Circular No. 199/2012/TT-BTC guides the implementation of Decree No. 122/2011/NĐ-CP dated December 27, 2011 of the Government on the conversion of corporate income tax preferences for enterprises currently enjoying corporate income tax preferences due to meeting export ratio conditions that have been terminated according to WTO commitments.

 CIRCULAR

Guidelines for implementing Decree No. 122/2011/NĐ-CP dated December 27, 2011 of the Government on the conversion of corporate income tax preferences for enterprises currently enjoying corporate income tax preferences due to meeting export ratio conditions that have been terminated according to World Trade Organization commitments.

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

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

Pursuant to Decree No. 122/2011/NĐ-CP dated December 27, 2011 of the Government amending and supplementing certain provisions of Decree No. 124/2008/NĐ-CP of the Government detailing and guiding the implementation of certain provisions of the Corporate Income Tax Law;

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;

Considering the proposal of the Director General of the State Tax Administration;

The Minister of Finance issues this Circular guiding the conversion of corporate income tax preferences as follows:

Article 1. Scope of application

This Circular guides the conversion of corporate income tax (CIT) preferences as stipulated in Clause 2, Article 2 of Decree No. 122/2011/NĐ-CP for enterprises currently enjoying CIT preferences due to meeting export ratio conditions (excluding enterprises meeting export ratio conditions for textile and garment activities) that have been terminated CIT preferences for export ratio conditions according to World Trade Organization commitments.

Article 2. Principles for selecting the conversion of corporate income tax (CIT) preferences

1. Enterprises that were granted Investment License, Business Registration Certificate, or 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 operations during the period they are enjoying CIT preferences due to meeting export ratio conditions as prescribed in foreign investment laws in Vietnam, domestic investment encouragement laws, and CIT laws shall continue to enjoy CIT preferences under these laws until the end of 2011.

2. Enterprises currently enjoying CIT preferences due to meeting export ratio conditions that have been terminated CIT preferences for export ratio conditions according to World Trade Organization commitments, starting from 2012, may choose to continue enjoying CIT preferences for the remaining time corresponding to actual investment incentive conditions met by the enterprise (excluding export ratio condition incentives), specifically as follows:

- May choose to continue enjoying CIT preferences for the remaining time corresponding to actual investment incentive conditions met by the enterprise as prescribed in CIT regulatory documents effective from the date the enterprise was granted establishment license up to the date Decree No. 24/2007/NĐ-CP dated February 14, 2007 of the Government detailing the implementation of the CIT Law took effect (according to CIT regulatory documents applicable from the 2006 tax year and earlier up to the date the enterprise was granted establishment license).

- Or may choose to continue enjoying CIT preferences for the remaining time corresponding to actual investment incentive conditions met by the enterprise as prescribed in CIT regulatory documents effective at the time of adjustment of tax preferences due to implementing World Trade Organization commitments (according to CIT regulatory documents applicable for the 2012 tax year).

3. The selection of conversion of CIT preferences for the remaining time must ensure the following principles:

- By 2012, enterprises currently applying reduced CIT rates due to meeting export ratio conditions that have been terminated CIT preferences due to implementing World Trade Organization commitments shall be converted to CIT rate preferences according to the guidelines in this Circular. If by 2012 the period of applying reduced CIT rates has expired, then conversion to CIT rate preferences will not be allowed.

- By 2012, enterprises currently enjoying tax exemption or reduced CIT rates due to meeting export ratio conditions that have been terminated CIT preferences due to implementing World Trade Organization commitments shall be converted to tax exemption or reduced CIT rate preferences according to the guidelines in this Circular. If by 2012 the period of tax exemption or reduced CIT rates has expired, then conversion to tax exemption or reduced CIT rate preferences will not be allowed.

Article 3. Method for Selecting Tax Preference Conversion for Corporate Income Tax

1. Enterprises that are still within the period of applying preferential tax rates and are currently enjoying tax exemption or reduction shall be entitled to continue benefiting from corporate income tax preferences for the remaining preferential period corresponding to the actual conditions met by the enterprise in terms of investment incentives (excluding preferential conditions based on export ratio) as stipulated in legal regulatory documents on corporate income tax from the date the enterprise was granted the business registration certificate until before the effective date of Decree No. 24/2007/ND-CP or according to the provisions of legal regulatory documents on corporate income tax at the time of adjustment of tax preferences due to implementation of WTO commitments.

