Circular No. 75/A-TC-TCT guiding the implementation of Decree No. 57-CP dated August 28, 1990 of the Government detailing the implementation of the Law on Income Tax and the Law amending and supplementing certain articles of the Law on Income Tax.

CIRCULAR

OF THE MINISTRY OF FINANCE

Guidelines for Implementing Decree No. 57-CP dated August 28, 1993 of the Government 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

Pursuant to the Law on Corporate Income Tax adopted by the National Assembly, Eighth Session, on June 30, 1990; the Law Amending and Supplementing Certain Provisions of the Law on Corporate Income Tax adopted by the National Assembly, Ninth Session, on July 6, 1993;

Pursuant to Decree No. 57/CP dated August 28, 1993 of the Government 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;

The Ministry of Finance hereby provides guidance as follows:

 

I. SCOPE OF APPLICATION OF CORPORATE INCOME TAX

1. Taxpayers.

According to Article 1 of the Law on Corporate Income Tax, all organizations and individuals conducting independent economic accounting belonging to all forms of ownership that have income from business activities within the territory of Vietnam must pay corporate income tax;

In cases where dependent units (subordinate to an independent economic accounting enterprise) can conduct full accounting, determine their own revenue, costs, and profits, these units may be taxpayers of corporate income tax;

Units with nationwide accounting systems that engage in production and business activities in different localities must declare and pay corporate income tax to the local tax authority regarding the taxable profit generated from other production and business activities;

Public service units and units operating with state budget funds, if they engage in business activities, must separately account for the results of such business activities and pay corporate income tax;

Where a business establishment implements a lump-sum system for collectives or individuals through capital, goods, etc., provided to the recipient and sets a fixed amount to be paid periodically (for example, a retail store assigns a salesperson to sell mobile stalls and requires them to pay a certain amount monthly), the recipient must pay turnover tax and corporate income tax at the applicable rate for the trade. The lump-sum payment is recorded as income of the assigning entity and aggregated into total income to determine taxable profit.

Non-taxpayers of corporate income tax:

According to Article 2 of the Law on Corporate Income Tax, business activities not subject to tax include:

Enterprises established and operating under the Law on Foreign Investment in Vietnam shall pay corporate income tax according to Article 26 of the Law on Foreign Investment in Vietnam.

Agricultural production activities of agricultural cooperatives, production groups, and individual farmers (household farmers) are subject to agricultural tax or land use tax for agriculture.

2. Taxable Objects:

The taxable object of corporate income tax includes income derived from processing, manufacturing, construction, transportation, state-owned farms, state-owned stations, commercial catering, various services, and other business activities of organizations and individuals as stipulated in Article 1 of the Law on Corporate Income Tax.

Taxable income includes: Basic and non-basic business income, income from leasing fixed assets; income from liquidation of fixed assets, income from transferring assets, transferring shares; share income; income from financial transactions, joint ventures, and economic cooperation.

 

II. BASIS FOR CALCULATING INCOME TAX

The basis for calculating corporate income tax as prescribed in Article 6 of the Law on Corporate Income Tax is the total annual taxable income and the tax rate.

1. Total annual taxable income.

Total annual taxable income (calculated based on the Gregorian calendar year) includes basic and non-basic business income, other income, and is determined as follows:

Taxable income = [Revenue - Reasonable and legitimate expenses - Other taxes except corporate income tax] + Other income

2. Revenue for calculating taxable income:

Revenue for calculating taxable income as prescribed in Article 2 of Decree No. 57-CP dated August 28, 1993 of the Government 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, is the total amount from selling goods, processing fees, commissions, service charges, and other receipts not yet reduced by any cost of the business during the tax period and is determined in accordance with the characteristics of each industry and business activity, as stipulated in Article 3 of Decree No. 55-CP dated August 28, 1993 of the Government detailing the implementation of the Law on Turnover Tax and the Law Amending and Supplementing Certain Provisions of the Law on Turnover Tax, and Section I/B of Circular No. 73A TC/TCT dated August 30, 1993 of the Ministry of Finance guiding turnover tax.

For products subject to special consumption tax, revenue for calculating taxable income is the sales revenue including special consumption tax.

3. Reasonable and legitimate expenses for calculating taxable income.

According to Article 9 of the Law on Corporate Income Tax and Article 4 of Decree No. 57-CP dated August 28, 1993 of the Government, reasonable and legitimate expenses are determined as follows:

a) Depreciation expense of fixed assets:

The value of fixed assets serving as the basis for depreciation is the actual purchase price plus (+) installation, transportation, and storage costs (if any).

For fixed assets of state-owned enterprises, the original cost is determined in accordance with current regulations on the preservation of capital.

Basic depreciation rate: Implemented according to the ratio specified in Decision No. 507 TC-ĐTXD dated July 22, 1986, and current regulations of the Ministry of Finance.

In cases where enterprises face difficulties in production and business operations, fixed assets are not fully utilized, and there are losses, the provincial tax bureaus may consider reducing the basic depreciation rate but must ensure the principle:

The reduction corresponds to the actual capacity utilization of fixed assets but does not exceed 50% of the rate specified in Decision No. 507 TC-ĐTXD and does not exceed the loss incurred in the year.

Processing the reduction of the basic depreciation rate before applying for exemption or reduction of state budget revenue usage.

