Circular No. 96/2015/TT-BTC dated June 22, 2015 of the Ministry of Finance guiding the Enterprise Income Tax in the Decree No. 12/2015/ND-CP dated February 12, 2015 of the Government detailing the implementation of the Law Amending and Supplementing a Number of Articles of the Tax Laws and amending and supplementing a number of articles of the decrees on taxes; amending a number of articles of the Circular No. 78/2014/TT-BTC dated June 18, 2014; Circular No. 119/2014/TT-BTC dated August 25, 2014 and the Circular No. 151/2014/TT-BTC dated October 10, 2014 of the Ministry of Finance

CIRCULAR

Providing guidance on enterprise income tax in
the Government’s Decree No. 12/2015/ND-CP of February 12, 2015, detailing the Law Amending and Supplementing a Number of Articles of the Laws on Taxes, and amending and supplementing a number of articles of the decrees on taxes; and amending and supplementing a number of articles of the Ministry of Finance’s Circular No. 78/2014/TT-BTC of June 18, 2014, Circular No. 119/2014/TT-BTC of August 25, 2014, and Circular No. 151/2014/TT-BTC of October 10, 2014[1]

Pursuant to Law No. 14/2008/QH12 on Enterprise Income Tax and Law No. 32/2013/QH13 Amending and Supplementing a Number of Articles of the Law on Enterprise Income Tax;

Pursuant to Law No. 71/2014/QH13 Amending and Supplementing a Number of Articles of the Laws on Taxes;

Pursuant to the Government’s Decree No. 218/2013/ND-CP of December 26, 2013, detailing and guiding the implementation of a number of articles of the Law on Enterprise Income Tax;

Pursuant to the Government’s Decree No. 12/2015/ND-CP of February 12, 2015, detailing the Law Amending and Supplementing a Number of Articles of the Laws on Taxes, and amending and supplementing a number of articles of the decrees on taxes;

Pursuant to the Government’s Decree No. 215/2013/ND-CP of December 23, 2013, defining the functions, tasks, powers and organizational structure of the Ministry of Finance;

At the proposal of the General Director of Taxation,

The Minister of Finance guides the application of enterprise income tax as follows:

Article 1. To amend and supplement Clause 1, Article 3 of the Ministry of Finance’s Circular No. 78/2014/TT-BTC of June 18, 2014, guiding the implementation of the Government’s Decree No. 218/2013/ND-CP of December 26, 2013, providing and guiding the implementation of the Law on Enterprise Income Tax (below referred to as Circular No. 78/2014/TT-BTC), as follows:

“1. The payable enterprise income tax amount in a tax period is taxed income minus the amount deducted for setting up the science and technology fund (if any) multiplied by the enterprise income tax rate.

The payable enterprise income tax shall be determined by the following formula:

- When Vietnamese enterprises making investment in a foreign country that has signed a double taxation avoidance agreement with Vietnam transfer their incomes to Vietnam after paying enterprise income tax in such country, such agreement shall apply. If the foreign country has not signed a double taxation avoidance agreement with Vietnam and the enterprise income tax rate applied in such country is lower than that applied in Vietnam, the difference in enterprise income tax shall be collected under the Law on Enterprise Income Tax of Vietnam.

- Vietnamese enterprises making investment in a foreign country and earning incomes from production and business activities in such country shall declare and pay enterprise income tax in accordance with the current Law on Enterprise Income Tax of Vietnam, including also enterprises that are enjoying income tax exemption and reduction under the law of the foreign country. The enterprise income tax rate used for calculating and declaring tax on incomes earned overseas is 22% (or 20% from January 1, 2016). The preferential tax rate (if any) such Vietnamese enterprises are enjoying under the current Law on Enterprise Income Tax shall not apply.

- If its income earned from an offshore investment project is already subject to enterprise income tax (or a similar tax) overseas, a Vietnamese enterprise making offshore investment may subtract the tax amount paid overseas by itself or by its foreign partner (including tax on dividends) from the enterprise income tax amount payable in Vietnam, which, however, must not exceed the enterprise income tax amount calculated under the Law on Enterprise Income Tax of Vietnam. The exempted or reduced enterprise income tax amount on the profit from the offshore investment project under the foreign country’s law may also be subtracted from the enterprise income tax amount payable in Vietnam.

- If a Vietnamese enterprise making offshore investment transfers its income back to Vietnam without declaring and paying tax on such income, the tax agency shall assess and collect the taxable income from the enterprise’s overseas production and business activities under the Law on Tax Administration.

- The dossier to be presented by a Vietnamese enterprise making offshore investment for the declaration and payment of tax on an income from its offshore investment project must comprise:

+ A copy of the declaration of overseas income tax certified by the taxpayer;

+ A copy of the overseas tax payment document certified by the taxpayer, or the original written certification by the foreign tax agency of the paid tax amount, or a copy of an equivalent document certified by the taxpayer.

- The income from the offshore investment project may be declared in the enterprise income tax finalization statement of the year in which the income is transferred back to Vietnam in accordance with the law on offshore direct investment. Any income (profit) or loss from the offshore investment project may not be subtracted from the enterprise’s loss or income (profit) arising in Vietnam when calculating enterprise income tax.

Article 2. To amend and supplement Clause 2, Article 4 of Circular No. 78/2014/TT-BTC as follows:

“2. Taxable income

Taxable income in a tax period includes income from the production and trading of goods and provision of services and other incomes.

Taxable income in a tax period shall be determined as follows:

Income from activities of production and trading of goods and provision of services is the turnover from these activities minus deductible expenses for these activities. An enterprise that has different production and trading activities subject to different tax rates shall separately calculate the income from each activity and multiply it by the corresponding tax rate.

Income from the transfer of real estate, investment projects, the right to participate in investment projects, or the right to explore, exploit and process minerals as prescribed by law shall be separately accounted for the declaration and payment of enterprise income tax at the rate of 22% (or 20% from January 1, 2016), and are ineligible for enterprise income tax incentives (except incomes from implementation of investment projects on construction of social houses for sale, lease or lease-purchase which enjoy the enterprise income tax rate of 10% under Point d, Clause 3, Article 19 of Circular No. 79/2014/TT-BTC).

In a tax period, if an enterprise suffers a loss from the transfer of real estate, investment projects or the right to participate in investment projects (excluding mineral exploration and exploitation projects), it may offset this loss against the profit from its production and business activities (including also other incomes prescribed in Article 7 of Circular No. 78/2014/TT-BTC). Any remaining loss after such offsetting may be further carried forward to subsequent years within the prescribed loss-carry forward period.

For the losses from the transfer of real estate, investment projects or the right to participate in investment projects (excluding mineral exploration and exploitation projects) of 2013 and previous years which are still in the loss-carry forward period, enterprises shall carry them forward to incomes from the transfer of real estate, investment projects or the right to participate in investment projects; if they cannot fully carry forward these losses, they may carry forward such losses to incomes from production and business activities (including also other incomes) of 2014 and subsequent years.

For an enterprise carrying out dissolution procedures, after obtaining the dissolution decision, if it transfers its fixed assets, the income (profit) (if any) from this transfer may be used to offset the loss from its production and business activities (including also the loss carried forward from previous years under regulations) in the tax period when such transfer is made.”

Article 3. To amend and supplement Clause 2, Article 5 of Circular No. 78/2014/TT-BTC as follows:

“2. The time for determining turnover for calculating taxable income shall be determined as follows:

a/ For the sale of goods, it is the time of transfer of the right to own or use goods to the buyer;

b/ For the provision of services, it is the time of completion of the provision of services or part of services for the buyer, except the cases specified in Clause 3, Article 5 of Circular No. 78/2014/TT-BTC and Clause 1, Article 6 of Circular No. 119/2014/TT-BTC;

c/ For air carriage, it is the time of completion of the provision of carriage services for the buyer;

d/ Other cases as prescribed by law.”

Article 4. To amend and supplement Article 6 of Circular No. 78/2014/TT-BTC (amended and supplemented in Clause 2, Article 6 of Circular No. 119/2014/TT-BTC, and Article 1 of Circular No. 151/2014/TT-BTC) as follows:

“Article 6. Deductible and non-deductible expenses when determining taxable income

1. Except for the non-deductible expenses prescribed in Clause 2 of this Article, enterprises may deduct any expense that fully satisfies the following conditions:

a/ Actual expenses related to their production and business activities;

b/ Expenses with adequate lawful invoices and documents;

c/ Expenses for purchase of goods or services valued at VND 20 million or more (VAT-inclusive prices) per invoice with non-cash payment documents.

Non-cash payment documents must comply with legal documents on value-added tax.

In case of purchase of goods or services valued at VND 20 million or more per invoice but, by the time of recording expenses, enterprises have not paid any money yet, they may still account such expenses as deductible expenses for determining taxable income. When making such payment without non-cash payment documents, enterprises shall declare and reduce expenses for the value of goods or services without non-cash payment documents in the tax period in which they make the cash payment (even when tax agencies and functional agencies have issued inspection or examination decisions with regard to the tax period in which such payment is made).

For goods or service purchase invoices for which cash has been paid before the effective date of Circular No. 78/2014/TT-BTC, adjustment under this Point is not required.

Example 7: In August 2014, enterprise A purchased goods valued at VND 30 million for which it had an invoice but had not yet made any payment. In the tax period of 2014, enterprise A included the expense for this purchase in deductible expenses for determining taxable income. In 2015, enterprise A paid in cash for this purchase. So it shall declare and reduce the expense for the value of such goods or services in the tax period in which it made the cash payment (the tax period of 2015).

In case an enterprise purchases goods or services for its production and business activities and has an invoice printed by the cash register under the law on invoices, if the value on such invoice is VND 20 million or more, based on this invoice and the non-cash payment document, the enterprise may include such value in deductible expenses when determining taxable income.

In case an enterprise purchases goods or services for its production and business activities and has an invoice printed by the cash register under the law on invoices, if the value on such invoice is under VND 20 million, based on this invoice and the cash payment document, the enterprise may include such value in deductible expenses for determining taxable income.

2. Non-deductible expenses for determining taxable income include:

2.1. Expenses failing to fully meet the conditions specified in Clause 1 of this Article.

In case an enterprise has expenses related to the value of uncompensated losses caused by natural disaster, epidemic, fire or other force majeure events, it may include these expenses in deductible expenses for determining taxable income, specifically as follows:

The enterprise shall determine by itself under regulations the total value of losses caused by natural disaster, epidemic, fire or other force majeure events.

