Law on Corporate Income Tax number 14/2008/QH12

LAW

Corporate Income Tax

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BASED ON THE CONSTITUTION OF THE SOCIALIST REPUBLIC OF VIETNAM IN 1992 AS AMENDED AND COMPLEMENTED BY RESOLUTION NO. 51/2001/QH10;

The National Assembly enacts the Corporate Income Tax Law,

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

This Law stipulates on taxpayers, taxable income, exempted income, tax base, tax calculation methods, and corporate income tax incentives.

Article 2. Taxpayer

1. Corporate income tax taxpayers are organizations engaged in production and business activities generating taxable income as prescribed by this Law (hereinafter referred to as enterprises), including:

a) Enterprises established in accordance with Vietnamese laws;

b) Enterprises established in accordance with foreign laws (hereinafter referred to as foreign enterprises) having a permanent establishment or not having a permanent establishment in Vietnam;

c) Organizations established under the Law on Cooperatives;

d) Public service units established in accordance with Vietnamese laws;

đ) Other organizations conducting production and business activities generating income.

2. Enterprises subject to taxable income as provided for in Article 3 of this Law shall pay corporate income tax as follows:

a) Enterprises established in accordance with Vietnamese laws shall pay tax on taxable income generated in Vietnam and taxable income generated outside Vietnam;

b) Foreign enterprises with a permanent establishment in Vietnam shall pay tax on taxable income generated in Vietnam and taxable income generated outside Vietnam related to the activities of such permanent establishment;

c) Foreign enterprises with a permanent establishment in Vietnam shall pay tax on taxable income generated in Vietnam that is not related to the activities of such permanent establishment;

d) Foreign enterprises without a permanent establishment in Vietnam shall pay tax on taxable income generated in Vietnam.

a) Branches, management offices, factories, workshops, transportation means, mines, oil wells, gas fields, or other natural resource extraction sites in Vietnam;

b) Construction sites, construction projects, installation, assembly works;

c) Service provision facilities, including advisory services provided through employees or other individuals or organizations;

d) Agents for foreign enterprises;

đ) Representative office in Vietnam where it is authorized to sign contracts on behalf of the foreign enterprise or a representative office without authority to sign contracts on behalf of the foreign enterprise but regularly engages in the delivery of goods or provision of services in Vietnam.

Article 3. Taxable Income

1. Taxable income includes income from production and business activities of goods and services and other income as provided for in Clause 2 of this Article.

2. Income from directly providing technical services to serve agriculture.

3. Income from implementing research and development contracts for scientific and technological products during the experimental production period, products produced using new technology first applied in Vietnam.

5. Income from vocational training exclusively for ethnic minorities, disabled persons, children in particularly difficult circumstances, and social delinquents.

6. Income distributed from joint venture and cooperative activities with domestic enterprises, after paying corporate income tax as prescribed by this Law.

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

Article 5. Tax Period

1. The tax period for corporate income tax is determined according to the Gregorian calendar year or fiscal year, except as provided for in Clause 2 of this Article.

2. The tax period for corporate income tax based on each occurrence of income applies to foreign enterprises as specified in Points c and d of Clause 2 of Article 2 of this Law.

Chapter II

BASIS AND METHOD OF CALCULATING TAX

Article 6. Basis for calculating tax

The basis for calculating tax is taxable income and tax rate.

Article 7. Determination of Taxable Income

1. Taxable income in the tax period is determined by subtracting exempted income and losses carried forward from previous years from the total income subject to tax.

2. Income subject to tax equals gross revenue minus deductible expenses of production and business activities plus other income, including income received outside Vietnam.

The Government shall provide detailed regulations and guidance for implementing this Article.

Article 8. Revenue

Gross revenue includes all proceeds from sales, processing fees, service provision fees, subsidies, surcharges, and premiums that the enterprise receives. Gross revenue is calculated in Vietnamese Dong; where revenue is in foreign currency, it must be converted to Vietnamese Dong at the average inter-bank foreign exchange rate published by the State Bank of Vietnam at the time the foreign currency revenue was generated.

The Government shall provide detailed regulations and guidance for implementing this Article.

