VGP – The income from the enterprise’s outbound investment projects shall be declared in the corporate income tax (CIT) finalization in the year of transferring such income to the local country by such enterprise.
Question: What are the fresh amendments on CIT as stipulated in Circular 96/2015/TT-BTC (Circular 96)?
Answer: Circular 96 was issued by the Ministry of Finance on June 22 to guide the implementation of Decree 12/2015/ND-CP on CIT, amend and supplement some articles of Circular 78/2014/TT-BTC; Circular 119/2014/TT-BTC, dated August 25, 2014; Circular 151/TT-BTC dated October 10, 2014 of the Ministry of Finance. Accordingly, Circular 96 features noteworthy amendments as follows:
1. Method of calculating CIT on project earnings of Vietnamese enterprises involved in outbound investment
Unlike the provisions of Circular 78 where the income arising from the enterprise’s outbound investment projects shall be declared in the CIT finalization of the outbound income generating year or the year following the outbound income generating year, Circular 96 states that the income from the enterprise’s outbound investment projects shall be declared in the CIT finalization in the year of transferring such income to the local country by such enterprise. This novelty aims to help enterprises simplify the tax declaration procedures, reduce the CIT burden in case where enterprises want to retain this income overseas for reinvestment or expand their investment operations.
Carrying forward losses
Circular 96 gives better guidance on carrying forward losses to the following year in connection with the types of corporate income. Specially, the losses, if any, in the taxation period from the enterprise’s transfer of real estate, investment projects, right to performance of investment projects (excluding exploration, mining projects) shall be offset with the profits production and business activities (including other income as defined in Article 7 of Circular 78. If remaining existent after offsetting, such losses shall continue to be carried forward to the following year within the statutory deadline.
Circular 96 has also added provisions on carrying forward losses upon separation, split of the enterprises while the current Circular 78 only specifies instructions on carrying forward losses upon conversion, merger or consolidation of enterprises.
Time of determining revenue to calculate Circular 96 amended the existing Circular 78 in terms of the time of determining revenue to calculate the taxable income with respect to the provision of services. Accordingly, the time of determining the revenue of this activity is none other than the date of completing the provision of services to the buyer rather than determining based on either the time of completing the provision of services to the buyer or the time of issuing invoice for service provision like before. This amendment of Circular 96 will serve as the legal basis for the tax authorities to collect tax arrears, manage taxation in case where enterprises perform acts of tax fraud.
Determining the purchase price of the transferred capital contribution
Circular 96 more clearly specifies the method of determining the purchase price of the transferred capital contribution. In case of the transfer of capital contribution for enterprise establishment, the purchase price shall be the value of the capital contribution accumulated until the time of transfer (instead of just the capital contribution as in the current regulations). What’s more, the loan interest costs for capital investment by the enterprises will not be included the purchase price. In case of transfer of the capital in form of an acquired capital, the purchase price is the capital value at the time of purchase. The purchase price was determined based on the capital contribution acquisition contract and payment vouchers.
Preferential tax rate
Circular 96 specifies the tax incentives for high-tech enterprises, high-tech applying agricultural enterprises.
These enterprises are only entitled to preferential CIT with respect to the income from high-tech operations, high-tech applications and the income amounts directly related to income from high-tech operations, high-tech application (as opposed to the whole income under the current regulations). Additional cases apply by 10% preferential tax rate for 15 years for the corporate income from the new investment project of producing any product on the List of Industry Supporting Products under Development Priorities.
Source: VGP News - news.chinhphu.vn