Official Dispatch No. 2512/TCT-CS dated June 24, 2015, New contents of Circular No. 96/2015/TT-BTC

To: Provincial Departments of Taxation

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The Ministry of Finance issued Circular No. 96/2015/TT-BTC dated June 22, 2015 on guidelines for corporate income tax in the Government's Decree No. 12/2015/NĐ-CP dated February 12, 2015 on guidelines for the law on amendments to laws on taxation and amendments to degrees on taxation; amendments to some articles of Circular No. 78/2014/TT-BTC dated June 18, 2014, circular no.119/2014/TT-BTC dated august 25, 2014, and Circular No. 151/2014/TT-BTC dated October 10, 2014 of the Ministry of Finance . General Department of Taxation hereby requests Provincial Departments of Taxation to notify tax officials and disseminate new contents of the Circular, which comes into force from August 06, 2015 and applies to tax period 2015 onwards, among local taxpayers. Some new contents of Circular No. 96/2015/TT-BTC:

1. Method for calculation of corporate income tax (CIT) in Article 1, which amends Clause 1 Article 3 of Circular No. 78/2014/TT-BTC)

Amendment to some regulations on declaration, payment of CIT by Vietnamese enterprises making investment overseas:

- In case of a Vietnamese enterprise who makes investment in a foreign country that has signed a Double Taxation Agreement and transfers income to Vietnam after paying CIT overseas, regulations of such Agreement shall apply. If the foreign country has not signed a Double Taxation Agreement with Vietnam and the rate of CIT incurred in the foreign country is lower, the difference in corporate income tax shall be collected in accordance with the CIT Law of Vietnam.

- Income from the overseas project shall be included in the annual CIT statement of the year in which income in transferred to Vietnam as prescribed by regulations of law on ODI. Income (profit) from or loss on the overseas project must not be deducted from the loss incurred or income (profit) earned in Vietnam by the enterprise when calculating corporate income tax.

- In case a Vietnamese ODI enterprise transfers its income to Vietnam without declaring, paying tax on such income, the tax authority shall impose tax on overseas business under the Law on Tax administration.

- Documents for declaration and payment of tax on income from overseas projects of Vietnamese enterprises making investment overseas are simplified to ensure compliance when applying International Agreements, including: (i) A photocopy of the declaration of overseas income tax certified by the taxpayer; (ii) A photocopy of the receipt for overseas tax payment certified by the taxpayer, or the original copy of the foreign tax authority of tax payment, or a photocopy of an equivalent document certified by the taxpayer.

In the old Circular:

- Income from overseas projects shall be included in the annual CIT statement of the year succeeding the fiscal year in which such income is earned, or included in the annual CIT statement of the same fiscal year in which such income is earned if the enterprise has ample evidence and documents proving the income and that payment of income tax on the overseas project.

- Income from an overseas project is classified as other incomes; loss on the overseas projects must not be deducted from income earned by the enterprise in Vietnam.

- Documents for declaring and paying tax incurred by a Vietnamese enterprise making investment overseas include: (i) The enterprise’s document on the division of the offshore investment project’s profit; (ii) The enterprise’s financial statement certified by an independent audit organization; (iii) The enterprise’s income tax return for the overseas project (certified by the project’s competent representative); (iv) The enterprise’s tax finalization written record (if any); (v) Document certifying or proving the tax amount paid overseas.

2. Determination of assessable income in Article 2, which amends Clause 2 Article 4 of Circular No. 78/2014/TT-BTC

More specific instructions on loss carryforward between various kinds of incomes: In a tax period, if a enterprise makes a transfer of real estate, project of investment, or right to participate in a project of investment (except for mineral exploration and extraction) and suffers from a loss, such loss shall be offset against the profit from the business operation (including other incomes prescribed in Article 7 of Circular No. 78/2014/TT-BTC) The loss that remains after offsetting shall carried forward to the next years within the carryforward time limit.

3. Time for determination of revenue to calculate CIT in Article 3, which amends Clause 2 Article 5 of Circular No. 78/2014/TT-BTC

Regulations on time for determination of revenue for calculating taxable income from service provisions are amended as follows:

Time for determination of revenue for calculating taxable income from service provision is the time of completion of service provision or part of service provision except for the case in Clause 3 Article 5 of Circular No. 78/2014/TT-THE MINISTRY OF FINANCE (revenue for calculating taxable income in certain cases) and Clause 1 Article 6 of Circular No. 119/2014/TT-BTC (revenue for calculating taxable income from goods/services exchanged).

In the old Circular:

Time for determination of revenue for calculating taxable income from service provision is the time of completion of service provision for the buyer or issuance of the invoice for service provision. If the invoice is issued before the completion of service provision, the time for determination of revenue for calculating taxable income is the time when the invoice is issued.

4. Deductible and non-deductible expenses when calculating taxable income in Article 4, which amends Article 6 of Circular No. 78/2014/TT-BTC

4.1. Documents for determination of damage caused by natural disasters, epidemics, conflagration, and other force majeure events (hereinafter referred to as calamities) without compensation:

a) Documents about assets/goods damaged by calamities that may be included in deductible expenses include:

- A statement of value of damaged assets/goods made by the enterprise.

A statement of value of damaged assets/goods must specify the value of damaged assets/goods, causes, responsibilities for such damage, categories, quantity, value of recoverable assets/goods (if any); statement of inventory of damaged goods certified by legal representative of the enterprise.

- A compensation claim upheld by the insurer (if any).

- Documents about responsibility for provision of compensation (if any).

b) Expired goods and goods damaged because of natural deterioration that are not compensated will be deductible expenses when calculating taxable income.

Documents about expired goods and goods damaged because of natural deterioration and that are included in deductible expenses include:

- Statement of damaged goods made by the enterprise.

A statement of value of damaged goods must specify the value of damaged goods, causes; categories, quantity, and values of recoverable goods (if any) enclosed with a statement of inventory of damaged goods certified by the legal representative of the company.

- A compensation claim upheld by the insurer (if any).

- Documents about responsibility for provision of compensation (if any).

The aforementioned documents shall be retained at the enterprise and presented to the tax authority on request.

In the old Circular:

In addition to the aforesaid documents, the enterprise must have the following documents:

a) With regard to assets/goods damaged by natural disaster, epidemic, conflagration that may be included in deductible expenses:

- An explanation for damage caused by calamities sent by the company to the supervisory tax authority.

- A written certification of the calamity made by the People’s Committee of the commune, the management board of the industrial zone, export-processing zone, or economic zone where the calamity happens.

b) With regard to assets/goods damaged by natural disaster, epidemic, conflagration that may be included in deductible expenses:

- Explanation for goods damaged because of expiration or natural deterioration made by the company and sent to the supervisory tax authority.

The enterprise shall send a written explanation for assets/goods damaged by calamities, goods damaged because of expiration or natural deterioration that are not compensable not later than the submission of the annual CIT declaration of the year in which assets/goods are damaged. Other documents (including statement of value of damaged assets/goods; certification by the People’s Committee of the commune, management board of the industrial park/export-processing zone/economic zone; application for indemnity granted by the insurer (if any); documents about responsibility for compensation (if any) and other documents) kept by the enterprise and presented to the tax authority on request.

4.2. Depreciation of fixed assets