Corporate Income Tax | Incentives on CIT in Vietnam

Danh mục nội dung

Vietnam tax incentives are applied for corporate income tax, import tax on goods imported to form fixed assets; export tax; exemption and reduction of land levy and land rent… Enterprises shall determine conditions for enjoyment of tax incentives, preferential tax rates, the tax exemption or reduction duration, and losses allowed to be cleared against taxed incomes in order to declare and finalize tax with tax agencies.

FDI companies and foreign investors are allowed to get many investment incentives by-laws, regarding corporate income tax, import tax on goods imported to form fixed assets; export tax; exemption and reduction of land levy and land rent… Enterprises shall determine conditions for enjoyment of tax incentives, preferential tax rates, the tax exemption or reduction duration, and losses allowed to be cleared against taxed incomes in order to declare and finalize tax with tax agencies.

CONDITIONS FOR APPLICATION OF CORPORATE INCOME TAX (CIT) INCENTIVES

Corporate income tax (CIT) incentives are applicable only to enterprises that observe accounting, invoice and document regulations and register and pay CIT as declared.

While enjoying CIT incentives, enterprises that carry out different products and business activities shall separately account income from production and business activities eligible for CIT incentives (including preferential tax rates or tax exemption or reduction) from income from those ineligible for CIT incentives for separate tax declaration and payment.
During a tax period, if an enterprise fails to separately account incomes from production and business activities eligible and ineligible for tax incentives, the income from production and business activities eligible for tax incentives equals (=) the total taxed income multiplied by (x) the ratio (%) of the turnover from or deductible expenses for production and business activities eligible for tax incentives to the total turnover or total deductible expenses of the enterprise in the tax period.
If an enterprise has an income or a deductible expense which cannot be separately accounted, such income or expense shall be determined according to the ratio of the turnover from or deductible expenses for production and business activities eligible for tax incentives to the total turnover or total deductible expenses of the enterprise.

Corporate income tax incentives are not applied and the tax rate of 20% is applied to enterprises that have the following incomes (*):

Income from capital or capital contribution right transfer; income from real estate transfer; income from transfer of investment projects, right to participate in investment projects or right to explore and exploit minerals; income from production or business activities outside Vietnam;
Income from the prospecting, exploration and exploitation of petroleum and other precious and rare natural resources and income from mining activities;
Income from the provision of services liable to excise tax in accordance with the Excise Tax Law.

For enterprises having investment projects eligible for corporate income tax incentives for being engaged in the fields eligible for investment incentives, incomes from these fields and incomes from the liquidation of waste materials and scraps of products in these fields, exchange rate differences directly related to turnover from and expenses for these fields, demand deposit interests and other directly related incomes are also eligible for corporate income tax incentives.

For enterprises having investment projects eligible for corporate income tax incentives for being located in geographical areas eligible for investment incentives (including also industrial parks, economic zones and hi-tech parks), incomes eligible for CIT incentives are all incomes from their production and business activities in such geographical areas, except those specified at (*).

Enterprises subject to the tax rate of 20% may apply the tax rate of 20% to all of their incomes, except those specified at (*).

PREFERENTIAL CORPORATE INCOME TAX RATES

The preferential tax rate of 10% for fifteen (15) years is applicable to

Incomes of enterprises from the implementation of new investment projects in geographical areas with particularly difficult socio-economic conditions specified by law, economic zones and hi-tech zones, including information technology parks established under the Prime Minister’s decisions.
Incomes of enterprises from the implementation of new investment projects in the fields of scientific research and technological development; application of high technologies on the list of high technologies prioritized for development investment in accordance with the Law on High Technologies; nursery of high technologies and hi-tech enterprises; venture investment in development of high technologies on the list of high technologies prioritized for development in accordance with the Law on High Technologies; construction investment and commercial operation of establishments nursing high technologies and hi-tech enterprises; investment in development water plants, power plants, water supply and drainage systems; bridges, roads, railways; airports, seaports, river ports; airfields, stations and other particularly important infrastructure facilities decided by the Prime Minister; production of software products; manufacture of composite materials, light building materials, rare and precious materials; generation of renewable energies, clean energy and energy from the waste disposal; development of biotechnology;
Incomes of enterprises from the implementation of new investment projects in the field of environmental protection, covering manufacture of equipment for treating environmental pollution, equipment for environmental observation and analysis; environmental pollution treatment and protection; collection and treatment of wastewater, exhaust and solid wastes; recycling and reuse of wastes;
Hi-tech enterprises and agricultural enterprises applying high technologies defined in the Law on High Technologies; Hi-tech enterprises and agricultural enterprises applying high technologies defined in the Law on High Technologies may enjoy preferential tax rates from the year of grant of certificates of hi-tech enterprises or agricultural enterprises applying high technologies. Hi-tech enterprises and agricultural enterprises applying high technologies may enjoy CIT incentives calculated on their total incomes, except incomes specified at (*).

The preferential tax rate of 10% is applicable throughout the operation duration to

Incomes of enterprises from socialized education and training, job training, health care, culture, sports and environmental protection activities (below referred to as socialized fields).
Incomes of publishing houses from publication activities in accordance with the Law on Publication;
Incomes of press agencies from printed newspapers (including advertisements on printed newspapers) in accordance with the Law on Publication;
Incomes of enterprises from the implementation of projects on investment and trading in social houses for sale or lease to or hire-purchase by the subjects specified by law;
Incomes of enterprises from the forest planting, tending and protection; agricultural cultivation, planting of forest trees and aquaculture in geographical areas with difficult socio-economic conditions; production, propagation and hybridization of plant varieties and animal breeds; salt production, exploitation and refinery;
Incomes of cooperatives engaged in agriculture, forestry, fisheries or salt production and not located in geographical areas with difficult or particularly difficult socio-economic conditions.

