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MEKONG COUNSEL

Circular superseding some Circulars guiding the implementation of the Law on Corporate Income Tax

On July 27th, 2012, Ministry of Finance issued Circular No. 123/2012/TT-BTC superseding some Circulars guiding the implementation of the Law on Corporate Income Tax No. 14/2008/QH12 and Decree No. 124/2008/ND-CP dated December 11th, 2008, Decree No. 122/2011/ND-CP dated December 27th, 2011 of the Government detailing and guiding the implementation of the Law on Corporate Income Tax (“CIT”). Accordingly, regulations in the Circulars guiding the Law on CIT shall be consolidated, some contents shall be as follows:

 

- Regulations on determination of turnover for taxable income calculation; of deductible and non-deductible expenses upon determination of taxable income; of other incomes; of tax-exempt incomes; determination and deferment of losses.

 

- CIT rate shall remain 25%. As for activities of prospecting, exploring and exploiting oil and gas in Vietnam, CIT rate shall be between 32% and 50% basing on the location, mining conditions and reserves of mines as decided by the Prime Minister.

 

- Conditions and principles for application of CIT incentives shall remain unchanged. Some incentives shall be briefly summarized as follows:

 

+ Applying tax exemption for 4 years and 50% reduction of payable tax amounts for 9 subsequent years, and the preferential tax rate of 10% for fifteen (15) years to: New enterprises under investment projects in geographical areas with extreme socio-economic difficulties as regulated; New enterprises under investment projects in economic zones or hi-tech parks established under the Prime Minister’s decisions; New enterprises under investment projects in the domains of high technology, scientific research and technological development, development of infrastructure works of special importance as decided by the Prime Minister;  Manufacture of software products.

 

+ Applying tax exemption for 4 years and 50% reduction of payable tax amounts for 9 subsequent years to new enterprises; Applying the preferential tax rate of 10% throughout the operation term to income of enterprises operating in socialized domains (education-training, vocational training, healthcare, cultural, sports and environmental domains) in geographical areas with extreme socio-economic difficulties as regulated.

 

+ Applying tax exemption for 4 years and 50% reduction of payable tax amounts for 5 subsequent years to new enterprises; Applying the preferential tax rate of 10% throughout the operation term to income of enterprises operating in socialized domains (education-training, vocational training, healthcare, cultural, sports and environmental domains) not in geographical areas with extreme socio-economic difficulties as regulated.

 

+ Applying tax exemption for 2 years and 50% reduction of payable tax amounts for 4 subsequent years, the preferential tax rate of 10% for ten (10) years to new enterprises under investment projects in geographical areas with socio-economic difficulties as regulated; Applying the preferential tax rate of 20% throughout the operation term to Agricultural Service Cooperatives, People’s Credit Funds.

 

Besides, some regulations shall be amended, supplemented to comply with regulations on some tax policies to support enterprises, including:

 

- CIT incentives for enterprises which are in the duration of CIT incentives and conducting tax period transformation shall be specified. Accordingly, enterprises may choose to receive incentives in the transformation year or in the following year.

 

- Incomes from transfer of real estate; project (not associated with the transfer of land use right, land leasing right); project deployment right, right to explore, exploit, process minerals which are not subject to CIT incentives nor deduction to incomes or losses of other business and production activities shall be accounted separately and paid CIT at 25%. In case these incomes are deducted to incomes or losses, enterprises shall carry out the deduction prior to declaring CIT.

 

- Supplementing deductible expenses, including: expenses for HIV/AIDS prevention at workplace; regular expenses of new enterprises to maintain business and production activities prior to making income.

 

- Amending regulation on incomes from goods sales and services provision activities subject to CIT exemption. Accordingly, business activities employing the annual average number of disabled persons, post-detoxicated persons, HIV-positive persons accounting for 30% or more shall be exempt from CIT, instead of 51%.

 

- In case enterprises receive payments from customers when expenses compliant with the turnover are not determined, such enterprises shall declare the provisional CIT amount at 1% of the turnover, instead of 2%.

 

- CIT incentives shall not be applied to incomes from services subject to special consumption tax as regulated in the Law on Special Consumption Tax.

 

- Supplementing subjects of CIT incentives. Accordingly, enterprises having income from publishing activity as regulated by the Law on Publishing shall be entitled to the preferential tax rate of 10% throughout the operation term. Micro-Financial Institutions shall be entitled to the preferential tax rate of 20% throughout the operation term.

 

This Circular shall be effective from September 10th, 2012 and applying to the CIT period of 2012 onwards, supersede Circular No. 130/2008/TT-BTC dated December 26th, 2008, Circular No. 177/2009/TT-BTC dated September 10th, 2009, Circular No. 40/2010/TT-BTC dated March 23rd, 2010, Circular No. 18/2011/TT-BTC dated February 10th, 2011 of the Ministry of Finance.