1. Except for the expenses specified in Clause 2 of this Article, enterprises may deduct all expenses if they meet the following conditions:

a) Expenses actually incurred related to the enterprise's production and business activities;

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

2. Non-deductible expenses when determining taxable income include:

a) Expenses that do not meet the conditions stipulated in Clause 1 of this Article, except for losses due to natural disasters, epidemics, and other force majeure situations that cannot be compensated;

b) Administrative fines;

c) Expenses reimbursed by other sources of funding;

d) Excess management costs allocated by foreign enterprises to their permanent establishments in Vietnam beyond the limits set by Vietnamese law."

d) The portion exceeding the limit prescribed by laws on setting up reserve funds;

e) Excess costs of raw materials, materials, fuel, energy, goods over the consumption quota established by the enterprise, reported to the tax authority, and the actual price at which they were dispatched from inventory;

g) Interest payments on loans for production and business purposes made to non-financial institutions or economic organizations exceeding 150% of the basic interest rate published by the State Bank of Vietnam at the time of borrowing;

h) Depreciation of fixed assets not in accordance with legal provisions;

i) Pre-deducted expenses not in accordance with legal provisions;

k) Wages and salaries of individual business owners; remuneration paid to founders who do not directly participate in management and business operations; wages, salaries, and other accounting entries to pay employees but which have not been actually paid or for which there are no invoices or receipts as required by law;

l) Interest payments on loans corresponding to the shortfall in subscribed capital;

m) Input VAT already deducted, VAT paid under the deduction method, and corporate income tax;

n) Advertising, marketing, promotional, brokerage commission expenses; hospitality, ceremonial, conference expenses; marketing support, cost support, discount payment expenses; gift and donation expenses of media organizations directly related to production and business activities exceeding 10% of total deductible expenses; for newly established enterprises, such expenses exceed 15% in the first three years from establishment. Total deductible expenses do not include these expenses; for commercial activities, total deductible expenses do not include the purchase price of goods sold;

o) Sponsorship expenses, except for sponsorship for education, healthcare, disaster relief, and building homes for the poor as stipulated by law.

3. Foreign currency expenses deductible when determining taxable income must be converted to Vietnamese Dong at the average inter-bank foreign exchange rate published by the State Bank of Vietnam at the time the foreign currency expense was incurred.

The Government shall provide detailed regulations and guidance for implementing this Article.

1. The corporate income tax rate is 25%, except as provided for in Clause 2 of this Article and Article 13 of this Law.

2. The corporate income tax rate for oil and gas exploration, development, and rare mineral resource activities ranges from 32% to 50%, depending on the project and business entity.

The Government shall provide detailed regulations and guidance for implementing this Article.

Article 11. Method of Calculating Tax

1. Corporate income tax payable in the tax period is calculated by multiplying taxable income by the tax rate; if the enterprise has already paid corporate income tax outside Vietnam, the amount paid can be deducted, but not more than the corporate income tax payable as stipulated by this Law.

2. The tax calculation method for enterprises specified in Points c and d of Clause 2 of Article 2 of this Law shall be implemented in accordance with the Government's regulations.

Article 12. Place of Tax Payment

Enterprises pay taxes at their main office location. If an enterprise has a dependent production unit operating in a province or centrally-administered city different from the location of its main office, the tax payable is calculated based on the ratio of costs between the production site and the main office location. The分级任务和直接翻译已经完成。根据要求，保持了文本的准确性和官方法律文件的形式。接下来，按照指定格式输出翻译结果：

The Government shall provide detailed regulations and guidance for implementing this Article.

Chapter III

TAX INCENTIVES FOR CORPORATE INCOME TAX

1. New enterprises established from investment projects in areas with particularly difficult socio-economic conditions, economic zones, high-tech zones; new enterprises established from investment projects in high-tech fields, scientific research and technological development, state investment in particularly important infrastructure, software production shall be subject to a tax rate of 10% for a period of fifteen years.

2. Enterprises operating in education and training, vocational training, healthcare, culture, sports, and environment sectors shall be subject to a tax rate of 10%.

3. New enterprises established from investment projects in areas with difficult socio-economic conditions shall be subject to a tax rate of 20% for a period of ten years.

4. Agricultural service cooperatives and people's credit funds shall be subject to a tax rate of 20%.

5. For investment projects that require special attraction with large scale and high technology, the duration of preferential tax rate application may be extended, but the extension period shall not exceed the time limit specified in Clause 1 of this Article.

6. The duration of preferential tax rate application stipulated in this Article shall be calculated from the first year the enterprise has revenue.

The Government shall provide detailed regulations and guidance for implementing this Article.