The value of uncompensated losses caused by natural disaster, epidemic, fire or other force majeure events is the total value of losses minus compensations paid by insurers or other organizations and individuals in accordance with law.

a/ For assets and goods lost due to natural disaster, epidemic or fire which may be included in deductible expenses, a dossier must comprise:

- The written record of inventory of the value of lost assets and goods, made by the enterprise.

This written record must specify the value of lost assets and goods, the cause of loss, responsibilities of organizations and individuals for the loss; types, quantities and values of recoverable assets and goods (if any); stock movement statement of the lost goods bearing the signature of a lawful representative of the enterprise, who shall take responsibility before law for the statement.

- The dossier of compensation accepted by the insurer (if any).

- The dossier identifying responsibilities of organizations and individuals obliged to pay compensation (if any).

b/ Goods damaged due to expiry or change of the natural biochemical process without compensation are allowed to be included in deductible expenses for determining taxable income.

A dossier for goods damaged due to expiry or change of the natural biochemical process without compensation and allowed to be included in deductible expenses must comprise:

- The written record of inventory of the value of damaged goods, made by the enterprise.

This written record must specify the value of damaged goods, causes of damage, types, quantities, values of recoverable goods (if any) enclosed with the stock movement statement of the damaged goods bearing the signature of a lawful representative of the enterprise, who shall take responsibility before law for the statement.

- The dossier of compensation accepted by the insurer (if any).

- The dossier identifying responsibilities of organizations and individuals to pay compensation (if any).

c/  The above dossiers shall be kept at the enterprise and produced to tax agencies upon request.

2.2. Depreciation of fixed assets in one of the following cases:

a/ Depreciation of fixed assets not used for the production and trading of goods and provision of services.

Particularly, fixed assets serving workers of enterprises such as mid-shift rest houses and canteens, locker rooms, toilets, infirmaries, and vocational training facilities, libraries, kindergartens, gyms, and equipment and furniture qualified as fixed assets installed in these works; clean water tanks, garages; commute cars, houses for workers; expenses for the construction of physical foundations and for procurement of machinery and equipment being fixed assets for organizing vocational training activities, may be depreciated and included in deductible expenses for determining taxable income.

b/ Depreciation of fixed assets that have no papers proving that they are owned by enterprises (except fixed assets from financial lease-purchase).

c/ Depreciation of fixed assets that are not managed, monitored and accounted in accounting books of enterprises under the current regime of fixed-asset management and cost accounting.

d/ The depreciated amount in excess of the rate prescribed in the Ministry of Finance’s current regulations on the management, use and depreciation of fixed assets.

Before depreciation, enterprises shall notify the direct managing tax agencies of their selected method of depreciation of fixed assets (for example, straight-line depreciation method). Every year, enterprises shall depreciate fixed assets according to the Ministry of Finance’s current regulations on the management, use and depreciation of fixed assets, including accelerated depreciation (if meeting conditions).

Enterprises operating with high economic efficiency are entitled to apply accelerated depreciation that must not exceed twice the rate of depreciation determined by the straight-line method, in order to quickly renovate technology for certain fixed assets according to the Ministry of Finance’s current regulations on the management, use and depreciation of fixed assets. When applying accelerated depreciation, enterprises shall ensure profitable business.

For fixed assets contributed as capital or fixed assets transferred upon division, split-up, separation, consolidation, merger or transformation and re-valued under regulations, enterprises receiving these assets may include their depreciation expense in deductible expenses based on their re-valued historical costs. For other assets not qualified as fixed assets contributed as capital or transferred upon division, split-up, separation, consolidation, merger or transformation and re-valued under regulations, enterprises receiving these assets may include or amortize their depreciation expense in or to deductible expenses based on their re-valued prices.

For fixed assets made by enterprises themselves, their historical costs that are allowed to be depreciated and included in deductible expenses are total production costs to create those assets.

For assets being tools, instruments, reusable packages, etc., which are not qualified as fixed assets under regulations, the expenses for purchasing these assets may be amortized to production and business expenses in the period but for no more than 3 years.

dd/ Depreciation of fixed assets that have been fully depreciated.

e/ Some specific cases:

- The following amounts may not be included in deductible expenses when determining taxable income: The depreciation corresponding to the historical cost in excess of VND 1.6 billion/car for passenger cars of 9 seats or under (except automobiles used for passenger transport, travel and hotel business; automobiles used as models and trial driving); the depreciation of fixed assets being civil aircraft and yachts not used for cargo and passenger transport and travel and hotel business.

Passenger cars of 9 seats or under exclusively used for passenger transport, travel and hotel business are those registered under the names of enterprises which, in their enterprise registration certificates or business registration certificates, have registered one of these business lines: passenger transport, travel or hotel business, and have been licensed for doing business in accordance with legal documents on passenger transport, travel or hotel business.

Civil aircraft and yachts not used for cargo, passenger and tourist transport are those of enterprises having registered and accounted the depreciation of fixed assets but not registered the cargo or passenger transport, travel or hotel business in their business registration certificates or enterprise registration certificates.

In case enterprises transfer or liquidate passenger cars of 9 seats or under, the residual value of such a car shall be determined to be the actual historical cost minus (-) the accumulated depreciation of the fixed asset under the regulations on management, use and depreciation of fixed assets by the time of the transfer or liquidation.

Example 8: Enterprise A buys a car of under 9 seats with the historical cost of VND 6 billion. It liquidates the car after making one-year depreciation. The depreciation amount is VND 1 billion according to regulations on management, use and depreciation of fixed assets (the depreciation period is 6 years according to regulations on fixed asset depreciation). The depreciation amount to be included in deductible expenses under tax policy is VND 1.6 billion/6 years = VND 267 million. Enterprise A liquidates the car for VND 5 billion.

Income from the car liquidation = VND 5 billion - (VND 6 billion - VND 1 billion) = VND 0

- For land-attached works used for production and business and other purposes, the depreciation of the value of these works corresponding to the area used for other purposes may not be included in deductible expenses.

For land-attached works such as office buildings, workshops and stores used for production and business activities of enterprises, enterprises may include their depreciation in deductible expenses for determining taxable income according to the rate of depreciation and the period of use of fixed assets under the Ministry of Finance’s current regulations applicable to these works if they meet the following conditions:

+ Having a land use rights certificate bearing the name of the enterprise (if the land is owned by the enterprise), or a land lease or borrowing contract between the enterprise and the land owner, with the enterprise’s representative taking responsibility before law for the accuracy of the contract (if the land is leased or borrowed).

+ Having an invoice of payment for the handed-over construction volume enclosed with the construction contract, contract liquidation document and financial settlement of the construction value bearing the name, address and tax identification number of the enterprise.

+ The work is managed, monitored and cost-accounted according to current regulations on management of fixed assets.

- In case fixed assets owned by enterprises and used for production and business are temporarily left unused for under 9 months due to seasonal production or temporarily left unused for repair or relocation or periodic maintenance for under 12 months, then they are used again for production and business activities, enterprises may depreciate these assets during that temporary non-operation period and include the depreciation expense in deductible expenses for determining taxable income.

Enterprises shall keep sufficient dossiers and provide them and the reason for the temporary non-operation of fixed assets upon request of tax agencies.

- Long-term land use rights may not be depreciated and amortized to deductible expenses for determining taxable income. For termed land use rights, if there are sufficient invoices and documents, the legally established procedures are complied with, and the land is used for business and production activities, they may be amortized to deductible expenses during the land use term specified in the land use rights certificates (including the case of temporary non-operation for repair or new construction).

In case an enterprise purchases tangible fixed assets being houses or architectural objects associated with long-term land use rights, the value of these land use rights shall be separated and recorded as intangible fixed asset. The historical cost of these tangible fixed assets is the actual purchase price plus (+) expenses directly related to the putting of these assets to use. The value of land use rights is the contractual purchase price of real estate (assets) matching the market price but not lower than the provincial-level People’s Committee-determined land price effective at the time of asset purchase. In case the value of these tangible fixed assets cannot be separated from the value of their associated land use rights, the value of land use rights shall be determined based on the provincial-level People’s Committee-determined land price effective at the time of asset purchase.

2.3. Expenses for raw materials, materials, fuel, energy and goods in excess of the state-set limits.

2.4. Expenses for the purchase of goods and services without invoices for which enterprises are allowed to make a list of purchased goods and services according to form No. 01/TNDN enclosed with Circular No. 78/2014/TT-BTC, but they fail to make such a list attached with payment documents issued for sellers and service providers in the following cases:

- Purchase of agricultural, forest and aquatic products directly from their producers or catchers;

- Purchase of hand-made products of jute, rush, bamboo, leaves, rattan, straw, coconut husk, coconut shell or raw materials from agricultural products directly from their producers who are not traders;

- Purchase of soil, rock, sand and gravel directly from exploiting households and individuals;

- Purchase of waste materials from people who directly collect them;

- Purchase of assets and services directly from households and individuals that are not traders;

- Purchase of goods and services of business individuals and households (excluding the above cases) that record a turnover below the value-added tax-liable level (VND 100 million/year).

Lists of purchased goods and services shall be signed by at-law representatives or authorized persons of enterprises, who shall take responsibility before law for the accuracy and truthfulness of these lists. Enterprises purchasing goods and services may make such lists and include their expenses in deductible expenses, which are not required to have non-cash payment documents. If the purchase prices of goods and services on a list are higher than the market prices at the time of goods purchase, tax agencies may base themselves on market prices at the time of purchase of goods or services of the same or similar type available on the market to re-determine the prices for re-calculating deductible expenses for determining taxable income.

2.5. Expenses for lease of assets from individuals without sufficient documents as follows:

- In case an enterprise leases assets from an individual, documents for determining deductible expenses include the lease contract and rent payment document.

- In case an enterprise leases assets from an individual and there is an agreement in the lease contract that the enterprise shall pay tax on such individual’s behalf, documents for determining deductible expenses include the lease contract, rent payment document, and document of tax payment on the individual’s behalf.

- In case an enterprise leases assets from an individual and there is an agreement in the lease contract that the rent is exclusive of tax (value-added tax or personal income tax) and that the enterprise shall pay tax on such individual’s behalf, the enterprise may include the total amount of rent, including the tax amount paid on such individual’s behalf, in deductible expenses.