In cases where enterprises invest in purchasing fixed assets with borrowed funds, operate effectively, and need to increase the basic depreciation rate to quickly repay borrowed funds according to agreements, the tax authority will consider processing the request to increase the basic depreciation rate of fixed assets invested with borrowed funds but must ensure the principle:

Must pay sufficient indirect taxes (turnover tax, special consumption tax) annually and not incur capital losses;

A business lacks funds to repay maturing debts after mobilizing its own capital sources (capital for basic construction investment, production and business development fund...);

The amount of additional depreciation not exceed the outstanding loan repayment amount and the recovery period of the basic depreciation must be no shorter than the loan repayment period stipulated in the loan agreement.

Based on the above principles, enterprises must submit a detailed explanatory letter with a written request from the local Tax Department for the Ministry of Finance (General Department of Taxation) to agree in writing on each specific case. The decision to increase the basic depreciation rate will be made upon submission of the annual settlement report.

Fixed assets that have been fully depreciated but are still in use shall continue to be depreciated to accurately reflect costs, but the amount of depreciation shall not exceed the ratio prescribed in Decision No. 507 TC/ĐTXD and shall not be included in costs to determine taxable income.

Rate of major repair depreciation:

Major repair depreciation expenses included in reasonable and legitimate costs are the actual reasonable expenses incurred for major repairs of fixed assets during the period, including:

Outsourced major repairs are calculated based on the actual payment amount according to the contract with the contractor;

Self-performed major repairs are calculated based on the actual reasonable expenses incurred.

For certain special industries where fixed assets require periodic major repairs, enterprises may pre-deduct major repair depreciation expenses from production and business costs, but such expenses must be used solely for major repairs of fixed assets and not for expansion investments or deepening investments. The maximum pre-deduction rate for major repair depreciation shall not exceed the ratio prescribed in Decision No. 507 TC/ĐTXD dated July 22, 1986 of the Ministry of Finance. Local tax authorities shall examine and decide on each specific case.

b) Raw material, material, fuel, energy costs (collectively referred to as material costs):

Material costs are only counted for materials directly related to the production and business operations and forming taxable income during the tax year.

Material consumption quota: This is the actual reasonable consumption quota based on the quotas prescribed by the State or competent authorities. In cases where there are no quotas, the basis shall be the actual quotas of previous years and linked to material savings for consideration.

Material cost price: The material cost price is the actual purchase price, transportation, loading and unloading, procurement, processing, manufacturing costs..., import tax for imported materials (if applicable). For inventory materials, their value can be reassessed whenever there is a price change in accordance with regulations. For self-manufactured materials, the cost is calculated based on the actual reasonable production costs.

During the use of materials, if scrap is recovered, the recovered scrap shall be accounted for as a reduction in material costs at either the selling price or the assessed value at the time of recovery.

Rewards for material procurement and extraction shall not be included in material costs.

For the trade and catering industry, the purchase price of goods sold is considered part of material costs. However, transportation, loading and unloading, procurement, and storage costs shall not be included in the purchase price.

c) Labor and wage costs:

Labor and wage costs are calculated based on the number of employees of the enterprise and the current wage scale and allowances (if any), tied to the production and business results of the enterprise.

Employees of the enterprise include those within the establishment, short-term and long-term contracts, seasonal workers participating in production and business activities generating taxable income during the tax year;

Enterprises paying wages based on unit labor prices, revenue, or production and business performance must base the unit labor price on the current wage system;

For products and services managed by the State, the unit labor price is set by the State.

For other products and services, the unit labor price is established by the enterprise based on the current wage system.

All unit labor prices serving as the basis for calculating costs to determine taxable income must be registered with the direct tax management authority;

Any wage expenses outside the system and beyond reasonable unit prices shall not be included in costs to determine taxable income;

For non-state economic organizations (cooperatives, production groups, private enterprises, individual households, joint-stock companies), labor and wage costs of employees are calculated based on the unit labor price and product wage rates and agreements between employees and enterprises.

To ensure fairness and reasonableness, provincial and municipal tax bureaus may base the labor and wage standards applied to state-owned enterprises and market conditions to establish wage standards for each industry and profession, to be decided by the Provincial People's Committee in specific periods.

Determining labor and wage costs deductible for calculating taxable income must adhere to the principle: The increase rate of the wage fund must be lower than the increase rate of realized income.

Private household business owners enjoy all income derived from business operations after deducting reasonable and legitimate expenses and paying taxes as prescribed (including income tax). Therefore, labor and wage costs for private household business owners are not recognized as costs when calculating taxable income.

d) Other deductible costs recognized as reasonable and legitimate, including those specified in Article 9 of the Income Tax Law and Point 5, Clause 4 of Decree No. 57-CP dated August 28, 1993 and current State regulations, specifically:

Management costs include general expenses such as administrative management costs, labor protection costs, recruitment and training costs, interest on loans including deepening investment loans calculated at the lending rate prescribed by the State Bank;

Costs for purchasing and paying for the use of technical documents, patents, technology transfer licenses, and technical services (not classified as fixed assets) are allocated gradually over time as business expenses.

