VietnameseDecree No. 24/2007/ND-CP dated February 14, 2007 of the Government detailing the implementation of the Law on enterprise income tax
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Decree No. 24/2007/ND-CP dated February 14, 2007 of the Government detailing the implementation of the Law on enterprise income tax
| Issuing body: | Government | Effective date: | Known Please log in to a subscriber account to use this function. Don’t have an account? Register here |
| Official number: | 24/2007/ND-CP | Signer: | Nguyen Tan Dung |
| Type: | Decree | Expiry date: | Known Please log in to a subscriber account to use this function. Don’t have an account? Register here |
| Issuing date: | 14/02/2007 | Effect status: | Known Please log in to a subscriber account to use this function. Don’t have an account? Register here |
| Fields: | Enterprise , Investment , Tax - Fee - Charge |
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Effect status: Known
THE GOVERNMENT ------- | SOCIALIST REPUBLIC OF VIET NAM Independence - Freedom - Happiness ---------- |
No: 24/2007/ND-CP | Hanoi, February 14, 2007 |
DECREE
DETAILING THE IMPLEMENTATION OF THE LAW ON ENTERPRISE INCOME TAX
THE GOVERNMENT
Pursuant to the December 25, 2001 Law on Organization of the Government;
Pursuant to the June 17, 2003 Law on Enterprise income tax;
At the proposal of the Minister of Finance,
DECREES:
Chapter I
APPLICATION SCOPE OF ENTERPRISE INCOME TAX
Article 1.- Organizations and individuals engaged in goods production and trading or service provision (hereinafter referred collectively to as business establishments) with incomes shall pay enterprise income tax according to the provisions of this Decree.
1. Organizations engaged in goods production and trading or service provision include State enterprises; limited liability companies; joint-stock companies; partnerships; foreign-invested enterprises and foreign parties to business cooperation contracts under the Investment Law and the Enterprise Law; foreign companies and organizations doing business in Vietnam not under the Investment Law and the Enterprise Law; private enterprises; cooperatives and unions of cooperatives (hereinafter referred to as cooperatives for short); cooperation groups; economic organizations of political organizations, socio-political organizations, social organizations, socio-professional organizations or people's armed forces units; administrative agencies and non-business units engaged in goods production and trading or service provision.
2. Vietnamese individuals engaged in goods production and trading or service provision include:
a/ Business individuals and groups of business individuals;
b/ Individual business households;
c/ Independent professional practitioners: medical doctors, lawyers, accountants, auditors, painters, architects, musicians, and others;
d/ Individuals leasing such properties as houses, land, means of transport, machinery and equipment or other types of property;
3. Foreign individuals doing business and having incomes generated in Vietnam, regardless of whether their business activities are carried out in Vietnam or overseas.
4. Foreign companies doing business through their permanent establishments in Vietnam.
Permanent establishments mean business establishments through which foreign companies conduct part or all of their income-generating business activities in Vietnam. Foreign companies' permanent establishments mainly take the following forms:
a/ Branches, executive offices, factories, workshops, goods-forwarding warehouses, means of transport, mines, oil or gas fields or natural resource-exploring and -exploiting sites or equipment and facilities in service of natural resource exploration;
b/ Construction sites; construction, installation or assembly projects; activities of construction supervision as well as construction, installation or assembly projects;
c/ Establishments providing services, including consultancy services provided by their employees or other persons;
d/ Agents of foreign companies;
e/ Vietnam-based representatives in the following cases:
- They are authorized to sign contracts on behalf of foreign companies;
- They are not authorized to sign contracts on behalf of foreign companies but regularly perform the delivery of goods or the provision of services in Vietnam.
In case a double taxation avoidance agreement which the Socialist Republic in Vietnam has signed otherwise provides for permanent establishments, the provisions of that agreement prevail.