2.6. Salaries, wages and bonuses paid to employees in one of the following cases:

a/ Salaries, wages and other amounts payable to employees that enterprises have accounted into production and business expenses in the period but have not paid such amounts or have no payment documents as required by law;

b/ Salaries, bonuses and life insurance premiums for employees for which the conditions for payment and levels of these amounts are not specified in one of the following documents: labor contract; collective labor agreement; financial regulations of the company, corporation or group; reward regulations issued by the chairperson of the Board of Directors, general director or director under the financial regulations of the company or corporation;

- In case the labor contract signed between an enterprise and a foreigner states that schooling expenses for children of the foreigner to acquire preschool to higher secondary education in Vietnam shall be paid by the enterprise, which are of salary or wage nature and have adequate invoices and documents according to regulations, these expenses may be included in deductible expenses for determining taxable income.

- In case the labor contract signed between an enterprise and an employee states that housing expenses shall be paid by the enterprise, which are of salary or wage nature and have adequate invoices and documents according to regulations, these expenses may be included in deductible expenses for determining taxable income.

- In case the contract signed between a Vietnamese enterprise and a foreign enterprise states that the Vietnamese enterprise shall pay accommodation expenses for foreign specialists during their working period in Vietnam, the house rent paid for foreign specialists working in Vietnam by the Vietnamese enterprise may be included in deductible expenses for determining taxable income.

c/ Salaries, wages and allowances payable to employees that enterprises have not yet paid by the deadline for submission of annual tax finalization dossiers, unless enterprises have a provision fund to supplement the wage fund of the subsequent year. The annual level of provision shall be decided by enterprises but must not exceed 17% of the implemented wage fund.

The implemented wage fund is the total of actually paid wages of that finalization year up to the deadline for submission of finalization dossiers as prescribed (excluding the amount deducted for the wage provision fund of the previous year which is spent in the tax finalization year).

The wage provision must ensure that enterprises do not suffer any loss after making deductions for setting up such provision; if suffering a loss, enterprises may not fully deduct 17% for this provision.

If, in a year, an enterprise deducts a wage provision fund, but, after six months from the last day of the fiscal year, it has not used or fully used this fund, the enterprise shall record a decrease in the following year’s expenses.

Example 9: When submitting the 2014 tax finalization dossier, enterprise A deducted a wage provision fund of VND 10 billion. By June 30, 2015 (if the enterprise applies the tax period according to calendar year), it has just spent VND 7 billion of the wage provision fund of 2014. Enterprise A shall record a decrease of VND 3 billion (10 billion - 7 billion) in wage expense of the following year (2015). When preparing the tax finalization dossier of 2015, if the enterprise wishes to make deduction, it may continue to deduct the wage provision fund as prescribed.

d/ Salaries and wages of owners of private enterprises or single-member limited liability companies (owned by an individual); remuneration paid to the founding members, members of the Members’ Council or Board of Directors who are not directly involved in administering production and business activities.

2.7. Expenses in kind for outfits of employees without any invoices and documents; expenses in cash for outfits of employees which exceed VND 5 (five) million/person/year.

In case an enterprise pays an expense both in cash and in kind for outfits of employees, for being included in deductible expenses for determining taxable income, the maximum level of this expense in cash must not exceed VND 5 (five) million/person/year, and the expense in kind must have invoices and documents.

For particular business lines, this expense must comply with specific regulations of the Ministry of Finance.

2.8. Expenses for rewarding innovations and improvements for which enterprises have no specific relevant regulations and have no council for test and acceptance of innovations and improvements.

2.9. Travel allowances for leaves at variance with the Labor Code.

If having adequate lawful invoices and documents as prescribed, working trip allowances and travel and accommodation expenses for employees going on working trips may be included in deductible expenses for determining taxable income. If the enterprise pays for the travel, accommodation and allowances of employees going on working trips in accordance with its financial regulations or internal rules, it may include such amounts in deductible expenses.

In case an enterprise sends an employee on a working trip (at home or overseas), every payment of VND 20 million or higher and payment for air fares that are made with personal bank cards may be considered non-cash payments and included in deductible expenses if the conditions below are fully satisfied:

- There are proper invoices and documents issued by the goods supplier or service provider.

- There is a decision or document of the enterprise assigning the employee to go on a working trip.

- The enterprise’s financial regulations or internal rules allow its employees to pay working trip expenses and air fares with their personal bank cards and get reimbursed by the enterprise.

In case an enterprise has purchased air fares through an e-commerce website for its employees to go on working trips to serve its production and business activities, documents used as the basis for including such payment in deductible expenses are electronic air tickets, boarding passes and non-cash payment documents of the enterprise. If an enterprise cannot collect boarding passes from its employees, documents used as the basis for including such payment in deductible expenses are electronic air tickets, decisions or documents assigning the employees to go on working trips, and non-cash payment documents of the enterprise.

2.10. The following deductible expenses which are paid to wrong subjects, for improper purposes, or in excess of prescribed levels:

a/ Additional expenses for female workers which are allowed to be included in deductible expenses, including:

- Expenses for vocational retraining for female workers whose current jobs are no longer suitable and who must change to do other jobs according to the development plans of enterprises.

These expenses include training fees (if any) + difference in salary grade (guaranteeing 100% wages for trainees).

- Salaries and allowances (if any) for teachers in crèches and kindergartens organized and managed by enterprises.

- Expenses for extra medical check-ups in the year, such as examination of occupational, chronic and gynecological diseases for female workers and employees.

- Allowances for female workers after the first or second childbirth.

- Overtime allowances for female workers who, for objective reasons, do not take leave after childbirth or have breaks for breastfeeding their babies, but stay to work for enterprises and get paid under current regulations, including the case of payment of product-based wages to female workers who still work without taking leave as prescribed.

b/ Additional expenses for ethnic minority workers which are included in deductible expenses, including training fees (if any) plus the difference in salary grade (guaranteeing 100% wage for trainees), housing, social insurance and health insurance allowances for ethnic minority workers in case they have not yet received any support from the State as prescribed.

2.11. Deductions in excess of VND 1 million/month/person for the voluntary pension fund and purchase of voluntary pension insurance for workers.

Deductions for the voluntary pension fund and purchase of voluntary pension insurance for workers allowed to be included in deductible expenses, besides not exceeding the level specified at this Point, must have their enjoyment conditions and levels written in one of the following documents: labor contract; collective labor agreement; financial regulations of the company, corporation or group; reward regulation issued by the chairperson of the Board of Directors, director general or director according to the financial regulations of the company or corporation.

Enterprises may not include in expenses payments for the above voluntary programs if they fail to fulfill all the obligations related to compulsory insurance for workers (including the case of owing compulsory insurance premiums).

2.12. Expenses for payment of unemployment allowances for workers at variance with current regulations.

2.13. Expenses for contribution to management funds for superior levels.

2.14. Contributions to various funds of (lawfully established) associations in excess of the limits set by these associations.

2.15. Electricity and water charges paid under electricity and water contracts which are directly signed between owners being households or individuals that lease out production and business locations and electricity and water suppliers without adequate documents in one of the following cases:

a/ Enterprises leasing production and business locations directly pay electricity and water charges to electricity and water suppliers without electricity and water bills and lease contracts of production and business locations;

b/ Enterprises leasing production and business locations pay electricity and water charges to the owners that lease out production and business locations without electricity and water bills consistent with the actually used volumes of electricity and water and lease contracts of production and business locations.

2.16. Expense for fixed asset leasing in excess of the rate of allocation by number of years for which the lessee has paid in advance the rental.

Example 10: Enterprise A leases fixed assets for four years and pays the rental of VND 400 million in a lump sum. The expense for fixed asset leasing accounted in annual expenses is VND 100 million. If this expense exceeds VND 100 million, the excess may not be included in reasonable expenses for determining taxable income.

For expense for repair of leased fixed assets, if the asset lease contract states that the lessee is responsible for the repair of the assets during the leasing period, such expense may be accounted in expenses or amortized to expenses for the maximum period of 3 years.

In case an enterprise pays for the procurement of assets other than fixed assets, such as expenses for the purchase and use of technical materials, patents, technology transfer licenses, trademarks, business advantages, brand use right, etc., such expenses may be amortized to business expenses for the maximum period of 3 years.

In case an enterprise contributes as capital the value of business advantages or the brand use right, such value may not be included in deductible expenses for determining taxable income.

2.17. Interests paid for production and business loans borrowed from those other than credit institutions or economic organizations in excess of 150% of the prime interest rate announced by the State Bank of Vietnam at the time of borrowing.

2.18. Interests paid for loans corresponding to the deficit of registered charter capital (or investment capital for private enterprises) according to the capital contribution schedule stated in the charter of the enterprise, even when the enterprise has commenced its production and business activities. Interests paid for loans borrowed during the investment process have been included in the value of invested assets or works.

If, during its business operation, the enterprise that has contributed sufficient charter capital pays interest on a loan for investment in another enterprise, such interest may be included in deductible expenses for determining taxable income.

Interest paid on a loan equivalent to the charter capital deficit according to the capital contribution schedule stated in the enterprise’s charter which may not be included in deductible expenses for determining taxable income shall be determined as follows:

- If the loan is smaller or equal to the charter capital deficit, the whole interest may not be deductible.

- If the loan is higher than the charter capital deficit according to capital contribution schedule:

+ If the enterprise has multiple loans, such interest is the ratio (%) of the charter capital deficit to total loans multiplied by (x) total interest.

+ If the enterprise has a single loan, such interest is the charter capital deficit multiplied by (x) the interest rate multiplied by (x) the time for paying the charter capital deficit.

(Loan interests must comply with Point 2.17 of this Article).

2.19. Deduction and use of provisions for inventory devaluation, losses in financial investments, bad receivables, and warranty of products, goods and construction and installation works, and professional risk provisions of price appraisal enterprises and independent audit service enterprises at variance with the Ministry of Finance’s guidance on deduction of provisions.

2.20. Pre-subtracted periodic or cyclic expenses that are not used or fully used at the end of the period or cycle.

Pre-subtracted expenses include pre-subtracted expenses for cyclic overhaul of fixed assets, pre-subtracted expenses for activities from which turnover has been accounted but the contractual obligation has not yet been fulfilled (even for enterprises leasing their assets or providing services for many years and collecting money in advance, and having recorded all of such money in the turnover of the year of money collection) and other pre-subtracted expenses.

If the turnover for calculating enterprise income tax has been accounted but all expenses have not yet fully arisen, production and business enterprises may include in deductible expenses according to regulations the expenses corresponding to the recorded turnover for determining taxable income. Upon completing the contract, enterprises shall calculate the exact actual expenses based on lawful invoices and documents to increase (if the actual expenses are higher than the pre-subtracted expenses) or reduce (if the actual expenses are lower than the pre-subtracted expenses) the expenses in the tax period when the contract is completed.