In cases where enterprises are still within the period of applying preferential tax rates and are currently enjoying tax exemption or reduction, if they choose to convert preferential conditions to other preferential conditions (excluding preferential conditions based on export ratio), when converting preferential tax rates and tax exemption/reduction periods for the remaining time, it must comply with the provisions of legal regulatory documents at a point in time when the enterprise chooses.

2. Enterprises that are still within the period of applying preferential tax rates but have completed the tax exemption or reduction period shall be entitled to select conversion to apply preferential tax rates for the remaining period corresponding to the actual conditions met by the enterprise (excluding preferential conditions based on export ratio) as stipulated in legal regulatory documents on corporate income tax from the date the enterprise was granted the business registration certificate until before the effective date of Decree No. 24/2007/ND-CP or according to the provisions of legal regulatory documents on corporate income tax at the time of adjustment of tax preferences due to implementation of WTO commitments.

3. Enterprises that are still within the tax exemption or reduction period but have completed the period of applying preferential tax rates shall be entitled to select conversion to apply tax exemption or reduction preferences for the remaining period corresponding to the actual conditions met by the enterprise (excluding preferential conditions based on export ratio) as stipulated in legal regulatory documents on corporate income tax from the date the enterprise was granted the business registration certificate until before the effective date of Decree No. 24/2007/ND-CP or according to the provisions of legal regulatory documents on corporate income tax at the time of adjustment of tax preferences due to implementation of WTO commitments.

In cases where enterprises are still within the tax exemption period, the tax reduction period, or have completed the tax exemption period but still have the tax reduction period, when implementing preferential conversion, if the number of years of corporate income tax exemption due to meeting the export ratio condition exceeds the number of years of exemption under the selected plan when converting due to meeting other preferential conditions (excluding preferential conditions based on export ratio), then for each year of corporate income tax exemption exceeding the limit, two years of 50% tax reduction will be deducted.

In cases where enterprises have not yet enjoyed tax exemptions or reductions for corporate income tax based on the export ratio by 2012 due to lack of taxable income: If enterprises do not have taxable income in the first three years, starting from the first year of revenue, the tax exemption and reduction period will be calculated from the fourth year of revenue. The conversion of preferential benefits for the remaining period will be carried out according to the above principle.

4. In cases where enterprises are currently enjoying tax preferences for corporate income tax under the expanded investment category but have had their tax preferences for corporate income tax terminated due to the export ratio condition, they may choose to continue benefiting from corporate income tax preferences for the remaining period corresponding to the actual conditions met by the enterprise in terms of expanded investment incentives (excluding preferential conditions based on the export ratio) at the time of issuance of the expanded investment permit or the time the expanded investment project begins production and operation (in cases where there is no expanded investment permit).

5. Some specific cases are guided as follows:

a) For enterprises currently enjoying preferences based on the export ratio condition (excluding export processing zones).

Example 1:

Enterprise A was established in 1988, is a wholly foreign-owned enterprise engaged in export-oriented production activities, meeting the conditions for investment incentives: the investment project implemented within the first five years of the Investment Law; the project exports at least 80% of its products. According to the business establishment permit, Enterprise A enjoys corporate income tax preferences: a corporate income tax rate of 15% throughout the project period, exempted from corporate income tax for two years, and a 50% reduction in corporate income tax for the following two years. The enterprise began generating taxable income in 2001. The enterprise has enjoyed tax preferences: exempted from corporate income tax for two years (2001 and 2002), and a 50% reduction in corporate income tax for the next two years (2003 and 2004).

