How long is the CIT period of the first year in Vietnam?

Do foreign enterprises with a Vietnam-based permanent establishment determine the corporate income tax period according to the calendar year?

Based on Clause 2, Article 3 of Circular 78/2014/TT-BTC, regulations on tax calculation methods are as follows:

Tax Calculation Methods

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2. The tax period is determined according to the calendar year. In cases where enterprises apply a financial year different from the calendar year, the tax period shall be determined according to the applied financial year. The first tax period for newly established enterprises and the final tax period for enterprises changing their type of enterprise, changing their form of ownership, merging, splitting, dissolving, or going bankrupt shall be determined in accordance with the accounting period as prescribed by accounting laws.

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Simultaneously, based on Article 5 of the Enterprise Income Tax Law 2008 regarding tax periods:

Tax Period

1. The corporate income tax period is determined according to the calendar year or financial year, except in cases as stipulated in Clause 2 of this Article.

2. The corporate income tax period for each arising income occasion applies to foreign enterprises specified at Points c and d, Clause 2, Article 2 of this Law.

Furthermore, based on Clause 2, Article 2 of the Enterprise Income Tax Law 2008 provisions:

Taxpayers

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2. Enterprises with taxable income stipulated in Article 3 of this Law must pay corporate income tax as follows:

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b) Foreign enterprises with a Vietnam-based permanent establishment must pay tax on taxable income arising in Vietnam and taxable income arising outside Vietnam related to the activities of such permanent establishment;

c) Foreign enterprises with a Vietnam-based permanent establishment must pay tax on taxable income arising in Vietnam that is not related to the activities of the permanent establishment;

d) Foreign enterprises without a Vietnam-based permanent establishment must pay tax on taxable income arising in Vietnam.

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In light of the above regulations, the corporate income tax period is commonly determined according to the calendar year.

However, in cases where enterprises apply a financial year different from the calendar year, the tax period shall be determined according to the applied financial year.

Additionally, the corporate income tax period is also applied for each arising income occasion for the following enterprises:

- Foreign enterprises with a Vietnam-based permanent establishment must pay tax on taxable income arising in Vietnam that is not related to the activities of the permanent establishment;

- Foreign enterprises without a Vietnam-based permanent establishment must pay tax on taxable income arising in Vietnam.

Therefore, foreign enterprises with a Vietnam-based permanent establishment will not determine the corporate income tax period according to the calendar year but will determine it according to each arising income occasion for such enterprises.

Vietnam: How long is the CIT period of the first year? (Image from Internet)

Vietnam: How long is the CIT period of the first year?

Based on Clause 3, Article 3 of Circular 78/2014/TT-BTC it is stipulated as follows:

Tax Calculation Methods

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3. In cases where the tax period for the first year of newly established enterprises since being granted the Enterprise Registration Certificate or Investment Certificate and the final tax period for enterprises changing their type of enterprise, changing their form of ownership, merging, splitting, dissolving, or going bankrupt is shorter than 3 months, it shall be added to the next tax period (for newly established enterprises) or the previous tax period (for enterprises changing their type of enterprise, changing their form of ownership, merging, splitting, dissolving, or going bankrupt) to form a corporate income tax period. The corporate income tax period for the first year or the final corporate income tax period shall not exceed 15 months.

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Therefore, it means that the corporate income tax period for the first year is at most 15 months.

Is income outside the territory of Vietnam an assessable income?

Taxable income for corporate income tax is stipulated in Article 7 of the Enterprise Income Tax Law 2008 as follows:

Determining Taxable Income

1. Taxable income in the tax period is determined by taxable income minus tax-exempt income and losses carried forward from previous years.

2. Taxable income is revenue minus deductible expenses of production, business, and other income, including income received outside Vietnam.

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Therefore, if enterprises have income outside the territory of Vietnam, it must still be included as taxable income for tax period determination.