Direct expenses related to the consumption of products or provision of services generating taxable income for the tax period such as packaging costs, finished product storage costs, transportation and handling fees, advertising and promotional expenses, and product consumption in accordance with general regulations;

Expenses for insurance funds under the unified regime of the State such as social insurance, property insurance for business establishments, health insurance as stipulated in Circular No. 12/TTLT-BTC-BYT-BLDT dated September 18, 1992 issued jointly by the Ministry of Finance, Ministry of Health, and Ministry of Labor, War Invalids and Social Affairs;

Various taxes payable such as turnover tax, special consumption tax, resource tax, revenue from capital usage, various fees... related to determining taxable income for the tax period;

Annual contribution payments;

e) Other expenses not mentioned above such as hospitality, ceremonial, transactional, and external communication expenses directly related to the production and business process calculated based on actual reasonable costs, but the maximum level of expenditure shall not exceed 5% of total expenses;

All expenses specified in points a, b, c, d, and e above must be supported by valid receipts and invoices. For agricultural, forestry, and marine products... purchased directly from producers who do not have invoices, a purchase list must be established detailing the name, address of the seller, quantity, unit price, and total amount;

4. The following items shall not be included in business expenses for determining taxable income or shall not be deducted from taxable income:

Interest payments on overdue bank loans and interest payments on borrowed funds from other entities exceeding the interest rate prescribed by the State Bank;

Capital preservation amounts higher than the actual required level;

Product damage losses exceeding the quota set by the State for certain industries (casting, glass...);

Production stoppage losses due to external causes, self-caused reasons, natural disasters, unexpected accidents; losses of assets, materials, and capital due to inability to identify responsible parties for material compensation such as losses in settlement of debts;

Losses caused by individual responsibility;

Costs for subsidizing monthly ticket purchases for staff and employees, travel expenses for annual leave;

Fine payments: fines for violations of economic contracts, reporting systems, business registration, tax declaration, delayed tax payment, false declarations, hidden taxes, violations of invoice and receipt systems...;

Training expenses not included in approved plans;

Costs covered by other sources of funding;

Costs for staff and employee sightseeing and vacation;

Costs for collective dining halls;

Regular and emergency hardship allowances;

Construction investment costs, costs for experts serving construction projects;

Support costs for localities, organizations, social groups...;

Uniform costs exceeding the prescribed standards;

Lunch expenses;

Bonuses and other types of bonuses;

Other losses outside those specified in point d, Article 13 of Decree No. 57-CP dated August 28, 1993 issued by the Government;

5. Determine other income items for calculating taxable income;

Other income of business establishments includes bank deposit interest, loan interest (excluding banks, credit institutions, financial institutions), income from asset leasing, proceeds from asset liquidation, transfer, share transfer (excluding real estate businesses, stocks, bonds), income from share contributions, financial activities, and joint venture and associated enterprise activities;

Specifically, income derived from joint venture and associated enterprise activities is handled as follows:

a) In cases where enterprises contribute capital to establish domestic joint ventures in the form of joint-stock companies or limited liability companies, and have paid corporate income tax at the receiving joint venture unit, the portion of income distributed from joint ventures according to the contributed capital does not count towards the taxable income of the enterprise, but enterprises must record and declare it as income of the enterprise;

b) In cases where domestic enterprises (organizations, individuals) jointly venture with foreign organizations or individuals under the form of business cooperation contracts as stipulated in Articles 8 and 17 of Decree No. 18-CP dated April 15, 1993 issued by the Government to detail the implementation of the Law on Foreign Investment in Vietnam, the income distributed to the Vietnamese side is counted towards the taxable income of the enterprise and taxed at the applicable tax rate for the industry of the joint venture activity as stipulated in Article 15 of Decree No. 57-CP dated August 28, 1993 issued by the Government;

In cases where domestic economic organizations or individuals jointly venture with each other under contractual forms, the income derived from joint venture activities must be taxed at the applicable tax rate for the industry of the joint venture activity. The receiving party of the joint venture has the responsibility to declare and pay the corporate income tax. After paying the corporate income tax, the distributed income does not count towards the taxable income, but must be recorded and declared as income;

If the joint venture contract is implemented in the form of profit sharing, the portion of the shared profit that has not been taxed must be declared and taxed by the entity;

Enterprises engaged in joint venture and associated enterprise activities must report and provide all relevant documents to the tax authority such as joint venture contracts, reconciliation statements, and confirmation from the local tax authority regarding the tax already paid, then the distributed income does not count towards the taxable income;

c) For enterprises engaged in consignment sales, agency sales, and entrusted sales activities, the handling of corporate income tax for consigned goods, entrusted goods, and agency sales is as follows:

Domestic organizations and individuals registered for business who send goods for consignment, entrustment accompanied by invoices or invoices combined with warehouse release forms, the income from consigned goods and entrusted goods is counted towards the income of the organization sending the goods for consignment and entrustment to determine taxable income.

Domestic organizations and individuals that are not enterprises and have goods for consignment or agency sale without invoices or warehouse release certificates, and who are not required to declare income tax, shall have the receiving party responsible for paying the income tax on behalf of the consignor or agent.

For foreign organizations and individuals with goods for consignment or agency sale, the income tax on such goods shall be handled specifically as follows:

If the foreign organizations and individuals belong to countries that have signed double taxation avoidance agreements with Vietnam, the payment of income tax shall be carried out according to the provisions regarding income tax in those agreements.

