Corporate income tax (“CIT”) is a tax levied on the taxable income of organizations engaged in production and trading of goods and services (hereinafter referred to as enterprises).
The regulations related CIT present the following contents:
II. Declaration, finalization;
IV. Cases entitled to CIT incentives;
V. Steps for CIT declaration, payment, finalization and refund;
VI. Frequently Asked Questions (FAQ).
To make it easier for readers to learn and understand the above contents, we have analyzed a few cases and systematized the above contents as below.
To view all relevant documents please see here (tax related regulations)
I. Tax bases and Tax rates
Tax bases and tax rates are applied separately to main business activities’ taxable income and other activities as presented below. The enterprise’s CIT liability in a certain period of will be equal to the total CIT liability arising from all of the business activities of the enterprise.
I.1. For main production and business activities
Based on Circular 78/2014/TT-BTC, CIT is determined based on the following formulas:
|
CIT payable |
= |
( |
CIT assessable income |
- |
The deduction for setting up of science and technology fund (if any) |
) |
x |
CIT rate |
Of which:
|
CIT assessable income |
= |
CIT taxable income |
- |
( |
CIT exempt income |
+ |
Losses carried forward |
) |
|
CIT taxable income |
= |
Revenue |
- |
Deductible expense |
+ |
Other taxable income |
Therefore, the shortened formula of the above 3 formulas is presented as below:
|
CIT liability |
= |
( |
Taxable income from the main business activities |
- |
CIT exempt income |
- |
Losses carried forward |
- |
Deduction for setting up of science and technology fund (if any) |
) |
x |
CIT rate |
Note:
- The factors used in the above formulas are assumed to have satisfied the conditions and regulations of CIT instead of accounting regulations.
- Because of the difference between the accounting data and the tax data, on the CIT return, CIT liability will be determined based on the basis of accounting profit (following accounting regulations) and adjustment for the difference between tax and accounting regulations.
|
Taxable income from the main business activities |
= |
Revenue for taxable income calculation |
- |
CIT deductible expense |
Revenue for taxable income calculation is determined according to the following principles:
- Revenue for taxable income calculation is the entire proceeds from the sale of goods, processing fees, and service provision fees, including price subsidies, surcharges and extras, which an enterprise is entitled to, regardless of whether money has been received or not.
- The timing of revenue for taxable income calculation is determined as follows:
- For the sale of goods, it is when the goods’ ownership and use rights were transferred to the buyer.
- For service provision, it is when the service provision was completed or when service invoice was issued.
Examples for the above principle are presented in Circular 78/2014/TT-BTC.
However, there will be special cases that did not follow the above principle. The details are in Article 5, Circular 78/2014/TT-BTC and other amendments and guidelines.
Expenses are deductible for CIT calculation purpose when:
- Not on the list of non-deductible expenses specified in Clause 2, Article 6, Circular 78/2014/TT-BTC, and
- Fully satisfy the following conditions:
- Being actual expenses arising for production and business activities of enterprises;
- Being supported with adequate invoices and documents as required by law;
- For purchase of goods or services with invoice value from VND 20 million (inclusive of VAT), there must be non- cash payment voucher.
For more detail guidance, please refer to instructions in Article 6, Circular 78/2014/TT-BTC and other amendments and guidelines.
CIT exempt incomes
Income exempt from CIT includes many types of income, for example:
- Income from farming, animal husbandry, aquaculture and salt production of the cooperative; Incomes of cooperatives operating in the fields of agriculture, forestry, fishery and salt production in areas with difficult socio-economic conditions or areas with special socio-economic conditions difficult; Incomes of enterprises from cultivation, husbandry and aquaculture in extremely difficult socio-economic areas; Income from fishing activities;
- Incomes divided from capital contribution, share purchase, joint venture or economic association with domestic enterprises, after contributed capital recipients, share issuers or joint venture or association parties have paid CIT under the Law on CIT, including those eligible for CIT incentives.
- Etc.
(See details of other incomes for calculating taxable income in Article 8, Circular 78/2014/TT-BTC and other amendments and guidelines).
Losses carried forward
The loss amount after the finalization of CIT of the previous tax years will be fully and continuously carried forward for CIT calculation of subsequent years, for no more than 5 consecutive years counting from following year when the losses incurred.
(See details of carry-forward of losses in Article 9, Circular 78/2014/TT-BTC and other amendments and guidelines).
The deduction for setting up of science and technology fund
See details in Article 10, Circular 78/2014/TT-BTC and other amendments and guidelines.