Starting from the 2012 corporate income tax period, the tax preference for corporate income tax based on the export ratio condition is terminated: Enterprise A has already enjoyed the full period of tax exemption and reduction for corporate income tax based on the export ratio condition, and only continues to enjoy the 15% corporate income tax rate preference based on the export ratio condition from 2012. The corporate income tax rate preferences that the enterprise can choose based on other tax preference conditions outside the export ratio condition to notify the tax authority to apply from 2012:

At the time of issuing the business registration certificate - Decree No. 139-HĐBT dated September 5, 1988 of the Council of Ministers (the time of investment permit issuance): if the condition of exporting at least 80% of the products is removed, Enterprise A only meets one criterion stipulated in Clause 2, Article 37 of Decree No. 139-HĐBT (the investment project implemented within the first five years of the Investment Law), so it does not belong to the priority category but belongs to the general category, the corporate income tax rate applied is 21% for the remaining period of the project.

b) Pursuant to Decree No. 28-HĐBT dated December 6, 1991 of the Council of Ministers: Enterprise A only meets one criterion: Enterprise meeting the conditions for investment projects within the first five years of implementing the Investment Law, the enterprise falls under the general category, the corporate income tax rate applicable is 21% for the remaining period of the project.

c) Pursuant to Decree No. 18/CP dated April 16, 1993, Decree No. 12/CP dated February 18, 1997, Decree No. 24/2000/NĐ-CP dated July 31, 2000, Decree No. 27/2003/NĐ-CP dated March 19, 2003 of the Government: Enterprise A does not meet the conditions for investment incentives applying the general corporate income tax rate of 25% for the remaining period of the project.

d) Pursuant to Decree No. 164/2003/NĐ-CP dated December 22, 2003, Decree No. 152/2004/NĐ-CP dated August 6, 2004 of the Government: Enterprise A does not meet the conditions for investment incentives applying the general corporate income tax rate of 28%; from 2009, the general corporate income tax rate is 25% according to Decree No. 124/2008/NĐ-CP dated December 11, 2008 of the Government for the remaining period of the project.

e) At the time of ending export incentives upon joining the WTO - Decree No. 122/2011/NĐ-CP dated December 27, 2011 of the Government: Enterprise A does not meet the conditions for investment incentives, applying the general corporate income tax rate of 25% for the remaining period of the project.

Therefore, Enterprise A is selected based on points a, b, c, d, and e above, with the most favorable option being the selection at point a and point b: applying a corporate income tax rate of 21% from 2012 for the remaining period of the project pursuant to Decree No. 139-HĐBT dated September 5, 1988 or Decree No. 28-HĐBT dated December 6, 1991 of the Council of Ministers.

Example 2:

Enterprise B was established on April 16, 1993, engages in production of goods for export, and meets the conditions for investment incentives: The investment project employs 500 workers or more; The project exports at least 80% of its products. According to the business establishment permit, Enterprise B enjoys corporate income tax incentives: a corporate income tax rate of 20% throughout the implementation period of the project, exemption from corporate income tax for two years, and a 50% reduction in corporate income tax for the next three years. The enterprise began generating taxable income in 2003. It has enjoyed tax incentives: exemption from corporate income tax for two years: 2003 and 2004, a 50% reduction in corporate income tax for the following three years: 2005, 2006, and 2007.

From the 2012 corporate income tax assessment period, the corporate income tax incentives end due to meeting the export conditions: Enterprise B has fully utilized the tax exemption and reduction periods based on the export ratio condition, and can only continue to enjoy the 20% tax rate incentive based on the export ratio condition until 2012 when it must cease the application of the 20% corporate income tax rate due to the export ratio condition. The corporate income tax rate incentives that the enterprise may choose based on other conditions for tax incentives besides the export ratio condition to notify the tax authority to apply from 2012:

a) At the time of issuing the business establishment permit - Decree No. 18/CP dated April 16, 1993 of the Government: if the export incentive condition is removed, Enterprise B only meets the condition of employing 500 workers or more: failing to meet the investment incentive conditions, the general corporate income tax rate of 25% must be applied for the remaining period of the project.

b) Pursuant to Decree No. 12/CP dated February 18, 1997 of the Government: Enterprise B meets the condition of employing 500 workers or more, thus applying a corporate income tax rate of 20% for ten years starting from 1993 (the year of enterprise establishment), by 2012 the tax rate incentive period has ended, and the general corporate income tax rate of 25% must be applied for the remaining period of the project.

c) Pursuant to Decree No. 24/2000/NĐ-CP dated July 31, 2000, Decree No. 27/2003/NĐ-CP dated March 19, 2003 of the Government: Enterprise B does not meet the conditions for investment incentives, the general corporate income tax rate of 25% must be applied for the remaining period of the project.

