LAW ON AMENDING AND SUPPLEMENTING A NUMBER OF ARTICLES OF THE CORPORATE INCOME TAX LAW
Pursuant to the Constitution of the Socialist Republic of Vietnam, 1992, as amended and supplemented by a number of articles under Resolution No. 51/2001/QH10; The National Assembly hereby promulgates the Law on Amending and Supplementing a Number of Articles of the Corporate Income Tax Law No. 14/2008/QH12.
Article 1:
Amend and supplement a number of articles of the Corporate Income Tax Law as follows:
1. Clause 3 of Article 2 is amended and supplemented as follows: “3. The permanent establishment of a foreign enterprise is a business establishment through which the foreign enterprise conducts part or all of its production and business activities in Vietnam, including:
a) Branches, executive offices, factories, workshops, means of transport, oil and gas fields, mines, or any place of exploitation of natural resources in Vietnam;
b) Construction sites, construction, installation, and assembly projects;
c) Service-providing establishments, including consultancy services through employees or other individuals;
d) Agents for foreign enterprises;
e) Representatives in Vietnam with authority to sign contracts in the name of the foreign enterprise or representatives without authority to sign contracts in the name of the foreign enterprise but regularly conduct the delivery of goods or provision of services in Vietnam.”
2. Clause 2 of Article 3 is amended and supplemented as follows: “2. Other income includes income from the transfer of capital or capital contribution rights; income from the transfer of real estate, transfer of investment projects, transfer of rights to participate in investment projects, transfer of exploration and exploitation rights for mineral resources; income from the use of assets or ownership of assets, including income from intellectual property rights as prescribed by law; income from the transfer, lease, or liquidation of assets, including valuable papers; income from interest on deposits, loans, foreign currency sales; income from previously written-off bad debts that are now recoverable; income from unclaimed liabilities; income from production and business activities omitted in previous years; and other income, including income from production and business activities outside Vietnam.”
3. Amend and supplement Clauses 1 and 4 of Article 4; add Clauses 8, 9, 10, and 11 to Article 4 as follows: “1. Income from cultivation, animal husbandry, aquaculture, and salt production of cooperatives; income of cooperatives operating in the fields of agriculture, forestry, fishery, and salt production in areas with difficult socio-economic conditions or particularly difficult socio-economic conditions; income of enterprises from cultivation, animal husbandry, and aquaculture in areas with particularly difficult socio-economic conditions; income from fishing activities.”
“4. Income from the production and business activities of enterprises with at least 30% of their average annual workforce being disabled persons, rehabilitated drug addicts, or people infected with HIV/AIDS, provided the enterprise employs at least twenty people annually. This does not apply to enterprises operating in the fields of finance or real estate.”
“8. Income from the transfer of certified emission reductions (CERs) of enterprises granted such certificates.”
“9. Income from tasks assigned by the State to the Vietnam Development Bank in investment and export credit activities; income from credit activities for the poor and other policy beneficiaries of the Vietnam Bank for Social Policies; income of state financial funds and other state funds operating on a non-profit basis as prescribed by law; income of organizations wholly owned by the State established by the Government to handle bad debts of credit institutions in Vietnam.”
“10. Non-distributed income of socialization institutions in education and training, healthcare, and other socialization fields, which is retained for reinvestment in the same institution, according to the specialized law on education, training, healthcare, and other socialization fields; non-distributable income forming the assets of cooperatives established and operating under the Cooperative Law.”
“11. Income from the transfer of technology in priority fields transferred to organizations and individuals in areas with particularly difficult socio-economic conditions.”
4. Clause 3 of Article 7 is amended and supplemented as follows:
“3. Income from the transfer of real estate, transfer of investment projects, transfer of rights to participate in investment projects, and transfer of exploration, exploitation, and processing rights for mineral resources must be separately declared for tax payment. Income from the transfer of investment projects (excluding mineral exploration and exploitation projects), transfer of rights to participate in investment projects (excluding mineral exploration and exploitation rights), and transfer of real estate, if losses are incurred, these losses can be offset against profits from other production and business activities during the tax period.”