For cyclic repair of fixed assets, enterprises may pre-subtract estimated repair expenses in annual expenses. If the actual repair expense is higher than the pre-subtracted amount, the enterprise may additionally include the difference in deductible expenses.

2.21. Losses due to exchange rate differences resulting from the re-valuation of monetary items of foreign currency origin at the end of the tax period, including exchange rate differences due to the re-valuation of the year-end balance, covering cash, deposits, money in transfer and receivables of foreign currency origin (except losses due to exchange rate differences resulting from the re-valuation of payables of foreign currency origin at the end of the tax period).

In the period of construction investment to form fixed assets of newly established enterprises which have not yet operated, exchange rate differences arising upon payment of monetary items of foreign currency origin for construction investment and exchange rate differences resulting from the re-valuation of payables of foreign currency origin at the end of the fiscal year shall be reflected separately. When the fixed assets are completely constructed and put to use, exchange rate differences arising in the period of construction investment (after clearing between positive and negative differences) shall be gradually distributed to the turnover from financial activities or to financial expenses within 5 years from the time the works are put to operation.

In the period of production and business, including construction investment to form fixed assets of operating enterprises, exchange rate differences arising from foreign-currency transactions of monetary items of foreign currency origin shall be accounted in the turnover from financial activities or in financial expenses in the fiscal year.

For receivables and loans of foreign currency origin arising in the period, the exchange rate difference allowed to be included in deductible expenses is the difference between the exchange rate at the time of debt or loan recovery and the exchange rate at the time of recording the receivable or initial loan.

2.22. Expenses for education funding (including funding for vocational education) not for the subjects specified at Item a of this Point or without documents to prove the funding mentioned at Item b below:

a/ Funding for education includes funding for public, people-founded and private schools within the national education system in accordance with the education law, which is not for contributing capital to or purchasing shares in the schools; funding physical foundations to serve teaching, learning and school activities; funding regular school activities; funding scholarships for students of  general education institutions, vocational education institutions and higher education institutions defined in the Education Law (which are directly granted to students or through education institutions, or through agencies and organizations with the fundraising function as prescribed by law); funding contests on subjects taught in schools among students; and funding the creation of education promotion funds in accordance with the education law;

b/ Documents to prove education funding include the written certification of funding signed by representatives of the funding enterprise, lawful education institution as the beneficiary, and students (or agency and organization with the fundraising function) who are beneficiaries (made according to form No. 03/TNDN issued together with Circular No. 78/2014/TT-BTC), enclosed with invoices and documents of goods purchase (for in-kind funding) or payment documents (for cash funding).

2.23. Expenses for health care funding not for the subjects specified at Item a of this Point or without documents to prove the funding mentioned at Item b below:

a/ Funding for health care includes funding for health facilities established under the health law which is not for contributing capital to or purchasing shares of those health facilities; funding for medical equipment, medical instruments and medicines; funding for regular activities of hospitals and health centers; funding in cash for patients through agencies and organizations with the fundraising function as prescribed by law;

b/ Documents to prove health care funding include the written certification of funding signed by representatives of the funding enterprise and beneficiary (or agency and organization with the fundraising function), made according to form No. 04/TNDN issued together with Circular No. 78/2014/TT-BTC, enclosed with invoices and documents of goods purchase (for in-kind funding) or payment documents (for cash funding).

2.24. Expenses for funding the remediation of consequences of natural disasters not for the subjects specified at Item a of this Point or without documents to prove the funding mentioned at Item b below:

a/ Funding for the remediation of consequences of natural disasters includes funding in cash or in kind to overcome consequences of natural disasters provided directly to lawfully established and operating organizations and victims of natural disasters through agencies and organizations with the fundraising function as prescribed by law;

b/ Documents to prove funding for the remediation of consequences of natural disasters include written certifications of funding signed by representatives of the funding enterprise and beneficiary that is affected by natural disaster (or agency or organization with the fundraising function), made according to form No. 05/TNDN issued with Circular No. 78/2014/TT-BTC, enclosed with invoices and documents of goods purchase (for in-kind funding) or payment documents (for cash funding).

2.25. Expenses for funding the building of houses for the poor not for the subjects specified at Item a of this Point; expenses for funding the building of houses for the poor or houses of great solidarity in accordance with law without documents to prove the funding mentioned at Item b below:

a/ Beneficiaries are poor households as prescribed by the Prime Minister. Funding includes funding in cash or in kind to build houses for poor households directly or through an agency or organization with the fundraising function as prescribed by law;

b/ Documents to prove funding for building houses for the poor include the written certification of funding signed by representatives of the funding enterprise and beneficiaries (or the agency or organization with the fundraising function), made according to form No. 06/TNDN issued together with Circular No. 78/2014/TT-BTC); written certification of poor households issued by the local administration (for funding the building of houses for the poor); and invoices and documents on goods purchase (for in-kind funding) or payment documents (for cash funding).

If the beneficiary is an agency or organization with the fundraising function, documents include the written certification of funding signed by representatives of the funding enterprise and the beneficiary being the agency or organization with the fundraising function; and invoices and documents for goods purchase (for in-kind funding) or payment documents (for cash funding).

2.26. Expenses for funding scientific research at variance with regulations; expenses for funding policy beneficiaries at variance with law; expenses for funding outside the state program for localities in geographical areas with extremely difficult socio-economic conditions.

State program means a program determined by the Government and implemented in localities in geographical areas with extremely difficult socio-economic conditions (including funding for the building of new bridges in geographical areas with extremely difficult socio-economic conditions under a scheme approved by a competent authority).

Expenses for funding policy beneficiaries must comply with relevant laws.

Documents to prove funding under the state program for localities in geographical areas with extremely difficult socio-economic conditions; funding for the building of new bridges in geographical areas with extremely difficult socio-economic conditions under a scheme approved by a competent authority; and funding policy beneficiaries must comply with relevant laws and include the written certification of funding signed by representatives of the funding enterprise and beneficiaries (or agency or organization with the fundraising function), made according to form No. 07/TNDN issued together with Circular No. 78/2014/TT-BTC), and invoices and documents on goods purchase (for in-kind funding) or payment documents (for cash funding).

Scientific research and procedures and dossiers for funding scientific research must comply with the Law on Science and Technology and relevant guiding legal documents.

2.27. Business management expenses allocated by overseas companies to their permanent establishments in Vietnam in excess of the expense level, which shall be calculated by the following formula:

Business management expenses of the overseas company allocated to its permanent establishment in Vietnam shall be counted only from the time such establishment is founded.

The basis for determining expenses and turnover of the overseas company is the financial statement of the company audited by an independent auditing firm which specifies the overseas company’s turnover and management expenses and the management expenses allocated by the overseas company to its permanent establishment in Vietnam.

If the permanent establishment of an overseas company in Vietnam has neither implemented regulations on accounting, invoices and documents nor paid tax by the method of declaration, it may not include in reasonable expenses its business management expense allocated by the overseas company.

2.28. Expenses which are offset by other funding sources; expenses paid from the science and technology development funds of enterprises; expenses for buying golf membership cards and for golf playing.

2.29. Expenses related to the hiring of management for the business of prize-winning electronic games or casino in excess of 4% of the turnover from such business.

2.30. Expenses not corresponding to taxed turnover, excluding:

- Actual expenses for HIV/AIDS prevention and control at the enterprises’ workplace, including expenses for training HIV/AIDS prevention and control officers of enterprises, expenses for HIV/AIDS prevention and control communication among enterprises’ workers, expenses for HIV counseling, examination and testing, and expenses in support of enterprises’ workers who are HIV-infected.

- Actual expenses for the performance of national defense and security education tasks, training and activities of militia and self-defense forces and other national defense and security tasks as prescribed by relevant laws.

- Actual expenses in support of Party and socio-political organizations in enterprises.

- Expenses for vocational education and training for workers, including:

+ Payment for trainers, learning materials, equipment serving vocational education, materials for practicing, and other supports for trainees.

+ Expenses for training workers recruited by enterprises.

- Direct expenses on the workers’ welfare: expenses for funerals and weddings of workers and their relatives; expenses on summer holidays or medical treatment support; expenses for refresher training at training institutions; expenses for supporting employees’ families affected by natural disasters, enemy sabotage, accidents and illness; expenses for rewarding workers’ children for their study achievements; expenses for supporting workers’ traveling during holidays; payment for accident insurance, health insurance, and other voluntary insurance for workers (except life insurance mentioned at Point 2.6, and voluntary pension insurance mentioned at Point 2.11, of this Article), and other welfare expenses. The total welfare expenses must not exceed the average actually implemented one month’s wage in the tax year of the enterprise.

The average actually implemented one month’s wage is the implemented wage fund in a year divided (:) by 12 months. For an enterprise that has operated for under 12 months, the average actually implemented one month’s salary is the wage fund implemented in the year divided (:) by the number of months of operation.

The implemented wage fund is the total wage actually paid in the year of finalization up to the deadline for submitting the annual finalization dossier (excluding the provision for the wage fund of the previous year spent in the tax finalization year).

- Other particular expenses suitable to each sector or field according to guiding documents of the Ministry of Finance.

2.31. Expenses for capital construction investment to form fixed assets.

Upon commencing business and production, enterprises that have not yet generated any turnover but have to regularly pay expenses to maintain their production and business activities (other than expenses for construction investment to form fixed assets) and meet the prescribed conditions on these expenses may include these expenses in deductible expenses for determining taxable income.

If, in the stage of investment, enterprises pay expenses for loans, they may include these expenses in the investment value. If, in the stage of capital construction investment, enterprises have to pay expenses for loans and earn revenues from interests on deposits, they may offset these expenses against these revenues and record the remaining difference as decrease in the investment value.

2.32. Expenses in support of localities, mass organizations and social organizations; expenses for charity (except expenses for funding education, health care, remediation of consequences of natural disasters and building of houses for the poor and houses of great solidarity; funding scientific research and funding policy beneficiaries under law, and funding under the state program for localities in geographical areas with extremely difficult socio-economic conditions mentioned at Points 2.22, 2.23, 2.24, 2.25 and 2.26, Clause 2 of this Article).