If the foreign organizations and individuals belong to countries that have not signed double taxation avoidance agreements with Vietnam, the Vietnamese receiving party shall pay the income tax on behalf of the consignor or agent.

The income tax paid by the consignee, agent, or sales representative on behalf of the consignor, agent, or sales representative shall be uniformly calculated at a rate of 3% on the actual selling price minus commission fees for consignment or agency.

The substitute tax paid may be deducted from the proceeds of the consignment or agency sale.

6. Tax rate for income tax.

a) The stable tax rate for income tax prescribed in Article 5 of Decree No. 57-CP dated August 28, 1993, issued by the Government detailing the implementation of the Income Tax Law and amendments to certain provisions of the Income Tax Law, shall be applied as follows:

The taxpayers subject to income tax at a stable rate on taxable income throughout the year for each industry group include business establishments that can determine their taxable income (excluding small traders and itinerant traders).

The tax rate specified in point a, Article 5 of Decree 57-CP dated August 28, 1993.

These taxpayers subject to income tax under Article 5 above shall classify their industries based on the national economic classification table issued by the General Statistics Office.

Repair activities involving industrial work such as vehicle and machinery repair should be classified according to the nature of the activity into corresponding industrial sectors.

Example: Repairing ships and automobiles would be classified under the production of transportation equipment at a tax rate of 25%.

Repair activities serving consumption needs such as household electrical repairs, electronic appliance repairs, bicycle and motorcycle repairs apply a 45% service tax rate.

Other income shall be taxed at the tax rate applicable to the primary business activity. In cases where multiple tax rates apply to the primary business activity, other income shall be taxed at the highest tax rate among the industries generating the highest proportion of taxable income.

Business establishments operating in multiple industries with different tax rates must separately account for the taxable income of each industry and apply the income tax rate specific to each industry. If a business establishment cannot separately account for the taxable income of each industry, the highest tax rate applicable to the industry generating the most taxable income shall be applied to the total taxable income of the establishment.

b) Additional tax rate for income tax.

According to Article 6 of Decree No. 57-CP dated August 28, 1993, issued by the Government, business establishments, in addition to paying income tax at the stable tax rate mentioned above, if they have taxable income exceeding the specified level, must also pay additional income tax as follows:

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

Non-state economic organizations such as joint-stock companies, limited liability companies, collective economic entities, etc., if their average monthly taxable income per capita exceeds 10 million VND, must pay additional income tax at a rate of 25% on the portion of taxable income exceeding 10 million VND.

Example: Joint-Stock Company X in the textile industry has a charter capital of 2 billion VND divided into 100 shares, with 10 shareholders each holding an equal number of shares, and its taxable income for the year is 1.8 billion VND.

+ Income tax payable at the stable rate:

1.8 billion VND x 35% = 630 million VND.

+ Portion of taxable income not subject to additional income tax: 10 million VND x 12 months x 10 shareholders = 1.2 billion VND.

+ Additional income tax payable:

(1.8 billion VND - 1.2 billion VND) x 25% = 150 million VND.

+ Total income tax payable by Company X:

630 million VND + 150 million VND = 780 million VND.

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 paying the stable tax rate for the industry and setting aside three funds as stipulated by the Government (Promotion Fund for Production and Business Development, Welfare Fund, Reward Fund).

+ Enterprises with objective advantages are those with favorable conditions in business operations compared to other enterprises, such as being in advantageous locations, providing raw materials, supplies, product sales, service provision; receiving state investment, capital support, priority in technical equipment, operating in less competitive industries, etc.

+ Each year, based on the conditions and production and business performance of the enterprise, the Provincial Tax Departments will identify enterprises required to pay additional income tax and specify the amount.

+ The additional income tax rates are applied as follows:

* A tax rate of 30% applies to industries such as resource extraction, production, construction, and transportation;

* A tax rate of 40% applies to trade, catering, and various services;

+ Business establishments applying additional income tax shall use a single tax rate. In cases where a business establishment operates in multiple industries, the additional income tax rate shall be determined based on the industry generating the highest taxable income.

+ Basis for determining supplementary income tax:

* The levels of the three enterprise funds that serve as the basis for determining additional taxable income for supplementary income tax are defined as follows:

The Promotion Fund for Production and Business Development is calculated at 35% of the remaining taxable income after deducting the income tax calculated at the stable rate.

Welfare Fund and Reward Fund: Each fund is calculated based on six months of the actual average salary level of the enterprise according to the wage system stipulated by the Government in Decree No. 26-CP dated May 23, 1993.

In cases where business establishments are allowed to allocate specialized funds such as the supplementary capital reserve fund, risk prevention fund..., the source for allocation shall be from the remaining profit after paying corporate income tax and additional corporate income tax.

+ Dividend distribution from remaining profit after paying income tax at the fixed rate and supplementary income tax rate.

Example: Enterprise X has taxable income as follows:

The total reasonable annual average wage fund according to regulations: 864 million.

CIT at a stable tax rate: 1,219.5 million - enterprise funds [(2,750 million - 1,219.5 million) * 35%] + 864 million = 1,399.6 million.

Additional income tax payable (at the rate for trade and services).

(2,750 million - 1,219.5 million - 1,399.6 million) x 40% = 52.4 million.

