing science and technology.

- The corporate income tax rate used to calculate the amount of tax to be recovered is the rate applicable to the enterprise during the period of allocating the fund.

- The interest rate applied to the recovered tax amount due to unused portions of the fund is the government bond interest rate for a one-year term applicable at the time of recovery, and the interest calculation period is two years.

Example: Company A determined the allocation level for the Science and Technology Development Fund at 10% of taxable income in 2009 and allocated the fund from 2009 to 2013. At the beginning of 2014 when preparing the final corporate income tax return for 2013, the company prepared a report on the allocation and use of the Science and Technology Development Fund over the past five years based on the annual reports on allocation and use of the fund as follows:

The allocation level for the fund in 2009 was 2 billion VND. By the end of 2013, the company had only used 1.2 billion VND for scientific research. In this case, the company only used 60% of the allocated fund (1.2/2 x 100). The company will be subject to back taxes and penalties as follows:

+ Corporate income tax due to not using up 70% of the fund (assuming the corporate income tax rate during the period of allocating the fund was 25%):

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

+ Interest generated from the corporate income tax due to not using up 70% of the fund (assuming the interest rate on government bonds for one year is 12%):

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

For years after 2009, the allocation and use of the Science and Technology Development Fund shall be calculated according to the principle that funds allocated earlier are used first, as stated above.

- The interest rate for interest on the amount of tax recovered based on the portion of the fund used for unintended purposes is the penalty interest rate stipulated by the Law on Tax Administration, and the interest calculation period is the time from the allocation of the fund to the recovery. The recovery date is the date when the violation is discovered and documented (except in cases where documentation is not required).

Determining the allocation date of the amount used for unintended purposes serves as the basis for calculating interest on the amount of tax recovered based on the portion of the fund used for unintended purposes according to the principle that funds allocated earlier are used first.

Example: Company B allocated the Science and Technology Development Fund as follows: 200 million VND in the 2009 tax period, 300 million VND in 2010, 300 million VND in 2011, 500 million VND in 2012, and 700 million VND in 2013. In 2010, the company used 200 million VND from the Science and Technology Development Fund, including 40 million VND used for unintended purposes. Annually, the company prepares a report on the allocation and use of the Science and Technology Development Fund. On May 5, 2011, through inspection, the tax authority discovered that in 2010, the company used 40 million VND from the Science and Technology Development Fund for unintended purposes and issued a penalty notice. The late payment penalty interest rate under current tax laws is 0.05% per day.

Case 1: In 2009, the company used 150 million VND for a science and technology project:

- The 40 million VND used for unintended purposes is determined to be from the allocation of the fund in the 2009 tax period.

- Corporate income tax due to using for unintended purposes:

40 million VND x 25% = 10 million VND

- Number of days for late payment penalty: from April 1, 2010 to May 5, 2011: 400 days.

Late payment penalty: 10 million VND x 0.05% per day x 400 days = 2 million VND

Case 2: In 2009, the company used 200 million VND for a science and technology project:

- The 40 million VND used for unintended purposes is determined to be from the allocation of the fund in the 2010 tax period.

- Corporate income tax due to using for unintended purposes:

40 million VND x 25% = 10 million VND

- Number of days for late payment penalty: from April 1, 2011 to May 5, 2011: 35 days.

Late payment penalty: 10 million VND x 0.05% per day x 35 days = 175,000 VND

3. The Science and Technology Development Fund of an enterprise can only be used for investment in science and technology in Vietnam. Expenditures from the Science and Technology Development Fund must have complete legal invoices and supporting documents as prescribed by law.

4. Enterprises are not allowed to include expenditures from the Science and Technology Development Fund in deductible expenses when determining taxable income for the tax period.

5. If an enterprise undergoing operation experiences changes in ownership form, merger, or consolidation, the newly established enterprise resulting from such changes shall inherit and be responsible for managing and using the Science and Technology Development Fund of the enterprise before the change, merger, or consolidation.

If an enterprise has a Science and Technology Development Fund that has not been fully utilized upon division or separation, the newly established enterprise resulting from such division or separation shall inherit and be responsible for managing and using the Science and Technology Development Fund of the enterprise before the division or separation. The division of the Science and Technology Development Fund shall be decided by the enterprise and registered with the tax authority.

IX. CORPORATE INCOME TAX RATE

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

2. The corporate income tax rate for activities related to oil and gas exploration, development, and exploitation, and rare mineral resources in Vietnam ranges from 32% to 50%. Based on the location of exploitation, conditions of exploitation, and reserves of the mine, enterprises with projects for oil and gas exploration, development, and exploitation, and rare mineral resources shall submit project investment files to the Ministry of Finance for the Prime Minister to decide the specific tax rate for each project and business entity.

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

Part D

PLACE OF TAX PAYMENT

1. Principles for Determination

Enterprises shall pay taxes at their headquarters location. In cases where an enterprise has production bases (including processing and assembly facilities) that are dependent accounting units operating in a province or centrally administered city different from the location of its headquarters, the tax amount will be calculated and paid both at the headquarters and at the production base locations.

The tax payment provisions set forth in this clause shall not apply to construction projects, project components, or dependent accounting unit construction bases.

2. Determination of Tax Amount and Declaration Procedures

2.1. The corporate income tax amount payable in the province or centrally administered city where the dependent production base is located shall be determined by multiplying the corporate income tax payable for the period by (x) the ratio of the costs of the dependent production base to the total costs of the enterprise.

The cost ratio is determined based on the ratio of the costs of the dependent production base to the total costs of the enterprise. The cost ratio is determined as follows:

The data for determining the cost ratio shall be based on the final tax settlement figures of the enterprise for the preceding year, which the enterprise uses to determine the tax payable and to declare and pay corporate income tax for subsequent years.

For enterprises currently in operation with dependent production bases in various localities, the data for determining the cost ratio for the headquarters and the dependent production bases shall be self-determined by the enterprise based on the final tax settlement figures for corporate income tax for the year 2008, and this ratio shall be used consistently from 2009 onwards.

