Circular No. 74-TC/TQD explains and guides the implementation of corporate income tax

CIRCULAR

Explanation and Guidance on the Implementation of Corporate Income Tax

Based on Article 48 of the Business Tax Regulation issued pursuant to Decision No. 200-NQ/TVQH dated January 18, 1966 of the Standing Committee of the National Assembly and Directive No. 35-TTg/TN dated February 21, 1966 of the Prime Minister, the Ministry of Finance hereby provides detailed regulations and guidance on the implementation of corporate income tax as follows:

Corporate income tax is levied on the profits from all commercial and industrial enterprises operating collectively or individually. By regulating income among industries and adjusting unreasonable profit levels, corporate income tax encourages and guides production and business activities in accordance with the policies of the Party and the State, promotes production development, implements industry planning, reallocates productive forces, strengthens and consolidates new production relations, and advances socialist transformation.

A. WHO MUST PAY CORPORATE INCOME TAX

Except for the cases mentioned below, all cooperatives, cooperative organizations, and individual households engaged in commercial and industrial businesses that generate profits must pay corporate income tax, including private individuals renting houses and land in cities and towns.

The following cases are exempt from paying corporate income tax:

- Itinerant traders who have paid itinerant trade tax (as itinerant trade tax is a combined form of two taxes (business tax and corporate income tax), collected as one);

- Individuals engaged in minor trades such as sharpening knives and scissors, parking bicycles, knitting, weaving, etc., due to low income, have been exempted from business tax;

- Establishments engaged in professions not considered part of commercial and industrial activities (such as writers selling books and newspapers, traditional doctors treating patients with acupuncture and pulse diagnosis, artists selling their own works, theatrical troupes performing traditional plays, schools producing goods without a business purpose, etc.) are also exempt from corporate income tax. However, if they engage in business activities subject to business tax, they must also pay corporate income tax (refer to Circular No. 07-TC/TQD dated March 5, 1966 of the Ministry of Finance regarding business tax);

- Individuals engaged in cargo transportation in mountainous areas using sleds, horses, or handcarts are exempt from corporate income tax;

- Establishments required to pay corporate income tax but experiencing low income or facing difficulties due to natural disasters, enemy attacks, or unexpected accidents may be eligible for a reduction or exemption of corporate income tax for a certain period upon application by the tax collection agency. The duration of this exemption is determined by the administrative committee at the provincial level or higher, depending on the extent of the establishment's difficulties or losses;

- In addition, to support cooperative organizations and individual operators engaged in cargo transportation using handcarts, three-wheeled vehicles, ox-drawn carts, and rickshaws, these establishments are temporarily exempt from corporate income tax, even though they fall under the category of businesses required to pay business tax according to the new Business Tax Regulation;

In regions where transportation conditions are difficult or where there is a shortage of transportation means, or in regions with special needs for transportation, transportation activities using specific types of transportation such as horse-drawn carriages, water buffalo-drawn carriages, boats, etc., if approved by the provincial administrative committee to temporarily suspend payment of business tax or grant exemptions for a certain period, they will also be temporarily exempt from corporate income tax during that period.

B. TAX SCHEDULES

I. To differentiate treatment among various business sectors, the new tax regulation stipulates three different tax schedules:

- One schedule for small-scale industry, handicrafts, transportation, construction, and agricultural business not subject to agricultural tax;

- One schedule for service and food industries;

- One schedule for commerce.

To encourage fair and reasonable contributions commensurate with the varying income situations of business establishments and to promote labor productivity and production development, all new corporate income tax schedules are progressive.

1. For small-scale industry, handicrafts, transportation, construction, and agricultural business not subject to agricultural tax, the tax schedule provided in the regulation is a progressive tax rate ranging from 8% to 22%, applicable to cooperatives.

For individual households engaged in these industries, the regulation stipulates that they must pay corporate income tax based on the tax schedule applied to cooperatives plus an additional 25%, thereby encouraging and promoting individual households to join collective operations while demonstrating the state's preference for cooperatives.

