Circular No. 176/2010/TT-BTC dated November 05, 2010 of the Ministry of Finance guiding enterprise to previously deduct from costs when determining incomes subject to corporate income tax in order to create an assistance source for the poor districts in implementing Resolution No. 30A/2008/NQ-CP dated December 27, 2008 of the Government on rapid and sustainable poverty reduction support program for 61 poor districts

CIRCULAR

GUIDING ENTERPRISE TO PREVIOUSLY DEDUCT FROM COSTS WHEN DETERMINING INCOMES SUBJECT TO CORPORATE INCOME TAX IN ORDER TO CREATE AN ASSISTANCE SOURCE FOR THE POOR DISTRICTS IN IMPLEMENTING RESOLUTION NO. 30a/2008/NQ-CP DATED DECEMBER 27, 2008 OF THE GOVERNMENT ON RAPID AND SUSTAINABLE POVERTY REDUCTION SUPPORT PROGRAM FOR 61 POOR DISTRICTS

Pursuant to the Law on Enterprise Income Tax No.14/2008/QH12 andthe documentsguiding the implementation ofthe Law onTax AdministrationNo.29/11/200678/2006/QH11dated 29/11/2006anddocumentsguiding the implementation;

Pursuant to the Resolution No.30a/2008/NQ-CP dated 27/12/2008 of the Government on rapid and sustainable poverty reduction support program for 61 poor districts;

Pursuant to the Decree No.118/2008/ND-CP dated 27/11/2008 of the Governmentdefining the functions, tasks, powers and organizational structure of the Ministry ofFinance;

After having directive opinion of the Prime Minister in the official dispatch No.3741/VPCP-KTTH dated 03/6/2010 of the Government Office,

TheMinistry ofFinance guides enterprises to previously deduct from costs when determining incomes subject to Corporate Income Tax (CIT) to assist for the poor districts in implementing the Resolution No.30a/2008/NQ-CP dated 27/12/2008 as follows:

Article 1. Subjects and scope of application

This Circular guides on calculating costs or previously deducting from costs when determining incomes subject to Corporate Income Tax (CIT) for the enterprises to assist or creating source for the enterprises to assist for the poor districtsin implementing the Resolution30a dated 27/12/2008 of the Government on rapid and sustainable poverty reduction support program for 61 poor districts (hereinafter referred to as Resolution No.30a).

The poor districts to be of the list of poor districts are subject to the Resolution No.30a, provided for in point 1 item IV of official dispatch No.705/TTg-KGVX dated 11/5/2009 of the Prime Minister and Annex I - the list of poor districts subject to the Resolution No.30a issuing attached herewith. Incase,the Prime Ministerprovides for otherwise, provisions of the Prime Ministershall becomplied with.

The concept ofenterprisein this Circularshall be construed asbusinessconcepthas beendefined inthe CIT LawNo.14/2008/QH12andtheguidelines.

Article 2. Deduction mechanism and Objectives of using deducted expenses

1. Enterprises must make funding plan for poor districts according to sponsoring content (as prescribedregime) which have been registered with the Ministry of Labour –WarInvalids and Social Affairs. This funding plan is sent to the District-levelPeople’sCommittee (DPC) where those enterprises have registeredto assist so such agencies to synthesize and submit to theProvincial-levelPeople committeefor approval. Based on approved poverty reduction program, the DPC issues written confirmationonfundingcommitmentof the enterprises inwhich statesclearlythe progress of funding, funding amount, financing activities of the enterprises for the district. Funding plan for the poor districts of the enterprises and confirmation of the DPC which receivesfundingare the basis for enterprisesto be included in the costs or deducted previously into expenses when determining income subject to CIT to spend or to create assistance sources for poor districts subject to the Resolution No. 30a.

Based onthefinancialabilityandfundingcommitment andprogress of fundingforpoor districts,enterprisesdetermine by themselves therate ofcost-accounting into costs when calculating CIT,ensuringthe principle:totalbalance of thepreviouslydeducted accountto fund forpoor districtssubject to the ResolutionNo.30anot more thanthe total amount that the enterprises havecommittedtofund forpoor districtssubject to the ResolutionNo.30awhich up to thetime offinancialstatements, the enterprises have notyetperformed.

2.The enterprises use thepreviouslydeducted amountonlyto fundeducation, health,disasterrecoveryandcharity housesfor poor peopleunderthe law regulationsforpoor districtssubject to the ResolutionNo.30a.

3.Fortheamounts that enterprises paid actuallyin the tax periodto fundeducation, health,disasterrecoveryandcharity housesfor poor peopleas prescribedby law forthe poor districtsto be of the list ofdistrictspoorsubject to theResolution No.30ahaving sufficientinvoices,legaldocumentsshallbe included in thededucted costwhen determiningincomesubject to CITunder regulations.In casethe funding foreducation, health,disasterrecoveryandcharity housesfor poor peopleintax periodwastaken fromthe previously deducted amountstocreate assistance sourceforpoor districtssubjecttoResolution No.30a, enterprisesshallnot be included indeductedexpenses when determining theincome subject toCIT.

