Decree No. 96/CP provides detailed regulations for implementing the Law on Business Income Tax and the Law Amending and Supplementing Certain Provisions of the Law on Business Income Tax.

DECREE

DECREE NO. 96-CP OF THE GOVERNMENT DATED DECEMBER 27, 1995 PROVIDING DETAILS ON THE IMPLEMENTATION OF THE LAW ON BUSINESS INCOME TAX AND THE LAW AMENDING AND COMPLEMENTING CERTAIN PROVISIONS OF THE LAW ON BUSINESS INCOME TAX

THE GOVERNMENT

Pursuant to the Government Organization Law dated September 30, 1992;
Pursuant to the Law on Business Income Tax which was adopted by the National Assembly of the Socialist Republic of Vietnam at its Eighth Session on June 30, 1990; the Law Amending and Complementing Certain Provisions of the Law on Business Income Tax which was adopted by the National Assembly of the Socialist Republic of Vietnam at its Ninth Session on July 5, 1993; and the Law Amending and Complementing Certain Provisions of the Law on Business Income Tax which was adopted by the National Assembly of the Socialist Republic of Vietnam at its Ninth Session on October 28, 1995;
At the proposal of the Minister of Finance,

DECREE

Chapter 1:

SCOPE OF APPLICATION OF BUSINESS INCOME TAX

Article 1.- The objects subject to business income tax as stipulated in Article 1 and Article 8 of the Law on Business Income Tax include organizations and individuals engaged in business activities (referred to collectively as business entities), regardless of industry, economic sector, or form of business, whether they have business establishments in Vietnam or abroad, and must pay business income tax if they generate business income in Vietnam.

Article 2.- The following activities are not subject to business income tax:

1. Agricultural production that is subject to land use tax.

Business income tax shall not be levied on agricultural products sold by agricultural production establishments without processing or only preliminary processing such as sorting, peeling, drying, or sun-drying (except for rubber).

2. Production of goods subject to special consumption tax, where the production establishment has declared and paid the special consumption tax, shall not be subject to business income tax at the production stage.

3. Exported goods include:

a. Goods directly exported or processed for foreign countries by the production establishment according to contracts signed with foreign parties (including cases where goods are taken out of the country for product promotion at trade fairs or exhibitions).

b. Goods sold or entrusted to export-import trading establishments for export according to economic contracts consistent with export licenses of the exporting establishments.

In case an export-import trading establishment purchases goods from a production establishment for export and sells them domestically, it must pay business income tax or special consumption tax at the production rate in addition to business income tax at the trading rate.

c. Goods received for reprocessing by establishments that directly sign processing contracts with foreign parties.

4. Credit activities of banking, credit, and financial companies.

Chapter 2:

BASIS FOR CALCULATING BUSINESS INCOME TAX AND BUSINESS INCOME TAX RATES

Article 3. The taxable business income as stipulated in Article 3 and Article 8 of the Law on Business Income Tax includes all proceeds from sales, processing fees, freight charges, commissions, service fees, etc. (including surcharges if any) generated during the tax payment period, regardless of whether these amounts have been collected or not.

The basis for calculating business income tax for certain business activities is specified as follows:

1. For production activities (including manufacturing, processing, assembly, and extraction), business income is the proceeds from selling products (including surcharges if any).

For printing books and newspapers, the basis for calculating business income tax does not include the cost of paper.

2. For processing activities, business income is the processing fee, including labor costs, fuel, power, auxiliary materials, and other expenses for processing (excluding main raw materials and semi-finished products sent for processing).

3. For construction activities:

a. For construction and installation activities (regardless of whether materials and raw materials are included in the contract or not), the basis for calculating business income tax is the total value of the construction project or component thereof, excluding the value of machinery, equipment, and interior decoration items attached to the project (if any).

b. For surveying, design, and other construction activities, the basis for calculating business income tax is the total proceeds from these activities.

c. For constructing a single project or component thereof, business income tax is calculated once based on the total value of the project or component.

d. For construction projects requiring phased payments, the basis for calculating business income tax for each period is the value of the completed project or component.

4. For transportation activities, business income is the freight charges for transporting goods and passengers, baggage, and other proceeds from transportation activities.

For air, sea, and rail transportation activities involving international transport, the basis for calculating business income tax is determined as follows:

- For transportation establishments within the scope of obtaining operating permits and registered for tax declaration in Vietnam, the basis for calculating business income tax is the freight charges for transportation within Vietnam and from Vietnam (the first port) to the final port abroad where passengers, baggage, and goods arrive. For international air transportation, the basis for calculating business income tax is the portion of revenue earned under international air transport conventions.

