Circular No. 40/2010/TT-BTC guides the determination of taxable income from the difference arising from revaluation of assets.

Article 1. Scope of Application.

1. The scope of application includes organizations engaged in production and business activities that generate taxable income under the Law on Corporate Income Tax (hereinafter referred to as enterprises).

2. The scope of application covers asset revaluation differences of enterprises as prescribed.

Article 2. Basis for Tax Calculation.

1. State-owned enterprises with 100% state capital that carry out fixed asset revaluation (Tangible Fixed Assets - TFA) according to regulations to convert into joint-stock companies shall record the value of TFA for depreciation purposes based on the revalued amount, and the difference between the revalued TFA value and the remaining TFA value recorded in the accounting books shall be recorded as an increase in the state capital at the enterprise.

2. Enterprises that carry out asset revaluation according to regulations to contribute capital, to transfer assets when dividing, splitting, merging, consolidating, or changing the form of enterprise (except for the case specified in Point 1 of Article 2 above) must calculate and pay corporate income tax (CIT) as follows:

a) Differences arising from the revaluation of Tangible Fixed Assets (TFA) for capital contribution, or for transferring assets when dividing, splitting, merging, consolidating, or changing the form of enterprise shall be included in other income when determining taxable CIT, specifically as follows:

- Differences arising from the revaluation of TFA for capital contribution shall be gradually allocated to other income when determining taxable CIT at the enterprise contributing the revalued assets. The gradual allocation of the revaluation difference of TFA to other income of the enterprise contributing the revalued assets shall be calculated over the remaining years of depreciation of TFA at the enterprise receiving the capital contribution.

- Differences arising from the revaluation of TFA for transferring assets when dividing, splitting, merging, consolidating, or changing the form of enterprise shall be included once in other income when determining taxable CIT at the enterprise transferring the revalued assets.

b) Differences arising from the revaluation of the value of land use rights with a term for capital contribution, or for transferring assets when dividing, splitting, merging, consolidating, or changing the form of enterprise, where the party receiving the land use rights is allowed to depreciate the value of land use rights according to the prescribed regime, the revaluation difference of the value of land use rights must be included in other income when determining taxable CIT according to the principle stated in Point 2a of Article 2 above.

Differences arising from the revaluation of the long-term value of land use rights for capital contribution, or for transferring assets when dividing, splitting, merging, consolidating, or changing the form of enterprise, where the party receiving the land use rights uses the value of land use rights in production and business activities but does not depreciate the value of land use rights according to the prescribed regime, the revaluation difference of the value of land use rights temporarily does not need to be taxed. In cases where the enterprise continues to transfer land use rights or continue to contribute land use rights to another entity after capital contribution, the enterprise receiving the capital contribution must declare and pay CIT.

In cases where enterprises transfer land use rights, continue to contribute land use rights to another entity for land that has been revalued for capital contribution, division, splitting, merging, consolidating, or changing the form of enterprise, the cost basis of the land is determined specifically as follows:

- For land that is Tangible Fixed Assets subject to depreciation (land with a term of use) when transferred, the cost basis is determined as the remaining value of land use rights (remaining value = revalued value recorded in the contribution agreement, division, splitting, merging, consolidating, or changing the form of enterprise agreement - depreciation already included in the enterprise's expenses).

- For land that is Tangible Fixed Assets not subject to depreciation when transferred, the cost basis of the land use rights is calculated based on the value of the land use rights before revaluation for contribution recorded in the contribution agreement, division, splitting, merging, consolidating, or changing the form of enterprise agreement.

Example: Enterprise A has 1,000 square meters of long-term land use rights and the land value recorded in the accounting books is 5 billion VND. Subsequently, Enterprise A contributes 1,000 square meters of land to Enterprise B for production and business activities. Both parties have agreed and issued a valuation agreement for the land contribution valued at 10 billion VND. Therefore, when contributing capital, Enterprise A must issue a contribution agreement clearly stating the value of land use rights before revaluation for contribution is 5 billion VND; the revalued value of land use rights for contribution is 10 billion VND. Differences arising from the revaluation of long-term land use rights for capital contribution, where the party receiving the land use rights does not depreciate the value of land use rights, the revaluation difference of the value of land use rights temporarily does not need to be taxed.

If Enterprise B does not use this land in production and business activities but continues to transfer it to Enterprise C or continues to contribute land use rights to Enterprise D with a price of 12 billion VND, then Enterprise B must declare and pay CIT. The cost basis of the land use rights for determining taxable income is calculated by deducting the value of land use rights before revaluation for contribution recorded in the contribution agreement, which is 5 billion VND.

c) The difference arising from the revaluation of land use rights contributed to investment projects for constructing houses and infrastructure for sale shall be included once in other income when determining taxable income for corporate income tax at the enterprise contributing the revalued asset. For perpetual land use rights, it is the difference between the revalued value and the recorded value of the land use rights in accounting books; for land use rights with a term, it is the difference between the revalued value and the remaining value of the land use rights.

d) When contributing capital or transferring assets, both parties must have a contribution record and an asset transfer record detailing the remaining recorded value on accounting books of the asset before revaluation, the revalued value of the asset, and the number of years remaining for depreciation of fixed assets (for depreciable fixed assets), accompanied by a file on the origin of the asset.

3. An enterprise receiving fixed assets contributed as capital or receiving assets transferred during division, separation, merger, consolidation, or conversion of business form shall depreciate such fixed assets according to their revalued value (except where the value of land use rights is not subject to depreciation as prescribed).

Article 3. Implementation.

This Circular takes effect 45 days from the date of signature and applies to the settlement of corporate income tax from 2009 onwards.

In cases where the Socialist Republic of Vietnam has signed an Agreement or Treaty that provides for the treatment of differences arising from the revaluation of assets differently from the guidance provided in this Circular, such provisions shall be implemented in accordance with the terms of the Agreement or Treaty.

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