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CIT, CIT (2), CIT (3) - Coggle Diagram

- - - - NOT substantiated with legitimate documents (i,e. labor contract/agreement. financial policy)
      - NOT actually paid before the deadline for annual CIT finalization.
      - NON-WORKING founders, Board members who are not directly involved in daily business operation
      - Special case
        
        IF last year’s performance bonus can only be settled after annual CIT finalization deadline
        
        (2) Record as previous year's expenses: NON-DEDUCTIBLE
        
        (1) Record as previous year's provision expense to supplement the subsequent year's salary fund: DEDUCTIBLE IF
        
        NOT exceed 17% of total paid salary in the previous year (calculated up to the deadline for CIT finalization)
        
        NOT lead to loss
        
        Used within 06 months AFTER the end of fiscal year (Afterwards, IF not used up, record a decrease in the deductible expenses of the next period)
    - - Exceptions
        
        (1) For employees
        
        Training/learning courses align with the staff’s working position
        
        Vocational retraining for female workers
        
        Staff commit to continue working for their company after finishing the course
        
        (2) For employees’ children
        
        Only applicable to expats who are currently working in Vietnam
        
        The children must be studying in Vietnam
        
        From kindergarten to high school
  - - - Infinite LUR: NOT allowed to be depreciated
      - Finite LUR depreciation is deductible IF serve for business activities & supported by documents
  - - - c. Soil, stones, sand, gravel directly sold by the excavating people;
      - d. Scrap from collectors
      - b. Handicraft products made of dried jute, sedge, leaves, rattan, bamboo, straw, coconut shell, or aquaculture by-products directly by craftsmen
      - e. Articles, assets and services directly from non-business households/ individuals
      - a. Agricultural/ forestry/ aquaculture products directly sold by growers or catchers
      - f. Goods and services of business households/ individuals that have a turnover < VND100 million/ year.
      - DOCUMENTS: Use form No. 01/TNDN INSTEAD OF a proper invoice to evidence for deductible expense for CIT calculation
  - - - Losses due to natural disaster, epidemic, fire or other force majeure events without compensation
      - Losses due to expiry or change of the natural biochemical process without compensation
- - - - Borrowing ≤ Uncontributed capital
        
        TOTAL interest on loan
      - Borrowing > Uncontributed capital
        
        Many borrowings: Total interest on loans x (Uncontributed capital / Total borrowings)
        
        1 borrowing: Uncontributed capital x Borrowing rate x No.of date uncontributed capital
    - - Negative result: The remaining amount of interest expense is adjusted to INCREASE the investment value
      - Positive result: The remaining amount of interest income is adjusted to REDUCE the investment value
  - - - i. Unrealised gain/loss
        
        Asset accounts (Cash, AR): Offset and adjust
        
        Gain = non-taxable income
        
        Loss = non-deductible expenses
        
        Payable accounts: Offset and record
        
        Gain = taxable income
        
        Loss = deductible expenses
      - ii. Realized gain/loss
        
        Gain = taxable income
        
        Loss = deductible expenses
    - - i. Unrealised gain/loss of payable account
      - ii. Realised gain/loss when actually making payment
      - TREATMENT
        
        Keep track separately in the pre-operating period
        
        Offset and amortize within maximum 5 years to financial income/expense since operation time
  - - - Exceptions
        
        devaluation (loss) of financial investments
        
        bad debts
        
        reduction in inventory prices
        
        warranty of products, goods, and construction/ installation works
    - - Exceptions
        
        Accruals employment cost paid within 90 days since year-end
        
        Accrual repairment of period overhaul
        
        Accrued expenses corresponding to accrual revenue
  - - - Exceptions
        
        Leasing expenses following schedule of prepaid allocation
        
        Repair expense incured during leasing period amortizes within 3 years
    - - Exceptions
        
        The owner (lessor) declare and pay VAT (specified in the contract): DEDUCTIBLE if having proof of payment and lease contract
        
        The company (lessee) declare and pay tax: DEDUCTIBLE if having proper invoices, lease contract, and tax declaration
    - - Exceptions
        
        HIV/AIDS prevention
        
        Support or Party and socio-political organisations in enterprises
        
        Performance of national defense and security education tasks
    - - Exceptions (Recipients must be legitimate and certified)
        