For newly established enterprises, or for enterprises currently in operation that establish or reduce dependent production bases in various localities, the enterprise must self-determine the cost ratio for the first tax calculation period for these cases. From the second tax calculation period onwards, the cost ratio shall be determined according to the principles stated above.

2.2. The enterprise at the headquarters location shall be responsible for declaring and paying corporate income tax for the income tax generated at the headquarters and at the dependent production bases according to Form No. 07/TNDN issued together with this Circular. Based on the quarterly corporate income tax payable, the cost ratio of the dependent production base, the enterprise shall determine the provisional quarterly corporate income tax payable at the headquarters and at the dependent production bases.

Example: Enterprise A has its headquarters in Hanoi and has dependent production bases in Hai Duong, Haiphong, and Bac Ninh. The cost ratio based on the total costs of the enterprise in 2008 is as follows: Hanoi: 0.2; Hai Duong: 0.3; Haiphong: 0.3; Bac Ninh: 0.2. The total corporate income tax payable for the first quarter of Enterprise A is 1 billion VND. Starting from 2009, if the enterprise does not establish or reduce dependent production bases in various localities, the aforementioned cost allocation ratio will be used consistently. The corporate income tax payable for each unit in the first quarter is as follows: Hanoi: 200 million VND (1,000 x 0.2); Hai Duong: 300 million VND; Haiphong: 300 million VND; Bac Ninh: 200 million VND.

3. Procedures for Transfer of Tax Documents Between State Treasury and Tax Authorities

Enterprises shall pay the corporate income tax generated at the headquarters location to the State Treasury at the same level as the tax authority where the enterprise registers for tax declaration, while also paying on behalf of the tax payable by the dependent production bases in various localities. Tax payment documents shall be prepared separately for each State Treasury where the budget is collected.

In cases where the enterprise at the headquarters location pays cash at the State Treasury at the headquarters location, the State Treasury shall transfer the funds and the budget revenue collection documents to the relevant State Treasury for recording the budget revenue portion of the tax from the dependent production and business bases.

4. Final Tax Settlement

Enterprises shall declare the final tax settlement of corporate income tax at the headquarters location, the remaining corporate income tax payable shall be determined by subtracting the provisional payments made at the headquarters and at the dependent production bases from the corporate income tax payable according to the final settlement. Any remaining corporate income tax payable or refundable upon final settlement shall be allocated according to the correct ratio at the headquarters and at the dependent production bases.

The classification, management, and utilization of revenue sources shall be carried out in accordance with the provisions of the State Budget Law.

5. Dependent Accounting Units of Enterprises Operating Across Industries with Income Outside Main Business Operations Shall Pay Taxes in the Province or Centrally Administered City Where Such Activities Occur.

Part E

DETERMINATION OF INCOME SUBJECT TO TAX AND CORPORATE INCOME TAX FROM CAPITAL TRANSFER AND SECURITIES TRANSFER

1. Income Subject to Tax

1.1. Income from capital transfer by an enterprise is income derived from transferring part or all of the capital invested by the enterprise in one or more organizations or individuals (including the sale of the entire enterprise).

1.2. Income from securities transfer by an enterprise is income derived from transferring part or all of the securities in which the enterprise has participated in investment in one or more organizations or individuals.

Income from securities transfer includes: stock transfers, bond transfers, fund certificates, and other types of securities as prescribed.

1.3. Enterprises with income from capital transfer or securities transfer shall declare and pay corporate income tax according to the guidelines provided in Part E of this Circular.

2. Basis for Tax Calculation

2.1. Taxable Income:

Taxable income from capital transfer is determined as follows:

Where:

- The transfer price is determined as the actual total value received by the transferring party according to the transfer contract.

In the case where a capital transfer contract stipulates payment on an installment or deferred basis, the revenue from the capital transfer contract does not include the installment interest or deferred interest as specified in the contract.

If the capital transfer contract does not specify the payment price or if the tax authority has grounds to determine that the specified payment price is not consistent with market prices, the tax authority has the right to inspect and set the transfer price. The basis for setting the transfer price is based on the investigation materials of the tax authority or the transfer price of similar capital transfers at the same time and in the same economic organization.

- The purchase price of the transferred capital is determined as follows for each case:

+ If it is the transfer of contributed capital to establish a business, then the value of the capital at the time of contribution is the transfer price. The value of the capital is determined based on the accounting books, invoices, and accounting documents of the transferring entity at the time of contribution and confirmed by the participating parties in the business or joint venture contract.

+ If it is capital acquired through repurchase, then the purchase price is the value of the capital at the time of purchase. The purchase price is determined based on the repurchase agreement and payment vouchers.

In the case where a company uses foreign currency for accounting (approved by the Ministry of Finance) and transfers contributed capital in foreign currency, the transfer price and purchase price of the transferred capital are determined in foreign currency; in the case where a company uses Vietnamese Dong for accounting and transfers contributed capital in foreign currency, the transfer price must be determined in Vietnamese Dong according to the exchange rate at the time of transfer, and the purchase price of the transferred capital is determined in Vietnamese Dong according to the exchange rate at the time of contribution or repurchase.

- Transfer costs are actual expenses directly related to the transfer, supported by legitimate receipts and invoices. In cases where transfer costs occur abroad, the original documents must be certified by a notary or independent auditor in the country where the costs occurred and translated into Vietnamese (with confirmation by an authorized representative).

Transfer costs include: costs for necessary legal procedures for the transfer; fees and taxes required when processing the transfer; transaction, negotiation, and contract signing costs, and other costs supported by documentation.

Example: Company A contributes 400 billion VND, including 320 billion VND for factory value and 80 billion VND in cash to establish a joint venture for producing toilet paper. Then, Company A transfers the aforementioned contributed capital to Company B for 550 billion VND. The contributed capital of Company A on the accounting books at the time of transfer is 400 billion VND, and the related transfer costs are 70 billion VND. The income subject to corporate income tax from this capital transfer is 80 billion VND (550 - 400 - 70).

b) Taxable income from securities transfer during the period is determined by subtracting the purchase price of the transferred securities from the selling price of the securities, and further subtracting any related transfer costs.

