What is Corporate Income Tax?

The purpose of applying corporate income tax is to:

• To create for the State a revenue associated with the business efficiency of the enterprise in particular and of the whole economy in general
• The amount of income that has been, is, and will arise from a business operating in a market economy.
• To adopt tax incentives, tax exemption and reduction, to encourage domestic and foreign investors to invest in Vietnam.
• Create fairness among businesses in production and business, in accordance with the policy of economic development in many sectors and in the integration process in our country today.

According to Clause 1 Article 3 of Circular 78/2014 / TT-BTC (amended by Circular 96/2015 / TT-BTC), the payable corporate income tax in the tax period is:

CIT payable = Taxable income X CIT rate

The tax rate of 20% applies to most businesses

Taxed income in a tax period is determined by taxable income minus tax-exempt income and losses carried forward from previous years according to regulations.
Taxable income = Taxable income - (Tax-exempt income + Losses carried forward as prescribed)
Taxable income = Revenue - Deductible expenses + Other income
Inside:

• Turnover: is the total proceeds from the sale of goods, processing fees or service charges, including price subsidies, surcharges and surcharges that an enterprise is entitled to, regardless of whether the money has been collected or not.
• Deductible expenses are actual expenses incurred in connection with production and business activities of the enterprise; expenses for the performance of defense and security tasks by enterprises according to the provisions of law. Having enough invoices and vouchers as prescribed by law. For a purchase of goods or services each time with a value of twenty million dong or more, a non-cash payment voucher is required, except in cases where non-cash payment is not required. according to regulations of the Law. Even so, there are many actual and documented expenses that are not deductible when calculating Corporate Income tax.

If an enterprise has deductions for its scientific and technological development fund, the payable enterprise income tax is determined as follows:
CIT payable = (Taxable income - S&T fund appropriation (if any)) X CIT rate
Appropriation to science and technology fund (if any): is allowed to deduct up to 10% of annual taxable income.