Nghị định 164/2003/NĐ-CP

DECREE No. 164/2003/ND-CP OF DECEMBER 22, 2003 DETAILING THE IMPLEMENTATION OF THE LAW ON ENTERPRISE INCOME TAX THE GOVERNMENT Pursuant to the December 25, 2001 Law on Organization of the Government; Pursuant to the June 17, 2003 Law No. 09/2003/QH11 on Enterprise Income Tax; At the proposal of the Minister of Finance, DECREES: Chapter I APPLICATION SCOPE OF ENTERPRISE INCOME TAX Article 1.- Organizations and individuals engaged in goods production and trading and/or service provision (hereinafter referred collectively to as business establishments) with incomes shall have to pay enterprise income tax according to the provisions in this Decree. 1. Organizations engaged in goods production and trading and/or service provision, including: State enterprises; limited liability companies; joint-stock companies; partnerships; foreign-invested enterprises and foreign parties to business cooperation contracts under the Law on Foreign Investment in Vietnam; foreign companies and organizations doing business in Vietnam not under the Law on Foreign Investment in Vietnam; private enterprises; cooperatives; cooperation groups; economic organizations of political organizations, socio-political organizations, social organizations, socio-professional organizations or people's armed force units; administrative agencies and non-business units engaged in goods production and/or trading and/or service provision. 2. Vietnamese individuals engaged in goods production and/or trading and/or service provision, including: a/ Business individuals and groups of business individuals; b/ Individual business households; c/ Independent professional practitioners: medical doctors, lawyers, accountants, auditors, painters, architects, musicians, and others; d/ Individuals leasing such properties as houses, land, transport means, machinery and equipment or other kinds of property; 3. Foreign individuals doing business and having incomes generated in Vietnam, regardless of whether their business activities are carried out in Vietnam or in foreign countries. 4. Foreign companies doing business through their resident establishments in Vietnam. Resident establishments are business establishments through which foreign companies conduct part or all of their income-generating business activities in Vietnam. Foreign companies' resident establishments mainly take the following forms: a/ Branches, executive offices, factories, workshops, goods-forwarding warehouses, transport means, mines, oil or gas fields or natural resource- exploring and -exploiting sites or equipment and facilities in service of natural resource exploration; b/ Construction sites; construction, installation and/or assembly projects; activities of construction supervision as well as construction, installation and/or assembly projects; c/ Establishments providing services, including consultancy services provided by their employees or other subjects; d/ Agents of foreign companies; e/ Vietnam-based representatives in cases where: - They are competent to sign contracts on behalf of foreign companies; - They are not competent to sign contracts on behalf of foreign companies but regularly perform the delivery of goods or the provision of services in Vietnam. In cases where a double taxation avoidance agreement which the Socialist Republic in Vietnam has signed otherwise provides for resident establishments, the provisions of such agreement shall apply. Article 2.- Subjects not liable to pay enterprise income tax include households, individuals, cooperation groups and cooperatives engaged in agricultural production with incomes from cultivation, husbandry and aquaculture products, except for peasant households and individuals engaged in large-scale commodity production with high incomes. The payment of enterprise income tax applicable to peasant households and individuals engaged in large-scale commodity production with high incomes from cultivation, husbandry and/or aquaculture products shall be prescribed separately. The Ministry of Finance shall be assigned to assume the prime responsibility for, and coordinate with the Ministry of Agriculture and Rural Development and the Ministry of Aquatic Resources in, submitting to the Government for promulgation regulations on payment of enterprise income tax, applicable to these subjects. Chapter II TAX CALCULATION BASES AND TAX RATES Article 3.- Tax calculation bases are taxable incomes in the tax-calculation period and tax rates. Enterprise income tax-calculation period shall be determined according to calendar year or fiscal year. Article 4.- Turnover for calculation of taxable income shall be determined as follows: 1. Turnover for calculation of taxable income shall be the total proceeds from goods sale and/or service provision, including price subsidies, surcharges and additional amounts enjoyed by business establishments, regardless of whether such amounts are collected or not. For business establishments that pay value added tax according to tax deduction method, the turnover for calculation of taxable income shall be the turnover without value added tax. For business establishments that pay value added tax directly on the added value, the turnover for calculation of taxable income shall be the turnover inclusive of value added tax. 2. For goods sale and/or service provision activities, the time for determining the turnover for calculation of taxable income shall be the time of transferring the right of ownership over goods, completing services or compiling invoices on goods sale and/or service provision. 3. Turnover for calculation of taxable income in some cases is specified as follows: a/ For goods sold by mode of installment payment, the turnover for calculation of taxable income shall be determined according to the sale price paid in lump sum, excluding the interests on deferred payment; b/ For goods and/or services used for barter, presentation, donation or internal consumption, the turnover for calculation of taxable income shall be determined according to the sale prices of goods and/or services of the same or similar categories at the time of barter, presentation, donation or internal consumption; c/ For goods-processing activities, the turnover for calculation of taxable income shall be the proceeds from the processing, including remuneration, costs of fuels, power, auxiliary materials and other costs in service of goods processing; d/ For property-leasing activities, the turnover for calculation of taxable income shall be the rentals paid by the lessees for each term under leasing contracts. In cases where the lessees pay rentals in advance for several years, the turnover for calculation of taxable income shall be divided for the number of years for which rentals have been paid in advance or be determined according to the rentals paid in lump sum. The Ministry of Finance shall guide in detail the methods of determining turnover from the advance payment of rentals for several years in order to determine taxable income suitable to each kind of business establishments defined at this Point; e/ For credit activities, the turnover for calculation of taxable income shall be the amounts of retrievable loan interests arising in the tax-calculation period; f/ For other activities, the turnover for calculation of taxable income shall be prescribed by the Ministry of Finance. Article 5.