CORPORATE INCOME TAX

OVERVIEW
Basic Tax concepts

Legislation
In Vietnam, Corporate Income Tax (“CIT”) is governed the by Law on Corporate Income Tax and its
relevant guidance. Other laws and regulations may also have impacts on CIT, such as MOF’s regulation on
(i) provisions, (ii) depreciation and (iii) market price determination.

Scope of CIT law

 Enterprises established and operating under the Enterprise Law, Investment Law, Law on Credit
Institutions, Insurance Business Law, Securities Law, Petroleum Law, Commercial Law and other
legal normative documents in the forms: Joint Stock Companies; Limited Liability Companies; Joint-
Venture Companies; Private Enterprises; State Enterprises, Lawyer Offices, Private Notary Public
Offices; The parties in the contracts ofbusiness cooperation; The parties in oil product sharing
contract, Oil and Gas Joint Venture Enterprise and JointOperating Companies.
 Public services units, non-public services unit with production and business of goods and services
having income in all areas.
 Organizations established and operating under the Cooperative Law
 Foreign enterprises having permanent establishment (“PE”) in Vietnam: they will pay CIT on income
sourced from Vietnam, regardless of whether such income is attributable to the activities of the PE,
plus income sourced from overseas as long as such income is attributable to the PE in Vietnam.

The Definition of PE
 Branch, operational office, plant, workshop, transportation means, mine, oil/gas field, and any
location where natural resources are exploited;
 Construction site, construction works, or installation and assembly works;
 Agent for a foreign company;
 Establishment providing services including consultancy services provided through its employees or
another entity;
 Representative in Vietnam in a case

Tax Period
Tax period is the Gregorian calendar year or the fiscal year of the enterprises if it is different from calendar
year. If the first tax period or last tax period is 3 months or less, business establishments are allowed to
combine two consecutive tax periods into one.
Example:
Company A established and registered its business on 10 July 2020. Its applicable fiscal year is 1 January to
31 December. The first tax period of Company A shall be the period from 10 July 2020 to 31 December
2020.
If Company A registered its business on 1 November 2020, it can choose to have the first tax period from 1
November 2020 to 31 December 2021.

Tax Rate
 From 1 January 2016, standard CIT rate is 20%
 CIT rate for business in prospecting, exploration and exploitation of petroleum and gas and other rare
and precious natural resources will be from 32% to 50% depending on each project/business.
 Public-service units which have the activities of goods and services business subject to CIT but these
units can account the revenue but cannot account and determine the cost and income of the business
operation shall declare and pay CIT by the rate% on the revenue of sales of goods and services, as
follows:
o For services: 5%
o For goods business: 1%
 o For other activities (including activities of education, health, art performance): 2%
Example:
Non-business unit A has the activity of house letting, the revenue from the house letting in one (01) year is
200 million dong, the unit does not account and determine the cost and income from the above house letting
because the unit has chosen to declare and pay CIT at the rate% on the revenue of sales of goods and
services as follows: Payable CIT amount = 200,000,000 dong x 5% = 10,000,000 dong

TURNOVER
Basic
Turnover used to calculate taxable income is the total sales revenue, processing fee, services fee, surcharge,
regardless of whether money has been received or not.
o Timing for recognizing turnover in order to calculate taxable income (Taxing time):
o In respect of goods, when the right to use or ownership of the goods is transferred to the buyer;
o In respect of services, when the services are completed or party completed per schedule.
o In case the time of invoicing service supply occurs before the time of services completion, the time
for determining the taxable revenue shall be calculated according to the time of invoicing.
o In respect of air transportation, upon the completion of the provision of the transportation service.
Taxable turnover does not include VAT if the taxpayer pays VAT under the deduction method. On the other
hand, direct-method VAT payer shall record turnover as the total invoice amount.
Example:
Company A is VAT deduction method tax payer. Its added value invoice is as follows:
Selling price: VND100,000
VAT @10%: VND10,000
Payment amount: VND110,000
Turnover for CIT purposes is VND100,000
If this Company is VAT direct method tax payer, its sales invoice states the payment amount of VND110,000
without any VAT portion. Turnover for CIT purposes is VND110,000.