- For foreign transportation establishments without business establishments in Vietnam but conducting passenger, baggage, and cargo transportation from Vietnamese ports to foreign destinations, the basis for calculating business income tax is the freight charges from the Vietnamese port (the first port) to the final port abroad where passengers, baggage, and goods arrive, regardless of where the ticket is purchased or how the freight charges are paid.

The ports referred to above include airports, seaports, river ports, railway stations, and bus terminals.

5. For food and beverage business activities, the basis for calculating business income tax is the total proceeds from selling food and beverages (including self-manufactured or purchased items), surcharges, and other revenues related to food and beverage business activities.

6. For trading business activities, the basis for calculating business income tax is determined as follows:

a. Calculating tax on business income as the total proceeds from sales (including surcharges if any).

b. Calculating tax on the difference between the selling price and the purchase price.

- The selling price is the price recorded on sales invoices or receipts (including surcharges if any).

- The purchase price of goods is the actual payment price recorded on the purchase invoice to the seller. For imported goods, it is the purchase price at the Vietnamese customs port (CIF) plus (+) import tax (if applicable), plus (+) special consumption tax (if applicable), excluding surcharges (if applicable).

The Ministry of Finance shall provide specific guidance on the selling price and purchase price for calculating taxes under each purchasing and selling method.

7. For agency and entrusted buying and selling activities, revenue is the commission and other income derived from such activities. In cases where the agent both buys and sells goods on behalf of the principal, the agent must pay turnover tax on the agency activity and also collect turnover tax on behalf of the principal according to commercial trading activities; taxable revenue from agency sales is the sale proceeds minus (-) the commission.

8. For service activities, the taxable revenue is the total amount received from service activities:

a. For repair services, it includes labor costs, materials, fuel, and other expenses for repairs.

b. For hotel room sales activities, it includes room rental fees and service charges (if any).

c. For postal and telecommunications services, it includes postal fee revenues, stamp sales, installation and subscription fees for telephones, messaging devices, fax machines, etc., transmission network information fees including additional charges (if any) and other postal service revenues.

For international postal and telecommunications activities, the taxable revenue is the amount that the Vietnamese taxpayer receives according to international practice.

For entities not belonging to the postal and telecommunications sector but engaging in postal services such as telephone, fax, etc., the taxable revenue is the commission earned or the additional revenue received over the postal service rates.

d. For insurance and reinsurance activities, revenue is the income from insurance operations (premiums, reinsurance premiums, appraisal fees, and other income from these activities).

đ. For pawnshop activities, the taxable revenue is the difference between the amount received and the advance given to the pledgor. If the pledged asset is sold to recover capital, the taxable revenue from this activity is the actual amount received from the sale of the asset.

e. For leasing activities of houses, equipment, machinery, transportation means, etc., the taxable revenue is the total amount received from these activities.

g. For lottery and other types of lotteries, the taxable revenue is the actual revenue from ticket and card sales (revenue based on ticket and card prices minus (-) commissions paid to ticket and card agents if any).

h. For golf course operations, the taxable revenue is the income from membership card sales, golf play tickets, coaching fees, equipment rentals, and other revenues. Other service activities such as accommodation, food, tourism, etc., related to golf course operations, have their taxable revenues determined separately for each activity.

Revenue from selling membership cards is calculated by multiplying (=) the number of actual cards sold (including those sold domestically and abroad) by the price marked on the card.

i. Revenue from marine agency activities is the total amount received from these activities, excluding payments made on behalf of the vessel owner according to the contract.

k. For advertising activities, the taxable revenue is the total amount received from advertising activities: advertising on radio stations, television, books, newspapers, signboards, promotional displays, and other forms of advertising.

Businesses with revenues in foreign currency may pay taxes in foreign currency or Vietnamese dong. If paying in Vietnamese dong, it must be converted at the exchange rate published by the State Bank of Vietnam at the time of taxation. If paying in foreign currency, it must be in convertible foreign currency.

Article 4.- The turnover tax rate applied to different industries and business activities is implemented according to the turnover tax table issued together with it.

Turnover tax applies to certain situations as follows:

1. Businesses operating in multiple industries with different turnover tax rates shall pay turnover tax according to the rate applicable to each industry. If the business cannot separately account for revenue from each industry, the highest rate applicable to any industry engaged in shall be applied.

2. Businesses producing products subject to industry-specific tax rates but with product-specific tax rates shall apply the product-specific tax rate.

3. Directly exploiting businesses using exploited products to produce other products shall apply the production product tax rate.

