Are enterprises required to pay corporate income tax in case of liquidation of assets in Vietnam?

Are enterprises required to pay corporate income tax in case of liquidation of assets in Vietnam?

Pursuant to Article 3 of the Law on Corporate Income Tax 2008, the regulations are as follows:

Taxable Income

1. Taxable income includes income from production, business activities in goods and services, and other incomes as stipulated in Clause 2 of this Article.

2. Other income includes income from the transfer of capital, transfer of real estate; income from ownership rights, use rights of assets; income from the transfer, lease, and liquidation of assets; income from interest on deposits, loans, sale of foreign currency; reversal of provisions; collection of bad debts that have been written off; collection of debts payable that cannot be identified; income from business activities of previous years overlooked, and other incomes, including income received from production and business activities outside Vietnam.

Thus, it can be seen that enterprises liquidating assets are subject to corporate income tax.

What are regulations on corporate income tax payers in Vietnam?

Based on Clause 1, Article 2 of the Law on Corporate Income Tax 2008, amended and supplemented by Clause 1, Article 1 of the Amendment of the Law on Corporate Income Tax 2013, taxpayers are regulated as follows:

- Corporate income tax payers are organizations engaged in the production and business of goods and services with taxable income according to this Law (hereinafter referred to as enterprises), including:

+ Enterprises established under the laws of Vietnam;

+ Enterprises established under the laws of foreign countries (hereinafter referred to as foreign enterprises) with or without a permanent establishment in Vietnam;

+ Organizations established under the Cooperative Law;

+ Non-business units established under the laws of Vietnam;

+ Other organizations engaged in production and business with income.

- Enterprises with taxable income defined in Article 3 of this Law must pay corporate income tax as follows:

+ Enterprises established under the laws of Vietnam pay tax on taxable income arising in Vietnam and taxable income arising outside Vietnam;

+ Foreign enterprises with a permanent establishment in Vietnam pay tax on taxable income arising in Vietnam and taxable income arising outside Vietnam related to the activities of that permanent establishment;

+ Foreign enterprises without a permanent establishment in Vietnam pay tax on taxable income arising in Vietnam.

- A permanent establishment of a foreign enterprise is a production and business establishment through which the foreign enterprise conducts part or all of its production and business activities in Vietnam, including:

+ Branches, executive offices, factories, workshops, transportation means, oil fields, gas fields, mines, or other natural resource extraction locations in Vietnam;

+ Construction sites, construction works, installation, assembly works;

+ Service supply locations, including consulting services through personnel or other organizations and individuals;

+ Agents for foreign enterprises;

+ Representatives in Vietnam in cases of authority to conclude contracts on behalf of foreign enterprises or representatives without authority to conclude contracts but regularly conduct the delivery of goods or services in Vietnam.

Are enterprises required to pay corporate income tax in case of liquidation of assets in Vietnam? (Image from the Internet)

How to calculate corporate income tax in Vietnam?

Pursuant to Article 6 of Decree 218/2013/ND-CP, the determination of taxable income is regulated as follows:

- Taxable income in a tax period is determined as follows:

Taxable income = Taxable revenue - Exempted income + Losses carried forward according to regulations

- Taxable income is determined as follows:

Taxable income = Revenue - Deductible expenses + Other incomes

Enterprises with multiple business activities may aggregate taxable income from production and business as the total income from all business activities. In cases where a business activity results in a loss, the enterprise may offset this loss against taxable income from profitable business activities at its discretion. The remaining income after the offset will apply the corporate income tax rate for profitable activities.

Income from the transfer of real estate, project investment transfers, rights to participate in investment projects, exploration, exploitation, and processing of minerals must be separately declared for tax purposes. In cases of loss when transferring rights to participate in investment projects or project investment transfers (except exploration and exploitation of minerals projects), or real estate transfers, such losses may be offset against profits from production and business activities within the tax period. If an enterprise undergoing dissolution sells real estate as fixed assets, income from real estate transfer (if any) may be offset against the income from production and business activities of the enterprise.

Pursuant to Article 10 of the Law on Corporate Income Tax 2008 (amended and supplemented by Clause 6, Article 1 of the Law on Corporate Income Tax Amendment 2013), the tax rates are stipulated as follows:

- The corporate income tax rate is 22%, except in the cases specified in Clauses 2 and 3 of this Article and for preferential tax rate subjects specified in Article 13 of this Law.

Cases subject to the 22% tax rate outlined in this clause will shift to the 20% tax rate starting from January 1, 2016.

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

Revenue serving as the basis for determining an enterprise's eligibility for the 20% tax rate in this clause is the revenue of the preceding fiscal year.

- The corporate income tax rate for activities of seeking, 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 provides detailed regulations and guidance on the implementation of this clause.