In case of employing ethnic minority workers, is there a reduction in corporate income tax?

Is it possible to reduce corporate income tax in case of employing ethnic minority workers?

1. How do companies established and operating in difficult areas receive incentives in terms of tax exemption and corporate income tax reduction?

According to Article 14 of the Law on Corporate Income Tax 2008 (amended and supplemented by Clause 8, Article 1 of the Law on Corporate Income Tax amended in 2013, Point b, Clause 4, Article 75 of the Law on Investment 2020), regulations on incentives Regarding tax exemption and tax reduction periods as follows:

– Income of enterprises from implementing new investment projects specified in Clause 1, Point a, Clause 2, Article 13 of this Law and high-tech enterprises and agricultural enterprises applying high technology are exempt from tax for a maximum of no more than four years and a 50% reduction of the tax payable for a maximum of no more than the next nine years.

– For projects Investments specified in Clause 2, Article 20 of the Investment Law, the Prime Minister decides to apply tax exemption for a maximum of no more than 06 years and a 50% reduction of tax payable for a maximum of no more than 13 subsequent years.

– Income of enterprises from implementing new investment projects specified in Clause 3, Article 13 of this Law and income of enterprises from implementing new investment projects in industrial parks, except industrial parks in areas with favorable socio-economic conditions according to the provisions of law are exempt from tax for a maximum of no more than two years and a 50% reduction of the tax payable for a maximum of no more than the next four years.

– The tax exemption and reduction period for an enterprise’s income from implementing a new investment project specified in Clauses 1 and 2 of this Article is calculated from the first year of taxable income from the investment project. In case there is no taxable income in the first three years, from the first year of revenue from the project, the tax exemption and tax reduction period is calculated from the fourth year. The tax exemption and tax reduction period for high-tech enterprises and agricultural enterprises applying high technology specified in Point c, Clause 1, Article 13 of this Law is calculated from the date of certification as a high-tech enterprise or agricultural enterprise applying high technology.

– Enterprises with investment projects to develop investment projects currently operating in fields and areas with corporate income tax incentives according to the provisions of this Law expand their scale production, increasing capacity, innovating production technology (expansion investment), if it meets one of the three criteria specified in this Clause, it can choose to enjoy tax incentives according to the project in operation for the remaining time (if any) or be exempted or tax reduced for the additional income due to expansion investment. The tax exemption and tax reduction period for additional income due to expansion investment specified in this Clause is equal to the tax exemption and tax reduction period applicable to new investment projects in the same area and field of corporate income tax incentives.

Expansion investment projects eligible for incentives specified in this Clause must meet one of the following criteria:

+ The original price of fixed assets increases when the project Investment completed and put into operation reaches a minimum of twenty billion VND for expansion investment projects in the field of corporate income tax incentives according to the provisions of this Law or from ten billion VND for expansion investment projects implemented in areas

with difficult socio-economic conditions or areas with particularly difficult socio-economic conditions according to the provisions of law;

+ Billion The increase in the total cost of fixed assets is at least 20% compared to the total cost of fixed assets before investment;

+ The design capacity is increased at least from 20% compared to the design capacity before investment.

In case an operating enterprise invests in expansion in a field or area with tax incentives according to the provisions of this Law but does not meet one of the three criteria specified in this Clause, tax incentives will be applied according to the active project for the remaining time (if any).

In case an enterprise enjoys tax incentives in the form of expansion investment, the increased income due to expansion investment is accounted for separately; In cases where separate accounting is not possible, income from expansion investment activities is determined according to the ratio between the original price of newly invested fixed assets put into use for production and business to the total original price of the enterprise’s fixed assets.

The tax exemption and tax reduction period specified in this clause is calculated from the year the investment project is completed and put into production and business.

Tax incentives specified in this Clause do not apply to cases of expanded investment due to mergers, acquisitions of businesses or active investment projects. The Government shall detail and guide the implementation of this Article.

Thus, the Company was established and operated in an area with difficult socio-economic conditions Tax exemption for a maximum of two years and a 50% reduction in tax payable for a maximum of four subsequent years.

2. Is corporate income tax reduced in case of employing ethnic minority employees?

According to Article 15 of the Law on Corporate Income Tax 2008 (supplemented by Clause 9, Article 1 of the Law on Corporate Income Tax amended in 2013), the provisions on cases of corporate income tax reduction are as follows:

“1. Manufacturing, construction, and transportation enterprises that employ many female workers are entitled to a reduction in corporate income tax equal to the amount spent on female workers.

2. Enterprises that employ a large number of ethnic minority workers are entitled to a corporate income tax reduction equal to the amount spent on ethnic minority workers.

3. Enterprises that transfer technology in areas prioritized for transfer to organizations and individuals in areas with difficult socio-economic conditions are entitled to a 50% reduction in corporate income tax calculated on income from technology transfer.

The Government shall detail and guide the implementation of this Article.”

Thus, in cases where businesses employ ethnic minority workers, they will receive a reduction in corporate income tax.

3. What are the conditions for applying corporate income tax incentives?

According to Article 18 of the 2008 Corporate Income Tax Law (amended and supplemented by Clause 12, Article 1 of the 2013 revised Corporate Income Tax Law), the conditions for applying corporate income tax incentives are as follows: following:

(1) Corporate income tax incentives specified in Articles 13, 14, 15, 16 and 17 of this Law apply to enterprises that implement accounting, invoices, documents and pay taxes according to declaration.

Corporate income tax incentives under the category of new investment projects specified in Article 13 and Article 14 of this Law do not apply to cases of division, separation, merger or merger. especially, business form conversion, ownership conversion and other cases as prescribed by law.

(2) Enterprises must separately account income from production and business activities eligible for tax incentives specified in Articles 13 and 14 of this Law from income from production and business activities not eligible for tax incentives; In cases where separate accounting is not possible, income from production and business activities eligible for tax incentives is determined according to the ratio between the revenue of production and business activities eligible for tax incentives to the total revenue of the enterprise.

(3) The 20% tax rate specified in Clause 2, Article 10 and regulations on tax incentives in Clauses 1 and 4, Article 4, Article 13 and Article 14 of this Law do not apply to:

– Income from capital transfer, transfer of capital contribution rights; income from real estate transfer, except social housing specified in Article 13 of this Law; income from transfer of investment projects, transfer of rights to participate in investment projects, transfer of rights to explore and exploit minerals; income from production and business activities outside Vietnam;

– Income from search, exploration and exploitation of oil, gas and other rare and precious resources and income from mineral exploitation activities;

– Income from service business subject to special consumption tax according to the provisions of the Law on special consumption tax;

– Other cases according to Government regulations.

(4) At the same time, if an enterprise enjoys many different tax incentives for the same income, the enterprise can choose to apply the most beneficial tax incentive.

Therefore, the conditions to apply for corporate income tax incentives include the conditions as mentioned above.

Thus, in the case of an enterprise employing ethnic minority workers, it is eligible for corporate income tax reduction.