However, for individual households engaged in these industries where the provincial or municipal administrative committee has decided that it is unnecessary to organize them into cooperatives due to the nature of the industry or profession, or for individual households engaged in production in remote areas where commercial and industrial activities are not concentrated and cannot be organized into cooperatives, the provincial or municipal administrative committee (or authorized authorities) may decide that only an additional 10% should be added.

2. For the service and food industries, the tax schedule provided in the regulation applies to individual households and is a progressive tax rate ranging from 10% to 28%.

To manage individual households in these two industries and assist them in adapting to changes, the regulation stipulates that cooperative organizations engaged in service and food industries shall pay taxes based on the tax schedule applied to individual households but with a deduction of 5%.

3. For the commerce sector, the tax schedule provided in the regulation applies to individual households and is a progressive tax rate ranging from 12% to 32%.

Corporate income tax for cooperative organizations engaged in commerce is calculated based on the above tax schedule but with a deduction of 5%, as explained in point 2.

II. At present, there are some commercial and industrial business establishments earning excessively high profits; to encourage these establishments to operate in accordance with the Party and State's guidelines, the tax policy stipulates the regulation of such excessively high profits as follows: in addition to paying taxes according to the prescribed tax tables, business establishments with excess income must also pay an additional percentage on the excess income. This rate is determined by the provincial or municipal administrative committees (or authorized authorities) for each case and varies among different industries.

The tax policy on income also provides exemptions and reductions aimed at encouraging cooperatives to enhance technical equipment, utilize waste materials, substitute raw materials, relocate facilities in accordance with state planning, and employ disabled veterans. These exemptions and reductions will be explained in the following sections.

C. CALCULATION OF TAX

I. FOR THE SMALL INDUSTRY, HANDICRAFT, TRANSPORTATION, CONSTRUCTION, AND AGRICULTURAL BUSINESS SECTORS THAT ARE NOT SUBJECT TO ENTERPRISE INCOME TAX

1. Cooperatives:

a) Taxable income is calculated as revenue minus (-) material costs, legitimate expenses, and exemption allowance, plus (+) incidental income.

Revenue: see explanation in Circular No. 07-TC/TQD dated March 5, 1996, issued by the Ministry of Finance.

Deductible items include: material costs, legitimate expenses, and exemption allowance.

Material costs.

When calculating material cost deductions, two categories should be noted: raw material, fuel, and material costs, and depreciation of fixed assets.

To enhance the supervisory role of finance over production and business operations through enterprise income tax collection, the deduction of raw material, fuel, and material costs must follow the principle that the maximum deduction cannot exceed the standard set by the state enterprise or agency placing orders. If a cooperative's actual raw material, fuel, and material costs are lower than the standard set by the ordering enterprise or agency, the tax authority shall deduct based on the cooperative's actual costs while reporting back to the ordering enterprise or agency to review and adjust the standards to better reflect reality. Provincial and municipal administrative committees must ensure that enterprises and agencies placing orders calculate prices and raw material, fuel, and material cost standards accurately, and upon signing each processing or ordering contract, they must send a copy to the tax authority for monitoring and management coordination to assist cooperatives in fulfilling their contracts properly.

The tax authority must assist cooperatives in managing and using raw materials, fuels, and materials efficiently, ensuring product quality and specifications. The tax authority must inspect the declaration of raw material, fuel, and material costs, prevent wastage and embezzlement of state materials, and ensure timely and accurate tax collection.

Depreciation of fixed assets (TSCĐ) must be calculated according to the industrial depreciation formula, separately for each fixed asset:

For the first period of enterprise income tax collection under the new tax policy, the tax authority will temporarily base calculations on current depreciation rates but will immediately adjust cases of clearly unreasonable deductions. Other unreasonable deductions will be recorded for later discussion with the handicraft industry management authority regarding adjustment measures according to the cooperative handicraft financial system (to be issued soon).

For the shipping transportation sector, the current depreciation method will be temporarily applied. The Ministry of Finance will coordinate with the Ministry of Transport to study this issue and provide guidance accordingly.

It should be noted that only fixed assets currently used in production can be depreciated. Fixed assets not yet in use or not used in production cannot be depreciated. Fixed assets that have been fully depreciated but are still usable should no longer be subject to basic depreciation but should continue to be subject to major repair depreciation to ensure that cooperatives have the conditions to repair fixed assets within the specified period.

