Circular No. 18/2011/TT-BTC amends and supplements Circular No. 130/2008/TT-BTC dated December 26, 2008, of the Ministry of Finance guiding the implementation of certain provisions of the Law on Corporate Income Tax No. 14/2008/QH12 and guiding the implementation of 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

Amending and supplementing Circular No. 130/2008/TT-BTC dated December 26, 2008 of the Ministry of Finance guiding the implementation of

 certain provisions of the Law on Corporate Income Tax No. 14/2008/QH12 and guiding the implementation

 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

 _____________________________

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 the implementation of certain provisions of the Law on Corporate Income Tax;

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;

Pursuant to the opinions of the Prime Minister at Official Letter No. 2225/VPCP-KTTH dated April 9, 2009 of the Office of the Government regarding the handling of foreign exchange rate discrepancies,

The Ministry of Finance guides the amendment and supplementation of certain contents in Circular No. 130/2008/TT-BTC dated December 26, 2008 of the Ministry of Finance on corporate income tax (CIT) as follows:

Article 1. Amending and supplementing certain contents in Circular No. 130/2008/TT-BTC:

1. Method for calculating CIT.

a) Supplement Point 3 Part B with the following content:

In cases where enterprises implement the conversion of the CIT tax period from the Gregorian year to the fiscal year or vice versa, the CIT tax period of the conversion year shall not exceed twelve months.

Example: Enterprise A applies the Gregorian year for the CIT tax period in 2010, but at the beginning of 2011 chooses to convert to the fiscal year starting from April 1 of this year to March 31 of the following year, then the CIT tax period of the conversion year is calculated from January 1, 2011 to March 31, 2011, the subsequent fiscal year CIT tax period is calculated from April 1, 2011 to March 31, 2012.

b) Amend and supplement Point 4 Part B as follows:

- Public institutions that generate business activities subject to corporate income tax and which record revenue but cannot determine costs and income from such business activities shall declare and pay corporate income tax based on a percentage of sales revenue, specifically as follows:

+ For services: 5%;

+ For goods trading: 1%;

+ For other activities (including education, healthcare, artistic performances): 2%;

Example: Public institution A generates rental business activities, annual rental revenue is 100 million VND, the institution records revenue but cannot determine costs and income from the rental business activity, therefore it chooses to declare and pay corporate income tax based on a percentage of sales revenue as follows:

Amount of CIT payable = 100,000,000 VND x 5% = 5,000,000 VND.

2. Deductible expenses and non-deductible expenses when determining taxable income.

a) Supplement Point 2.1 Section IV Part C with the following content:

a1. Documentation for assets and goods damaged due to natural disasters, epidemics, fires, which are deductible expenses, is as follows:

- A letter from the enterprise sent to the directly managing tax authority explaining the damage to assets and goods due to natural disasters, epidemics, fires.

- An inventory valuation statement of damaged assets and goods prepared by the enterprise.

The inventory valuation statement of damaged assets and goods must clearly state the value of the damaged assets and goods, the cause of the damage, the responsibility of organizations and individuals for the damage; the type, quantity, and value of recoverable assets and goods (if any), accompanied by documentation on the assets and goods; a ledger of the entry and exit of damaged goods with confirmation signed by a legitimate representative of the enterprise and responsible before the competent authority.

- A confirmation letter from the local government authority where the natural disaster, epidemic, fire occurred confirming that such events occurred during that time.

- Compensation claim documentation accepted by the insurance company (if any).

- Documentation specifying the liability of organizations and individuals required to compensate (if any).

a2. Goods that are damaged due to expiration or natural changes in their biological processes and are within the limit set by the enterprise are deductible expenses when determining taxable income. If goods are damaged due to expiration or natural changes in their biological processes and exceed the limit set by the enterprise, the excess amount will not be deductible expenses when determining taxable income.

Documentation for goods that are damaged due to expiration or natural changes in their biological processes and are deductible expenses is as follows:

- A letter from the enterprise sent to the directly managing tax authority explaining the damage to goods due to expiration or natural changes in their biological processes and are within the limit set by the enterprise.

