What are the corporate income tax incentives for income from enterprises implementing new investment projects in Vietnam?

What are the corporate income tax incentives for income from enterprises implementing new investment projects in Vietnam?

Based on Clause 4, Article 19 of Circular 78/2014/TT-BTC, the provisions are as follows:

Preferential Tax Rate

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4. A preferential tax rate of 20% for ten years (10 years) applies to:

a) Income of enterprises from implementing new investment projects in areas with difficult socio-economic conditions as stipulated in the Appendix issued together with Decree No. 218/2013/ND-CP of the Government of Vietnam.

b) Income of enterprises from implementing new investment projects: manufacturing high-end steel; producing energy-saving products; manufacturing machinery and equipment for agricultural, forestry, fishery, and salt production; manufacturing irrigation equipment; manufacturing and refining livestock, poultry, and aquatic feed; developing traditional crafts (including building and developing traditional handicrafts, processing agricultural food products, and cultural products).

Enterprises implementing new investment projects in fields or areas of tax incentives as specified in this clause from January 1, 2016, apply a tax rate of 17%.

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Simultaneously, based on Clause 3, Article 20 of Circular 78/2014/TT-BTC, amended by Article 6 of Circular 151/2014/TT-BTC, as follows:

Tax Exemption and Reduction Incentives

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“3. Tax exemption for 2 years and a 50% reduction in the payable tax amount for the next 4 years for income from implementing new investment projects as stipulated in Clause 4, Article 19 of Circular No. 78/2014/TT-BTC dated June 18, 2014, of the Ministry of Finance and the income of enterprises from implementing new investment projects in industrial zones (except for industrial zones located in areas with favorable socio-economic conditions).

Areas with favorable socio-economic conditions stipulated in this clause are inner districts of special class cities, class I central cities, and provincial class I cities, excluding districts of newly established provincial class I cities from January 1, 2009; in cases where an industrial zone spans both favorable and unfavorable areas, tax incentives for the industrial zone are determined based on the actual location of the investment project on the ground.

The identification of special class, class I cities stipulated in this clause is implemented according to the provisions of Decree 42/2009/ND-CP dated May 7, 2009, of the Government of Vietnam regulating urban classification and documents amending this Decree (if any).

Thus, according to the above regulations, the corporate income tax incentive for income from enterprises implementing new investment projects is 20% for ten years (10 years).

Additionally, corporate income tax for income from enterprises implementing new investment projects is exempt for 2 years and reduced by 50% of the payable tax for the next 4 years.

What are the corporate income tax incentives for income from enterprises implementing new investment projects in Vietnam? (Image from the Internet)

How is the tax year determined for enterprises using a fiscal year different from the calendar year in Vietnam?

Based on Clause 2, Article 3 of Circular 78/2014/TT-BTC, which stipulates the method of tax calculation as follows:

Method of Tax Calculation

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2. The tax period is determined according to the calendar year. In cases where enterprises use a fiscal year different from the calendar year, the tax period is determined according to the fiscal year in use. The first tax period for a newly established enterprise and the last tax period for an enterprise changing its form, ownership, merging, splitting, dissolving, or bankrupting is determined in accordance with the accounting period as prescribed by accounting laws.

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Simultaneously, based on Article 5 of the Law on Corporate Income Tax 2008 which stipulates the tax period as follows:

Tax Period

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

2. The corporate income tax period for each income arising applies to foreign enterprises prescribed at points c and d, clause 2, Article 2 of this Law.

Additionally, based on Clause 2, Article 2 of the Law on Corporate Income Tax 2008, it is stipulated:

Taxpayers

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2. Enterprises with taxable income specified in Article 3 of this Law must pay corporate income tax as follows:

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b) Foreign enterprises with permanent establishments in Vietnam pay tax on the taxable income derived in Vietnam and taxable income derived outside Vietnam related to the operation of such permanent establishments;

c) Foreign enterprises with permanent establishments in Vietnam pay tax on the taxable income derived in Vietnam which is not related to the operation of such permanent establishments;

d) Foreign enterprises without permanent establishments in Vietnam pay tax on the taxable income derived in Vietnam.

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Thus, it can be seen that enterprises using a fiscal year different from the calendar year will have their tax period determined according to the applicable fiscal year.

How to determine the income for calculating corporate income tax in Vietnam?

Taxable income for corporate income tax is stipulated in Article 7 of the Law on Corporate Income Tax 2008, and the determination is as follows:

- Taxable income in the tax period is determined by taxable income minus tax-exempt income and losses carried forward from previous years.

- Taxable income is the revenue minus eligible deductible expenses from production, business activities, plus other income, including income received outside of Vietnam.