d) Pursuant to Decree No. 108/2006/NĐ-CP dated September 22, 2006, investment projects employing regularly between 500 and 5000 workers fall under the list of preferential investment sectors. Pursuant to Decree No. 164/2003/NĐ-CP, newly established businesses from investment projects in preferential sectors are subject to a corporate income tax rate of 20% for ten years. Enterprise B meets the condition of employing 500 workers or more, thus applying a corporate income tax rate of 20% for ten years starting from 1993, by 2012 the tax rate incentive period has ended, and the general corporate income tax rate of 25% must be applied for the remaining period of the project.

e) At the time of ending export incentives due to joining the WTO - Decree No. 122/2011/NĐ-CP dated December 27, 2011 of the Government: Enterprise B does not meet the conditions for investment incentives, the general corporate income tax rate of 25% must be applied.

Therefore, Enterprise B is selected based on points a, b, c, d, and e above. Based on the aforementioned points, Enterprise B has exhausted the period of enjoying corporate income tax incentives, and must apply the general corporate income tax rate of 25% from 2012 for the remaining period of the project.

Example 3:

Enterprise C was established on January 1, 2003, engages in production of goods for export, and meets the conditions for investment incentives: The production project is located in an industrial park; The project exports at least 80% of its products. According to the business establishment permit, Enterprise C enjoys corporate income tax incentives: a corporate income tax rate of 10% throughout the implementation period of the project, exemption from corporate income tax for four years, and a 50% reduction in corporate income tax for the next four years. Enterprise C began generating taxable income in 2006, up to the end of 2011, Enterprise C has enjoyed incentives: exemption from corporate income tax for four years from 2006 to the end of 2009, a 50% reduction in corporate income tax in 2010 and 2011; from 2012, the incentives end according to the WTO commitment, therefore Enterprise C will not enjoy a 50% reduction in corporate income tax for the remaining two years and will not continue to enjoy a corporate income tax rate of 10%.

The corporate income tax incentives for exemption, reduction, and tax rates that the enterprise may choose based on other conditions for tax incentives besides the export condition to notify the tax authority to apply from 2012:

a) At the time of issuing the business establishment permit - Decree No. 24/2000/NĐ-CP dated July 31, 2000 of the Government: The enterprise meets the condition of being a production project in an industrial park with preferential treatment: exemption from corporate income tax for one year: 2006, reduction of 50% corporate income tax for two years: 2007 and 2008; application of a corporate income tax rate of 20% for the remaining period of the project.

b) According to Decree No. 27/2003/NĐ-CP dated March 19, 2003 of the Government: The enterprise meets the condition of being a production project in an industrial park with preferential treatment: exemption from corporate income tax for two years: 2006 and 2007, reduction of 50% corporate income tax for three years: from 2008 to 2010; application of a corporate income tax rate of 15% for the remaining period of the project.

c) According to Decree No. 152/2004/NĐ-CP: under the conditions of production in an industrial park, the enterprise enjoys preferential corporate income tax exemption for three years, reduction of 50% corporate income tax for seven subsequent years. By 2012, Enterprise C had been exempted from tax for four years: 2006 to the end of 2009, reduced by 50% in 2010 and 2011; Enterprise C had been exempted from tax for one additional year, one year of tax exemption for the enterprise will be offset by two years of 50% reduction. Therefore, by 2012, the enterprise still benefits from a 50% reduction for three years (seven years minus two years already reduced and one year of excess exemption equals two years of reduction).

Regarding the corporate income tax rate: According to Decree No. 152/2004/NĐ-CP, enterprises meeting the production conditions in an industrial park apply a corporate income tax rate of 15% for twelve years (from 2003 to 2014); from 2015, the general corporate income tax rate of 25% applies for the remaining period of the project.

d) At the time of terminating export incentives due to joining the WTO: Decree No. 122/2011/NĐ-CP dated December 27, 2011 of the Government: Enterprise C does not meet the investment incentive conditions and must apply the general corporate income tax rate of 25%.

Thus, Enterprise C can choose among points a, b, c, and d above, where the advantageous option is selecting the timing mentioned in point b or point c to apply from 2012:

+ Incentives according to Decree No. 27/2003/NĐ-CP of the Government: Termination of tax exemption and reduction from 2012; application of a corporate income tax rate of 15% for the remaining period of the project.

