Income subject to corporate income tax according to legal regulations

Does a business that has only been in operation for 1 month have to finalize its annual corporate income tax?

1. Who must pay corporate income tax?

Pursuant to Article 2 of Circular 78/2014/TT-BTC stipulating specific corporate income tax payers as follows:

1. Corporate income taxpayers are organizations that produce and trade goods and services with taxable income (hereinafter referred to as enterprises), including:

a) Enterprises established and operating under the provisions of the Enterprise Law, Investment Law, Credit Institutions Law, Insurance Business Law, Securities Law, Petroleum Law, Commercial Law and other legal documents in the following forms: Joint stock company; Limited liability company; Partnership company; Private enterprise; Law Office, Private Notary Office; The parties in the business cooperation contract; Parties in the petroleum product distribution contract, Petroleum joint venture enterprise, Joint operating company.

b) Public and non-public public service units that produce and trade goods and services with taxable income in all fields.

c) Organizations established and operating under the Cooperative Law.

d) Enterprises are allowed to established under the provisions of foreign law (hereinafter referred to as foreign enterprises) with a permanent establishment in Vietnam.

A permanent establishment of a foreign enterprise is a production and business establishment through which a foreign enterprise conducts part or all of its production and business activities in Vietnam, including:

– Branches, executive offices, factories, workshops, methods transportation facilities, mines, oil and gas fields or other natural resource exploitation locations in Vietnam;

– Construction sites, construction, installation and assembly works;

– Service providers, including consulting services through employees or other organizations and individuals;

– Agents for foreign enterprises;

– Representative in Vietnam in the case of a representative with authority to sign contracts in the name of a foreign enterprise or a representative without authority to sign contracts in the name of a foreign enterprise but who regularly delivers goods or provides services in Vietnam.

In case the Double Taxation Avoidance Agreement signed by the Socialist Republic of Vietnam has different provisions on permanent establishments, it shall comply with provisions of that Agreement.

e) Organizations other than the organizations mentioned in Points a, b, c and d, Clause 1 of this Article that have activities of producing and trading goods or services, and have taxable income.

2. Foreign organizations doing business in Vietnam not under the Investment Law, Enterprise Law or with income arising in Vietnam pay corporate income tax according to separate instructions of the Ministry of Finance. If these organizations have capital transfer activities, they must pay corporate income tax according to the instructions in Article 14 Chapter IV of this Circular.

2. What income is subject to corporate income tax?

In Article 3 of Decree 218/2013/ND-CP, Article 1 and Article 6 of Decree 12/2015/ND-CP, Article 1 of Decree 91/2014/ND-CP detailing and guiding the implementation of the Law on Corporate Income Tax, regulating income subject to corporate income tax Specific careers are as follows:

1. Taxable income includes income from production and trading of goods and services and other income specified in Clause 2 of this Article. For businesses that register for business and have income specified in Clause 2 of this Article, this income is determined to be income from production and business activities of the establishment.

2. Other income includes:

– Income from capital transfer includes income from the transfer of part or all of the capital invested in an enterprise, including cases of selling a business, transferring securities, transferring the right to contribute capital and other forms of capital transfer according to the provisions of law;

– Income from transferring investment projects, income from transferring the right to participate in investment projects, income Import from transfer of rights to explore, exploit and process minerals according to the provisions of law; income from real estate transfer as prescribed in Articles 13 and 14 of this Decree;

– Income from use rights, property ownership rights, including income from intellectual property rights, income from technology transfer according to the provisions of law;

– Income from transfer, lease, and liquidation of assets (except real estate), including other valuable papers;

– Income from deposit interest, capital loan interest, foreign currency sales includes: Deposit interest at credit institutions, capital loan interest in all forms as prescribed by law including late payment interest, installment interest, credit guarantee fee and other fees in capital loan contracts; income from foreign currency sales; exchange rate differences due to reassessment of debts payable in foreign currency at the end of the fiscal year; Exchange rate differences arising during the period (except exchange rate differences arising during the capital construction investment process to form fixed assets of newly established enterprises that have not yet been put into production and business activities shall be implemented according to the guidance of the Ministry of Finance). For receivables and loans originating in foreign currency arising during the period, the exchange rate difference of these receivables and loans is the difference between the exchange rate at the time of debt collection and the exchange rate at the time of recording the receivable debt or the initial loan;

– Amounts deducted in advance as expenses but not used or not fully used according to the appropriation term but the enterprise does not account for adjusting and reducing expenses;

– Bad debts that have been written off can now be recovered;

– Debts payable whose creditors cannot be identified;

– The amount of business income from previous years that was overlooked was discovered;

– The difference between the collection of fines and compensation due to violation of economic contracts or bonuses due to good performance of contractual commitments (excluding fines and compensation recorded as a decrease in the value of the project during the investment period) minus (-) the amount of fines and compensation due to breach of contract according to the provisions of law;

– Donations in cash or in kind received;

– Differences due to reassessment of assets according to the provisions of law to contribute capital, transfer when dividing, separating, merging, consolidating, converting the type of enterprise, except in cases of equitization, arrangement, innovation of enterprises with 100% charter capital held by the state.

Enterprises receiving assets are accounted for at reassessed prices when determining deductible expenses specified in Article 9 of this Decree.

– Other income, including tax-exempt income specified in Clause 6 and Clause 7, Article 4 of this Decree.

3 Taxable income arising in Vietnam of foreign enterprises specified in Points c, d, Clause 2, Article 2 of the Law on Corporate Income Tax is income received originating from Vietnam from activities of providing services, providing and distributing goods, lending capital, royalties to Vietnamese organizations and individuals or to foreign organizations and individuals doing business in Vietnam or from capital transfers, investment projects, capital contribution rights, rights to participate in investment projects, rights to explore, exploit and process mineral resources in Vietnam, regardless of location of conducting business.

Taxable income specified in this clause does not include income from services performed outside the territory of Vietnam such as: Repair of means of transport, machinery and equipment abroad; advertising, marketing, investment promotion and trade promotion abroad; Brokerage for selling goods, brokerage for selling services abroad; training abroad; divide international postal and telecommunications service charges for foreign parties.

The Ministry of Finance provides specific guidance on taxable income specified in this Clause.

3. Does a business that has only been in operation for 01 month have to finalize its annual corporate income tax?

In Clause 3, Article 3 of Circular 78/2014/TT-BTC guiding the implementation of Decree 218/2013/ND-CP guiding the Law on Corporate Income Tax promulgated by the Minister of Finance, it is stipulated:

“Article 3. Method tax calculation

…

3. In case the first year tax period of a newly established enterprise from the date of issuance of the Business Registration Certificate or Investment Certificate and the last year’s tax period for an enterprise converting business type, converting form of ownership, consolidation, merger, division, separation, dissolution, bankruptcy are shorter than 03 months, the tax period of the following year (for newly established enterprises) or the previous year’s tax period (for enterprises converting business type) will be added. business, conversion of ownership form, consolidation, merger, division, separation, dissolution, bankruptcy) to form a corporate income tax period. The first year’s corporate income tax period or the last year’s corporate income tax period must not exceed 15 months.”