PwC

Decree 218 on Corporate Income

Tax (CIT)
Decree 218 guiding the implementation of the amended CIT law
has just been issued, and is effective from 1 January 2014. The
circular to implement this decree is still awaited. Some notable
changes include:
1. CIT rate reduced
The standard CIT rate is reduced from 25% to 22% in 2014, and further
reduced to 20% from 2016. For enterprises with total revenues of less
than VND20 billion (equivalent to approximately US$1 million), the 20%
rate will apply from 2014.
2. CIT incentives
Large manufacturing projects (except for those manufacturing products
subject to special sales tax or exploiting mineral resources) are eligible
for CIT incentives if the projects meet either of the following criteria:
(i) having minimum investment capital of VND 6,000 billion, disbursed
within 3 years after being licensed, and having minimum revenue of
VND 10,000 billion/annum for at least 3 years after the first year of
generating revenue; or
(ii) having minimum investment capital of VND 6,000 billion, disbursed
within 3 years after being licensed, and using minimum 3,000
headcount for at least 3 years after the first year of generating
revenue.
New investment projects in industrial zones (except for industrial zones in cities Type 1) are now entitled
to CIT incentives. Cities Type 1 include Ho Chi Minh City, Hanoi, Hai Phong, Da Nang, Can Tho, Hue,
Vinh, Dalat, Nha Trang, Quy Nhon, Buon Me Thuot, Thai Nguyen, Nam Dinh and Viet Tri.
New investment projects are defined as projects which are carried out for the first time or are
independent of an existing project, except projects established from division, demerger, merger,
acquisition or conversion and projects established from a change of owner, or inheriting fixed assets,
business location, business sectors from existing enterprises. This definition will likely be a contentious
area.
PwC VietnamNewsBrief
This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information
contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness
of the information contained in the publication, and, to the extent permitted by law, PwC does not accept or assume any liability, responsibility or duty or care for any
consequences of you or anyone else acting or refraining to act, in reliance on the information contained in this publication or for any decision based on it.
3 January 2014
PwC
Business expansion projects are now entitled to CIT incentives if any of
the following criteria are met:
(i) they involve additional fixed assets costing at least VND 20 billion
(or VND 10 billion if the projects are in certain specified regions with
difficult socio-economic conditions); or
(ii) they involve additional fixed assets of at least 20% compared with
the period before expansion; or
(iii) they constitute an increase of at least 20% of the designed capacity
compared with the period before expansion.
3. Taxable income
The definition of taxable income of foreign companies in Vietnam is
changed to include income sourced from Vietnam for the distribution of
goods (this clause covers on-the-spot export/import and supply of goods
under certain Incoterms (e.g. DDP, etc)).
Losses from transfer of immovable property, transfer of investment
projects, transfer of rights to participate in an investment project (except
exploiting mineral resources) are allowed to be offset against profits from
normal business activities.
4. Deductible expenses
The deductibility cap applying to A&P expenses is increased from 10% to
15% for all enterprises. Payment discounts are now not subject to the
A&P cap.
The requirement for registration of material consumption levels is
abolished.
Voluntary employer pension contributions are now deductible, but
subject to a cap of VND 1 mil/month/person and the entitlement must be
stated in the labour contract, internal labour agreement or financial rules
of the company.
*****
Please contact us if you need further information.
To get in touch please contact:
Ho Chi Minh City:
Richard Irwin - Partner
+84 (8) 3824 0117
r.j.irwin@vn.pwc.com
Annett Perschmann-Taubert - Director
+84( 8) 3823 0796 ext 1519
annett.ingrid.perschmann@vn.pwc.com
Ha Noi
Nguyen Huong Giang - Partner
+84 (4) 3946 2237
n.huong.giang@vn.pwc.com