5. Article 9 is amended and supplemented as follows: “Article 9. Deductions and non-deductible expenses when determining taxable income
1. Except for the expenses specified in Clause 2 of this Article, enterprises are entitled to deduct all expenses when determining taxable income if they meet the following conditions:
a) The expenses incurred must be related to the production and business activities of the enterprise, or expenses related to national defense and security obligations as prescribed by law;
b) The expenses must have valid invoices and documents as prescribed by law. For invoices related to the purchase of goods and services with a value of VND 20 million or more per transaction, non-cash payment documents are required, except in cases where non-cash payment documents are not required as prescribed by law.
2. Non-deductible expenses when determining taxable income include:
a)Expenses that do not meet the conditions specified in Clause 1 of this Article, except for losses caused by natural disasters, epidemics, or other force majeure events that are not compensated;
b) Fines for administrative violations;
c) Expenses that are reimbursed by other funding sources;
d) Excessive business management expenses allocated by foreign enterprises to their permanent establishments in Vietnam, beyond the limit determined by Vietnamese law;
e) Excessive provisions for reserves as prescribed by law;
f) Interest on loans for production and business activities that exceeds 150% of the base interest rate announced by the State Bank of Vietnam at the time of borrowing, if the lender is not a credit institution or economic organization;
g) Depreciation expenses that are not in accordance with legal regulations;
h) Pre-paid expenses that are not in accordance with legal regulations;
i) Salaries and wages of the owner of private enterprises, remuneration for enterprise founders who do not directly participate in business management; wages and salaries, and other expenses accounted for to pay employees but not actually paid or without invoices as required by law;
k) Interest expenses corresponding to the portion of charter capital that has not been fully contributed;
l) Input VAT that has been deducted, VAT paid under the deduction method, and corporate income tax;
m) Advertising, marketing, promotion, brokerage commissions, receptions, gifts, conferences, support for marketing, and other expenses directly related to production and business activities that exceed 15% of the total deductible expenses. Total deductible expenses do not include the expenses specified in this point; for trading activities, the total deductible expenses do not include the purchase price of the goods sold;
n) Sponsorships, except for sponsorships for education, healthcare, scientific research, disaster recovery, construction of solidarity houses, charitable houses, or housing for policy beneficiaries as prescribed by law; sponsorships under State programs for localities in areas with particularly difficult socio-economic conditions;
o) Contributions to voluntary pension funds or social security funds, or purchases of voluntary pension insurance for employees, exceeding the legal limit;
p) Expenses related to the business activities of banks, insurance, lottery, securities, and other specific business activities as prescribed by the Minister of Finance.
3. Expenses incurred in foreign currencies, which are deductible for determining taxable income, must be converted into Vietnamese dong at the average exchange rate on the interbank foreign exchange market announced by the State Bank of Vietnam at the time the expense is incurred.
The Government shall provide detailed regulations and guidance on the implementation of this Article.”
6. Article 10 is amended and supplemented as follows: “Article 10. Tax rates
1. The corporate income tax rate is 22%, except for the cases specified in Clauses 2 and 3 of this Article, and for those eligible for preferential tax rates as prescribed in Article 13 of this Law.
From January 1, 2016, cases subject to the 22% tax rate shall apply a tax rate of 20%.
2. Enterprises with total annual revenue not exceeding VND 20 billion shall apply a tax rate of 20%.
The revenue used as the basis for determining whether an enterprise is eligible for the 20% tax rate is the revenue of the preceding year.
3. The corporate income tax rate applicable to activities of oil and gas exploration, exploitation, and rare resource extraction in Vietnam ranges from 32% to 50%, depending on each project and business establishment.
The Government shall provide detailed regulations and guidance on the implementation of this Article.”
