When do businesses receive preferential corporate income tax rates?

Preferential corporate income tax rates create strong financial leverage for business development in Vietnam. With preferential tax rate policies, businesses will have the opportunity to accumulate significant financial resources to reinvest and expand production and business activities. Please follow Long Phan’s following article to help you properly apply corporate income tax incentives according to current regulations.

Regulations on types of income subject to corporate income tax

Pursuant to Clause 2, Article 3 of the Law on Enterprise Income Tax 2008, amended and supplemented by Clause 2, Article 1 of the Law on Enterprise Income Tax amended in 2013, the types of income subject to corporate income tax include:

• Income from capital transfer, transfer of capital contribution rights; income from real estate transfer, investment project transfer, transfer of rights to participate in investment projects, transfer of rights to explore, exploit and process minerals;
• Income from property use rights, property ownership rights, including income from intellectual property rights according to the provisions of law;
• Income from transfer, lease, and liquidation of assets, including valuable papers;
• Income from interest on deposits, loans, foreign currency sales;
• Revenues from bad debts that have been written off are now recoverable;
• Revenue from liabilities whose owner cannot be identified;
• The omitted business income from previous years and other income, including income from production and business activities outside Vietnam.

Incentives on corporate income tax rates

Preferential tax rate of 10% for 15 years

This incentive is intended to encourage important investment projects in especially difficult areas, as well as areas with positive socio-economic impacts. Subjects include:

1. Enterprise income from implementing new investment projects in areas with particularly difficult socio-economic conditions, economic zones, and high-tech zones;
2. Enterprise income from implementing new investment projects, including:

• Scientific research and technological development;
• High technology applications are in the list of high technologies prioritized for investment and development;
• Incubating high technology, incubating high-tech businesses;
• Venture capital investment for high technology development belongs to the category of high technology prioritized for development investment;
• Investment in construction and business of high-tech incubators and high-tech business incubation facilities;
• Investing in developing particularly important infrastructure of the State according to the provisions of law; software product production;
• Production of composite materials, light construction materials, and rare materials;
• Producing renewable energy, clean energy, energy from waste destruction;
• Biotechnology development; environmental protection.

3. Income of high-tech enterprises and agricultural enterprises applying high technology;
4. Enterprise income from implementing new investment projects in the manufacturing sector (except for projects producing goods subject to special consumption tax and mineral exploitation projects).
5. Enterprise income from implementing investment projects in the manufacturing sector (except for projects producing goods subject to special consumption tax and mineral exploitation projects, with a minimum investment capital of twelve thousand billion VND, using technology must be appraised according to regulations, disbursement of total registered investment capital no more than five years from the date of investment permission according to the provisions of investment law).

Preferential tax rate of 10% for the entire operating period

This preferential corporate income tax rate applies to socialization activities and social investment projects with far-reaching impacts. Specifically, they are:

• Enterprise income from carrying out socialization activities in the fields of education – training, vocational training, health, culture…;
• Income of enterprises from implementing investment projects – trading in social housing for sale, lease, or lease purchase in the case of Article 53 of the Law on Housing (Amended by Point b, Clause 6, Article 99 of the Law on Investment according to the public-private partnership method 2020);
• Income of press agencies from printing press activities, including advertising on print newspapers; income of the publishing agency from publishing activities;
• Business income from: planting, caring for, and protecting forests; cultivating and processing agricultural and aquatic products in areas with difficult socio-economic conditions…
• Income of cooperatives operating in the fields of agriculture, forestry, fishery, and salt production that are not located in areas with difficult socio-economic conditions or areas with extremely difficult socio-economic conditions difficulties, except for the income of cooperatives in Clause 1, Article 4 of the Law on Enterprise Income Tax 2008.

Preferential tax rate of 17% for 10 years

This preferential corporate income tax rate applies to new investment projects in economically difficult areas and some specific manufacturing industries. Specifically:

1. Enterprise income from implementing new investment projects in areas with difficult socio-economic conditions;
2. Enterprise income from implementing new investment projects, including:

• Producing high-quality steel; production of energy saving products;
• Production of machinery and equipment for agricultural, forestry, fishery and salt production;
• Production of irrigation equipment;
• Producing and refining animal, poultry and aquatic feed; developing traditional industries.

Note: From January 1, 2016, enterprise income specified in this Clause is subject to a tax rate of 17%.

Preferential tax rate of 15%

Applicable to income of businesses engaged in farming, animal husbandry and processing in the field of agriculture and fisheries that are not located in areas with difficult socio-economic conditions or areas with poor economic conditions – society is especially difficult.

Preferential tax rate of 17% for the entire operating period

Applicable to people’s credit funds and microfinance institutions that enjoy a tax rate of 20% to support microfinance services. From January 1, 2016, this tax rate decreased to 17%.

Conditions for applying corporate income tax incentives

According to the provisions of Article 18 of the Law on Enterprise Income Tax 2008 (amended and supplemented in 2013), businesses that want to enjoy corporate income tax (CIT) incentives need to meet the following conditions:

1. Conditions for implementing accounting and tax declaration regimes

Corporate income tax incentives specified in Articles 13, 14, 15, 16 and 17 of this Law apply to enterprises that implement accounting, invoices and vouchers and pay taxes according to declaration. However, corporate income tax incentives under the new investment project category do not apply to the following cases:

• Divide, split, merge, and consolidate businesses.
• Change business form, change ownership.
• Other cases as prescribed by law.

2. Conditions for separate accounting of income

• Enterprises must separately account income from production and business activities eligible for tax incentives specified in Articles 13 and 14 of this Law from activities not eligible for incentives.
• In case the enterprise cannot account separately, it will be determined according to the ratio between the revenue of the preferential activity and the total revenue of the enterprise.

3. Not subject to the 20% tax rate and tax incentives for:

• Income from capital transfer, transfer of capital contribution rights; income from real estate transfer, except social housing specified in Article 13 of this Law; income from transfer of investment projects, transfer of rights to participate in investment projects, transfer of rights to explore and exploit minerals; income from production and business activities outside Vietnam;
• Income from activities of searching, exploring and exploiting oil, gas and other rare and precious resources and income from mineral exploitation activities;
• Income from service business is subject to special consumption tax according to the provisions of the Law on Special Consumption Tax;
• Other cases according to Government regulations.

Procedures for implementing corporate income tax incentives

According to Article 22 of Circular 78/2014/TT-BTC, enterprises themselves determine the conditions for tax incentives, preferential tax rates, tax exemption period, tax reduction, and the amount of loss to be deducted (-) from calculated income tax to self-declare and self-finalize taxes with tax authorities. Tax authorities will check and inspect preferential conditions and tax exemption amounts. If the enterprise does not meet the preferential conditions, the tax authority will collect taxes and impose administrative penalties according to regulations.

Consulting and support services on various types of tax incentives for businesses according to current regulations at Long Phan

Long Phan specializes in providing professional consulting services, helping businesses grasp and make the most of corporate income tax incentives, ensuring optimal benefits for businesses. Our specific services include:

• Review conditions for enjoying corporate income tax incentives.
• Consulting on choosing appropriate tax incentives.
• Support procedures for determining preferential tax rates.
• Instructions for tax declaration and settlement.
• Drafting tax exemption documents.
• Representative working with tax authorities.
• Consulting on resolving problems regarding tax incentives.

Incentives on corporate income tax rates are an opportunity to help businesses optimize profits and improve their competitiveness in the market. If you have any questions, please contact Long Phan via hotline 0906735386 for detailed advice. Long Phan is committed to providing optimal solutions, helping businesses make the most of tax incentives in accordance with the law.