Q&A ON TAX POLICY AND LAW

(Baonghean) - Question:Our company, a non-state-owned enterprise, is required to relocate according to the provincial People's Committee's plan. Are we subject to corporate income tax on the compensation for fixed assets on the land and relocation assistance payments? If so, are related expenses deductible when determining taxable corporate income?

Reply:

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

Article 7. Other income

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16. Any money, assets, or other material benefits received by the enterprise from organizations or individuals under agreements or contracts in accordance with civil law, resulting from the enterprise handing over the old land location for the relocation of its production and business facilities, after deducting related expenses such as relocation costs (transportation and installation costs), the remaining value of fixed assets, and other expenses (if any).

"Specifically, any funds, assets, or material benefits that businesses receive under State policies, approved by competent State agencies for the relocation of production facilities, shall be managed and used in accordance with relevant laws."

Based on the above regulations, in the case of a company that is a non-state-owned enterprise and must relocate according to the planning of a competent state agency, when the enterprise receives compensation for fixed assets on the land and relocation support funds, after deducting related expenses such as relocation costs (transportation, installation costs), the remaining value of fixed assets, and other expenses (if any), the enterprise shall account for the remaining amount as other income and declare and pay corporate income tax according to regulations.

NGHE AN TAX DEPARTMENT