7. Article 13 is amended and supplemented as follows: “Article 13. Tax incentives
1.A 10% tax rate shall be applied for a period of 15 years for:
a) Income from new investment projects in areas with particularly difficult socio-economic conditions, economic zones, and high-tech zones;
b) Income from new investment projects in scientific research and technological development; high-tech applications in the list of prioritized high-tech fields for development as prescribed by the Law on High Technology; high-tech incubators and high-tech enterprises; venture capital investment for high-tech development in the list of prioritized high-tech fields for development as prescribed by the Law on High Technology; investment in the construction and operation of high-tech incubators and high-tech enterprises; investment in the development of key national infrastructure as prescribed by law; software production; production of composite materials, light construction materials, and rare materials; production of renewable energy, clean energy, energy from waste treatment; development of biotechnology; and environmental protection;
c) Income of high-tech enterprises and agricultural enterprises applying high technology as prescribed by the Law on High Technology;
d) Income from new investment projects in manufacturing (except for projects producing goods subject to special consumption tax and mineral exploitation projects) that meet one of the following criteria:
-The project has a minimum investment capital of VND 6,000 billion, with disbursement not exceeding three years from the date of issuance of the Investment Certificate, and achieves a minimum annual revenue of VND 10,000 billion no later than three years after the project generates revenue;
-The project has a minimum investment capital of VND 6,000 billion, with disbursement not exceeding three years from the date of issuance of the Investment Certificate, and employs more than 3,000 workers.
2.A 10% tax rate shall apply to:
a) Income of enterprises from activities in socialization fields such as education and training, vocational training, healthcare, culture, sports, and environment;
b) Income of enterprises from new investment projects and business activities in social housing for sale, lease, or lease-purchase, as specified for eligible subjects under Article 53 of the Law on Housing;
c) Income of print media organizations from printing activities, including advertising revenue on printed publications, as prescribed by the Law on Journalism; income of publishing houses from publishing activities as prescribed by the Law on Publishing;
d) Income of enterprises from the planting, nurturing, and protection of forests; aquaculture, agriculture, and forestry activities in areas with difficult socio-economic conditions; production and breeding of plant varieties and animal breeds; salt production, except for salt production specified in Clause 1, Article 4 of this Law; investment in the preservation of post-harvest agricultural products, aquatic products, and food;
đ) Income of cooperatives operating in agriculture, forestry, fishery, or salt production that are not located in areas with difficult or particularly difficult socio-economic conditions, except for the income of cooperatives specified in Clause 1, Article 4 of this Law.
3. A 20% tax rate shall apply for ten years to:
a) Income from new investment projects in areas with difficult socio-economic conditions;
b) Income from new investment projects in steel production, energy-saving products, production of machinery and equipment for agriculture, forestry, fishery, and salt production; production of irrigation equipment; production and refining of animal feed, poultry feed, and aquafeed; and development of traditional occupations.
As of January 1, 2016, income from activities specified in this Clause shall be subject to a 17% tax rate.
4. A 20% tax rate shall apply to income of People’s Credit Funds and microfinance institutions.
As of January 1, 2016, income of People’s Credit Funds and microfinance institutions shall be subject to a 17% tax rate.
5. For projects requiring special investment attraction, with large-scale investments and high technology, the period of application of preferential tax rates may be extended, but the extended period shall not exceed fifteen years.
6. The period for applying preferential tax rates specified in this Article shall start from the first year the enterprise has revenue from a new investment project; for high-tech enterprises or agricultural enterprises applying high technology, it shall start from the date they are certified as such; for high-tech application projects, it shall start from the date of certification of the high-tech application project.
The Government shall provide detailed regulations and guidance on the implementation of this Article.”
8. Article 14 is amended and supplemented as follows:“Article 14. Tax exemption and reduction incentives
1. Income of enterprises from new investment projects specified in Clause 1, Point a, Clause 2, Article 13 of this Law, and income of high-tech enterprises or agricultural enterprises applying high technology shall be exempt from tax for up to four years and shall enjoy a 50% reduction in payable tax amounts for up to the following nine years.
2. Income of enterprises from new investment projects specified in Clause 3, Article 13 of this Law, and income from new investment projects in industrial zones, except for industrial zones located in areas with favorable socio-economic conditions as prescribed by law, shall be exempt from tax for up to two years and shall enjoy a 50% reduction in payable tax amounts for up to the following four years.
