Which income is exempt from corporate income tax in Vietnam?

Which income is exempt from corporate income tax in Vietnam?

Pursuant to Article 4 of the 2008 Law on Corporate Income Tax (amended by Clause 2, Article 1 of the 2014 Law on Amendments to Tax Laws and supplemented by Clause 3, Article 1 of the 2013 Amended Law on Corporate Income Tax), the following types of income are exempt from CIT:

- Income from crop cultivation, animal husbandry, aquaculture, processing of agricultural, aquatic products, and salt production by cooperatives; income of cooperatives operating in the fields of agriculture, forestry, fishery, and salt-making in areas with difficult socio-economic conditions or especially difficult socio-economic conditions; income of enterprises from crop cultivation, animal husbandry, aquaculture, processing of agricultural, aquatic products in areas with especially difficult socio-economic conditions; income from offshore fishing activities.

- Income from the provision of directly agricultural service technical services.

- Income derived from performing scientific research and technology development contracts, products in the trial production phase, and products made from new technology first applied in Vietnam.

- Income from the production, trading of goods, and services of enterprises with an average annual labor force of 30% or more being disabled people, former drug addicts, HIV/AIDS-infected persons, and an average number of employees in the year from twenty or more, excluding enterprises operating in the field of finance or real estate business.

- Income from vocational training activities exclusively for ethnic minorities, people with disabilities, children with particularly difficult circumstances, and social vices subjects.

- Dividends received from the contribution of capital, joint ventures, and affiliations with domestic enterprises after paying corporate income tax as prescribed by this law.

- Sponsorships received for use in educational, scientific research, cultural, artistic, charitable, humanitarian activities, and other social activities in Vietnam.

- Income from foreign emissions reduction trading (CERs) of businesses awarded emissions reduction certificates.

- Income from activities assigned by the State to the Vietnam Development Bank in development investment credit, export credit activities; income from credit activities for the poor and other policy beneficiaries of the Social Policy Bank; income of state financial funds and other state funds operating not for profit as stipulated by law; income of an organization wholly owned by the State established to manage non-performing loans of Vietnamese credit institutions.

- Undistributed income of the socialization facilities in the fields of education - training, healthcare and other socialization fields reserved for reinvestment in such facilities as regulated by specialized laws related to education - training, healthcare and other socialization fields; undistributed income forming assets of cooperatives established and operating following the Cooperative Law regulations.

- Income from technology transfer in prioritized fields to organizations and individuals in areas with especially difficult socio-economic conditions.

Which income is exempt from corporate income tax in Vietnam? (Image from the Internet)

How is the corporate income tax period for foreign enterprises doing business in Vietnam determined?

According to Article 5 of the 2008 Law on Corporate Income Tax:

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 occurrence of income applies to foreign enterprises as specified in points c and d, clause 2, Article 2 of this Law.

The corporate income tax period for foreign enterprises is calculated for each occurrence of income.

Which entity is the corporate income taxpayer in Vietnam?

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

- The corporate income taxpayers are organizations engaging in production, business, goods, and services which generate taxable income under this Law (hereinafter referred to as enterprises) including:

+ Enterprises established under the laws of Vietnam;

+ Enterprises established under the laws of foreign countries (hereinafter referred to as foreign enterprises) having or not having a permanent establishment in Vietnam;

+ Organizations established under the Cooperative Law;

+ Non-business units established under the laws of Vietnam;

+ Other organizations engaged in production or business activities generating income.

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

+ Enterprises established under the laws of Vietnam pay tax on taxable income generated in Vietnam and taxable income generated outside Vietnam;

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

+ Foreign enterprises with a permanent establishment in Vietnam pay tax on taxable income generated in Vietnam that is unrelated to the activities of the permanent establishment;

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

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

+ Branches, operational offices, factories, workshops, transport means, oil fields, gas fields, mines, or places of extracting natural resources in Vietnam;

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

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

+ Agents for foreign enterprises;

+ Representatives in Vietnam in case they are authorized to sign contracts in the name of the foreign enterprise or not authorized to sign contracts under the name of the foreign enterprise but regularly conduct delivery of goods or services provision in Vietnam.