Total CIT payable

1,219.5 million + 52.4 million = 1,271.9 million.

Additional CIT is determined when there is an official settlement of the entire year's results and must be paid once within twenty days from the date of receipt of the notification from the tax authority.

c) The taxpayers subject to CIT under a fixed tax rate based on revenue are individual traders and small private businesses as stipulated in Clauses 1, 2, and 3 of Article 11 of the Law on Corporate Income Tax.

The monthly average turnover subject to the fixed tax rate for small traders is determined by the tax authority based on the results of revenue surveys, with public and democratic discussions with the business establishments.

The turnover of itinerant traders is the value of each consignment calculated at wholesale prices prevailing at the market place of departure.

Those who are required to pay CIT under a fixed tax rate must also pay turnover tax according to the specific tax schedule prescribed for each type of business activity.

 

III. DECLARATION, PAYMENT OF INCOME TAX

1. Organizations and individuals engaged in business activities in various economic sectors must maintain accounting records in accordance with the Accounting and Statistics Regulation issued by the State Council pursuant to Decree No. 06/LCT-HĐNN dated May 20, 1988, and the Organizational Regulations of State Accounting issued by the Council of Ministers pursuant to Decision No. 25-HĐBT dated May 18, 1989, and other guiding decisions and circulars of the Ministry of Finance.

The basis for determining taxable income includes accounting documents, reports, and related materials of the business establishment that have been verified and confirmed as reasonable and valid by the tax authority in accordance with state regulations. If the business establishment fails to comply with the prescribed accounting system, the tax authority has the right to determine the taxable income, and in this case, the business establishment must pay the CIT according to the decision of the tax authority.

2. To ensure accurate calculation and payment of CIT in accordance with the prescribed regulations, the business establishment must declare fully and accurately and submit the declaration forms within the specified time limit as prescribed by the tax authority.

3. Organizations and individuals engaged in business activities not subject to fixed tax rates or periodic payments (monthly or quarterly) must file provisional CIT declarations according to the attached form and send them to the tax authority within ten days of the start of the following month. The period for tax payment is regulated by the directly managing tax authority.

The tax authority will verify, calculate, and notify the amount of CIT payable no later than the fifteenth day of the following month.

The business establishment is responsible for temporarily paying CIT monthly according to the tax authority's notification, no later than the twentieth day of the following month.

4. At the end of the year, upon final settlement, the business establishment must submit the CIT final declaration form according to the attached form to the tax authority no later than forty-five days after the end of the year. The tax authority is responsible for verifying, calculating, and issuing a notification of the total CIT payable for the year, the provisional CIT already paid, and the additional CIT still due from the business establishment. The business establishment must pay the full amount of additional CIT no later than fifteen days after receiving the tax authority's notification. In cases where the business establishment overpays CIT, the excess amount will be refunded in the following year by deducting it from the CIT payable for the next year.

5. Small traders and itinerant traders who pay CIT based on turnover must pay the tax definitively monthly or per consignment. There is no need for a final settlement at the end of the year with the tax authority.

Business establishments that cease operations, merge, split, or stop doing business must report and submit the final CIT declaration form to the tax authority before officially ceasing operations and must pay all due CIT according to Article 14 of the Law on Corporate Income Tax.

 

IV- EXEMPTIONS AND REDUCTIONS OF INCOME TAX

A- CASES OF INCOME TAX EXEMPTIONS

1. Elderly, disabled persons, small traders, sideline workers contributing to family economy... whose monthly income only ensures a minimum living standard for themselves (the minimum living standard is a monthly income of 90,000 dong per labor force directly involved in production and business).

2. Transportation activities using primitive means in mountainous areas such as bicycles, handcarts, hand-pulled carts, animal-drawn carts, rafts, and non-motorized boats.

3. New production facilities established and officially operating from 1993 are exempt from CIT for the first two years from the date they generate income.

Example: An enterprise officially operating from 1993, with losses in 1993, would be exempt from CIT for the years 1994 and 1995 if it made a profit in 1994.

4. Business establishments relocating from lowland to mountainous or island regions are exempt from CIT for the first three years from the date they commence operations in these regions, provided they have confirmation letters from both the departure and arrival locations and new business licenses issued by the authorities at the arrival location.

5. Scientific research activities and scientific and technological service contracts as stipulated in Points 1, 2, and 3 of Section I of Circular No. 55/TT-LB dated October 2, 1992, issued jointly by the Ministry of Finance and the State Science Council, and meeting the conditions set out in Points 1 and 2 of Section II of Circular No. 55/TT-LB. Only the income derived from implementing scientific contracts and scientific and technological service contracts is exempt from CIT. For business establishments engaging in both production and business activities and scientific research and technological services, separate accounting for the income of each activity is required.

6. Exemption from CIT for six months from the date of commencement of trial production for products produced under trial production as stipulated in Point 4 of Section I of Circular No. 55/TT-LB. Only the income generated from trial production products is exempt from CIT. Separate accounting for the income from trial production products is required.

Side occupations and family economies must meet the following conditions:

Family economy workers must be state employees on duty, cooperative members working additional hours outside the prescribed time of their agencies, factories, or collective units.

Those who work together must be parents, spouses, children beyond the working age, if they are relatives, they must also be beyond the working age and listed in the household registration.

