Is corporate income tax calculated on revenue or profit in Vietnam?

What are bases for determining corporate income tax payable in Vietnam?

According to Article 6 of the Law on Corporate Income Tax 2008, the base for tax calculation is taxable income and the tax rate.

Additionally, as per Article 11 of the Law on Corporate Income Tax 2008, the corporate income tax payable in the tax period is calculated by multiplying taxable income by the tax rate.

Is corporate income tax calculated on revenue or profit in Vietnam?

According to Article 3 of the Law on Corporate Income Tax 2008, amended and supplemented by Clause 1, Article 1 of the Law Amending Tax Laws 2014:

Taxable Income

1. Taxable income includes income from production and business activities of goods and services and other income specified in Clause 2 of this Article.

2. Other income includes income from capital transfer, transfer of capital contribution rights; income from real estate transfer, transfer of investment projects, transfer of rights to participate in investment projects, transfer of rights for exploration, exploitation, and processing of minerals; income from the rights to use and own assets, including income from intellectual property as per the law; income from transfer, lease, liquidation of assets, including types of transferable securities; income from interest on deposits, lending, selling of foreign currency; recovered bad debts; income from undetermined obligations; income from business activities of previous years that were omitted, and other income.

When a Vietnamese enterprise investing abroad repatriates income after paying corporate income tax abroad, in countries with which Vietnam has signed agreements on the avoidance of double taxation, the agreements prevail; in countries where such agreements have not been signed, if the foreign corporate income tax rate is lower, the difference is collected based on the Vietnamese Law on Corporate Income Tax.

Furthermore, Article 7 of the Law on Corporate Income Tax 2008 provides the method for determining taxable income as follows:

Determining Taxable Income

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

2. Taxable income equals revenue minus deductible expenses from production and business operations plus other income, including income received outside Vietnam.

3. Income from real estate transfer activities must be separately determined for tax declaration.

The Government of Vietnam details and guides the implementation of this Article.

As stated above, taxable income is the basis for determining the corporate income tax payable. Taxable income is calculated by:

Taxable income - Tax-exempt income - Losses carried forward from previous years.

Taxable income includes:

+ Income from production and business activities: This is revenue minus deductible expenses related to business activities.

+ Other income: Includes income from non-core business activities, such as: Capital transfer, real estate, rights to participate in projects; rights to use and own assets, including income from intellectual property; interest from deposits, loans, selling foreign currency; recovered bad debts, undetermined obligation collections, etc.

Therefore, corporate income tax is not directly calculated on revenue but is based on taxable income, which includes revenue from production and business activities minus reasonable expenses, plus other income after subtracting tax-exempt items and transferred losses. Hence, the income used for calculating corporate income tax is profit after deducting expenses and adjusting other income.

However, it should be noted that if taxable income is positive (even when core business operations are not profitable but there is other income, such as interest from deposits, asset transfers, or other collections), the enterprise still has to pay corporate income tax.

Therefore, the payment of corporate income tax depends on taxable income, not solely on profit from core business operations. Enterprises must clearly determine taxable income to accurately calculate the amount of tax payable according to regulations.

Is corporate income tax calculated on revenue or profit in Vietnam? (Image from the Internet)

What is the current corporate income tax rate in Vietnam?

According to Article 10 of the Law on Corporate Income Tax 2008, amended and supplemented by Clause 6, Article 1 of the Amended Law on Corporate Income Tax 2013 and Clause 1, Article 67 of the Oil and Gas Law 2022, the corporate income tax rate is regulated as follows:

Tax Rate

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

Cases subject to the 22% tax rate as prescribed in this clause switch to a 20% tax rate from January 1, 2016.

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

Revenue serving as the basis for determining which enterprises are eligible for the 20% tax rate is the revenue of the preceding year.

The corporate income tax rate for oil and gas activities is from 25% to 50% in accordance with each oil and gas contract; the rate for the exploration, search, and exploitation of other rare and precious resources in Vietnam is from 32% to 50% depending on each project, each business establishment.

Accordingly, the current corporate income tax rate is 20%, except for subjects eligible for tax rate incentives.

Specifically, the corporate income tax rate for oil and gas activities ranges from 25% to 50% in accordance with each oil and gas contract; the rate for the exploration, search, and exploitation of other rare and precious resources in Vietnam ranges from 32% to 50% depending on each project, each business establishment.