1. Corporate Income Tax

a) Concept

Corporate income tax (CIT) is a direct tax levied on the taxable income of a business arising from business activities, investment activities, financial activities, and other activities as prescribed by law.

b) Importance of tax law compliance

• For businesses:
  • Ensure legal business operations, avoid legal violations and sanctions.
  • Be highly regarded for transparency and reputation, build trust with customers, partners, investors, and enhance brand reputation.
  • Enjoy tax incentives and support from government policies, creating favorable conditions for business development.
• For the economy:
  • Ensure revenue for the state budget, contributing to resources for public spending, national defense, and socio-economic development.
  • Create a fair business environment for businesses, encouraging healthy competition.
  • Ensure security, social order, and build a civilized and modern society.

2. Explanation of regulations

a) Taxpayers

• Businesses established under Vietnamese law and operating in Vietnam.
• Branches, representative offices of foreign non-profit organizations operating in Vietnam.
• Foreign-invested businesses established under Vietnamese law operating abroad, for income from business activities, investment activities, financial activities, and other activities in Vietnam.

Some special cases:

• Individual businesses
• Cooperatives
• Non-profit organizations

b) Taxable income

Taxable income is the total revenue of a business minus the deductible expenses when calculating tax.

• Revenue: Includes all income of a business arising from business activities, investment activities, financial activities, and other activities as prescribed by law.
• Deductible expenses: Are reasonable expenses directly related to business activities, investment activities, financial activities, and other activities of the enterprise as prescribed by law.

c) Tax rate

• General tax rate: For the taxable income of a business is 20%.
• Preferential tax rates:
  • Apply a tax rate of 10% to income from business activities of start-up businesses in the first 05 years from the date of being granted a certificate of start-up business.
  • Apply a tax rate of 15% to income from business activities of start-up businesses in the next 05 years after the expiration of the application of the 10% tax rate.
  • Apply a tax rate of 15% to income from business activities of businesses implementing investment projects in economic zones and high-tech parks for 10 years from the date the project is put into operation.
  • Apply a tax rate of 15% to income from business activities of businesses implementing investment projects in areas with difficult socio-economic conditions for 15 years from the date the project is put into operation.
• Higher tax rate: Apply a higher tax rate of 35% to income from business activities of mineral exploitation enterprises.

d) Tax calculation method

• Tax deduction method: CIT payable = Taxable income x Tax rate.
• Fixed profit rate method: CIT payable = Revenue x Profit rate.

e) Tax declaration and payment

• Tax declaration deadline: Businesses need to declare CIT by period with the following tax declaration periods:
  • Quarterly tax declaration: Submit within 20 days after the end of each quarter.
  • Annual tax declaration: Submit within 3 months after the end of the fiscal year.
• Tax declaration instructions: Businesses can declare CIT in two forms:
  • Electronic tax declaration: Businesses access the General Department of Taxation’s electronic tax portal to declare taxes online.
  • Paper tax declaration: Businesses use the tax declaration form prescribed by the Ministry of Finance and submit it to the competent tax authority.
• Tax payment instructions: Businesses can pay CIT in two forms:
  • Pay tax through banks: Businesses transfer tax money to the tax authority’s bank account according to the instructions of the tax authority.
  • Pay tax directly at the tax authority: Businesses pay cash or checks at the tax counter of the competent tax authority.

f) Preferential Policies 

• Preferential tax rates:
  • Apply a preferential tax rate of 10% to the taxable income from business activities of start-up businesses in innovation and creation for the first 03 years from the date of being granted a certificate of start-up business in innovation and creation.
  • Apply a preferential tax rate of 15% to the taxable income from business activities of start-up businesses in innovation and creation for the next 04 years.
  • Apply a preferential tax rate of 15% to the taxable income from business activities of businesses implementing investment development projects in economic zones and high-tech parks for 10 years from the date the project is put into operation.
  • Apply a preferential tax rate of 15% to the taxable income from business activities of businesses implementing investment development projects in areas with difficult socio-economic conditions for 15 years from the date the project is put into operation.
  • Apply a preferential tax rate of 15% to the taxable income from business activities of businesses operating in the fields of agriculture, forestry, and fishery.
  • Apply a preferential tax rate of 20% to the taxable income from business activities of small and medium-sized businesses during the prescribed period (05 years for small businesses and 03 years for medium-sized businesses).
• Preferential treatment on tax payment time:
  • Businesses are exempt from CIT for 02 years for income from business activities affected by the Covid-19 pandemic.
  • Businesses are entitled to defer or reduce CIT in case of financial difficulties caused by natural disasters, war, or other objective factors.
• Preferential treatment on tax deduction:
  • Businesses are entitled to deduct reasonable expenses directly related to their business activities as prescribed by law.
  • Some deductible expenses include: research and development expenses for science and technology; environmental protection expenses; expenses for supporting vocational training for employees…

g) Responsibilities

• Tax registration: Businesses must register for tax with the competent tax authority within 15 days from the date of establishment of the business or the date the business has a change in tax registration information and must update the tax registration information when there is a change.
• Tax declaration: Businesses must declare tax on time in accordance with the provisions of the law and must declare tax accurately, honestly, and fully in accordance with the provisions of the law.
• Tax payment: Businesses must pay tax on time in accordance with the provisions of the law and pay tax in full according to the declared amount.
• Keep accounting books and tax documents: Businesses must keep accounting books and tax documents in accordance with the provisions of the law and preserve accounting books and tax documents for the period prescribed by law.
• Cooperate with tax authorities: Businesses must provide complete, accurate, and timely information and data related to the business activities of the business to the tax authority when requested and must cooperate with the tax authority in tax inspection and examination.

In addition, businesses also have other responsibilities such as:

• Implement anti-tax evasion measures: Businesses must implement measures to prevent, detect, and handle tax evasion acts in accordance with the provisions of the law.
• Participate in the propaganda and education of tax laws: Businesses are responsible for participating in the propaganda and education of tax laws for their employees and related parties.

References:

• Consolidated Document No. 22/VBHN-VPQH Corporate Income Tax Law https://quochoi.vn/tintuc/Pages/tin-hoat-dong-cua-quoc-hoi.aspx?ItemID=82304
• Circular guiding the implementation of the Corporate Income Tax Law https://thuvienphapluat.vn/van-ban/Thue-Phi-Le-Phi/Thong-tu-40-2021-TT-BTC-huong-dan-thue-gia-tri-gia-tang-thue-thu-nhap-ca-nhan-477635.aspx
• Website of the General Department of Taxation https://www.gdt.gov.vn/