1

CORPORATE INCOME TAX

Lecturer: Le Phuong Thao, MBA

School of Business - International University
 Objectives

After complete this lecture, you are able to

 Determine the primary authorities for Corporate Income Tax
research
 Understand the scope of Corporate Income Tax
 Understand the tax bases and methods of tax computation
 Understand tax registration, withholding, declaration,
finalization and refund
 Legal Documents
on Corporate Income Tax

CIT
Law No. 14/2008/QH12 Law No. 32/2013/QH13 
Decree No. 92/2013/ND-CP
Decree No. 124/2008/ND-CP Decree No. 218/2013/ND-CP
Decree No. 91/2014/ND-CP
Decree No. 12/2015/ND-CP
Circular no. 130/2008/TT-BTC Decree No 44/2021/NĐ-CP  

Circular 141/2013/TT-BTC
Circular 78/2014/TT-BTC
Circular no. 203/2009/TT-BTC of Oct 20, 2009
Circular 151/2014/ TT-BTC
Circular no. 66/2010/TT-BTC of Apr 4, 2010 Circular 96/2015/ TT-BTC
Circular no. 18/2011/TT-BTC of Feb 10, 2011
Circular 45/2013/TT-BTC
(guiding the management, use and depreciation
of fixed assets)
 Scope of Corporate Income Tax
4

 Corporate income tax payers

 Sources of income
 Corporate income taxpayers
5

Any organization producing and trading goods and services

which has taxable income (hereinafter referred to as an
enterprise), comprising
1. Enterprises established and operating under Vietnamese Laws:
 worldwide income (including income sourced from Vietnam and other
countries)
2. Foreign enterprises with permanent establishments in Vietnam:
 Income sourced from Vietnam
 Income sourced from overseas activities that is attributed to the
permanent establishment in Vietnam
3. Foreign enterprises without permanent establishments in Vietnam:
 Income sourced from Vietnam
 Corporate income taxpayers
6

 Permanent establishment in Vietnam is

 production and business establishment through which foreign enterprises
conduct some or all income-generating production and business activities in
Vietnam

 Including:
 Branches, executive offices, factories, workshops, means of transport,
mines, oil and gas fields, or other places for extraction of natural
resources in Vietnam;
 Construction sites and construction, installation or assembly works;
 Providers of services, including consultancy services through
employees or other organizations or individuals;
 Agents for foreign enterprises;
 Vietnam-based representatives
 Taxable Income
7

Taxable income include

 All income from supply of goods or services (main
activities of the enterprises – ordinary/primary income)
 Other income : income derived not from the business
lines in the business registration certificate of the
enterprises
 Tax Computation
8

Other
Taxable income = Turnover - Deductible
exp. + taxable
income

Loss
Taxable Exempt carried
Assessable income = - -
income income forward
from
previous
year
Science
Assessable
Tax liability = - &Technology X Tax Rate
income Fund Allocation

Note: other taxable income is calculated separately

on the net basis for each activity
 Tax Period
9

 The Western calendar year OR

 The fiscal year

Note: if the first or the last tax period is less than 3

months  could combine 2 consecutive tax
periods into 1
 Tax Rate
10

 The standard CIT rate is 22% (from 1/1/2014 – 31/12/2015); 20% (from 1/1/2016)
 20% for enterprises with a total revenue for the preceding year not exceeding VND20
billion (from 1/1/2014 – 31/12/2015);

 Applicable for all income, except

 Income from capital transfer, from transfer of capital contribution right, from transfer of
real estate, etc…
 Income from exploration and exploitation of oil and gas, rare natural resources, and
mineral resources (32% to 50% depending on each project/business.)
 Income from supply of services subject to special sales tax

To support taxpayers during the Covid pandemic, a 30% CIT reduction applies for 2021 for
companies having total revenue in 2021 not exceeding VND200b and being less than what
they earned in 2019. The latter requirement does not apply in certain cases, such as newly
established companies and companies which underwent a merger or demerger in 2021.
 Turnover
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 Tax point: The time for fixing turnover to calculate

taxable income
 In respect of goods, the time when ownership of the goods
was transferred (not the time when the sale invoice was
issued)
 In the case of services, the time when the services are fully
or partially completed (not the time when the sale invoice
was issued)
 Turnover
12

 VAT – deduction method

 Turnover does not include VAT

 VAT – direct method

 Turnover is the total invoice amount
 Turnover for Special Cases
13

 Turnover on goods sold on installments = the selling price of the

goods as for a one-off payment [lump sum price], excluding interest

on late payments
 Interest is classified as “Other income”