Turnover for specific cases

For goods sold by way of instalment

Turnover for CIT purposes is the lump sum payment price excluding interest on instalment. Interest shall be
classified as “other income”.
Example:
Car Dealer Company sells 2 cars on 10 months instalment basis. Total instalment payment is VND250
million/car. If lump sum payment price is VND200 million/car, turnover for CIT purposes is 2 x 200 million
=
VND400 million. This provision applies even if payment under the instalment extends over a number of tax
periods.

For goods, services used for exchange, internal consumption (except those serving business
operations)
Turnover is determined at the selling price of products, goods or services of the same or similar kind in the
market at the time of use. For goods and services produced by the business that are internally used to
continue the business/production process, recognition of turnover is not required.
Example:
Company A produces automotive parts and assembles automobiles. If company A uses the tires it produces
for display, product introduction, or assembling automobiles, the value of such tires shall not be included in
the assessable income. Company B produces computers. The value of computers that Company B produces
and provides for its employees to work at that company shall not be included in assessable income.

For processing activities (“gia công” in Vietnamese)

Turnover is the processing fee, including fuel, sub-materials, and other expenses
required for processing goods.
Example:
Processing company B provides processing service to an exporter. According to the processing contract, B
will provide the necessary sub-materials for the processing. During the tax period B issued invoice to the
exporter with the details:
Processing fees: VND234,000,000
Sub-material costs: VND35,000,000
Taxable turnover is VND269,000,000

For agency or consignment activities (selling at the price fixed by the principal)
Turnover is the receivable commission
Example:
Shop X acts as agent of Company A on the basis of selling A’s products at the price fixed by A. Commission
is 20% on selling price. The revenue of A’s products during the tax period is VND400,000,000. Turnover for
CIT purposes is: 400,000,000 x 20% = VND80,000,000
The principal (i.e. Company A in the above example) shall recognize the total sale price by the agent as its
turnover, the commission paid to the agent is its deductible expense.

For leasing assets

Turnover is the rent amount receivable for each period under the lease contract. If the lessee pays rent in
advance for a number of years the annual turnover will be calculated by dividing the advance rent by the
number of years or determined by lump sum payment
Example:
According to the machinery lease contract, the monthly rent amount is VND15,000,000. The lessee prepaid
the rent for a period of 24 months starting from 1 March 2020 to the lessor.
Taxable turnover for 2020 tax period: 15,000,000 * 10 = VND150,000,000
Taxable turnover for 2021 tax period: 15,000,000 * 12 = VND180,000,000
Taxable turnover for 2022 tax period: 15,000,000 * 2 = VND30,000,000
Or total of tax turnover (VND 360,000,000) is assessed on the year 2020 at tax payer wish

For golf course business

Turnover is the proceeds from the sale of membership cards and golf playing tickets and other revenues in
the
tax period determined as follows:
o For the form of daily golf ticket and card sales, the revenue of golf business as a basis for
determining the CIT is the proceeds from ticket and card sales, card sales arising in the tax period.
o For the form of ticket and membership card sales of the prepaid cards for several years, the revenues
as a basis for determining the CIT each year is the actual proceeds from card selling divided by the
number of years of card using.

For lending activity, finance leasing

• Turnover is the receivable interest or rental receivable of the tax period.
For transport activities
• Turnover is the total revenue of passenger, cargo and luggage transportation arising in the tax period.
For activity of power supply, water supply
• Turnover is the amount of electricity, clean water recorded on VAT invoice.
For insurance and reinsurance activities
• Turnover is the receivable primary premium, service fee, reinsurance premium, commission for
reinsurance, and others income, after deducting certain payments like premium refund, etc.

For construction and installation activities

Turnover is the value of works, works items or the value of volume of construction works, installation and
acceptance.
For a business co-operation contract:
• If revenue sharing: turnover is the revenue each party is entitled to;
• If product sharing: turnover is the sale price of the products shared to each party;
• Profit sharing: turnover is the total sale proceeds under the BCC; one party will be responsible for
accounting
work and business result determination:
o pre-tax profit sharing BCCs: each party shall self-manage its CIT obligation
o After-tax profit sharing BCCs: the representative shall be obliged for CIT declaration on behalf of
other parties.

