LAW ON
ENTERPRISE INCOME TAX 14/2008/QH12
Pursuant to the 1992
Constitution of the Socialist Republic of Vietnam, which was amended and
supplemented under Resolution No. 51/2001/QH10;
The National Assembly
promulgates the Law on Enterprise Income Tax.
Chapter
I. GENERAL
PROVISIONS
Article 1. Governing scope
This Law provides for
enterprise income taxpayers, taxable incomes, tax-exempt incomes, tax bases,
tax calculation methods, and tax incentives.
Article 2. Taxpayers
1. Taxpayers are goods and
service production and business organizations which have taxable incomes under
the provisions of this Law (below referred to as enterprises), including:
a/ Enterprises established
under Vietnamese law;
b/ Enterprises established
under foreign laws (below referred to as foreign enterprises) with or without
Vietnam-based permanent establishments;
c/ Organizations established
under the Law on Cooperatives;
d/ Non-business units
established under Vietnamese law;
e/ Other organizations engaged
in income-generating production and business activities.
2. Enterprises having taxable
incomes under Article 3 of this Law shall pay enterprise income tax as follows:
a/ Enterprises established
under Vietnamese law shall pay tax on taxable incomes generated in and outside
Vietnam;
b/ Foreign enterprises with
Vietnam-based permanent establishments shall pay tax on taxable incomes
generated in Vietnam and taxable incomes generated outside Vietnam which are
related to the operation of such establishments;
c/ Foreign enterprises with
Vietnam-based permanent establishments shall pay tax on taxable incomes
generated in Vietnam which are not related to the operation of such permanent
establishments.
d/ Foreign enterprises without
Vietnam-based permanent establishments shall pay tax on taxable incomes
generated in Vietnam.
3. Foreign enterprises
permanent establishments are production and business establishment through
which foreign enterprises conduct some or all income-generating production and
business activities in Vietnam, including:
a/ Branches, executive offices,
factories, workshops, means of transport, mines, oil and gas fields, or other
places of extraction of natural resources in Vietnam;
b/ Construction sites,
construction works, installation and assembly projects;
c/ Establishments providing
services, including consultancy services through employees or other
organizations or individuals;
d/ Agents for foreign
enterprises;
e/ Vietnam-based
representatives, in case of representatives which are competent to conclude
contracts in the name of foreign enterprises or representatives which are
incompetent to conclude contracts in the name of foreign enterprises but
regularly deliver goods or provide services in Vietnam.
Article 3. Taxable incomes
1. Taxable incomes include
income from goods and service production and business activities and other
incomes specified in Clause 2 of this Article.
2. Other incomes cover income
from the transfer of capital or real estate; income from the right to own or
use assets; income from the transfer, lease or liquidation of assets; income
from interests, loans or foreign currency sales; refund of provisions; recovery
of bad debts already written off; collection of payable debts of unidentifiable
creditors; omitted income from previous years business activities, and other
incomes, including income generated from production and business activities
outside Vietnam.
Article 4. Tax-exempt incomes
1. Income from cultivation,
husbandry and aquaculture of organizations established under the Law on
Cooperatives.
2. Income from the application
of technical services directly for agriculture.
3. Income from the performance
of contracts on scientific research and technological development, trial
products and products turned out with technologies applied for the first time
in Vietnam.
4. Income from enterprises
goods and service production and business activities exclusively reserved for
disabled, detoxified and HIV-infected laborers. The Government shall specify
criteria and conditions for the determination of enterprises exclusively
reserved for disabled, detoxified and HIV-infected laborers.
5. Income from job-training
activities exclusively reserved for ethnic minority people, the disabled,
children in extremely disadvantaged circumstances and persons involved in
social evils.
6. Incomes divided for capital
contribution, joint venture or association with domestic enterprises, after
enterprise income tax has been paid under the provisions of this Law.
7. Received financial supports
used for educational, scientific research, cultural, artistic, charitable,
humanitarian and other social activities in Vietnam.
