Decree No. 57-CP detailing the implementation of the Law on Corporate Income Tax and the Law Amending and Supplementing Certain Provisions of the Law on Corporate Income Tax.

DECREE

OF THE GOVERNMENT DECREE NO. 57-CP AUGUST 28, 1993 DETAILING THE IMPLEMENTATION OF THE INCOME TAX LAW AND THE LAW AMENDING AND COMPLEMENTING CERTAIN PROVISIONS OF THE INCOME TAX LAW

THE GOVERNMENT:

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

Pursuant to the Income Tax Law adopted by the National Assembly of the Socialist Republic of Vietnam at its Eighth Session on June 30, 1990; the Law Amending and Complementing Certain Provisions of the Income Tax Law adopted by the National Assembly of the Socialist Republic of Vietnam at its Ninth Session on July 6, 1993;

At the proposal of the Minister of Finance;

DECREE:

Chapter 1:

SCOPE OF APPLICATION OF INCOME TAX

Article 1. The taxpayers for income tax include independent economic accounting organizations and individuals engaged in business activities with income (collectively referred to as business entities), whether regular or irregular, with fixed or mobile business locations as specified in Article 1 and Article 2 of the Income Tax Law.

Chapter 2:

BASIS FOR CALCULATING INCOME TAX AND INCOME TAX RATES

Article 2. Gross revenue for calculating taxable income includes all proceeds from sales, processing fees, commissions, service charges, and other revenues not yet reduced by any cost of the business entity during the tax period, determined in accordance with the characteristics of each industry and business activity, as stipulated in Article 3 of Government Decree No. 55-CP dated August 28, 1993 detailing the implementation of the Business Tax Law and the Law Amending and Complementing Certain Provisions of the Business Tax Law.

Article 3. The Ministry of Finance shall provide detailed guidance on determining taxable income as prescribed in Article 7 of the Income Tax Law for each industry and profession.

Article 4. Deductible expenses for calculating taxable income as provided in Article 9 of the Income Tax Law are as follows:

1. Depreciation of fixed assets. All fixed assets used for production and business operations must be depreciated and included in production and business costs.

2. Raw material, material, fuel, energy (collectively referred to as materials) costs calculated based on actual consumption rates and reasonable warehouse prices, used in production and business operations related to taxable income generated during the tax period.

3. Wages, salaries, and other amounts having the nature of wages applicable to all sectors of the economy, based on state policies on wages and income.

4. For individual businesses, the portion of wages and salaries paid to external hires as stipulated in Clause 3 of this Article may be deducted; however, wages and salaries paid to the head of an individual business shall not be considered as deductible expenses when determining taxable income.

5. Other deductible expenses beyond those mentioned in Clauses 1, 2, and 3 of this Article include:

a) General management expenses.

b) Expenses for purchasing or paying for the use of technical documents, patents, inventions, technology transfer licenses, and technical services (excluding fixed assets).

c) Expenses for product consumption or service provision.

d) Insurance premiums paid according to unified state regulations.

e) Expenses made in accordance with established procedures.

g) Taxes deductible include export duties, import duties, business taxes, special consumption taxes, and other taxes or fees directly related to business activities such as land taxes, resource taxes, capital gains, stamp duties, traffic fees, etc.

6. The following items shall not be considered as reasonable and allowable expenses for determining taxable income or for reducing taxable income:

a) Losses from defective products exceeding permissible limits, losses from production stoppages due to any cause, losses caused by personal responsibility or where the responsible party cannot be identified.

b) Penalties paid by the business entity.

c) Expenditures in the nature of bonuses, such as bonuses from funds, savings bonuses, etc.

d) Expenditures not in compliance with state regulations.

e) Other losses.

g) Expenditures covered by other sources of funding.

h) Capital preservation expenditures exceeding prescribed limits.

Article 5

a) Business entities (except small individual traders and itinerant traders) pay income tax at a stable rate on annual taxable income for each group of industries as follows:

- A tax rate of 25% for electricity generation; mining, mineral, forestry, fisheries, water supply for production and living; metallurgy; machinery manufacturing, equipment, transportation vehicles, and transmission materials; basic chemical production; fertilizer production; pesticide production; construction materials production; transportation; construction; irrigation.

