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LAW
ON
CORPORATE INCOME TAX
National Assembly of the Socialist Republic of Vietnam
Legislature XII, 3rd Session
[May 2008]
Pursuant to the 1992 Constitution of the Socialist Republic of
Vietnam as amended by Resolution 51-2001-QH10;
The National Assembly hereby promulgates the Law on Corporate Income
Tax.
CHAPTER I
General Provisions
Article 1 Governing scope
This Law regulates taxpayers, taxable income, tax exempt income, the
basis for tax assessment, methods of tax assessment, and corporate
income tax incentives.
Article 2 Applicable entities
1. Corporate income taxpayer means any organization conducting
activities of production and/or business in goods and services which
earns taxable income as stipulated in this Law (hereinafter referred
to as an enterprise), comprising:
(a) An enterprise established pursuant to the law of Vietnam.
(b) An enterprise established pursuant to foreign law (hereinafter
referred to as a foreign enterprise) with or without a resident
establishment in Vietnam.
(c) An enterprise established pursuant to the Law on Co-Operatives.
(d) A professional entity established pursuant to the law of
Vietnam.
(dd) Any other organization conducting activities of production
and/or business which earns income.
2. An enterprise which earns taxable income as stipulated in article
3 of this Law must pay corporate income tax as follows:
(a) An enterprise established pursuant to the law of Vietnam must
pay tax on taxable income arising in Vietnam and on taxable income
arising outside of Vietnam.
(b) A foreign enterprise with a resident establishment in Vietnam
must pay tax on taxable income arising in Vietnam and on taxable
income arising outside Vietnam and relating to the operation of such
resident establishment.
(c) A foreign enterprise with a resident establishment in Vietnam
must pay tax on taxable income arising in Vietnam and not relating
to the operation of the resident establishment.
(d) A foreign enterprise which does not have a resident
establishment in Vietnam must pay tax on taxable income arising in
Vietnam.
3. Resident establishment of a foreign enterprise means a production
and/or business establishment via which a foreign enterprise
conducts part or all of its production and/or business activities in
Vietnam which earn income, comprising:
(a) Branches, operational offices, plants, workshops, means of
transportation, mines, petroleum and gas fields, and any other
location in Vietnam where natural resources are mined.
(b) Construction sites; and construction, installation and assembly
works.
(c) Establishments providing services, including consultancy
services provided via people working for such establishment or via
other organizations or individuals.
(d) Agents of foreign enterprises.
(dd) Representatives in Vietnam where they are representatives with
authority to sign contracts in the name of the foreign enterprise,
or where they are representatives without authority to sign
contracts in the name of the foreign enterprise but regularly
deliver goods or provide services in Vietnam.
Article 3 Taxable income
1. Taxable income comprises income earned from activities of
production [and/or] business in goods and services and other income
as stipulated in clause 2 of this article.
2. Other taxable income comprises income from capital transfers and
from real property transfers; income from the ownership of or right
to use assets; income from transfer, leasing out or liquidation of
assets; income being interest on deposits, loans or sales of foreign
currency; income being recoveries from contingency reserves; income
earned from bad debts which were written-off and are now
recoverable; income being debts payable to unidentifiable creditors;
income from business omitted in previous years, and other income
including income receivable from activities of production and/or
business outside Vietnam.
Article 4 Tax exempt income
1. Income earned from products of cultivation, husbandry and
aquaculture by organizations established pursuant to the Law on
Co-Operatives.
2. Income earned from performance of technical services directly
serving agricultural production.
3 Income earned from performance of contracts for scientific
research and technological development, from products during their
period of test production, and from products made from new
technology applied for the first time in Vietnam.
4. Income earned from activities of production [and/or] business in
goods and services by enterprises specially reserved for employees
being disabled people, reformed addicts and people infected with
HIV. The Government shall provide regulations on the criteria and
conditions for determining enterprises specially reserved for
employees being disabled people, reformed addicts and people
infected with HIV.
5. Income earned from occupational training activities specially
reserved for ethnic minority people, disabled people, children
living in particularly difficult conditions and reformed offenders.
6. Income distributed from activities being capital contribution,
joint venture [and/or] association with a domestic enterprise after
payment of corporate income tax in accordance with this Law.
7. Aid funds receivable for use in educational, scientific research,
cultural, artistic, charitable, humanitarian and other social
activities in Vietnam.