Expenses.

When calculating deductible expenses such as management fees and sales expenses, including enterprise taxes and taxes already paid, only those expenses recognized in the cooperative financial system should be acknowledged, and receipts should be checked to ensure that the amount spent corresponds to the nature of the expense, promptly identifying instances of wasteful spending or non-compliance.

The following items shall not be included in deductible expenses or losses:

- Enterprise income tax;

- Penalties paid to tax authorities or other authorities;

- Wages paid to workers hired beyond the permitted ratio (except as provided below);

- Construction costs for production-related facilities (this has already been deducted under the fixed asset depreciation category). Costs of raw materials used in the manufacture of fixed assets for self-provisioning;

- Losses due to natural disasters or enemy actions (within the scope of income tax exemptions and reductions);

- Other expenses not recognized by the tax authority due to non-compliance.

Exemption allowance.

Currently, in collective economic organizations, wages are distributed based on income, with variations month-to-month; additionally, labor productivity in cooperatives is low, many people are new to the profession, and skill levels and productivity vary widely; therefore, it is impossible to establish a uniform wage system. Consequently, when calculating income, wages cannot be deducted (as with state-owned enterprises), but fixed exemption allowances must be established and deducted from cooperative income to determine taxable income. These exemption allowances differ between various industries and regions.

- Industries and trades requiring skilled labor or simple labor, heavy work or light work;

- Production and business establishments located in Hanoi, Hai Phong, or other cities, towns, mountainous areas, or different regions with varying living costs;

For certain industries and trades that require special care and encouragement to move to rural areas, the regulations stipulate a unified exemption rate for all three zones (mechanical engineering, electricity, chemical, glass manufacturing, sand, inland waterway transport: 38 dong; shipbuilding, ferry: 34 dong);

Additionally, in mountainous areas, efforts should be made to encourage the development of handicrafts, therefore, for towns and rural areas in mountainous regions, the same exemption rate applies;

To encourage cooperatives to relocate their facilities according to local government guidance, the provincial administrative committee (or authorized authority) may decide to allow cooperatives to enjoy the exemption rate at the old location for a period of one to two years if the exemption rate at the old location is higher than at the new location. Cooperatives that voluntarily relocate their facilities will not be eligible for this preferential clause;

The method for calculating the exemption quota for various types of labor in cooperatives is as follows:

- For cooperatives engaged in multiple trades, regarding direct work, members regularly working in which trade shall be exempted from one quota according to the specified rate for that trade. Regarding indirect work (such as members engaged in planning, accounting, statistics, etc.), each person shall be exempted from one quota according to the specified rate for the main production trade of the cooperative;

- For apprentices in cooperatives, if they are sent down by the supervising agency for training workers for the industry and the cooperative must bear the living expenses, then half (1/2) of the exemption quota shall be deducted for each person according to the specified rate for the trade being learned. For other apprentices, if recognized by the general assembly of cooperative members and the revenue collection agency, then half (1/2) of the exemption quota shall be deducted for each person according to the specified rate for the trade being learned;

Cooperatives that hire workers can deduct the wages paid to hired workers, but only within the scope allowed by the cooperative's organizational charter, which means not exceeding 10% of the number of cooperative members on the list, and the wage deduction for hired workers cannot exceed the wage level of cooperative members with the same technical skill level;

Specifically, for some production bases serving national defense or export (mechanical, sewing, etc.), if they need to hire more than 10% of the total number of cooperative members due to urgent plan completion requirements within a short time, and if confirmed by the supervising agency, then the deduction of wages for the entire period as mentioned above for all hired workers is allowed;

The formula for calculating the number of exemption quotas is as follows:

Calculating each unit of labor as 25 days per month ensures strict labor management and encourages rational labor utilization in production cooperatives;

For rural handicraft cooperatives, the calculation of exemption deductions is more complex because the production time for handicrafts is not continuous but interspersed with agricultural production, so it can be based on the quota of products compared to the value of the cooperative's labor day, and calculate the number of labor days, and from there calculate the number of exemption quotas deducted;

