Are advertising expenses considered deductible expenses when calculating corporate income tax in Vietnam?

Are advertising expenses considered deductible expenses when calculating corporate income tax in Vietnam?

Based on point m, clause 2, Article 9 of the 2008 Law on Corporate Income Tax, as amended and supplemented by clause 5, Article 1 of the 2013 Law on Amendments to Law on Corporate Income Tax, the regulations are as follows:

Deductible and Non-deductible Expenses in Determining Taxable Income

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2. Expenses that are not deductible when determining taxable income include:

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l) Input value-added tax that has already been deducted, value-added tax paid under the deduction method, corporate income tax;

m) Expenses on advertising, marketing, promotions, brokerage commissions, receptions, ceremonies, conferences, marketing support, costs directly related to production and business activities exceeding 15% of the total deductible costs. The total deductible costs do not include the expenses stipulated in this point; for commercial activities, the total deductible costs do not include the purchase price of goods sold;

n) Sponsorships, except for those directed towards education, healthcare, scientific research, disaster recovery, building solidarity or beneficial houses, houses for policy beneficiaries as prescribed by law, and sponsorships under State programs for areas with special socio-economic difficulties;

o) Contributions to voluntary retirement funds or social welfare-like funds, purchasing voluntary retirement insurance for employees exceeding the legal regulations;

p) Expenses related to specific business activities: banking, insurance, lottery, securities, and other specified business sectors as determined by the Minister of Finance.

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From the above regulation, it can be seen that if a company's advertising expenses do not exceed 15% of the total deductible expenses, they will be considered deductible when calculating corporate income tax.

However, if advertising expenses exceed 15% of the total deductible expenses, the excess portion will not be deductible when calculating corporate income tax.

Note: The total deductible expenses do not include the items specified in point m, clause 2, Article 9 of the 2008 Law on Corporate Income Tax; for commercial activities, the total deductible expenses do not include the purchase price of goods sold.

Are advertising expenses considered deductible expenses when calculating corporate income tax in Vietnam? (Image from the Internet)

What income is exempt from corporate income tax in Vietnam?

Based on Article 4 of the 2008 Law on Corporate Income Tax (amended and supplemented by clause 3, Article 1 of the 2013 Law on Amendments to Law on Corporate Income Tax and clause 2, Article 1 of the Law on Amending and Supplementing Certain Articles of Laws on Taxation 2014), income exempt from corporate income tax is specified as follows:

- Income from cultivation, husbandry, farming, processing of agricultural products, aquatic products, or salt production of cooperatives; income of cooperatives operating in agriculture, forestry, fisheries, or salt production in areas with difficult socio-economic conditions or areas with special socio-economic difficulties; income of enterprises from cultivation, husbandry, farming, or processing of agricultural products or aquatic products in areas with special socio-economic difficulties; income from marine fishing activities.

- Income from the direct provision of technical services for agricultural activities.

- Income from performing research and technological development contracts, products during the trial production period, and products made from new technologies first applied in Vietnam.

- Income from production, business, and service activities of enterprises with 30% or more of the annual average workforce being disabled individuals, rehabilitated individuals, or individuals infected with the human immunodeficiency virus (HIV/AIDS), and with an annual average workforce of twenty or more, excluding enterprises operating in finance and real estate.

- Income from vocational training activities exclusively for ethnic minorities, disabled individuals, children with special difficult circumstances, and individuals with social evils.

- Income from capital participation, joint ventures, or associations with domestic enterprises, after having paid corporate income tax as prescribed by this Law.

- Sponsorship funds received for educational activities, scientific research, culture, art, charity, humanitarian activities, and other social activities in Vietnam.

- Income from transferring Certified Emission Reductions (CERs) of enterprises granted such certifications.

- Income from tasks assigned by the State to the Vietnam Development Bank in investment and export credit operations; income from credit activities for the poor and other policy beneficiaries of the Social Policy Bank; income of State financial funds and other State funds not pursuing profit motives as per legal regulations; income of organizations 100% owned by the State established by the Government of Vietnam to handle bad debts of Vietnamese credit institutions.

- Undistributed income of socialization facilities in education-training, healthcare, and other socialization areas remaining to reinvest in developing such facilities in accordance with specialized laws on education-training, healthcare, and other socialization domains; non-shareable income forming assets of cooperatives established and operating according to the Cooperative Law.

- Income from technology transfer in priority sectors for transfer to organizations or individuals in areas with special socio-economic difficulties.

What is the corporate income tax period in Vietnam?

According to Article 5 of the 2009 Law on Corporate Income Tax, the corporate income tax period is determined according to the calendar year or the fiscal year.

However, for foreign enterprises with permanent establishments in Vietnam paying tax on taxable income arising in Vietnam unrelated to the activities of the permanent establishment, and foreign enterprises without a permanent establishment in Vietnam paying tax on taxable income arising in Vietnam, the corporate income tax is calculated on a per-income basis.