Article 5 Tax assessment period
1. The tax assessment period for corporate income tax shall be
calculated in accordance with the western calendar year or the
financial year, except for the case stipulated in clause 2 of this
article.
2. The tax assessment period for corporate income tax shall be each
occasion on which income arises applicable to foreign enterprises
stipulated in sub-clauses (c) and (d) of article 2.2 of this Law.
CHAPTER II
Basis and Method of Tax Assessment
Article 6 Basis for tax assessment
The basis for tax assessment shall be assessable income and tax
rates.
Article 7 Determination of assessable income
1. Assessable income within any one tax period shall be equal to
taxable income less tax exempt income and losses carried forward
from previous years.
2. Taxable income shall equal turnover less deductible expenses of
activities of production and/or business, plus other income
including income receivable from outside Vietnam.
3. Income from real property transfers must be separately determined
in order to declare and pay tax.
The Government shall provide detailed regulations and guidelines for
implementation of this article.
Article 8 Turnover
Turnover means total sales revenue, processing fees and fees for
provision of services including price subsidies and additional
charges and fees to which the enterprise is entitled. Turnover shall
be calculated in Vietnamese dong, and any turnover in foreign
currency must be converted into Vietnamese dong at the average
trading exchange rate on the inter-bank foreign currency market as
published by the State Bank of Vietnam at the time when the turnover
in foreign currency is generated.
The Government shall provide detailed regulations and guidelines for
implementation of this article.
Article 9 Deductible expenses and non-deductible expenses when
determining taxable income
1. An enterprise shall be permitted to deduct all expenses, except
for those stipulated in clause 2 of this article, if they satisfy
both the following conditions:
(a) The expenses actually arose and relate to the activities of
production and/or business of the enterprise.
(b) The expenses are accompanied by complete invoices and source
vouchers as stipulated by law.
2. The following items shall be non-deductible expenses when
determining taxable income:
(a) Expenses which fail to satisfy both the conditions stipulated in
clause 1 of this article, except for that part of the value of a
loss due to a natural disaster, epidemic or other event of force
majeure for which compensation is not payable.
(b) Fines for administrative offences.
(c) Expenses covered by other funding sources.
(d) That part of business management expenses allocated by a foreign
enterprise to its resident establishment in Vietnam which exceeds
the level calculated by the allocation method stipulated by the law
of Vietnam.
(dd) That part of expenses which exceeds the level stipulated by law
for establishment of contingency reserves.
(e) That 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.
(g) That part of interest payments on loans for production [and/or]
business to an entity which is neither a credit institution nor an
economic institution which exceeds one hundred and fifty (150) per
cent of the basic interest rate as published by the State Bank of
Vietnam at the time of the loan.
(h) Depreciation of fixed assets which is incorrect in terms of the
law.
(i) Amounts advanced for expenses which are incorrect in terms of
the law.
(k) Salaries and wages of owners of private enterprises;
remuneration paid to founding members of an enterprise who are not
directly involved in executive management of production [and/or]
business; and salaries and wages and items otherwise accounted for
in order to be paid to employees but not actually expended or
without the invoices and source vouchers required by law.
(l) Interest payments on loans corresponding to the unpaid portion
of charter capital.
(m) Input value added tax which has been credited, value added tax
paid in accordance with the tax credit method, and corporate income
tax.
(n) That 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, and for discounting payments; and of expenses
for complimentary newspapers by press agencies directly related to
production and/or business which exceeds ten (10) per cent of the
total amount of deductible expenses; but applicable to newly
established enterprises, that part of such expenses which exceeds
fifteen (15) per cent in the first three years as from the date of
establishment. Total amount of deductible expenses shall not include
the expenses stipulated in this paragraph; and in the case of
commercial business activities, total amount of deductible expenses
shall not include the purchase price of goods sold.
(o) Items of financial aid except financial aid for education,
health care, to overcome the consequences of a natural disaster or
to build a charitable home for poor people as stipulated by law.
3. Expenses in foreign currency which are deductible when
determining taxable income must be converted into Vietnamese dong at
the average trading exchange rate on the inter-bank foreign currency
market as published by the State Bank of Vietnam at the time when
such expenses in foreign currency arose.
The Government shall provide detailed regulations and guidelines for
implementation of this article.
Article 10 Tax rates
1. The rate of corporate income tax shall be twenty five (25) per
cent, except for the cases stipulated in clause 2 of this article
and in article 13 of this Law.