Attached to this circular is guidance on applying the exemption rates;

Ancillary income

Ancillary income includes the following items:

- Revenue from selling scrap materials and by-products;

- Surplus revenue from selling fixed assets after full depreciation, and from selling low-value consumables after full allocation to production costs;

- Interest income from bank deposits;

- Surplus revenue from transferring raw materials, fuels, and materials to other production establishments;

- Rent income from houses and workshops (if any);

- Other ancillary income from sideline businesses, such as transporting a single trip, performing repair work, etc.;

b) Quarterly or semi-annual profit tax must be calculated based on the average taxable income per cooperative member, converted to an annual figure, and apply the appropriate progressive tax rate listed in the tax table;

Taxation is applied to the excess income portion;

Cooperatives that have excess income due to technological improvements, production rationalization leading to increased labor productivity, or improved management resulting in savings on raw materials, fuels, and materials, preventing waste and embezzlement, or increasing labor intensity, shall still be subject to the normal tax rate (22%) for corporate profit tax on the excess income;

Cooperatives that have excess income due to improper business practices, such as purchasing old raw materials at low prices but selling them to the state at high prices, knowing inaccurate pricing or processing formulas set by enterprises or agencies but not reporting them for correction due to personal gain, or selling goods to the market at high prices, etc., shall be subject to a tax rate of 22% plus an additional percentage ranging from 6% to 15%, determined by the provincial or city administrative committee for each production establishment upon recommendation by the revenue collection agency. The provincial or city administrative committee may delegate the county, town, or district administrative committee to examine and decide on these additional percentages;

Determining the additional tax rate must be based on three factors:

- The amount of excess income, whether large or small;

- The profit margin, whether high or low compared to cooperatives in the same trade;

- Business attitude;

c) Cases of reduction or exemption from corporate profit tax;

- Reduction of corporate profit tax for cooperatives that purchase machinery, tools, and construct production workshops;

In order to encourage the enhancement of technical equipment for industries that need to advance towards mechanization and semi-mechanization, the tax regulations stipulate that cooperatives that actually purchase machinery, tools, and construct production workshops can deduct a portion of their corporate profit tax to fund accumulation. This tax reduction varies by industry and the organizational level of the cooperative. When considering deductions, two cases should be distinguished:

- The case where the cooperative implements the current year's equipment plan;

- The case where the previous year's equipment plan was not completed, and the cooperative must carry it over to the current year, and if the existing accumulation fund is insufficient to cover the costs.

The highest tax reduction rate for each case is set as follows:

Only officially recognized cooperatives shall enjoy the above tax reduction provisions.

Collection agencies should urge management agencies to guide cooperatives to incorporate equipment purchases, machine acquisitions, and production building constructions into their plans. However, the basis for calculating the amount of tax reduction is not the planned estimate but the actual expenditure in each settlement period; therefore, generally, the tax reduction mentioned here should only be implemented during income tax payment periods.

The classification of cooperatives as high-level or medium-level for determining the tax reduction rate is decided by the provincial or municipal administrative committee upon the proposal of the industrial management agency and the collection agency.

- Exemption of corporate income tax for cases producing with scrap materials, waste products, and substitute raw materials.

To encourage cooperatives to save raw materials and fully utilize self-reliance spirit without relying on state-provided raw materials, cooperatives that apply scrap materials, waste products to produce additional goods, and those using locally sourced raw materials to replace imported raw materials or those provided by the state to produce products shall be exempted from tax on the profit generated from using scrap materials, waste products, or substitute raw materials. The exemption period is one year from the date of sale of products made from scrap materials, waste products, or substitute raw materials.

The issue of using scrap materials, waste products, and substitute raw materials is quite complex. It is necessary to base regulations on actual conditions. It is recommended that localities report to the Ministry cases where cooperatives produce with scrap materials, waste products, and substitute raw materials, so the Ministry can compile the situation, study, and promulgate necessary regulations as a basis for the aforementioned tax exemption.

- Reduction or exemption of corporate income tax for cooperatives relocating facilities.