1. New enterprises established from investment projects in areas with particularly difficult socio-economic conditions, economic zones, high-tech zones; new enterprises established from investment projects in high-tech fields, scientific research and technological development, state investment in particularly important infrastructure, software production; new enterprises established and operating in education and training, vocational training, healthcare, culture, sports, and environment sectors shall be exempted from tax for a maximum of four years and have their taxes reduced by 50% for a maximum of nine subsequent years.

2. New enterprises established from investment projects in areas with difficult socio-economic conditions shall be exempted from tax for a maximum of two years and have their taxes reduced by 50% for a maximum of four subsequent years.

3. The tax exemption and reduction periods stipulated in this Article shall be calculated from the first year the enterprise has taxable income; if the enterprise does not have taxable income within the first three years from the year it starts generating revenue, the tax exemption and reduction periods shall be calculated from the fourth year.

The Government shall provide detailed regulations and guidance for implementing this Article.

Article 15. Other Tax Reduction Cases

1. Enterprises engaged in production, construction, transportation using a large number of female workers shall be granted corporate income tax reductions equivalent to additional costs for female workers.

The Government shall provide detailed regulations and guidance for implementing this Article.

1. Enterprises with losses may carry forward such losses to the following year; these losses can be deducted from taxable income. The carryforward period shall not exceed five years, starting from the year following the year in which the loss occurred.

2. Enterprises with losses from real estate transfer activities may only carry forward such losses against the taxable income of such activities.

Article 17. Establishment of Enterprise Science and Technology Development Fund

2. Within a five-year period from the establishment of the fund, if the Enterprise Science and Technology Development Fund is not used or is not fully utilized at 70%, or is used for improper purposes, the enterprise must pay to the state budget corporate income tax on the portion of income allocated to the fund that was not used or used improperly, along with interest generated from such tax.

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 fund allocation.

The interest rate applied to the tax recovery amount calculated based on the unused portion 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.

The interest rate applied to the tax recovery amount calculated based on the portion of the fund used for improper purposes is the late payment penalty interest rate as prescribed by the Law on Tax Administration, and the interest calculation period is the period from the establishment of the fund to its recovery.

3. Enterprises shall not account for expenses from the Enterprise Science and Technology Development Fund as deductible expenses when determining taxable income for the tax period.

4. The Enterprise Science and Technology Development Fund may only be used for science and technology investments in Vietnam.

1. The corporate income tax incentives stipulated in Articles 13, 14, 15, 16, and 17 of this Law shall only apply to enterprises that maintain accounting records, invoices, and other documents, and declare taxes based on their declarations.

2. Enterprises must separately account for income from production and business activities eligible for tax incentives under Articles 13 and 14 of this Law from income from production and business activities not eligible for tax incentives; if separate accounting is not possible, the income from production and business activities eligible for tax incentives shall be determined according to the ratio of revenue from such activities to the total revenue of the enterprise.

3. The corporate income tax incentives stipulated in Articles 13 and 14 of this Law shall not apply to:

a) Income specified in Clause 2, Article 3 of this Law;

b) Income from activities related to oil exploration, extraction, and rare mineral resources;

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

d) Other cases as prescribed by the Government.

Chapter IV

IMPLEMENTING PROVISIONS

Article 19. Effective Date

1. This Law takes effect from January 1, 2009.

2. This Law replaces the Corporate Income Tax Law No. 09/2003/QH11.

3. Enterprises currently enjoying corporate income tax incentives under the provisions of Corporate Income Tax Law No. 09/2003/QH11 shall continue to enjoy these incentives for the remaining period as prescribed by Corporate Income Tax Law No. 09/2003/QH11; in cases where the level of tax incentives, including preferential tax rates and tax exemption and reduction periods, is lower than the incentives provided for in this Law, such enterprises shall be granted tax incentives under this Law for the remaining period.

4. For enterprises entitled to tax exemption and reduction periods under the provisions of Corporate Income Tax Law No. 09/2003/QH11 but have yet to generate taxable income, the start date for calculating the tax exemption and reduction periods shall be calculated according to the provisions of this Law and shall commence from the date this Law comes into effect.

Article 20. Guidance on Implementation

The Government shall provide detailed regulations and guidance on implementing Articles 4, 7, 8, 9, 10, 11, 12, 13, 14, 15, 18, and other necessary contents of this Law as required for management purposes.

This Law was adopted by the National Assembly of the Socialist Republic of Vietnam, the twelfth session, third meeting, on June 3, 2008./.