- The selling price of the securities is determined as follows:

+ For listed securities and unlisted securities of public companies that have registered for trading at a securities trading center, the selling price of the securities is the actual selling price (matching price or negotiated price) announced by the Stock Exchange or Securities Trading Center.

+ For securities of companies not falling under the above cases, the selling price of the securities is the transfer price recorded in the transfer agreement.

- The purchase price of the securities is determined as follows:

+ For listed securities and unlisted securities of public companies that have registered for trading at a securities trading center, the purchase price of the securities is the actual purchase price (matching price or negotiated price) announced by the Stock Exchange or Securities Trading Center.

+ For securities purchased through auction, the purchase price of the securities is the price recorded in the auction result announcement of the organization conducting the share auction and the payment receipt.

+ For securities not falling under the above cases, the purchase price of the securities is the transfer price recorded in the transfer agreement.

- Transfer costs are actual expenses directly related to the transfer, supported by legal receipts and invoices.

Transfer costs include: costs for necessary legal procedures for the transfer; fees and taxes required when processing the transfer; securities deposit fees as prescribed by the State Securities Commission and receipts from the securities company; trust fees based on receipts from the entrusted unit; transaction, negotiation, and contract signing costs, and other costs supported by documentation.

2.2. Corporate Income Tax Rate:

The corporate income tax rate applicable to income from capital transfer and securities transfer is 25%.

Determining the amount of corporate income tax payable:

3. Declaration and Payment of Tax

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

An enterprise with income from capital transfer and securities transfer shall declare such income as other income and include it in taxable income when calculating corporate income tax.

For foreign enterprises and organizations conducting production and business activities in Vietnam outside the scope of the Investment Law and the Enterprise Law transferring capital.

The recipient of the capital transfer is responsible for determining, declaring, deducting, and withholding on behalf of the foreign organization the corporate income tax payable.

The deadline for submitting tax declaration forms is the tenth day following the date the competent authority approves the capital transfer, or the date the parties agree on the capital transfer in the capital transfer contract in cases where approval is not required.

Documents for tax declaration for income from capital transfer:

- Corporate Income Tax Declaration Form for Capital Transfer (Form No. 08/TNDN issued together with this Circular);

- Copy of the capital transfer contract. In cases where the contract is in a foreign language, the main contents must be translated into Vietnamese: the transferring party; the receiving party; the transfer date; the transfer content; rights and obligations of each party; the contract value; payment terms, methods, and currency.

- Copy of the decision approving the capital transfer by the competent authority (if any);

- Copy of the capital contribution certificate;

- Original receipts of all expenses.

In case additional documents are required, the tax authority must notify the organization or individual receiving the transferred capital on the same day of receiving the file if the file is received directly, or within three working days from the date of receipt through postal service or electronic transactions.

Location for submitting tax declaration documents: at the tax authority where the foreign organization's enterprise conducting the capital transfer is registered to pay taxes.

Tax payment deadline: concurrent with the deadline for submitting the tax declaration form.

Part G

DETERMINATION OF INCOME SUBJECT TO TAX AND ENTERPRISE INCOME TAX FROM THE TRANSFER OF REAL ESTATE

I. INCOME SUBJECT TO TAX

1. Income from the transfer of real estate includes income from transferring land use rights, transferring land lease rights, and subleasing land by real estate businesses as prescribed by laws on land, regardless of whether there are existing infrastructure works or architectural structures attached to the land.

Income from the transfer of real estate includes the following forms:

- Income from transferring land use rights; transferring land lease rights; subleasing land by real estate businesses.

- Income from transferring land use rights; transferring land lease rights; subleasing land by real estate businesses attached to assets on the land, including:

+ Housing;

+ Infrastructure facilities;

+ Architectural structures on the land;

+ Other assets attached to the land, including agricultural, forestry, and fishery products (crops, livestock).

- Income from transferring ownership or usage rights of housing.

Income from land leasing activities of real estate trading enterprises does not include cases where enterprises only lease houses, infrastructure, and architectural works on the land.

2. Enterprises with income from the transfer of real estate shall declare and pay enterprise income tax according to the guidelines set forth in Part G of this Circular.

II. BASIS FOR CALCULATING INCOME TAX

The basis for calculating income tax from real estate transfers is taxable income and tax rate.

Taxable income equals income subject to tax minus losses from previous years' real estate transfer activities (if any).

1. Taxable income.

Taxable income from the transfer of real estate is determined by deducting the cost of the real estate and related deductible expenses from the revenue obtained from the real estate transfer activities.

1.1. Revenue from real estate transfer activities.

a) Revenue from real estate transfer activities is determined based on the actual transfer price of the real estate (including all additional charges and fees, if any) at the time of the real estate transfer.

If the transfer price of land use rights is lower than the price stipulated by the People's Committee of the province or centrally-administered city, then it will be calculated based on the price stipulated by the People's Committee of the province or centrally-administered city at the time of the real estate transfer.

The revenue determination time for tax calculation purposes is the time when the seller delivers the real estate to the buyer, irrespective of whether the buyer has registered ownership rights or land use rights with the competent state agency.

In cases where enterprises receive advance payments from customers for land allocated or leased by the State for investment projects involving infrastructure, housing for transfer or leasing, the revenue determination time for provisional enterprise income tax is the time when the enterprise receives customer payments.

- If the enterprise has received customer payments and can identify corresponding costs, the enterprise declares and pays provisional enterprise income tax based on revenue minus costs.

- If the enterprise has received customer payments but cannot yet identify corresponding costs, the enterprise declares provisional enterprise income tax at a rate of 2% of the revenue received, which is not included in the taxable revenue for the year.

For enterprises that had collected advance payments from customers before 2009 but did not declare and pay provisional enterprise income tax, the amount collected must be declared in 2009 to calculate provisional enterprise income tax according to the above principles.