For activities of bonus games business

• Turnover is the proceeds from these activities including special consumption tax minus the amount paid to
customer for bonus.
For securities trading activities
• Turnover is the proceed from brokerage services, securities dealing, securities underwriting, portfolio
management, financial advisory and securities investment, investment fund management, issue of fund
certificate, market organization services and other securities services under regulations of the law.
For derivative financial services
• Turnover is the proceeds from the provision of derivative financial services performed in the tax period.

DEDUCTIBLE EXPENSES

General rule

An expense item should be deductible if:

o The expenses are actually incurred and relevant to the production and business activities of the
enterprises
o The expenses have legitimate supporting invoices or documents
o For payments of goods, services procurement with invoice amounting to VND20 million or more
(VAT inclusive), must have non-cash payment vouchers (further reference to VAT regulations).

List of non-deductible expenses

Expenses which do not meet the three general deductibility conditions

However, the losses (of goods, materials, assets, etc) resulting from natural calamities, diseases or other
force majeure events are still deductible for CIT purposes, even though they do not meet the above
conditions, provided that the portion of these losses are not compensated by any third
parties
Also, Goods damaged due to expiry and changes in natural biochemical process without compensation shall
be included in deductible expenses when determining the taxable income.

Depreciation of fixed assets is not deductible for CIT purposes if:

o The fixed assets are not used for business activities;
o There are no document supporting that the fixed assets are owned by the business
o The depreciation expenses of the fixed assets are not recorded and monitored in the company
accounting
o books under accounting regulations
o Depreciation of fully depreciated fixed assets
o Depreciation for works on land not used for production and business
o Temporary not use
o Other intangible assets can be amortised for 20 years longest
o Upgrading vs. Repair expenses
o The excess of depreciation expenses over the limit provided by the MoF.
o Land use right

Method of Depreciation – Straight-line method

Level of depreciation = Historical cost of the fixed assets / Duration of use of the fixed assets
Example:
Company A buys a power generator at the invoice amount of VND210 mil. Transportation cost VND10 mil.
Installation, commissioning, tests cost totals VND20 mil. The economic life of the machinery is 12 years.
The duration of use is expected to be 10 years which is in accordance with the stipulated duration of use in
Circular (8-10 years). The generator is put into use from 1 July 2012. Depreciation expenses for CIT purpose
is
calculated as follow:
Historical cost: 210 + 10 + 20 = 240 mil Annual depreciation: 240 / 10 = 24 mil
First year depreciation: 24/12*6 = 12 mil
If the Company is profitable and would like to depreciate the generator as fast as possible to upgrade to a
more advanced generator, the allowed period would be 4 years (i.e. 2 times faster than the 8-year period).

Method of Depreciation – Adjusted reducing balance method (rarely applied)

Accelerated depreciation rate = Straight line method depreciation rate x Adjusted ratio
Straight line method depreciation rate = 1 / Duration of use x 100
Duration of use (t) Adjusted ratio
t ≤ 4 years 1.5
4 years < t ≤ 6 years 2.0
t > 6 years 2.5
For the final years, if the annual depreciation level based on the reducing balance method is less than the
average depreciation calculated based on the residual value of the fixed assets divided by the residual
duration of use, depreciation level of such year will be equal to the residual value of the fixed assets divided
by the residual duration of use.

Company A buys a brand new machinery for producing electronic chips at a historical cost of VND2,000
mil. The duration of use is determined to be 5 years which is within the time frame in Circular 45. The
machinery and equipment is put into use from 1 January 2021. Depreciation expenses for CIT purpose is
calculated as follow:
Straight line method depreciation rate = 1/5 x 100 = 20%
Accelerated depreciation rate = 20% x 2 = 40%
Year Reducing Balance Calculation Annual depreciation Accumulated depreciation
2021 2,000,000 2,000,000 x 40% 800,000 800,000
2022 1,200,000 1,200,000 x 40% 480,000 1,280,000
2023 720,000 720,000 x 40% 288,000 1,568,000
2024 432,000 432,000/2 216,000 1,784,000
2025 216,000 432,000/2 216,000 2,000,000

List of non-deductible expenses

The excess of costs of materials, fuel, power and goods over the reasonable consumption level
The reasonable consumption level is determined by the business at the beginning of the year or before
production, and kept at the enterprise. If the consumption level is subject to Government’s levels, then the
Government level applies.
Example
Cost of sale charged to P&L for the tax period is VND250,000,000, of which cost of raw materials, fuel,
power
and goods used for production, services or trading of goods that exceeds the reasonable consumption level
determined by the business is VND15,000,000.
Deductible cost of sale is: 250,000,000 – 15,000,000 = VND235,000,000