- A tax rate of 35% for consumer goods manufacturing; food industry, grain processing, and other productions.

- A tax rate of 45% for trade, catering, and various services.

Business entities operating multiple industries with different tax rates must separately account for taxable income for each industry and pay income tax at the respective industry's tax rate. If a business entity cannot separately account for taxable income for each industry, the highest income tax rate applicable to the industry operated shall be applied to the total taxable income of the entire business entity.

b) Other income of business entities (other than income from core business activities) is subject to income tax at the tax rate applicable to core business activities.

Other income includes bank deposit interest; loan interest (not part of credit activities); rental income; income from asset liquidation and transfer; income from equity participation; income from other financial activities; income from joint ventures and cooperatives. Specifically, income from joint ventures must be taxed at the receiving joint venture unit, and if not taxed at the receiving joint venture unit, it must be taxed on the share of income received.

Article 6. In addition to paying income tax at the stable rate prescribed in Point a of Article 5 of this Decree, business entities with taxable income exceeding the prescribed limit must also pay additional income tax as follows:

a) Individual businesses with average monthly taxable income over 10 million VND must pay additional income tax at a rate of 25% on the amount exceeding 10 million VND.

b) Economic organizations outside state-owned enterprises shall pay additional income tax at a rate of 25% on the portion of income exceeding 10 million VND per capita monthly average contribution if their taxable income exceeds 10 million VND per capita monthly average contribution.

c) State-owned enterprises with high taxable income due to objective advantages must pay additional income tax. The additional income tax is calculated on the remaining income after applying the stable tax rate and setting aside three funds for the enterprise as prescribed by the Government.

An enterprise with objective advantages is an enterprise that enjoys more favorable business conditions than other enterprises, resulting in lower costs and higher income, such as having a favorable business location; being prioritized for technical equipment; operating in industries with little domestic competition...

The additional income tax rates for each industry and profession are stipulated as follows:

- 30% for resource extraction, production, construction, and transportation industries.

- 40% for commerce, catering, and various service industries.

The amount set aside for the three funds, which serves as the basis for determining additional income tax, is stipulated as follows:

- The fund for encouraging production and business development is calculated at 35% of the remaining income after applying the stable tax rate.

- The reward fund and welfare fund, each calculated at six months' average actual salary level of the enterprise based on the wage system prescribed by the Government in Decree No. 26-CP dated May 23, 1993.

Chapter 3:

TAX DECLARATION, PAYMENT, AND COLLECTION OF INCOME TAX

Article 7. Organizations and individuals engaged in business under various economic sectors must comply with accounting regulations as prescribed by the Accounting and Statistics Law dated May 10, 1988, and the State Accounting Organization Charter issued pursuant to Decree No. 25-HĐBT dated March 18, 1989, of the Council of Ministers (now the Government), and guiding decisions and circulars of the Ministry of Finance.

Article 8. The Ministry of Finance shall uniformly issue invoices for use by businesses nationwide.

Article 9. When the tax authority requests relevant documents related to the assessment of income tax, the business entity shall be responsible for:

1. Submitting all necessary documents within the required timeframe as requested by the tax authority;

2. Explaining and proving unclear items in the declaration form or accounting books and vouchers.

Business entities may not refuse to present, provide, or explain the necessary documents above on grounds of professional confidentiality or other reasons at the request of the tax authority.

The tax authority must keep confidential the documents provided by the business entity.

Article 10. Business organizations and individual businesses not subject to fixed-sum taxation must submit monthly income tax declarations and make provisional tax payments according to the tax authority's regulations. At year-end, they must settle and pay income tax to the tax authority.

Article 11. Small household businesses and itinerant traders must pay income tax through fixed-sum taxation based on monthly revenue and per transaction. They do not need to reconcile accounts with the tax authority at year-end.

Article 12. Organizations and individuals who delay payment of taxes or fines specified in tax notices, collection orders, or penalty decisions shall, in addition to paying the full amount of tax or fine as prescribed, be subject to a daily late payment penalty of 0.2% (two thousandths) of the delayed payment amount.