Upon delivery of the real estate, the enterprise reconciles the enterprise income tax payable. If the provisional enterprise income tax paid is less than the tax due, the enterprise must pay the difference to the State Budget. If the provisional enterprise income tax paid exceeds the tax due, the enterprise may offset the excess against future tax liabilities or have the excess refunded.

b) Revenue for calculating taxable income in certain cases is determined as follows:

- If an enterprise leases land from the State and collects annual rent, then subsequently subleases the land with or without infrastructure or architectural structures, the revenue for calculating taxable income is the amount paid by the lessee each period according to the lease agreement. If the lessee pays rent in advance for multiple years, the revenue for calculating taxable income is allocated over the number of years for which the payment was made in advance.

- If a financial institution receives the value of land use rights as collateral for a loan and takes over the land use rights as collateral instead of performing the secured obligation if there is a transfer of land use rights as collateral for the loan, the revenue for calculating taxable income is the agreed-upon transfer price of the land use rights.

- If land use rights are transferred as seized assets to secure enforcement of judgments, the revenue for calculating taxable income is the agreed-upon transfer price of the land use rights between the parties involved or the price determined by the Appraisal Board.

Determination of revenue for the cases mentioned in paragraph b must comply with the principles stated in paragraph a of this point.

1.2. Costs associated with the transfer of real estate:

a) Principles for determining costs:

- The deductible expenses for determining the taxable income from real estate transfer activities during the tax period must correspond to the revenue used to calculate the taxable income.

- In cases where the investment project is completed in phases and transferred gradually according to the progress of completion, the common expenses used for the project and the direct expenses used for the completed portion of the project shall be allocated based on the square meters of land transferred to determine the taxable income of the transferred land area; including: internal road expenses; green space expenses; expenses for constructing water supply and drainage systems; transformer station expenses; compensation expenses for assets on the land; compensation, support, and resettlement expenses and organizational expenses for implementing compensation, support, and resettlement that have not been deducted from the land use fee or land rental fee payable to the State budget; land use fees payable to the State budget and other expenses invested on the land related to the transfer of land use rights and land rental rights. The allocation of these expenses shall be carried out according to the following formula:

In cases where a part of the project area cannot be transferred and is used for other business activities, the aforementioned common expenses shall also be allocated to this part of the area for tracking, accounting, and declaring corporate income tax for other business activities.

In cases where a business has infrastructure construction activities lasting from over one year to five years and only settles the value of the infrastructure when all works are completed, when consolidating the transfer expenses of real estate for the transferred land area, the business may temporarily allocate actual infrastructure construction costs incurred according to the ratio of the transferred land area using the above formula. After completing the infrastructure construction process, the business may adjust the temporarily allocated infrastructure construction costs for the transferred land area to align with the total infrastructure value. If additional taxes are paid due to adjustments compared to the required corporate income tax from transferring real estate, the business may deduct the excess tax paid from the tax payable in the next tax period or be refunded according to current regulations; if the tax already paid is insufficient, the business must pay the remaining tax due according to the regulations.

b) Transfer expenses of real estate that can be deducted include:

+ For state-granted land with land use fees and land lease fees, the cost is the actual amount of land use fees and land lease fees paid to the state budget;

+ For land acquired from other organizations or individuals, it is based on the contract and legal payment vouchers when acquiring land use rights or land lease rights; in cases without contracts or legal payment vouchers, the cost is calculated according to the price set by the provincial or centrally-administered municipal People's Committee at the time the business acquires the real estate transfer;

+ For land acquired from other organizations or individuals, the basis is the contract and legal payment receipts when acquiring land use rights or land rental rights; in cases where there is no contract or legal payment receipt, the cost price is determined according to the land price set by the People's Committee of the province or centrally-administered city at the time the business acquires the real estate transfer.

+ In cases where a business exchanges a construction project for state-owned land, the cost is determined according to the value of the exchanged project, except in cases where specific regulations of competent state agencies apply;

If the capital cost of the land according to the contribution agreement is higher than the market price at the time of contribution, the tax authority will base the land price at the time of contribution to reassess the land price for determining taxable income.

+ The auction price in cases of land use right or land lease right auctions;

+ For land of businesses with origins from inheritance under civil law; received, given, or gifted without determining the cost, it is determined according to the prices of various types of land decided by the provincial or centrally-administered municipal People's Committee based on the framework price of various types of land prescribed by the Government at the time of inheritance, receipt, gift, or grant;

+ For land of a business with origins from inheritance under civil law; or received as gifts without a determined cost price, it is determined according to the land prices decided by the People's Committee of the province or centrally-administered city based on the Land Price Table prescribed by the Government at the time of inheritance, gift, or donation.

For land of a business inherited, given, or donated before 1994, the cost price is determined according to the land prices decided by the People's Committee of the province or centrally-administered city in 1994 based on the Land Price Table prescribed in Decree No. 87/CP dated August 17, 1994 of the Government.

- Land damage compensation costs.

- Crop damage compensation costs.

- Resettlement compensation, support costs, and organization implementation costs for compensation, support, and resettlement as prescribed by law.

- Compensation, support, resettlement expenses, and organizational expenses for implementing compensation, support, and resettlement as prescribed by law.

These compensation, compensation, support, resettlement expenses, and organizational expenses for implementing compensation, support, and resettlement, if they lack invoices, shall be recorded in a detailed list stating: the name; address of the recipient; compensation and support amount; signature of the recipient, and confirmed by the local government authority where the land is located according to the legal provisions on compensation, support, and resettlement when the State recovers land.

- Land improvement costs, site leveling costs.

- Infrastructure construction costs such as roads, electricity, water supply, drainage, telecommunications...

- Investment expenses for constructing infrastructure such as roads, electricity, water supply, drainage, postal and telecommunications...

- Other costs related to the transferred real estate.

In cases where a business engages in multiple industries, separate accounting for each activity's costs is required. If individual activity costs cannot be separately accounted for, common costs shall be allocated according to the ratio of revenue from real estate transfers to the total revenue of the business.

In cases where a business engages in multiple industries, separate accounting for each expense must be conducted. In cases where individual expenses cannot be separately accounted for, common expenses shall be allocated according to the ratio between revenue from real estate transfers and the total revenue of the business.