Or:

Or:

Example 4:

+ Corporate income tax exemptions and reductions according to Decree No. 152/2004/NĐ-CP: Reduction of 50% for three years from 2012 to 2014; application of a corporate income tax rate of 15% from 2012 to 2014.

Enterprise D was established on January 7, 2004, in a difficult economic and social area, business activity: production of goods for export exceeding 50% of products, the enterprise began generating taxable income from 2005.

According to Decree No. 164/2003/NĐ-CP dated December 22, 2003 of the Government, enterprises meeting the conditions specified in List A (export projects achieving more than 50% of total value of goods produced and traded in the fiscal year) attached as an appendix to Decree No. 164/2003/NĐ-CP and located in areas specified in List B attached as an appendix to Decree No. 164/2003/NĐ-CP, enjoy the following incentives: application of a corporate income tax rate of 15% for twelve years from 2004 to the end of 2015; exemption from corporate income tax for three years: 2005, 2006, and 2007; reduction of 50% corporate income tax for seven years: from 2008 to the end of 2014.

a) At the time of issuing the business establishment permit - Decree No. 164/2003/NĐ-CP dated December 22, 2003 of the Government: Removing the condition of export projects, enterprises meeting the condition of being projects in economically disadvantaged areas apply a corporate income tax rate of 20% for ten years from 2004 to the end of 2013, enjoy exemption from corporate income tax for two years (2005 and 2006), and reduction of 50% corporate income tax for six years (from 2007 to the end of 2012). By the end of 2011, the enterprise had enjoyed exemption for three years: from 2005 to the end of 2007 (one year of excess exemption, one year of tax exemption of the enterprise will be offset by two years of 50% reduction). Therefore, the enterprise only enjoys a 50% reduction for four years: from 2008 to the end of 2011, there is no tax exemption or reduction in 2012.

b) At the time of terminating export incentives due to joining the WTO - Decree No. 122/2011/NĐ-CP dated December 27, 2011 of the Government: Enterprises newly established from investment projects in economically disadvantaged areas apply a corporate income tax rate of 20% for ten years from 2004 to the end of 2013, enjoy exemption from corporate income tax for two years (2005 and 2006), and reduction of 50% corporate income tax for four years (from 2007 to the end of 2010).

Thus, Enterprise D can choose among points a and b above, where the advantageous option is choosing the timing mentioned in point a: applying a corporate income tax rate of 20% in 2012 and 2013 according to Decree No. 164/2003/NĐ-CP dated December 22, 2003 of the Government, from 2014 applying the general rate of 25%; from 2012, the period of tax exemption and reduction ends.

Example 5:

Enterprise E was established on January 7, 2004, engages in export production activities, and meets the conditions for investment incentives: export projects exceeding 50% of products. Enterprise E enjoys corporate income tax incentives: According to Decree No. 164/2003/NĐ-CP, the enterprise applies a corporate income tax rate of 20% for ten years, exemption from corporate income tax for two years, and reduction of 50% corporate income tax for the next three years. The enterprise began generating taxable income from 2004. Enterprise E has enjoyed tax incentives: exemption from corporate income tax for two years: 2004 and 2005, reduction of 50% corporate income tax for the next three years: from 2006 to the end of 2008.

From the corporate income tax calculation period in 2012 when export incentives terminate, the enterprise has enjoyed the full period of tax exemption and reduction due to exports and only enjoys the period of applying a corporate income tax rate of 20%, thus the corporate income tax rate of 20% will be terminated. The corporate income tax rates that the enterprise can choose based on other conditions for tax incentives outside the export ratio to notify the tax authority to apply from 2012:

a) At the time of issuing the business establishment license - Decree No. 164/2003/NĐ-CP dated December 22, 2003: The preferential condition based on export ratio was removed, since the enterprise did not meet other investment preference conditions, thus it had to apply a corporate income tax rate of 28%; from 2009, the general corporate income tax rate of 25% as stipulated in Decree No. 124/2008/NĐ-CP dated December 11, 2008 of the Government would be applied for the remaining period of the project.

b) At the time when export preferences were terminated due to joining the WTO - Decree No. 122/2011/NĐ-CP dated December 27, 2011 of the Government: Since the enterprise did not meet other investment preference conditions, it had to apply the general corporate income tax rate of 25% for the remaining period of the project.