In order to contribute to encouraging the redistribution of productive forces and the establishment of new economic zones, the charter stipulates that cooperatives relocating facilities according to local government guidance, if they encounter difficulties in production and reduced income at the new location, may be considered for a reduction in corporate income tax for a period of three months to one year by the provincial or municipal administrative committee (or authorized authority) based on the collection agency's recommendation. If difficulties persist, they may be further considered for a reduction in tax for another period of three months to one year. The reduction rates for corporate income tax are as follows:

- Relocation to mountainous areas and regions with many difficulties: reduce corporate income tax by 25% to 50%;

- Relocation to other locations: reduce corporate income tax by 10% to 20%.

For special difficult cases, the provincial or municipal administrative committee (or authorized authority) may consider a full exemption of corporate income tax for the aforementioned period. This applies to both cases:

a) Relocation of facilities according to local government economic relocation planning;

b) Relocation due to air defense evacuation requirements, according to local government plans.

In both cases, cooperatives will only be considered for tax reduction if production encounters difficulties and income decreases due to objective circumstances. Objective circumstances referred to here include labor productivity decline compared to before, temporary raw material supply difficulties caused by relocation, lack of electricity and water, overall cooperative income decrease by at least 25% compared to before relocation, due to the new location being cramped and unfavorable for production, increased transportation costs, and storage costs.

If the decrease in cooperative income is due to subjective faults of the cooperative, such as lax labor management, inadequate ideological leadership, members not actively participating in production and taking advantage of the situation to engage in trade, then the cooperative shall not benefit from tax reduction or exemption.

- Tax reduction for war invalids participating in production in handicraft, transport, architectural cooperatives...

For war invalids' production facilities, adequate consideration is needed, while encouraging small-scale industrial, handicraft, transport, and architectural cooperatives to recruit war invalids to participate in production. Therefore, the charter stipulates:

- War invalids participating in production in cooperatives are exempt from corporate income tax on their own portion. The exempted tax portion must be returned to the war invalid by the cooperative.

- Cooperatives with 10% or more of their members being war invalids shall have their corporate income tax reduced proportionally, calculated based on the remaining tax after deducting the individual exemption for war invalid members. If a cooperative has 70% or more of its members as war invalids, it shall be exempt from all corporate income tax payable (after deducting the individual exemption for war invalid members). The corporate income tax reduced or exempted must be allocated to the cooperative's reserve fund.

This provision aims to encourage war invalids to participate in production industries. War invalids participating in service, food and beverage, and commerce industries are not covered by this support.

- The time for tax reduction.

The deduction of income tax is not done monthly but only during tax payment periods following each business settlement period of cooperatives. However, if it is determined that the cooperative is facing difficulties, with reduced income, or if the cooperative is in a situation where a large percentage of tax reduction is applicable, when calculating the provisional monthly tax, the tax collection agency should take into account the specific situation of the cooperative to estimate the provisional monthly amount accurately, thereby reducing the difficulties for the cooperative while also avoiding the need to refund taxes at the end of the payment period.

- Cases involving agricultural cooperatives, salt-making cooperatives, and fishing cooperatives engaging in additional businesses.

The income tax regulations distinguish between agricultural cooperatives, salt-making cooperatives, and fishing cooperatives that engage in additional small-scale industrial, handicraft, transportation, construction, or agricultural businesses not subject to agricultural tax, which must pay corporate income tax on the additional business portion at the lowest rate specified in the tax table, which is 8%. If they engage in other businesses such as services, food and beverage, and commerce, they must pay income tax like other cooperatives engaged in these businesses according to the tax tables mentioned in Articles 24 and 27 of the regulations.

Agricultural cooperatives, salt-making cooperatives, and fishing cooperatives that additionally engage in small-scale industry, handicraft, transportation, construction, and agricultural businesses not subject to agricultural tax are entitled to provisions regarding exemption quotas, tax deductions in cases where they have technical equipment and produce from waste materials, and exemption of income tax for war invalid members participating in production. If the number of war invalid members constitutes 10% or more of the total number of members in the small-scale industrial, handicraft, transportation, and construction production units, the cooperative will also be eligible for tax deductions at a corresponding rate.