The costs that have been paid by the State or financed from other sources shall not be included in the transfer expenses of real estate.

2. The corporate income tax rate on real estate transfers is 25%.

3. Determining the amount of corporate income tax payable:

The corporate income tax payable during the tax period for the activity of transferring real estate equals the taxable income from the activity of transferring real estate multiplied (x) by the tax rate of 25%.

Income from real estate transfers must be determined separately for declaration and tax payment. Preferential tax rates and exemption, reduction periods as guided in Part H of this Circular shall not apply to income from real estate transfer activities. In cases where real estate transfer activities result in losses, these losses cannot be offset against production and business income and other income but can be carried forward to offset taxable income from real estate transfer activities in subsequent years (if any). The maximum carryforward period does not exceed five consecutive years, starting from the year following the year in which the loss occurred.

III. DECLARATION, PAYMENT, AND SETTLEMENT OF TAX.

1. Businesses submit tax declaration forms and pay corporate income tax on income from real estate transfers to the local tax authority where the transferred real estate is located.

Tax declaration forms, payment documents, and tax payment receipts for income from real estate transfers generated locally are the basis for settlement procedures at the main office location.

2. For businesses that do not regularly engage in real estate transfer activities.

Businesses that do not regularly engage in real estate transfer activities declare provisional corporate income tax on a case-by-case basis for each occurrence of real estate transfer.

The tax return for corporate income tax from each real estate transfer transaction is the Corporate Income Tax Return Form for Real Estate Transfer, Model No. 09/TNDN, issued together with this Circular.

Based on the tax return for corporate income tax from real estate transfer activities, the tax authority records the amount of tax due according to the tax return or adjusts the amount of tax due and directly notifies the taxpayer within three working days from the date of receipt of the tax return.

At the end of the tax year when filing the final corporate income tax return, the corporation must separately settle the corporate income tax from real estate transfers. If the tax paid based on the notification during the process of obtaining the land use right certificate is less than the tax due according to the final corporate income tax return, the corporation must pay the remaining tax due to the State Budget. If the tax paid exceeds the tax due according to the final corporate income tax return, the excess tax paid can be deducted from the outstanding corporate income tax of other business activities or deducted from the corporate income tax due in the next period. In cases where real estate transfer activities result in losses, the corporation must track these separately and carry forward the losses against future taxable income from real estate transfer activities according to regulations.

3. For corporations frequently engaging in real estate transfer activities.

Corporations frequently engaging in real estate transfer activities shall file taxes, pay taxes, and settle taxes according to the guidelines set forth in Circular No. 60/2007/TT-BTC dated June 14, 2007, of the Ministry of Finance.

If a corporation frequently engaging in real estate transfer activities requests to pay taxes on a per-transaction basis, it shall file taxes as if it were not frequently engaging in real estate transfer activities.

At the end of the tax year, the corporation shall complete the final settlement of corporate income tax for all real estate business activities declared on a per-transaction basis and provisional quarterly corporate income tax returns. If the provisional tax paid during the year is less than the tax due according to the final corporate income tax return, the corporation must pay the remaining tax due to the State Budget. If the provisional tax paid exceeds the tax due according to the final corporate income tax return, the excess tax paid can be deducted from the corporate income tax due in the next period. In cases where real estate transfer activities result in losses, the losses can be carried forward against future taxable income from real estate transfer activities according to regulations.

4. Corporations declare corporate income tax for real estate transfer activities using Tax Return Form No. 09/TNDN issued together with this Circular. Provisional corporate income tax from advance payments received from customers is paid at the local tax office where the real estate is located and declared in Part II of Tax Return Form No. 09/TNDN. Upon delivery of the real estate, the corporation must officially settle the corporate income tax for real estate transfer activities and declare it in Part I of Tax Return Form No. 09/TNDN.

5. In cases where financial institutions accept real estate as collateral for loans to replace the fulfillment of secured obligations, such financial institutions must declare and pay corporate income tax from real estate transfers into the State Budget when transferring the real estate. If the real estate is auctioned off as collateral for a loan, the proceeds must be used for repayment according to the Government's regulations on securing loans for financial institutions and declared and taxed according to the regulations. After repaying the relevant amounts, the remaining funds are returned to the businesses that mortgaged the real estate to secure the loan. Financial institutions or organizations authorized by financial institutions to conduct auctions must declare, withhold, and pay corporate income tax from real estate transfers into the State Budget under their own name, address, tax code, invoice... and clearly indicate on the documents that they have declared and paid tax on behalf of selling collateral.

6. In cases where enforcement agencies auction off real estate as collateral for enforcement, the proceeds must be handled according to the Government's regulations on seizing and auctioning land use rights to secure enforcement. Organizations authorized to conduct auctions must declare, withhold, and pay corporate income tax from real estate transfers into the State Budget under their own name, address, tax code, invoice... and clearly indicate on the documents that they have declared and paid tax on behalf of selling enforcement collateral.

Part H

TAX INCENTIVES FOR CORPORATE INCOME TAX

I. Article CONDITIONS AND PRINCIPLES FOR APPLYING TAX INCENTIVES ON CORPORATE INCOME TAX

1. Conditions for applying tax incentives on corporate income tax: Tax incentives on corporate income tax shall only apply to businesses that comply with accounting records, invoices, and documents as prescribed and declare and pay corporate income tax according to their declarations.

2. Principles for applying tax incentives on corporate income tax

2.1. During the period of enjoying tax incentives on corporate income tax, if a business engages in multiple production and business activities, the business must separately account for income from production and business activities eligible for tax incentives on corporate income tax (including preferential tax rates or exemptions/reductions).

In cases where during the tax period, the business does not separately account for income from production and business activities eligible for tax incentives and income from production and business activities not eligible for tax incentives, the income from production and business activities eligible for tax incentives shall be determined by multiplying the total taxable income from production and business activities (excluding other income) by the percentage ratio of revenue from production and business activities eligible for tax incentives to the total revenue of the business during the tax period.