- An inventory valuation statement of damaged goods prepared by the enterprise.

The inventory valuation statement of damaged goods must clearly state the value of the damaged goods, the cause of the damage; the type, quantity, and value of recoverable goods (if any); a ledger of the entry and exit of damaged goods with confirmation signed by a legitimate representative of the enterprise and responsible before the competent authority.

- Compensation claim documentation accepted by the insurance company (if any).

- Documentation specifying the liability of organizations and individuals required to compensate (if any).

The enterprise sends a letter to the directly managing tax authority explaining the damage to assets and goods due to natural disasters, epidemics, fires; goods that are damaged due to expiration or natural changes in their biological processes and are not compensated, no later than when submitting the declaration for final settlement of CIT according to the regulations of the year in which the assets and goods were damaged or deteriorated. Other documents (including the inventory valuation statements of damaged assets and goods, confirmation letters from local authorities, compensation claim documentation accepted by the insurance company (if any), documentation specifying the liability of organizations and individuals required to compensate (if any) and other relevant documents) are kept by the enterprise and presented to the tax authority upon request.

b) Amend and supplement Point 2.2 Section IV Part C as follows:

- The enterprise shall notify the tax authority directly managing it of the depreciation method for fixed assets (FA) that the enterprise chooses to apply before implementing such a method (for example, notifying the choice to implement the straight-line depreciation method...). Each year, the enterprise decides on the depreciation rate for FA according to the current regulations of the Ministry of Finance regarding management, use, and depreciation of FA, including cases of accelerated depreciation.

- In cases where FA owned by the enterprise is temporarily halted from use due to seasonal production for less than nine months; temporary halt for repair, relocation, periodic maintenance, for up to twelve months, and then the FA continues to be put back into service for business operations, during the period of temporary halt, the enterprise is allowed to record depreciation expenses, and the depreciation expense for the period of temporary halt can be included in deductible costs when determining taxable income.

The enterprise must send a notification to the tax authority detailing the reasons for the temporary halt of FA at the latest time when submitting the annual corporate income tax declaration as required.

- Long-term land use rights are not allowed to be recorded as deductible expenses when determining taxable income; land use rights with a term if they have full invoices and comply with all procedures stipulated by law, and participate in business operations, can be gradually allocated as deductible expenses over the permitted land use period.

- In cases where the enterprise purchases tangible FA such as buildings and structures attached to long-term land use rights, the value of the land use rights must be determined separately and recorded as intangible FA, while the original cost of tangible FA such as buildings and structures is the actual purchase price paid plus (+) related direct costs incurred to bring the tangible FA into use.

+ If the asset purchased from organizations or individuals has a separate VAT invoice indicating the value of the land use rights, the value of the land use rights listed on the invoice is recorded as intangible FA and is not allowed to be recorded as deductible expenses.

+ If the asset purchased from households or individuals without a VAT invoice, the value of the land use rights is recorded as intangible FA and is not allowed to be recorded as deductible expenses. The value of the land use rights is determined based on market prices but cannot be lower than the land price set by the People's Committee of the province or centrally-administered city at the time of asset purchase.

c) Amend and supplement Point 2.3 of Section IV Part C as follows:

The enterprise shall independently establish and manage consumption quotas for raw materials, materials, fuel, energy, and goods used in production and business. These quotas are established at the beginning of the year or production period and kept at the enterprise, and must be presented fully to the tax authority upon request.

For the main products of the enterprise, the enterprise is responsible for notifying the directly managing tax authority of the primary consumption quotas within three months from the start of production and business activities. The list of primary consumption quotas for the main products of the enterprise is decided by the enterprise.

