Corporate income tax exemption and reduction durations in Vietnam

Corporate income tax exemption and reduction durations in Vietnam (Internet image)

This problem, LawNet would like to answer as follows

1. Corporate income tax exemption and reduction durations in Vietnam

According to Article 20 of Circular 78/2014/TT-BTC (amended in Circular 96/2015/TT-BTC) on incentives for tax exemption and reduction period, the regulations are as follows:

- Tax exemption for 4 years and 50% tax reduction for the next 9 years are applied to:

+ Incomes of enterprises from execution of projects of investment prescribed in Clause 1 Article 19 of Circular 78/2014/TT-BTC (amended in Clause 1 Article 11 of Circular 96/2015/TT-BTC)

+  Incomes of enterprises from the implementation of new investment projects in the socialized fields in geographical areas with difficult or particularly difficult socio-economic conditions specified in the Appendix to Decree 218/2013/ND-CP.

- Tax exemption for 4 years and 50% reduction of payable tax amounts for 5 subsequent years are applicable to incomes of enterprises from the implementation of new investment projects in the socialized fields in geographical areas outside the list of those with difficult or particularly difficult socio-economic conditions specified in the Appendix to Decree 218/2013/ND-CP.

-  Tax exemption for 2 years and 50% reduction of payable tax amounts for 4 subsequent years are applicable to incomes from the implementation of new investment projects specified in Clause 4, Article 19 of Circular 78/2014/TT-BTC (The preferential tax rate of 20% for ten (10) years is applicable to:

+ Incomes of enterprises from the implementation of new investment projects in geographical areas with difficult socio-economic conditions specified in the Appendix to the Decree 218/2013/ND-CP;

+ Incomes from enterprises from the implementation of new investment projects on production of hi-class steel, energy-conserving products, machinery and equipment for agriculture, forestry, fisheries and salt production, irrigation and drainage equipment, livestock and aquatic animal feed; and development of traditional crafts and trades (including building and development of traditional handicraft production, farm produce and food processing and production of cultural products);

- Enterprises implementing new investment projects in the fields or geographical areas eligible for the tax incentives specified in this Clause will enjoy the tax rate of 17% from January 1, 2016.

- Areas with favorable socio-economic conditions specified in this Clause are inner-city districts of special-class cities, grade-I cities directly under the central government and grade-I cities directly under the province including districts of special grade urban centers, grade I urban centers directly under the central government, and grade I urban centers directly under the province newly established from the district since January 1, 2009;

In case the industrial park is located in both favorable and unfavorable areas, the determination of tax incentives for the industrial park shall be based on the actual location of the investment project in the field;

The determination of special-class and grade-I cities specified in this Clause must comply with Decree 42/2009/ND-CP dated May 7, 2009 on urban classification and documents amending Decree 42/2009/ND-CP (if any).

- The tax exemption and reduction period specified in Article 20 of Circular 78/2014/TT-BTC (amended in Circular 96/2015/TT-BTC) is calculated continuously from the first year the enterprise has taxable income from new investment projects entitled to tax incentives;

In case an enterprise has no taxable income for the first three years from the first year of revenue from a new investment project, the tax exemption or reduction period is counted from the fourth year the new investment project arises. revenue;

The tax exemption or reduction period for hi-tech enterprises and hi-tech agricultural enterprises according to the above provisions shall be counted from the year of being granted the Certificate of recognition as hi-tech enterprises, hi-tech agricultural enterprises.

2. Procedures for application of CIT incentives in Vietnam

Procedures for application of CIT incentives in Vietnam as prescribed in Article 22 of Circular 78/2014/TT-BTC (amended in Circular 96/2015/TT-BTC) are as follows:

- Enterprises shall determine by themselves conditions for enjoyment of tax incentives, preferential tax rates, the tax exemption or reduction duration, and losses allowed to be cleared against taxed incomes in order to declare and finalize tax with tax agencies.

- When conducting examination and inspection at enterprises, tax agencies shall examine conditions actually satisfied by enterprises for enjoyment of tax incentives, CIT amounts eligible for exemption or reduction, and losses allowed to be cleared against taxable incomes.

If enterprises fail to satisfy conditions for enjoyment of preferential tax rates and tax exemption or reduction duration, tax agencies shall retrospectively collect tax and sanction tax-related administrative violations under regulations.

  Vo Van Hieu

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