What are the Corporate Income Tax Incentives Policies? What are the Conditions for Applying CIT Incentives?
What is the Corporate Income Tax Incentive Policy?
The corporate income tax incentive policy is considered one of the necessary tools to regulate the current economy.
The corporate income tax incentive policy includes regulations issued by the State on measures and benefits aimed at reducing the tax burden on certain businesses in the form of incentive tax rates, tax exemption periods, and other forms. These aim to encourage and support businesses in their business activities while contributing to the development of the national economy.
According to the provisions of Article 19 Circular 78/2014/TT-BTC (supplemented by Article 1 Circular 96/2015/TT-BTC and supplemented by clause 5 Article 11 Circular 96/2015/TT-BTC), the preferential corporate income tax rates are as follows:
- A 10% preferential tax rate applies to entities specified in clauses 1 and 3 Article 19 Circular 78/2014/TT-BTC, revised and supplemented by clauses 1 and 3 Article 11 Circular 96/2015/TT-BTC.
- A 15% tax rate applies to entities specified in clause 5 Article 11 Circular 96/2015/TT-BTC.
- A 20% preferential tax rate applies to entities specified in clause 4 Article 19 Circular 78/2014/TT-BTC.
- A 17% tax rate applies to entities specified in clause 5 Article 19 Circular 78/2014/TT-BTC.
What are the conditions for applying corporate income tax incentives? Does investing in new projects qualify for corporate income tax incentives?
What are the conditions on accounting policies and invoices to apply for corporate income tax incentives?
To benefit from corporate income tax incentives, businesses must meet the conditions specified in clause 1 Article 18 Circular 78/2014/TT-BTC as follows:
Conditions for applying corporate income tax incentives
1. Corporate income tax incentives only apply to businesses that implement accounting policies, invoices, documents, and pay corporate income tax by declaration.
2. During the period of enjoying corporate income tax incentives, if businesses engage in multiple production and business activities, they must separately calculate the income from production and business activities that enjoy corporate income tax incentives (including preferential tax rates, tax exemptions, reductions) and the income from business activities that do not enjoy tax incentives for separate tax declarations and payments.
If, during the tax period, the business does not separately calculate income from production and business activities that enjoy tax incentives and income from production and business activities that do not enjoy tax incentives, the income of the production and business activities enjoying tax incentives is determined by multiplying (=) the total taxable income by the percentage (%) of revenue or deductible expenses of the production and business activities enjoying tax incentives over the total revenue or total deductible expenses of the business during the tax period.
If there is revenue or deductible expenses that cannot be separately accounted, the revenue or deductible expenses are determined according to the ratio of revenue or deductible expenses of the production and business activities enjoying tax incentives to the total revenue or deductible expenses of the business.
Thus, only when businesses implement accounting policies, invoices, documents, and declare corporate income tax by filing, can they apply for corporate income tax incentives.
Which corporate income items are not eligible for corporate income tax incentives?
Based on clause 3 Article 18 Circular 78/2014/TT-BTC (amended and supplemented by clause 1 Article 10 Circular 96/2015/TT-BTC), the following items are not eligible:
- Corporate income tax incentives and the 20% tax rate (including businesses subject to the 20% tax rate according to clause 2 Article 11 Circular 78/2014/TT-BTC) do not apply to the following incomes:
+ Income from capital transfers, capital contribution rights transfers; income from real estate transfers (except income from investing in social housing as stipulated at point d clause 3 Article 19 Circular 78/2014/TT-BTC); income from investment project transfers, project participation rights transfers, mineral exploration and extraction rights transfers; income from production and business activities outside Vietnam.
+ Income from activities of searching, exploring, and extracting oil, gas, and other precious resources, and income from mineral extraction activities.
+ Income from service businesses subject to special consumption tax according to the Law on Special Consumption Tax.
LawNet