Expenses paid to certain suppliers without proper Declaration/Summary of Expenses under

prescribed form 01/TNDN and payment vouchers.
o In case an enterprise leases assets from an individual, documents for determining deductible
expenses is the lease contract and proof of rent payment.
 o In case an enterprise leases assets from an individual and the lease contracts allow the enterprise to
pay tax on such individual’s behalf, documents for determining deductible expenses are the lease
contract, proof of rent payment, and proof of tax payment on the individual’s behalf.
o In case an enterprise leases assets from an individual where the lease contracts states that the rent is
o exclusive of tax (VAT, personal income tax) and allows the enterprise to pay tax on such individual’s
behalf, the enterprise may include the total amount of rent in deductible expenses, including the tax
paid on such individual’s behalf.

Salaries, wages in following cases

Salaries, wages not actually paid or not supported by proper payment vouchers and
other documents.
Example
According to the labour contracts, the company has to pay a total of VND2,000,000,000 to its staff for
December 2020.
However, due to cash follow problem, the company only paid the December salary in April 2020. This
amount is not deductible for 2020 CIT purposes.
However, if the enterprises accrue the employment costs under the form of provision to a fund to cover
additional employment costs of the following year, which a limit of 17% of the current year’s salary fund,
the expenses are still deductible to the current year, even if they are paid after the CIT return submission.

Salaries, wages in following cases

Salaries and bonuses for employees for which the conditions for entitlement and rates of entitlement are not
specified in one of the following documents: employment contract; collective labor agreement; financial
regulations of the company, corporation or group; reward regulations issued by the President of the Board of
Directors, general director or director under the financial regulations of the company or corporation.
Schooling fees for expatriate’s children (kindergarten to high school) and/ or housing fee provided to
expatriates pursuant to the labour contracts, provided that such items are in line with regulations on salaries
and wages and supported by proper documents shall also be deductible.
Example
In the above example, the Company made a provision to the additional salary fund to cover the December
salary to be paid in 2021 and this amount is lower than 17% of its 2020 salary fund, the Company is still
entitled to claim tax deduction of this amount to 2020.

Salaries, wages in following cases

Salaries, wages, allowance payable to employees which are not actually paid before the deadline for
submission of the CIT return, unless the entity makes salary fund provision for the next year, which is not
more than 17% the actual salary fund (and must make sure that the entity is still not in-loss position,
otherwise 17% should not be reached). The actual salary fund is the total amount paid out up to finalisation
deadline, excluding payments during the year that is associated with last year’s salary fund. The salary fund
must be used up within 06 months from end of the financial year, otherwise the unused portion would be
adjusted to the deductible expenses of the next year.
Example
When submitting the 2020 tax settlement dossier, enterprise has set aside salary provision fund of 10 billion
dong. By June 30, 2021, enterprise A spends the amount from the salary provision fund of the year 2020
including 7 billion dong. Enterprise A must record reduction of salary expense of the next year (2015)
including 3 billion dong (10 billion minus 3 billion). When preparing the settlement dossier of the year
2021, if enterprise A has a need of deduction, it shall continue to set aside deduction of salary provision fund
as prescribed.

Salaries, wages in following cases

Salary of the private business owner, owner of onemember limited liability company; remuneration paid to
founders, members of the board of management, council who are not directly involved in management of
production, business
Example
During the tax period, the company paid to members of its BOM a remuneration amount of VND
205,000,000 for attending BOM meetings and recorded this as a salary expenses item. This amount is not
deductible for CIT purposes and must be added back to the taxable income.
If the BOM members are also directors of the company who manage the business, their remuneration shall
be deductible.

List of non-deductible expenses

o Expenses for bonus of initiatives and renovation but the enterprises do not have specific regulations
on bonus of initiatives and renovation without the acceptance Council of the initiatives and
improvements.
o Transporation (i.e. car, train) allowances for staff on leave not in accordance with the provisions of
the Labour Code
o Payments made to female or minority ethnic employees if made to the incorrect or inappropriate
person, and in excess of the stipulated levels
o Payment for compulsory insurance funds/trade union fee for labours exceeding the prescribed level.

