Circular No. 176/2010/TT-BTC guiding enterprises to set aside expenses in advance when determining taxable income for corporate income tax to create a source of support for poor districts in implementing Resolution No. 30a/2008/NQ-CP dated December 27, 2008 of the Government on the Program to rapidly and sustainably reduce poverty in 61 poor districts.

CIRCULAR

Guidelines for enterprises to deduct expenses in advance when determining taxable income for corporate income tax to create resources to support poor districts in implementing Resolution No. 30a/2008/NQ-CP dated December 27, 2008 of the Government on the Program to reduce poverty quickly and sustainably in 61 poor districts be subject to corporate income tax to create a source of support for poor districts in implementing Resolution No. 30a/2008/NĐ-CP dated December 27, 2008 of the Government on the Program to reduce poverty quickly and sustainably for 61 poor districts

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Pursuant to the Law on Corporate Income Tax No. 14/2008/QH12 and its guiding documents; the Law on Tax Administration No. 78/2006/QH11 dated November 29, 2006 and its guiding documents;

Pursuant to Resolution No. 30a/2008/NQ-CP dated December 27, 2008 of the Government on the Program to reduce poverty quickly and sustainably in 61 poor districts;

Pursuant to the Decree No. 118/2008/NĐ-CP dated November 27, 2008 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

Following the directive of the Prime Minister in Circular No. 3741/VPCP-KTTH dated June 3, 2010 of the Government Office,
The Ministry of Finance issues guidelines for enterprises to deduct expenses in advance when determining taxable corporate income tax (CIT) to finance poor districts in implementing Resolution No. 30a dated December 27, 2008 of the Government on the Program to reduce poverty quickly and sustainably in 61 poor districts as follows:

Article 1. Scope and Applicability

This Circular guides the inclusion in expenses or deduction in advance from expenses when determining taxable CIT of enterprises to enable enterprises to finance or create resources for enterprises to finance poor districts in implementing Resolution No. 30a dated December 27, 2008 of the Government on the Program to reduce poverty quickly and sustainably in 61 poor districts (hereinafter referred to as Resolution No. 30a).

Poor districts under the List of Poor Districts Implementing Resolution No. 30a, as prescribed in Point 1, Section IV of Circular No. 705/TTg-KGVX dated May 11, 2009 of the Prime Minister and Appendix I List of Poor Districts Implementing Resolution No. 30a attached hereto. In case the Prime Minister issues a different regulation, it shall be implemented according to the regulation of the Prime Minister in that document.

The term "enterprise" in this Circular is understood as the enterprise defined in the Law on Corporate Income Tax No. 14/2008/QH12 and its guiding documents.

Article 2. Mechanism for Deduction and Purpose of Use of Advance Deduction Amount

1. Enterprises must develop a plan to sponsor poor districts according to the sponsorship content (as prescribed) registered with the Ministry of Labor, Invalids and Social Affairs. This sponsorship plan is sent to the People's Committee of the district where the enterprise registers to sponsor so that the People's Committee of that district can aggregate it into the Poverty Reduction Plan at the district level for approval by the Provincial People's Committee. Based on the approved Poverty Reduction Plan, the People's Committee issues a confirmation letter committing to the enterprise's sponsorship, specifying the sponsorship progress, amount of sponsorship, and activities sponsored by the enterprise for the district. The enterprise's sponsorship plan for poor districts and the confirmation letter of the People's Committee of the receiving district serve as the basis for the enterprise to include in expenses or deduct in advance from expenses when determining taxable CIT to finance or create resources to support poor districts in implementing Resolution No. 30a.

Based on financial capacity and sponsorship commitments, sponsorship progress for poor districts, enterprises independently determine the amount to be included in expenses when calculating CIT, ensuring the principle: the total balance of the account for advance deductions to sponsor poor districts in implementing Resolution No. 30a shall not exceed the total amount of sponsorship commitments made by enterprises to poor districts in implementing Resolution No. 30a that have not been implemented by the time the financial report is prepared.

2. This advance deduction amount can only be used by enterprises to sponsor education, healthcare, disaster relief, and building love houses for the poor in poor districts implementing Resolution No. 30a in accordance with the provisions of the law.

3. For amounts actually spent during the tax period to sponsor education, healthcare, disaster relief, and building love houses for the poor in poor districts listed in the List of Poor Districts Implementing Resolution No. 30a, which are supported by valid invoices and receipts, they may be included in deductible expenses when determining taxable CIT according to the regulations. If the amounts for sponsoring education, healthcare, disaster relief, and building love houses for the poor in the tax period were taken from the advance deduction amount to create resources to support poor districts implementing Resolution No. 30a, then enterprises shall not be allowed to include them in deductible expenses when determining taxable CIT.

