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Corporate income tax (“CIT”)

Tax treatment for business activities eligible for CIT incentive

On 20 March 2024, Binh Duong Tax Department issued Official Letter No. 6427/CTBDU-TTHT guiding on CIT tax treatment as follows:

According to the instructions in Clause 9, Article 18 of Circular No. 78/2014/TT-BTC:

In the same tax period, the Company incurs losses in business activities eligible for tax incentives, while having profit from business activities not eligible for tax incentives, or other profit from business activities (excluding income from real estate transfer activities, transfer of investment projects; income from transfer of rights to participate in investment projects, transfer of rights to explore, exploit and process minerals according to the provisions of law) (or vice versa), the Company can offset losses from tax incentive activities with the taxable income of income-generating activities selected by the Company. The income after offsetting will apply the CIT tax rate of the activity which has remaining income.

If an enterprise has been suffering losses from previous tax periods (the time limit for carrying forward losses has not expired), it may clear such losses against incomes from income-generating activities. If the enterprise cannot separate the losses of each activity, the enterprise will transfer the loss to the income of the activity that is eligible for corporate income tax incentives first, then transfer the loss to the income of the activity that is not eligible for corporate income tax incentives.

Salary and wage paid to the member of Board of Directors (“BOD”)

On 22 March 2024, Hanoi Tax Department issued Official Letter No. 14112/CTHN-TTHT providing guidance on expense for members of BOD as follows:

In case the Company pays salaries, wages and other monetary or non-monetary benefits to members of BOD who do not directly participate in operating production and business, this expense is not included in deductible expenses when determining taxable income for CIT according to the provisions of Clause 2.6, Article 4 of Circular No. 96/2015/TT-BTC of the Ministry of Finance.

In case the Company pays salaries, wages and other monetary or non-monetary benefits to BOD members  who directly participate in operating production and business, this amount will be included in deductible expense when determining taxable income for CIT if the conditions and amounts of these expenses are recorded in one of the documents such as labor contracts; collective labor agreement; the Company’s financial regulations… and satisfy the regulations specified in Article 4 of Circular No. 96/2015/TT-BTC, Clause 2 Article 3 of Circular No. 25/2018/TT-BTC.