What are the methods of allocating corporate income tax in Vietnam?

What are cases of allocating corporate income tax in Vietnam?

According to Clause 1, Article 17 of Circular 80/2021/TT-BTC, the cases eligible for the allocation of corporate income tax include:

- Electronic lottery business activities;

- Real estate transfer activities;

- Dependent units, business locations being production facilities;

- Hydropower plants located across multiple provinces.

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

What are the methods of allocating corporate income tax in Vietnam?​

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

- Allocation of corporate income tax payable for electronic lottery business activities:

The corporate income tax payable to each province where electronic lottery business activities occur is calculated by multiplying (=) the corporate income tax payable from electronic lottery business activities 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 at Point a, Clause 2, Article 13 of Circular 80/2021/TT-BTC.

- Allocation of corporate income tax payable for real estate transfer activities:

The corporate income tax payable to each province where real estate transfer activities occur is temporarily paid quarterly and settled by multiplying (=) the taxable revenue of real estate transfer activities in each province by (x) 1%.

- Allocation of corporate income tax payable for taxpayers with dependent units and business locations being production facilities:

The corporate income tax payable to each province where production facilities are located is calculated by multiplying (=) the corporate income tax payable for production and business activities by (x) the percentage (%) of costs incurred by each production facility over the total costs incurred by the taxpayer (excluding costs of activities enjoying corporate income tax incentives). Costs to determine the allocation rate are the actual costs incurred during the tax period.

The corporate income tax payable for production and business activities excludes the corporate income tax payable for activities enjoying corporate income tax incentives. The corporate income tax payable for activities enjoying incentives is determined according to the business results of the activities enjoying incentives and the preferential rate enjoyed.

- Allocation of corporate income tax payable for hydropower plants located across multiple provinces:

The corporate income tax payable by the hydropower plant is calculated by multiplying (=) the corporate income tax payable for production and business activities by (x) the percentage (%) of costs incurred by each hydropower plant over the total costs incurred by the taxpayer (excluding costs of activities enjoying corporate income tax incentives). Costs to determine the allocation rate are the actual costs incurred during the tax period. The corporate income tax payable for production and business activities excludes the corporate income tax payable for activities enjoying corporate income tax incentives.

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

Who is the corporate income taxpayer in Vietnam?

According to Article 2 of the Corporate Income Tax Law 2008 (amended and supplemented by Clause 1, Article 1 of the Amended Corporate Income Tax Law 2013), the corporate income taxpayers are specified as follows:

- Corporate income taxpayers are organizations producing, trading goods, and services with taxable income as prescribed in the Corporate Income Tax Law 2008, including:

+ Enterprises established under Vietnamese law;

+ Enterprises established under foreign law (hereinafter referred to as foreign enterprises) with or without permanent establishments in Vietnam;

+ Organizations established under the Law on Cooperatives;

+ Public service units established under Vietnamese law;

+ Other organizations engaged in production and business activities with income.

- Enterprises having taxable income as specified in Article 3 of the Corporate Income Tax Law 2008 must pay corporate income tax as follows:

+ Enterprises established under Vietnamese law must pay tax on taxable income arising in Vietnam and taxable income arising outside Vietnam;

+ Foreign enterprises with a permanent establishment in Vietnam must pay tax on taxable income arising in Vietnam and taxable income arising outside Vietnam related to the activities of the permanent establishment;

+ Foreign enterprises with permanent establishments in Vietnam must pay tax on taxable income arising in Vietnam, where such income is not related to the activities of the permanent establishment;

+ Foreign enterprises with no permanent establishment in Vietnam must pay tax on taxable income arising in Vietnam.

- A permanent establishment of a foreign enterprise is a production or business establishment through which the foreign enterprise conducts a part or the whole of its production and business activities in Vietnam, including:

+ Branches, executive offices, factories, workshops, means of transportation, oil, and gas mines, or other places for the extraction of natural resources in Vietnam;

+ Construction sites, construction, installation, and assembly establishments;

+ Service supply establishments, including consultancy services through employees or other organizations and individuals;

+ Agents for foreign enterprises;

+ Representatives in Vietnam in cases where the representative has authority to sign contracts in the name of the foreign enterprise or the representative does not have authority to sign contracts in the name of the foreign enterprise but regularly engages in the delivery of goods or services in Vietnam.