What is turnover for calculating taxable income for corporate income tax in Vietnam?

What is turnover for calculating taxable income for corporate income tax in Vietnam?

Based on Clause 1, Article 5 of Circular 78/2014/TT-BTC guiding the determination of turnover for calculating CIT liability is as follows:

Turnover

1. Turnover for calculating taxable income is determined as follows:

Turnover for calculating taxable income includes the total sales, processing fees, and service fees, including any subsidies, surcharges, and excess profits that the enterprise is entitled to, regardless of whether the money has been collected or not.

a) For enterprises paying value-added tax (VAT) using the tax credit method, turnover does not include VAT.

Example 4: Enterprise A is subject to VAT by the tax credit method. The VAT invoice contains the following details:

Sales price: 100,000 VND.

VAT (10%): 10,000 VND.

Payment price: 110,000 VND.

Turnover for calculating taxable income is 100,000 VND.

b) For enterprises paying VAT using the direct method on value-added, turnover includes VAT.

Example 5: Enterprise B is subject to VAT by the direct method on value-added. The sales invoice only states the sales price as 110,000 VND (price including VAT).

Turnover for calculating taxable income is 110,000 VND.

c) If an enterprise engages in service business where customers prepay for several years, the turnover for calculating taxable income is distributed over the prepaid years or determined based on one-time payment turnover. If an enterprise is enjoying tax incentives, the determination of the tax-exempted amount must be based on the total CIT payable for the years prepaid divided by the number of prepaid years.

Turnover for calculating taxable income includes the total sales of goods, processing fees, and service fees, including any subsidies, surcharges, and excess profits that the enterprise is entitled to, regardless of whether the money has been collected or not.

For enterprises paying VAT using the tax credit method, turnover does not include VAT.

For enterprises paying VAT using the direct method on value-added, turnover includes VAT.

If an enterprise engages in service business where customers prepay for several years, the turnover for calculating taxable income is distributed over the prepaid years or determined based on one-time payment turnover.

If an enterprise is enjoying tax incentives, the determination of the tax-exempted amount must be based on the total CIT payable for the years prepaid divided by the number of prepaid years.

What is turnover for calculating taxable income for corporate income tax in Vietnam? (Image from the Internet)

How to determined turnover for calculating CIT for goods and services sold on installment in Vietnam?

According to Point a, Clause 3, Article 5 of Circular 78/2014/TT-BTC as follows:

Turnover

...

3. Turnover for calculating taxable income in certain circumstances is determined as follows:

a) For goods and services sold under installment or deferred payment method, it is the one-time payment sales turnover, excluding installment or deferred payment interest.

...

The turnover for calculating CIT for goods and services sold on installment is determined as the one-time payment sales turnover, excluding installment or deferred payment interest.

Which entities are corporate income tax payers in Vietnam?

Based on Article 2 of the Corporate Income Tax Law 2008, amended and supplemented by Clause 1, Article 1 of the Law on Amendments to the Corporate Income Tax Law 2013, the taxpayers are regulated as follows:

- Taxpayers include organizations engaged in production and business of goods and services with taxable income as prescribed by this Law (hereinafter referred to as enterprises), including:

+ Enterprises established under the laws of Vietnam;

+ Enterprises established under foreign laws (hereinafter referred to as foreign enterprises) with or without a permanent establishment in Vietnam;

+ Organizations established under the Cooperative Law;

+ Public service units established under the laws of Vietnam;

+ Other organizations engaged in production and business with income.

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

+ Enterprises established under the laws of Vietnam 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 that permanent establishment;

+ Foreign enterprises with a permanent establishment in Vietnam must pay tax on taxable income arising in Vietnam that is not related to the activities of the permanent establishment;

+ Foreign enterprises without a permanent establishment in Vietnam must pay tax on taxable income arising in Vietnam.

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

+ Branches, executive offices, factories, workshops, means of transport, oilfields, gas wells, mines, or locations for extracting natural resources in Vietnam;

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

+ Service-providing establishments, including consulting services through employed individuals or other organizations and individuals;

+ Agents for foreign enterprises;

+ Representatives in Vietnam in cases of being representatives with the authority to sign contracts on behalf of the foreign enterprise or representatives without the authority to sign contracts on behalf of the foreign enterprise but regularly perform goods delivery or service supply in Vietnam.