Article 5. Tax period
1. An enterprise income tax
period is the calendar year or fiscal year, except the cases defined in Clause
2 of this Article.
2. The enterprise income tax period
upon each time of income generation applies to foreign enterprises specified at
Points c and d, Clause 2, Article 2 of this Law.
Chapter
II. TAX
BASES AND TAX CALCULATION METHODS
Article 6. Tax bases
Tax bases include taxed income
and tax rate.
Article 7. Determination of
taxed income
1. Taxed income in a tax period
is the taxable income minus tax-exempt incomes and losses carried forward from
previous years.
2. Taxable income is turnover
minus deductible expenses for production and business activities plus other
incomes, including income received outside Vietnam.
3. Income from real estate
transfer must be separately determined for tax declaration and payment.
The Government shall detail and
guide the implementation of this Article.
Article 8. Turnover
Turnover is the total sales,
processing remuneration, service provision charges, subsidies and surcharges
enjoyed by enterprises. Turnover is calculated in Vietnam dong; foreign
currency turnover, if any, must be converted into Vietnam dong at the average
exchange rate on the inter-bank foreign currency market announced by the State
Bank of Vietnam at the time foreign-currency turnover is generated.
The Government shall detail and
guide the implementation of this Article.
Article 9. Deductible and non-deductible
expenses upon determination of taxable incomes
1. Except the expenses
specified in Clause 2 of this Article, enterprises are entitled to deduction of
all expenses which fully meet the following conditions:
a/ They are actually paid
expenses related to production and business activities;
b/ They are accompanied with
adequate invoices and documents as prescribed by law.
2. Non-deductible expenses upon
determination of taxable incomes include:
a/ Expense not fully satisfying
the conditions specified in Clause 1 of this Article, except the uncompensated
value of losses caused by natural disasters, epidemics or other force majeure
circumstances;
b/ Fine for administrative
violations;
c/ Expense already covered by
other funding sources;
d/ Business administration
expense allocated by foreign enterprises to their Vietnam-based permanent
establishments in excess of the level calculated according to the allocation
method prescribed by Vietnamese law;
e/ Expense in excess of the
law-prescribed norm for the deduction and setting up of provisions;
f/ Expense for raw materials,
materials, fuel, energy or goods in excess of the wastage rate set by
enterprises and notified to tax offices and the actual ex-warehousing price;
g/ Payment for interests on
loans for production and business activities of entities other than credit
institutions or economic organizations in excess of 150% of the basic interest
rate announced by the State Bank of Vietnam at the time of loaning;
h/ Fixed asset depreciation
made in contravention of law;
i/ Expenses advanced in
contravention of law;
j/ Salaries and wages of owners
of private enterprises; remuneration paid to enterprise founders who do not
personally administer production and business activities; salaries, wages and
other accounted amounts payable to laborers which have actually not been paid
to them or paid without invoices or documents as prescribed by law;
k/ Loan interests paid
corresponding to the insufficient amount of the charter capital;
l/ Credited input value-added tax,
value-added tax to be paid according to the credit method, and enterprise
income tax;
m/ Expense for advertisement,
marketing, sales promotion and brokerage commissions; expense for reception,
protocol and conferences; expense in support of marketing and payment discount;
expense for press agencies newspapers given as presents or gifts directly
related to production and business activities in excess of 10% of total
deductible expenses; for newly set up enterprises, such expense in excess of
15% of total deductible expenses for the first 3 years from the date of setting
up. Total deductible expenses exclude the expenses specified at this Point; for
trade activities, total deductible expenses exclude purchasing prices of sold
goods;
n/ Financial supports, excluding
those for educational and healthcare activities and for mitigating natural
disaster consequences and building houses of gratitude for the poor as
prescribed by law.
3. Deductible foreign currency
expenses upon the determination of taxable incomes must be converted into
Vietnam dong at the average exchange rate on the inter-bank foreign currency
market announced by the State Bank of Vietnam at the time foreign currency
expenses arise.