In cases where the enterprise adjusts or supplements the previously notified consumption quotas during production and business operations, it must notify the directly managing tax authority again. The final deadline for notifying the tax authority about adjustments or supplements to the consumption quotas is the deadline for submitting the corporate income tax declaration as required for the settlement year. In cases where certain raw materials, materials, fuels, or goods have state-established consumption quotas, these must be followed.

d) Amend and supplement Point 2.5 of Section IV Part C as follows:

d1. Amend Point 2.5b of Section IV Part C as follows:

Not deductible expenses include bonuses for employees that are not specifically detailed in terms of conditions and amounts in any of the following documents: Labor contracts; Collective labor agreements; Financial regulations of the Company, Corporation, Group; Bonus regulations stipulated by the Chairman of the Board of Directors, General Director, or Director according to the company’s financial regulations.

d2. Amend and supplement Point 2.5c of Section IV Part C as follows:

- In cases where the enterprise sets aside a reserve fund to supplement the next year's salary fund to ensure uninterrupted salary payments and not use it for other purposes, the reserve fund can be set aside but not exceeding 17% of the actual salary fund implemented.

The actual salary fund implemented is the total amount of salaries actually paid in the settlement year until the final submission deadline for the settlement report (excluding the amount set aside for the previous year's salary reserve fund used in the current tax settlement year).

- In cases where the enterprise's salary fund has been approved according to regulations, the setting aside of a salary reserve fund must ensure that the sum of the reserved amount and the actual salary and wages paid until the submission deadline does not exceed the total salary and wages payable to employees according to the approved salary fund (if applicable).

- The setting aside of a salary reserve fund must ensure that after setting aside, the enterprise does not incur a loss; if the enterprise incurs a loss, it cannot set aside up to 17%.

Example: The salary fund of Enterprise A (EPA) for 2011 to pay to employees was approved at 10 billion VND:

+ Case 1: In 2011, EPA paid salaries, wages, and allowances to employees totaling 8 billion VND, leaving a balance of 2 billion VND against the approved salary fund by the end of December 31, 2011. In the first quarter of 2012, the unit continued to use the 2011 salary fund to pay salaries and wages for 2011, totaling 30 million VND. Thus, the actual salary fund implemented in 2011 until the final submission deadline is 8.3 billion VND. To ensure uninterrupted salary payments in the following year, EPA is allowed to set aside a maximum reserve fund of: 8.3 billion VND x 17% = 1.411 billion VND.

The total amount of wages included in expenses when determining taxable income for the year 2011 = 8.3 billion VND + 1.411 billion VND = 9.711 billion VND.

+ Case 2: As of March 31, 2012, DNA had paid wages and salaries for the year 2011 and supplementary payments in the first three months of 2012 totaling 9.5 billion VND. Therefore, to ensure uninterrupted wage payments, DNA can establish a maximum reserve fund of: 9.5 billion VND x 17% = 1.615 billion VND.

The total amount of wages for 2011 if calculated correctly at 17% on the actual wage fund equals 9.5 billion VND + 1.615 billion VND = 11.115 billion VND.

However, since the approved wage fund for employees according to regulations is 10 billion VND, the total amount of wages included in expenses when determining taxable income for the year 2011 is 10 billion VND.

- In the previous year, if the enterprise established a wage reserve fund but by December 31 of the following year, the enterprise has not used or has not fully used the wage reserve fund, then the enterprise must reduce expenses of the following year.

Example: When submitting tax settlement documents for 2011, Enterprise B established a wage reserve fund of 10 billion VND. By December 31, 2012, Enterprise B only spent 7 billion VND from the 2011 wage reserve fund, then Enterprise B must reduce wage expenses of the following year (2012) by 3 billion VND (10 billion VND - 7 billion VND). When preparing tax settlement documents for 2012, if Enterprise B needs to establish a wage reserve fund, it shall continue to establish the wage reserve fund according to regulations.

d3. Supplement Point 2.5 Section IV Part C with the following content:

- In the case where the labor contract signed by the enterprise with foreign workers includes provisions for educational expenses for the children of foreign workers studying in Vietnam at the primary and secondary level, which are paid by the enterprise and have the nature of wages or salaries, and such expenditures comply with legal regulations on wages and salaries and are supported by complete documentation, they may be included in deductible expenses when determining corporate income tax payable.

