What is the formula for calculating profit before tax in Vietnam? Which income of enterprises is subject to corporate income tax in Vietnam?

What is the formula for calculating profit before tax in Vietnam?

Based on point 3.15, clause 3, Article 113 of Circular 200/2014/TT-BTC which stipulates:

Guidance on preparing and presenting the Statement of Business Performance (Form No. B02-DN)

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3. Content and method of calculating indicators in the Business Performance Report

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3.15. Total accounting profit before tax (Code 50):

This indicator reflects the total accounting profit achieved in the reporting year of the enterprise before deducting corporate income tax expenses from business operations and other activities arising during the reporting period. Code 50 = Code 30 + Code 40.

Thus, the profit before tax is the indicator code 50 on the Business Performance Report according to Form No. B02-DN issued with Circular 200/2014/TT-BTC.

Specifically, profit before tax includes all profits from manufacturing, business operations, financial profits, and other arising profits. Profit before tax is calculated as total revenue minus expenses.

The formula for calculating profit before tax is as follows:

In which:

- Total revenue is the entire revenue collected from the enterprise's production and business activities as shown in receipts and sales invoices.

- Fixed expenses include cost of goods sold, transportation costs, production costs, employee hiring costs, rental costs, and other fixed expenses in business.

- Incidental expenses are all expenses incurred during the company's operations that are not planned by the enterprise.

What is the formula for calculating profit before tax in Vietnam? (Image from the Internet)

Which income of enterprises is subject to corporate income tax in Vietnam?

According to Article 3 of the Law on Corporate Income Tax 2008 (amended by clause 1, Article 1 of the Law on Amendments to Tax Laws 2014) it is stipulated that taxable income includes:

(1) Taxable income includes income from production activities, business of goods, services, and other income specified in (2).

(2) Other income includes: income from capital transfers, contribution capital transfers; income from real estate transfers, project transfers, right to participate in project transfers, rights to explore, exploit, and process minerals transfers; income from the use rights of assets, ownership rights of assets, including income from intellectual property rights as prescribed by law; income from transfers, leasing, liquidation of assets, including valuable papers; income from interest on deposits, loans, foreign exchange sales; collection from previously written-off bad debts now collected; collection from obligations not identifiable in liability; income from business activities in previous years overlooked and other income.

Vietnamese enterprises investing abroad transferring post-corporate income tax profits back to Vietnam, in countries that Vietnam has signed double taxation avoidance agreements, shall comply with the agreements; in countries that Vietnam has not signed such agreements, if the corporate income tax rate where the enterprise operates is lower, the difference will be collected based on the Vietnam Corporate Income Tax Law.

Which income of enterprises is exempt from corporate income tax in Vietnam?

According to Article 4 of the Law on Corporate Income Tax 2008 (supplemented by clause 3, Article 1 of the Amended Law on Corporate Income Tax 2013 and clause 2, Article 1 of the Law on Amendments to Tax Laws 2014) specific regulations on tax-exempt income are as follows:

(1) Income from cultivation, husbandry, aquaculture, processing agricultural products, aquaculture production, salt production of cooperatives; income of cooperatives operating in agriculture, forestry, fishery, and salt production in areas with difficult or particularly difficult socio-economic conditions; income from cultivation, husbandry, aquaculture, processing agricultural products, aquaculture production in areas with particularly difficult socio-economic conditions; income from fishing activities.”

(2) Income from the provision of technical services directly serving agriculture.

(3) Income from performing contracts for scientific research and technology development, products in the trial production stage, products made from new technology applied for the first time in Vietnam.

(4) Income from production and business activities of goods and services of enterprises with at least 30% of the average number of employees in the year being persons with disabilities, rehabilitated persons, and individuals infected with HIV/AIDS, and having at least twenty employees on average in the year, excluding enterprises operating in finance, real estate business sectors.”

(5) Income from vocational training activities specifically for ethnic minorities, disabled persons, children in special difficult circumstances, and social evil subjects.

(6) Dividends from capital contributions, joint ventures, or affiliate linkage with domestic enterprises, after corporate income tax has been paid according to the Law on Corporate Income Tax 2008.

(7) Sponsored funds received for educational, scientific research, cultural, artistic, charitable activities, humanitarian activities, and other social activities in Vietnam.