Do public service providers in the healthcare sector have to declare corporate income tax in Vietnam?

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What organizations engaged in the production and business of goods and services are required to pay corporate income tax in Vietnam?

Based on Clause 1 Article 2 of the Law on Corporate Income Tax 2008 as follows:

Taxpayers

1. Corporate income taxpayers are organizations engaged in the production and business of goods and services with taxable income as prescribed by this Law (hereinafter referred to as enterprises), including:

a) Enterprises established under Vietnam's laws;

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

c) Organizations established under the Law on Cooperatives;

d) Non-business units established under Vietnam's laws;

dd) Other organizations engaged in production and business activities with income.

Thus, in general, organizations engaged in production and business activities with income are corporate income taxpayers. Specifically, these include:

- Enterprises established under Vietnam's laws;

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

- Organizations established under the Law on Cooperatives;

- Non-business units established under Vietnam's laws;

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

Public service providers in the healthcare sector that are not enterprises, do they need to declare corporate income tax?

What income is subject to corporate income tax?

According to the provisions of Article 3 of the Law on Corporate Income Tax 2008 (amended and supplemented by Clause 1, Article 1 of the Law on Amending Various Tax Laws 2014) on income from production and business activities subject to corporate income tax, as follows:

- Taxable income includes income from production and business of goods and services and other income.

- Other income includes: income from capital transfers, transfer of contributed capital; income from real estate transfers, transfer of investment projects, transfer of the right to participate in investment projects, transfer of the right to explore, exploit, and process minerals; income from the right to use or own assets, including intellectual property rights as prescribed by law; income from transfers, leases, liquidation of assets, including valuable papers; income from interest on deposits, loans, foreign exchange sales; recoveries of bad debts previously written off; recoveries of unidentified payable debts; income from business activities of previous years omitted and other income.

Vietnamese enterprises investing abroad transfer income after paying corporate income tax abroad back to Vietnam, for countries where Vietnam has signed a Double Taxation Avoidance Agreement, it shall comply with the Agreement;

For countries where Vietnam has not signed a Double Taxation Avoidance Agreement, if the corporate income tax rate in those countries is lower, the difference will be charged compared to the corporate income tax calculated according to the Vietnamese Law on Corporate Income Tax.

Do public service providers in the healthcare sector have to declare corporate income tax in Vietnam?

According to the provisions of Official Dispatch 3002/TCT-CS 2020 by the General Department of Taxation guiding the application of CIT policies to public service providers in the fields of healthcare and education, as follows:

- Article 11 of Decree 218/2013/ND-CP December 26, 2013 of the Government of Vietnam detailing and guiding the implementation of the Law on CIT stipulates:

“Article 11. Tax calculation method

1. The CIT payable in the tax period equals taxable income multiplied by (x) the tax rate;...

5. Non-business units, organizations other than enterprises established and operating under Vietnam's laws with business activities of goods and services with taxable income where these entities recognize revenue but cannot determine costs, income from business activities shall declare and pay CIT based on a percentage of revenue from goods and services sales. Specifically:

a) For services (including deposit interests, loan interests): 5%. For separate education, healthcare, and performing arts activities, the tax rate prescribed in Point c of this Clause shall apply;

b) For goods business: 1%;

c) For other activities: 2%.”

On November 28, 2017, the Office of the Government of Vietnam issued Official Letter 551/TB-VPCP announcing the conclusion of the Government leaders: “1. Tax for public service providers shall comply with tax laws”.

Based on the above regulations and Official Letter 511/TB-VPCP, in principle, public service providers and organizations other than enterprises established and operating under Vietnam's laws with business activities of goods and services with taxable income where these entities recognize revenue but cannot determine costs, income from business activities shall declare and pay CIT based on a percentage of revenue from goods and services sales.

Public service providers in the healthcare sector that are not enterprises established and operating under Vietnam's laws with business activities of goods and services with taxable income where these entities recognize revenue but cannot determine costs, income from business activities shall declare and pay corporate income tax based on a percentage of revenue from goods and services sales.