The Government shall detail and
guide the implementation of this Article.
Article 10. Tax rates
1. The enterprise income tax
rate is 25%, except the cases specified in Clause 2, this Article, and Article
13, of this Law.
2. The enterprise income tax
rate applicable to activities of prospecting, exploring and exploiting oil and
gas and other precious and rare natural resources is between 32% and 50%,
depending on each project or business establishment.
The Government shall detail and
guide the implementation of this Article.
Article 11. Tax calculation
method
1. An enterprise income tax
amount payable in a tax period is the taxed income multiplied by the tax rate;
in case an enterprise has paid income tax outside Vietnam, the paid tax amount
may be subtracted but must not exceed the enterprise income tax amount payable
under the provisions of this Law.
2. The tax calculation method
applicable to enterprises listed at Points c and d, Clause 2, Article 2 of this
Law complies with the Governments regulations.
Article 12. Places for tax
payment
Enterprises shall pay tax at
places where they are headquartered. In case an enterprise has a dependent
cost-accounting production establishment operating in a province or centrally
run city other than the place of its headquarters, the payable tax amount shall
be calculated based on the ratio of expenses between the place where the
production establishment is located and the place where the enterprise is
headquartered. The decentralization, management and use of tax revenues comply
with the State Budget Law.
The Government shall detail and
guide the implementation of this Article.
Chapter
III. ENTERPRISE
INCOME TAX INCENTIVES
Article 13. Tax rate incentives
1. Newly set up enterprises
under investment projects in geographical areas with extreme socio-economic
difficulties, economic zones or hi-tech parks; newly set up enterprises under
investment projects in the domains of high technology, scientific research and
technological development, development of the States infrastructure works of
special importance, or manufacture of software products are entitled to the tax
rate of 10% for fifteen years.
2. Enterprises operating in
education-training, vocational training, healthcare, cultural, sports and
environmental domains are entitled to the tax rate of 10%.
3. Newly set up enterprises under
investment projects in geographical areas with socio-economic difficulties are
entitled to the tax rate of 20% for ten years.
4. Agricultural service
cooperatives and peoples credit funds are entitled to the tax rate of 20%.
5. For large-scale and hi-tech
projects in which investment should be particularly attracted, the duration for
application of tax rate incentives may be extended but must not exceed the
duration specified in Clause 1 of this Article.
6. The duration for application
of tax rate incentives specified in this Article is counted from the first year
an enterprise has turnover.
The Government shall detail and
guide the implementation of this Article.
Article 14. Tax exemption and
reduction duration incentives
1. Newly set up enterprises
under investment projects in geographical areas with extreme socio-economic
difficulties, economic zones or hi-tech parks; newly set up enterprises under
investment projects in the domains of high technology, scientific research and
technological development, development of the States infrastructure works of
special importance or manufacture of software products; newly set up
enterprises operating in education-training, vocational training, healthcare,
cultural, sports and environmental domains are entitled to tax exemption for no
more than four years and a 50% reduction of payable tax amounts for no more
than nine subsequent years.
2. Newly set up enterprises
newly set up under investment projects in geographical areas with
socio-economic difficulties are entitled to tax exemption for no more than two
years and a 50% reduction of payable tax amounts for no more than four
subsequent years.
3. The tax exemption or
reduction duration specified in this Article is counted from the first year an
enterprise has taxable income; in case an enterprise has no taxable income for
the first three years from the first year it has turnover, the tax exemption or
reduction duration is counted from the fourth year.
The Government shall detail and
guide the implementation of this Article.
Article 15. Other cases
eligible for tax reduction
1. Production, construction or
transport enterprises which employ many female laborers are entitled to
reduction of enterprise income tax amounts equal to additional expenses for
female laborers.
2. Enterprises which employ
many ethnic minority laborers are entitled to reduction of enterprise income
tax amounts equal to additional expenses for ethnic minority laborers.
