New guidelines on corporate income tax
VGP – The Ministry of Finance on June 18, 2014 enacted Circular 78/2014/TT-BTC (Circular 78) guiding the implementation of Decree 218/2013/ND-CP, dated December 26, 2013 guiding the implementation of the Law on Corporate Income Tax (CIT).
Question: What are the new regulations on corporate income tax?
Answer: Under Circular 78, since January 1, 2014, the CIT declined to 22% (instead of 25% previously).
Enterprises with total revenue in the previous year less than VND 20 billion are subject to the applied rate of 20% where an enterprise is newly established within less than 12 months, the tax return in the related year follows the quarterly provisional tax rate of 22%.
Upon the end of the financial year, if the average income of the preceding months of the year does not exceed VND 1.67 billion, the tax rate of 20% shall apply to the enterprise for the fiscal year.
From January 1, 2016, the cases subject to 22% tax rate will change to the one of 20%.
The CIT rate for the operations of research, exploration and exploitation of oil and gas in Viet Nam still ranges from 32% to 50% in particular, the operations of search, exploration and mining of rate resources (including platinum, gold, silver, tin anhydride, antimony, precious stones and rare earths except oil and gas) are still subject to the tax rate of 50%.
Circular 78 stipulates that income from transfer operations of real estate, investment projects, investment project participating rights, rights of mineral exploration, mining and processing as prescribed law shall be separately accounted for when declaring and paying taxes at the rate of 22% (from 20% from January 1, 2016). Corporate income from implementation of investment projects in social housing for sale, rent and hire-purchase shall be subject to the tax rate of 10%.
Non-business units, other organizations that are not enterprises or enterprises that have paid value-added tax by the direct method, conducted business operations of goods and services subject to CIT, and were able to identify their revenue without defining costs, income of their business operations, the tax declaration and payment shall be prorated on the sales of goods and services, namely 5% for services (particularly 2% for education, health, art shows); 1% for commodity trading and 2% for other act activities.
The Circular shall take effect from August 2, 2014, replacing Circular 123/2012/TT-BTC dated July 27, 2012 and applying to the CIT assessing period 2014 onwards./.
