Tax Alert New Circular on Corporate Income Tax June 2015

Transcription

1 Tax Alert New Circular on Corporate Income Tax June 2015 June 2015 Tax Alert New CIT Circular Trang 1

2 Circular 96/2015/TT-BTC (Circular 96) on Corporate Income Tax (CIT) was officially issued on 22 June 2015, which is quite some time since the effective date of the Law 71 and Decree 12. Circular 96 details significant CIT changes introduced in the Decree 12 and Law 71 by amending and supplementing a number of articles of Circular 78/2014 (Circular 78). Below are notable changes in the Circular 96: Revenue recognition of services provision Revenue from services shall be taxable when the services are either fully completed or partially provided by agreed progress to buyers, irrespective of invoice issuance time. Difference between VAT revenue and CIT revenue is anticipated, due to this change. CIT declaration and payment for income generating from offshore investment project of Vietnamese companies Income from offshore investments of Vietnamese companies shall be included into the CIT finalization returns of the year when such income is repatriated, instead of the income generating year as per previous rules. Income or loss arising from the offshore investment projects is not allowed to be offset against domestic business for CIT calculation purposes. Dossiers to be submitted upon CIT declaration and payment for the income from offshore investment project are simplified. June 2015 Tax Alert New CIT Circular Trang 2

3 Simplifying administrative procedure related to loss of goods or materials Enterprises are no longer required to submit the explanation letter to the tax authority related to natural disaster, epidemic, fire or goods damaged due to expiry or change of natural biochemical process. The requirement for local authority s confirmation on loss due to natural disaster, epidemic, fire is also removed. CIT deductible expenses Guidance on calculation of non-deductible interest amount corresponding to the uncontributed equity is detailed; Payment for below employment expenses is deductible at the level stated in the internal policy and no longer subject to current cap for CIT deduction purpose: Clothing allowance in kind for employees; Per diem allowance for domestic and overseas business trip to employees; Life insurance benefit and contribution to social security fund. Companies are no longer required to build up and manage their standard consumption level (the norms) of raw materials, materials, fuel, energy and goods used in production and business, except cases controlled and prescribed by the State. Payments by individual s credit cards are still accepted as cashless payment and qualify for CIT deduction purpose. June 2015 Tax Alert New CIT Circular Trang 3

4 Other taxable income The concept of Other incomes are those generating from unlicensed business activities in a tax period is removed. Realized loss due to exchange rate difference not directly related to revenue and expenses of main business activities is recorded into financial expenses instead of operational expenses of main business activities; Unrealized loss due to evaluation of payables at the financial year-end not directly related to revenue and expenses of main business activities is recorded into financial expenses for CIT calculation purposes.; Circular 96 officially introduces tax treatment to share premium applicable in companies which is consistent with guidance under Official Letter 16200/BTC-TCT dated 6 November 2014 per our update in November 2014 Tax Updates. Accordingly, a premium arising from capital contribution shall be: included into equity account and not taxable provided that this premium belongs to the company rather than specific owners, or considered as income generating from capital transfer activity and taxable if this premium belongs to specific owners. Tax incentives Detailed guidance on tax incentives applicable to investment projects located at incentivized locations is provided in form of specific examples, some highlights of which are as belows: Companies with transportation projects set up in incentivized locations (including Industrial Zones, Economics Zone and High Technology Zone) shall be entitled to corresponding tax incentives on income generating from routes with departure or June 2015 Tax Alert New CIT Circular Trang 4

5 destination within the incentivized location where those investment projects are set up. Companies with investment project set up in incentivized locations having income generating in other incentivized locations shall be entitled to corresponding tax incentive scheme applicable to those other locations. Detailed guidance are provided for tax incentives applicable to initially registered phases of investment projects licensed before 1 January 2014, expansion projects and investment projects in industrial zones during the period , investment projects setting up at locations becoming incentivized ones from 1 January Select of the tax incentive duration when the first tax period is under 12months is now avalaible to expansion projects, certified hi-tech enterprises and agricultural enterprises applying high technologies. Effectiveness Circular 96 shall come into effect since 6 August 2015 and apply for the tax year 2015 onwards. Companies with financial years other than calendar year shall follow the below transition provision: Transitional CIT incentive schemes (including: tax exemption and tax reduction period, favourable tax rate) are applicable for the remaining project period since 1 January 2015; Others provisions are effective since 1 January June 2015 Tax Alert New CIT Circular Trang 5

6 Contact For more information on this Tax Alert or our Tax & Advisory Services of EY Vietnam please contact: Hanoi Office Huong Vu Trang Pham Japanese Business Service Junichi Harada Korean Business Service Kyung Hoon Han Ho Chi Minh Office Christopher Butler Manager Manager EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promisesto all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com Ernst & Young Vietnam Limited. All Rights Reserved. APAC No ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. ey.com Nhung Tran nhung.tran@vn.ey.com Thinh Xuan Than thinh.xuan.than@vn.ey.com Thy Thi Anh Huynh thy.anh.huynh@vn.ey.com Director Japanese Business Service Takahisa Onose takahisa.onose@vn.ey.com Director June 2015 Tax Alert New CIT Circular Trang 6