Adding tax exemption conditions in the draft revised Law on Corporate Income Tax

Supplementing the method of calculating corporate income tax to facilitate micro-enterprises, encouraging individual businesses and business households to convert into enterprises. Illustration: H.Anh

In line with the development of the socio-economy

On June 8, 2024, the National Assembly passed Resolution No. 129/2024/QH15 on the Law and Ordinance Development Program for 2025, adjusting the Law and Ordinance Development Program for 2024. Accordingly, the revised Law on Corporate Income Tax will be commented on by the National Assembly at the 8th session (October 2024) and approved at the 9th session (May 2025). According to Mr. Truong Ba Tuan, Deputy Director of the Department of Tax, Fee and Charge Policy Management and Supervision (Ministry of Finance), after more than 15 years of implementation, the Law on Corporate Income Tax has come into effect, positively impacted many economic and social aspects of the country and achieved important results. The Law has been completed in accordance with the direction of reforming the tax, fee and charge system as defined in the documents and resolutions of the Party and the State, at the same time, closely following the goals and directions defined in the Strategy for reforming the tax policy system for the period 2011-2020, thereby contributing significantly to creating a favorable investment and business environment, ensuring fairness and equality in competition among enterprises... However, Mr. Truong Ba Tuan said that according to the development of the economy and society, the Law on Corporate Income Tax has revealed some limit ations such as not meeting the requirements from practice and the new development requirements of the economy, as well as ensuring the consistency of the legal system... Practice has raised the need to amend and supplement the Law on Corporate Income Tax to suit the development of the economy and society at home and abroad.

Clarifying the key contents of the draft Law, Mr. Le Minh Khiem, Head of the Corporate Income Tax Department, Department of Tax, Fee and Charge Policy Management and Supervision (Ministry of Finance) said that the Draft Law has detailed regulations on taxpayers who are enterprises and public service units on the basis of legalizing the regulations that are being stably implemented in sub-law documents; clearly stipulating taxable income arising in Vietnam for foreign enterprises without a permanent establishment in Vietnam, including income from the provision of goods and services in the form of e-commerce business, business on digital platforms, regardless of the location of business. At the same time, supplement the provisions on compliance with international treaties in cases where international treaties to which Vietnam is a party have different provisions on permanent establishments in order to comply with the Law on International Treaties as well as the implementation of Vietnam's commitments when participating in relevant international treaties...

Regarding the method of calculating taxes, the draft Law has supplemented the provisions on applying the simple method of calculating taxes according to the percentage of revenue for enterprises with total annual revenue of no more than 3 billion VND in cases where revenue can be determined but expenses and income cannot be determined in order to facilitate micro-sized enterprises, encourage individual businesses and business households to convert into enterprises, thereby contributing to the implementation of the Party and State's policies on private economic development and regulating specific collection levels.

Tax exemption conditions in many fields

Regarding tax-exempt income, Mr. Le Minh Khiem said that the draft Law has amended and supplemented the content, criteria and specific conditions for a number of tax-exempt income items on the basis of legalizing the regulations that have been stably implemented in sub-law documents; supplementing regulations related to the undivided income of socialized establishments that are exempt from tax to stipulate that in cases where specialized laws do not specifically stipulate, the ratio of undivided income to taxable income of socialized establishments, the minimum ratio is 25% of taxable income; at the same time, adding the subject of cooperative s to comply with the provisions of the Law on Cooperatives 2023.

In addition, the draft Law also adds a number of tax-exempt income items including: income from the first transfer of carbon credits after issuance, income from interest and from the first transfer of green bonds after issuance; direct support from the state budget and from the Investment Support Fund established by the Government; compensation from the State according to the provisions of law; the difference due to revaluation of assets according to the provisions of law for equitization and restructuring of enterprises in which the State holds 100% of charter capital; income of public service units from providing public service; income from revenue-generating activities of the National Defense and Security Industry Fund, and the Investment Support Fund.

Regarding the determination of taxable income, the draft Law also adds specific provisions on the determination of taxable income and taxable income to legalize the provisions that are being stably implemented in sub-Law documents. At the same time, amend and supplement the regulations on taxable income to allow enterprises to offset profits from real estate transfers, investment project transfers, and transfers of investment project participation rights against losses from production and business activities, except for production and business activities that are enjoying tax incentives.

Reviewing the amendment of the Law on Corporate Income Tax, Mr. Nguyen Trinh, representative of the Project on Strengthening Public Finance Management in Vietnam (Germany International Cooperation Organization - GIZ) said that it is necessary to amend the Law, and emphasized that the completion of the draft Law on Corporate Income Tax will aim for a more favorable business environment, encourage investment and sustainable development as well as meet the objectives set for corporate income tax reform as stated in the Tax Reform Strategy for the period 2021-2030. According to Mr. Nguyen Trinh, these changes in the revised Law on Corporate Income Tax will help ensure that the tax system is consistent with modern economic practices and meets the requirements of the global market economy.