What exemptions and reductions are annulled for corporate income tax in tax policy reform in Vietnam?

What is Corporate Income Tax in Vietnam?

According to Article 3 of the Corporate Income Tax Law 2008 as amended by Clause 1 Article 1 of the Law on Amendment of Tax Laws 2014, it is stipulated:

Taxable Income

1. Taxable income includes income from production and business activities of goods and services and other incomes stipulated in Clause 2 of this Article.

2. Other income comprises: income from capital transfers, contribution transfers; income from real estate transfers, investment project transfers, rights to participate in investment projects, rights to explore, exploit, and process minerals; income from the right to use assets, right to own assets, including income from intellectual property rights as defined by law; income from transfers, leases, liquidation of assets, including valuable papers; income from deposit interests, lending, foreign currency sales; amounts collected from previously written-off bad debts now recoverable; amounts collected from unidentified payables; income from businesses of previous years overlooked and other incomes.

Vietnamese enterprises investing abroad transfer part of their income after paying corporate income tax abroad back to Vietnam. For countries with which Vietnam has signed a double taxation avoidance agreement, the provisions of the agreement shall apply; for countries with which Vietnam has not signed a double taxation avoidance agreement, if the corporate income tax rate in those countries is lower, the difference shall be collected compared to the corporate income tax calculated under Vietnam's Corporate Income Tax Law.

Accordingly, corporate income tax can be understood as a direct tax levied directly on the taxable income of enterprises, including income from production, business activities of goods, services, and other incomes as prescribed by law, after deducting reasonable and lawful expenses related to the enterprise's income.

What exemptions and reductions are annulled for corporate income tax in tax policy reform in Vietnam? (Image from the Internet)

What exemptions and reductions are annulled for corporate income tax in tax policy reform in Vietnam?

According to point d Clause 1 Section 3 Article 1 of Decision 508/QD-TTg 2022:

III. STRATEGY IMPLEMENTATION SOLUTIONS

1. On tax policy reform

a) For value-added tax: expand the tax base by reducing the group of goods and services not subject to value-added tax and the group of goods and services subject to a 5% tax rate; towards basically applying a single rate; study to increase the value-added tax rate according to the roadmap; review and adjust the revenue threshold for applying the deduction method in accordance with reality; study adopting a uniform tax calculation method based on a percentage of revenue for taxpayers with revenue below the threshold or not eligible to apply the deduction method; complete regulations related to value-added tax on exported goods and services, ensuring they reflect the true nature and align with international practices. Study to amend and supplement regulations on tax deduction, value-added tax refund in a simple, transparent manner, and in harmony with relevant laws;

...

Thus, the solutions for implementing the strategy for corporate income tax policy reform according to the tax system reform strategy by 2030 are as follows:

- Review to amend or annul tax exemptions and reductions that are no longer suitable for the development and international integration requirements;

- Minimize the integration of social policies with tax exemption and reduction policies, ensuring tax neutrality for stable medium- and long-term application;

- Implement corporate income tax incentives for small and micro enterprises, while shifting the focus of foreign investment attraction policy from quantity to quality, encouraging participation of economic sectors in investing in key industries and prioritized localities;

- Expand the tax base in line with the country's socio-economic context and international practices;

- Implement international standards on anti-transfer pricing, anti-base erosion, and profit shifting.

Therefore, implementing the strategy for corporate income tax policy reform according to the tax system reform strategy by 2030 requires reviewing to amend or annul tax exemptions and reductions that are no longer suitable for development and international integration requirements.

Which entities are corporate income taxpayers in Vietnam?

According to Clause 1 Article 2 of the Corporate Income Tax Law 2008, entities subject to corporate income tax are organizations conducting the production and business of goods and services with taxable income as stipulated by this Law (hereinafter referred to as enterprises), including:

- Enterprises established under Vietnamese law;

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

- Organizations established under the Law on Cooperatives 2023;

- Professional units established under Vietnamese law;

- Other organizations engaged in production, business activities with income.