- In the case where the labor contract signed by the enterprise with employees includes provisions for housing allowances paid by the enterprise to employees, and such payments have the nature of wages or salaries, comply with legal regulations on wages and salaries, and are supported by complete documentation, they may be included in deductible expenses when determining corporate income tax payable.

e) Amend and supplement Point 2.6 Section IV Part C as follows:

Not included in deductible expenses: Expenditures on uniforms provided to employees without invoices or supporting documents; expenditures on uniforms provided to employees in cash or in kind exceeding five million VND per person per year.

If an enterprise provides uniforms to employees both in cash and in kind, the maximum expenditure allowed to be included in deductible expenses when determining taxable income shall not exceed five million VND per person per year.

For industries with special characteristics, such expenses shall be implemented in accordance with specific regulations of the Ministry of Finance.

g) Amend and supplement Point 2.9 Section IV Part C as follows:

Not included in deductible expenses: Travel allowances for annual leave that do not comply with the provisions of the Labor Code; travel allowances for employees traveling domestically and internationally exceeding twice the prescribed rate according to the guidelines of the Ministry of Finance for civil servants and public officials.

Travel expenses and rental costs for accommodation for employees on business trips, if supported by valid invoices and supporting documents, may be included in deductible expenses when determining taxable income. In cases where enterprises allocate travel and accommodation expenses for employees, the allocated travel and accommodation expenses may be included in deductible expenses according to the regulations of the Ministry of Finance for civil servants and public officials.

h) Amend Point 2.11 Section IV Part C as follows:

Not included in deductible expenses: Contributions to mandatory insurance funds for employees exceeding the prescribed limits, contributions to union fees for employees exceeding the prescribed limits. Expenditures for forming management costs for superiors exceeding the prescribed limits by the superior management authority; contributions to funds of associations (such associations are established in accordance with the law) exceeding the prescribed limits by the association.

Part on contributions forming management cost expenses for higher levels is the part contributed by enterprises under State-owned Economic Groups, Joint Stock Companies with one member owned by the State established in accordance with the regulations of competent state agencies; the contribution part of enterprises under State-owned Corporations established pursuant to Decision No. 90, Decision No. 91 of the Government Prime Minister; the contribution part of enterprises directly under the Ministries in charge.

i) Amend and supplement Point 2.18 Section IV Part C as follows:

Not included in deductible expenses: Prepaid expense items within a period that have not been spent or fully utilized by the due date.

Prepaid items include: prepaid major repair expenses for fixed assets according to cycles, prepaid items for activities that have recorded revenue but still need to fulfill obligations according to contracts, and other prepaid items.

In cases where enterprises generate production and business activities that have recorded taxable income but have not yet incurred all related costs, they may prepay corresponding deductible expense items according to regulations based on the recorded revenue when determining corporate income tax payable income. Upon completion of the contract, the enterprise must adjust and accurately determine the corporate income tax payable based on actual invoices and legal documents issued in accordance with regulations.

For fixed assets subject to periodic major repairs, enterprises are allowed to prepay repair costs according to budget estimates into annual expenses. If the actual repair expenditure exceeds the estimated amount, the enterprise can include the difference in deductible expenses.

k) Amend Point 2.20 Section IV Part C as follows:

Not included in deductible expenses: Exchange rate loss from revaluation at year-end of cash, deposits, funds in transit, foreign currency receivables; exchange rate loss arising during basic construction investment to form fixed assets that have not yet been put into production and business operations (regardless of whether the enterprise has commenced production and business operations or not).

l) Supplement Point 2.30 Section IV Part C with the following content:

When commencing production and business operations, if an enterprise incurs regular expenses to maintain its production and business operations without generating revenue, and these expenses meet the stipulated conditions, such expenses shall be included in deductible expenses when determining taxable income.

m) Supplement Point 2.31 Section IV Part C as follows:

- Corporate income tax withheld from employees' income is not included in deductible expenses when determining taxable income, which refers to the tax amount withheld by the enterprise from employees' income to be paid to the state budget. In cases where the enterprise enters into labor contracts stipulating that employee salaries and wages do not include personal income tax, the personal income tax paid by the enterprise on behalf of employees is considered a salary expense and is included in deductible expenses when determining taxable income.