2. The rate of corporate income tax applicable to activities of
prospecting, exploration and mining of petroleum and gas and other
rare and precious natural resources shall be from thirty two (32)
per cent to fifty (50) per cent, depending on each specific project
and business establishment.
The Government shall provide detailed regulations and guidelines for
implementation of this article.
Article 11 Method of assessing tax
1. The amount of corporate income tax payable within any one tax
period shall equal assessable income multiplied by the tax rate;
where an enterprise has already paid income tax outside Vietnam, the
amount of corporate income tax already paid shall be deducted but at
a maximum not in excess of the amount of corporate income tax
payable pursuant to this Law.
2. The method of assessing tax applicable to the enterprises
stipulated in sub-clauses (c) and (d) of article 2.2 of this Law
shall be implemented in accordance with regulations of the
Government.
Article 12 Tax payment
An enterprise shall pay tax in the place where it has its main head
office. If an enterprise has a dependently accounting production
establishment which operates in a province or city under central
authority other than that in which such enterprise has it main head
office, then the amount of corporate income tax assessable and
payable shall be determined in accordance with a ratio of expenses
as between the place where the enterprise has the production
establishment and the place where the enterprise has its main head
office. Delegation of authority regarding, and management and use of
sources of income receivable shall be implemented in accordance with
provisions in the Law on State Budget.
The Government shall provide detailed regulations and guidelines for
implementation of this article.
CHAPTER III
Corporate Income Tax Incentives
Article 13 Incentives being preferential tax rates
1. The tax rate of ten (10) per cent shall apply for fifteen (15)
years to newly established enterprises from investment projects in
areas with specially difficult socio-economic conditions, in
economic zones and in high-tech zones; and to newly established
enterprises from investment projects in the sectors of high
technology, scientific research and technological development,
investment in development of specially important infrastructure
facilities of the State, and production of software products.
2. The tax rate of ten (10) per cent shall apply to enterprises
operating in the sectors of education and training, occupational
training, health care, culture, sport and the environment.
3. The tax rate of twenty (20) per cent shall apply for ten (10)
years to newly established enterprises from investment projects in
areas with difficult socio-economic conditions.
4. The tax rate of twenty (20) per cent shall apply to agricultural
service co-operatives and to people's credit funds.
5. The duration of preferential tax rates may be extended in the
case of large scale and high-tech projects which particularly need
to attract investment, but the duration of extension shall not
exceed the duration stipulated in clause 1 of this article.
6. The duration of the preferential tax rates stipulated in this
article shall be calculated from the first year in which the
enterprise has turnover.
The Government shall provide detailed regulations and guidelines for
implementation of this article.
Article 14 Incentives being duration of tax exemption and reduction
1. The following enterprises shall be exempted from corporate income
tax for a maximum period of four (4) years and shall be entitled to
a fifty (50) per cent reduction of the amount of corporate income
tax payable for a maximum period of nine (9) subsequent years: Newly
established enterprises from investment projects in areas with
specially difficult socio-economic conditions, in economic zones and
in high-tech zones; newly established enterprises from investment
projects in the sectors of high-tech, scientific research and
technological development, investment in development of specially
important infrastructure facilities of the State, and production of
software products; and newly established enterprises operating in
the sectors of education and training, occupational training, health
care, culture, sport and the environment.
2. The following enterprises shall be exempted from corporate income
tax for a maximum period of two (2) years and shall be entitled to a
fifty (50) per cent reduction of the amount of corporate income tax
payable for a maximum period of four (4) subsequent years: Newly
established enterprises from investment projects in areas with
difficult socio-economic conditions.
3. The duration of tax exemption and reduction stipulated in this
article shall be calculated from the first year in which the
enterprise has taxable income; if an enterprise does not have
taxable income in the first three years as from the first year in
which it has turnover, then the duration of tax exemption and
reduction shall be calculated from the fourth year.
The Government shall provide detailed regulations and guidelines for
implementation of this article.
Article 15 Other cases of tax reduction
1. Enterprises engaged in production, construction or transportation
which employ many female employees shall be entitled to a reduction
of corporate income tax equal to the additional amount of expenses
incurred for female employees.
2. Enterprises employing many ethnic minority people shall be
entitled to a reduction of corporate income tax equal to the
additional amount of expenses incurred for employees being ethnic
minority people.