2.33. Expenses directly related to the issuance of stocks (excluding stocks being payables) and payment of dividends (excluding dividends of stocks being payables), and purchase and sale of treasury shares, and other expenses directly related to the increase and decrease of equity of enterprises.

2.34. Payment for the right to exploit minerals in excess of the actual amount arising in the year.

In case of lump-sum payment, the actual amount arising in the year shall be determined based on the total payment for the right to exploit minerals distributed over the remaining years. In case of annual payment, the actual payment arising in the year is the amount for the right to exploit minerals of the year paid by the enterprise to the state budget.

2.35. Expenses for insurance business, lottery business, securities business and a number of other specific business activities which do not comply with separate written guidelines of the Ministry of Finance.

2.36. Fines paid for administrative violations, including violations of traffic safety law, violations of regulations on business registration, violations of regulations on accounting and statistics, and violations of tax laws, including tax late-payment interests in accordance with the Law on Tax Administration, and fines for other administrative violations as prescribed by law.

2.37. Input value-added tax which has been credited or refunded; input value-added tax on fixed assets which are cars with 9 seats or under in excess of the credit level specified in legal documents on value-added tax; enterprise income tax, except the case in which enterprises pay enterprise income tax for foreign contractors as agreed in the contracts with foreign contractors or foreign subcontractors that incomes received by foreign contractors or foreign subcontractors are exclusive of enterprise income tax; and personal income tax, except the case in which labor contracts signed by enterprises state that salaries or wages payable to workers are exclusive of personal income tax.”

Article 5. To amend and supplement a number of provisions of Article 7 of Circular No. 78/2014/TT-BTC as follows:

1. To amend and supplement the first paragraph of Article 7 as follows:

“Article 7. Other incomes

Other incomes include the following incomes:”

2. To amend and supplement Clause 9, Article 7 as follows:

“9. Income from exchange rate difference, which shall be determined specifically as follows:

If an enterprise has exchange rate differences arising in a tax year and resulting from the re-valuation of payables of foreign currency origin at the end of the fiscal year:

- The exchange rate difference arising in the period and directly related to the turnover from and expenses for the enterprise’s main production and business activities shall be accounted as an expense for or income from these activities. The exchange rate difference arising in the period and not directly related to the turnover from and expenses for the enterprise’s main production and business activities shall be accounted as a financial expense if it is a loss, or as other income if it is a profit, for determining taxable income.     

- Exchange rate difference profits resulting from the re-valuation of foreign-currency payables at the end of the fiscal year may be cleared against exchange rate difference losses resulting from such re-valuation. After the clearing, exchange rate difference profits or losses directly related to the turnover from or expenses for the enterprise’s main production and business activities shall be accounted as income from or expense for such activities. Exchange rate difference profits or losses not directly related to the turnover from or expenses for the enterprise’s main production and business activities shall be accounted as other income or financial expense for determining taxable income.

For receivables and loans of foreign currency origin arising in the period, the exchange rate difference accounted as deductible expense or income is the difference between the exchange rates at the time of recovery of the receivables or loans and at the time of initial recognition thereof.

The above exchange rate differences exclude foreign exchange rate differences resulting from the re-valuation of the year-end balance in cash, deposits, money in transfer and receivables of foreign currency origin.”

3. To replace Clause 22, Article 7 with the following new Clause 22:

“22. In case an enterprise admits a new capital-contributing member as prescribed by law and the amount contributed by this member is larger than the value of his/her/its contribution to the total charter capital of the enterprise:

If this positive difference is identified as belonging to the enterprise to be added to its business capital, it shall not be included in taxable income for calculating enterprise income tax of the enterprise.

If this positive difference is divided to the existing capital-contributing members, it is the income of these members.”

 Article 6. To amend and supplement a number of provisions of Article 8 of Circular No. 78/2014/TT-BTC (amended and supplemented in Article 4 of Circular No. 151/2014/TT-BTC) as follows:

1. To amend and supplement Clause 1a, Article 8 of Circular No. 78/2014/TT-BTC as follows:

“1. Income from cultivation, husbandry, aquaculture, processing of agricultural and aquatic products and salt production of cooperatives; income of cooperatives engaged in agriculture, forestry, fisheries and salt production in geographical areas with difficult socio-economic conditions or geographical areas with extremely difficult socio-economic conditions; income of enterprises from cultivation, husbandry, aquaculture and processing of agricultural and aquatic products in geographical areas with extremely difficult socio-economic conditions; and income from fishing activities.

a/ Incomes from cultivation (including products of planted forests), husbandry, aquaculture, and processing of agricultural and aquatic products of cooperatives and enterprises eligible for tax incentives (including tax rate incentives and tax exemption or reduction) regulated in this Circular are incomes from products of cultivation, husbandry, aquaculture and processing of agricultural and aquatic products (including those purchased for processing) by enterprises and cooperatives themselves.

To be eligible for tax incentives (including preferential tax rate and tax exemption and reduction) prescribed in this Circular, incomes from products and goods processed from agricultural and aquatic products must fully meet the following conditions:

- The ratio of the value of materials being agricultural and aquatic products to the cost of production of goods and products (goods and product production cost) is at least 30%.

- Processed products and goods are not liable to excise tax, except the cases decided by the Prime Minister at the proposal of the Ministry of Finance.

Enterprises shall separately determine incomes from products and goods processed from agricultural and aquatic products in order to enjoy enterprise income tax incentives.

Tax-exempt incomes specified in this Clause include income from the liquidation of products of cultivation, husbandry and aquaculture (except liquidation of rubber trees), and income from the sale of waste materials and discarded products related to products of cultivation, husbandry, aquaculture and to the processing of agricultural and aquatic products.

Products of cultivation, husbandry and aquaculture of cooperatives and enterprises shall be identified according to the codes of level-1 economic sectors of agriculture, forestry and fisheries as prescribed in Vietnam’s system of economic sectors.”

2. To amend and supplement Clause 9, Article 8 of Circular No. 78/2014/TT-BTC (amended and supplemented in Article 4 of Circular No. 151/2014/TT-BTC) as follows:

“9. Incomes from the performance of state-assigned tasks of the Vietnam Development Bank in development investment credit and export credit activities; incomes from the extension of credit to the poor and other policy beneficiaries by the Vietnam Bank for Social Policies; incomes of the Vietnam Asset Management Company; incomes from revenue-generating activities in the performance of state-assigned tasks of state-owned financial funds, such as the Vietnam Social Security Fund, the Deposit Insurance of Vietnam, the Health Insurance Fund, the Job Training Support Fund, the Overseas Employment Support Fund of the Ministry of Labor, War Invalids and Social Affairs, the Farmer Support Fund, the Vietnam Legal Aid Fund, the Public-Utility Telecommunications Fund, Local Development Investment Funds, the Vietnam Environmental Protection Fund, the Credit Guarantee Fund for Small- and Medium-Sized Enterprises, the Cooperative Development Support Fund, the Poor Women Support Fund, the Overseas Citizen and Legal Entity Protection Fund, the Housing Development Fund, the Fund for Development of Small- and Medium-Sized Enterprises, the National Science and Technology Development Fund, the National Technology Renewal Fund, the Fund for Capital Support for Self-Employed Poor Workers, the Land Development Fund, and other state funds operating for not-for-profit purposes as prescribed or decided by the Government or the Prime Minister which are established and operate in accordance with law.

Units that earn incomes other than those from revenue-generating activities in the performance of state-assigned tasks shall calculate and pay tax under regulations.”

3. To add the following Clause 12 to Article 8 of Circular No. 78/2014/TT-BTC:

“12. Incomes of bailiff offices (except incomes from activities other than bailiff activities) during their pilot operation under the law on enforcement of civil judgments.

Bailiff offices and bailiff activities must comply with relevant legal documents.”

Article 7. To amend and supplement Clause 3, Article 9 of Circular No. 78/2014/TT-BTC as follows:

“3. An enterprise undergoing transformation, merger, consolidation, division, split-up, dissolution or bankruptcy shall carry out tax finalization with the tax agency by the time the decision on transformation, merger, consolidation, division, split-up, dissolution or bankruptcy is issued (unless the tax finalization is not required under regulations). Losses which arise before the enterprise is transformed, merged or consolidated shall be monitored in detail in the year they arise and cleared against the enterprise’s incomes of that year after transformation, merger or consolidation and its incomes of subsequent years, which must not exceed 5 consecutive years from the year following the year they arise.

The losses which arise before the enterprise is divided or split up into other enterprises and are still in the prescribed loss-carry forward period shall be distributed to these enterprises in proportion to their ratios of equity.”

Article 8. To amend and supplement the second em rule, Point a, Clause 2, Article 14 of Circular No. 78/2014/TT-BTC as follows:

“- The purchasing price of the transferred capital amount shall be determined on a case-by-case basis as follows:

+ In case of transfer of contributed capital for enterprise establishment, it is the value of the contributed capital amount accumulated by the time of transfer stated in accounting records, dossiers and documents and certified by parties investing in the enterprise or to the business cooperation contract, or shall be based on audit results provided by an independent auditing firm, for wholly foreign-owned enterprises.

+ In case of redemption of contributed capital, it is the value of the capital amount at the time of redemption. The purchasing price shall be determined based on the redemption contract and payment documents.

For an enterprise that practices cost accounting in a foreign currency under regulations on accounting regime, if it transfers the contributed capital in such foreign currency, the transfer price and purchasing price of the transferred capital amount shall be determined in such foreign currency. For an enterprise that practices cost accounting in Vietnam dong, if it transfers the contributed capital in a foreign currency, the transfer price shall be determined in Vietnam dong at the purchase exchange rate applied at the time of transfer by the commercial bank where the enterprise opens its account.”

Article 9. To amend and supplement Clause 3, Article 17 of Circular No. 78/2014/TT-BTC as follows:

“3. Determination of payable enterprise income tax amounts:

The amount of enterprise income tax on real estate transfer in a tax period is the taxed income from real estate transfer multiplied by (x) the tax rate of 22%.

Income from real estate transfer shall be separately determined for tax declaration and payment and is ineligible for enterprise income tax incentives.

Dossiers for declaration and payment and documents of payment of tax on incomes from real estate transfer in localities where the transferred real estates are located shall be used for carrying out tax finalization procedures in localities where the enterprise is headquartered.”

