Decree No. 26/2001/ND-CP amends and supplements certain provisions of Decree No. 30/1998/ND-CP dated May 13, 1998, of the Government detailing the implementation of the Law on Corporate Income Tax.

DECREE

Amending and supplementing certain Articles of Decree No. 30/1998/NĐ-CP

dated May 13, 1998 of the Government detailing the implementation of the Law on Corporate Income Tax

Pursuant to the Law on Corporate Income Tax No. 09/2003/QH11 dated June 17, 2003;

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Pursuant to the Government Organization Law dated September 30, 1992;

Pursuant to the Law on Corporate Income Tax (No. 03/1997/QH9 dated May 10, 1997);

Pursuant to Clause 11, Clause 12, Article 1 of the Law amending and supplementing certain Articles of the Law on Foreign Investment in Vietnam (No. 18/2000/QH10 dated June 9, 2000);

At the proposal of the Minister of Finance,

DECREE:

Article 1. Amending and supplementing certain Articles of Decree No. 30/1998/NĐ-CP dated May 13, 1998 of the Government detailing the implementation of the Law on Corporate Income Tax as follows:

1. Amending and supplementing Clauses 1, 6, and 7 of Article 3 regarding revenue for calculating taxable income as follows:

a) Clause 1 of Article 3 is amended and supplemented as follows:

"1. For goods and services sold by production and business establishments, the total revenue includes all proceeds from sales and service provision, including subsidies, surcharges, and premiums that the establishment enjoys. If the production and business establishment pays value-added tax under the direct method based on added value, the revenue for calculating taxable income shall include the value-added tax. The time of determining revenue for calculating taxable income is when the goods and services have been consumed, regardless of whether payment has been received or not. The Ministry of Finance shall specify the revenue for calculating taxable income for certain special activities."

b) Clause 6 of Article 3 is amended as follows:

"6. For leasing activities, it is the amount receivable each period according to the contract. In cases where the lessee pays in advance for multiple years, the revenue shall be allocated over the corresponding number of years."

c) Clause 7 of Article 3 is amended as follows:

"7. For credit activities, it is the interest income arising during the tax period."

2. Amending and supplementing Clause 6 and Clause 7 of Article 4 regarding reasonable expenses deductible for calculating taxable income as follows:

a) Clause 6 of Article 4 is amended and supplemented as follows:

"6. Expenses for female workers as prescribed by law; expenses for labor protection; expenses for work uniforms within the maximum limit set by the Ministry of Finance; expenses for protecting business premises; contributions to social insurance and health insurance under the responsibility of the business establishment employing workers; union fees; amounts contributed to form management costs at higher levels as stipulated."

b) Clause 7 of Article 4 is amended as follows:

"7. Interest payments on borrowed capital from financial institutions and other organizations and individuals at the actual interest rate agreed upon in the loan contract, but not exceeding the highest lending rate published by commercial banks at the time of signing the loan contract."

3. Article 5 is amended as follows:

"Revenue and reasonable expenses must be recorded in the accounting books of business establishments in Vietnamese dong. In cases where revenue and expenses arise in foreign currency, they must be converted into Vietnamese dong using the average exchange rate of the inter-bank market at the time of occurrence of the foreign currency revenue or expenses."

4. Clause 3 of Article 9 is amended as follows:

"3. Business establishments with advantageous business locations, industries with low competition yielding high income, after paying corporate income tax at a rate of 32%, if the remaining income relative to current equity exceeds 20%, the excess above 20% must be subject to additional corporate income tax at a rate of 25%. Temporary exemption from additional corporate income tax applies to the following cases:
a) Business establishments applying a corporate income tax rate of 25% for a period of three years from the date the Law on Corporate Income Tax comes into effect as provided in Clause 2 of Article 9 of Decree No. 30/1998/NĐ-CP dated May 13, 1998 of the Government;
b) Projects in investment areas, industries, and regions encouraged for investment applying corporate income tax rates of 25%, 20%, or 15% as provided in Clause 4 and Clause 5 of Article 9 of Decree No. 30/1998/NĐ-CP dated May 13, 1998 of the Government;
c) Production establishments exporting more than 50% of their products or having export revenue accounting for more than 50% of total revenue."

5. Article 12 is amended as follows:

'Income earned by foreign investors from investments in Vietnam (including refunded corporate income tax and income from the transfer of capital) if transferred abroad or retained outside Vietnam must be subject to withholding tax on repatriation of income. The withholding tax rate on repatriation of income is specified as follows:

1. A rate of 3% applies to:

a) Overseas Vietnamese investing in Vietnam under the Law on Foreign Investment in Vietnam;

b) Foreign investors investing in Industrial Zones, Export Processing Zones, High-Tech Zones;

c) Foreign investors contributing statutory capital or capital to implement joint venture contracts of $10 million or more;

d) Foreign investors investing in economically disadvantaged areas listed in the investment encouragement catalog.

2. A rate of 5% applies to:

a) Foreign investors contributing statutory capital or capital to implement joint venture contracts between $5 million and less than $10 million;

b) Foreign investors investing in projects in healthcare, education, and scientific research.

3. A rate of 7% applies to foreign investors contributing statutory capital or capital to implement joint venture contracts not covered by the provisions of this Article."

Article 2. This Decree takes effect 15 days after its issuance and applies to corporate income tax settlement from 2001 onwards.

Provisions in Decree No. 30/1998/NĐ-CP dated May 13, 1998 of the Government detailing the implementation of the Law on Corporate Income Tax and other guiding documents inconsistent with this Decree are abolished.

Article 3. The Minister of Finance shall guide the implementation of this Decree.

Ministers, Heads of ministerial-level agencies, Heads of government-affiliated agencies, Chairpersons of provincial and centrally governed city People's Committees are responsible for implementing this Decree.