Article 2.-Non-payers of enterprise income tax include households, individuals, cooperation groups and cooperatives engaged in agricultural production with incomes from cultivation, husbandry and aquaculture products; except for farmers and farmer households engaged in large-scale commodity production with high incomes.
The payment of enterprise income tax applicable to farmers and farmer households engaged in large-scale commodity production with high incomes from cultivation, husbandry or aquaculture products shall be governed by separate regulations. The Ministry of Finance shall assume the prime responsibility for, and coordinate with the Ministry of Agriculture and Rural Development and the Ministry of Fisheries in, submitting to the Government for promulgation regulations on payment of enterprise income tax to be applicable to these subjects.
Chapter II
TAX CALCULATION BASES AND TAX RATES
Article 3.-Tax calculation bases are taxable income in the taxation period and tax rate.
Enterprise income taxation period is determined according to the calendar year or fiscal year.
Article 4.-Turnover for calculation of taxable income is determined as follows:
1. Turnover for calculation of taxable income is the total goods sales or service charge, including price subsidies, surcharges and additional amounts, earned by business establishments, regardless of whether or not such amounts have been collected.
For business establishments that pay value added tax (VAT) by the tax credit method, turnover for calculation of taxable income is VAT-exclusive turnover. For business establishments that pay VAT directly on added value, turnover for calculation of taxable income is VAT-inclusive turnover.
2. For goods sale and service provision activities, the time for determining turnover for calculation of taxable income is the time of transferring the ownership of goods, completing services or making out invoices on goods sale or service provision.
3. Turnover for calculation of taxable income in some cases is specified as follows:
a/ For goods sold on installment payment, turnover for calculation of taxable income is determined based on the sale price paid in lump sum, excluding interest on deferred payment;
b/ For goods or services used for barter, donation or internal consumption, turnover for calculation of taxable income is determined based on the sale price of goods or services of the same or similar category at the time of barter, donation or internal consumption;
c/ For goods-processing activities, turnover for calculation of taxable income is proceeds from the processing, including remuneration, costs of fuels, power, auxiliary materials and other costs in service of goods processing;
d/ For property leasing activities, turnover for calculation of taxable income is rent paid by the lessee for each term under the leasing contract. If the lessee pays rent in advance for several years, turnover for calculation of taxable income is divided by the number of years for which the rent has been paid in advance or determined based on the rent payable in lump sum.
The Ministry of Finance shall specifically guide the methods of determining turnover from the advance payment of rent for several years in order to determine taxable income suitable to each type of business establishment defined at this Point;
e/ For credit activities, turnover for calculation of taxable income is receivable loan interest arising in the taxation period;
f/ In other cases, turnover for calculation of taxable income is specified by the Ministry of Finance.
Article 5.- Reasonable expenses to be subtracted for calculation of taxable income include:
1. Depreciations of fixed assets used for goods production and trading or service provision activities. Fixed asset depreciation rate is determined based on the value of fixed assets and depreciation duration. Establishments producing and trading in goods or providing services with high economic efficiency may apply a higher depreciation rate which, however, must not exceed two times the prescribed depreciation rate, in order to quickly renew their technologies.
The Ministry of Finance shall specify fixed asset standards, depreciation duration and rate and quick depreciation specified in this Clause.
2. Costs of raw materials, materials, fuel, energy and goods volume actually used for goods production and trading or service provision related to turnover and taxable income in a period, which are calculated according to a reasonable consumption norm and actual ex-warehousing prices, that enterprises shall determine by themselves and take responsibility therefor before law.
Business establishments that purchase products made of rattan, bamboo, rush, coconut fibers or palm leaves directly from their makers, handicraft and fine-art articles from non-business artisans; earth, stone, sand and gravel exploited by people themselves; scraps from scrap collectors and some services from non-business individuals without invoices and vouchers may make lists thereof according to the Finance Ministry's regulations on the basis of written payment requests of goods sellers or service providers. Directors of business establishments who approve payments according to those lists shall bear responsibility before law for the accuracy and truthfulness of the lists.