- Reasonable expenses allowed to be subtracted for the calculation of taxable income include: 1. Depreciation of fixed assets used for goods production and trading and/or service provision activities. The fixed assets' depreciation rates shall be determined according to the value of fixed assets and depreciation duration. Establishments producing and/or dealing in goods and services with high economic efficiency may apply quicker depreciation rates which, however, must not exceed two times the prescribed depreciation rate, in order to quickly renew their technologies. The Ministry of Finance shall specify fixed asset standards, as well as duration and rate of depreciation and quick depreciation prescribed in this Clause. 2. Costs of raw materials, supplies, fuel, energy and goods volume actually used in goods production and trading and/or service provision related to turnover and taxable income in a period, which shall be calculated according to a reasonable consumption norm and actual ex-warehousing prices determined by enterprises themselves for which they shall take responsibility before law. Business establishments, that purchase products made of rattan, bamboo, rush, coconut fibers or palm leaves from their makers, handicraft and fine-art articles from non-business artisans; earth, stone, sand and gravel directly from exploiters; discarded materials directly from gatherers and some services from non-business individuals without invoices and vouchers, may make lists thereof according to the Finance Ministry's regulations on the basis of the payment requests of goods sellers and/or service providers. Directors of business establishments who approve the payments according to such lists shall have to bear responsibility before law for the accuracy and truthfulness thereof. 3. Wages, remuneration and allowances paid to laborers according to the Labor Code, expenses for mid-shift meals and food rations: a/ Wages, remuneration and allowances paid to laborers in State enterprises shall be calculated into reasonable expenses according to the current regimes; b/ Wages, remuneration and allowances paid to laborers in other business establishments shall be calculated into reasonable expenses under labor contracts; c/ Expenses for mid-shift meals for laborers, which shall be calculated into reasonable expenses, must not exceed the minimum wage level prescribed by the State for State officials; d/ Food rations for laborers working in some special branches and lines shall comply with the State-prescribed regimes. 4. Expenses for scientific and technological research; innovations and modifications, healthcare and laborers' training according to the prescribed regimes; financial donation for education. 5. Expenses for services purchased from outside: electricity, water, telephone, repair of fixed assets; rentals of fixed assets; audit; legal services; designing, establishment and protection of trademarks; property insurance; payments for use of technical documents; patents; technological licenses not belonging to fixed assets, technical services and other services purchased from outside. 6. Payments: a/ Expenses for female laborers, including: - Expenses for re-training of female workers and officials in cases where their former professions are no longer suitable in order to shift them to other professions under business establishments' development plannings. These extra expenses shall cover: training fees (if any) + difference between wage ranks and grades (those who are sent to study shall enjoy 100% of their wages). - Payment of wages and allowances (if any) to teachers in nurseries and kindergartens organized and managed by enterprises. The number of these teachers shall be determined according to the norms prescribed by the education and training system; - Expenses for organizing an additional health check in a year such as examination of occupational, chronic or gynecological diseases for female workers and employees; - Payment of allowances for female laborers after childbirth. The allowance levels must not exceed VND 300,000 for business establishments based in cities, townships or towns or VND 500,000 for business establishments located in geographical areas defined in List B and List C of the Appendix to this Decree, aiming to help the mothers partly overcome difficulties. - During the period of breast-feeding, if, for objective reasons, female laborers do not take rests for feeding their children according to the prescribed regimes but stay to work for business establishments, they shall enjoy allowances for overtime work according to the prescribed regimes. For business establishments engaged in production, construction or transportation activities involving large numbers of female laborers, if they can separately account and monitor the actual payments for female laborers, they shall enjoy enterprise income tax reduction according to Article 45 of this Decree. b/ Expenses for labor safety protection according to the Labor Code. In some business establishments where laborers have to wear uniforms at working places, expenses for the purchase of uniforms shall be calculated into reasonable expenses. c/ Expenses for protection of business establishments; working mission allowances; d/ Deductions for contribution to social insurance and heath insurance funds under the responsibility of labor-employing business establishments; trade union funding; support of Party's and mass organizations' activities at business establishments; deductions for forming the source to cover managerial costs for superior levels and setting up associations' funds according to the prescribed regimes. 7. Payment of interests on loans for production, business and services to credit institutions, financial organizations and other economic organizations at the actual interest rates; payment of interests on loans borrowed from other subjects at the actual interest rates which, however, must not exceed 1.2 times the lending interest rates of commercial banks at the time of borrowing. 