Vietnam: Is corporate income tax exempted for income from the transfer of Certified Emissions Reductions?

Vietnam: Is corporate income tax exempted for income from the transfer of Certified Emissions Reductions?

Pursuant to Clause 8, Article 4 of the 2008 Law on Corporate Income Tax, as supplemented by Clause 3, Article 1 of the 2013 Amended Law on Corporate Income Tax, the law stipulates as follows:

Tax-exempt income

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8. Income from the transfer of Certified Emissions Reductions (CERs) of enterprises granted Certified Emissions Reductions.

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Additionally, the guidance in Clause 8, Article 4 of Decree 218/2013/ND-CP regulates as follows:

Tax-exempt income

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8. Income from the first-time transfer of Certified Emissions Reductions (CERs) of enterprises granted Certified Emissions Reductions; subsequent transfers shall be subject to corporate income tax as prescribed.

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Thus, the income from the transfer of Certified Emissions Reductions of enterprises granted Certified Emissions Reductions will be exempt from corporate income tax. However, this exemption only applies to income from the first-time transfer of Certified Emissions Reductions (CERs) of enterprises granted Certified Emissions Reductions; subsequent transfers shall be subject to corporate income tax as prescribed.

Vietnam: Is corporate income tax exempted for income from the transfer of Certified Emissions Reductions? (Image from internet)

What other incomes are exempt from corporate income tax besides income from the transfer of Certified Emissions Reductions in Vietnam?

Pursuant to Article 4 of the 2008 Law on Corporate Income Tax, as amended and supplemented by Clause 3, Article 1 of the 2013 Amended Law on Corporate Income Tax and Clause 2, Article 1 of Law No. 71/2014/QH13 on Amendments to Tax Laws 2014, in addition to income from the transfer of Certified Emissions Reductions, enterprises are exempt from corporate income tax for the following incomes:

- Income from cultivation, husbandry, aquaculture, processing of agricultural and aquatic products, and salt production by cooperatives; income of cooperatives operating in the fields of agriculture, forestry, fisheries, and salt production in areas with difficult or exceptionally difficult socio-economic conditions; income of enterprises from cultivation, husbandry, aquaculture, and processing of agricultural and aquatic products in areas with exceptionally difficult socio-economic conditions; income from activities of offshore fishing.

- Income from providing technical services directly serving agriculture.

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

- Income from production and business activities of goods and services of enterprises that have an average of at least 30% of their employees being disabled, rehabilitated people, or those infected with the human immunodeficiency virus (HIV/AIDS) and with an annual average of at least twenty employees, excluding enterprises operating in the field of finance and real estate business.

- Income from vocational training activities specifically for ethnic minority people, disabled people, children with special difficult circumstances, and social evils subjects.

- Income shared from capital contributions, joint ventures, and associations with domestic enterprises after having paid corporate income tax according to the 2008 Law on Corporate Income Tax.

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

- Income from performing tasks assigned by the State from the Vietnam Development Bank in development investment credits, export credits; income from credit activities for the poor and other policy beneficiaries of the Vietnam Bank for Social Policies; income of state financial funds and other State funds that operate not for profit as prescribed by law; income of organizations wholly owned by the Government of Vietnam established to handle bad debts of Vietnamese credit institutions.

- The undivided income of socialized establishments in the fields of education – training, healthcare, and other socialized fields retained for reinvestment according to regulations of specialized laws on education – training, healthcare, and other socialized fields; the undivided income forming assets of cooperatives established and operated according to the 2023 Law on Cooperatives.

- Income from the transfer of technology in priority transfer fields to organizations and individuals in areas with exceptionally difficult socio-economic conditions.

What are the taxable incomes subject to corporate income tax in Vietnam?

Pursuant to Article 3 of the 2008 Law on Corporate Income Tax, as amended by Clause 1, Article 1 of Law No. 71/2014/QH13 on Amendments to Tax Laws 2014, taxable incomes subject to corporate income tax include income from production, business activities of goods and services, and other incomes. Other incomes include the following:

- Income from capital transfer, transfer of the right to contribute capital;

- Income from real estate transfer, investment project transfer, transfer of the right to participate in investment projects, and transfer of the right to explore, exploit, and process minerals;

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

- Income from the transfer, lease, and liquidation of assets, including all types of valuable papers;

- Income from interest on deposits, loans, and foreign currency sales; recoveries from bad debts previously written off;

- Amounts from debts without identified creditors;

- Income from business activities of previous years that were omitted and other incomes.

- Vietnamese enterprises' income from overseas investments post corporate income tax paid abroad, for which if the respective countries have signed double taxation avoidance agreements with Vietnam, those agreements' regulations are to be applied.

If such countries have not signed double taxation avoidance agreements with Vietnam and the corporate income tax rate in those countries is lower, then the differential amount needs to be paid in accordance with Vietnam's Law on Corporate Income Tax.