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The Ministry of Finance is currently gathering public feedback on a draft decree guiding the Law on Corporate Income Tax. Notably, the draft outlines 14 categories of income that would be exempt from corporate income tax (CIT), with the aim of promoting investment and innovation, and providing support for disadvantaged communities and priority sectors.
Under the proposal, CIT-exempt income includes earnings from fishing, crop cultivation, afforestation, livestock production, aquaculture, and agricultural and aquatic product processing in areas with extremely difficult socio-economic conditions. The exemption would also apply to cooperatives and cooperative unions engaged in these fields and salt production, and to those engaged in agriculture, forestry, fishery and salt production in difficult or extremely difficult areas.
Income from scientific research, technological development, innovation, digital transformation, and the sale of products turned out by newly applied technologies or products from pilot production processes would also be exempt from CIT for a period of up to three years.
Enterprises with at least 30 percent of their total employees recruited from vulnerable groups, including persons with disabilities, former drug addicts and HIV-infected persons, and usually employing an annual average of at least 20 employees would also be given CIT exemption, provided they are not engaged in the financial or real estate sector.
Besides, vocational training institutions dedicated to ethnic minorities, persons with disabilities, disadvantaged children, and other socially vulnerable groups would be exempt from CIT.
Other CIT-exempt income categories include dividends from capital contributions, purchased shares, or partnerships with domestic enterprises after corporate income earners’ partners have fulfilled their tax obligations; financial donations for education, culture, arts, charity or other social activities in Vietnam; financial donations from non-affiliated enterprises for scientific research, technological development, innovation or technology transfer; and the state budget’s financial supports.
CIT exemption would also be given for proceeds from the asset revaluation for equitization or restructuring of state-owned enterprises; income from the initial transfer of emission reduction certificates and carbon credits issued to enterprises; interests on green bonds and income from the initial transfer of green bonds; income from the performance of the State-assigned tasks; undivided earnings of institutions mobilizing social resources for investment in education, health and related activities; income from technology transfer in prioritized sectors to entities and individuals in extremely difficult areas; and income from public services provided by public non-business units.
Under the draft, tax breaks are also proposed for new enterprises transformed from business households.
A tax exemption period would be counted consecutively from the first year in which an enterprise earns a taxable income. In case the enterprise generates no taxable income within the first three years from the date of turnover generation, the exemption period would be counted from the fourth year.
In case an enterprise’s first tax period is shorter than 12 months, it might choose to enjoy the CIT exemption within that period or register the following tax period with the tax authority.
To qualify for the exemption, household and individual businesses must have registered their operation and operated continuously for at least 12 months before receiving their initial enterprise registration certificates.
Worthy of note, enterprises that are formed through the restructuring or re-registration involving individuals who were previously legal representatives, general partners or major capital contributors in other enterprises dissolved within the past 12 months would not be eligible for CIT exemption.
Upon the expiration of the CIT exemption period, those implementing investment projects in prioritized sectors, fields and localities would continue to enjoy other CIT incentives.
When both the CIT exemption and incentive periods expire, enterprises would pay CIT at the rate of 15 percent for annual income of up to VND 3 billion, or 17 percent for income of between VND 3 billion and VND 50 billion.
By VLLF