4. Production and assembly of specialized electronic machinery and equipment, computers, turnover tax rate 4% includes:

- Production and assembly of specialized electronic machinery and equipment (switching centers, transmitters, receivers) for telephones, telegraph, wireless broadcasting, and television.

- Production and assembly of radar equipment.

- Production and assembly of specialized electronic equipment for traffic signal control systems, warning signs, sirens, security, fire protection, and firefighting systems.

- Production and assembly of electronic equipment for management systems installed in production facilities or in machinery and transport equipment.

- Production and assembly of specialized electronic machinery and equipment for research, testing, and medical purposes.

- Production and assembly of computers and printers accompanying computers.

5. Agricultural production enterprises engaged in agricultural product processing must pay turnover tax according to the industry and processed product consumption tax rate.

6. Manufacturing enterprises organizing retail outlets for product sales must pay turnover tax or special consumption tax according to the industry and product manufacturing tax rate at the place of production and turnover tax according to commercial trade tax rate at the location of retail outlets.

7. Business entities selling goods that cannot be determined to be machinery, equipment, raw materials for production or general merchandise shall apply a sales tax rate of 2%. For carriage trade activities, if the revenue cannot be determined according to the group of items, a tax rate of 2% shall be applied on the total revenue of the entire trip.

8. The tax rate of 20% applies to the revenue from selling racehorse tickets, while a tax rate of 4% applies to the revenue from selling tickets for horse racing spectators.

Based on the sales tax rates table and the above provisions, the Ministry of Finance shall guide the determination of the applicable tax rates for each business activity and industry.

Chapter 3:

REGISTRATION, REPORTING, AND PAYMENT OF SALES TAX

Article 5.- In accordance with Article 10 of the Sales Tax Law, business entities must register and report their sales tax obligations to the tax authority at the place of business. This provision is implemented as follows:

1. Subordinate units such as companies, factories, branches, stores... of State-owned enterprises, companies, and business entities must register and pay taxes to the tax authority at the place of business. Business entities in the trading sector with fixed locations selling goods outside the permitted trading area, which have already paid taxes on carriage trade activities, do not need to pay sales tax at the fixed location.

Business entities acting as agents and selling goods for other businesses must register and report to the tax authority regarding agency sales, sales revenue, and commission income. If they fail to comply with the regulations on agency sales, the entity must pay sales tax based on trading activities calculated on sales revenue.

Each trading business entity can only apply one of two methods for calculating and paying sales tax on trading activities: based on sales revenue or based on the difference between selling price and purchase price. Entities subject to taxation under this provision must register and report sales tax payments and settlements to the local tax authority.

2. Production entities with dependent branches or stores selling products produced by the entity must calculate sales tax based on actual selling prices at the branches or stores but deduct the sales tax already paid by the branches or stores for these products.

3. Domestic taxpayers selling goods to foreign parties, renting machinery, equipment, transportation means from foreign countries, or providing services to foreigners must register, report, and pay sales tax and income tax on behalf of the foreign party.

The Ministry of Finance shall specify the combined collection rates for sales tax and income tax for each business activity.

Article 6.- Business entities must strictly adhere to the documentation system for purchasing and selling goods, service invoices, accounting records, and statistical reports as prescribed by current regulations.

Article 7.- The Ministry of Finance shall unify the issuance and management of purchase and sale invoices, declaration forms, and tax payment documents.

Article 8.- When the tax authority requests relevant documents and bases related to the calculation and payment of sales tax, the business entity has the responsibility to:

1. Submit all necessary documents and bases in full and on time as required by the tax authority;

2. Explain and prove unclear items in the declaration form or accounting books, invoices, and related bases.

Business entities may not refuse to present, provide, or explain documents and bases requested by the tax authority on grounds of professional confidentiality or other reasons.

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

Article 9.- Sales tax must be paid periodically or monthly within the time frame specified by the tax authority for each entity; however, the deadline for payment of the previous month's tax shall not exceed the 15th day of the following month.

Small traders must pay sales tax monthly on the last days of the month as stipulated by the tax authority.

Article 10.- Based on Article 14 of the Sales Tax Law regarding small traders being able to calculate and pay sales tax under a quota system for each period, the Ministry of Finance shall determine the average monthly revenue level for small traders eligible for the quota system, suitable for each type of business and market conditions during each period.

Chapter 4:

TAX REDUCTION AND EXEMPTION

Article 11.- Specific cases eligible for tax reduction or exemption under Article 18 of the Sales Tax Law are defined as follows:

1. Exemption applies to elderly, disabled individuals, small-scale producers and traders, sideline workers, family auxiliary economic activities... whose monthly income is equivalent to the minimum wage set by the state.