Example:
Car Dealer Co. sells 2 cars on 10 months installment basis.
 Total installment payment is VND250 million/car.
 Lump sum payment price is VND200 million/car
 Turnover for CIT purposes is
2 x 200 = VND400 million.
 Turnover for Special Cases
14

 For goods and services used for exchange , donations, gifts, internal consumption,
turnover is determined by the selling price of products, goods and services of the
same or similar kind on 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: Manufacturer Y produces product A,

Y issued 10 products A to exchange for a number of goods B,
Y used 20 products A to reward their employees.
The selling price (excluding of VAT) of product A at the time of exchange and
reward is VND20000 per product.
Turnover for CIT purposes is:

(10+20)*20,000 = VND600,000
 Turnover for Special Cases
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 For processing activities, the turnover is processing fee,

including wages, cost of fuel, power, sub-materials, and other

costs required for the processing of 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
VND269,000,000
 Taxable turnover is
 Turnover for Special Cases
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 For agency or consignment activities (selling at the price fixed

by the principal), the turnover is the receivable commission

Example: Shop X act 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 VND400mil. Turnover
for CIT purposes of Shop X is:
400mil * 20% = VND80mil

 The principal (i.e. Company A in the above example) shall recognize the total
sale price by the agent (VND400mil) as its turnover, the commission
(VND80 mil) paid to the agent is its deductible expense.
 Turnover for Special Cases
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 For lending activities, finance leasing activities, turnover is the receivable

interest or rental receivable in the tax period .
 For transportation, turnover shall be the total monies receivable from
transportation of passengers, luggage and cargo.
 For electricity and clean water supply, it is the sum of money indicated
on the value-added invoice. The time of determining turnover used for
calculating taxable income is the day on which electricity meter
readings are certified and recorded on electricity or clean water bills.
Example: An electricity bill is recorded with an electricity meter reading
from December 5 to January 5. Turnover recorded on this bill will be used
for January.
Further details can be found in Circular 78
 Deductible expenses
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 Expenses
 actually arise
 directly related to creation of the turnover and taxable
income in the tax assessment period,
 have adequate invoices and vouchers as required by
law.
 Non-deductible Expenses
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1. Expenses which do not meet the general deductibility conditions, except

the value of losses from natural disasters and other unforeseen
circumstances with no compensation,
2. Depreciation of fixed assets is not deductible if
 The fixed assets are not used for business activities
 There is no document supporting that the fixed assets are owned by the
business (except for finance-leased ones)
 Depreciation of fully depreciated assets
 The depreciation expense s are not recorded and monitored in the
company accounting books
 The depreciation expense s are not in accordance with the prevailing
regulations (Circular 45/2013/TT-BTC)
 Non-deductible Expenses
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 Straight-line method

Historical cost
Level of depreciation =
Stipulated Duration of use

Example: Company A buys a power generator

 The invoice amount of VND210 mil.
 Transportation cost VND10 mil.
 Installation, commissioning, tests cost totals VND20 mil.
 The economical life of the machinery is 12 years.
 The stipulated duration of use is maximum 10 years according to the circular 45.
 The generator is put into use from 1 July 2014.
 Non-deductible Expenses
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 Depreciation expenses for CIT purpose is calculated as follow:

 Historical cost:
 210 + 10 + 20 = 240 mil
 Annual depreciation:
 24/10=24 mil
 First year depreciation:
 24/12*6 = 12 mil
Note: If the Company is profitable and would like to make faster depreciation using
straight line method for technology changes, the depreciation expenses are capped
at 2 times of normal expense under straight line method
 Ex: the company want to depreciate the generator asap to upgrade to a more
advanced one, the allowed period would be 5 years (i.e. 2 times faster than the 10-
year period).
 Non-deductible Expenses
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Adjusted reducing balance method

 Used for the sectors with quickly development or
technology changes
 Applied only for fixed assets which meet the following
conditions:
 New invested fixed assets (not second hand)
 Machinery and equipment, or instruments for
measurement and testing
 Non-deductible Expenses
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Adjusted reducing balance method