Therefore, Enterprise E could choose according to points a and b above. According to the aforementioned time points, Enterprise E has completed the period during which it enjoyed corporate income tax preferences and will now apply the general corporate income tax rate of 25% starting from 2012 for the remaining period of the project.

b) For export processing enterprises operating in Export Processing Zones and Industrial Parks.

Example 6:

Enterprise G is a wholly foreign-owned enterprise established on October 18, 1991, engaged in export production activities. According to the Business Establishment License, Enterprise G enjoys corporate income tax preferences: a corporate income tax rate of 10% throughout the implementation period of the project, exempted from corporate income tax for four years. The enterprise began generating taxable income in 1994. Enterprise G has enjoyed tax preferences: exempted from corporate income tax for four years, from 1994 to 1997.

Starting from the 2012 corporate income tax assessment period, the export preference was terminated due to meeting the export ratio requirement: The enterprise has fully utilized the tax exemption and reduced corporate income tax period, and will only continue with the preferential tax rate application until the end of the export preference period. The corporate income tax rate preference of 10% due to meeting the export ratio requirement will be terminated. The corporate income tax rate preferences that the enterprise can choose due to meeting other corporate income tax preference conditions outside the export ratio requirement should be reported to the tax authority for application starting from 2012:

a) At the time of issuing the Business Establishment License - According to Decree No. 28-HĐBT dated December 6, 1991 of the Council of Ministers: Enterprise G only meets one criterion: The investment project within the first five years of implementing the Investment Law, the corporate income tax rate applied is 21% for the remaining period of the project.

b) According to Decree No. 18/CP dated April 16, 1993: Enterprise G does not meet the investment preference conditions, thus it must apply the general corporate income tax rate of 25% for the remaining period of the project.

c) According to Decree No. 192/CP dated December 28, 1994 of the Government: If the export preference condition is removed, Enterprise G only meets the condition of the production project in industrial parks: Enterprise G is entitled to a preferential corporate income tax rate of 18% for the remaining period of the project.

d) According to Decree No. 36/CP dated April 24, 1997 of the Government: If the export preference condition is removed, Enterprise G only meets the condition of the production project in industrial parks: Enterprise G is entitled to a preferential corporate income tax rate of 15% for the remaining period of the project.

e) According to Decree No. 27/2003/NĐ-CP dated March 19, 2003 of the Government: Enterprises meeting the condition of the production project in industrial parks are entitled to a corporate income tax rate of 15% for the remaining period of the project.

g) According to Decree No. 164/2003/NĐ-CP dated December 22, 2003, and Decree No. 152/2004/NĐ-CP dated August 6, 2004: Enterprises meeting the condition of the production project in Industrial Parks are entitled to a corporate income tax rate of 15% for twelve years from 1991 to 2002, from 2003 onwards, the preferential tax rate period ends, and the general corporate income tax rate must be applied for the remaining period of the project.

h) At the time when export preferences were terminated due to joining the WTO - Decree No. 122/2011/NĐ-CP dated December 27, 2011 of the Government: Enterprise G must apply the general corporate income tax rate of 25% since it does not meet the investment preference conditions.

Therefore, Enterprise G can choose according to points a, b, c, d, e, g, and h above, where the advantageous option is to select the time point mentioned at points d and e: applying a corporate income tax rate of 15% starting from 2012 for the remaining period of the project according to Decree No. 36/CP dated April 24, 1997 of the Government or Decree No. 27/2003/NĐ-CP.

Example 7:

Export Processing Enterprise H was established on August 1, 2000, engaged in export production activities. According to the Business Establishment License, Enterprise H enjoys corporate income tax preferences: a corporate income tax rate of 10% throughout the implementation period of the project, exempted from corporate income tax for four years, and a 50% reduction in corporate income tax for the next four years. The enterprise began generating taxable income in 2004. Enterprise H has enjoyed tax preferences: exempted from corporate income tax for four years, from 2004 to 2007, and a 50% reduction in corporate income tax for the next four years, from 2008 to 2011.