CIT rates
|
Type of CIT rate |
Rates |
|
The standard corporate income tax rate |
20% |
|
The CIT rate applicable to petroleum prospecting, exploration and exploitation in Vietnam |
32 – 50% |
|
The CIT rate applicable to the prospecting, exploration and extraction of precious and rare natural resources (including platinum, gold, silver, tin, tungsten, antimony, gemstones and rare earth other than petroleum) |
40 – 50% |
(See details of tax rates in Article 11, Circular 78/2014/TT-BTC and other amendments and guidelines).
I.2. For other activities
I.2.1 For real estate transfers
Income from real estate transfer is detailed in Clause 1, Article 17, Circular 78/2014/TT-BTC and other amendments and guidelines.
Taxable income from real estate transfer is determined as follows:
|
CIT payable |
= |
( |
Revenue from real estate transfer |
- |
The cost of the real estate |
- |
Deductible expenses related to the real estate transfer |
) |
x |
Tax rate |
Revenue from real estate transfer
- Revenue from real estate transfer shall be determined based on the actual transfer price under the real estate transfer or purchase and sale contract in accordance with law (including surcharges and extra fees, if any).
- The timing of revenue for taxable income calculation is when the seller handed over the real estate to the purchaser; or when the advance money was collected according to the progress payment in any form.
However, there will be special cases where the above principle does not apply, see details in Article 17, Circular 78/2014/TT-BTC and other amendments and guidelines.
The cost of the real estate transfer
The cost of land transferred right is determined in accordance with the origin of the land use right.
(See details in Clause 1, Article 17, Circular 78/2014/TT-BTC and other amendments and guidelines.).
Deductible expenses related to the real estate transfer
- If not on the list of non-deductible expenses specified in Clause 2, Article 6, Circular 78/2014/TT-BTC and on the list of deductible real estate transfer expenses mentioned in Clause 1, Article 17, Circular 78/2014/TT-BTC and other amendments and guidelines; and
- Deductible expenses to determine taxable income of real estate transfer activities in the tax period must correspond to the revenue used on calculation of taxable income.
For more detail guidance, please refer to instructions in Article 17, Circular 78/2014/TT-BTC and other amendments and guidelines.
CIT rate: The standard CIT rate 20%.
I.2.2 Incomes from capital transfer
Pursuant to Circular 78/2014/TT-BTC, taxable income from capital transfer is determined based on the following formulas:
|
CIT payable |
= |
( |
Transfer price |
- |
Purchasing price of the transferred capital |
- |
Transfer expenses |
) |
x |
CIT rate |
Transfer price
The transfer price is the total proceeds received by the transferor under the transfer contract.
(See details in Clause 2, Article 14, Circular 78/2014/TT-BTC and other amendments and guidelines).
Purchasing price of the transferred capital
The purchase prices for 2 types of capital are determined as follows:
- Capital contributed for enterprise establishment: the purchasing price is the value of the contributed capital amount recorded in accounting books, invoices and documents; and
- Capital previously purchased: the purchasing price is capital value at the time of original purchase.
(See details in Clause 2, Article 14, Circular 78/2014/TT-BTC and other amendments and guidelines).
Transfer expenses
Transfer expenses are actual expenses directly related to the capital transfer, and supported with lawful documents and invoices.
(See details in Clause 2, Article 14, Circular 78/2014/TT-BTC and other amendments and guidelines.).
CIT rate: The standard CIT rate 20%.
I.2.3 Incomes from securities transfer
Pursuant to Circular 78/2014/TT-BTC, taxable income from securities transfer is determined based on the following formulas:
|
CIT payable |
= |
( |
Selling price |
- |
Purchasing price |
- |
Transfer expenses |
) |
x |
CIT rate |
The selling price
See details guidance for different types of securities in Clause 2, Article 15, Circular 78/2014/TT-BTC and other amendments and guidelines.
The purchasing price
See details guidance for different types of securities in Clause 2, Article 15, Circular 78/2014/TT-BTC and other amendments and guidelines.
Transfer expenses
See details guidance for different types of securities in Clause 2, Article 15, Circular 78/2014/TT-BTC and other amendments and guidelines.
CIT rate: The standard CIT rate 20%.
I.2.4. Other income (other than real estate transfer, capital transfer and securities)
- Income from deposit interest and capital loan interest including late payment interest, installment interest, credit guarantee fee and other fees in the loan contract.
- Etc.
(See details guidance for calculating taxable income of other incomes in Article 7, Circular 78/2014/TT-BTC and other amendments and guidelines.).
II. Declaration and finalization
The process of CIT declaration and finalization for all activities will be done through HTKK software (provided via the website of the General Department of Taxation. To update the latest version click here). Through this software, tax authorities provides the forms used in declaration and finalization process.
Note: It is necessary to prepare detailed tax calculation spreadsheets for each business activity to present to with tax authorities when necessary.
1. For main production and business activities
a. Provisional CIT declaration
On quarterly basis, an enterprise do not need to submit the quarterly CIT declaration.
