Is corporate income tax deductible for fines paid for traffic violations in Vietnam?

Is corporate income tax deductible for fines paid for traffic violations in Vietnam?

Pursuant to the provisions of Clause 36, Article 6 of Circular 78/2014/TT-BTC which stipulates the deductible and non-deductible expenses when determining taxable income of enterprises as follows:

Deductible and Non-Deductible Expenses When Determining Taxable Income

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2. Non-deductible expenses when determining taxable income include:

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2.36. Administrative violation fines including: traffic law violations, violations of business registration policies, violations of accounting and statistical policies, tax law violations including late payment penalties according to the provisions of the Law on Tax Administration and other administrative violation penalties according to legal provisions.

2.37. Input value-added tax that has been deducted or refunded; input value-added tax of fixed assets that are automobiles with up to 9 seats exceeding the deductible limit as prescribed by legal documents on value-added tax; corporate income tax except for the case where an enterprise pays corporate income tax on foreign contractors' behalf according to the terms of the contractor agreement, foreign subcontractors' revenue does not include corporate income tax; personal income tax except where an enterprise signs a labor contract stipulating that wages and salaries paid to employees do not include personal income tax.

Therefore, according to the above regulations, fines for traffic law violations are non-deductible expenses when determining taxable income.

Is corporate income tax deductible for fines paid for traffic violations in Vietnam? (Image from Internet)

What income is subject to corporate income tax in Vietnam?

Pursuant to Article 3 of the Corporate Income Tax Law 2008 (amended and supplemented by Clause 3, Article 1 Amended Corporate Income Tax Law 2013, Clause 2, Article 1 Law on Amendments to Tax Laws 2014) taxable income includes income from production and business activities of goods and services and other income.

In which, other income includes:

- Income from capital transfer, capital contribution rights;

- Income from real estate transfer, investment project transfer, investment project participation rights transfer, exploration, exploitation, and processing of minerals transfer;

- Income from the right to use assets, ownership of assets, including income from intellectual property rights as prescribed by law;

- Income from the transfer, lease, liquidation of assets, including various types of negotiable instruments;

- Income from interest on deposits, loans, foreign currency exchange; revenues from bad debts written off and now recovered;

- Revenues from undetermined payables;

- Income from business activities of previous years omitted and other income.

Moreover, for Vietnamese enterprises investing abroad transferring part of the income after having paid corporate income tax abroad back to Vietnam, where Vietnam has signed agreements to avoid double taxation, implementation will be according to agreement provisions;

For countries where Vietnam has not signed agreements to avoid double taxation, if the corporate income tax rate of the countries from which the enterprise transfers back is lower, then the difference compared to corporate income tax calculated under Vietnam's Corporate Income Tax Law shall be collected.

What income is exempt from corporate income tax in Vietnam?

According to Article 4 of the Corporate Income Tax Law 2008, (amended and supplemented by Clause 3, Article 1 Amended Corporate Income Tax Law 2013, Clause 2, Article 1 Law on Amendments to Tax Laws 2014) income exempt from tax includes the following income:

- Income from cultivation, husbandry, aquaculture, processing of agricultural products, aquatic products, salt production of cooperatives; income of cooperatives operating in agriculture, forestry, fishery, salt production in areas with difficult socio-economic conditions or in areas with particularly difficult socio-economic conditions; income of enterprises from cultivation, husbandry, aquaculture, processing of agricultural products, aquatic products in areas with particularly difficult socio-economic conditions; income from fishing activities.

- Income from the provision of direct technical services serving agriculture.

- Income from the execution of scientific research and technology development contracts, products during trial production period, products made from new technology applied for the first time in Vietnam.

- Income from production and business activities of goods and services enterprises have with at least 30% of the average number of employees in the year being disabled persons, rehabilitated people, and people infected with the HIV/AIDS virus, and with an average number of employees in the year being at least twenty people, not including enterprises operating in the fields of finance, real estate business.

- Income from production and business activities of goods and services enterprises exclusively for disabled persons, rehabilitated people, and HIV-infected people. The Government of Vietnam prescribes the criteria and conditions to determine enterprises exclusively for disabled persons, rehabilitated persons, and HIV-infected persons.

- Income from teaching vocational training exclusively for ethnic minorities, disabled persons, children with special difficult circumstances, and social evils subjects.

- Income divided from domestic enterprises after having corporate income tax paid according to the provisions of this Law.

- Grant received to use for educational, scientific research, cultural, artistic, charitable, humanitarian, and other social activities in Vietnam.

- Income from the transfer of emission reduction certs (CERs) of enterprises awarded emission reduction certs.

- Income from implementing state-assigned duties of the Vietnam Development Bank in investment credit development, export credit; income from credit activities for the poor and other policy objects of the Social Policy Bank; income of state financial funds and other funds of the State operating for non-profit purposes as prescribed by law; income of organizations wholly owned by the Government of Vietnam established to handle non-performing loans of Vietnamese credit institutions.

- Undistributed income of socialization establishments in the field of education - training, healthcare, and other socialization fields retained for developing such establishments according to sectorial law provisions on education - training, healthcare, and other socialization fields; undistributed income forming assets not to be divided of cooperatives established and operating under the Cooperative Law.

- Income from technology transfer in priority transfer areas to organizations and individuals in areas with special difficult socio-economic conditions.