List of non-deductible expenses

o Utilities expenses (Water and electricity)
o Contribution to the funds of the Association in excess of limits set by the Association.
o The expenses of unemployment allowance.
o Contribution to form the fund of superior management expense.

List of non-deductible expenses

The excess portion of costs of hiring fixed assets over the annual allocated amount based on the prepayment
Enterprise A leases fixed assets in four years with the rent of 400 million dong and makes one-time payment.
The expense of fixed assets leasing is accounted in the annual expense that is 100 million. If the expense of
fixed assets leasing exceeds 100 million then the excess over 100 million dong shall not be included in
reasonable expenses when determining taxable income

Payment of interest on loans

In June 202 the Company borrowed from its shareholders individual VND1,000,000,000 at the interest rate
of
1.7%/month. At that time the SBV’s prime rate was 1%. The deductible interest for the Company is
VND15,000,000/month (i.e. 1.5%).

Payment of interest on loans corresponding to the uncontributed charter capital according to the contribution
schedule in the charter of the company. Payments of interest which has been capitalised to the
assets/investments.
The Company has a registered charter capital of VND100,000,000 which the shareholders committed to
contribute fully in 2020. By end of 2020 the shareholders only contribute VND50,000,000 and in 2021 the
Company borrowed VND200,000,000 at the rate of 12%/year from a bank.
The non-deductible interest shall be: (200,000,000 – 50,000,000) x12%

List of non-deductible expenses

• Making and using provisions, those are not in accordance with the MoF regulations relating to inventory
devaluation, financial investment loss, bad debts, warranty of goods/ construction works, professional risk
provisions of value appraisal enterprises and independent audit service enterprises.
• Periodic or cyclic pre-deducted expenses that are not used or completely used at the end of the period or
cycle..
• Loss due to foreign exchange rate differences due to revaluation of monetary items denominated in foreign
currencies at the end of tax period.
• Support to (i) education, (ii) medical entities, (iii) victims of natural calamities and for (iv) building houses
for the poor where the recipients/activities are not eligible or when no supporting documents are available.
• Support for scientific research not in accordance with regulations; support not in accordance with State
programs for areas with special difficult socio-economic conditions.
The excess portion over the allowed limit of business management expenses allocated by foreign
companies to their permanent establishments in Vietnam
A: Business management expenses allocated by the foreign company
to its permanent establishment in Vietnam for the tax period.
B: Total turnover of the permanent establishment in Vietnam of the tax period.
C: Total turnover of the foreign company, including turnover of its
permanent establishments in other countries of the tax period.
D: Total business management expenses of the foreign company of the tax
period.
𝐁 = 𝐀/𝐂𝐱𝐃

The excess portion over the allowed limit of business management expenses allocated by foreign
companies to their permanent establishments in Vietnam
Branch B in Vietnam of the Singaporean company F has a total turnover of VND2.5 billion in this tax year.
Company F has total turnover VND50 billion (including turnover of its other permanent establishments).
During
the tax year, Company F allocated a business management expenses to B totalling VND74 million.
According to the audited accounts of F, total business management expenses of the business as a whole is
VND500 million. Determine the level of deductible business management expenses for B in respect of this
tax period.

VND million
Actual business management expenses allocated by Company F 74
Deductible business management expense for Branch B 500 x 2.500/50.000 (25)
Disallowed business management expenses that is to be added back to the taxable income 49

If B is a company owned by F then the allocated management expenses are not deductible to B.

OTHER TAXABLE INCOME

Income from Transfer of Capital or Securities

General
Transfer of capital is defined as the transfer of a part or all of the capital that the enterprises have invested to
another investor, including the case of transferring the entire enterprise they own.
Securities include stocks, bonds, fund certificates and other securities under the laws.

