Circular No. 03/2009/TT-BTC dated January 13, 2009 of the Ministry of Finance guiding the reduction, and extension of the time limit for payment of enterprise income tax under the Government’s Resolution No. 30/2008/NQ-CP of December 11, 2008, on urgent measures to curb economic decline, maintain economic growth and ensure social welfare

CIRCULAR

ON REDUCTION AND DEFERMENT OF CORPORATE INCOME TAX PURSUANT TO RESOLUTION 30/2008/NQ-CP OF THE GOVERNMENT DATED 11 DECEMBER 2008 ON URGENT SOLUTIONS FOR ALLEVIATING THE ECONOMIC DOWNTURN BY PRESERVING ECONOMIC GROWTH AND ENSURING THE WELFARE OF SOCIETY

Pursuant to the Law on Corporate Income Taxand its implementing guidelines;Pursuant to the Law onManagement of Taxand its implementingguidelines;
Pursuant to Resolution21/2008/QH12of the National Assembly Legislature XII on the estimated State Budget for year 2009;
Pursuant toDecree 118/2008/ND-CPof the Government dated27 November 2008 on functions, duties, powers andorganizationalstructureof the Ministry of Finance;
PursuanttoResolution30/2008/NQ-CPoftheGovernmentdated11 December2008onurgentsolutions for alleviatingthe economic downturnbypreserving economic growth andensuring the welfare of society;
TheMinistryofFinanceherebyprovidesthefollowingguidelinesonreductionanddefermentofcorporate income tax ["CIT"] for enterprises meeting difficulties in year 2009:

Part I

GENERAL PROVISIONS

1. The amount of CIT payable by smalland medium sized-enterprises for the fourth quarter of year 2008andforyear2009shallbereducedbythirtypercent(30%)inaccordancewiththeguidelinesin Part II of thisCircular.

An enterprise must satisfy either ofthe following criteria to qualify as a small or medium-sized enterprise:

- Charter capital stipulated in its business registration certificate or investment certificate effectivepriorto1 January2009doesnotexceed10 billiondong;similarlyforanenterprise newly established after 1January 2009, charter capital stipulated in itsinitial business registration certificateor investment certificate mustnot exceed10 billion dong.

Example1:TheinitialbusinessregistrationcertificateofEnterprise Awasissuedon1July 2007 and records charter capital at 11billion dong, and the business registration certificate amended for the first time on 30 June 2008 records charter capital of 10 billion dong. AccordinglyEnterprise Aqualifiesasasmallormedium-sizedenterpriseandshallbeentitled totheCITreductionpursuanttothisCircular. Iftheamendedbusinessregistrationcertificate hadrecordedchartercapitalat15 billiondong,thenEnterprise Awouldnotqualifyasasmall or medium-sized enterprise (unless it satisfied the condition onemployees stipulated in the nextparagraph)forentitlementtothereductionofCITandtheextensionoftimeforpayment of CIT pursuant to this Circular.

- The average number of employees during the fourth quarter of year 2008, excluding employeeswithshort-termcontractsunder3months,wasnotmorethanthreehundred(300).

Inthecaseofanenterprisewithturnover,whichwasnewlyestablishedonorafter1 October 2008,thenumberofstaffpaidsalaryintheinitialmonth(amonthbeingafull30days)must not be more than 300.

Theaveragenumberofemployeesasaresultofincreasesandreductionsduringthefourth quarter of year 2008 shall be determined in accordance with the weightedaverage of the number ofmonths; and the initial month or last month working for the enterprise shallbe countedas a month.

Example 2:Enterprise B had 302employeeson its list of salaried staff for themonth of October2008. InNovember2008itrecruited2moreemployees,and10employeesretiredin December2008. Accordinglytheaveragenumberofemployeesasaresultofincreasesand reductions inthe fourth quarter ofyear 2008shallbedeterminedas follows:

(2 people x 2 months- 10people x 1 month)/3 months= (-) 2 employees.