Starting from the 2012 corporate income tax assessment period, the export preference was terminated due to meeting the export ratio requirement: The enterprise has fully utilized the tax exemption and reduced corporate income tax period, and will only continue with the preferential tax rate application until the end of the export preference period. The corporate income tax rate preference of 10% due to meeting the export ratio requirement will be terminated. The corporate income tax rate preferences that the enterprise can choose due to meeting other corporate income tax preference conditions outside the export ratio requirement should be reported to the tax authority for application starting from 2012:

a) At the time of issuing the Business Establishment License - Decree No. 24/2000/NĐ-CP dated July 31, 2000 of the Government: Enterprises meeting the condition of the production project in industrial parks are entitled to a corporate income tax rate of 20% for the remaining period of the project.

b) According to Decree No. 27/2003/NĐ-CP dated March 19, 2003 of the Government: Enterprises meeting the condition of the production project in industrial parks are entitled to a corporate income tax rate of 15% for the remaining period of the project.

c) According to Decree No. 164/2003/NĐ-CP dated December 22, 2003, and Decree No. 152/2004/NĐ-CP dated August 6, 2004: Enterprises meeting the condition of the production project in industrial parks are entitled to a preferential corporate income tax rate of 15% for twelve years from 2000 to 2011, from 2012 onwards, the general corporate income tax rate of 25% must be applied.

d) At the time when export preferences were terminated due to joining the WTO - Decree No. 122/2011/NĐ-CP dated December 27, 2011 of the Government: Enterprise H must apply the general corporate income tax rate of 25% since it does not meet the investment preference conditions.

Accordingly, Enterprise H is selected according to Points a, b, c, and d mentioned above, among which the advantageous option is the selection at Point b: applying a corporate income tax rate of 15% from 2012 for the remaining period of the project pursuant to Decree No. 27/2003/NĐ-CP dated March 19, 2003 of the Government.

c) In the case of export processing enterprises not operating within export processing zones or industrial parks.

Example 8:

Export processing enterprise K was established in 2003, engaged in production and business activities for export products, with an average workforce of 6,000 workers annually. According to the Enterprise Establishment License, Enterprise K enjoys a corporate income tax rate of 10% throughout the implementation period of the project, exempted from corporate income tax for 4 years starting from when income is generated, and a reduction of 50% on corporate income tax payable for the next 4 years. The enterprise began generating taxable income in 2003. Enterprise K has enjoyed corporate income tax exemption for 4 years: from 2003 to 2006; and a 50% reduction in corporate income tax from 2007 to 2010.

Starting from the 2012 corporate income tax assessment period, the tax incentives are terminated due to non-compliance with the export ratio condition: Since the enterprise has fully utilized the corporate income tax exemption period, it will be subject to termination of the tax rate incentive of 10%.

The corporate income tax rates that the enterprise may choose, based on meeting other conditions for tax incentives besides the export condition, should be reported to the tax authority for application starting from 2012:

a) At the time of issuing the establishment license, according to Decree No. 27/2003/NĐ-CP dated March 19, 2003 of the Government: If the enterprise does not meet the conditions for tax rate incentives, it must apply a corporate income tax rate of 25% for the remaining period of the project.

b) Pursuant to Decree No. 108/2006/NĐ-CP dated September 22, 2006, projects employing 5,000 or more workers regularly are included in the list of investment sectors with special preferential treatment. According to Decree No. 164/2003/NĐ-CP, new businesses established from investment projects in preferential sectors shall apply a corporate income tax rate of 20% for 10 years. Enterprise K meets the condition of employing over 5,000 workers, thus applying a corporate income tax rate of 20% for 10 years from 2003 to 2012, and a general corporate income tax rate of 25% from 2013 onwards for the remaining period of the project.

c) Upon termination of export incentives due to joining the WTO, according to Decree No. 122/2011/NĐ-CP dated December 27, 2011 of the Government, since Enterprise K does not meet the investment incentive conditions, it must apply a general corporate income tax rate of 25%.

Accordingly, Enterprise K is selected according to Points a, b, and c mentioned above, among which the advantageous option is the selection at Point b: applying a corporate income tax rate of 20% in 2012, and a general corporate income tax rate of 25% from 2013 onwards.

d) In the case of enterprises currently enjoying corporate income tax incentives under expanded investment programs.

