Corporate Tax in Vietnam: Definition and Calculation
What is the corporate tax in Vietnam? How is corporate income tax calculated? Because I just established a company for 2 days specializing in the electronic equipment business. I don’t know if my company is in the group that has to pay corporate income tax. If so, how is it calculated?
What is the corporate tax in Vietnam?
Pursuant to Article 3 of the 2008 Law on Corporate Income Tax (amended by Clause 1, Article 1 of the Law on Amending Tax Laws 2014) stipulates that taxable income is as follows:
- Taxable income includes income from the production and trading of goods and services and other incomes specified in Clause 2 of this Article.
- Other incomes include income from the capital transfer, transfer of the right to contribute capital; income from transfer of the real estate, transfer of investment projects, transfer of the right to participate in investment projects, transfer of the right to explore, exploit, and process minerals; income from property use rights, property ownership, including income from intellectual property rights as prescribed by law; incomes from the transfer, lease or liquidation of assets, including valuable papers; income from interest on deposits, loans and foreign currency sales; receivables from bad debts that have been written off and are now recoverable; receivables from liabilities whose owners cannot be identified; omitted business income of previous years and other income.
If an overseas-invested Vietnamese enterprise transfers its income after paying corporate income tax abroad to Vietnam, for countries with which Vietnam has signed an Agreement to avoid double taxation, they comply with the provisions of the Agreement; for countries to which Vietnam has not signed an Agreement on the avoidance of double taxation, in the case of corporate income tax in the countries to which the enterprise moves back with a lower corporate income tax rate, the difference shall be collected. corporate income tax amount calculated according to the Law on corporate income tax of Vietnam.
Thus, corporate income tax is a tax that the state directly collects into the state budget on the taxable income of enterprises (organizations engaged in the production and business activities of goods and services)…
Who has to pay corporate tax in Vietnam?
Pursuant to Article 2 of the 2008 Law on Corporate Income Tax, taxpayers are as follows:
- Corporate income taxpayers are organizations engaged in the production and trading of goods and services with taxable incomes in accordance with this Law (hereinafter referred to as enterprises), including:
- Enterprises established in accordance with the law of Vietnam;
- Enterprises established in accordance with foreign laws (hereinafter referred to as foreign enterprises) with or without a permanent establishment in Vietnam;
- Organizations established under the Law on Cooperatives;
- Non-business units established in accordance with Vietnamese law;
- Other organizations with income-generating production and business activities.
- Enterprises with taxable income specified in Article 3 of this Law must pay corporate income tax as follows:
- Enterprises established in accordance with Vietnamese law pay tax on taxable income arising in Vietnam and taxable income arising outside Vietnam;
- Foreign enterprises having a permanent establishment in Vietnam shall pay tax on taxable income arising in Vietnam and taxable income arising outside Vietnam related to the operation of such permanent establishment;
- Foreign enterprises having a permanent establishment in Vietnam shall pay tax on taxable income arising in Vietnam that is not related to the operation of the permanent establishment;
- Foreign enterprises without permanent establishments in Vietnam shall pay tax on taxable incomes arising in Vietnam.
- A permanent establishment of a foreign enterprise is a production and business establishment through which the foreign enterprise conducts part or all of its production and business activities in Vietnam, including:
- Branches, executive offices, factories, workshops, means of transport, oil fields, gas fields, mines or other locations for exploitation of natural resources in Vietnam;
- Location of construction, construction, installation and assembly works;
- Establishments providing services, including consulting services through employees or other organizations and individuals;
- Agents for foreign enterprises;
Representative in Vietnam in the case of a representative competent to sign contracts in the name of a foreign enterprise or a representative who is not authorized to sign contracts in the name of a foreign enterprise but regularly delivers goods. goods or provide services in Vietnam.” (amended and supplemented by Clause 1, Article 1 of the Law on Corporate Income Tax as amended 2013)
Thus, assuming your company is established in accordance with Vietnamese law, your company is subject to corporate income tax.
How to calculate corporate income tax
Pursuant to Article 6 of Decree 218/2013/ND-CP stipulating the determination of taxable income as follows:
- Taxable income in the tax period is determined as follows:
- Taxable income = Taxable income – Tax-exempt income + Carry-forward losses as prescribed
- Taxable income is determined as follows:
- Taxable income = Revenue – Deductible expenses + Other income
If an enterprise has many business activities, the taxable income from production and business activities is the total income of all business activities. If there is a loss in business activities, the loss shall be offset against the taxable income of the business activities with income selected by the enterprise. The remaining income after clearing shall apply the corporate income tax rate of business activities with income remaining.
Income from real estate transfer, investment project transfer, right to participate in investment projects, and transfer of mineral exploration, mining, and processing right must be determined separately for tax declaration and payment… In case of transfer of the right to participate in investment projects, transfer of investment projects (except for mineral exploration and mining projects), and real estate transfer, if there is a loss, this loss shall be offset against the profit of the operation. business activities in the tax period. If an enterprise carries out procedures for dissolution and sells real estate as a fixed asset, income from real estate transfer (if any) shall be offset against income from production and business activities of the enterprise.
Pursuant to Article 10 of the Law on Corporate Income Tax 2008 (amended and supplemented by Clause 6, Article 1 of the 2013 Law on Corporate Income Tax), the tax rates are as follows:
- The corporate income tax rate is 22%, except for the cases specified in Clauses 2 and 3 of this Article and the subjects eligible for tax incentives specified in Article 13 of this Law.
Cases subject to the tax rate of 22% specified in this Clause shall apply the tax rate of 20% from January 1, 2016.
- Enterprises with a total annual turnover of not more than twenty billion dongs shall apply the tax rate of 20%.
The turnover used as the basis for determining the enterprise eligible to apply the tax rate of 20% in this Clause is the turnover of the preceding year.
- The corporate income tax rate applicable to the prospecting, exploration, and exploitation of oil, gas, and other rare and precious resources in Vietnam is from 32% to 50%, suitable to each project and each business establishment…
The Government shall detail and guide the implementation of this Article.”
Assuming your company’s taxable income is 5 billion per year, minus tax exemptions, losses, etc., the tax rate is 20%.
Thus, your company has to pay a corporate income tax of one billion dong.
You can read the previous article here: VAT Tax Vietnam: Objects and Calculation
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Q: What is the currency in Vietnam?
The currency in Vietnam is the Vietnamese dong (VND). The exchange rate as of February 2023 is around 23,000 VND to 1 USD.
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Vietnam’s economy is driven by several key industries, including manufacturing, agriculture, and services.
Q: What is the current state of the economy in Vietnam?
Vietnam’s economy has been experiencing rapid growth in recent years, with a 7.11% growth rate in 2019 before being impacted by the COVID-19 pandemic in 2020.