Averagenumber of employeesduring the fourthquarter of year 2008 is 302 - 2 = 300people. AccordinglyEnterprise Bqualifiesasasmallormedium-sizedenterpriseandisentitledtothe CIT reductionand the extension of time for paymentofCIT pursuant to this Circular.

Example 3: EnterpriseC is newlyestablished andits initial business registration certificate was issued in October 2008. The first dateon which EnterpriseC had turnover was 10 December 2008.There are 295 employees on the salary list for January 2009. AccordinglyEnterpriseCqualifiesasasmallormedium-sizedenterpriseandisentitledtothe CIT reductionand the extension of time for paymentofCIT pursuant to this Circular.

2. AnextensionoftimeforpaymentofCITpursuanttoPartIIIthisCircular shallapplytosmalland medium-sized enterprises as defined in clause I above,and also toenterprises producingor processingagricultural,forestryorseafoodproducts,textilesandgarments,footwear,andelectronic components.

3. The CIT reduction andextension oftime for payment stipulated in this Circular shall applyto enterprisesalready implementing the accounting regime on invoices and source documents, and which have registered topay tax in accordancewith their declarations.

Part II

REDUCTION OF CORPORATE INCOME TAX

1. The amount of CIT payable by smalland medium sized-enterprises for the fourth quarter of year 2008and foryear 2009 shall be reduced by thirtyper cent (30%), specifically as follows:

(a) TheCITreductionforthefourthquarterofyear2008shallequal30%oftheamountofCIT payableforthatquarter. EnterprisesshallfixtheamountofCITpayableforthefourthquarter of year 2008as follows:

- If revenue, expenses and taxable income of the fourth quarter of year2008are determinable, then the amount of CIT payable for such quarter shall be fixed onthe basisofthetaxableincomeforthatquarterasaccountablebytheenterpriseinitsbooks of accounts.

- Ifrevenue,expensesandtaxableincomeofthefourthquarterofyear2008arenotable to be determined, then the amount of CIT payable for that quarter shallbe fixedas follows:

(b) The CIT reduction for year 2009shallequal30% of the amount ofCIT payablefor that year.

Enterprises shall themselves calculate the amount of their 30% tax reduction when they declare theamount of CIT provisionally payable for the fourth quarter of year 2008 and for each quarter of year 2009; and shall themselvesdetermine the amount of their reduction entitlement when they conductaccounting finalizationfor years2008 and 2009.

InthecaseofanyenterprisecurrentlyentitledtoCITincentives,thenthefiguretobereduced by 30% shall be the remaining CIT figure afterdeducting the amount of preferential CIT pursuant to the law oncorporate income tax.

Example4:Enterprise Xhastaxableincomeof500milliondonginthetaxassessmentperiod beingyear2009. Enterprise Xiscurrentlyentitledtothepreferentialtaxrateof15%anda 50%reductionoftheamountoftaxpayable. AccordinglytheremainingCITfigureshallbe determinedas follows:

- AmountofCITpayableatthetaxrateof15%is500 milliondongx15%=75 million dong.

- Amount of CIT payable after the 50% reduction is 75 million dong x 50% = 37.5 milliondong.

- AmountofCITfurtherreducibleby30%pursuanttothisCircularis37.5 milliondongx 30% = 11.25million dong.

- Remainingamount of CIT payableis37.5 million dong -11.25 million dong = 26.25 milliondong.

2. Enterprisesshallconductproceduresforimplementingtheabovebydeclaringandpayingtaxandby conducting CIT tax finalization on the current standardforms.

(a) Provisional self-declaration for the fourth quarter of year 2008and foreach quarter of year 2009shallbemade as follows:

Enterprisesshallwritethefollowingtwoadditionallinesbeforetheundertakingattheendof the current standard formfor provisionalCIT declarations:

- CIT reduced in accordance with Resolution 30 = (Tax payablein the tax assessment period x 30%).

- Remaining CIT payable in the tax assessmentperiod = (CIT payable in the period x 70%).

