The key contents of the amendment Law on corporate income tax No.32/2013/QH13 dated 19 June 2013 effective from 01 Jan 2014

The amendment Law on corporate income tax reduces tax rate and raises tax incentives

The amendment Law on corporate income tax No.32/2013/QH13 dated 19 June 2013 effective from 01 Jan 2013 amended and supplemented 12 of 20 articles of the Law on income corporate tax 2008, consists of eight main the group of issues as follows:

1. The amendment Law on corporate income tax on taxable income:

 * Additional some taxable incomes:
 o Income from transfers of the right to contribute capital investment
 o Income from transfers of investment projects, from transfers of the right to participate in investment projects;
 o Income from transfers of the right to explore, mine and process minerals;
 o Income from intellectual property rights in accordance with law intellectual property rights
 o Income from transfer or liquidation of assets including valuable papers.

 *Delete taxable income: income being recoveries from contingency reserves

2 .The amendment Law on corporate income tax on tax exempt income

 2.1 . Additional incomes shall be tax exempt:
 - Income earned by cooperative from salt production; and income earned by co-operatives from activities in the sectors of agriculture, forestry, fisheries and salt production in geographical areas with difficult or specially difficult socio-economic conditions
 - Income earned by enterprises from cultivation [growing crops], husbandry [livestock breeding] and aquaculture in geographical areas with especially difficult socioeconomic conditions;
 - income earned from fisheries and aquaculture activities.

 2.2 . Income from transfers of certified emission reductions (CERS) of enterprises issued with certificates of emission reduction

 2.3. Income from implementation of the task assigned by the State to Vietnam Development Bank to provide State investment development loans and State export credit loans; income from credit provided to poor people and other policy subjects by social policy banks; income of State finance funds and other State funds operating for non-profit purposes in accordance with law; and income of organizations in which the State owns 100% charter capital and which are established by the Government in order to deal with bad debts of Vietnamese credit institutions

 2.4. The portion of undistributed income earned by establishments conducting socialization in the sectors of education and training, medical health and other socialization sectors which is retained for investment in development of such establishment in accordance with specialized branch law in the sectors of education and training, culture, medical health or other socialization sector; and the portion of income formed from undistributed assets of a co-operative established and operating in accordance with the Law on Co-operatives

 2.5. Income from transfer of technology in the sector of priority [or incentives] for technology transfer to any organization or individual in areas with specially difficult socio-economic conditions

3. The amendment Law on corporate income tax on determination of assessable income and loss transfer from the transfer of real estate and a number of new generated revenues.
 - Income from transfers of investment projects, from transfers of the right  to participate in investment projects, and from transfers of the right to explore, mine and process minerals must be separately determined in order to declare and pay tax as income from real property transfers,
 - Losses from a transfer of an investment project (except a project to explore [or] mine minerals) or from a transfer of the right to participate in an investment project (except a project to explore [or] mine minerals) or from a real property transfer may be set-off against profit from production and business activities within a tax assessment period

4. The amendment Law on corporate income tax regarding deductive expenses and nondeductive expenses when determining taxable income.

 4.1. About deductible expenses must have a payment voucher proving payment not using cash.
Condition for deductible expenses must be must have a payment voucher proving payment not using cash for the purchase of goods and services on each occasion valued at twenty million VND or more, except for cases are not required to have evidence from non-cash payment in accordance with law .
Government specifies a number of cases required no proof of non-cash payments, such as :
 - Expenses not required invoices in accordance with law: purchase of agricultural, forestry , fisheries products, soil, rock, sand and gravel which are made and sold directly by individuals; wages and salaries paid to  laborers; travel expenses under package budget; entertaiment expenses;
 - Expenses are from purchase of goods being the property and services of persons not businessman;
 - Expenses payment for goods and services in the form of clearing, payment authorization and payment method other non-cash: payment by cards, payment by electronic means, payment through credit institutions non-bank financial institutions;
 - Some other cases are not required to have proof of non-cash payment as stipulated by the Government.

 4.2 Remove regulation on a part of expenses for raw materials, supplies, fuel, power and goods which exceeds the wear and tear levels formulated by the enterprise and notified by it to the tax office and actual ex-warehouse prices

 4.3. The control level for a part of expenses for advertising, marketing, promotion and broker”s commissions; of expenses for receptions, formal occasions and conferences; of expenses for assisting marketing, of expenses for assisting costs directly related to production [and/or] business, is increased to fifteen (15) per cent of the total amount of deductible expenses, while reviewing eliminate some expenses out of control level.