4.The contentandprocedures,records offundingforeducation, health,disasterrecoveryandcharity housesfor the poor people,enterprisesperformunder the guidance in the point2.21,2.22,2.23and2.24itemsIV, PartCof Circular No.130/2008/TT-BTCdated26/12/2008ofthe Ministry of Financedetailingthe implementationof CITLawandDecree No.124/2008/ND-CPdated11/12/2008.

Article 3.Management of deducted expenses

1.Termofthe previous deductedamounts into coststo fundpoor districtssubject to the Resolution30a undertheprovisions ofthisArticleis3years fromthe year the enterprisesdeduct.Where thetermination of previously deductedterm but the enterprises did not use upamountdeductedorusedfor improper purposes, the enterpriseshall refund theamountalreadydeducted butnotused,usedbut not uporusedfor improper purposes into other incomewhen determiningincome subject to CITandtheinterestgeneratedfromthecorrespondingpayable income tax.

a) Tax rate of CITused to calculatethe recovery taxis a taxrate applied to enterprises inthe deduction term.Whereintheterm ofdeduction,the enterpriseapply thedifferenttax rate of CIT, tax rate of CITused tocalculatethe recovery taxis the tax rateat the timeof deduction of therecoveredamount accordingthe principleoffirst deducted, first used.

b)Interest rateforrecovered taxamount which the enterprise have already deducted but not yet used upistheone year-termTreasury bill’sinterest rate appliedat the time ofrecoverytime andtheinterest calculated time is calculated by year,sincethe next year ofthededucted year torecovered one.

For example:in 2010, Company Ahas committedtosupportfor thepoordistrict Bto the end of 2012wasonebilliondongandthepoordistrict Cis twobilliondong(with certification oftheDPCBandC).Based on thecommitment tosupport theDistrictBandDistrictCofCompanyAandassistanceCertificationofthe DPCBandC,CompanyAdetermine the previously deducted rate intocostto create assistanceresourcesforthepoor districtsubject to theResolution No.30ain 2010was2billion dong.

By the end of2012, the funding amount of Company to district Bis0.7billion dong and todistrictCis0.8billion dong.In this case,the Companyonly used1.5billion dong, not yetusedup the previously deductedamountofthe year 2010, theCompanyis collectedarrearsand interestincurredas follows:

+CIT iscollectedarrearsdue to not yet used up thepreviously deductedamount(assumingtax rate of CIT in the deduction term is25%):

(2billion- 1,5billion) x 25% = 125million dong

+Time to calculate interestfrom 2011 to 2012 is two years. Therefore, the interest arising fromCIT collectedarrearsdue to not yet used up thepreviously deductedamount(assumingtheone year-termTreasury bill’sinterest rateis 12%):

125billionx 12% x 2years= 30billion dong

The years after 2010, thepreviously deductedamountand use ofthepreviously deductedamountis calculated according to principleoffirst deducted, first used as mentioned above.

c) The interest rate forthe recoverytaxamountcalculated onthe previously deductedamountusedfor improper purposes isthe interest rate calculated under ratio oflate payment penalties as prescribedofthe Tax Administration Law and the time periodforinterest isthe period since being previously deducted until being collected arrears.The date ofrecovery isthe date that theviolation is detected and recorded in writing (exceptfor the casenotrequired torecord).

d) Thedetermination of the previously deductedtimeof the amount used for improper purposesfor useasabasisofcalculating interestfor the collected arrears tax amountcalculated on thepreviously deducted portionused for improper purposesis according to principleoffirst deducted, first used.

2.The program ofthe Government spoverty reductionassistanceis implemented from2009to 2020.Therefore,enterprisesare entitled to deduct or previously deducted intocosts to createassistance sourceforpoor districtssubject to the ResolutionNo.30a maximumupto 2019andthe latestis at thetime of submissionoftaxsettlement reportsof the year 2020, the enterprises mustcompletethe previous deduction liquidation proceduresto createassistance source forpoor districtssubject to the ResolutionNo.30aandreimbursement of thesurplus(ifany)into other incomewhen determiningincome subject toCIT of the year2020andthe interestsarisingfromthecorrespondingpayable CIT under the provisions ofclause1of thisArticle.

Article 4.Implementation organization

1.This Circular takes effect 45 days after the signing date.

2. The contents which arenot guided in this Circular and the contents which arenot contrary to the guidance in this Circular shall comply with current regulations.

During the course of implementationif any problemarises, theorganizationsand individualsneedpromptlyto reflect to the Ministry of Financefor study andadditional guidance./.