Are income from deposit subject to corporate income tax in Vietnam?

Are income from deposit subject to corporate income tax in Vietnam?

According to the provisions in Clause 7, Article 7 of Circular 78/2014/TT-BTC (amended by Clause 1, Article 5 of Circular 96/2015/TT-BTC), income from deposit are considered taxable corporate income in the following cases:

- In cases where income from interest on deposits and loans is higher than the interest expense from borrowing, after offsetting, the remaining difference is accounted as other income when determining taxable income.

- In cases where income from interest on deposits and loans is lower than the interest expense from borrowing, after offsetting, the remaining difference is deducted from the main business production income when determining taxable income.

Are income from deposit subject to corporate income tax in Vietnam? (Image from the Internet)

What is the method of calculating corporate income tax in Vietnam?

As stipulated in Clause 1, Article 3 of Circular 78/2014/TT-BTC (amended by Article 1 of Circular 96/2015/TT-BTC), the method of calculating corporate income tax is prescribed as follows:

The corporate income tax payable during the tax period is the taxable income minus the deduction for the science and technology fund (if any) multiplied by the corporate income tax rate.

The corporate income tax payable is determined by the following formula:

Corporate Income Tax Payable = (Taxable Income - Deduction for Science & Technology Fund (if any)) x Corporate Income Tax Rate

Additionally, for Vietnamese enterprises investing abroad, the method of calculating corporate income tax is implemented as follows:

- Vietnamese enterprises investing overseas, transferring post-tax income back to Vietnam from countries having signed the Agreement on the Avoidance of Double Taxation, shall comply with the Agreement; for countries not having signed the Agreement, if the overseas corporate income tax rate is lower, the difference compared to the corporate income tax calculated according to Vietnam's Corporate Income Tax Law is collected.

- Vietnamese enterprises investing overseas with income from production and business activities abroad must declare and pay corporate income tax according to Vietnam's existing Corporate Income Tax Law, even if enjoying tax incentives or reductions in the investment host country. The corporate income tax rate for income from abroad is 22% (20% from January 1, 2016), not applying the preferential rate (if any) enjoyed under the current Corporate Income Tax Law for Vietnamese enterprises investing overseas.

- In cases where income from an overseas investment project has been subject to corporate income tax (or a tax of a similar nature) abroad, when calculating the payable corporate income tax in Vietnam, the overseas-invested Vietnamese enterprise is allowed to deduct the tax already paid abroad, or paid on their behalf by the receiving country investment partner (including tax on share interest), but the deductible tax amount must not exceed the tax calculated according to Vietnam's Corporate Income Tax Law. Tax exemption or reduction for profits from overseas investment projects under the investment host country's law is also deducted when determining the corporate income tax payable in Vietnam.

- In cases where a Vietnamese enterprise investing abroad repatriates income without declaring and paying tax on the repatriated income, the tax authority shall impose foreign-sourced taxable production and business income according to the Law on Tax Administration.

When is the corporate income tax accounting period in Vietnam?

According to Article 5 of Corporate Income Tax Law 2008, the accounting period for corporate income tax is determined as follows:

- For regular enterprises: the corporate income tax accounting period is determined according to the calendar year or financial year;

- For foreign enterprises with permanent establishments in Vietnam paying tax on taxable income generated in Vietnam not related to the activities of the permanent establishment: the corporate income tax accounting period is per occurrence of income generation;

- For foreign enterprises without permanent establishments in Vietnam paying tax on taxable income generated in Vietnam: the corporate income tax accounting period is per occurrence of income generation.