2.2. A newly established business from an investment project eligible for tax incentives on corporate income tax is a business registering for business for the first time, except in the following cases:

a) Businesses established in cases of division, separation, merger, or consolidation as provided by law;

b) Businesses established due to changes in business form or ownership, except in cases of transferring, leasing, or entrusting state-owned enterprises;

c) Private enterprises, single-member limited liability companies newly established where the business owner is an individual business operator and there has been no change in the previous business operations;

d) Private enterprises, partnerships, limited liability companies, or cooperatives newly established where the legal representative (except when the legal representative is not a capital contributor), general partners, or the person with the highest capital contribution have participated in business operations as legal representatives, general partners, or persons with the highest capital contribution in existing or dissolved businesses but less than twelve months have passed since the dissolution of the old business to the establishment of the new business.

An investment project is a set of proposals for medium and long-term capital investments to carry out investment activities as prescribed by laws on investment.

2.3. Within the same tax period, if a portion of income falls under different preferential corporate income tax rates and periods of exemption or reduction, the business may choose the most favorable tax incentive among those applicable.

2.4. During the period of enjoying tax incentives on corporate income tax, if a business fails to meet any of the conditions for tax incentives stipulated in this Circular in a given tax year, the business will not enjoy the incentives in that tax year and must pay corporate income tax at the rate of 25%.

2.5. If during the tax period, a business simultaneously engages in business activities eligible for tax incentives and those not eligible for tax incentives, it must separately account for income from business activities eligible for tax incentives and those not eligible for tax incentives for separate declaration and payment of taxes.

If business activities eligible for tax incentives incur losses while business activities not eligible for tax incentives (excluding real estate transfer activities) generate income (or vice versa), the business may offset the losses against the income from business activities generating income, as chosen by the business. The remaining income after offsetting shall be taxed at the corporate income tax rate applicable to the business activities still generating income.

2.6. Tax incentives on corporate income tax shall not apply to:

a) Other types of income specified in Section V of Part C of this Circular;

b) Income from oil and gas exploration, exploitation, and other precious mineral resources;

c) Income from operating games of chance and betting as prescribed by law;

d) Income from mining activities.

2.7. A business established through a change in business form, ownership, division, separation, merger, or consolidation shall be responsible for paying off any outstanding tax debts and penalties of the business being changed, divided, separated, merged, or consolidated and shall inherit tax incentives on corporate income tax for the remaining period if it continues to meet the conditions for tax incentives on corporate income tax.

2.8. During the period of enjoying tax exemptions or reductions on corporate income tax as prescribed, if the competent authority discovers an increase in corporate income tax for the exempted or reduced tax period, the business shall enjoy tax exemptions or reductions on corporate income tax as prescribed. Depending on the fault of the business, the competent authority may impose penalties for violations of tax laws as prescribed.

- During the period of enjoying tax exemptions or reductions on corporate income tax, if the competent authority discovers that the amount of tax exempted or reduced as prescribed is less than the amount declared by the business, the business shall only enjoy tax exemptions or reductions on corporate income tax based on the amount discovered by the inspection and audit. Depending on the fault of the business, the competent authority may impose penalties for violations of tax laws as prescribed.

II. INCENTIVES ON TAX RATES

1. A preferential tax rate of 10% for a period of fifteen years (15 years) shall apply to:

1.1. New businesses established from investment projects in areas with particularly difficult socio-economic conditions as specified in the Appendix issued together with Decree No. 124/2008/NĐ-CP dated December 11, 2008, of the Government.

1.2. Enterprises newly established from investment projects in economic zones, high-tech zones established pursuant to the Prime Minister's Decision;

1.3. Enterprises newly established from investment projects in the following fields:

- High technology as prescribed by law; scientific research and technological development;

- Investment in developing water treatment plants, power plants, water supply and drainage systems; bridges, roads, railways; airports, seaports, river ports; airfields, railway stations and other particularly important infrastructure works decided by the Prime Minister;

- Production of software products.

2. Enterprises newly established from investment projects in the fields specified in Point 1.3 Clause 1 of this Part, which are large-scale projects, high-tech projects, or new projects requiring special attraction of investment, may have the preferential tax rate of 10% extended for additional periods but the total duration of application of the 10% tax rate shall not exceed thirty years according to the Prime Minister's Decision based on the proposal of the Minister of Finance.

3. The preferential tax rate of 10% shall apply throughout the period of operation to the income derived from activities in the fields of education-training, vocational training, healthcare, culture, sports, and environment (hereinafter referred to collectively as socialized fields).

The detailed list of activities in the socialized fields shall be carried out according to the list prescribed by the Prime Minister.

4. The preferential tax rate of 20% shall apply for ten years (10 years) to enterprises newly established from investment projects in areas with difficult socio-economic conditions as stipulated in the Appendix issued together with Decree No. 124/2008/ND-CP dated December 11, 2008 of the Government.

5. The preferential tax rate of 20% shall apply throughout the period of operation to Agricultural Service Cooperatives and People's Credit Funds.

For newly established Agricultural Service Cooperatives and People's Credit Funds in areas with particularly difficult socio-economic conditions as stipulated in the Appendix issued together with Decree No. 124/2008/ND-CP dated December 11, 2008 of the Government, after the expiration of the period during which the preferential tax rate of 10% as provided in Point 1.1 Clause 1 of this Part applies, they shall switch to applying the 20% tax rate.

6. The period of application of preferential tax rates as provided in this Part shall be calculated continuously from the first year in which the enterprise generates revenue from activities eligible for tax preference.

7. Upon expiration of the period of application of the preferential tax rate as provided in Points 1, 2, and 4 of this Part, the enterprise shall switch to applying the 25% tax rate.

III. TAX PREFERENCES ON TIME OF EXEMPTION AND REDUCTION

1. Exemption from tax for four years and reduction of 50% of the tax payable for nine subsequent years for:

1.1. Enterprises newly established from investment projects in areas with particularly difficult socio-economic conditions as stipulated in the Appendix issued together with Decree No. 124/2008/ND-CP dated December 11, 2008 of the Government.

