What are non-deductible expenses upon determination of taxable incomes in Vietnam?

What are non-deductible expenses upon determination of taxable incomes in Vietnam?

Pursuant to Clause 2, Article 9 of the 2008 Law on Corporate Income Tax, upon determination of taxable incomes, the non-deductible expenses are as follows:

- Expenses that do not meet the conditions stipulated in Clause 1, Article 9 of the 2008 Law on Corporate Income Tax (amended by Clause 3, Article 1 of the 2014 Law Amending Various Tax Laws), except for the value of damage caused by natural disasters, epidemics, and other force majeure events that are not compensated;

- Fines for administrative violations;

- Expenses offset by other funding sources;

- Part of business management expenses allocated by foreign enterprises to their permanent establishments in Vietnam exceeding the level calculated according to the allocation method prescribed by Vietnamese law;

- Expenses exceeding the limits prescribed by the law on setting up reserves;

- Part of the cost of raw materials, materials, fuel, energy, and goods exceeding the consumption norms set by the enterprise, notified to the tax authority, and the actual warehouse release price;

- Interest expenses on loans for production and business activities from entities other than credit institutions or economic organizations exceeding 150% of the basic interest rate announced by the State Bank of Vietnam at the time of borrowing;

- Depreciation of fixed assets not conforming to the law;

- Provisions for expenses not conforming to the law;

- Salaries and wages of private enterprise owners; remuneration paid to founding members who do not directly participate in the enterprise's production and business activities; salaries, wages, and other expenses recorded to pay employees but not actually paid or not having invoices and documents as prescribed by law;

- Interest expenses on loans equivalent to the shortfall in charter capital;

- Deductible input VAT already deducted, VAT payable under the deduction method, corporate income tax;

- Part of advertising, marketing, promotion, brokerage commissions; reception, hospitality, conference expenses; marketing support, cost support, payment discounts; complimentary newspapers and gifts directly related to production and business activities exceeding 10% of the total deductible expenditures; for newly established enterprises, the excess part of 15% in the first three years from the establishment date. The total deductible expenditure does not include the expenses mentioned in this point; for commercial activities, the total deductible expenditure does not include the purchase price of goods sold;

- Sponsorship expenses, except for sponsorship for education, healthcare, disaster recovery, and building charity houses for the poor as prescribed by law.

What are non-deductible expenses upon determination of taxable incomes in Vietnam? (Picture from Internet)

What is the corporate income tax rate in Vietnam?

According to Article 10 of the 2008 Law on Corporate Income Tax, amended and supplemented by Clause 6, Article 1 of the 2013 Law on Amending the Corporate Income Tax Law, the rates are stipulated as follows:

Tax Rate

1. The corporate income tax rate is 22%, except for the cases stipulated in Clauses 2 and 3 of this Article and for entities eligible for preferential tax rates as stipulated in Article 13 of this Law.

Cases subject to the 22% tax rate stipulated in this clause will switch to the 20% tax rate from January 1, 2016.

2. Enterprises with total annual revenue not exceeding twenty billion dong apply a tax rate of 20%.

Revenue used to determine whether an enterprise is subject to the 20% tax rate mentioned in this clause is the revenue of the preceding fiscal year.

3. The corporate income tax rate for activities of searching, exploring, and exploiting oil, gas, and other rare resources in Vietnam ranges from 32% to 50% depending on each project and business establishment.

the Government of Vietnam provides detailed regulations and guidelines for the implementation of this Article.

Thus, the applied corporate income tax rate for enterprises is 20%.

However, for enterprises searching for, exploring, and exploiting oil, gas, and other rare resources in Vietnam, the tax rate ranges from 32% to 50% depending on each project and business establishment.

Where to pay corporate income tax in Vietnam?

Based on Article 12 of Circular 78/2014/TT-BTC, it is stipulated as follows:

Principle of Determination

Enterprises pay tax at their headquarters. In cases where an enterprise has a production facility (including processing, assembling) accounting independently in a different province or city under central authority other than the place where the enterprise's headquarters is located, the tax amount is paid at both the headquarters and the location of the production facility.

This allocation of tax payable stipulated in this clause does not apply to cases where the enterprise has works, work items, or construction establishments accounting independently.

Therefore, enterprises pay tax at the locality where their headquarters are located.

In cases where an enterprise has a production facility accounting independently operating in a different province or city under central authority other than the location of the headquarters, the tax amount is paid at both the headquarters and the location of the production facility.