The preferential tax rate of 20% for ten (10) years is applicable to

Incomes of enterprises from the implementation of new investment projects in geographical areas with difficult socio-economic conditions specified by law;
Incomes from enterprises from the implementation of new investment projects on production of hi-class steel, energy-conserving products, machinery and equipment for agriculture, forestry, fisheries and salt production, irrigation and drainage equipment, livestock and aquatic animal feed; and development of traditional crafts and trades (including building and development of traditional handicraft production, farm produce and food processing and production of cultural products); Enterprises implementing new investment projects in the fields or geographical areas eligible for the tax incentives specified in this Clause will enjoy the tax rate of 17% from January 1, 2016.

The duration of application of preferential tax rates specified in this Article shall be counted consecutively from the first year when enterprises generate turnover from new investment projects eligible for tax incentives. For hi-tech enterprises and agricultural enterprises applying high technologies, this duration shall be counted from the year when they are recognized as hi-tech enterprises or agricultural enterprises applying high technologies. For projects applying high technologies, this duration shall be counted from the year when they are granted certificates of projects applying high technologies.

CORPORATE INCOME TAX EXEMPTION AND REDUCTION DURATION

Tax exemption for 4 years and 50% reduction of payable tax amounts for 9 subsequent years are applicable to

Incomes of enterprises from the implementation of new investment projects specified in:
Incomes of enterprises from the implementation of new investment projects in geographical areas with particularly difficult socio-economic conditions specified by law, economic zones and hi-tech zones, including information technology parks established under the Prime Minister’s decisions.
Incomes of enterprises from the implementation of new investment projects in the fields of scientific research and technological development; application of high technologies on the list of high technologies prioritized for development investment in accordance with the Law on High Technologies; nursery of high technologies and hi-tech enterprises; venture investment in development of high technologies on the list of high technologies prioritized for development in accordance with the Law on High Technologies; construction investment and commercial operation of establishments nursing high technologies and hi-tech enterprises; investment in development water plants, power plants, water supply and drainage systems; bridges, roads, railways; airports, seaports, river ports; airfields, stations and other particularly important infrastructure facilities decided by the Prime Minister; production of software products; manufacture of composite materials, light building materials, rare and precious materials; generation of renewable energies, clean energy and energy from the waste disposal; development of biotechnology;
Incomes of enterprises from the implementation of new investment projects in the field of environmental protection, covering manufacture of equipment for treating environmental pollution, equipment for environmental observation and analysis; environmental pollution treatment and protection; collection and treatment of wastewater, exhaust and solid wastes; recycling and reuse of wastes;
Hi-tech enterprises and agricultural enterprises applying high technologies defined in the Law on High Technologies;
Hi-tech enterprises and agricultural enterprises applying high technologies defined in the Law on High Technologies may enjoy preferential tax rates from the year of grant of certificates of hi-tech enterprises or agricultural enterprises applying high technologies.
Incomes of enterprises from the implementation of new investment projects in the socialized fields in geographical areas with difficult or particularly difficult socio-economic conditions specified by law.

Tax exemption for 4 years and 50% reduction of payable tax amounts for 5 subsequent years are applicable to incomes of enterprises from the implementation of new investment projects in the socialized fields in geographical areas outside the list of those with difficult or particularly difficult socio-economic conditions specified by law.

Tax exemption for 2 years and 50% reduction of payable tax amounts for 4 subsequent years are applicable to

Incomes of enterprises from the implementation of new investment projects in geographical areas with difficult socio-economic conditions specified by law;
Incomes from enterprises from the implementation of new investment projects on production of hi-class steel, energy-conserving products, machinery and equipment for agriculture, forestry, fisheries and salt production, irrigation and drainage equipment, livestock and aquatic animal feed; and development of traditional crafts and trades (including building and development of traditional handicraft production, farm produce and food processing and production of cultural products);

The tax exemption or reduction duration specified in this Article shall be counted consecutively from the first year an enterprise has taxable income from a new investment project eligible for tax incentives. If an enterprise has no taxable income for the first 3 years, counting from the first year it has turnover from a new investment project, the tax exemption or reduction duration shall be counted from the fourth year.

PROCEDURES FOR APPLICATION OF CORPORATE INCOME TAX (CIT) INCENTIVES

Enterprises shall determine by themselves conditions for the enjoyment of tax incentives, preferential tax rates, the tax exemption or reduction duration, and losses allowed to be cleared against taxed incomes in order to declare and finalize tax with tax agencies.

When conducting examination and inspection at enterprises, tax agencies shall examine conditions actually satisfied by enterprises for the enjoyment of tax incentives, corporate income tax amounts eligible for exemption or reduction, and losses allowed to be cleared against taxable incomes. If enterprises fail to satisfy conditions for the enjoyment of preferential tax rates and tax exemption or reduction duration, tax agencies shall retrospectively collect tax and sanction tax-related administrative violations under regulations.

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INVESTMENT IN VIETNAM INCENTIVES ON CORPORATE INCOME TAX (CIT)