According to regulations, for production and business enterprises with taxable income, they must pay corporate income tax (CIT). Below is a detailed guide on how to calculate CIT according to the latest regulations, businesses should note to avoid errors.
1. Instructions on how to calculate CIT
According to Clause 1, Article 3 of Circular 78/2014/TT-BTC (amended and supplemented by Circular 96/2015/TT-BTC), the payable CIT amount in the tax period is the taxable income minus the deduction. setting up a science and technology fund (if any) multiplied by the tax rate.
The payable CIT in 2020 is determined according to the following formula:
CIT payable = Taxable income – Scientific and industrial fund setting x CIT rate
In which, taxable income is determined according to the following formula:
Taxable income = Taxable income – (Exempt income + losses carried forward in accordance with regulations)
According to Article 2 of Circular 96/2015/TT-BTC, the taxable income in the tax period is determined according to the following formula:
Taxable income = (Revenue – deductible expenses) + Other income
Note: The corporate income tax rate in 2020 is 20% (According to Article 11 of Circular 78/2014/TT-BTC).
2. Determination of taxable income
To calculate taxable income, businesses first need to calculate revenue, deductible expenses and other incomes.
According to Clause 1, Article 5 of Circular 78/2014/TT-BTC, revenue is the entire proceeds from the sale of goods, processing fees, and service provision fees, including price subsidies, surcharges and extras that an enterprise is entitled to. benefits regardless of whether the money has been received or not.
- For enterprises paying value added tax (VAT) according to the tax credit method, the revenue is exclusive of VAT.
- For enterprises that pay VAT by the direct method on VAT, the revenue includes VAT.
- In case an enterprise has business activities in which customers pay in advance for many years, the revenue to calculate taxable income is allocated to the number of years of prepayment or determined according to the revenue of one-time payment, etc.
Expenses deductible when determining taxable income:
According to Article 6 of Circular No. 78/2014/TT-BTC (amended and supplemented by Circular 96/2015/TT-BTC), enterprises are entitled to deduct all expenses if they fully satisfy the following conditions:
- Actual expenses incurred in connection with production and business activities of enterprises.
- Expenses with sufficient legal invoices and documents as prescribed by law.
- Expenses if there is an invoice for buying goods and services each time with a value of 20 million VND or more (price includes VAT) when paying, there must be non-cash payment vouchers.
Other income of the enterprise:
According to Article 7 of Circular 78/2014/TT-BTC (amended and supplemented by Circular 96/2015/TT-BTC), other incomes of enterprises when calculating income tax in 2018 include:
- Income from capital transfer, securities transfer.
- Income from real estate transfer.
- Income from transfer of investment projects; transfer the right to participate in investment projects; transfer the right to explore, exploit and process minerals in accordance with law.
- Income from ownership, right to use property.
- Income from foreign currency sales.
- Income from exchange rate difference, etc.
Losses are carried forward in accordance with the following provisions:
- Enterprises are allowed to carry forward losses continuously for no more than 05 years
- According to Clause 2, Article 9 of Decree No. 78/2014/TT-BTC, enterprises that suffer losses after tax finalization shall transfer all and continuously the losses into income (taxable income minus tax-free income) of The next years.
- The period of loss transfer shall not exceed 5 consecutive years, counting from the year following the year in which the loss is incurred.
Determination of loss and loss transfer of the enterprise:
According to Article 9 of Circular 78/2014/TT-BTC (amended and supplemented by Circular 96/2015/TT-BTC), the loss of enterprises is determined as follows:
– Loss incurred in a tax period is the negative difference in taxable income excluding losses carried forward from previous years.
Taxable Income = (Revenue – deductible expenses + other income) – Exempt income
3. CIT rate
- The tax rate of 20% applies to all enterprises established under Vietnamese law.
- The tax rate from 32% to 50% will apply to enterprises having activities of searching, exploring, exploiting oil and gas, and other rare and precious resources in Vietnam.
- The tax rate of 50% will apply to enterprises having activities of searching, exploring and exploiting rare and precious natural resource mines. For example: platinum, gold, silver, tin, etc.
Above are answers to questions about how to calculate corporate income tax according to current law. To avoid legal risks please contact DHP LAW. DHP LAW is proud to be a tax accounting service provider for hundreds of businesses:
DHP Law Firm
Address: 09.OT06 Landmark 4 Building, Vinhomes Central Park, 720A Dien Bien Phu, Binh Thanh District, City. Ho Chi Minh City.
Phone: 0986.938.627 (Mr. Hung) or 0975909669 (Ms. Huyen)