Latest way to calculate corporate income tax 2024

The calculation and regulation of corporate income tax for the year 2024 are subjects of concern for businesses and enterprises. In this article, we will write about the specific details regarding the corporate income tax calculation, its applicable rates, and the treatment of foreign income tax paid by enterprises in Vietnam.

1. Method of Calculating Corporate Income Tax in 2024.

The method for calculating corporate income tax in 2024 is outlined in Article 11 of the Law on Corporate Income Tax, which stipulates the following:

• Corporate income tax payable in a given tax period is determined as the taxable income multiplied by the prescribed tax rate. Additionally, if an enterprise has paid income tax to a foreign country, this amount can be deducted from their tax liability, but it must not exceed the corporate income tax amount that the enterprise is required to pay under local regulations.
• The specific tax calculation method for enterprises categorized in Points c and d of Clause 2, Article 2 of the Law on Corporate Income Tax is governed by the government's regulations, which are further elucidated in Section 2.2.

Article 2. Taxpayers - Law on Corporate Income Tax

Enterprises with taxable income as specified in Article 3 of this Law must fulfill their corporate income tax obligations as follows:

• Foreign enterprises with permanent establishments within Vietnam are liable to pay tax on income generated within Vietnam that is unrelated to the operations of the permanent establishment.
• Foreign enterprises without permanent establishments in Vietnam are required to pay tax on income derived within the territory of Vietnam.

Latest way to calculate corporate income tax 2024

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2. Instructions on how to calculate corporate income tax in specific cases

In Article 11 of Decree 218/2013/ND-CP (amended by Clause 8, Article 1 of Decree 12/2015/ND-CP), instructions on the method of calculating corporate income tax in a specific case are as follows:

2.1. Vietnamese businesses have paid taxes abroad

The amount of corporate income tax payable in the tax period is equal to (=) taxable income multiplied by (x) the tax rate.

Vietnamese enterprises investing abroad transfer their income after paying corporate income tax in foreign countries to Vietnam. For countries that have signed double taxation avoidance agreements, it shall be carried out according to regulations. provisions of the Agreement; For countries that have not signed the Double Taxation Avoidance Agreement, in case the corporate income tax in the country where the investment enterprise is relocating has a lower corporate income tax rate, the difference compared to the amount will be collected. Corporate income tax is calculated according to Vietnam's Corporate Income Tax Law.
 

The calculation and regulation of corporate income tax for the year 2024

2.2. Foreign enterprises generate taxable income in Vietnam

For businesses falling under the categories outlined in Points c and d of Clause 2, Article 2 of the Law on Corporate Income Tax (for a comprehensive understanding, please refer to Section 1), the calculation of corporate income tax payable is based on a percentage of their revenue from the sale of goods and services within Vietnam. This calculation is specified as follows:

• Services: 5%, especially restaurant, hotel, casino management services: 10%; In case of providing services associated with goods, the goods are calculated at a rate of 1%; In case the value of goods and services cannot be separated, 2%
• Supply and distribution of goods in Vietnam in the form of on-site import and export or according to international trade terms (Incoterms) is 1%;
• Royalty is 10%;
• Renting aircraft (including renting engines and spare parts for aircraft) and ships is 2%;
• Renting drilling rigs, machinery, equipment, and means of transport (except aircraft, including renting aircraft engines and spare parts) is 5%;
• Loan interest is 5%;
• Transfer of securities and reinsurance abroad is 0.1%;
• Derivative financial services is 2%;
• Construction, transportation and other activities are 2%.

2.3. Real estate transfer activities

The amount of corporate income tax payable on real estate transfer is equal to (=) income from real estate transfer multiplied by (x) the tax rate of 20%.

2.4. Oil and gas activities account for revenue and expenses in foreign currency

For oil and gas exploitation activities that stipulate the accounting of revenue and expenses in foreign currency in the contract, the taxable income and tax amount payable are determined in foreign currency.

3. What is the role of paying corporate income tax?

Paying corporate income tax is associated with the rights and obligations of the business. Specifically:

• Corporate income tax is one of the largest sources of state budget revenue, contributing greatly to socio-economic development.
• Corporate income tax is also an indicator for investors to evaluate whether to invest in that business or not.
• Corporate income tax is an important tool for the State to perform the function of redistributing income and ensuring social justice.

For corporate income tax, usually each enterprise will have an accounting department responsible for handling tax calculation and tax finalization with competent state agencies. However, newly established businesses and small and medium-sized enterprises often encounter many difficulties in this issue.

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