CIT RATE, CIT INCENTIVES

CIT RATE, CIT INCENTIVES

Pursuant to Article 11 of Circular 78/2014/TT-BTC and Articles 11 and 12 of Circular 96/2015/TT-BTC regulating corporate income tax rates, preferential tax rates and tax rates applicable to 1 Some specific industries, specifically as follows:

I. CIT RATE

From January 1, 2016, the corporate income tax rate is 20%, except for cases where preferential tax rates are applied and tax rates are applied to some specific industries.

II. CIT RATE IS APPLICABLE TO SOME SPECIFIC SECTORS

- Tax rates from 32% to 50% apply to petroleum prospecting, exploration and exploitation activities in Vietnam.

- Tax rate of 50% applies to the prospecting, exploring and extraction of precious and rare natural resources.

III. PREFERENTIAL CIT TAX RATE

1. Apply the corporate income tax rate of 10% for a period of fifteen years (15 years)

(1) Income of the enterprise from execution of new investment projects in extremely disadvantaged areas, economic zones, hi-tech zones;

(2) Income of the enterprise from execution of new investment projects, including: scientific research and technology development; application of high technologies given priority according to the Law on High Technology; cultivation of high technology, cultivation of high-tech enterprises; Venture capital investment for high technology development belongs to the list of high technologies prioritized for investment and development according to the provisions of the 2008 High Technology Law; investment in construction and business of high-tech incubators and high-tech business incubation facilities; Investing in the development of particularly important State infrastructure 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 according to the provisions of the High Technology Law 2008;

(4) Income of the enterprise from execution of new investment projects in the manufacturing sector (except for manufacturing of products subject to special excise tax and mineral extraction projects) that satisfy any of the following criteria:

- The project's initial capital is at least VND 6,000 billion disbursed within 03 years from the date of investment license according to regulations of law on investment, and the total revenue is at least VND 10,000 billion per year after not more than 3 years from the first year in which revenues are generated by the project;

- The project’s initial capital is at least VND 6,000 billion disbursed within 03 years from the date of investment license according to regulations of law on investment, and project regularly has over 3,000 employees after not more than 3 years from the first year in which revenues are generated by the project.

(5) Income of the enterprise from execution of new investment projects in manufacturing of products on the List of prioritized supporting products manufactured that satisfy any of the following criteria:

- Ancillary products are meant to support high technologies according to the provisions of the High Technology Law 2008;

- Ancillary products are meant to support manufacturing of: textile and garment; leather and footwear; electronics and IT products; manufacturing of cars; fabricating mechanics that, up to January 01, 2015, they cannot be manufactured in Vietnam or can be manufactured in Vietnam and satisfy technical standards of EU or equivalent standards.

(6) Income of the enterprise from execution of project of investment in manufacturing, except for manufacturing of products subject to special excise tax and mineral extraction projects whose capital is VND 12,000 billion or over, using high technologies that must be appraised accordance with the High Technology Law 2008, Science and Technology Law 2013, and capital of which is disbursed within 05 years from the date of investment licensing.

2. Apply the corporate income tax rate of 10% over the entire operating period

(1) Income of the enterprise investment in the public sector fields of education - training, vocational training, healthcare, culture, sports and environment;

(2) Income of the enterprise from execution of social housing investment and business projects for sale, lease, or lease purchase for social housing tenants specified in the 2014 Housing Law;

(3) Income of the enterprise from: planting, cultivating, and protecting forests; farming husbandry, aquaculture in disadvantaged areas; forestry in disadvantaged areas; production, propagation and cross-breeding of plant and animal breeds; production, extraction and refining of salt, except salt production specified in Clause 1, Article 4 of the Law on Corporate Income Tax 2008 (amended by Clause 2, Article 1 of the Law amending Tax Laws 2014) investment in post-harvest preservation of agriculture products; preservation of agriculture products, aquaculture products, and foods.

3. Apply the corporate income tax rate of 17% for a period of ten years (10 years)

(1) Income of the enterprise from execution of new investment projects in disadvantaged areas.

(2) Income of the enterprise from execution of new investment projects, including:

- Producing high-quality steel.

- Production of energy saving products.

- Manufacturing machinery and equipment for agricultural, forestry, fishery and salt production.

- Production of irrigation equipment.

- Producing and refining animal, poultry and aquatic feed.

- Developing traditional occupations (including building and developing traditional occupations in handicraft production, agricultural and food processing, and cultural products).

4. Apply the corporate income tax rate of 17% over the entire operating period

Micro-finance institutions are established and operate according to the provisions of the Law on Credit Institutions 2010.

For micro-finance institutions newly established in disadvantaged areas after the expiration of the tax rate of 10% (specified in Point a, Clause 1, Article 19 of Circular 78 /2013/TT-BTC) will switch to applying the tax rate of 17%.

IV. TAX EXEMPTION AND REDUCTION DURATIONS

1. Tax exemption for 4 years and 50% reduction of payable tax amount for the next 9 years to.

(1) New investment projects are subject to apply the corporate income tax rate of 10% for a period of fifteen years (15 years);

(2) New investment projects in the field of socialization implemented in disadvantaged areas or extremely disadvantaged areas.

2. Tax exemption for 4 years and 50% reduction of payable tax amount for the next 5 years to.

New investment projects in the field of socialization in geographical areas outside the list with disadvantaged areas or extremely disadvantaged areas.

3. Tax exemption for 2 years and 50% reduction of payable tax amount for the next 4 years to.

(1) New investment projects are subject to apply the corporate income tax rate of 17% for a period of ten years (10 years);

(2) New investment projects in industrial parks (except industrial parks located in advantaged areas).

Areas with favorable socio-economic conditions are urban districts of special - grade, or centrally run grade-I urban centers and those in provincial grade-I cities; Does not include districts of special - grade, centrally run grade-I urban centers and those in provincial grade-I cities under the province newly established from the district since January 1, 2009;

V. THE DURATION OF APPLICATION OF PREFERENTIAL TAX RATES SPECIFIED

- The duration of application of preferential tax rates specified shall be counted consecutively from the first year when the enterprise generate turnover from new investment project eligible for tax incentives;

- For hi-tech enterprises and agricultural enterprises applying high technologies, this duration shall be counted from the date when they are recognized as hi-tech enterprise or agricultural enterprise applying high technologies;

- For projects applying high technologies, this duration shall be counted from the date when they are granted certificates of projects applying high technologies.

VI. DETERMINE THE DURATION OF TAX EXEMPTION AND REDUCTION

- Tax exemption and reduction period shall be counted continuously from the first tax period an enterprise has taxable income from a new investment project eligible for tax incentives, in case the enterprise does not have taxable income in the first three years (3 years), the period of tax exemption and reduction begins in the 4th year from the first year revenue is generated by the new project.

- Tax exemption and reduction period for high-tech enterprises and agricultural enterprises applying high technologies will begin from the year in which they are granted the Certificate of High-tech Enterprise or Certificate of Agriculture Enterprise Applying High Technologies.

In case, in the first tax period, the enterprise has taxable income but its new investment project has a production and business operation duration eligible for tax incentives of under 12 months, the enterprise may choose to enjoy tax exemption or tax reduction for new investment project right in that tax period or register with the tax authority a tax incentive to start from the next tax period.