May enterprises deduct CIT for traffic violation fines incurred by automobiles in Vietnam?

May enterprises deduct CIT for traffic violation fines incurred by automobiles in Vietnam?

Based on the provisions at Point 2.36, Clause 2, Article 6 of Circular 78/2014/TT-BTC as amended by Article 4 of Circular 96/2015/TT-BTC, which regulates the deductible and non-deductible expenses when determining taxable income of enterprises as follows:

Deductible and non-deductible expenses in determining taxable income

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

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2.36. Fines for administrative violations including: traffic law violations, violations of business registration policies, violations of accounting and statistical policies, violations of tax laws, including tax late payment fees as stipulated by the Law on Tax Administration and other administrative violations as prescribed by law.

2.37. Input value-added tax that has been deducted or refunded; input value-added tax of fixed assets being cars with up to 9 seats that exceed the deductible limit as stipulated by the legal documents on value-added tax; corporate income tax except in cases where the enterprise pays corporate income tax on behalf of a foreign contractor, as per the agreement in the contractor agreement, the foreign subcontractor, turnover of the contractor, the foreign subcontractor does not include corporate income tax; personal income tax except in cases where the enterprise signs labor contracts stipulating that wages and salaries paid to laborers do not include personal income tax.

Furthermore, based on Point b, Clause 2, Article 9 of the Law on Corporate Income Tax 2008 as amended and supplemented by Clause 5, Article 1 of the Amended Law on Corporate Income Tax 2013, it is also stipulated regarding deductible and non-deductible expenses in determining taxable income as follows:

Deductible and non-deductible expenses in determining taxable income

1. Except for the expenses specified in Clause 2 of this Article, enterprises are entitled to deduct all expenses if the following conditions are met:

a) The actual expenses incurred are related to the production and business activities of the enterprise;

b) The expenses have sufficient invoices and documents as prescribed by law.

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

a) Expenses that do not meet the conditions specified in Clause 1 of this Article, except for the unindemnified value of losses caused by disasters, epidemics, and other force majeure cases;

b) Fines for administrative violations;

c) Expenses offset by other funding sources;

d) The portion of business management expenses allocated by foreign enterprises to permanent establishments in Vietnam exceeding the allocation level prescribed by Vietnamese law;

e) The portion exceeding the legal limit of the deduction for reserves;

f) Excess expenses on raw materials, materials, fuel, energy, and goods surpassing the consumption limit established by the enterprise as announced to the tax authority and the actual price when exporting the stock;

g) The interest paid on loans for production and business from non-credit or economic organizations exceeding 150% of the basic interest rate announced by the State Bank of Vietnam at the time of the loan;

h) Depreciation of fixed assets that do not comply with the law;

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Thus, based on the aforementioned regulations, fines for traffic violations incurred by the automobiles of enterprises are non-deductible expenses in determining corporate income taxable income.

May enterprises deduct CIT for traffic violation fines incurred by automobiles in Vietnam? (Image from the Internet)

Where do enterprises pay CIT in Vietnam?

Based on Article 12 of Decree 218/2013/ND-CP, regulations on where corporate income tax is paid are as follows:

Place of tax payment

1. Enterprises pay taxes at the locality where the headquarters is located. In case an enterprise has a production establishment, which is dependent accounting, in a province or city under central authority different from the locality where the headquarters is situated, tax is calculated and paid at both the headquarters and the place where the production establishment is located.

The corporate income tax payable in provinces and cities under central authority where there is a dependent accounting production establishment is determined by multiplying the corporate income tax due for the enterprise by the ratio of expenses incurred at the dependent accounting production establishment over the enterprise's total expenses.

This regulation does not apply to projects, construction items, or construction establishments that are dependent accounting.

The allocation, management, and use of revenue from corporate income tax are implemented according to the provisions of the National Budget Law.

2. Units with dependent accounting under enterprises with comprehensive sector-wide accounting and income outside of the main business activities shall pay taxes at the province or city under central authority where such business activities take place.

3. The Ministry of Finance provides guidance on the place of tax payment stipulated in this Article.

Thus, enterprises pay corporate income tax at:

- The locality where the enterprise's headquarters is located.

In cases where an enterprise has a dependent accounting production establishment in a province or city under central authority different from where the headquarters is situated, tax will be calculated and paid at both the headquarters and the place where the production establishment is located.

Note: this regulation does not apply to projects, construction items, or construction establishments that are dependent accounting.

- The province or city under central authority where business activities occur: For units with dependent accounting under enterprises with comprehensive sector-wide accounting and income outside the main business activities.

Which income of enterprises is exempt from CIT in Vietnam?

Pursuant to Article 4 of the Law on Corporate Income Tax 2008 (amended by Clause 3, Article 1 of the Amended Law on Corporate Income Tax 2013 and Clause 2, Article 1 of the Law Amending Various Tax Laws 2014), specific income exempt from corporate income tax includes:

(1) Income from cultivation, husbandry, aquaculture, processing agricultural products, seafood, and 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, and processing agricultural products, seafood in areas with particularly difficult socio-economic conditions; income from fishery activities.

(2) Income from directly performing technical services serving agriculture.

(3) Income from carrying out scientific research and technological development contracts, products in the trial production phase, products made from new technologies implemented for the first time in Vietnam.

(4) Income from the production, business activities of goods and services of enterprises having from 30% of the average number of employees during the year or more as disabled, post-rehabilitation individuals, individuals infected with HIV/AIDS and having an average number of employees during the year from twenty or more, excluding enterprises operating in the finance and real estate business.

(5) Income from vocational training activities dedicated to ethnic minorities, disabled people, children in special difficult circumstances, individuals with social evils.

(6) Income shared from joint ventures, business alliances with domestic enterprises, after having paid corporate income tax in accordance with the Law on Corporate Income Tax 2008.

(7) Sponsorship allocated for educational, scientific research, cultural, artistic, charity, humanitarian activities and other social activities in Vietnam.