Example 9:

Enterprise L was established on May 2, 1997, and on April 1, 2005, the enterprise was permitted by the competent state agency to implement an expanded production investment project (the project falls under industry A with an export ratio exceeding 50% and implemented in area C). The project is exempted from taxes for 4 years and enjoys a 50% reduction in taxes for the following 7 years. The project was completed and began operations in 2006, and the enterprise has enjoyed tax incentives for income from the expanded investment project as follows: exempted from corporate income tax for 4 years (from 2006 to 2009) and a 50% reduction in corporate income tax for the next 2 years (from 2010 to 2011).

Starting from the 2012 corporate income tax assessment period, the tax incentives are terminated due to non-compliance with the export ratio condition.

a) At the time the expanded investment project begins operations: According to Article 38 of Decree No. 164/2003/NĐ-CP dated December 22, 2003, if the condition of the project falling under industry A with an export ratio exceeding 50% is excluded, the project only meets the condition of investment in area C and is eligible for expanded investment incentives of exemption for 1 year in 2006, and a 50% reduction in corporate income tax for 2007 and 2008. The enterprise has been exempted for 4 years and received a 50% reduction for 2 years, so from 2012, the enterprise will no longer enjoy tax incentives for the expanded investment project.

b) Upon termination of export incentives due to joining the WTO, according to Decree No. 122/2011/NĐ-CP dated December 27, 2011 of the Government, the expanded investment project is no longer eligible for investment incentives.

Accordingly, Enterprise L is selected according to Points a and b mentioned above. Based on the aforementioned periods, Enterprise L has ceased to enjoy tax incentives for the expanded investment project from 2012 and no longer receives corporate income tax benefits.

Article 4. Procedures for Implementing Preferential Conversion

The enterprise shall be responsible for notifying the directly managing tax authority of its selection of the preferential tax scheme according to Appendix No. 01 issued together with this Circular.

The deadline for submitting a written notification to the tax authority is the deadline for filing the final income tax return for corporate income tax (TNDN) year 2012 as prescribed.

In cases where the enterprise has declared the enjoyment of preferential corporate income tax (TNDN) (including having notified the tax authority) but the selected preferential level for conversion is lower than the preferential level specified in this Circular or is not consistent with the preferential conversion option prescribed in this Circular, the enterprise shall adjust and supplement the declaration in accordance with the provisions of the Law on Tax Administration and other guiding documents on tax management, and must also submit a written notification to the tax authority regarding the selection of a preferential level that is consistent with the preferential conversion prescribed in this Circular.

State-owned enterprises that have been assigned by the Ministry of Agriculture and Rural Development to conduct offshore wind power project surveys before the effective date of this Circular shall continue to implement according to the assigned documents; any new matters arising after the effective date of this Circular shall be implemented in accordance with the provisions of this Circular.

1. This Circular takes effect from December 31, 2012, and applies from the 2012 corporate income tax period. Content previously guided by the Ministry of Finance that differs from the content guided in this Circular is hereby abolished.

2. Tax authorities at all levels shall be responsible for disseminating, promoting, and guiding enterprises in implementation.

During the implementation process, if there are difficulties, organizations and individuals are requested to promptly reflect to the Ministry of Finance for research and resolution./.

 

SOCIALIST REPUBLIC OF VIETNAM
Independence - Freedom - Happiness
______________

NOTICE OF SELECTION OF PREFERENTIAL TAX SCHEME IN ACCORDANCE WITH CIRCULAR NO. 199/2012/TT-BTC

Respectfully submitted to: Tax Authority: …

[01] Name of taxpayer:...

[03] Name of Tax Agent (if any): …

Corporate Income Tax (TNDN) preferential tax currently being enjoyed until 2012 due to meeting export ratio conditions, which was terminated due to implementing WTO commitments:

+ Preferential tax rate: …%; Application period: from year … to year …

+ Preferential tax exemption: … years; from year … to year …

+ Preferential tax reduction: … years; from year … to year …

Now, the Enterprise hereby notifies the selection of converting preferential Corporate Income Tax (TNDN) according to the legal regulations on Corporate Income Tax (TNDN): The preferential benefits proposed for the remaining time from 2012:

+ Preferential tax rate: …%; Application period: from 2012 to year …

+ Preferential tax exemption: … years; from 2012 to year …

+ Preferential tax reduction: … years; from year … to year …

I solemnly declare that the contents declared are true and accurate, and I am responsible under the law for the contents declared herein.