 Annual depreciation level
= reducing balance x accelerated depreciation rate

 Accelerated depreciation rate

= Straight line method depreciation rate x adjusted ratio

1
Straight line method depreciation rate = X 100
Duration of use

Duration of use (t) Adjusted ratio

t<= 4 yrs 1.5
4yrs < t < 6yrs 2
t > 6yrs 2.5
 Non-deductible Expenses
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 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 under circular 45.
 The machinery and equipment is put into use from 1 January
2014.
 Depreciation expenses for CIT purpose is calculated as
follow:
 Straight line method depreciation rate = 1/5 * 100 = 20%
 Accelerated depreciation rate = 20% * 2 = 40%
 Non-deductible Expenses
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Year Reducing Calculation Annual Accumulated

balance depreciation depreciation
2014 2,000,000 800,000 800,000
2015 1,200,000 480,000 1,280,000
2016 720,000 288,000 1,568,000
2017 432,000 216,000 1,784,000
2018 216,000 216,000 2,000,000
 Non-deductible Expenses
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 For enterprises which do not have business of

transportation, tourism, or hotel in their business
registration certificates, the following
depreciation expenses shall not be deductible:
 The depreciation amount corresponding to the excess over
VND1.6bil of historical cost
 The entire depreciation expenses of civil airplanes or yachts

 The restriction applied for purchases from 1/1/2009

 Non-deductible Expenses
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 Example:
Kingstar Ltd. is a company specialized in assembling electronics for
export, it bought a Mercedes sedan for its General Director’s business
travel in April 2014 at the value of VND3 bil and is depreciating the car
over 6 years, which is within the range of circular 45
 2014 accounting depreciation:
(9/12)*(VND3,000/6) = VND375 mil
 2014 deductible depreciation expense
(9/12)*(VND1,600/6) = VND200 mil
 Non-deductible Expenses
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 Upgrading vs. Repaid expense:

 Expenses incurred for upgrading, improving the assets shall be added to historical cost for
depreciation.
 Repaid expenses must be accounted fully for the current year or amortized for maximum
of 3 years

Note: A tax deduction is allowed for depreciation of fixed assets during

production suspension periods of less than 9 months (if due to seasonal
production) and 12 months (if due to repairs, maintenance or relocation)
 Non-deductible Expenses
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 Any portion of costs of raw materials, materials, fuel or goods which are
used in excess of the reasonable consumption levels.
 Example: Cost of good sold charged to P&L for the tax period is VND250mil
of which cost of raw materials used for production of goods that exceeds the
reasonable consumption level determined by the business is VND15mil

 Deductible cost of good sold = 235mil

Enterprises shall establish its own reasonable consumption levels of raw

material and only disclose to the Tax office the main level of basic
products.
 Non-deductible Expenses
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 Employee remuneration expenses which are not actually paid or are not stated
in a labour contract, collective labour agreement, and the financial rules of the
company.
 Salaries, wages and allowances payable to laborers which, upon the expiration of the
time limit for submission of annual tax finalization dossiers, have actually not been
paid. Unless enterprises make provision salary funds for the subsequent years to
ensure uninterrupted payment of salaries.
 Yearly provision levels <= 17% of current year’s salary funds

 Salaries and wages of owners of private enterprises or one-member limited

liability companies (owned by a single individual); remunerations paid to
founders and members of members’ councils or boards of directors who do
not personally participate in administering goods production and trading or
service provision activities.
 Non-deductible Expenses
31

 Company payroll shows that (VND’000):

 Salary 1,278,000
 Bonus 200,000
 Total payable 1,478,000
 Less personal income tax
and statutory contribution withheld (350,000)
 Net payable to the employee 1,128,000
Out of the total bonus, there was VND100mil paid to some permanent
employees without any bonus policy mentioned in labour contracts signed
with the company.

So, salary and allowance cost of CIT purposes is

VND1,478mil – 100mil= 1,378mil
 Non-deductible Expenses
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 Expenses for uniforms of employees paid in cash over VND 5 mil per person
per year
 Expenses for employees which are not strictly business-related
 golf membership and fees
 incentives for initiatives, improvement without basis ( ex: no internal regulations…)
 Interest on loans corresponding to the portion of charter capital not yet
contributed;
 Interest on loans from non-economic and non-credit organizations exceeding
1.5 times the interest rate set by the State Bank of Vietnam;
 Non-deductible Expenses
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 Provisions for stock devaluation, bad debts, financial

investment losses, product warranties, or construction work
which are not in accordance with the prevailing regulations;
 Management expenses allocated to permanent establishments
in Vietnam by the foreign company’ s head office which are
not in accordance with the regulations;
 Non-deductible Expenses
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 Unrealized foreign exchange losses due to the revaluation of foreign

currency items other than account payables at the end of a financial
year;
 Donations for education, health care, natural disasters, or building
charitable homes for the poor where without supporting document or
with ineligible ones
 Administrative penalties, fines
 Fines under economic contracts should be deductible
 Creditable input value added tax, corporate income tax, and personal
income tax.