- Withheld corporate income tax on behalf of foreign contractors (withholding tax) is included in deductible expenses when determining taxable income in cases where the contract between the enterprise and the foreign contractor/subcontractor specifies that the contractor/subcontractor's revenue does not include corporate income tax (withholding tax).

3. Determining income items.

a) Supplement Point 5 Section V Part C with the following content:

- In cases where interest income from deposits and lending exceeds interest expense on loans as prescribed, the remaining difference after offsetting is included in other income when determining taxable income.

- In cases where interest income from deposits and lending is less than interest expense on loans as prescribed, the remaining difference after offsetting is included in deductible expenses when determining taxable income.

b) Amend and supplement Point 6 Section V Part C as follows:

- During the tax year, if there is an exchange rate difference arising during the period and an exchange rate difference from revaluing foreign currency liabilities at year-end, it shall be determined as follows:

+ Exchange rate differences arising during the period directly related to the revenue and expenses of the main production and business activities of the enterprise shall be included in the expenses or income of the main production and business activities. Exchange rate differences arising during the period not directly related to the revenue and expenses of the main production and business activities, if resulting in a loss, shall be included in production and business expenses, and if resulting in a gain, shall be included in other income.

+ Gains from revaluating foreign currency liabilities at year-end shall be offset against losses from revaluating foreign currency liabilities at year-end. After offsetting, if there is a gain, it shall be included in other income, and if there is a loss, it shall be included in production and business expenses when determining taxable income.

In cases where exchange rate differences from revaluing foreign currency liabilities result in a loss for the enterprise's operating results, a portion of the exchange rate difference may be allocated to the next year to prevent the enterprise from incurring a loss, provided that the exchange rate difference included in expenses in the current year is at least equal to the exchange rate difference of the foreign currency due for payment in that year.

The above exchange rate differences do not include exchange rate differences from revaluing year-end balances of cash, deposits, funds in transit, foreign currency receivables; exchange rate differences arising during basic construction investment to form fixed assets that have not yet been put into production and business operations (irrespective of whether the enterprise has commenced production and business operations or not).

- Income from foreign currency trading activities: equals the total amount received from selling foreign currencies minus the total purchase price of the sold foreign currencies.

c) Amend and supplement Point 11 Section V Part C as follows:

In the case where a business has revenue from fines and compensation due to a partner's breach of contract that exceeds the expenses for fines and compensation due to contract breaches (these fines do not fall under administrative penalties as stipulated by the Administrative Violation Handling Ordinance), the remaining difference after offsetting shall be included in other income.

In the case where a business has revenue from fines and compensation due to a partner's breach of contract that is lower than the expenses for fines and compensation due to contract breaches (these fines do not fall under administrative penalties as stipulated by the Administrative Violation Handling Ordinance), the remaining difference after offsetting shall be deducted from other income. If the entity does not generate other income in the year, it may be deducted from production and business income.

d) Amend and supplement Point 16 Section V Part C as follows:

Income from the sale of scrap materials and by-products is determined by subtracting recovery costs and consumption costs of scrap materials and by-products from the revenue from selling such items.

- In the case where a business generates income from selling scrap materials and by-products produced during the manufacturing process of products enjoying corporate income tax benefits, this income shall enjoy corporate income tax benefits.

- In the case where a business generates income from selling scrap materials and by-products produced during the manufacturing process of products not enjoying corporate income tax benefits, this income shall be included in other income and shall not be subject to corporate income tax benefits.

e) Supplement Section V Part C with the following content:

The refund of export and import taxes on goods that have been actually exported or imported and generated within the year of finalizing corporate income tax shall be deducted from costs. In the case where the refund of export and import taxes on goods that have been actually exported or imported is generated in previous years of finalizing corporate income tax, it shall be included in other income. If this income is directly related to the production and business activities enjoying corporate income tax benefits, then this income shall enjoy corporate income tax benefits. If this income is not directly related to the production and business activities enjoying corporate income tax benefits, then this income shall be included in other income and shall not be subject to corporate income tax benefits.