3. Wages, remuneration and allowances paid to laborers according to the Labor Code, expenses for mid-shift meals and food rations:
a/ Wages, remuneration and allowances paid to laborers in State enterprises which are accounted as reasonable expenses according to current regulations;
b/ Wages, remuneration and allowances paid to laborers in other business establishments which are accounted as reasonable expenses under labor contracts;
c/ Expenses for mid-shift meals for laborers which are accounted as reasonable expenses and may not exceed the minimum wage set by the State for state employees;
d/ Food rations for laborers working in some special sectors and doing some special jobs as prescribed by the State.
4. Expenses for scientific and technological research; innovations and modifications, healthcare; and training of laborers according to regulations; financial supports for education.
5. Charges for services purchased from outside: electricity, water, telephone, repair of fixed assets; rent of fixed assets; audit; legal services; designing, establishment and protection of trademarks; property insurance; payments for use of technical documents; invention patents; technological licenses not pertaining to fixed assets, technical services and other services purchased from outside.
6. Payments:
a/ Expenses for female laborers, including:
- Expenses for job re-training of female workers and employees whose current jobs are no longer appropriate in order to shift them to other jobs under business establishments' development plans.
These extra expenses cover training fees (if any) + wage level and grade-based difference (ensuring 100% of wages for trainees);
- Payment of wages and allowances (if any) to teachers in nurseries and kindergartens organized and managed by enterprises. The number of these teachers shall be determined according to the norm prescribed by education and training authorities;
- Expenses for organizing an additional health check in a year such as examination of occupational, chronic or gynecological diseases for female workers and employees;
- Payment of allowances for female laborers after childbirth. Pursuant to the provisions of labor law and based on actual price fluctuations in each period, the Ministry of Finance shall coordinate with the Ministry of Labor, War Invalids and Social Affairs in specifying the maximum allowance level for female laborers after childbirth;
- During the period of breast-feeding, if, for objective reasons, female laborers do not take breast-feeding breaks according to regulations but stay on to work for business establishments, they are entitled to overtime allowances according to regulations.
For business establishments employing large numbers of female laborers in production, construction or transportation activities, if they can separately account and keep track of actual payments for female laborers, they are entitled to enterprise income tax reduction according to Article 41 of this Decree.
b/ Expenses for labor safety protection according to the Labor Code;
In business establishments where laborers are required to wear uniforms at workplaces, expenses for uniforms shall be accounted as reasonable expenses.
c/ Expenses for protection of business establishments; working mission allowances;
d/ Appropriations for social insurance and heath insurance funds under the responsibility of employing business establishments; trade union funding; support of Party cells' and mass organizations' activities at business establishments; contributions to cover managerial costs at higher levels and associations' funds according to regulations.
7. Payment of interests on loans for production, business and services to credit institutions, financial institutions and other economic organizations at actual interest rates; payment of interests on loans borrowed from other entities at actual interest rates which, however, must not exceed 1.2 times the lending interest rate applied by commercial banks at the time of borrowing.
8. Appropriations for use as provisions according to regulations.
9. Severance allowances for laborers according to regulations.
10. Expenses for goods sale or service provision, including: expenses for preservation, packing, transportation, loading and unloading, renting of warehouses and storing yards and product warranty for goods or services.
11. Expenses for advertisement, marketing, sales promotion, reception, public relation expenses, payment of brokerage commissions, conference expenses and other expenses directly related to goods production and trading or service provision, which must not exceed 10% of the total of expenses listed in Clauses 1 thru 10 of this Article. For trading activities, total reasonable expenses used for determining the controlled level are exclusive of costs of goods sold.
12. Payable taxes, charges, fees and land rents related to goods production and trading or service provision (except enterprise income tax), including:
a/ Export duty, import duty;
b/ Special consumption tax;
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