3. The tax exemption and reduction period for income of enterprises from new investment projects specified in Clauses 1 and 2 of this Article shall start from the first year they have taxable income from the project. If there is no taxable income within the first three years from the first year they have revenue from the project, the exemption and reduction period shall start from the fourth year. For high-tech enterprises or agricultural enterprises applying high technology specified in Point c, Clause 1, Article 13 of this Law, the period shall start from the date of certification as a high-tech enterprise or agricultural enterprise applying high technology.
4. Enterprises with expansion investment projects in sectors or areas eligible for corporate income tax incentives under this Law may choose to enjoy incentives either for the remaining period of their existing projects or for the additional income derived from the expansion investment. The tax exemption and reduction period for additional income from expansion investment shall be the same as that applied to new investment projects in the same sector or area eligible for corporate income tax incentives.
Expansion investment projects eligible for incentives under this Clause must meet one of the following criteria:
a) The increase in fixed assets from the completion and operation of the expansion project must reach a minimum of VND 20 billion for projects in sectors eligible for corporate income tax incentives under this Law, or VND 10 billion for projects in areas with difficult or particularly difficult socio-economic conditions as prescribed by law;
b) The increase in fixed assets must account for at least 20% of the total fixed asset value before the expansion investment;
c) The designed capacity must increase by at least 20% compared to the designed capacity before the expansion investment.
If an enterprise with an ongoing project that has expansion investment in sectors or areas eligible for incentives under this Law does not meet any of the criteria specified in this Clause, it shall apply the incentives of the ongoing project for the remaining period (if any).
In the case of expansion investment eligible for tax incentives, the additional income from the expansion investment shall be separately accounted for; if it cannot be separately accounted for, the income from the expansion investment shall be determined based on the ratio of new fixed assets put into use for production and business over the total fixed assets of the enterprise.
The tax exemption and reduction period specified in this Clause shall start from the year the expansion project is completed and put into production and business.
Tax incentives under this Clause shall not apply to expansion investments resulting from the merger or acquisition of enterprises or ongoing projects. The Government shall provide detailed regulations and guidance on the implementation of this Article.”
9. Add Clause 3 to Article 15 as follows: “3. Enterprises transferring technology in prioritized fields to organizations or individuals in areas with difficult socio-economic conditions shall be eligible for a 50% reduction in corporate income tax on income from the technology transfer.”
10. Article 16 is amended and supplemented as follows: “Article 16. Loss carryforward
1. Enterprises incurring losses may carry forward such losses to the following years, and the losses shall be deducted from taxable income. The carryforward period shall not exceed five years from the year following the year the losses were incurred.
2. Enterprises incurring losses from the transfer of real estate, transfer of investment projects, or transfer of rights to participate in investment projects, after offsetting as prescribed in Clause 3, Article 7 of this Law, and enterprises incurring losses from the transfer of exploration, exploitation, and processing rights for mineral resources may carry forward such losses to the following years. The carryforward period shall comply with Clause 1 of this Article.”
11.Clause 1 of Article 17 is amended and supplemented as follows: “1. Enterprises established and operating in accordance with Vietnamese law may set aside up to 10% of annual taxable income to create a Science and Technology Development Fund. For state-owned enterprises, in addition to complying with the provisions of this Law, they must ensure that the minimum allocation to the Science and Technology Development Fund complies with the provisions of the Law on Science and Technology.”
12. Article 18 is amended and supplemented as follows: “Article 18. Conditions for applying tax incentives
1. Corporate income tax incentives based on new investment projects, as specified in Articles 13 and 14 of this Law, shall not apply to cases of division, separation, merger, consolidation, conversion of business type, or ownership transfer, and other cases as prescribed by law.
2. Enterprises must separately account for income from production and business activities eligible for tax incentives, as specified in Articles 13 and 14 of this Law, from income from activities not eligible for tax incentives. If enterprises fail to account separately, the income eligible for tax incentives shall be determined based on the ratio of revenue from tax-incentivized activities to total revenue of the enterprise.