The Government shall detail and
guide the implementation of this Article.
Article 16. Carrying forward of
losses
1. Loss-suffering enterprises
may carry forward their losses to the subsequent year; those losses may be
included in taxed income. The time limit for carrying forward losses is five
years, counting from the year following the year the losses arise.
2. Enterprises suffering losses
from real estate transfer activities may only carry forward losses into those
activities taxed income.
Article 17. Deduction for
setting up of enterprises scientific and technological development funds
1. Enterprises established and
operating under Vietnamese law may deduct up to 10% of taxed income for setting
up their scientific and technological development funds.
2. Within five years after
being set up, if a scientific and technological development fund is not used,
has been used below 70% or used for improper purposes, the enterprise shall
remit into the state budget the enterprise income tax amount calculated on the
income already deducted for setting up the fund but not used or used for
improper purposes and the interest on that enterprise income tax amount.
The enterprise income tax rate
used for calculating the to-be-recovered tax amount is the tax rate applicable
to the enterprise during the time of operating the fund.
The interest rate for calculating
the interest on the to-be- recovered tax amount calculated on the unused fund
amount is the interest rate for one-year term treasury bonds applicable at the
time of recovery, and the interest payment period is two years.
The interest rate for calculating
the interest on the to-be- recovered tax amount calculated on the fund amount
used for improper purposes is the interest used for late payment fines under
the provisions of the Tax Administration Law, and the interest payment period
is counted from the time a fund is set up to the time of recovery.
3. Enterprises may not account
expenses covered by their scientific and technological development funds as
deductible ones upon the determination of taxable incomes in a tax period.
4. Enterprises scientific and
technological development funds may be used only for scientific and
technological investment in Vietnam.
Article 18. Conditions for
application of tax incentives
1. Enterprise income tax
incentives specified in Articles 13, 14, 15, 16 and 17 of this Law apply only
to enterprises which implement regulations on accounting, invoices and
documents and pay tax according to declaration.
2. Enterprises shall account
separately income from production and business activities eligible for tax
incentives specified in Articles 13 and 14 of this Law from income from
production and business activities ineligible for tax incentives; if those
incomes cannot be separately accounted, income from production and business
activities eligible for tax incentives shall be determined based on the ratio
between turnover from production and business activities eligible for tax
incentives and total turnover.
3. Enterprise income tax
incentives specified in Articles 13 and 14 of this Law do not apply to:
a/ Incomes specified in Clause
2, Article 3 of this Law;
b/ Income from activities of
prospecting, exploring and mining oil, gas and other precious and rare natural
resources;
c/ Income from prize-winning
game or betting business as prescribed by law;
d/ Other cases specified by the
Government.
Chapter
IV. IMPLEMENTATION
PROVISIONS
Article 19. Implementation
effect
1. This Law takes effect on
January 1, 2009.
2. This Law replaces Enterprise
Income Tax Law No. 09/2003/QH11.
3. Enterprises which enjoy
enterprise income tax incentives under Enterprise Income Tax Law No.
09/2003/QH11 may continue enjoying those incentives for the remaining duration
under Enterprise Income Tax Law No. 09/2003/QH11; in case enterprise income tax
incentives, including tax rate incentives and tax exemption and reduction
duration, are lower than the tax incentives specified in this Law, the tax
incentives under this Law apply for the remaining duration.
4. Enterprises which are
entitled to tax exemption or reduction duration under Enterprise Income Tax Law
No. 09/2003/QH11 but have no taxable income yet, the tax exemption or reduction
duration will be counted under this Law and from the date this Law takes
effect.
Article 20. Implementation
guidance
The Government shall detail and
guide the implementation of Articles 4, 7, 8, 9, 10, 11, 12, 13, 14, 15 and 18
and other necessary contents of this Law to meet management requirements.
This Law was passed on June 3,
2008, by the 12th National Assembly of the Socialist Republic of Vietnam at its
third session.