Small traders who operate for less than five days in a month are exempt from paying sales tax for that month; those operating for less than fifteen days in a month are entitled to a 50% reduction in the tax payable for that month, while those operating for fifteen days or more must pay the full quota tax.

2. Business entities facing difficulties due to natural disasters, enemy attacks, or unexpected accidents may be considered for tax reduction. The reduction amount is calculated as a percentage of asset losses, but it shall not exceed 50% of the sales tax payable and the reduced tax amount shall not exceed 30% of the value of the lost assets. The tax reduction period shall not exceed twelve months from the month following the occurrence of the loss.

3. Cases eligible for tax reduction under paragraph 3 of Article 18 of the Sales Tax Law are as follows:

a. Business entities operating in mountainous areas, islands; fishing in distant sea areas; research institutions, application of new technology, testing new technological chains encountering difficulties and incurring losses may be considered for tax reduction during the initial period. The amount of tax reduction per year (based on the Gregorian calendar year) corresponds to the amount of loss, but shall not exceed 50% of the tax payable and the tax reduction period shall not exceed two years (24 months).

b. Production bases for items that need to replace imported goods, which are announced annually, shall be eligible for a 50% reduction in business income tax during the initial period, starting from when the produced items meet the criteria to replace imported goods, and limited within the validity period of the list of items replacing imported goods. For items with a production cycle under six months, the tax reduction period is one year (12 months). For items with a production cycle of six months or more, the tax reduction period is two years (24 months).

c. Newly established production bases (belonging to industries specified in Section I - Business Income Tax Rate Table), encountering difficulties, shall be eligible for a 50% reduction in business income tax during the first year (12 months) from the month they generate revenue. Those bases facing significant difficulties and generating losses may have their taxes reduced further, but the maximum amount of tax reduction shall not exceed 50% of the tax payable, and the total tax reduction period shall not exceed two years (24 months). For production bases located in mountainous areas and islands, this period shall not exceed three years (36 months), starting from the first month of tax reduction.

A newly established production base is a new investment facility that has been granted a production permit and directly registers and declares business income tax payments to the tax authority. Existing facilities that were previously established and subsequently divided, merged, renamed, or underwent investment improvements, expansions, or changes in product lines do not qualify for tax reductions under this provision.

4. If a production and business establishment is simultaneously eligible for tax reductions on business income according to different cases stipulated in the Law on Business Income Tax, the Law on Encouraging Domestic Investment, and other regulations, it shall only be eligible for a tax reduction under one case.

The Ministry of Finance shall specify the procedures for applying for tax exemptions and reductions as provided in Clause 1 and provide detailed procedures and authorities for reviewing tax reductions as provided in Clauses 2 and 3 of this Article. The Ministry of Planning and Investment shall coordinate with the Ministry of Finance and other relevant agencies to publish lists of items that need to be encouraged for domestic production to replace imported goods at various times.

Article 12.- Business income tax shall temporarily not be levied on:

- Broadcasting radio and television programs according to plans using state budget funds.

- Publishing specialized magazines and internal newsletters.

- Direct activities serving agricultural production of irrigation stations, maintaining original livestock and poultry herds.

- Activities such as repairing, maintaining roads, dredging channels, building bridges, embankments, and greenhouses; restoring cultural and artistic works; maintaining environmental hygiene, preserving zoos, flower gardens, parks, and trees using state budget funds or public donations.

- Geological exploration, surveying, and mapping.

- Selling fixed assets (for asset renewal).

- Selling state-owned houses to current tenants.

- Health insurance, social insurance, labor insurance.

- Selling scrap materials and by-products that have already been accounted for in reducing production costs.

- Self-service meal activities in government agencies, enterprises, schools, and military forces.

- Other specific cases as prescribed by the Government.

Chapter 5:

FINAL PROVISIONS

Article 13.- The Government shall establish separate reward systems for organizations and individuals who contribute to implementing the Law on Business Income Tax, and penalty systems for those who violate the Law on Business Income Tax.

Article 14.- This Decree takes effect from January 1, 1996, replacing existing Government regulations on business income tax. Any previous regulations on business income tax that conflict with the provisions of this Decree shall be abolished.

Article 15.- The Minister of Finance shall guide the implementation of this Decree. Ministers of Ministries, Heads of agencies equivalent to Ministries, and Chairmen of Provincial People's Committees shall be responsible for enforcing this Decree.

 

 

BUSINESS INCOME TAX TABLE
(Annexed to Decree No. 96/CP dated December 27, 1995 of the Government detailing the implementation of the Law on Business Income Tax and the Law Amending and Supplementing Certain Provisions of the Law on Business Income Tax)