Article 10. To amend and supplement a number of provisions of Article 18 of Circular No. 78/2014/TT-BTC (amended and supplemented in Article 5 of Circular No. 151/2014/TT-BTC) as follows:

1. To amend and supplement Clause 3, Article 18 of Circular No. 78/2014/TT-BTC as follows:

“3. Enterprise income tax incentives and the tax rate of 20% are not applied to enterprises (even enterprises subject to the tax rate of 20% as prescribed in Clause 2, Article 11 of Circular No. 78/2014/TT-BTC) that have the following incomes:

a/ Income from transfer of capital or transfer of the capital contribution right; income from real estate transfer (except income from social housing investment and trading specified at Point d, Clause 3, Article 19 of Circular No. 78/2014/TT-BTC); income from transfer of investment projects, the right to participate in investment projects or the right to explore and exploit minerals; and income earned from production or business activities outside Vietnam;

b/ Income from the prospecting, exploration and exploitation of petroleum and other precious and rare natural resources and income from mineral exploitation activities;

c/ Income from the provision of excise tax-liable services in accordance with the Law on Excise Tax.”

2. To amend and supplement Clause 4, Article 18 of Circular No. 78/2014/TT-BTC as follows:

“4. For enterprises having investment projects eligible for enterprise income tax incentives because of operating in the fields or located in geographical areas eligible for investment incentives, the incentives shall be determined as follows:

a/ For enterprises having investment projects eligible for enterprise income tax incentives because of operating in the fields eligible for investment incentives, their incomes from these fields, incomes from the liquidation of waste materials and discarded products in these fields, exchange rate differences directly related to turnover from and expenses for these fields, demand deposit interests and other directly related incomes are also eligible for enterprise income tax incentives.

b/ For enterprises having investment projects eligible for enterprise income tax incentives because of operating in geographical areas eligible for investment incentives (including industrial parks, economic zones and hi-tech parks), their incomes eligible for enterprise income tax incentives include all incomes earned from production and business activities in such geographical areas, except the incomes specified at Points a, b and c, Clause 1 of this Article.

- For enterprises having investment projects to provide transportation services eligible for enterprise income tax incentives because of operating in geographical areas eligible for investment incentives (including industrial parks, economic zones and hi-tech parks), they will be entitled to enterprise income tax incentives for the incomes from transportation services if the projects are established in geographical areas eligible for investment incentives and the place of departure or destination of such transportation services is within such localities.

Example 15a: In 2015, a new enterprise in Son La province (a geographical area with extremely difficult socio-economic conditions) provides transportation services. The enterprise is entitled to enterprise income tax incentives because it is located in the geographical area with extremely difficult socio-economic conditions.

In 2015, the enterprise has many buses running on fixed routes (from Son La to Hanoi city and vice versa and from Son La to Ha Long and vice versa) and contractual buses (running from Son La to Da Nang city and vice versa, from Hanoi city to Da Nang city and vice versa, and from Bac Ninh city to Son La).

The enterprise shall determine its enterprise income tax incentives for incomes from transportation services based on the geographical area where the investment project is established (in this case Son La province - a geographical area with extremely difficult socio-economic conditions) and the place of departure or destination of transportation services in this geographical area (Son La province), specifically as follows:

+ Income from transportation services for the following bus routes will be eligible for enterprise income tax incentives because the place of departure or destination is in Son La province: buses running on fixed routes (from Son La to Hanoi city and vice versa and from Son La to Ha Long city and vice versa) and contractual buses (running from Son La to Da Nang city and vice versa and from Bac Ninh city to Son La).

+ Income from transportation services for the following bus routes will not be eligible for enterprise income tax incentives because the place of departure or destination is outside Son La province: buses running from Hanoi city to Da Nang city and vice versa.

- For enterprises having investment projects eligible for enterprise income tax incentives because of operating in geographical areas eligible for investment incentives that earn an income outside the geographical areas where the projects are implemented:

(i) If this income is earned in the geographical area ineligible for investment incentives, it will not be eligible for enterprise income tax incentives under the condition on geographical areas eligible for investment incentives.

(ii) If this income is earned in the geographical area eligible for investment incentives, it will be eligible for enterprise income tax incentives under the condition on geographical areas eligible for investment incentives. Enterprise income tax incentives for this income shall be determined depending on each geographical area and the duration and levels of incentives applicable in the geographical area where the investment project is implemented.

* Example 15b: Enterprise income tax incentives for (production) enterprises located in geographical areas eligible for investment incentives:

In 2015, an enterprise has a new production project in Ha Giang province (a geographical area with extremely difficult socio-economic conditions). The enterprise is entitled to enterprise income tax incentives because this project is located in a geographical area with extremely difficult socio-economic conditions.

In 2015, the enterprise commences production and sells products in Ha Giang province (a geographical area with extremely difficult socio-economic conditions) and adjacent provinces (outside Ha Giang province) such as Cao Bang province (a geographical area with extremely difficult socio-economic conditions), Lao Cai city (a geographical area with difficult socio-economic conditions, and Hanoi city (a geographical area ineligible for investment incentives). As the products are produced in Ha Giang province (where the investment project is implemented), so income from the products sold in Ha Giang province and adjacent provinces is eligible for enterprise income tax incentives applicable to the province.

* Example 15c: Enterprise income tax incentives for (construction) enterprises located in geographical areas eligible for investment incentives:

In 2015, a new construction enterprise is established in Ha Giang province (a geographical area with extremely difficult socio-economic conditions). It is entitled to enterprise income tax incentives because it is located in a geographical area with extremely difficult socio-economic conditions.

In 2015, the enterprise carries out construction activities in Ha Giang province and also in adjacent provinces including Cao Bang province (a geographical area with extremely difficult socio-economic conditions), Lao Cai city (a geographical area with difficult socio-economic conditions), and Hanoi city (a geographical area ineligible for investment incentives). As the construction activities are carried out in Ha Giang province, so incomes from these activities are eligible for enterprise income tax incentives applicable to Ha Giang province. For incomes from construction activities carried out in other localities, enterprise income tax incentives shall be determined as follows:

+ Income earned in Cao Bang province (a geographical area with extremely difficult socio-economic conditions) is eligible for enterprise income tax incentives at the rate and for the remaining duration eligible for incentives applicable to the enterprise.

+ Income earned in Lao Cai city (a geographical area with difficult socio-economic conditions) is eligible for enterprise income tax incentives at the rate and for the remaining duration eligible for incentives applicable to the enterprise in Lao Cai city.

+ Income earned in Hanoi city (a geographical area ineligible for investment incentives) is ineligible for enterprise income tax incentives.

* Example 15d: Enterprise income tax incentives for (service) enterprises located in geographical areas eligible for investment incentives:

In 2015, a new service enterprise is established in Ha Giang province (a geographical area with extremely difficult socio-economic conditions). It is entitled to enterprise income tax incentives because it is located in a geographical area with extremely difficult socio-economic conditions.

In 2015, the enterprise provides services in Ha Giang province and also in adjacent provinces including Cao Bang province (a geographical area with extremely difficult socio-economic conditions), Lao Cai city (a geographical area with difficult socio-economic conditions), and Hanoi city (a geographical area ineligible for investment incentives). As service activities are carried out in Ha Giang province, so incomes from these activities are eligible for enterprise income tax incentives applicable to Ha Giang province. For incomes from service activities carried out in other localities, enterprise income tax incentives shall be determined as follows:

+ Income earned in Cao Bang province (a geographical area with extremely difficult socio-economic conditions) is eligible for enterprise income tax incentives at the rate and for the remaining duration eligible for incentives applicable to the enterprise.

+ Income earned in Lao Cai city (a geographical area with difficult socio-economic conditions) is eligible for enterprise income tax incentives at the rate and for the remaining duration eligible for incentives applicable to the enterprise in Lao Cai city.

+ Income earned in Hanoi city (a geographical area ineligible for investment incentives) is ineligible for enterprise income tax incentives.

c/ Enterprises subject to the tax rate of 20% may apply this rate for all their incomes, except the incomes specified at Points a, b and c, Clause 1 of this Article.”

3. To amend and supplement Clause 5, Article 18 of Circular No. 78/2014/TT-BTC (amended and supplemented in Article 5 of Circular No. 151/2014/TT-BTC) as follows:

“5. New investment projects:

a/ New investment projects eligible for enterprise income tax incentives provided in Articles 15 and 16 of Decree No. 218/2013/ND-CP include:

- Projects which are granted investment certificates for the first time from January 1, 2014, and generate turnover after the date of grant of such certificates.

- Domestic investment projects associated with the establishment of new enterprises capitalized at under VND 15 billion and being outside the list of conditional investment fields which are granted enterprise registration certificates from January 1, 2014.

- Investment projects independent from projects of operating enterprises (including investment projects capitalized at under VND 15 billion and being outside the list of conditional investment fields) which are granted investment certificates from January 1, 2014, for implementation of these independent projects.

- Notary offices established in geographical areas with difficult or extremely difficult socio-economic conditions.

To be eligible for enterprise income tax incentives under regulations, new investment projects must have investment licenses or investment certificates granted by competent state agencies or obtain investment permission in accordance with the investment law.

b/ New investment projects eligible for enterprise income tax incentives applicable to new investment do not include:

- Investment projects formed from the division, split-up, merger, consolidation or transformation of enterprises in accordance with law;

- Investment projects formed from ownership conversion (including implementation of new investment projects that use assets and business places and lines of old enterprises for continued production and business activities, and acquisition of operating investment projects);

Enterprises established or having investment projects formed from transformation, ownership conversion, division, split-up, merger or consolidation may continue enjoying enterprise income tax incentives of enterprises or investment projects before the transformation, conversion, division, split-up, merger or consolidation for the remaining duration if they still satisfy the conditions for enterprise income tax incentives;

c/ For enterprises currently enjoying enterprise income tax incentives for enterprises newly established from investment projects, incentives will be granted only for incomes from production and business activities satisfying the conditions for investment incentives stated in their first-time enterprise registration certificates or investment certificates. Enterprises currently engaged in production and business activities may continue enjoying tax incentives for the remaining duration if the change in their enterprise registration certificates or investment certificates does not affect their eligibility for tax incentives, or may enjoy incentives applicable to expanded investment if they are eligible for tax incentives;

d/ For licensed investment projects with investment capital, phasing and schedule registered in their initial investment registration dossiers submitted to licensing agencies, if actually implemented subsequent phases are regarded as their component projects (except force majeure events, difficulties due to objective causes in ground clearance or completion of administrative procedures by state agencies, natural disasters, fires or other difficulties or force majeure events), these component projects are eligible for tax incentives for the remaining duration of the licensed investment projects from the date they generate incomes eligible for incentives;

For investment projects licensed before January 1, 2014, with investment phases as mentioned above, their component projects are eligible for tax incentives at the rates currently applied to these investment projects for the remaining duration eligible for incentives, counting from January 1, 2014.