The Government shall provide detailed regulations and guidelines for
implementation of this article.
Article 16 Carrying forward losses
1. Enterprises which suffer a loss shall be entitled to carry
forward the loss to the following year and such loss shall be
deductible from assessable income. Losses may be carried forward for
a maximum period of five years as from the year following the year
in which the loss arose.
2. Enterprises which suffer a loss from activities being real
property transfers shall only be entitled to carry forward the loss
to assessable income from such activities.
Article 17 Establishment of Science and Technology Development Fund
of an enterprise
1. Enterprises established and operating pursuant to the law of
Vietnam shall be entitled to deduct a maximum of ten (10) per cent
of their annual assessable income in order to establish the Science
and Technology Development Fund of the enterprise.
2. If a Science and Technology Development Fund, within a period of
five (5) years from the date of its establishment, does not entirely
use up seventy (70) per cent of its funds or uses funds for an
incorrect purpose, then the enterprise must pay into the State
Budget part of its corporate income tax calculated on the income
which was taken to establish the Fund and which was not entirely
used up or which was used for the incorrect purpose plus interest
arising on such amount of corporate income tax.
The corporate income tax rate used to assess the amount of tax
recoverable shall be the tax rate which applied to the enterprise in
the period when it established its Science and Technology
Development Fund.
The interest rate for calculating the amount of tax recoverable on
the part of the funds not entirely used up shall be the interest
rate on State treasury bonds with a term of one year applicable at
the time of recovery and the period for calculating interest payable
shall be two years.
The interest rate for calculating the amount of tax recoverable on
funds used for an incorrect purpose shall be the interest rate for
late payment stipulated in the Law on Tax Management and the period
for calculating interest payable shall be the period from the date
when the Fund was established until the date when tax is recovered.
3. Enterprises shall not be permitted to account for expenses of the
Science and Technology Development Fund in their deductible expenses
when determining taxable income in any one tax period.
4. Funds of a Science and Technology Development Fund shall only be
permitted to be used for investment in science and technology in
Vietnam.
Article 18 Conditions for applicability of tax incentives
1. The corporate income tax incentives prescribed in articles 13 to
17 inclusive of this Law shall only apply to enterprises which
comply with the cost accounting regime, maintain invoices and source
vouchers, and pay tax in accordance with declarations.
2. Enterprises must account separately for income from activities of
production and/or business entitled to the tax incentive rates
prescribed in articles 13 and 14 of this Law, from income from
activities of production and/or business not entitled to tax
incentive rates, failing which it shall be determined as a ratio of
turnover from activities entitled to tax incentive rates over total
turnover of the enterprise.
3. The corporate income tax incentives prescribed in articles 13 and
14 of this Law shall not apply to:
(a) The income stipulated in article 3.2 of this Law.
(b) Income from activities of prospecting, exploration and mining of
petroleum and gas and other rare and precious natural resources.
(c) Income from business in games with prizes and in gambling.
(d) Other cases as stipulated by the Government.
CHAPTER IV
Implementing Provisions
Article 19 Effectiveness
1. This Law shall be of full force and effect as from 1 January
2009.
2. This Law shall replace Law on Corporate Income Tax 09-2003-QH11.
3. Enterprises currently entitled to corporate income tax incentives
pursuant to the Law on Corporate Income Tax 09-2003-QH11 shall
continue to be entitled to such incentives for the residual term in
accordance with Law 09-2003-QH11; if the level of incentives
including preferential tax rates and duration of tax exemption and
reduction is less than the level of incentives pursuant to this Law,
then the tax incentives stipulated in this Law shall apply for the
residual term.
4. In the case of enterprises in the category of entitlement to tax
exemption and reduction pursuant to Law 09-2003-QH11 which do not
yet have taxable income, the time of commencement of entitlement to
tax exemption and reduction shall be calculated pursuant to this Law
and as from the date on which this Law takes effect.
Article 20 Implementing guidelines
The Government shall provide detailed regulations and guidelines for
implementation of articles 4, 7, 8, 9, 10, 11, 12, 13, 14, 15 and 18
of this Law and of other necessary items as required for management
purposes.
This Law was passed by Legislature XII of the National Assembly of
the Socialist Republic of Vietnam at its 3rd Session on 3 June 2008.
Chairman of the National Assembly
NGUYEN PHU TRONG
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