The production and service activities of retired persons, if not individual or private economy, are considered family sideline economy.

In cases where one or more individuals within the working age are not state employees or cooperative members but are solely engaged in family economy for three years, they must switch to registering as individual business households.

B. CASES ELIGIBLE FOR REDUCED INCOME TAX

1. New production facilities established after being exempt from income tax for the first two years as stipulated in Point 3, Section A of Part IV above shall be granted a 50% reduction in the amount of income tax payable in the following two years.

Specifically, new production facilities established in difficult areas shall be granted a 50% reduction in the amount of income tax payable over the next four years.

2. Organizations and individuals operating in difficult areas may be eligible for a maximum 50% reduction in the amount of income tax payable, with the tax reduction period not exceeding two years.

3. Production facilities and certain other industries that require encouragement for investment, if they expand production and business operations or deepen investments resulting in higher efficiency than before, shall be eligible for reduced income tax.

The eligibility for reduced income tax for these production and business facilities must meet the following conditions:

They have actually spent funds on investment.

Investments must result in higher efficiency than before, reflected in the achieved income being higher than before.

The amount of reduced income tax equals the actual expenditure on reinvestment, excluding self-funded capital, i.e., it is equal to the difference between the total amount spent on reinvestment and the investment construction capital, development fund, and other self-funded capital; however, the maximum reduction cannot exceed 50% of the annual income tax payable and cannot exceed the additional income generated by the investment.

Income tax reduction will not be granted for expansion or deepening investments for entities already exempted or reduced income tax according to the provisions of Point 3, Point 4, Section A, Point 1, Point 2, Section B above, and those permitted to deduct higher depreciation rates for fixed assets than the prescribed rate.

To alleviate difficulties and encourage enterprises to expand and deepen investments with high economic efficiency, during the year under review, enterprises with investments can temporarily retain a portion of the income tax payable; the temporary retention of income tax does not exceed 30% of the planned annual income tax payable and does not exceed 50% of the additional income tax due to investment as per the economic justification.

The formal reduction of income tax for the facility under review is determined at the end of the fiscal year.

Example:

In 1993, the business entity invested 90 million VND in expanding production and business operations: Of which, 20 million VND was invested using the business entity's basic construction capital.

According to the approved economic justification, the additional income tax due to the investment's efficiency is 50 million VND per year.

The business entity was assigned a plan to pay 120 million VND in income tax in 1993.

The temporary reduction in income tax in 1993 is calculated as follows:

Actual investment expenditure for expanding production and business operations, excluding self-owned capital, is: 90 million - 20 million = 70 million VND;

The temporary reduction in income tax in 1993 is 25 million VND (equal to 50% of the additional income tax due to the investment's efficiency as per the approved economic justification and lower than 30% of the planned income tax payable in 1993).

By the end of 1993, based on the actual settlement, the additional income due to the investment's efficiency is 56 million VND. The total income tax payable for the entire year of 1993 is 130 million VND.

The actual income tax reduction for 1993 is 56 million VND.

4. Enterprises producing goods to replace imported goods according to the list published by the State Planning Commission are eligible for a maximum 50% reduction in the income tax payable for the goods replacing imported goods within one year from the start of production generating income.

The conditions for being considered for tax reduction are:

Products produced by enterprises listed in the "list of products to replace imported goods" published by the State Planning Commission during each period and while this list remains effective.

The enterprise begins producing such products after the publication date of the list of products to replace imported goods. Starting production includes cases where the enterprise previously produced or switched to producing other products for more than two years and now resumes production.

The enterprise strictly adheres to accounting records, invoices, and accurate profit calculations for products intended to replace imported goods, providing a basis for considering tax reduction on profits.

In special cases, there must be a written request from the People's Committee of the province or centrally-administered city, or from the relevant ministry, and it must be approved by the Government. The Ministry of Finance may consider reducing taxes on profits for specific cases.

The enterprise must submit a written report to the direct tax management authority, clearly explaining according to the aforementioned conditions to report to higher tax authorities for consideration of tax reduction on profits for the enterprise.

Difficult areas are those with harsh natural conditions, underdeveloped infrastructure, directly affecting production and business results and workers' income, only ensuring a minimum living standard equivalent to the national minimum wage.

Newly established production and business enterprises are those newly invested and constructed according to decisions of competent authorities and granted business registration certificates. Enterprises that were established earlier but have been reorganized, merged, or split into new enterprises, or old production enterprises that have been renamed or improved, expanded, or changed their product range are not considered newly established enterprises and are not eligible for tax reduction under this provision.

C. CASES ELIGIBLE FOR CARRYING FORWARD LOSSES TO THE FOLLOWING YEAR

Production and business enterprises encountering difficulties due to natural disasters, enemy attacks, accidents, unexpected risks, or objective and irresistible reasons resulting in losses, confirmed by the direct tax management authority, are eligible to carry forward losses from the current year to the following year to offset taxable profits before calculating corporate income tax. The period for carrying forward losses for tax purposes shall not exceed two years.

*Example: - An enterprise suffered a loss of 90 million VND in 1993.

Taxable profit:

In 1994 was 30 million VND.

In 1995 was 50 million VND.

The enterprise will be allowed to carry forward losses to offset taxable profits in the two subsequent years.

In 1994 was 30 million VND.

In 1995 was 50 million VND.

