Q&A ON TAX POLICIES AND LAWS

(Baonghean) - Question:Our company is a non-state-owned enterprise that must relocate according to the planning of the Provincial People's Committee. Does our company have to pay corporate income tax for compensation for fixed assets on land and relocation support? If so, can related expenses be deducted when determining taxable income?

Reply:

Clause 16, Article 7, Circular No. 78/2014/TT-BTC dated June 18, 2014 of the Ministry of Finance guiding the implementation of the Law on Corporate Income Tax stipulates:

“Article 7. Other income

…

16. Other money, assets, and material benefits that the enterprise receives from organizations and individuals according to agreements and contracts in accordance with civil law when the enterprise hands over the old land location to relocate its production and business facilities after deducting related expenses such as relocation costs (transportation and installation costs), remaining value of fixed assets, and other expenses (if any).

As for the money, assets, and material benefits that enterprises receive under State policies and approved by competent State agencies to relocate production facilities, they shall be managed and used in accordance with relevant laws.

Based on the above provisions, in case the company is an enterprise without state capital and must relocate according to the planning of a competent state agency, when the enterprise receives compensation for fixed assets on land and relocation support money, after deducting related expenses such as relocation costs (transportation and installation costs), the remaining value of fixed assets and other expenses (if any), the enterprise shall account for the remaining amount in other income and declare and pay corporate income tax according to regulations.

NGHE AN TAX DEPARTMENT