 4.4 .Items of financial aid

 - Current regulations (Point o Paragraph 2 of Article 9 of the Law), the enterprise is deducted from expenses for activities funded education , health , disaster recovery and of gratitude for the poor .
 - New revised law adds items are included in deductible expenses when determining assessable income for the financial aids in accordance with State programs for localities in areas with specially difficult socio-economic conditions.

 4.5. Additional provisions on part of expenses being payments to a voluntary retirement fund or a fund in the nature of a social welfare fund, or to purchase voluntary retirement insurance for employees. The expenses being payments to a voluntary retirement fund or a fund in the nature of a social welfare fund, or to purchase voluntary retirement insurance for employees which exceed the level stipulated by law is not includes in the deductive expenses.

 4.6. Additional principles for expenses for business activities being banking, insurance,  lotteries, securities and a number of other special business activities as stipulated in regulations of the Ministry of Finance

5 . The amendment Law on corporate income tax on tax rate

 Reduce the general CIT tax rate from 25 % to 22 %, particularly for businesses with total annual revenue not exceeding twenty (20) billion VND shall be entitled to the tax rate of twenty (20) per cent applicable from 01.07.2013.

 From 01 Jan 2016 the general tax rate is 20 % and the 20 % preferential tax rate shall be reduced to 17 %.

6 . The amendment Law on corporate income tax on tax incentives

 6.1.The 10% CIT rate shall be applied for 5 years, tax-exemption for 4 years and fifty (50) per cent reduction of the amount of CIT payable for a maximum period of nine (9) subsequent years for investment projects in the additinal fields: scientific research and technological development; application of high-tech on the list of high-tech for which incentives are granted for investment in development under the Law on High-Tech; high-tech incubation and high-tech incubator enterprises; venture investment in the development of high-tech on the list of high-tech for which incentives are granted for investment in development under the Law on High-Tech; investment in construction and commercial operation of high-tech incubation and high-tech incubator enterprises; investment in development of specially important State infrastructure in accordance with law; manufacture of software products; manufacture of composite materials, various types of light building materials and of rare materials; production of recycled energy, clean energy and energy from destruction of waste; development of biological technology; and protection of the environment, high technology, agricultural enterprises tech applications under the provisions of the Law on high technology.

 6.2. The tax rate of ten (10) per cent on income from the business of implementing investment projects shall apply to additional fields: social residential housing for sale, printing newspapers, income of publishers, Income of co-operatives operating in the sectors of agriculture, forestry, fisheries and salt production.

 6.3. The 20% CIT rate shall be applied for 10 years, tax-exemption for 2 years, a fifty (50) per cent reduction of the amount of CIT payable for a maximum period of four (4) subsequent years entitled to investment projects in the additional fields:  production of high-grade steel; production of energy-saving products; manufacture of machinery and equipment servicing production in the agricultural, forestry, fisheries and salt production sectors; manufacture of irrigation equipment; production and refining of feed for poultry, livestock [domestic animals] and fisheries; and development of traditional trades.

 6.4 . The tax rate of twenty (20) per cent shall apply to income of people”s credit funds and of microfinance institutions

 6.5 . Tax exemption shall be applied for 2 years, a 50% reduction of corporate income tax payable in the subsequent 4 years for enterprises to invest in industrial parks (IP).

 From 01 Jan 2009, CIT Law No.14/2008/QH12 has no regulation on preferential CIT for newly established enterprises in industrial parks (only reserved for preferential enterprises have invested in the industry before 2009) .

 6.6. In addition to comprehensive business income tax reduction for technology transfer activities should be encouraged to transfer

 6.7. Specifying enterprises operating in the field of education - training, vocational training, health, culture, sports and environment applies the preferential tax rate of 10% is the basis of socialization in the field this area.

 7. The amendment Law on corporate income tax on tax incentives for investment expansion

 Revised Law specifies concepts of investment expansion, principles and criteria of tax incentives shall be applied for investment expansion.

 8. The amendment Law on corporate income tax specify a number of cases not eligible for tax incentives

 - The CIT incentives prescribed in articles 13 and 14 of this Law applicable to income of enterprises from new investment projects do not apply to cases of separation, merger, consolidation or conversion of form of enterprise, nor to transfer of ownership or other cases stipulated by law
 - The CIT rate of twenty (20) per cent prescribed in article 10.2 and the provisions on tax incentives in articles 4.4, 13 and 14 of this Law do not apply to: Income from capital transfers and from transfer of the right to contribute capital; income from real property transfers except for social residential housing prescribed in article 13 of this Law; income from transfer of an investment project or the right to participate in an investment project, or from transfer of the right to explore [and/or] mine minerals; and [does not apply] to income from production and business activities outside Vietnam

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 Reference: Law on corporate incom tax 2008 and 2013 (Download)