Taxable income
Taxable income = Transfer price – Purchase price – Transfer expense

Company A holds 20,000 shares of a listed company. During the tax period, Company A sold 50% of this
investment at VND50,000 per share. These shares were purchased at VND30,000 per share last year, with
total other cost of purchase amounting to VND50,000,000. A was also paid with dividend of
VND60,000,000. Calculate taxable income for the tax period.
VND
Total purchased price (20,000 x 30,000) 600,000,000
Other costs 50,000,000
Total costs 650,000,000
Purchased cost per share (650,000/20,000) 32,500
Consideration on sale of 10,000 shares 500,000,000
Purchased costs (10,000 x 32,500) (325,000,000)
Taxable gain 175,000,000
Dividend is exempt because it has been taxed at the investee company.
Tax declaration
Enterprises set up in Vietnam shall aggregate the taxable income from transfer of securities/capital with
other taxable income of the tax period to calculate the total tax payable.
Foreign companies and organizations shall pay CIT on transfer of capital under the withholding method by
the transferees within 10 days after the transfer. It should be noted that foreign companies and organizations
transferring securities shall be subject to CIT on the deemed basis under the FCT regulations.

Income from transfer of real estate

General
o Liable to pay CIT on incomes from real estate transfer are enterprises of all economic sectors and
business lines having incomes from real estate transfer; and real estate enterprises having incomes
from land sublease.
o Incomes from real estate transfer
o Real estate enterprises that have income from the sublease of land do not include those that only
lease houses, infrastructure facilities or architectural works on land.

Tax base: Taxable income = Turnover – Cost – Transfer expense

Tax declaration
Enterprises which do not have regular transfers of real estates shall declare and pay provisional CIT on
transfer of real estate on every transfer, finalization of all transfer activities is required at year-end.
Enterprises having regular transfer of real estate shall declare and pay taxes in a similar manner to primary
income, however they can register to provisionally pay CIT on each transfer similar to the above
requirement.

Other items
o Income from transfer of project, income from assignment of project implementation, assignment of
the right of exploration, extraction and processing of mineral
o Income related to ownership or right to use assets
o Interest and charges on deposit
o Income from asset lease in any form
o Gain from trading foreign currencies,
o Net income from transfer or disposal of assets (excluding realestate)
o Gain from realized foreign exchange difference or from revaluation of account payables.
o Reversion of provisions which are not fully used by due date
o Bad debts written-off which are now collected
o Receipts of fines for economic breaches (after deducting payable fines)
o Account payables of which creditors are unidentified
o Difference in revaluation of assets for capital contribution, transfer upon split, merger, consolidation
o Income which was omitted in previous years
o Gifts, gifts in cash and in kind income received in cash or in kind from marketing assistance, cost
assistance,
o payment discount, promotional bonus and other allowances.
o The compensation for fixed assets on the land and relocation assistance money after deducting the
related
o expenses
o Reversion of unused provision or not fully used; reversed provisions for warranty of construction
works
o Import and export tax refund of goods actually exported and imported arising in the settlement year
of CIT
o The earnings related to the consumption of goods and services not included in revenue, after
subtracting the
o costs to generate such income.
 o Incomes from capital contribution for joint stock, local economic joint venture and association
divided from income before payment of corporate income tax.
o Income from disposal of scraps and discarded products after deducting the expenses of recovery and
consumption
o Incomes received in cash or in kind from funding sources; Other income as prescribed by the law

INCOME FROM OVERSEAS BUSINESS

Taxable income
• Taxable income from overseas business activities will be the income prior to payment of the associated
corporate income tax in such country. Similarly to income from transfer of real estate, overseas income is
subject to tax at 20%, without any reduction or exemption even if the company is currently subject to some
CIT incentives in Vietnam. Overseas income is declared in the year incurred or the following year,
depending on the availability of information and documentation
• The CIT paid in the foreign country (including CIT which is exempt or reduced by the foreign country
and/or
dividend tax) will be credited when calculating Vietnam CIT payable, provided that the credited amount
does
not exceed the Vietnam CIT payable for this income
Example
VND
Income earned from an investment project at country X 800,000,000
Tax rate at country X 20%
Tax paid at country X after a 50% reduction as investment incentive (80,000,000)
Net income remitted back to Vietnam 720,000,000
Taxable income declared for Vietnam CIT purposes 800,000,000
CIT payable @ 20% 160,000,000
Less: tax paid and tax reduced in country X (160,000,000)
Outstanding CIT liability 0

