Amendments and additions to corporate income tax

(Baonghean) - Question: It is known that on October 1st, the Government issued Decree No. 91/2014/ND-CP amending and supplementing a number of articles of decrees regulating taxes. This decree contains many provisions; could the Tax Department please provide information on the amendments and supplements regarding corporate income tax (CIT)?

Reply:On October 1st, the Government issued Decree No. 91/2014/ND-CP amending and supplementing several articles of decrees regulating taxes. This Decree takes effect from November 15th, 2014. The Decree introduces significant changes compared to previous tax decrees. The issue you are asking about is regulated in Article 1 of the Decree, which applies to corporate income tax calculation from 2014 onwards. Here are the main changes:

1/ The regulation is amended to exempt corporate income tax on the difference resulting from the revaluation of assets of state-owned enterprises during privatization (Clause 1, Article 1, Decree 91).

2/ Amend the tax exemption period from 1 year to a maximum of 3 years for income from the implementation of scientific research and technology development contracts; income from the sale of products made from new technologies applied for the first time in Vietnam according to the law and guidance of the Ministry of Science and Technology, tax exemption from 1 year to a maximum of 5 years from the date of revenue from the sale of the product; income from the sale of products produced on a trial basis during the trial production period as prescribed by law (Clause 2, Article 1, Decree 91);

3/The regulations are amended to allow businesses to deduct the following welfare expenses directly paid to employees, provided the business has invoices and supporting documents as prescribed: (expenses for funerals and weddings of the employee and their family; vacation expenses; medical treatment support expenses; expenses for supplementary education at training institutions; expenses for supporting employees' families affected by natural disasters, war, accidents, or illness; expenses for rewarding employees' children with good academic achievements; expenses for travel expenses during holidays and Tet (Lunar New Year)). These expenses are based on the guidance of the Ministry of Finance; the total amount of these expenses shall not exceed one month's average actual salary paid in the tax year. (Clause 4, Article 1, Decree 91).

4/ Supplementing regulations to allow businesses to depreciate at actual value for cars with nine (9) seats or less used as models and test drives by car business establishments (currently only allows depreciation and inclusion in costs of the original cost from 1.6 billion VND) (Clause 5, Article 1, Decree 91);

5/ The regulations stipulate that areas with favorable socio-economic conditions do not include districts of special-class cities, centrally-administered Class I cities, and newly established Class I cities under provincial administration that were created from districts since January 1, 2009. Accordingly, enterprises with investment projects in industrial parks located in these areas are entitled to incentives as prescribed (Clause 6, Article 1, Decree 91).

6/ The regulations stipulate that projects with phased investment and projects involving the regular addition of machinery are entitled to tax incentives at the same rate as those applied to initial investment projects; for investment projects granted investment licenses before January 1, 2014, the tax incentives for the remaining period are calculated from January 1, 2014 (Clause 7, Article 1, Decree 91).

7/The transitional provisions for corporate income tax incentives for textile and garment enterprises meeting export criteria whose tax incentives were discontinued due to WTO commitments are supplemented. These enterprises are selected to continue enjoying tax incentives based on the conditions they meet (in addition to the export ratio requirement) for the remaining incentive period as stipulated in previous legal documents on corporate income tax at the time of establishment or in previous legal documents on corporate income tax at the time of adjustment due to WTO commitments (Clause 8, Article 1, Decree 91).

8/ Update information on some localities in the Appendix to the List of localities eligible for corporate income tax incentives to reflect the reality (from towns to cities) (Clause 9, Article 1, Decree 91).

Nghe An Tax Department