3. The 20% tax rate specified in Clause 2 of Article 10, and the tax incentives specified in Clauses 1 and 4 of Article 4, Articles 13 and 14 of this Law, shall not apply to:
a) Income from capital transfer, capital contribution transfer, real estate transfer, except for income from social housing as specified in Article 13 of this Law; income from the transfer of investment projects, transfer of rights to participate in investment projects, transfer of exploration and exploitation rights for mineral resources; income from production and business activities outside of Vietnam;
b) Income from activities related to the exploration and exploitation of oil, gas, and rare resources, and income from mineral extraction activities;
c) Income from business services subject to special consumption tax as prescribed by the Law on Special Consumption Tax;
d) Other cases as prescribed by the Government.
4. If, at the same time, an enterprise is entitled to multiple tax incentives for the same income, the enterprise may choose to apply the most favorable tax incentive.”
Article 2
1. This Law shall come into effect from January 1, 2014, except for the provisions specified in Clause 2 of this Article.
2. The provisions on applying the 20% tax rate for enterprises with total annual revenue not exceeding VND 20 billion, as specified in Clause 6, Article 1, and the provisions on applying the 10% tax rate to the income of enterprises from new investment projects in social housing, as specified in Clause 7, Article 1 of this Law, shall take effect from July 1, 2013.
3. Enterprises with investment projects that, as of the end of the tax period in 2013, are still enjoying corporate income tax incentives (preferential tax rates or tax exemption/reduction periods) under legal documents issued before this Law takes effect, shall continue to enjoy such incentives for the remaining period as prescribed in those documents. If the enterprises meet the conditions for tax incentives under this Law, they may choose to continue enjoying the current incentives or apply the incentives under this Law for the remaining period, either as incentives for new investments or for expanded investments, depending on the specific situation.
As of the end of the tax period in 2015, enterprises with investment projects that are subject to the 20% preferential tax rate, as specified in Clause 3, Article 13 of the Corporate Income Tax Law No. 14/2008/QH12, as amended and supplemented in Clause 7, Article 1 of this Law, shall apply the 17% tax rate starting from January 1, 2016, for the remaining period.
4. The following provisions related to corporate income tax in the laws listed below shall be repealed:
a) Clause 2, Article 7 of the Law on Deposit Insurance No. 06/2012/QH13;
b) Clause 2, Article 4 of the Law on Health Insurance No. 25/2008/QH12;
c) Clause 1, Article 10; Clause 1, Article 12; Clause 2, Article 18; Clause 2, Article 19; Clauses 1 and 2, Article 22; Clause 3, Article 24; and Clause 2, Article 28 of the Law on High Technology No. 21/2008/QH12;
d) Clauses 1, 4, 5, 6, 7, and 8, Article 44, and Article 45 of the Law on Technology Transfer No. 80/2006/QH11;
đ) Clause 1, Article 53; Clause 5, Article 55; and Clause 3, Article 86 of the Law on Vocational Training No. 76/2006/QH11;
e) Clause 1, Article 68 of the Law on Vietnamese Laborers Working Abroad No. 72/2006/QH11;
g) Clause 2, Article 6 of the Law on Social Insurance No. 71/2006/QH11;
h) Clause 3, Article 8 of the Law on Legal Aid No. 69/2006/QH11;
i) Clause 3, Article 66 of the Law on Higher Education No. 08/2012/QH13;
k) Article 34 of the Law on Persons with Disabilities No. 51/2010/QH12;
l) Clause 4, Article 33 of the Law on Investment No. 59/2005/QH11;
m) Clause 2, Article 58; Clause 2, Article 73; Clause 3, Article 117; and Clause 3, Article 125 of the Law on Enterprises No. 60/2005/QH11.
5. The Government shall provide detailed regulations and guidance on the implementation of the provisions assigned in this Law.
This Law was passed by the National Assembly of the Socialist Republic of Vietnam, Session XIII, 5th Meeting, on June 19, 2013.
