Are enterprises allowed to deduct fixed asset expenses when determining taxable corporate income in Vietnam?

What incomes are subject to corporate income tax in Vietnam?

According to Article 3 of the 2008 Corporate Income Tax Law, amended by Clause 1, Article 1 of the 2014 Law on Amendments to Tax Law No. 71/2014/QH13, income subject to corporate income tax includes income from production and business activities involving goods and services, as well as other income.

In particular, other income includes:

- Income from capital transfer, transfer of capital contribution rights;

- Income from real estate transfer, transfers of investment projects, transfer of rights to participate in investment projects, transfer of rights to explore, extract, and process minerals;

- Income from property use rights, ownership rights, including income from intellectual property rights as prescribed by law;

- Income from the transfer, lease, and liquidation of assets, including types of valuable papers;

- Income from interest on deposits, loans, and foreign currency sales; collections from previously written-off bad debts;

- Collections from unidentified payable debts;

- Omitted income from earlier business operations and other incomes.

- Income brought back to Vietnam by overseas-invested Vietnamese enterprises after paying corporate income tax abroad, following the provisions of double taxation agreements that Vietnam has signed.

For countries that Vietnam hasn't signed double taxation agreements with, the difference will be collected compared to the corporate income tax rate under Vietnam's corporate income tax law if the transferred corporate income tax rate is lower.

Are enterprises allowed to deduct fixed asset expenses when determining taxable corporate income in Vietnam? (Image from the Internet)

Are enterprises allowed to deduct fixed asset expenses when determining taxable corporate income in Vietnam?

According to Clause 1, Article 6 of Circular 78/2014/TT-BTC (amended and supplemented by Clause 2, Article 5 of Circular 119/2014/TT-BTC) on deductible expenses when determining taxable income as follows:

Deductible and Non-deductible Expenses for Determining Taxable Income

1. Except for non-deductible expenses listed in Clause 2 of this Article, enterprises are allowed to deduct all expenses if the following conditions are met:

a) The expenses actually incurred are related to the business production of the enterprise.

b) The expenses have sufficient legitimate invoices and documents as prescribed by law.

c) In case of purchase invoices for goods or services valued at 20 million VND or above (including VAT), payments must be made via non-cash payment methods.

Non-cash payment vouchers shall follow the provisions of legal documents on value-added tax.

According to the above provisions, expenses incurred by enterprises shall be deductible when determining taxable corporate income if they meet the stipulated conditions.

Additionally, the following fixed asset expenses are not deductible when determining taxable corporate income under Clause 2, Article 6 of Circular 78/2014/TT-BTC (amended and supplemented by Article 4 of Circular 96/2015/TT-BTC):

- Fixed assets not used for the production and business activities of goods and services.

- Fixed assets without proof of enterprise ownership (except for leased financial fixed assets).

- Fixed assets not managed, tracked, and accounted for in the enterprise’s accounting books in accordance with current fixed asset management and accounting policies.

- Depreciation exceeding the current regulations of the Ministry of Finance on asset management, use, and depreciation policies.

- Fully depreciated fixed assets.

- Some other specific fixed assets.

What is the corporate income tax rate in Vietnam?

According to Article 10 of the 2008 Corporate Income Tax Law, amended and supplemented by Clause 6, Article 1 of the 2013 Law on Amendments to Corporate Income Tax Law (with terms replaced by Clause 1, Article 67 of the 2022 Petroleum Law), the corporate income tax rate is stipulated as follows:

Tax Rate

1. The corporate income tax rate is 22%, except for cases specified in Clause 2 and Clause 3 of this Article, and for entities eligible for tax incentives under Article 13 of this Law.

Cases subject to the 22% tax rate as stipulated in this Clause shall apply a 20% tax rate starting from January 01, 2016.

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

The revenue basis for determining if an enterprise is subject to the 20% tax rate as stipulated in this Clause shall be the revenue of the preceding year.

3. The corporate income tax rate for petroleum activities ranges from 25% to 50% based on each petroleum contract; the corporate income tax rate for other precious resource exploration, discovery, and extraction activities in Vietnam ranges from 32% to 50% based on each project and each production establishment.

The Government of Vietnam prescribes in detail and guides the execution of this Article.

Thus, the current corporate income tax rate is 20%.

For petroleum activities, the tax rate ranges from 25% to 50% based on each petroleum contract; for other precious resource exploration, discovery, and extraction activities in Vietnam, the tax rate ranges from 32% to 50% based on each project and each production establishment.

* For enterprises with an annual total revenue not exceeding twenty billion dong, the applicable tax rate is 20%.