Enterprise income tax incentives enjoyed by enterprises before January 1, 2014, under legal documents for incomes from component projects of their initial investment projects earned before January 1, 2014, shall not be adjusted.

During the phased implementation of component projects as mentioned above, if the enterprise obtains permission from a state management agency in charge of investment (defined in Investment Law No. 59/2005/QH11 of November 29, 2005, and guiding legal documents) for extension of its project and strictly complies with the extended duration, it is entitled to the tax incentives prescribed above;

dd/ For enterprises operating in a socialized field eligible for tax incentives, if they are established as a result of transformation under law and satisfy the criteria for socialized establishments under the Prime Minister’s decisions and, before being transformed, did not enjoy any enterprise income tax incentives applicable to the field, they are entitled to tax incentives like new investment projects from the date of transformation;

Upon transformation, enterprises satisfying the criteria for socialized establishments under the Prime Minister’s decisions and currently enjoying the enterprise income tax rate of 10% for incomes from socialization activities may continue enjoying this tax rate.”

4. To amend and supplement Point a, Clause 6, Article 18 of Circular No. 78/2014/TT-BTC (amended and supplemented in Article 5 of Circular No. 151/2014/TT-BTC) as follows:

“6. Incentives for expansion investment

a/ If satisfying one of the three criteria prescribed at this Point, enterprises having investment projects to develop operating investment projects such as expansion of production, increase of capacity and renewal of production technology (collectively referred to as expansion projects) in a field or geographical area eligible for enterprise income tax incentives under Decree No. 218/2013/ND-CP (including economic zones, hi-tech parks, and industrial parks other than those located in urban districts of special-grade urban centers, centrally run grade-I urban centers and provincially run grade-I urban centers) may choose to enjoy enterprise income tax incentives (including preferential tax rate and tax exemption or reduction duration, if any) for the operating projects for the remaining duration. They may also choose to have a duration of tax exemption or reduction for additional incomes brought about by expanded investment (without enjoying the preferential tax rate) equal to the tax exemption or reduction duration applicable to new investment projects in the same geographical area or field eligible for enterprise income tax incentives. For the first alternative, the expansion projects must be in a field or geographical area eligible for enterprise income tax incentives under Decree No. 218/2013/ND-CP and in the same field or geographical area of the operating projects;

An expansion project mentioned at this Point must satisfy one of the following three criteria:

- The historical cost of additional fixed assets upon project completion and commissioning is at least VND 20 billion, if the project operates in a field eligible for enterprise income tax incentives under Decree No. 218/2013/ND-CP, or at least VND 10 billion, if it is located in a geographical area with difficult or extremely difficult socio-economic conditions under Decree No. 218/2013/ND-CP.

- The historical cost of additional fixed assets accounts for at least 20% of the total historical cost of fixed assets before investment.

- The design capacity upon expansion investment is at least 20% higher than the design capacity stated in the economic-technical study report prior to the initial investment.

In case an enterprise chooses to enjoy incentives for expansion investment, additional incomes brought about by expansion investment shall be separately accounted. In case it cannot separately account these additional incomes, such incomes shall be determined according to the ratio of the historical cost of fixed assets newly invested for use for production and business activities to the total historical cost of fixed assets of the enterprise.

The tax exemption or reduction duration mentioned in this Clause shall be counted from the year when the completed expansion project generates income. If no taxable income is generated during the first three years from the first year when turnover is generated from the expansion project, the tax exemption or reduction duration shall be counted from the fourth year when the project generates turnover.

In case an operating enterprise invests in upgrading, replacement or renewal of technologies of an operating project in a field or geographical area eligible for tax incentives under Decree No. 218/2013/ND-CP but fails to satisfy one of the three criteria prescribed at this Point, its operating project will be entitled to tax incentives for the remaining duration (if any).

For enterprises having investment projects currently eligible for tax incentives, if during 2009-2013, they additionally procured machinery and equipment in the course of production and business activities not under the above-said expansion projects, additional incomes from such procurement also are eligible for tax incentives at the levels currently applicable to the projects for the remaining duration, counting from the tax period of 2014.

Tax incentives mentioned in this Clause are not applicable to expanded investment as a result of division, split-up, merger or ownership conversion (including cases of implementation of new investment projects using assets and business places and lines of old enterprises for continued production and business activities), and acquisition of operating enterprises or investment projects.

For enterprises having investment projects formed from ownership conversion, division, split-up, merger or consolidation, they are entitled to enterprise income tax incentives applicable to the enterprises or investment projects before such conversion, division, split-up, merger or consolidation for the remaining duration if they are still eligible for such enterprise income tax incentives.”

5. To add the following Clause 8a to Article 18 of Circular No. 78/2014/TT-BTC:

“8a. In the first tax period, if an investment project of an enterprise (including new investment project, expanded investment project, hi-tech enterprise and hi-tech agriculture enterprise) has a production and business duration eligible for tax incentives of under 12 (twelve) months, the enterprise may choose to enjoy tax incentives for its investment project right in the first tax period or register with the tax agency to enjoy tax incentives from the subsequent tax period. If the enterprise registers to enjoy tax incentives from the subsequent tax period, it shall determine the payable tax amount of the first tax period and pay it to the state budget under regulations.”

Article 11. To amend and supplement a number of provisions of Article 19 of Circular No. 78/2014/TT-BTC as follows:

1. To amend and supplement Clause 1, Article 19 of Circular No. 78/2014/TT-BTC as follow:

“1. The preferential tax rate of 10% for fifteen (15) years is applicable to:

a/ Incomes of enterprises from the implementation of new investment projects in geographical areas with extremely difficult socio-economic conditions specified in the Appendix to Decree No. 218/2013/ND-CP, economic zones and hi-tech parks, including centralized information technology parks established under the Prime Minister’s decisions;

b/ Incomes of enterprises from the implementation of new investment projects in the fields of scientific research and technological development; application of high technologies on the list of high technologies prioritized for development investment in accordance with the Law on High Technologies; nursery of high technologies and hi-tech enterprises; venture investment to develop high technologies on the list of high technologies prioritized for development in accordance with the law on high technologies; investment in construction and commercial operation of establishments nursing high technologies and hi-tech enterprises; investment in development of water plants, power plants and water supply and drainage systems; bridges, roads and railways; airports, seaports and river ports; airfields, terminals and other particularly important infrastructure facilities decided by the Prime Minister; software production; manufacture of composite materials, light building materials and rare and precious materials; generation of renewable energy, clean energy and energy from waste disposal; and development of biotechnology;

To be eligible for tax incentives, investment projects on development of water plants, power plants and water supply and drainage systems; bridges, roads and railways; airports, seaports and river ports; or airfields and terminals must generate turnover or incomes from their operation. In case enterprises construct these works, incomes from construction activities are ineligible for tax incentives under this provision;

c/ Incomes of enterprises from the implementation of new investment projects in the field of environmental protection, covering manufacture of equipment for treating environmental pollution, equipment for environmental observation and analysis; environmental pollution treatment and environmental protection; collection and treatment of wastewater, gas emissions and solid wastes; and recycling and reuse of wastes; 

d/ Hi-tech enterprises and hi-tech agriculture enterprises defined in the Law on High Technologies;

Hi-tech enterprises and hi-tech agriculture enterprises defined in the Law on High Technologies may enjoy preferential tax rates from the year they are granted certificates of hi-tech enterprises or hi-tech agriculture enterprises.

Hi-tech enterprises and hi-tech agriculture enterprises are entitled to enterprise income tax incentives for incomes from hi-tech activities and hi-tech application activities and directly related incomes from these activities when these activities are in the fields eligible for investment incentives prescribed in Clause 4, Article 18 of Circular No. 78/2014/TT-BTC (amended and supplemented at Point a, Clause 2, Article 10 of this Circular).

For enterprises that are enjoying enterprise income tax incentives or have fully enjoyed enterprise income tax incentives provided in legal documents on enterprise income tax, if they are granted certificates of hi-tech enterprises or hi-tech agriculture enterprises, the incentive level for hi-tech enterprises or hi-tech agriculture enterprises is equal to that applicable to hi-tech enterprises or hi-tech agriculture enterprises prescribed in Clause 1, Article 15, and Clause 1, Article 16, of Decree No. 218/2013/ND-CP, minus the incentives (preferential tax rate and tax exemption or reduction duration, if any) they enjoyed upon establishment.

dd/ Incomes of enterprises from the implementation of new production projects (except projects producing excise tax-liable goods items and mineral exploitation projects) which satisfy either of the following criteria:

- Having an initial registered investment capital of at least VND 6 (six) trillion, having fully disbursed capital within 3 years after being granted the initial investment license under the investment law, and having a total turnover of at least VND 10 (ten) trillion per year after 3 years at most from the year of generating turnover from the project (from the 4^th year at the latest after the year of generating turnover, the enterprise must attain a total turnover of at least VND 10 (ten) trillion per year).

- Having an initial registered investment capital of at least VND 6 (six) trillion, having fully disbursed capital within 3 years after being granted the initial investment license under the investment law, and regularly employing an average of over 3,000 workers per year after 3 years at most from the year of generating turnover from the project (from the 4^th year at the latest after the year of generating turnover, the enterprise must have employed an average of over 3,000 workers per year on a regular basis).

The annual average number of regular employees shall be determined under the Ministry of Labor, War Invalids and Social Affairs’ Circular No. 40/2009/TT-BLDTBXH of December 3, 2009.

In case its investment project fails to satisfy the criteria prescribed at this Point (except those implemented behind schedule for objective reasons in ground clearance and completion of administrative procedures by state agencies, for natural disaster, enemy sabotage or fire and consent of the investment-licensing agency, which shall be reported to the Prime Minister for approval), an enterprise is not entitled to enterprise income tax incentives and shall declare and pay enterprise income tax amounts declared for enjoyment of incentives in the previous years (if any) and a late-payment interest as prescribed. It, however, will not be fined for false declaration under the law on tax administration.

e/ Incomes from the implementation of production projects, except projects producing excise tax-liable goods items and mineral exploitation projects, with an investment capital of at least VND 12 (twelve) trillion, using technologies appraised under the Law on High Technologies or the Law on Science and Technology, and having disbursed the total registered investment capital within 5 years after being granted an investment license under the investment law;

g/ Incomes from the implementation of new investment projects producing products on the list of supporting industrial products prioritized for development which satisfy either of the following criteria:

- The industrial products support high technologies under the Law on High Technologies;

- The industrial products support the production of textile-garment, footwear or electronic-information technology products; manufacture and assembly of automobiles; or mechanical engineering which, by January 1, 2015, are unavailable at home or are available but required to meet the European Union (EU)’s technical standards or equivalent.