RELIEF FOR LOSSES

Loss carry forward

• The loss arising in a tax period is the negative difference of taxable income.
• The enterprise that suffers losses after the tax settlement must continuously transfer all the losses to the
taxable income of the succeeding years. The continuous loss transfer period must not exceed 5 years as from
the year succeeding the loss-making year.
• The enterprise shall temporarily transfer the loss to the taxable income of the quarters after making the
tentative tax declaration and officially transfer the loss to the succeeding year after making the annual tax
settlement declaration.
• Enterprises making losses between the quarters in the same fiscal year are allowed to offset the loss of the
previous year against the next quarter of that fiscal year. When making CIT settlement, the enterprise shall
calculate and continuously transfer all the loss of the year to the taxable income of the succeeding years as
prescribed.
• The enterprises shall independently calculate the loss deducted from taxable incomes according the above
principle. In case other losses keep arising while the previous loss is being transferred, the newly arising
losses (excluding the loss transferred from the previous period) shall be completely transferred within 5
consecutive succeeding years.
• In case the competent agency discover that the loss transferred by the enterprise is different from the loss
determined by the enterprise while carrying out CIT inspection, the loss shall be transferred under the
conclusion from the inspection agencies, ensuring that the loss is completely and continuously transferred
within 5 years as from the year succeeding the loss-making year as prescribed.
• After 5 years as from the loss-making year, the loss not yet transferred shall not be transferred to the
incomes in the succeeding years
TAX INCENTIVES
General
Reduced tax rates (or “preferential tax rate”) for a certain period of time, and/or
Full exemption followed by 50% reduction of the tax liability for a number of tax periods (“tax holiday”).

Tax incentives shall not apply to

o Income from capital or capital contribution right transfer; income from real estate transfer (except
income from investment and trading in social houses); 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;
o Income from the prospecting, exploration and exploitation of petroleum and other precious and rare
natural resources and income from mining activities;
o Income from the provision of services liable to excise tax in accordance with the Excise Tax Law.
o Other taxable income which is not related to incentive activity.

Tax incentives could also be applied the below which is directly related to incentives business:
o incomes from the liquidation of waste materials and scraps of products,
o exchange rate differences
o demand deposit interests

Application scope
o Preferential location
o Preferential business field (activities)
o Large-scale production project (except one to produce product subject to excise tax)

Incentives duration
Preferential tax rates shall be counted consecutively:
• From the first year when enterprises generating 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.
Tax holiday starts continuously from:
• the first year of making profit, without taking into account losses carried forward from previous years; or
• If the enterprises have no taxable income within the first 3 years upon having revenue, the tax holiday shall
apply from the 4th year.
• If an enterprise has taxable income in the first tax period but its new investment project has a production or
business operation duration eligible for tax incentives of under 12 (twelve) months, the enterprise may
choose to enjoy tax incentives for the new investment project right in that tax period or register with the tax
agency a tax incentive duration counted from the subsequent tax period. If the enterprise registers a tax
incentive duration in the subsequent tax period, the first tax period’s payable tax amount shall be determined
for remission into the state budget under regulations.
These provisions may effectively render the tax holiday useless in many cases.

Investment on expansion
Criteria
o The increase in cost of fixed assets when the project is finished and put into operation is at least
VND 20 billion (if the expansion project is of a favored field) or VND 10 billion (if the expansion
project is located in a avored area)
o Ratio of increase in cost of fixed assets is at least 20% of total cost of fixed assets before investment.
o Designed capacity after expansion increases by at least 20% compared to the designed capacity
mentioned in the technical and economic feasibility study done before initial investment.
Other deduction
There are certain cases whereby enterprises may enjoy a double deduction, i.e. Expenses are deducted from
(i) turnover for taxable income determination and then (ii) deducted again from the tax payable, including
Specific
expenses to minority ethnic employees
Enterprises that transfer technologies in the prioritized fields to organizations and individuals in
geographical areas with difficult socio- economic conditions are entitled to 50% reduction of payable CIT
calculated on incomes from technology transfer.

