The Latest Law on Corporate Income Tax: What Businesses Need to Know?

This article provides a comprehensive overview of the latest Law on Corporate Income Tax (CIT) in Vietnam, including:

 

  • Taxpayers: Who is subject to CIT?
  • Taxable income: How to determine CIT taxable income.
  • Tax rate: The current CIT tax rate and preferential tax rate cases.
  • Tax period & tax calculation method: How to calculate CIT by period and applicable methods.
  • Tax payment: Instructions for timely CIT payment.
  • Exempt income: Cases where businesses are exempt from CIT.
  • Business responsibilities: Regulations on tax declaration, payment, and handling of violations.
 

1. Overview of the Current Law on Corporate Income Tax

a) Origin

  • The current Law on Corporate Income Tax, officially known as the Law No. 22/2008/QH12 on Corporate Income Tax, was adopted by the National Assembly of the Socialist Republic of Vietnam on June 3, 2008, at the 2nd Session of the 12th National Assembly.
  • This law is built on the inheritance and promotion of the strengths of the previous Profit Tax Law, while adding many new provisions suitable for the economic and social reality of the country in the new period.

b) Effective enforcement

  • The Law on Corporate Income Tax 2008 took effect on January 1, 2009.
  • This Law has been amended and supplemented by a number of articles by the Law No. 32/2013/QH13 dated November 28, 2013, and other legal documents.
  • Currently, the Law on Corporate Income Tax 2008 has been amended and supplemented many times and is being applied as the Consolidated Document No. 22/VBHN-VPQH dated December 12, 2023.

c) The Role of the Current Law on Corporate Income Tax

  • Regulating income, ensuring social fairness, and promoting socio-economic development.
  • Creating an equal and transparent business environment for businesses.
  • Contributing to strengthening the state management of corporate income tax.

2. Main Content of the Current Law on Corporate Income Tax

a) Taxpayers:

  • Businesses established and operating in accordance with Vietnamese law:
    • Joint-stock companies
    • Limited liability companies
    • Private businesses
    • Cooperatives
    • State-owned enterprises
    • Other businesses as prescribed by law

Businesses must have a legal business license and operate in the registered business lines.

  • Foreign businesses operating in Vietnam:
    • Foreign businesses with branches and representative offices in Vietnam.
    • Foreign businesses signing business cooperation contracts with Vietnamese businesses and conducting business activities in Vietnam.
    • Foreign businesses with income arising in Vietnam.

b) Taxable Income:

Revenue after deducting allowable expenses as prescribed by law.

Specifically:

  • Revenue: Includes all income arising from the production, business of goods and services, and other activities of businesses as prescribed by law.
  • Allowable expenses: Include actual and reasonable expenses directly related to the production and business activities of businesses, as prescribed in Article 4 of the Law on Corporate Income Tax.

c) Tax Rate

  • Standard tax rate of 20%: Applicable to all businesses, except for cases specified in Clause 2 of Article 10 and Article 13 of the Law.
  • Tax rate from 32% to 50%: Applicable to the activities of exploration, exploitation of oil and gas, and precious resources as prescribed in Article 11 of the Law. The specific tax rate is determined based on each project, each business establishment, and is regulated by the Ministry of Finance.
  • Tax rate from 25% to 50%: Applicable to some special cases as prescribed in Article 12 of the Law.

d) Tax Period

  • The tax period is 12 months (from January 1 to December 31 of the Gregorian calendar) for businesses with a fiscal year coinciding with the Gregorian calendar.
  • Businesses can choose to apply a fiscal year different from the Gregorian calendar, but must notify the tax authority as prescribed.
  • The tax period for businesses applying a fiscal year different from the Gregorian calendar is 12 months, starting from the first day of the first month of the fiscal year to the last day of the twelfth month of the fiscal year.

e) Tax Calculation Method

CIT Calculation Formula: CIT payable = Taxable income x Tax rate

In which:

  • Taxable income: The total revenue after deducting allowable expenses as prescribed by the Law on Corporate Income Tax.
  • Tax rate: The CIT rate applicable to the businesses, as prescribed in Article 10 of the Law on Corporate Income Tax.

f) Tax Payment

  • Deadline for CIT Declaration and Payment:
    • By tax period: Businesses must declare and pay CIT for each tax period.
    • Monthly: Businesses with revenue from the sale of goods and services reaching or exceeding VND 200 billion in a fiscal year must declare and pay CIT on a monthly basis.
    • Special cases: Businesses pay CIT by the method of prepayment, additional payment, and tax settlement.
  • CIT Declaration and Payment Documents:
    • CIT declaration form according to the prescribed form.
    • Documents, invoices, accounting books, and documents related to the determination of revenue, expenses, taxable income, and CIT payable.
  • CIT Declaration and Payment Procedures:
    • Businesses declare CIT on the declaration form according to the prescribed form and submit it directly to the tax authority or online.
    • Businesses pay CIT by tax period or monthly.
    • Businesses make CIT prepayments, additional payments, and tax settlements in accordance with regulations.
  • Regulations on Penalties for Late CIT Payment: Businesses that make incorrect or incomplete declarations, leading to underpayment or late payment of tax, shall be penalized in accordance with the provisions of the tax law.

g) Exempt Income

  • Income from conversion, dissolution, and bankruptcy activities
  • Income from investment and financing activities
  • Income from other activities:
    • Income from insurance activities
    • Income from software export activities
    • Income from technology transfer activities
    • Income from science and technology activities
    • Income from education and training activities
    • Income from medical activities

h) Responsibilities of Enterprises

  • Declare CIT accurately, completely, and on time
  • Pay CIT on time
  • Maintain tax accounting records
  • Cooperate with tax authorities
  • Take responsibility for violations of tax laws, including fines, tax recovery, late tax recovery, and forced enforcement of administrative decisions, etc.
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