Agricultural cooperatives, salt-making cooperatives, and fishing cooperatives with industrial production bases are exempt from corporate income tax on handicraft products exempted from corporate tax as stipulated in Article 9 of the commercial and industrial tax regulations.

2. Individual Businesses

Individual households producing handicrafts, engaging in transportation, construction, and agricultural businesses not subject to agricultural tax, pay corporate income tax as explained in Part B above.

Individual households producing handicrafts, engaging in transportation, and construction are allowed to deduct one exemption quota for each person actually participating in production and serving as the main labor force, and half (1/2) of an exemption quota for each auxiliary worker actually participating in production.

The taxable income of individual households engaged in the aforementioned businesses is the total household income, not averaged per person involved in production. Households with annual income exceeding 1,600đ must pay an additional percentage ranging from 6% to 15%, as decided by the provincial or municipal administrative committee (or authorized authority), based on the recommendation of the tax collection agencies, for the excess income.

Corporate income tax for individual households is collected monthly and simultaneously with the final year-end business tax, without further refunds. Calculation methods are guided by the State-Owned Enterprise Tax and Commercial and Industrial Tax Bureau.

Production establishments, although named as production groups or production associations, if in reality operate as individual businesses, must pay corporate income tax as individual households.

II. FOR THE FOOD AND BEVERAGE AND SERVICE INDUSTRY

1. Individual Businesses

a) The taxable income of individual households operating in the food and beverage and service industries is: sales revenue or service revenue minus (-) the cost of goods purchased or fuel and material costs, business expenses, and exemption quotas, plus (+) incidental income (if any).

The cost of goods includes the purchase price and transportation costs from the purchasing location to the store..

Business expenses include rent or seat fees, electricity and water charges, oil and lamp expenses, bookkeeping supplies, repair and equipment purchase costs for business use, business tax, and other expenses recognized by the tax collection agency.

The tax collection agency needs to organize the tracking of the purchase volume of individual households to ensure the ability to verify cost and revenue. It is necessary to establish a system for all individual businesses, if they cannot maintain accounting records, at least they must keep sufficient purchase receipts for the convenience of tax inspection by the tax collection agency.

Exemption Quotas

Individual households are allowed to deduct a certain number of exemption quotas for the registered business owner. For some households in essential trades requiring family assistance, the tax collection agency may consider additional deductions of up to half (1/2) or one exemption quota.

For individual households hiring workers and paying wages under master-apprentice relations, the tax collection agency must report to the Administrative Committee for review, and when calculating taxes, only one exemption quota is deducted for the household head, and wage payments to hired workers are not deductible. In exceptional cases, with local government approval, an additional exemption quota may be deducted when calculating taxable income.

b) The calculation of corporate income tax for individual households must be based on the total household income, not averaged per person involved in business operations (as with cooperatives).

Individual households operating in the food and beverage and service industries pay corporate income tax according to the tax schedule set out in Article 24 of the commercial and industrial tax regulations.

Households with average annual income exceeding 1,500đ must pay an additional percentage ranging from 8% to 18% on the excess income regardless of the reason for the excess income. The additional rate is determined by the tax collection agency based on two factors: the extent of the excess income and the profit margin, and proposed to the provincial or municipal administrative committee (or authorized authority) for decision on a case-by-case basis.

c) Individuals owning houses and land who lease them in cities and towns with taxable income exceeding the tax-exempt threshold set for the service industry, that is, over 28 dong per month in Hanoi and Haiphong, and over 26 dong per month in other cities and towns, must pay income tax at the same rate as other business operators in the service industry.

2. Cooperative Groups

To differentiate cooperative groups from individual households, Article 25 of the regulations stipulates that cooperative groups engaged in the food service and service industries shall pay income tax based on the average taxable income of members actually participating in business operations, according to the tax schedule applicable to individual households, minus (-) 5%.

Cooperative groups are entitled to deduct one tax-exempt allowance for each member directly involved in business operations. The formula for calculating the number of exemptions is as follows:

Cooperative groups with an average member income exceeding 1,500 dong per year must pay an additional 8% to 18% on the excess income. The additional tax rate is proposed by the revenue collection agency and decided upon by the provincial or municipal administrative committee (or authorized authority) for each group.