SCIENCE AND TECHNOLOGY FUND ALLOCATION

Form of fund organisation

o Set up a fund body having no legal entity and operate as a dependent unit
o No fund body is set up, instead staff of the company manage the operation

Level of fund allocation

For other type of businesses: up to 10% of total assessable income
For SOE: from 310% of total assessable income

Timing of usage and interest rate applied

Within 5 years after extracting, if the scientific and technological development fund is not used or
improperly
used, or less than 70% thereof is used, the enterprise must pay the CIT on the income used to establish the
fund that is not used of improperly used, and the on profit generated from such CIT amount.
The money improperly used must not be included in the total amount used for scientific and technological
development.
• The CIT rate for calculating the tax amount reclaimed is the tax rate applicable to the enterprise during the
establishment of the fund.
• The interest rate for calculating the profit of the tax amount reclaimed from the unused part of the fund, is
the interest rate of 1-year treasury bonds at the reclaiming time, and the period for interest calculating is
two years.

Not included in the expenses

In case, the actual payment exceeding the provided amount, the excessive amount could be recorded into
business result for tax purpose. The scientific and technological development funds of enterprises are only
used for investment in scientific research and technology development of enterprises in Vietnam.

Change of ownership
The distribution of scientific and technological development funds are decided by enterprises and registered
at
the tax authorities.

TAX EXEMPT INCOME

o Income earned from products of cultivation, husbandry by organization established
o Income from sales of products resulting from new technology in Vietnam is exempted in 5 year
o Income from technical service provision directly to agricultural activities
o Income from implementing R&D contracts is exempted for 3 years
o Income of enterprises where more than 30% of their employees are disabled, HIV-infected persons
o Income from vocational training services specially for ethnic minority people, disabled people,
special difficulty children, HIV effected, social effected people
o After tax income from capital contribution to a Vietnameseenterprise
o Tax exempt income
o Aid fund received used for education, scientific research, cultural, charity with certain condition met.
o Income from transfer of CERs for the first time
 o Income from implementing of government assignment of several organisations
o Undistributable income for reinvestment of socialisation organisations, cooperative
o Income of technology transfer in priority industry to the organisation/individual in special difficult
areas
o Income from bailiff office during the pilot period

TAX ADMINISTRATION APPLICABLE TO CORPORATE INCOME TAX

Responsibility to submit CIT returns to tax agencies

o Tax payers shall submit CIT returns to tax agencies directly managing them;
o If taxpayers have dependent unit with independent accounting records, the unit files tax return at its
tax local office;
o If taxpayers have dependent unit (including dependent production unit) with dependent accounting
records, the unit does not require filing the return separately. The taxpayer shall file & pay the tax for
this unit also.
o If the production unit is located at the location different to its head office, the enterprise shall files the
returns for that unit at the head office but allocate the amount attributable to the unit to the same level
treasury office of the unit
- The CIT attributable of the unit = CIT payable in the period (x) the proportion of expenses of the
unit to the total expenses of the enterprise.
o For economic groups and corporations that have member with dependent accounting record, if this
member can separately accounted for its taxable turnover, expense and income, the unit shall file the
return and pay tax at the local tax office.
o If member conduct business operations different from its of groups or corporations and can
separately account incomes from these business operations, it shall file the return and pay tax at the
local tax office

Timing for Declaration

o CIT provisional calculated on a quarterly basis
o CIT finalisation on yearly basis or by the time of termination of business operations or contracts,
transformation of enterprise ownership or enterprise reorganization.
o Tax payers are required to pay late payment interest if the finalized amount is at least 20% higher
than the
o quarterly paid amounts, calculated from deadline for Quarter IV tax liability’s payment to actual
payment date of the difference.
o Tax declaration in some specific cases:
 On occasion applicable to real estate transfer activities;
 On occasion applicable to foreign contractors having income from capital transfer.
 On percentage of sales applicable to government services body having income but cannot
determine relevant expenditures.

Declaration of CIT on real estate transfer

 in the provinces or cities of head quarter : their managing tax agencies.
 in provinces or cities other than the localities of head quarter the tax return: tax office determine by
the Director of Tax Department at the location of real estate transfer;
 on an irregular basis: on occasion of each transfer.
 on a regular basis: on a quarterly basis.
 Enterprises which are allocated or leased land by the State for the implementation of investment
projects on building infrastructure or houses for transfer or lease with the collection of advances
from customers based on the construction progress in any form

CIT on the proportion (%) of turnover

 Applies to government services unit having income but cannot determine relevant expenditures.
 The unit having regularly trade in goods or services subject to CIT may make monthly tax
declaration and are
 not required to make annual tax finalization.
 The unit having irregularly trade in goods or services subject to CIT shall declare CIT on occasion
basic