The currently applied corporate income tax rate of 2023 is 20%, 25% to 50% depending on each business field and line. Compared to 2022, the CIT rate between 25% and 50% will change from July 1, 2023 when the Petroleum Law 2022 comes into effect. Let’s explore in details in the following article with Faro Vietnam.

1. The latest corporate income tax applies from July 1, 2023

In Article 10 of the Law on Corporate Income Tax 2008 (amended in Clause 6, Article 1 of the Law on Corporate Income Tax, as amended in 2013 and Clause 1, Article 67 of the Petroleum Law 2022 (effective from July 1, 2023)) regulations on corporate income tax rates are as follows:

1.1 Tax rate of 20%

The corporate income tax rate applicable to all businesses is 20%; Except for the case where the tax rate from 32% to 50% in Section (2) is applied or the enterprise is eligible for the preferential tax rate.

1.2 Tax rate from 25% to 50%

The corporate income tax rate for petroleum activities is from 25% to 50%, suitable for each oil and gas contract; (This tax rate applies from 1/7/2023 instead of the tax rate from 32% to 50%)
The corporate income tax rate applicable to the search, exploration and exploitation of other rare and precious resources in Vietnam ranges from 32% to 50%, suitable for each project and each business establishment.

2. Determine the amount of corporate income tax payable

The payable corporate income tax amount in the tax period is calculated by multiplying the taxable income by the tax rate; In case an enterprise has paid income tax outside Vietnam, the paid income tax amount may be deducted but must not exceed the payable enterprise income tax amount according to the provisions of the Law on Corporate Income Tax.

Corporate income tax rate in 2023

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3. Determination of taxable income for corporate income tax

Taxable income in a tax period is determined by taxable income minus tax-free income and losses carried forward from previous years. Taxable income is equal to turnover minus deductible expenses of production and business activities plus other incomes, including incomes received outside Vietnam.

Income from real estate transfer, investment project transfer, right to participate in investment projects, transfer of mineral exploration, mining and processing rights must be determined separately for tax declaration and payment. Incomes from the transfer of investment projects (except for mineral exploration and mining projects), income from the transfer of the right to participate in investment projects (except for the transfer of the right to participate in mineral exploration and exploitation projects). ), income from real estate transfer, if there is a loss, this loss shall be offset against the profit of production and business activities in the tax period.

4. Expenses that are deductible and non-deductible when determining taxable income

Except for expenses that are not deductible when determining taxable income, an enterprise may deduct all expenses when determining taxable income if it fully meets the following conditions:

• Actual expenses incurred in connection with production and business activities of the enterprise; expenses for vocational education activities; expenditures for performing defense and security tasks of the enterprise in accordance with law;
• Expenses with sufficient invoices and documents as prescribed by law. For goods and service purchase invoices each time with a value of twenty million dong or more, a non-cash payment document must be provided, except for cases where it is not required to have a non-cash payment document. according to regulations of the Law.

The latest corporate income tax applies from July 1, 2023

5. Expenses that are not deductible when determining taxable income include

• Expenses that do not fully satisfy the conditions specified in Clause 1 of this Article, except for the value of losses due to natural disasters, epidemics and other force majeure cases, which are not compensated;
• Fines for administrative violations;
• Expenditures covered by other funding sources;
• The portion of business administration expenses allocated by the foreign enterprise to the permanent establishment in Vietnam in excess of the amount calculated according to the method of allocation prescribed by Vietnamese law;
• Expenses in excess of the provisions of the law on setting up provisions;
• The interest payment on loans for production and business loans of subjects who are not credit institutions or economic organizations exceeds 150% of the basic interest rate announced by the State Bank of Vietnam at the time of borrowing.
• Depreciation of fixed assets is not in accordance with the provisions of law;
• The advance deduction for expenses is not in accordance with the provisions of law;
• Salaries and wages of private business owners; remuneration paid to enterprise founders who are not directly involved in production and business management; salaries, wages, other expenses to pay employees but in fact do not pay or do not have invoices and documents as prescribed by law;
• Payment of loan interest corresponding to the deficit of charter capital;
• The deducted input value-added tax, value-added tax paid by the credit method, corporate income tax;
• Grants, except for grants for education, health care, scientific research, disaster recovery, building houses of great solidarity, houses of gratitude, houses for policy beneficiaries as prescribed by law. laws, grants under the State's programs for localities in areas with extremely difficult socio-economic conditions;
• The contribution to the voluntary retirement fund or fund of a social security nature, purchase of voluntary retirement insurance for employees in excess of the prescribed amount in accordance with law;
• Expenses for business activities: banking, insurance, lottery, securities and a number of other specific business activities as prescribed by the Minister of Finance.
• Expenses in foreign currency are deductible when determining taxable income that must be converted into Vietnam dong at the average exchange rate on the inter-bank foreign currency market announced by the State Bank of Vietnam at the time of arising foreign currency payments.
   

If you still have question regarding latest corporate income tax applies from July 1, 2023, feel free to reach out to us using the contact information provided below:

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