4. Determining losses and carrying forward losses.

Amend and supplement Point 2 Section VII Part C as follows:

- After finalizing taxes, if a business incurs a loss, it must carry forward the entire loss continuously to taxable income of subsequent years. The period for carrying forward losses shall be continuous and not exceed five years, starting from the year following the year in which the loss was incurred.

Example 1: In 2011, Company A incurred a loss of 10 billion VND, and in 2012, Company A generated taxable income of 12 billion VND. Therefore, the entire loss of 10 billion VND incurred in 2011 must be carried forward to taxable income in 2012.

Example 2: In 2011, Company B incurred a loss of 20 billion VND, and in 2012, Company B generated taxable income of 15 billion VND:

+ Company B must carry forward the entire loss of 15 billion VND to taxable income in 2012;

+ The remaining loss of 5 billion VND must be carried forward continuously to subsequent years, but not exceeding five years from the year following the year in which the loss was incurred (losses in 2011 can be carried forward up to 2016).

- For businesses that incur losses between quarters within the same fiscal year, they may offset the losses of the previous quarter against the subsequent quarters of the same fiscal year. When finalizing corporate income tax, the business shall determine the total loss for the year and carry forward the entire loss continuously to taxable income of subsequent years according to the provisions above.

- Businesses shall self-determine the amount of loss deductible from taxable income according to the principle stated above. If additional losses occur during the period of carrying forward losses, these new losses (excluding losses carried over from previous periods) shall be carried forward continuously and not exceed five years from the year following the year in which the loss was incurred.

In the case where the competent authority conducting inspection or audit of corporate income tax finalization determines a different amount of loss to be carried forward compared to the amount determined by the business, the amount of loss to be carried forward shall be determined according to the conclusion of the inspection or audit authority, ensuring that the loss is carried forward continuously and not exceeding five years from the year following the year in which the loss was incurred, as provided.

Beyond the five-year period from the year following the year in which the loss was incurred, any uncarried-forward loss will not be allowed to be carried forward to subsequent years' income.

5. Corporate Income Tax on Capital Transfer and Securities Transfer.

a) Supplement Point 1.3 Part E with the following content:

In the case where a joint-stock company issues additional shares to raise capital, the excess between the issue price and the par value shall be recorded in the share premium account and shall not be subject to corporate income tax on the share premium.

b) Amend and supplement Point 2.1a Part E as follows:

Taxable income from transferring investment capital in a business is determined as follows:

Where:

- The sale price is determined as the actual total market value received by the transferor according to the transfer agreement.

In the case where the transfer agreement specifies payment through installment or deferred payment, the revenue from the transfer agreement does not include interest on installments or deferred payments as specified in the agreement.

In the case where the transfer agreement does not specify a payment price or the tax authority has grounds to determine that the payment price is not consistent with the market price, the tax authority has the right to inspect and set the transfer price. If a business transfers part of its equity contribution in another business and the transfer price for this equity contribution is not consistent with the market price, the tax authority may re-evaluate the entire value of the business at the time of transfer to determine the corresponding transfer price based on the proportion of the transferred equity contribution.

The transfer price shall be determined based on the investigation materials of the tax authority or based on the transfer prices of other similar cases at the same time, in the same economic organization, or from similar transfer contracts at the time of transfer. In case the tax authority's determination of the transfer price is not appropriate, it shall be based on the valuation price of professional appraisal organizations authorized to determine the transfer price at the time of transfer in accordance with the regulations.

- The purchase price of the transferred capital portion (capital price) is determined based on accounting books and vouchers regarding the investment capital in the business entity of the transferring organization or individual at the time of capital transfer, confirmed by the parties participating in the enterprise or joint venture contract, or the audit result of an independent auditing company for a wholly foreign-owned enterprise.

In case a business entity uses foreign currency for accounting (approved by the Ministry of Finance) and transfers capital contribution in foreign currency, the transfer price and the purchase price of the transferred capital shall be determined in foreign currency; in case a business entity uses Vietnamese dong for accounting and transfers capital contribution in foreign currency, the transfer price must be determined in Vietnamese dong according to the exchange rate at the time of transfer.

