Vietnam: Does the revenue for CIT calculation include VAT?

Vietnam: Does revenue for CIT calculation include VAT?

According to Article 8 of the Law on Corporate income tax 2008, revenue is defined as the total amount earned from sales, processing, service provision, subsidies, surcharges, and additional charges that enterprises are entitled to receive.

Revenue is calculated in Vietnamese dong; in cases where revenue is in foreign currency, it must be converted to Vietnamese dong using the average exchange rate in the interbank foreign exchange market as announced by the State Bank of Vietnam at the time the foreign currency revenue arises.

Additionally, based on Clause 1, Article 8 of Decree 218/2013/ND-CP, it is stipulated as follows:

Revenue

Revenue for calculating taxable income is specified in Article 8 of the Corporate Income Tax Law.

1. The revenue for calculating taxable income includes all receipts from sales, processing, service provision, including subsidies, surcharges, and additional charges that enterprises are entitled to receive, regardless of whether the money has been collected or not.

For enterprises declaring and paying VAT using the tax credit method, the revenue for CIT calculation is the revenue excluding VAT. For enterprises declaring and paying VAT using the direct method on added value, the revenue for CIT calculation includes VAT.

2. The point in time for determining the revenue to calculate taxable income for goods sold is the time of transferring ownership or use rights of the goods to the buyer.

The point in time for determining the revenue to calculate taxable income for services is the time of completion of the service provision to the buyer or the time of issuing the service provision invoice.

3. The revenue for calculating taxable income for certain cases is specifically regulated as follows:

a) For goods sold on deferred payment, the revenue is determined according to the one-time payment selling price, excluding installment or deferred interest;

b) For goods and services used for exchange or internal consumption (excluding goods and services used for continuous business production of the enterprise), it is determined according to the sale price of similar or equivalent products, goods, or services at the time of exchange, internal consumption;

...

The revenue for calculating taxable income is the total money from sales, processing, and service provision, including subsidies, surcharges, and additional charges that enterprises are entitled to, regardless of whether the money has been collected or not.

The determination of revenue for CIT calculation is based on the taxation method as follows:

- For enterprises declaring and paying VAT using the tax credit method: The revenue for CIT calculation is the revenue excluding VAT.

- For enterprises declaring and paying VAT using the direct method on added value: The revenue for CIT calculation includes VAT.

Vietnam: Does the revenue for CIT calculation include VAT? (Image from the Internet)

When is the time for determining revenue to calculate taxable income for CIT in Vietnam?

According to Clause 2, Article 5 of Circular 78/2014/TT-BTC (as amended and supplemented by Article 3 of Circular 96/2015/TT-BTC), the point in time for determining revenue to calculate taxable income is determined as follows:

- For the sale of goods, it is the time of transferring ownership or use rights of the goods to the buyer.

- For service provision activities, it is the time of completion of the service provision or the completion of each part of the service provision to the buyer, except in cases specified in Clause 3, Article 5 of Circular 78/2014/TT-BTC, Clause 1, Article 6 of Circular 119/2014/TT-BTC.

- For air transportation activities, it is the time of completion of the transport service provision to the buyer.

- Other cases according to legal provisions

Is the CIT calculation period determined only by the calendar year or the fiscal year in Vietnam?

Pursuant to regulations in Article 5 of the Law on Corporate income tax 2008, it is stipulated as follows:

Tax Calculation Period

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

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

Besides being determined by the calendar year or fiscal year, the CIT calculation period can also be determined by each income occurrence if it is a foreign enterprise specified at Points c and d, Clause 2, Article 2 of the Law on Corporate income tax 2008. Specifically:

The CIT calculation period for each income occurrence applies to the following foreign enterprises:

- Foreign enterprises with a permanent establishment in Vietnam paying tax on taxable income arising in Vietnam where the income is not related to the activities of the permanent establishment.

- Foreign enterprises without a permanent establishment in Vietnam paying tax on taxable income arising in Vietnam.