Further details can be found in Circular 78

 Other Taxable Income
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1. Income from capital or securities transfer

2. Income from real estate transfer
3. Income from asset ownership or use right, including
copyright royalties in any form paid for asset ownership or
use right; royalties from intellectual property rights; and
income from technology transfer under law.
4. Income from transfer or liquidation of assets (except real
estate) and other valuable papers.
 Income = turnover - residual book value - expenses
related to the asset transfer or liquidation.
 Other Taxable Income
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 Income from interest and charges on deposit, from lending under all forms according
to the law
 Income from foreign currency trading, from realized foreign exchange difference
 Reversion of provisions which are not fully used by the due date
 Bad debts written off which are now collected
 Account payables of which creditors are unidentified
 Receipts of fines for economic breaches (after deducting payable fines)
 Income which was omitted in previous years
 Difference in revaluation of assets for capital contribution, transfer upon split, merger
consolidation, etc
 Refunds of import duty or export duty related to the current year shall be recorded as a
decrease in expense, while refunds of the previous year shall be considered as other
income and taxed at standard tax rate
 Other income items:
 Further details can be found Circular 78
 Exempt Income
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1. Income from cultivating, breeding, rearing and growing aquatic products of

organization established under Co-operative Law.
2. Income from providing technical services that directly serve for agricultural
activities such as watering, plant disease prevention, harvesting agricultural
products, etc.
3. Income from carrying out R&D contracts or from product sales during trial
production, from selling products made from new technology which was first
applied in Vietnam, exemption only applies to the first year.
4. Income from production, trading of goods or providing services of
enterprises having at least 51% employees who are disabled or HIV-
infected, etc..
5. Income from capital contribution in domestic companies after the
investing companies have paid CIT (or exempt from CIT)
 Losses Carried Forward
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 Losses incurred in a quarter may be carried forward to the following

quarters of the same tax year.
 Losses are required to carry forward entirely and continuously within
5 years from the year in which the loss occurred.
 Losses of incentivised activities can be offset against profits from
non-incentivised activities, and vice versa.
 Losses from the transfer of real estate are allowed to be offset
against other business activities
 Gain from the transfer of real estate are NOT allowed to be offset
against other business activities
 Losses Carried Forward
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JetBlue co., has the profit/loss position as follows. It is entitled to a 2 years tax holiday
(CIT exempted) from the first profitable year.

Year Profit/Loss Loss carried forward Assessable income

2014 (100,000) - -
2015 50,000 - -
2016 60,000 - -
2017 80,000 (80,000) -
2018 100,000 (20,000) 80,000
100,000
The losses cannot be carried forward as above !!!!!!

The loss must be carried forward to 2015, then 2016

 No benefit from such losses carried forward

 Tax Incentives
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 Tax incentives are granted based on regulated encouraged sectors and

difficult socio-economic locations.
 The sectors which are encouraged include education, health care,
sport/culture, high technology, environmental protection, scientific
research, infrastructural development and computer software manufacture.

 The two preferential rates of 10% and 20% are available for 15
years and 10 years respectively, starting from the commencement of
operating activities. When the preferential rate expires, the CIT rate
reverts to the standard rate.
 Tax Incentives
41

 Taxpayers may be eligible for tax holidays and reductions.

 The holidays take the form of a complete exemption from
CIT for a certain period beginning immediately after the
enterprise first makes profits, without taking into
account losses carried forward, of the applicable rate.
 where the enterprise has not derived profits within 3 years of the
commencement of operations, the tax holiday/tax reduction will
start from the fourth year of operation.
 Tax Incentives
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 Criteria for eligibility for these holidays and reductions are set
out in the CIT regulations.
 Additional tax reductions may be available for engaging in
manufacturing, construction, and transportation activities
which employ many female staff, or employ ethnic minorities.
 Tax incentives do not apply to other incomes
 Income from the sale of scrap from production process being
subject to CIT incentive shall be subject to CIT incentive. On
the contrary, such income shall be considered as other income
and taxed at standard rate.
 Further details can be found Circular 78 and 96
 Administration
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 Provisional quarterly CIT returns must be filed and taxes must be paid by the 30th
day of the first month of the subsequent quarter.
 Final CIT returns are filed annually. The annual CIT return must be filed and
submitted not later than 90 days from the fiscal year end. The outstanding tax
payable must be paid at the same time the annual CIT return is submitted.
 Where a taxpayer has dependent branches in different provinces, a single CIT return
is required. However, manufacturing enterprises are required to allocate tax
payments to the various provincial tax authorities in the locations where they have
manufacturing branches. The basis for allocation is the proportion of expenditure
spent by each branch over the total expenditure of the company.
 The standard tax year is the Western calendar year. Companies are required to notify
the tax authorities in case of using a tax year other than the Western calendar year.
44 THE END