The remaining loss of 10 million VND from 1993 cannot be carried forward to offset taxable profits in the third year (1996).

D. AUTHORITY TO CONSIDER EXEMPTIONS AND REDUCTIONS IN CORPORATE INCOME TAX AND CARRYING FORWARD LOSSES TO THE FOLLOWING YEAR.
AND CARRY THE LOSS FORWARD TO THE FOLLOWING YEAR.

1. The tax authority directly managing the production and business enterprise is responsible for strictly checking according to the conditions stipulated in this Circular to exempt and reduce corporate income tax and carry forward losses for the cases specified in Point 3-Section A-Part IV; Point 1-Section B-Part IV; Section C-Part IV above. Exemptions and reductions in corporate income tax for these cases and carrying forward losses to the following year are implemented during the final settlement of corporate income tax without requiring a decision.

2. Cases of exemptions and reductions stipulated in Points 1, 2, 4, 5, 6, 7 of Section A, and Point 2 of Section B, Part IV of this Circular are decided by the Director of the General Tax Department for exemptions and reductions below 50 million VND.

3. Cases of reductions stipulated in Point 3 of Section B, Part IV of this Circular and exemptions and reductions stipulated in Point 2 of Section D, Part IV of this Circular are decided by the Director of the State Tax总局，对于减免税额在5000万以下的，由税务总局局长决定；超过5000万的，由财政部部长决定。

4. The authority deciding on tax exemptions and reductions is also the authority deciding on temporarily withholding corporate income tax as stipulated in Point 3, Section B, Part IV.

E. APPLICATION DOCUMENTS AND PROCEDURES FOR EXEMPTIONS AND REDUCTIONS IN CORPORATE INCOME TAX

1. For exemptions stipulated in Point 1 and Point 2, Section A, Part IV of this Circular, the following must be provided:

The production and business enterprise must submit a written application for exemption from corporate income tax (two copies), detailing the reasons for requesting the exemption, with confirmation from local authorities (People's Committee of the commune, ward) and the local tax authority verifying against the stipulated conditions, signing and stamping at the end of the application form, then sending one copy to the enterprise and retaining one copy at the tax authority.

2. For exemptions stipulated in Point 3, Section A, Part IV of this Circular, the following must be provided:

Decision on establishment of a new enterprise.

Business registration, tax declaration (tax registration certificate, turnover tax);

Completion and handover documents for the new production facility;

Annual settlement report, annual tax settlement report.

3. For reductions stipulated in Point 1, Section B, Part IV of this Circular, the following must be provided:

Documentation for exemption from tax for the first two years;

Annual settlement reports related to the tax reduction;

Documents confirming difficult areas.

4. For reductions stipulated in Point 4, Section A, Part IV of this Circular, the following must be provided:

Application for tax exemption and reduction;

Decision by local authorities allowing closure of the headquarters;

Business registration;

Decisions on tax exemption and reduction for previous years (if applicable);

Official annual settlement;

Inspection report and recommendation by the direct tax management authority.

5. For reductions stipulated in Point 4, Section B, Part IV of this Circular, the following must be provided:

Application for tax exemption and reduction;

Official annual settlement report including detailed profit calculation for products replacing imported goods;

Inspection report and recommendation by the direct tax management authority.

6. For reductions stipulated in Point 5, Section A, Part IV of this Circular, the following must be provided:

Application for tax exemption and reduction;

Decision on establishment by the competent authority. If it is a collective organization or individual, they must provide a scientific research activity registration certificate issued by the provincial or municipal science management agency as stipulated in Article 15 of Decree No. 35-HĐBT dated January 25, 1992;

Business license (for business entities);

Scientific research contracts, scientific service contracts. These contracts must ensure complete documentation as prescribed by current regulations on managing research topics and projects (decision of the competent authority). Specifically, contracts between organizations and individuals (including foreign entities) must be confirmed by the state management agency for science:

Contracts with a value of 100 million dong or more shall be confirmed by the Ministry of Science, Technology, and Environment;

Contracts under 100 million dong shall be confirmed by the provincial or municipal science management agency;

The official annual settlement statement of the entity containing detailed data on the results of scientific research and service activities;

The annual settlement inspection report and the request of the direct tax management agency;

7. In cases of tax reduction as provided for in point 6, Section A, Part IV of this Circular, there must be:

Economic and technical justification approved by the supervising agency determining the product as a trial production item;

Official annual settlement statement detailing the effectiveness of the trial production activity of new products;

The annual settlement inspection report and the request of the direct tax management agency;

8. In cases of tax reduction as provided for in point 2, Section B, Part IV of this Circular, there must be:

Official annual settlement;

The annual settlement inspection report and the request of the direct tax management agency;

Report on employee income;

Documents confirming that the area is difficult;

9. In cases of tax reduction as provided for in point 3, Section B, Part IV of this Circular, there must be:

Official annual settlement statement (annual financial plan for cases where corporate income tax is temporarily withheld);

Economic justification of the deepening investment plan; expansion and investment plan for the year (for cases where corporate income tax is temporarily withheld);

Annual settlement inspection report on business results, tax settlement, and related documents explaining the actual expenditures: invoices, payment vouchers, project settlement documents, and local tax authority's letter requesting the amount of actual reinvestment expenditure not yet settled from the capital within the year (investment capital needs according to the plan for cases where corporate income tax is temporarily withheld), investment capital available within the year (basic construction fund, production development fund...);