The list of supporting industrial products prioritized for development and eligible for enterprise income tax incentives is that promulgated by the Prime Minister together with Decision No. 1483/QD-TTg of August 26, 2011; when legal documents concerning this list are amended, supplemented or replaced, the amending, supplementing or replacing documents shall apply.”

2. To amend and supplement Clause 2, Article 19 of Circular No. 78/2014/TT-BTC as follows:

“2. Cases eligible for extension of the duration eligible for preferential tax rates:

a/ Investment projects mentioned at Points b and c, Clause 1 of this Article which are of large size and furnished with high or new technologies which need special investment attraction;

b/ Projects mentioned at Point e, Clause 1 of this Article which must satisfy one of the following criteria:

- Producing globally competitive products and goods with a turnover of over VND 20 trillion per year within 5 years after generating turnover;

- Regularly employing an average of over 6,000 workers;

- Being in the field of economic-technical infrastructure, including investment in development of water plants, power plants, water supply and drainage systems, bridges, roads, railways, airports, seaports, river ports, airfields, terminals, renewable energy, clean energy, energy-saving industries, and oil refining and petrochemistry.

c/ At the proposal of the Minister of Finance, the Prime Minister shall decide to extend the duration eligible for preferential tax rates prescribed in this Clause for no more than 15 (fifteen) years.”

3. To amend and supplement Point a, Clause 3, Article 19 of Circular No. 78/2014/TT-BTC as follows:

“3. The preferential tax rate of 10% is applicable throughout the operation duration to:

a/ Enterprises’ incomes from socialized education and training, job training, health care, culture, sports and environment, and judicial assessment activities (below referred to as socialized fields).

The list of types, sizes and standards of enterprises engaged in socialized fields is that promulgated by the Prime Minister.”

4. To amend and supplement Point e, Clause 3, Article 19 of Circular No. 78/2014/TT-BTC as follows:

“3. The preferential tax rate of 10% is applicable throughout the operation duration to:

e/ Enterprises’ incomes from forest planting, tending and protection; cultivation, husbandry, aquaculture, and processing of agricultural and aquatic products in geographical areas with difficult socio-economic conditions; afforestation in geographical areas with difficult socio-economic conditions; production, propagation and hybridization of plant varieties and animal breeds; salt production, exploitation and refining, except salt production mentioned in Clause 1, Article 4 of Decree No. 218/2013/ND-CP; investment in the preservation of post-harvest farm produce, agricultural and aquatic products and food, including investment for direct preservation or leased preservation of agricultural and aquatic products and food.”

5. To add the following Clause 3a to Article 19 of Circular No. 78/2014/TT-BTC:

“3a. The tax rate of 15% is applicable to enterprises’ incomes from cultivation, husbandry, and processing of agricultural and aquatic products in geographical areas not classified as meeting with difficult socio-economic conditions or extremely difficult socio-economic conditions.”

Article 12. To amend and supplement a number of provisions of Article 20 of Circular No. 78/2014/TT-BTC as follows:

1. To amend and supplement Point a, Clause 1, Article 20 of Circular No. 78/2014/TT-BTC as follows:

“1. Tax exemption for four years and 50% reduction of payable tax amounts for 9 subsequent years are applicable to:

a/ Enterprises’ incomes from the implementation of investment projects specified in Clause 1, Article 19 of Circular No. 78/2014/TT-BTC (amended and supplemented in Clause 1, Article 11 of this Circular).”

2. To amend and supplement Clause 4, Article 20 of Circular No. 78/2014/TT-BTC as follows:

“4. The tax exemption or reduction duration specified in this Article shall be counted consecutively from the first year an enterprise has taxable income from a new investment project eligible for tax incentives. If an enterprise has no taxable income for the first three years, counting from the first year it has turnover from a new investment project, the tax exemption or reduction duration shall be counted from the fourth year after the project generates turnover.

Example 20: In 2014, enterprise A has a new investment project on software production. If it earns in 2014 taxable income from such project, the tax exemption or reduction duration shall be counted consecutively from 2014. If such project generates turnover in 2014 but still has no taxable income by 2016, the tax exemption or reduction duration shall be counted consecutively from 2017.

The tax exemption or reduction duration for hi-tech enterprises and hi-tech agriculture enterprises under the above provisions shall be counted from the year an enterprise is granted a certificate of hi-tech enterprise or hi-tech agricultural enterprise.”

Article 13. To add the following Clauses 2a, 2b, 2c, 2d and 2dd to Article 23 of Circular No. 78/2014/TT-BTC:

1. To add the following Clauses 2a, 2b, 2c, 2d and 2dd to Article 23 of Circular No. 78/2014/TT-BTC:

“2a. For enterprises that had an expansion project licensed by a competent agency or made investment during 2009-2013 and, by the tax period of 2014, satisfy the conditions for tax incentives (fields or geographical areas eligible for incentives, including industrial parks, economic zones and hi-tech parks) under Law No. 32/2013/QH13 and Law No. 71/2014/QH13 and guiding documents, they are entitled to the tax incentives for expanded investment under these Laws and guiding documents for the remaining duration counting from the tax period of 2015.

For enterprises that had an investment project on expanded production still under  construction by December 31, 2008, and continued such construction in 2009, and completed the project and put it into production and business in 2010, if they satisfy the conditions for tax incentives (fields or geographical areas eligible for incentives, including industrial parks, economic zones and hi-tech parks) as prescribed at the time of deciding on the implementation of the project, they may choose to enjoy incentives for additional incomes from expanded investment either under legal documents effective at the time of such decision or under Law No. 32/2013/QH13 and Law No. 71/2014/QH13 and guiding documents for the remaining duration counting from the tax period of 2015.

2b. For enterprises that implemented an investment project in an industrial park during 2009-2013, by the tax period of 2014, if they satisfy the conditions for tax incentives (fields or geographical areas eligible for incentives) under Law No. 32/2013/QH13 and Law No. 71/2014/QH13 and guiding documents, they are entitled to the tax incentives under these Laws and guiding documents for the remaining duration counting from the tax period of 2015.

2c. For enterprises that have an investment project in a geographical area which, before January 1, 2015, was not eligible for tax incentives (including industrial parks, economic zones and hi-tech parks, and from January 1, 2015, becomes eligible for tax incentives under Law No. 32/2013/QH13 and Law No. 71/2014/QH13 and guiding documents, they will be entitled to the tax incentives under these Laws and guiding documents for the remaining duration counting from the tax period of 2015.

For enterprises that have an investment project located in a geographical area eligible for tax incentives, which, from January 1, 2015, becomes eligible for higher tax incentives under Law No. 32/2013/QH13 and Law No. 71/2014/QH13 and guiding documents, they will be entitled to the tax incentives prescribed in these Laws and guiding documents for the remaining duration counting from the tax period of 2015.

2d. After January 1, 2015, if geographical areas where enterprises carry out investment projects are classified as those eligible for tax incentives, the enterprises are entitled to these tax incentives for the remaining period counting from the tax period in which such classification is effected.

2dd. For the cases specified in Clauses 2a, 2b and 2c of this Article, if, by the tax period of 2015, an investment project has not yet generated any turnover, the duration eligible for preferential tax rates shall be counted consecutively from the first year when turnover is generated from the investment project eligible for tax incentives. For the cases specified in Clauses 2a, 2b and 2c of this Article, if, by the tax period of 2015, an investment project has not yet generated any income, the tax exemption or reduction duration shall be counted consecutively from the first year when taxable income is generated from the investment project eligible for tax incentives (if the enterprise has no taxable income in the first three years counting from the first year in which turnover is generated from the investment project, the tax exemption or reduction duration shall be counted consecutively from the fourth year in which the project generates turnover)”.

2. To amend and supplement Clause 3, Article 23 of Circular No. 78/2014/TT-BTC as follows:

“3. For enterprises that are established from investment projects with investment licenses or investment certificates granted before January 1, 2014, but are still in the investment stage and have not yet generated any turnover, they are entitled to enterprise income tax incentives for new investment projects under Law No. 32/2013/QH13 and Law No. 71/2014/QH13 and guiding documents.

For enterprises that started an expansion project before January 1, 2014, and put it to production and business since this date with turnover, if such project is implemented in a field or located in a geographical area eligible for enterprise income tax incentives under Decree No. 218/2013/ND-CP (including economic zones, hi-tech parks, and industrial parks other than those located in districts of special-grade or centrally run grade-I urban centers or provincially run grade-I urban centers), they are entitled to enterprise income tax incentives for additional incomes brought about by expanded investment under Circular No. 78/2014/TT-BTC.”

Article 14. Effect

1. This Circular takes effect on August 6, 2015, and applies from the 2015 period of enterprise income tax onward.

- For enterprises applying a fiscal year other than calendar year:

+ The enterprise income tax incentives (tax exemption or reduction duration and duration for application of preferential tax rates) prescribed in this Circular shall be applied for the remaining period from the tax period of 2015.

+ Other amendments and supplements apply from January 1, 2015.

- For incomes earned from overseas investment projects from the tax period of 2014 and before, enterprises shall declare and pay tax in accordance with the circular on enterprise income tax applicable in the corresponding period; from 2015 on, enterprises are not required to declare and pay tax on their incomes transferred back to the country. Incomes from overseas investment projects earned from the tax period of 2015 must comply with this Circular.

2. To annul Point 2.21, Clause 2, Article 6, and Clause 5, Article 20, of Circular No. 78/2014/TT-BTC and documents guiding enterprise income tax promulgated by the Ministry of Finance and other agencies which are contrary to this Circular.

Article 15. Implementation responsibility

1. Provincial-level People’s Committees shall direct their functional agencies in organizing the implementation of the Government’s regulations and the Ministry of Finance’s guidance.

2. Tax agencies at all levels shall disseminate, and guide enterprises in implementing, this Circular.

3. Enterprises regulated by this Circular shall comply with this Circular.

Any problems arising in the course of implementation should be promptly reported to the Ministry of Finance for study and settlement.-

For the Minister of Finance
Deputy Minister
DO HOANG ANH TUAN