4. The content and procedures, documents for sponsoring education, healthcare, disaster relief, and building love houses for the poor by enterprises shall be carried out in accordance with the guidance provided in Points 2.21, 2.22, 2.23, and 2.24, Section IV, Part C of Circular No. 130/2008/TT-BTC dated December 26, 2008 of the Ministry of Finance detailing the implementation of the Law on Corporate Income Tax and Decree No. 124/2008/NĐ-CP dated December 11, 2008.

Article 3. Management of advance deductions

1. The term for advance deductions into expenses to finance poor districts to implement Resolution No. 30a according to the provisions of this Article is three years from the year when the enterprise makes the deduction. In cases where the deduction period expires and the enterprise has not fully utilized the deducted amount or has used it for purposes other than intended, the enterprise must return the unused, underutilized, or improperly used amount to other income when determining taxable income for Corporate Income Tax (TNDN) and the corresponding interest arising from the Corporate Income Tax payable.

a) The corporate income tax rate used to calculate the recovered tax is the rate applicable to the enterprise during the deduction period. If the enterprise applies different corporate income tax rates during the deduction period, the corporate income tax rate used to calculate the recovered tax is the rate at the time of deduction of the recovery amount based on the principle that the advance deduction amount is used first.

b) The interest rate applied to the recovered tax calculated on the portion of the advance deduction not fully utilized is the interest rate of one-year government bonds applicable at the time of recovery, and the interest calculation period is counted annually, starting from the year following the year of deduction until the year of recovery.

Example: In 2010, Company A committed to support Poor District B until the end of 2012 with 1 billion VND and Poor District C with 2 billion VND (confirmed by the People's Committee of District B and District C). Based on Company A's commitment to support Poor Districts B and C and the confirmation of financial assistance by the People's Committees of Districts B and C, Company A determined the advance deduction into expenses to create a source of support for poor districts to implement Resolution No. 30a in 2010 as 2 billion VND.

By the end of 2012, Company A had only provided support to Poor District B with 0.7 billion VND and Poor District C with 0.8 billion VND. In this case, the company had only used 1.5 billion VND, leaving the remaining 0.5 billion VND of the 2010 advance deduction unused. Therefore, the company will be subject to additional Corporate Income Tax and interest as follows:

+ Additional Corporate Income Tax due to underutilization of the advance deduction (assuming the corporate income tax rate during the deduction period is 25%):

(2 billion - 1.5 billion) x 25% = 125 million VND

+ Interest calculation period from 2011 to the end of 2012 is two years. Therefore, the interest arising from the additional Corporate Income Tax due to underutilization of the advance deduction (assuming the interest rate of one-year government bonds is 12%) is:

125 million x 12% x 2 years = 30 million VND

For years after 2010, the advance deduction and utilization of the advance deduction are calculated according to the principle that the advance deduction amount is used first as mentioned above.

c) The interest rate applied to the recovered tax calculated on the portion of the advance deduction used for improper purposes is the penalty interest rate according to the Tax Administration Law, and the interest calculation period is the time from the date of deduction to the date of recovery. The recovery date is the date when the violation is discovered and documented (except in cases where documentation is not required).

d) The determination of the deduction date of the amount used for improper purposes serves as the basis for calculating interest on the recovered tax calculated on the portion of the advance deduction used for improper purposes according to the principle that the advance deduction amount is used first.

2. The poverty reduction program of the Government was implemented from 2009 to 2020. Therefore, enterprises can make advance deductions into expenses to create a source of support for poor districts to implement Resolution No. 30a up to 2019 at the latest. By the deadline for submitting the final tax report for 2020, enterprises must complete the liquidation procedures for advance deductions to support poor districts implementing Resolution No. 30a and return any surplus amount (if any) to other income when determining taxable income for Corporate Income Tax of 2020 and the corresponding interest arising from the Corporate Income Tax payable according to the provisions of Clause 1 of this Article.

Article 4. Organization of Implementation

1. This Circular shall take effect 45 days from the date of signature.

2. Matters not covered by this Circular and matters not contrary to the provisions of this Circular shall be implemented in accordance with current regulations.

During implementation, if there are any difficulties, organizations and individuals are requested to promptly report to the Ministry of Finance for research and supplementary guidance./.