Corporate income tax (“CIT”)

1. The current system of legal documents

Luật

1. Law No. 14/2008/QH12 of the 01th National Assembly on Corporate Income Tax (effective from January 01, 2009);
2. Law No. 32/2013/QH13, promulgated on June 19, 2013, by the 13th National Assembly, amends and supplements several articles of the Corporate Income Tax Law (effective from January 1, 2014).
3. Law No. 71/2014/QH13, promulgated on November 26, 2014, by the 13th National Assembly, amends the 2014 tax laws (effective from January 1, 2015).

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Decree

1. Government Decree 218/2013/ND-CP dated December 26, 2013, provides detailed regulations and guidance on the implementation of the Corporate Income Tax Law (effective from February 15, 2014).
2. Decree 91/2014/ND-CP amends the Decrees regulating taxes (effective from November 15, 2014);
3. Decree 12/2015/ND-CP provides guidance on the Law amending and supplementing a number of articles of the Laws on taxation and amending and supplementing a number of articles of the Decrees on taxation (effective from January 1, 2015).

Circulars

1. Circular 78/2014/TT-BTC, guiding the implementation of Government Decree No. 218/2013/ND-CP dated December 26, 2013, stipulating and guiding the implementation of the Corporate Income Tax Law (effective from August 2, 2014);
2. Circular 96/2015/TT-BTC issued on June 22, 2015 by the Ministry of Finance provides guidance on corporate income tax under Decree 12/2015/ND-CP dated February 12, 2015 of the Government detailing the implementation of the Law amending and supplementing a number of articles of the Laws on taxation and amending and supplementing a number of articles of the Decrees on taxation and amending and supplementing a number of articles of Circular 78/2014/TT-BTC dated June 18, 2014, Circular 119/2014/TT-BTC dated August 25, 2014, Circular 151/2014/TT-BTC dated October 10, 2014 of the Ministry of Finance (effective from August 6, 2015);
3. Circular No. 25/2018/TT-BTC dated March 16, 2018, guiding Government Decree No. 146/2017/ND-CP dated December 15, 2017, and amending and supplementing a number of articles of Circular No. 78/2014/TT-BTC dated June 18, 2014, and Circular No. 111/2013/TT-BTC dated August 15, 2013, of the Ministry of Finance.

2. Summarize the content of the new text.

Circular 25/2018/TT-BTC, Guiding Decree 146/2017/ND-CP amending Circular 78/2014/TT-BTC and Circular 111/2013/TT-BTC.

On March 16, 2018, the Ministry of Finance issued Circular 25/2018/TT-BTC guiding Decree 146/2017/ND-CP amending Circular 78/2014/TT-BTC and Circular 111/2013/TT-BTC. Accordingly, it amends and supplements a number of regulations on deductible and non-deductible expenses when calculating corporate income tax, specifically:

• Furthermore, in cases where a business transfers a portion of its capital or the entire business to another entity in accordance with the law, if assets are transferred, the receiving business is only allowed to deduct depreciation of fixed assets as deductible expenses for those assets that meet the depreciation criteria based on their remaining book value at the transferring business.
• Expenses for purchasing life insurance for employees exceeding the prescribed limit or not specifying eligibility conditions in the records will not be deductible when calculating corporate income tax. Previously, this expense was not subject to any limit;
• Increase the deductible amount for contributions to voluntary retirement funds, voluntary retirement insurance, life insurance for employees, etc., when calculating corporate income tax, to a maximum of 03 million VND/month/person, provided the following requirements are met:
• The conditions and amount of entitlement are specifically stated in one of the following documents: Employment contract; Collective labor agreement; Financial regulations of the Company, Corporation, or Group; Bonus regulations stipulated by the Chairman of the Board of Directors, General Director, or Director in accordance with the financial regulations of the Company or Corporation.
• Businesses must fulfill all mandatory obligations to employees (including cases of outstanding mandatory insurance contributions).

Previously, the limit was 1 million VND/month/person and did not include life insurance.

3. Some points to note in the reply letter.

Expenses paid to overseas companies (Official Letter No. 231/TCT-CS dated January 15, 2018, from the General Department of Taxation)

If a company in Vietnam cannot provide documents proving that the foreign company has industrial property or intellectual property rights to the detailed instruction manual (technical information, product manufacturing methods, etc.) for producing the product in Vietnam, issued by a competent authority in a foreign country, then the Vietnamese company is not allowed to include the fees paid to the foreign company as deductible expenses when determining corporate income tax.

Corporate income tax incentives (Official Letter No. 754/TCT-DNL dated March 6, 2018, from the General Department of Taxation)

Businesses with investment projects that are eligible for corporate income tax incentives due to meeting the condition of having income generated outside the location of the investment project:

(i) If this income arises in an area not designated as an investment-incentive area, it is not eligible for corporate income tax incentives under the Area Conditions.

(ii) If this income arises in an area designated as an investment-incentive area, it is entitled to corporate income tax incentives according to the conditions of that area. The determination of corporate income tax incentives for this income is made on a case-by-case basis, taking into account the duration and level of corporate income tax incentives offered by the enterprise in the area where the investment project is implemented.

Tax policy for advertising activities on Facebook and Google (Official Letter No. 1550/TCT-CS dated April 24, 2018, from the General Department of Taxation)

In cases where a Vietnamese enterprise hires another entity in Vietnam to conduct advertising on Facebook and Google, the input value-added tax (VAT) on advertising expenses for taxable business activities is fully deductible if it meets the conditions for input VAT deduction as guided in Article 15 of Circular No. 219/2013/TT-BTC dated December 31, 2013, of the Ministry of Finance. If an enterprise incurs advertising expenses on Facebook and Google, and these expenses meet all the actual conditions related to the enterprise's business activities, are supported by valid invoices and documents bearing the enterprise's name, address, and tax code, and are non-cash payment documents as prescribed for payments exceeding VND 20 million, then these expenses are deductible when determining taxable corporate income.

Regarding bank payment documents, the Company complies with the regulations in Clause 3, Article 15 of Circular No. 219/2013/TT-BTC dated December 31, 2013, issued by the Ministry of Finance. If Google and Facebook (foreign contractors) sign contracts with the Company in Vietnam to provide advertising services on Google and Facebook applications and generate income in Vietnam, then Google and Facebook are subject to contractor tax (VAT and corporate income tax) in Vietnam. The Company in Vietnam is responsible for declaring, withholding, and paying taxes on behalf of the foreign contractors as prescribed.

Interest expense on cash loans (Official Letter No. 2023/TCT-CS dated May 25, 2018 of the General Department of Taxation)

According to Clause 2, Article 6 and Clause 1, Article 13 of Decree No. 222/2013/ND-CP, non-credit institutions are prohibited from using cash when borrowing and lending to each other. Therefore, if a non-credit institution conducts loan and repayment transactions without using the payment methods stipulated above, the interest expense incurred by the enterprise will not be deductible when determining corporate income tax.