10. In cases of loss carryforward as provided for in Section C, Part IV of this Circular, there must be:

Minutes of the Board determining the damage value (with representatives of the direct tax management agency), for cases of natural disasters, enemy actions, accidents;

Official annual settlement statement explaining in detail the damage value due to natural disasters, accidents...;

Official annual settlement inspection report and the request of the direct tax management agency;

The direct tax management agency is responsible for checking and reviewing the relevant data and circumstances related to the examination and decision on tax exemption and reduction, handling cases within its jurisdiction. Cases outside its jurisdiction must have comments and recommendations in writing attached to the enterprise's tax exemption and reduction application sent to the higher-level tax agency for review and decision. All documents and materials for tax exemption and reduction must be original, if they are copies, they must be notarized.

Tax exemption and reduction examination is carried out when there is an official annual settlement statement.

 

V. DUTIES OF BUSINESS ENTITIES

1. When the tax authority requests documents related to tax examination, the business entity has the duty to:

a) Provide sufficient and timely documents;

b) Explain and prove unclear items in the declaration forms, books, accounting vouchers;

c) Inventory raw materials and goods warehouses to reconcile with books and accounting vouchers.

Business entities may not refuse to present, provide, or explain necessary documents as required by the tax authority on the grounds of professional confidentiality.

2. Business entities have the right to require the tax authority not to disclose to other organizations or individuals without responsibility the documents presented or provided by the business entity which belong to the professional confidentiality of the business entity.

 

VI. PENALTY AND REWARD

The handling of violations and rewards shall be implemented in accordance with Articles 27, 29, and 30 of the Corporate Income Tax Law, as stipulated in Circular No. 11 TC/TCT dated February 24, 1993, issued by the Ministry of Finance guiding the implementation; Decree No. 01 CP dated October 18, 1992, issued by the Government regarding administrative penalties in the field of taxation. For late payment of taxes or fines, in addition to paying the full amount of tax or fine as prescribed by law, a daily penalty of 0.2% (two thousandths) of the outstanding tax amount will be imposed for each day of delay.

 

VII. DUTIES AND LIMITATIONS OF THE TAX AUTHORITY

1. The task of managing corporate income tax collection is handled by the tax agencies at all levels under the Ministry of Finance.

2. The authority of each level of the tax agency in examining complaints is as follows:

The higher-level tax agency examines complaints handled by the lower-level tax agency.

If further complaints exist, the Minister of Finance makes the final decision.

During the complaint process, organizations or individuals must still pay the full amount of tax or fine as notified.

 

VIII. EFFECTIVE DATE OF IMPLEMENTATION

This Circular takes effect from September 1, 1993.

The corporate income tax settlement for the year 1993 will be averaged monthly throughout the year: the first eight months will be calculated based on the tax rate specified in the Corporate Income Tax Law, and the last four months will be calculated based on the revised tax rate.

The examination of tax exemptions and reductions will be conducted for the 1993 settlement period.

This Circular replaces Circular No. 47 TC/TCT dated October 4, 1990, and other provisions contrary to this Circular.

During the implementation, if any issues arise, business entities, localities, and sectors should promptly reflect them to the Ministry of Finance (General Department of Taxation) for resolution.

 

SOCIALIST REPUBLIC OF VIETNAM

Independence - Freedom - Happiness

Prepared by Accountant Director

CORPORATE INCOME TAX PROVISIONAL PAYMENT FORM

Month (quarter)...year...

Name of business entity (or name of individual business owner) industry

Place of business

Place of account opening...Account number

The figures and documents above ensure accuracy and truthfulness; if the tax authority checks and finds them inconsistent with reality, the entity will be subject to penalties as stipulated in Point 1b, Article 27 of the Corporate Income Tax Law.

SOCIALIST REPUBLIC OF VIETNAM
Independence - Freedom - Happiness

Prepared by Accountant Director

APPLICATION FOR REDUCTION OR EXEMPTION FROM CORPORATE INCOME TAX

Respectfully submitted to:

Name of Business:

Business sector:

Business location:

Bank account opening place: Account number:

Request the tax authority to consider reducing or exempting corporate income tax for the entity in the month of year

Corporate income tax payable:

Corporate income tax requested to be reduced or exempted:

Corporate income tax still payable:

Reason for requesting reduction or exemption from corporate income tax:

Supporting documents for the application for reduction or exemption from corporate income tax include:

1-

2-

3-

The figures and documents above ensure accuracy and truthfulness; if the tax authority checks and finds them inconsistent with reality, the entity will be subject to penalties as stipulated in Point 1b, Article 27 of the Corporate Income Tax Law.

SOCIALIST REPUBLIC OF VIETNAM

Independence - Freedom - Happiness

Prepared by Accountant Director

CORPORATE INCOME TAX SETTLEMENT DECLARATION FORM

Year:

Name of business entity (or name of household business owner)

Industry

Place of business

Bank account opening place Account number

The figures and documents above ensure accuracy and truthfulness; if the tax authority checks and finds them inconsistent with reality, the entity will be subject to penalties as stipulated in Point 1b, Article 27 of the Corporate Income Tax Law.