- Transfer costs include actual expenses directly related to the transfer, supported by valid invoices and receipts. In case transfer costs arise abroad, the original documents must be certified by a notary or independent auditing organization in the country where the costs occur, and the documents must be translated into Vietnamese (with confirmation by an authorized representative).

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

c) Supplement Point 3.1 of Part E with the following content:

In case a business entity transfers capital without receiving money but receives other assets or material benefits (such as shares, fund certificates...), which generate income, this income shall be considered as other income and declared as taxable income when calculating corporate income tax.

d) Amend and supplement Point 3.2 of Part E as follows:

For foreign organizations operating in Vietnam or generating income in Vietnam that do not operate under the Investment Law and the Enterprise Law (referred to collectively as foreign contractors) engaging in capital transfer activities.

The organization or individual receiving the capital transfer is responsible for determining, declaring, withholding, and paying on behalf of the foreign organization the corporate income tax due. In case the recipient of the capital transfer is also a foreign organization not operating under the Investment Law and the Enterprise Law, the domestic enterprise established under Vietnamese law where the foreign organizations invest capital shall be responsible for declaring and paying on behalf of the corporate income tax due from the foreign organization's capital transfer activity.

6. Corporate Income Tax from Real Estate Transfer.

a) Amend and supplement Point 1 of Item I of Part G as follows:

All types of enterprises, regardless of ownership component or industry, with income from land use right transfer, land lease right transfer; real estate businesses with income from subleasing land fall within the scope of corporate income tax from real estate transfer.

Income from real estate transfer includes the following forms:

- Income from land use right transfer, land lease right transfer; income from subleasing land.

- Income from land use right transfer, land lease right transfer attached to property on land; income from subleasing land attached to property on land. Property on land includes:

+ Housing;

+ Infrastructure;

+ Architectural works on land;

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

- Income from ownership or use rights transfer of housing.

Income from subleasing land by real estate businesses does not include cases where the business only leases houses, infrastructure, and architectural works on land.

b) Amend and supplement Point 5 of Item III of Part G as follows:

In case a credit institution accepts the value of real estate as collateral for a loan to replace the performance of the secured obligation, when permitted to transfer the real estate according to the law, the credit institution must declare and pay corporate income tax from the real estate transfer activity into the State Budget. In case the real estate collateral is auctioned, the proceeds shall be used for repayment according to the Government's regulations on securing loans for credit institutions and declared and paid tax according to the regulations. After repaying the above amounts, the remaining amount shall be returned to the business entities that mortgaged the real estate to secure the loan.

In case a credit institution is allowed to transfer mortgaged real estate according to the law to recover capital and cannot determine the capital cost of the real estate, the capital cost shall be determined equal to the loan principal to be repaid under the real estate mortgage contract plus unpaid interest costs up to the time of forced sale of the mortgaged real estate according to the credit contract plus any incurred transfer costs if there are valid invoices and receipts.

c) Amend and supplement Point 6 of Item III of Part G as follows:

In case the enforcement agency auctions real estate as enforcement collateral, the proceeds shall be handled according to the Government's decree on the seizure and auction of land use rights to secure enforcement. The organization authorized to auction the real estate shall declare, withhold, and pay corporate income tax from the real estate transfer activity into the State Budget. On the documents, it shall clearly state the declaration and payment of tax on behalf of the sale of enforcement collateral.

In the case where the enforcement agency transfers real estate as collateral for enforcement if the cost basis of the real estate cannot be determined, the cost basis shall be equal to the amount of debt owed according to the court's decision for enforcement plus any additional costs incurred during the transfer of the real estate if there are valid invoices and receipts.

7. Tax incentives for corporate income tax.

a) Supplement Point 2.2 Section I Part H with the following content:

In the case where a business is newly established from an investment project and the domestic investment project has a capital investment scale under fifteen (15) billion Vietnamese dong and does not fall within the List of Investment Fields Subject to Conditions, the documentation to determine the investment project is the certificate of enterprise registration.