8. Deductions for reserve amounts according to the prescribed regimes. 9. Severance allowances for laborers according to the prescribed regimes. 10. Expenses for goods sale and/or service provision, including: expenses for preservation, packaging, transportation, portage, renting of warehouses and storing yards and product warranty for goods and/or services. 11. Expenses for advertisement, marketing, sale promotion, guest reception, festivities, transaction expenses, payment of brokerage commissions, expenses for conferences and other expenses directly related to goods production and trading and/or service provision, which must not exceed 10% of the total expenses listed from Clause 1 to Clause 10 of this Article. For trading activities, the total reasonable expenses used for determining the controlled level shall exclude the purchase prices of goods sold out. 12. Payable taxes, charges, fees and land rents which are related to goods production and trading and/or service provision (except enterprise income tax), including: a/ Export tax, import tax; b/ Special consumption tax; c/ Value added tax for business establishments which pay value added tax directly on the added value; value added tax for business establishments which pay value added tax according to tax deduction method in cases of purchasing and/or importing goods and/or services for the production of goods and/or provision of services, which are not subject to value added tax; input value added tax in cases of exporting goods and/or services but failing to fully meet conditions for tax deduction and reimbursement according to law provisions on value added tax; input value added tax not allowed to be deducted due to late declaration as compared with prescribed time limit; d/ Excise tax; e/ Natural resource tax; f/ Agricultural land use tax; g/ House and land tax; h/ Charges and fees according to law provisions; i/ Land rents. 13. Business management expenses allocated by foreign companies to their resident establishments in Vietnam according to the proportion of such resident establishments' turnover to the total turnover of such foreign companies, including turnover of resident establishments in other countries. Vietnam-based resident establishments of foreign companies, which have not yet applied the regimes of accounting, invoices and vouchers and pay tax according to their declaration, shall not be allowed to account the business management expenses allocated by such foreign companies into reasonable expenses as prescribed in this Clause. Article 6.- The following expenses must not be accounted into reasonable expenses: 1. Wages and remuneration paid by business establishments due to their failure to strictly observe the labor contract regimes as prescribed by labor legislation, except for cases of hiring laborers for piece work. Wages and remuneration of owners of private enterprises, members of partnerships, heads of business households and business individuals, remuneration paid to founding members and members of the managing boards of limited liability companies or joint-stock companies, who do not directly participate in the administration of goods production and trading and/or service provision. 2. Deductions advanced as expenses by actually not spent, which include advance deductions for overhaul of fixed assets, charges for warranty of goods and construction works or other advance deductions. 3. Expenditures without invoices and vouchers or with invalid invoices and vouchers. 4. Fines for administrative violations such as violations of traffic law, violations of business registration regimes, violations of accounting and statistic regulations, violations of tax legislation and other administrative violations. 5. Expenses not related to turnover and taxable income such as expenses for capital construction investment; support for localities, mass organizations and social organizations outside business establishments; expenses for charity purposes and other expenses not related to turnover and taxable income. 6. Expenses covered by other funding sources such as non-business expenses, allowances for regular and unexpected difficulties. Article 7.- Turnover, reasonable expenses and taxable income shall be determined in Vietnam dong. In cases where business establishments have turnover, reasonable expenses and taxable income in foreign currencies, such foreign currency amounts must be converted into Vietnam dong at the exchange rates announced by Vietnam State Bank at the time such foreign currency turnover and expenses arise, except for cases where otherwise provided for by law. For foreign currencies without exchange rates with Vietnam dong, the conversion must be effected through a foreign currency with exchange rate with Vietnam dong. Article 8.- Taxable incomes shall include: incomes from goods production and trading and/or service provision activities and other incomes in the tax-calculation period, including those generated from goods production and trading and/or service provision activities overseas. 1. Taxable incomes from goods production and trading and/or service provision activities shall be the turnover for the calculation of taxable income minus (-) reasonable expenses related goods production and trading and/or service provision activities in the tax-calculation period. In cases where business establishments earn incomes from activities of share capital and/or joint-venture capital contribution, for which enterprise income tax has been paid by business establishments receiving such share capital and/or joint-venture capital, these incomes shall not be subject to enterprise income tax. 2. Other taxable incomes in the tax-calculation period include: a/ Differences between securities purchase and sale; b/ Incomes from activities related to industrial property right and copyrights; c/ Other incomes from property ownership and use rights; d/ Incomes from the transfer of land use right or land rent right; e/ Profits from the transfer or liquidation of property; f/ Interests on deposits, loans and goods sale with deferred payment; g/ Differences from the sale of foreign currencies, profits from foreign exchange rate differences; h/ Year-end balances of reserves according to the prescribed regimes; i/ Bad debts already written off from the accounting books but now recovered; j/ Payable debts with unidentifiable creditors; k/ Incomes from goods production and trading and/or service provision activities in previous years, which had been omitte