However, the enterprise must make quarterly provisional CIT payment for the first three quarters of the tax year based on the business result, with the following conditions:
- If the total provisional tax amount paid in four quarters is > 80% of the annual finalized tax liability: the taxpayer need to make payment of the outstanding CIT liability of the tax year.
- If the total provisional tax amount paid in four quarters is < 80% of the annual finalized tax liability: In addition to the outstanding CIT liability of the tax year, the taxpayer also needs to pay the late payment interest applied from the date succeeding the payment deadline of the fourth quarter.
(See details at Clause 3, Article 1, Decree 91/2022/ND-CP)
b. Finalization
The steps to finalize CIT are as follows:
- Select the finalization Form No. 03/TNDN;
- Select the tax period, business lines, and necessary appendices for declaration (03-1A/TNDN and 03-2A/TNDN are two basic appendices that enterprises normally do business and production should have);
- Enter information on the income statement in Appendix 03-1A/TNDN, loss transfer information in Appendix 03-2A/TNDN and other appendices (if any). After entering the data in the appendix, it will automatically be transferred to the final settlement declaration 03/TNDN.
For other criteria and appendices, please see detailed instructions available on the software HTKK.
2. For real estate transfers
a. Temporary payment declaration.
- Enterprise conducts real estate transfer activities on regular basis: make temporary payment like the main production and business activities mentioned in Section 1 Part II or make declaration upon actual occurrence (if wanted to);
- Enterprise does not conduct real estate transfer activities on regular basis: make declaration upon actual occurrence using CIT declaration Form No. 02/TNDN.
b. Finalization
- Enterprise conducts real estate transfer activities on regular basis: the steps for CIT Finalization are performed in similar manner as presented in Section 1 Part II;
- Enterprise does not conduct real estate transfer activities on regular basis: they must finalize the tax amount from the real estate transfer separately using to Appendix 03-5/TNDN of the finalization form 03/TNDN; In case there is an allocation of payable corporate income tax for real estate transfer, the taxpayer must additionally submit the Appendix form No. 03-8A/TNDN.
3. For capital transfer and securities transfer
a. Temporary payment declaration
If the taxpayer declares CIT from the sale of the entire one-member limited liability company owned by the taxpayer in the form of capital transfer with real estate attached, it shall use Form No. 06/TNDN for declaration every time the tax is incurred.
b. Finalization
Income from both capital transfer and securities transfer activities are declared as other incomes on finalization declaration 03/TNDN.
4. For other activities beside real estate and capital transfer: declared together with the main production and business activities.
III. Tax refund
Overpaid taxes after finalization are cleared/refunded in the following order:
- Step 1: Automatically Offset against the outstanding tax, late payment interest, fines (hereinafter referred to as "debts") (with same economic content and area as those of the overpaid amount) or tax, late payment interest, fines payable next time (hereinafter referred to as "new amounts payable") (with same economic content and area as those of the overpaid amount). Offset against another taxpayer's debts or new amount payables that belong to the same category and area as those of the overpaid amount if the current taxpayer has no more debt (if any). The enterprise will need to submit the application including: form No. 01/DNXLNT attached in Circular 80/2021/TT-BTC and relevant documents to the tax authority specified in Clause 3 of Article 25, Circular 80/2021/TT-BTC.
- Step 2: If the overpaid amount has not fully cleared, or the enterprise does not have debts, the enterprise has the right to claim tax refund or continue clearing with subsequent tax payments.
- Step 3: If the taxpayer requests for tax refund, after the decision on tax refund amount, the tax authority will conduct tax inspection to determine whether or not the refund is allowed and the actual refund amount according to Article 77, Law on Tax administration 38/2019/QH14.
- Step 4: Tax refund (If any).
(See details in Clause 1 & 2, Article 25, Circular 80/2021/TT-BTC).
IV. Cases entitled to CIT incentives
Cases entitled to CIT incentives:
- New investment projects in areas of investment promotion, operating in the field of investment promotion or large-scale projects.
- Expansion investment projects need to meet certain criteria.
Types of tax incentives:
- Preferential tax rates;
- Tax exemption and reduction;
(See details of conditions and beneficiaries of CIT incentives in Chapter VI, Circular 78/2014/TT-BTC and other amendments and guidelines).
V. Steps of tax declaration, payment, finalization and refund
Step 1: Calculate CIT for each type of business activity of the enterprise. See in Part I. Tax bases and tax rates and Part V. Cases eligible for CIT incentives.
Step 2: Declare and pay tax.See in Part II. Declaration and settlement.
Step 3: Settlement.See in Part II. Declaration and settlement.
Step 4: Tax refund (if any). See in Part III. Tax refund
VI. Frequently Asked Questions
See details in Frequently asked questions about taxes