Chapter 4:

REDUCTION AND EXEMPTION FROM INCOME TAX

Article 13. Reduction and exemption from income tax are stipulated as follows:

a) Cases eligible for exemption from income tax:

- Individuals with weak health, disabilities, small-scale traders, part-time workers, sideline occupations, family supplementary economy... whose monthly income only ensures a minimum living standard for themselves.

- Transportation activities using primitive means in mountainous areas such as hand carts, three-wheeled trucks, animal-drawn vehicles, rafts, and non-motorized boats.

- New production facilities officially operating from 1993 are exempt from income tax for two years from the date of generating income.

- Businesses relocating from lowland areas to mountainous and island regions are exempt from income tax for three years from the date of operation in these regions.

- Scientific research contracts and scientific and technological service contracts.

- Products produced during trial production are exempt from income tax for six months from the start of trial production.

b) Cases eligible for reduction in income tax:

- New production facilities, after being exempt from income tax for two years as stipulated in point a of this Article, are entitled to a 50% reduction in income tax payable for the next two years.

- New production facilities established in difficult regions are entitled to a 50% reduction in income tax payable for the next four years.

- Organizations and individuals conducting business in difficult regions may be granted a maximum 50% reduction in income tax payable; the tax reduction period shall not exceed two years.

- Production facilities and certain other professions encouraged for investment, if expanding production and business operations or deepening investments leading to significantly higher efficiency than before, are eligible for income tax reduction. The tax reduction amount equals the actual expenditure on reinvestment (excluding self-funded capital); however, the maximum reduction cannot exceed 50% of the annual income tax payable and should not exceed the additional income generated by the investment. During the year, these entities may temporarily retain up to 30% of the planned income tax payable for investment and up to 50% of the additional income tax payable based on the investment feasibility study. The final decision on tax reduction will be made upon annual settlement.

- Enterprises producing goods to replace imported goods listed in the directory published by the State Planning Commission are eligible for a maximum 50% reduction in income tax payable for the replacement goods for one year from the start of production with income.

c) In this context, some terms are understood as follows:

- Mountainous region refers to mountainous communes recorded in current regulations of the Government's Ethnic and Mountainous Affairs Committee.

- Difficult region refers to areas with harsh natural conditions and extremely underdeveloped infrastructure directly affecting business results and employee incomes, ensuring only a minimum living standard for employees.

- A newly established production facility is a new facility that has been invested in and constructed according to the decision of the competent authority and obtained a business registration permit. Facilities that were established previously, which have now been divided, separated, merged, renamed, or have undergone investment for renovation or changed their product lines are not considered newly established facilities eligible for tax reduction under this provision.

d) Production and business facilities encountering difficulties due to natural disasters, enemy activities, accidents, unexpected risks, or force majeure resulting in losses, and confirmed by the direct revenue collection management agency, may carry forward the losses of the current fiscal year to the next fiscal year to offset against taxable income before calculating corporate income tax. The period for carrying forward losses to calculate corporate income tax shall not exceed two years.

The Ministry of Finance shall specify the level of income exempt from or subject to reduced tax, procedures for declaring exemption from tax, reduction of taxable income, and carrying forward losses to the next year, and shall detail the procedures and authority for granting tax reductions, tax exemptions, and permission to carry forward losses to the next year, as provided for in this Article.

Chapter 5:

FINAL PROVISIONS

Article 14. The Government shall establish separate regulations on reward systems for organizations and individuals who contribute to the implementation of the Corporate Income Tax Law and penalty systems for organizations and individuals who violate the Corporate Income Tax Law.

Article 15. This Decree takes effect from September 1, 1993, replacing Decree No. 353-HĐBT dated October 2, 1990, issued by the Council of Ministers.

All previous provisions regarding corporate income tax that conflict with the provisions of this Decree are hereby abolished.

Article 16. The Minister of Finance shall guide the implementation of this Decree.

The Minister, Heads of Ministries equivalent to Ministries, Heads of agencies under the Government, Chairpersons of People's Committees of provinces and centrally-administered cities are responsible for organizing the implementation of this Decree.