Cooperative groups used by state trading enterprises or cooperative buying and selling organizations, if they purchase stalls, cabinets, or repair shops, may have their income tax reduced by a percentage equal to the ratio of expenses incurred to taxable income, but the reduction amount cannot exceed 10% of the income tax payable.

Income tax for cooperative groups and individual households engaged in the food service and service industries is collected monthly along with business tax, with no annual settlement. The calculation method is guided by the State Revenue Bureau and the Commerce and Industry Tax Bureau.

III. FOR THE TRADING INDUSTRY

The determination of taxable income and the calculation of income tax for individual households and cooperative groups engaged in the trading industry are similar to those for households and cooperative groups engaged in the service and food service industries. However, note the following two points:

- Regarding the tax-exempt allowance, regardless of how individual households organize their trading activities, they are only entitled to one exemption.

- Individual households with an annual income (or cooperative groups with an average member income of more than 1,400 dong per year) must pay an additional 10% to 20% on the excess income, regardless of the cause. The additional tax rate is proposed by the revenue collection agency and decided upon by the provincial or municipal administrative committee (or authorized authority) for each case.

For cooperative groups engaged in the food service and trading industries with craft production, livestock farming, or crop cultivation departments.

To encourage cooperative groups engaged in the food service and trading industries to shift towards production, the tax policy provides that such cooperative groups, if they have small-scale industrial or craft production departments, or agricultural business departments not subject to agricultural tax, will be exempt from income tax on these business departments for one year from the date of product sales. After this period, if the production department still faces difficulties, the provincial or municipal administrative committee (or authorized authority) may consider extending the tax exemption for another year, but not exceeding one year.

Upon expiration of the tax exemption period, the cooperative group must pay tax on the income from the production department, but this income is taxed separately according to the tax schedule specified in Article 16, rather than being combined with the income from the trading or food service business departments for joint taxation.

If the production department of the cooperative group purchases production equipment, it can deduct a portion of the income tax to fund a reserve fund. The deduction rate equals the ratio of expenses incurred to taxable income, but the reduction amount cannot exceed 10% of the income tax payable.

D. REPORTING PROCEDURES

Cooperatives must maintain accounting records in accordance with the state's regulations, and must settle profits and losses every three or six months.

Within ten days at the beginning of the month following each business settlement period, cooperatives must submit tax declaration forms and business settlement documents to the revenue collection agency, as directed by the Revenue Bureau.

Cooperatives must pay taxes within five days after receiving the tax payment notice from the revenue collection agency.

In cases of merger, division, or cessation of operations, cooperatives must report to the revenue collection agency, settle profits and losses for the actual operating period, submit tax declaration forms for the operating period to the revenue collection agency, and pay taxes before ceasing operations or transferring to a new organization.

The revenue collection agency is responsible for urging cooperatives to submit declarations on time, reviewing declarations, calculating taxes, and issuing timely tax payment notices. All these tasks must be completed promptly within the month following the settlement, without delay.

For individual business operators, the revenue collection agency calculates and collects income tax monthly based on declared revenue or fixed revenue and the average profit margin of each trade.

E. EFFECTIVE DATE

For small-scale industrial, craft, transportation, construction, and agricultural businesses not subject to agricultural tax, corporate income tax will be implemented according to the new regulations starting January 1, 1966.

If the tax calculated under the new regulations for cooperatives shows a sudden increase compared to the old regulations, and there is a sudden change in the cooperative's income, the provincial or municipal administrative committee (or authorized authority) may consider reducing the tax to avoid significant impact on the cooperative's income, facilitating stable production and business operations.

For other business entities (cooperative groups and individual households paying income tax concurrently with business tax under the monthly final settlement system), income tax will be collected according to the new regulations concurrently with the new business tax, based on the revenue of February 1966, as instructed in Circular No. 11-TC/TQD dated February 2, 1966, issued by the Ministry of Finance.

Pursuant to the business tax ordinance of the National Assembly and this explanatory circular, the State Revenue and Business Tax Department is responsible for guiding collection agencies on specific methods for calculating corporate income tax.