Are cooperatives subject to corporate income tax on income from cultivation and farming in Vietnam?

Are cooperatives subject to corporate income tax on income from cultivation and farming in Vietnam?

Based on Clause 1 Article 4 of the Law on Corporate Income Tax 2008 as amended by Clause 2 Article 1 of the Law No. 71/2014/QH13 on Amending Tax Laws 2014 (amended and supplemented by Clause 3 Article 1 of the Law Amending the Corporate Income Tax Law 2013), the income exempt from personal income tax is regulated as follows:

Tax-exempt Income

1. Income from cultivation, farming, aquaculture, and processing of agricultural and aquatic products, and salt production of cooperatives; income of cooperatives operating in agriculture, forestry, fishery, and salt production in areas with difficult or exceptionally difficult socio-economic conditions; income of enterprises from cultivation, farming, aquaculture, and processing of agricultural and aquatic products in areas with exceptionally difficult socio-economic conditions; income from fishing activities.

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Therefore, income from cultivation and farming of cooperatives is subject to corporate income tax exemption. Accordingly, cooperatives do not have to pay corporate income tax on income from cultivation and farming.

Are cooperatives subject to corporate income tax on income from cultivation and farming in Vietnam? (Image from the Internet)

What is the current corporate income tax rate in Vietnam?

Based on Article 10 of the Law on Corporate Income Tax 2008, as amended and supplemented by Clause 6 Article 1 of the Law Amending the Corporate Income Tax Law 2013, the corporate income tax rates are governed as follows:

Tax Rate

1. The corporate income tax rate is 22%, except as specified in Clauses 2 and 3 of this Article and for entities eligible for preferential tax rates specified in Article 13 of this Law.

The cases subject to the 22% tax rate as stipulated in this Clause shall transition to a 20% tax rate from January 1, 2016.

2. Enterprises with an annual total revenue not exceeding twenty billion VND apply a tax rate of 20%.

The revenue serving as the basis for determining that an enterprise belongs to the category applying the 20% tax rate in this Clause is the revenue of the preceding year.

3. The corporate income tax rate for activities of searching, exploring, and exploiting oil, gas, and other precious resources in Vietnam ranges from 32% to 50% depending on each project and business establishment.

The Government of Vietnam shall stipulate in detail and guide the implementation of this Article.

Thus, the current corporate income tax rate is 20%. Except for the corporate income tax rate for activities such as searching, exploring, and exploiting oil, gas, and other precious resources in Vietnam, which ranges from 32% to 50% depending on each project and business establishment, and entities eligible for preferential tax rates specified in Article 13 of the Law on Corporate Income Tax 2008.

Which income qualifies for the preferential corporate income tax rate of 10% in Vietnam?

Based on Article 13 of the Law on Corporate Income Tax 2008, as amended and supplemented by Clause 7 Article 1 of the Law Amending the Corporate Income Tax Law 2013, the preferential corporate income tax rate of 10% applies to the following income:

- Income of enterprises from performing socialization activities in the fields of education - training, vocational training, healthcare, culture, sports, and the environment;

- Income of enterprises from implementing social housing projects for sale, rent, or rent-purchase for subjects specified in Article 53 of the Housing Law;

- Income of press agencies from printed press activities, including advertising in printed press, as stipulated by the Press Law 2016; income of publishing agencies from publishing activities as stipulated by the Publishing Law 2012;

- Income of enterprises from: afforestation, forest protection, farming and breeding in areas with difficult socio-economic conditions, production and breeding of plant varieties and animal breeds, salt production, except for salt production specified in Clause 1 Article 4 of the Law on Corporate Income Tax 2008; investment in post-harvest preservation of agricultural products, preservation of aquatic products and food;

- Income of cooperatives operating in agriculture, forestry, fishery, and salt production not in areas with difficult or exceptionally difficult socio-economic conditions, except for income of cooperatives specified in Clause 1 Article 4 of the Law on Corporate Income Tax 2008.

* The 10% tax rate applies for fifteen years to:

- Income of enterprises from implementing new investment projects in areas with exceptionally difficult socio-economic conditions, economic zones, and high-tech zones;- Income of enterprises from implementing new investment projects, including:

+ Scientific research and technological development;

+ Application of high technology prioritized for development investment according to the High Technology Law 2008;+ High-tech incubation, high-tech enterprise incubation;

+ Venture capital for high-tech development according to the High Technology Law 2008;

+ Investment in building and operating high-tech incubators, high-tech enterprise incubators;

+ Investment in developing particularly important infrastructure for the State according to law;

+ Software production;

+ Production of composite materials, light construction materials, rare materials;

+ Renewable energy production, clean energy production, and energy production from waste destruction;

+ Biotechnology development;

+ Environmental protection;

- Income of high-tech enterprises, and agricultural enterprises applying high technology according to the High Technology Law 2008;

- Income of enterprises from implementing new investment projects in the manufacturing sector (excluding projects producing goods subject to special consumption taxes, or mineral exploitation projects) meeting one of the following criteria:

+ Projects with a minimum investment capital scale of six trillion VND, disbursement within three years from the investment certificate issuance date, and minimum total revenue of ten trillion VND/year, no later than three years from the year revenue is generated;

+ Projects with a minimum investment capital scale of six trillion VND, disbursement within three years from the investment certificate issuance date, and employment of over three thousand laborers.