1.2. Enterprises newly established from investment projects in economic zones, high-tech zones established pursuant to the Prime Minister's Decision;

1.3. Enterprises newly established from investment projects in the following fields:

- High technology as prescribed by law; scientific research and technological development;

- Investment in developing water treatment plants, hydroelectric power plants, water supply and drainage systems; bridges, roads, railways; airports, seaports, river ports; airfields, railway stations and other particularly important infrastructure works decided by the Prime Minister;

- Production of software products.

1.4. Enterprises newly established in socialized fields implemented in areas with difficult socio-economic conditions or particularly difficult socio-economic conditions as stipulated in the Appendix issued together with Decree No. 124/2008/ND-CP dated December 11, 2008 of the Government.

2. Exemption from tax for four years and reduction of 50% of the tax payable for five subsequent years for enterprises newly established in socialized fields implemented in areas not included in the list of areas with difficult socio-economic conditions or particularly difficult socio-economic conditions as stipulated in the Appendix issued together with Decree No. 124/2008/ND-CP dated December 11, 2008 of the Government.

3. Exemption from tax for two years and reduction of 50% of the tax payable for four subsequent years for enterprises newly established from investment projects in areas with difficult socio-economic conditions as stipulated in the Appendix issued together with Decree No. 124/2008/ND-CP dated December 11, 2008 of the Government.

4. The period of exemption and reduction of tax as provided in this Section shall be calculated continuously from the first year in which the enterprise generates taxable income from the investment project eligible for tax preference; In case the enterprise does not generate taxable income in the first three years, starting from the year it generates revenue from the investment project, the period of exemption and reduction of tax shall be calculated from the fourth year.

Example: In 2009, Enterprise A was newly established from an investment project producing software products. If Enterprise A generated taxable income from the software production project in 2009, the period of tax exemption and reduction shall be calculated continuously from 2009. In case the software production project of Enterprise A generated revenue from 2009 but did not generate taxable income until 2012, the period of tax exemption and reduction shall be calculated continuously from 2012.

5. The number of years of tax exemption and reduction shall be determined in accordance with the tax period. The time of commencement of continuous calculation of the tax exemption and reduction period shall be from the first tax period in which the enterprise begins to generate taxable income (excluding losses carried forward from previous tax periods). In case the first tax period generates taxable income but the business operation period is less than twelve months, the enterprise has the right to register with the tax authority to calculate the tax exemption and reduction period from that first tax period or from the next tax period. In case the enterprise registers the tax exemption and reduction period in the next tax period, it must determine the tax payable of the first tax period to pay into the State Budget according to regulations. The tax period specified in Point 3 Part B shall not be applied to determine tax exemption and reduction preferences as provided herein.

IV. OTHER CASES OF TAX REDUCTION

1. Enterprises operating in the fields of production, construction, and transportation shall be entitled to reduce the corporate income tax payable corresponding to the additional amount actually spent on female employees as guided at Item a Point 2.10 Section IV Part C of this Circular if they can account separately.

Units under the General Companies that are not directly engaged in production and business operations shall not be entitled to tax reduction under this provision.

2. An enterprise using labor from ethnic minority groups shall be entitled to a reduction in corporate income tax payable corresponding to the additional amount actually spent on such labor, as stipulated in sub-item b point 2.10 Section IV Part C of this Circular, if it maintains separate accounting records.

V. PROCEDURES FOR IMPLEMENTING TAX INCENTIVES ON CORPORATE INCOME TAX

Enterprises shall determine their own eligibility for tax incentives, preferential tax rates, exemption periods, reduction periods, and deductible losses against taxable income for self-declaration and settlement with the tax authority.

When inspecting or auditing enterprises, the tax authority must verify the conditions for enjoying tax incentives, the amount of corporate income tax exempted or reduced, and deductible losses against taxable income according to the actual conditions met by the enterprise. In cases where enterprises fail to meet the conditions for applying preferential tax rates and exemption/reduction periods, the tax authority shall collect back taxes and impose administrative penalties for tax violations as prescribed.

Part I

IMPLEMENTATION

1. This Circular shall take effect 15 days after its publication in the Official Gazette and shall apply to tax periods starting from 2009 onwards.

Enterprises that adopt a fiscal year different from the calendar year and are not eligible for preferential corporate income tax rates shall apply a corporate income tax rate of 25% from the tax period of 2009 onwards.

2. Enterprises currently benefiting from corporate income tax incentives (including preferential tax rates, exemption periods, and reduction periods) as prescribed in previous legal documents on corporate income tax, or pursuant to Investment Licenses or Investment Incentive Certificates already issued, shall continue to enjoy these incentives for the remaining time. If the preferential tax rate and exemption/reduction periods are lower than those prescribed in this Circular, the enterprise shall apply the tax incentives as prescribed in this Circular for the remaining time starting from the tax period of 2009.

The determination of the remaining time to enjoy tax incentives shall be calculated continuously from when the provisions of previous legal documents on corporate income tax, or pursuant to Investment Licenses or Investment Incentive Certificates already issued, were implemented.

The remaining incentive period is equal to the number of years the enterprise still enjoys tax incentives (preferential tax rates, exemption periods, reduction periods) as guided in this Circular minus the number of years the enterprise has enjoyed tax incentives (preferential tax rates, exemption periods, reduction periods) under previous legal documents on corporate income tax, or pursuant to Investment Licenses or Investment Incentive Certificates already issued up to the end of 2008. The determination of the remaining incentive period must ensure the following principles:

- By the end of the tax period in 2008, if an enterprise has exhausted the preferential tax rate period under previous legal documents on corporate income tax, or pursuant to Investment Licenses or Investment Incentive Certificates already issued, it shall not be allowed to switch to applying preferential tax incentives (preferential tax rates, exemption periods, reduction periods) for the remaining time as guided in this Circular.

- By the end of the tax period in 2008, if an enterprise is still within the preferential tax period (preferential tax rates, exemption periods, reduction periods) under previous legal documents on corporate income tax, or pursuant to Investment Licenses or Investment Incentive Certificates already issued, it shall continue to enjoy the remaining years of preferential tax rates and preferential tax rates, exemption periods, reduction periods as guided in this Circular.

