Regulations on duration of corporate income tax exemption and reduction in Vietnam
Vietnam has regulations on duration of corporate income tax exemption and reduction. Let’s find out this issue with Lawyer X through the following situation: “Dear Lawyer! I want to ask how long is duration of corporate income tax exemption and reduction in Vietnam? What are other cases of CIT reduction? Thanks for answering my questions!”
Legal grounds
- Vietnam law on corporate income tax
Regulations on duration of tax exemption and reduction
– Incomes of enterprises from execution of the new investment projects specified in Clause 1, Point a Clause 2 Article 13 of Law on Corportate Income Tax, and high-tech enterprises and agriculture enterprises applying high technologies shall be eligible for CIT exemption for no more than 4 years and 50% reduction of CIT payable for no more than 9 subsequent years.
– With respect to the investment projects specified in Clause 2 Article 20 of the Law on Investment, the Prime Minister shall decide to apply tax exemption for no more than 06 years and reduce 50% of total CIT payable for no more than 13 subsequent years.
– Incomes of an enterprise from execution of new investment projects specified in Clause 3 Article 13 of Law on Corportate Income Tax and incomes of an enterprise from execution of new investment projects in industrial parks (except those located in advantaged areas as prescribed by law) shall be eligible for CIT exemption for no more than 2 years and 50% reduction of CIT payable for no more than 4 subsequent years.
– The duration of exemption/reduction of CIT on incomes of an enterprise from execution of new investment projects prescribed in Clause 1 and Clause 2 of this Article begins from the first year in which it earns taxable income from the project. In case where the enterprise earns no taxable income in the first 03 years, the tax exemption/reduction duration will begin in the 4th year from the first year in which revenue is generated by the project. The duration of tax exemption/reduction applied to high-tech enterprises, agriculture enterprises applying high technologies prescribed in Point c Clause 1 Article 13 of Law on Corportate Income Tax begins from the date on which they are granted the certificate of high-tech enterprise or certificate of agriculture enterprise applying high technologies.
– If one of the three conditions prescribed at this Clause is satisfied, the enterprise having a project of investment in another operating project such as expansion of production scale, increase of capacity and innovation of production technology (hereinafter referred to as “expansion”) in a field or area eligible for CIT incentives may decide whether to apply CIT incentives to its operating project for the remaining period (if any) or apply tax exemption or reduction to the increase in incomes from expansion. The duration of tax exemption or reduction to the increase in incomes from expansion prescribed in this Clause equals the tax exemption or reduction period applied to a new investment project in the same field or area eligible for CIT incentives.
The expansion eligible for CIT incentives specified in this Clause must satisfy one of the following criteria:
+ The increase in cost of fixed assets when the project is finished and put into operation is at least VND 20 billion, if the expansion is of a field eligible for CIT incentives as prescribed in Law on Corportate Income Tax, or VND 10 billion, if the expansion is located in disadvantaged area or extremely disadvantaged area as prescribed by law;
+ The ratio of increase in cost of fixed assets to total cost of fixed assets before investment is at least 20%;
+ Design capacity after expansion increases by at least 20% compared to the design capacity before investment.
In case where an operating enterprise makes an expansion in a field or area eligible for tax incentives as prescribed in Law on Corportate Income Tax but fails to satisfy any of the criteria mentioned in this Clause, tax incentives shall apply to the project for the remaining period (if any).
If the enterprise chooses incentives applied to expansion, the increase in income from expansion must be accounted for separately. If the enterprise is not able to separate the increase in income from expansion, it shall be determined according to the ratio of cost of new fixed assets to total cost of fixed assets of the enterprise.
The duration of tax exemption or reduction mentioned in this Clause begins from the year in which the expansion project is finished and put into operation.
Tax incentives mentioned in this Clause do not apply in the cases of expansion due to merger or acquisition of operating projects or enterprises.
Other cases of CIT reduction
– A manufacturing, construction or transport enterprise that employs a large amount of female employees shall be eligible for CIT reduction which is proportional to the expenditure on female workers.
– An enterprise that employs a large amount of ethnic workers is eligible for CIT reduction which is proportional to the expenditure on the ethnic workers.
– Income of an enterprise from transfer of technology in a field in which the technology transfer is given priority to an organization or individual located in a disadvantaged area is eligible for 50% reduction of CIT thereon.
The Government shall elaborate and provide guidelines for this Article.
Regulations on Loss carryforward
– An enterprise may carry forward any loss it incurs to the next years. Such loss is deducted from assessable income. The maximum loss carryforward period is 5 years from the year in which loss is incurred.
– Losses incurred by an enterprise from transfer of real estate, investment project or right to participate in an investment project, that remain after offsetting according to Clause 3 Article 7 of Law on Corportate Income Tax and losses incurred by an enterprise from transfer of the right to mineral exploration and extraction shall be carried forward to the next year and deducted from assessable income from such operation. The loss carryforward period complies with the provisions in Clause 1 of this Article.
Please see more:
- Instructions for exclusive registration of company logos in Vietnam
- Service of changing the legal representative of Vietnamese enterprises
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Frequently asked questions
A manufacturing, construction or transport enterprise that employs a large amount of female employees shall be eligible for CIT reduction which is proportional to the expenditure on female workers.
An enterprise that employs a large amount of ethnic workers is eligible for CIT reduction which is proportional to the expenditure on the ethnic workers.
An enterprise may carry forward any loss it incurs to the next years. Such loss is deducted from assessable income. The maximum loss carryforward period is 5 years from the year in which loss is incurred.
Conclusion: So the above is Regulations on duration of corporate income tax exemption and reduction in Vietnam. Hopefully with this article can help you in life, please always follow and read our good articles on the website: lsxlawfirm.com