Enterprises which select the method for determining the amount of CIT entitled to this reductionbyaccountingfortheirrevenue,expensesandtaxableincomeforthefourthquarter ofyear2008mustlodgeanadditionalreportontheirbusinessresultsforthefourthquarterof year 2008 together with their tax declaration.

(b) Self-declaration of tax finalization for year 2008:

Enterprisesshallwritethefollowingtwoadditionallinesbeforetheundertakingattheendof the current standard formfor tax finalization declarations:

- In caseswhere the amountof CIT forthe fourth quarter of year 2008 is determinable:

- CITreducedinaccordancewithResolution 30=(CITforthefourthquarterofyear2008 x 30%).

- RemainingCITpayableforyear2008=(CITpayableforyear2008lessCITreducible pursuant to Resolution 30).

- IncaseswheretheamountofCITinthefourthquarterofyear2008isnotaccountable by the enterprise in itsbooks ofaccounts:

+ CIT reducedin accordancewith Resolution 30 =(CITpayable foryear 2008 x 30% / 4).

+ RemainingCIT payable foryear 2008 = (CIT payablefor year2008x 92.5%).

(c) Self-declaration of tax finalization for year 2009:

Enterprisesshallwritethefollowingtwoadditionallinesbeforetheundertakingattheendof the current standard formfor tax finalization declarations:

- CIT reducedin accordancewith Resolution 30 =(CITpayable foryear 2009 x 30%).

- RemainingCIT payable foryear 2009 = (CIT payablefor year2009x 70%).

Part III

DEFERMENT OF TIME FOR PAYMENT OF CIT

1. The amount of CIT for which payment is deferred shall be determinedas follows:

(a) Inthecaseofsmallandmedium-sizedenterprises,itshallbethe amount ofprovisionalCITfor each quarterof year 2009after making the reduction stipulated in this Circular.

(b) Inthecaseofenterprisesproducingorprocessingagricultural,forestryorseafoodproducts, textiles and garments, footwear, and electronic components,it shall bethe amount of provisionalCIT for each quarter of year 2009 in respect of the income from these activities.

IfanenterpriseisunabletodeterminetheamountofprovisionalCITonanyoftheabove-named activitiesasdistinctfromtheamountofprovisionalCITpayableonotheractivities,thentheamount of provisional CIT fromoperations of manufacturing and processing for which payment shallbe deferredshallbecalculatedasapercentagebeingtotalturnoverfromtheformeractivitiesovertotal turnover of the enterprisein year 2008.

2. Payment shall be deferred for nine (9) monthsas from the last day of the period for payment pursuant to theLawon Management of Tax, and specifically as follows:

- PaymentoftheamountofprovisionalCITassessableforthefirstquarterofyear2009shallbe deferreduntil 29 January 2010 at the latest.

- Paymentoftheamountof provisional CITassessable forthe secondquarterofyear 2009shall be deferreduntil 29 April2010 at the latest.

- PaymentoftheamountofprovisionalCITassessableforthethirdquarterofyear2009shall be deferreduntil 30 July 2010 at the latest.

- PaymentoftheamountofprovisionalCITassessableforthefourthquarterofyear2009shall be deferreduntil 29 October 2010 at the latest.

3. Enterprises shall implement the followingprocedures for deferment of tax payment: they shall prepare CIT provisional payment declarations for each quarter in accordance with the current regulations,andbeforethelinecontainingtheundertakinginthetaxdeclarationtheyshallrecordthe date on which they propose to make thedeferred payment.

4. Duringtheperiodofdeferment,enterprisesshallnotbedeemedtohavecommittedthebreachof delaying tax payment, and shallnotbe subject to any administrative penalty for late paymentin respective of the amount oftax for whichpayment isdeferred.

Part IV

ORGANIZATION OF IMPLEMENTATION

1. This Circular shallbe of full forceand effectafter forty-five (45)days from the date of its signing.

2. AnyproblemsarisingduringimplementationshouldbepromptlyreportedtotheMinistryofFinance for additional guidelines.