- By the end of the tax period in 2008, if an enterprise is enjoying a preferential tax rate but has just completed the exemption period under previous legal documents on corporate income tax, or pursuant to Investment Licenses or Investment Incentive Certificates already issued, it shall only enjoy the remaining reduction period as guided in this Circular, and continue to enjoy the remaining years of preferential tax rates as guided in this Circular.

- By the end of the tax period in 2008, if an enterprise is enjoying a preferential tax rate and is within the reduction period under previous legal documents on corporate income tax, or pursuant to Investment Licenses or Investment Incentive Certificates already issued, the remaining reduction period shall be equal to the reduction period as guided in this Circular minus the number of years the enterprise has already enjoyed reductions up to the end of the tax period in 2008, and continue to enjoy the remaining years of preferential tax rates as guided in this Circular.

- By the end of the tax period in 2008, if an enterprise has exhausted the exemption and reduction periods under previous legal documents on corporate income tax, or pursuant to Investment Licenses or Investment Incentive Certificates already issued, it shall not be eligible for preferential tax incentives (preferential tax rates, exemption periods, reduction periods) as guided in this Circular.

3. Enterprises currently enjoying exemption and reduction periods for corporate income tax as prescribed in previous legal documents on corporate income tax, or pursuant to Investment Licenses or Investment Incentive Certificates already issued, but not enjoying preferential tax rates, shall continue to enjoy the remaining exemption and reduction periods from the tax period of 2009 onwards, and then switch to applying a tax rate of 25%.

4. Enterprises eligible for exemption and reduction periods as prescribed in previous legal documents on corporate income tax, or pursuant to Investment Licenses or Investment Incentive Certificates already issued, if by the end of the tax period in 2008:

4.1. Have not yet generated revenue, the exemption and reduction periods shall be counted from the first year the enterprise generates taxable income; if there is no taxable income in the first three years following the first year of revenue generation, the exemption and reduction periods shall be counted from the fourth year.

4.2. In cases where there has been revenue but not for at least three years, the tax exemption and reduction period shall be calculated from the first year with taxable income, starting from the year when revenue was generated; if there is no taxable income in the first three years following the year when revenue was generated, the tax exemption and reduction period shall be calculated from the fourth year, specifically as follows:

For enterprises whose first tax period begins from 2007 onwards and have already generated revenue, the tax exemption and reduction period shall be continuously calculated from the first year with taxable income. If there is no taxable income until the end of 2009, the tax exemption and reduction period shall be calculated from 2010.

4.3. In cases where there has been revenue for three years or more, the tax exemption and reduction period shall be calculated from the 2009 tax period, specifically as follows:

For enterprises whose first tax period began before 2007 and had revenue but did not have taxable income and had not yet calculated the tax exemption and reduction period, the tax exemption and reduction period shall be calculated from the 2009 tax period.

5. Enterprises operating in socialized sectors before January 1, 2009, which were applying a higher tax rate than 10%, shall switch to applying a 10% tax rate for this activity as of January 1, 2009.

6. Enterprises operating from 2009 that have investment projects to build new production lines, expand scale, innovate technology, improve ecological environment, and enhance production capacity shall not enjoy corporate income tax incentives for income from these investment projects. Investment projects before 2009 that are currently enjoying corporate income tax incentives (under the expanded investment incentive category) shall continue to enjoy incentives for the remaining period, and the additional income from expanded investment projects applying a 28% tax rate shall be switched to apply a 25% tax rate.

Enterprises with expanded production investment projects that were under construction as of December 31, 2008, and completed and went into operation in 2009 shall continue to enjoy the tax exemption and reduction period for additional income from these expanded investment projects according to Circular No. 134/2007/TT-BTC; the additional income from this project shall apply a 25% tax rate, and the tax exemption and reduction period for additional income shall be calculated from 2009 when the project goes into operation.

Enterprises must notify the tax authority about ongoing expanded production investment projects under construction when submitting the corporate income tax final settlement declaration for the 2008 tax period.

7. Enterprises that have obtained Investment License, Business Registration Certificate, Investment Certificate before the Socialist Republic of Vietnam officially became a member of the World Trade Organization (January 11, 2007), and have income from business activities (excluding textile and garment activities) during the period they are enjoying corporate income tax incentives due to meeting export ratio conditions stipulated in foreign investment laws, domestic investment encouragement laws, and corporate income tax laws, shall continue to enjoy corporate income tax incentives according to these laws, but the incentive period shall not exceed 2011.

8. This Circular replaces:

- Circular No. 134/2007/TT-BTC dated November 23, 2007, of the Ministry of Finance guiding the implementation of Decree No. 24/2007/NĐ-CP dated February 14, 2007, of the Government detailing the implementation of the Law on Corporate Income Tax.

- The corporate income tax declaration form for organizations engaged in business activities declaring corporate income tax from land use rights transfer, land lease rights transfer, model number 02/TNDN (issued together with Circular No. 60/2007/TT-BTC).

9. Abolish the contents of guidance on corporate income tax issued by the Ministry of Finance and other sectors that are inconsistent with the guidance provided in this Circular.

10. Việc giải quyết những tồn tại về thuế, quyết toán thuế, miễn, giảm thuế và xử lý vi phạm pháp luật về thuế thu nhập doanh nghiệp trước kỳ tính thuế năm 2009 thực hiện theo các quy định tương ứng hướng dẫn về thuế thu nhập doanh nghiệp ban hành trước kỳ tính thuế năm 2009.

11. Trường hợp nước Cộng hoà Xã hội Chủ nghĩa Việt Nam có tham gia ký kết một Hiệp định hoặc Điều ước quốc tế mà Hiệp định hoặc Điều ước quốc tế đó có quy định về việc nộp thuế thu nhập doanh nghiệp khác với nội dung hướng dẫn tại Thông tư này thì thực hiện theo quy định của Điều ước quốc tế đó.

Trong quá trình thực hiện, nếu có khó khăn vướng mắc đề nghị các tổ chức, doanh nghiệp phản ánh kịp thời về Bộ Tài chính để được giải quyết kịp thời./.