Can construction projects outside the province in areas with particularly difficult economic conditions receive any incentives?

Can construction projects outside the province in areas with particularly difficult economic conditions receive any incentives?

1. Can construction of projects outside the province in extremely difficult economic areas receive incentives?

Pursuant to Clause 4, Article 18 of Circular No. 78/2014/TT-BTC, amended and supplemented by Clause 2, Article 10, Circular 96/2015/TT-BTC, as follows:

“4. Business Enterprises with investment projects that enjoy corporate income tax incentives due to meeting conditions on investment incentive fields and investment incentive areas determine incentives as follows:

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b) Enterprises that have investment projects that enjoy corporate income tax incentives due to meeting preferential conditions on areas (including industrial parks, economic zones, high-tech zones), then the income eligible for corporate income tax incentives is all income arising from production and business activities in preferential areas, except for the income stated in Points a, b, c, Clause 1 of this Article.

– Enterprises with investment projects that are entitled to corporate income tax incentives because they meet the conditions of the area generating income outside the area where the investment project is implemented are:

(i) If this income arises in an area that is not in the area of investment incentives, then: enjoy corporate income tax incentives according to local conditions.

(ii) If this income arises in an area with investment incentives, you will enjoy corporate income tax incentives according to local conditions. The determination of corporate income tax incentives for this income is determined for each area based on the time and corporate income tax incentives of the enterprise in the area where the investment project is implemented.

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Example 15c: Corporate income tax incentives due to meeting geographical conditions (operating in the construction sector):

In 2015, a newly established enterprise in Ha Giang province (an area with particularly difficult socio-economic conditions) operates in the construction sector due to meeting the conditions of areas with particularly difficult socio-economic conditions.

In 2015, the enterprise carried out construction activities in Ha Giang province, and also had construction activities in neighboring provinces such as Cao Bang province (area with extremely difficult socio-economic conditions), Lao Cai city (area with difficult socio-economic conditions), Hanoi city (not in preferential areas). Construction activities are carried out in Ha Giang province, so income from construction activities in Ha Giang province is entitled to corporate income tax incentives according to Ha Giang province. For income from construction activities in neighboring provinces, corporate income tax incentives are determined as follows:

+ For income in Cao Bang province (an area with particularly difficult socio-economic conditions): enjoy corporate income tax incentives according to the level and The remaining tax incentive period of the enterprise.

+ For income in Lao Cai city (area with difficult socio-economic conditions): enjoy corporate income tax incentives according to the conditions of the area with difficult socio-economic conditions according to the level and duration of corporate income tax incentives according to the conditions in Lao Cai city for the remaining time of the enterprise.

+ For with income in Hanoi city (not in preferential areas): not eligible for tax incentives”

Thus, the revenue from construction activities in non-preferential areas (outside the province) is not eligible for corporate income tax incentives.

2. How long is the period of enjoying corporate income tax incentives for construction works outside the province?

In addition, Clause 2, Article 18 of Circular 78/2014/TT-BTC also provides additional instructions:

– While enjoying corporate income tax incentives, if an enterprise carries out many production and business activities, the enterprise must separately calculate income from production and business activities that enjoy corporate income tax incentives (including preferential tax rates, tax exemptions, tax reductions) and income from business activities that do not enjoy tax incentives to declare and pay taxes separately.

– In the case of In a tax period, an enterprise does not separately calculate income from production and business activities that enjoy tax incentives and income from production and business activities that do not enjoy tax incentives. The income from production and business activities that enjoy tax incentives is determined by (=) total taxable income multiplied by (x) the percentage (%) of revenue or deductible expenses of production and business activities that enjoy tax incentives compared to the total revenue or total deductible expenses of the enterprise in the tax period.

– In case there is a deductible revenue or expense that cannot be accounted for separately, that deductible revenue or expense is determined according to the ratio between the revenue or deductible expense of production and business activities enjoying tax incentives to the total revenue or deductible expense of the enterprise.

3. If you do not receive incentives, will the costs related to the project be included in the deductible costs?

The calculation of costs depends on whether the costs are actually spent or not, whether they are directly related to production and business activities or not, whether there are invoices or payment documents or not, and does not depend on whether the business is eligible for incentives or not. Conditions for determining reasonable costs can be found in Article 6 of Circular 78/2014/TT-BTC (amended by Article 4 of Circular 96/2015/TT-BTC).