In the case where a business is newly established from an investment project and the domestic investment project has a capital investment scale from fifteen (15) billion Vietnamese dong up to under three hundred (300) billion Vietnamese dong and does not fall within the List of Investment Fields Subject to Conditions, the investor shall follow the procedures to register the investment according to the form at the provincial-level state management agency.

b) Amend Point 2.5 Section I Part H as follows:

In the year when the business generates losses from activities enjoying tax incentives, non-taxable income from other business activities (excluding income from the transfer of real estate) that have income (or vice versa), the business may offset such income against the taxable income of the profitable activities chosen by the business. The remaining income after offsetting shall be subject to the corporate income tax rate applicable to the ongoing profitable activities.

c) Supplement Point 1.3 Section III Part H as follows:

To enjoy corporate income tax incentives in the case of businesses newly established from investment projects in industries such as waterworks, power plants, water supply and drainage systems; roads, railways; airports, seaports, river ports; airfields, stations, and other particularly important infrastructure projects as decided by the Prime Minister, the business must generate revenue and income from the operation of these investment projects. If enterprises carry out construction and installation work on these projects, the income from such activities shall not be eligible for corporate income tax incentives.

d) Amend and supplement Point 5 Part I as follows:

- Businesses operating in other fields but generating income from activities in education-training, vocational training, healthcare, culture, sports, and environmental protection (hereinafter referred to collectively as socialized fields) and meeting the criteria of types, scales, and standards set forth in the List of Socialized Field Types, Criteria, and Standards prescribed by the Prime Minister shall apply a corporate income tax rate of 10% throughout their operational period for income derived from educational, vocational training, healthcare, cultural, sports, and environmental activities starting from January 1, 2009.

- Businesses operating in socialized fields before January 1, 2009, meeting the criteria of types, scales, and standards set forth in the List of Socialized Field Types, Criteria, and Standards prescribed by the Prime Minister and currently applying a higher corporate income tax rate than 10% for income from socialized field activities shall switch to applying a 10% tax rate for such income starting from January 1, 2009.

e) Supplement Part I with the following content:

- Starting from January 1, 2009, agricultural service cooperatives and people's credit funds engaged in agricultural service activities shall apply a tax rate of 20%, including those established before January 1, 2009, which have not yet enjoyed the preferential corporate income tax rate or whose preferential tax period has expired (excluding cases where agricultural service cooperatives and people's credit funds are currently applying a 10% tax rate).

- Enterprises producing software products that are currently enjoying corporate income tax incentives based on the Investment License or Investment Incentive Certificate issued and whose tax incentives (including preferential tax rates, tax exemption periods, and tax reduction periods) under Circular No. 130/2008/TT-BTC are more favorable than those stipulated in the Investment License or Investment Incentive Certificate shall continue to enjoy the tax incentives specified in Circular No. 130/2008/TT-BTC for the remaining period starting from the 2009 tax year.

- No corporate income tax incentives shall be applied to income from mineral extraction activities of enterprises established and granted investment licenses for mineral extraction activities from January 1, 2009. For enterprises engaged in mineral extraction activities prior to January 1, 2009, which are currently enjoying corporate income tax incentives under previous laws and regulations on corporate income tax or based on the Investment License or Investment Incentive Certificate issued, they shall continue to enjoy such incentives for the remaining period.

Article 2. Implementation.

This Circular shall take effect forty-five days from the date of signature and shall apply to the corporate income tax period for the year 2011.

Contents not specified in this Circular and contents not contrary to the provisions specified in this Circular shall be implemented in accordance with Circular No. 130/2008/TT-BTC dated December 26, 2008, of the Ministry of Finance on corporate income tax.

Repeal Circular No. 177/2009/TT-BTC dated September 10, 2009, on guidelines for determining taxable income from exchange rate differences on foreign currency payable debts.

Replace the purchase invoice form number 01/TNDN (annexed to Circular No. 130/2008/TT-BTC dated December 26, 2008, of the Ministry of Finance). In cases where enterprises purchase goods or services without invoices and are permitted to prepare a Purchase Invoice according to the regulations, they shall prepare the Purchase Invoice annexed to this Circular.

During implementation, if there are difficulties or obstacles, units are requested to report to the Ministry of Finance for timely guidance and resolution.