What are cases of distribution of corporate income tax in Vietnam?

What are cases of distribution of corporate income tax in Vietnam?

According to Clause 1, Article 17 of Circular 80/2021/TT-BTC, the circumstances in which tax distribution is required are stipulated as follows:

- Activities related to electronic lottery business;

- Activities involving the transfer of real estate;

- Dependent units, business locations as production facilities;

- Hydropower plants located across multiple provinces.

What are cases of distribution of corporate income tax in Vietnam? (Image from the Internet)

How many methods are there for distributing corporate income tax in Vietnam?

According to Clause 2, Article 17 of Circular 80/2021/TT-BTC, the methods of tax distribution are regulated as follows:

Tax declaration, tax calculation, tax settlement, distribution and payment of corporate income tax

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2. Methods of distribution:

a) distribution of corporate income tax payable for electronic lottery business activities:

The corporate income tax payable for each province where there is electronic lottery business activity is equal to (=) the corporate income tax payable for the electronic lottery business activity multiplied by (x) the percentage (%) of actual ticket sales revenue from electronic lottery business activities in each province over the total actual ticket sales revenue of the taxpayer.

Actual ticket sales revenue from electronic lottery business activities is determined according to the provisions of point a, clause 2, Article 13 of this Circular.

b) distribution of corporate income tax payable for real estate transfer activities:

The corporate income tax payable for each province where there are real estate transfer activities is temporarily paid quarterly and settled by (=) the taxable income from real estate transfer activities in each province multiplied by (x) 1%.

c) distribution of corporate income tax payable for taxpayers with dependent units, business locations as production facilities:

The corporate income tax payable in each province where there is a production facility is equal to (=) the corporate income tax payable for production and business activities multiplied by (x) the percentage (%) of the expenses of each production facility over the total expenses of the taxpayer (excluding costs related to activities enjoying corporate income tax incentives). The expenses used to determine the distribution ratio are the actual costs incurred during the tax period.

The corporate income tax payable for production and business activities does not include the corporate income tax payable for activities enjoying corporate income tax incentives. The corporate income tax payable for incentivized activities is determined according to the production and business results of the incentivized activities and the level of incentives enjoyed.

d) distribution of corporate income tax payable for hydropower plants located across multiple provinces:

The corporate income tax payable for the hydropower plant is equal to (=) the corporate income tax payable for production and business activities multiplied by (x) the percentage (%) of expenses of each hydropower plant over the total expenses of the taxpayer (excluding the costs of activities enjoying corporate income tax incentives). The expenses used to determine the distribution ratio are the actual costs incurred during the tax period.

After determining the corporate income tax payable by the hydropower plant, the corporate income tax payable for each province is equal to (=) the corporate income tax payable by the hydropower plant multiplied by (x) the percentage (%) of the investment value of the part of the hydropower plant located within each province's administrative boundaries over the total investment value of the hydropower plant.

Thus, according to the above regulation, there are three methods for distributing corporate income tax.

How is taxable income for CIT determined in Vietnam?

Based on Article 7 of the Enterprise Income Tax Law 2008 as amended and supplemented by Clause 2, Article 1 of the Revised Enterprise Income Tax Law 2013 and Clause 1, Article 1 of Law No. 71/2014/QH13 on Tax Amendment 2014, the regulation on taxable income is specified as follows:

Taxable Income

1. Taxable income includes income from the production and business of goods and services and other income specified in Clause 2, Article 7 of the Enterprise Income Tax Law 2008.

2. Other income includes income from the transfer of capital, capital contribution rights; income from real estate transfer, project transfer, transfer of participation rights in investment projects, transfer of exploration, exploitation, and processing of minerals; income from property rights, property ownership rights, including income from intellectual property rights as prescribed by law; income from transfer, lease, disposal of assets, including financial instruments; income from deposit interest, lending capital, foreign currency sales; recovery of previously written-off bad debts; income from unidentifiable liabilities; income from business activities of previous years that were omitted, and other income.

Vietnamese enterprises investing abroad transferring the portion of income after corporate income tax has been paid abroad to Vietnam, for the countries with which Vietnam has signed an agreement on avoiding double taxation will comply with the provisions of the agreement; for countries with which Vietnam has not signed a double taxation avoidance agreement, if the corporate income tax in the countries from which enterprises transfer income is lower, collect the difference compared to the corporate income tax calculated according to the Enterprise Income Tax Law of Vietnam.”

Thus, according to the above provisions, taxable income of an enterprise includes income from activities involving production, business, and other income as regulated.