        Medical entities
        
        Victims of natural calamities
        
        Education
        
        Building welfare house
        
        Scientific research
    - - Exceptions: bonds and debt securities
    - - Maximum deductible: Expense in Vietnam = Total management expenses of overseas company x (Revenue of VN company / Total revenue of overseas company)
- - - - DTA: Follow DTA's guide
      - No DTA: (1) Gross-up income to calculate CIT payable in VN & (2) Credit CIT paid in overseas regarding such income
        
        Oversea tax rate < VN tax rate: Pay the CIT gap
        
        Oversea tax rate > VN tax rate: No adjustment
      - 3. NOTE
        
        Incentive of reduced tax rate is NOT applicable to foreign income
        
        Deducted amount must NOT exceed CIT payable under Vietnamese regulation
        
        Exempted/reduced CIT amount under overseas legislation is deductible
        
        Loss offset is NOT allowed – must determine & declare CIT payable separately
- - - - Actual receipt under contract
      - Transactions ≥ VND20 mil WITHOUT non-cash payment evidence: to be deemed by Tax Authority
      - Excluding late payment interest
      - Not clearly stated in contract or not an arm length transaction: to be deemed by Tax authority
    - - i. Contributed capital transfer
        
        Accounting books, documents confirm by founders
        
        Audited FSs (applied for 100% FDI company)
      - ii. Purchased capital transfer: historical cost at purchasing time under purchase agreement/ payment documents
    - - The investee’s functional currency is a foreign currency: The consideration and historical cost = foreign currency
      - The investee’s functional currency is VND: The consideration and historical cost = VND
      - Exchange rate = the buying exchange rate applicable on the inter-bank foreign currency market announced by the State Bank at the time of transfer/purchase
- - - - Listed shares/ unlisted public company shares but registered for trading at Security trading center: Price announced by the Stock Exchange or Security Trading Center
      - Other cases: Agreed transfer price under contract
    - - Listed shares/ unlisted public company shares but registered for trading at Security trading center: Price announced by the Stock Exchange or Security Trading Center
      - Share purchased from auction: Price indicated in the notice of share auction winning results issued by the share auctioning organization
      - Other cases: under contract
- - - - Actual transfer price under contract per law (above the land price of the provincial-level People’s Committee at the time of signing the contract)
      - Recognition: When the seller hands over the real estate to the purchaser, REGARDLESS of whether the purchaser has registered the property ownership or land use rights; or has its land use rights established at a competent state agency
      - SPECIAL CASE
        
        An enterprise collects advanced money in any form by customers according to schedule
        
        Collect money in advanced as schedule: Declare and temporarily pay CIT
        
        ii. Cannot determine expenses: Declare and temporarily pay an CIT amount equal to 1% of the collected sum of money
        
        i. Can determine expenses corresponding to recorded revenue: Declare and temporarily pay an CIT amount based on turnover minus these expenses
        
        Hand over the real estate: Finalize CIT liability and settle the tax gap
    - - Criteria
        
        Corresponding to taxable revenue
        
        Qualified 4 conditions [see CIT (1)]
      - Examples
        
        Cost of the transferred land, based on the LUR origin
        
        Expense & compensation for land or crop damage
        
        Compensation, support and resettlement expenses and expenses for organization of compensation, support and resettlement per law
        
        Charges and fees related to the grant of LUR per law
        
        Expense for soil improvement and ground leveling
        
        Expense for the construction of infrastructure (ex: roads, power lines, water supply and drainage systems, post and telecommunications facilities)
        
        The value of infrastructure facilities and architectural works on land
      - SPECIAL CASE
        
        A project is partially completed and gradually transferred according to the completion progress
        
        Expenses for infrastructure investment is allocated per transferred land areas = Total expenses x Transferred area land / Total land area allocated for the project (excluding area used for public purposes)
        
        If an infrastructure facility takes over many years and the value CAN ONLY be finalized when the whole work is completed
        
        When transferring real estate: Accrue total expenses for infrastructure investment to calculate allocated expense
        
        When the whole work complete: Summarize, re-calculate the cost of transferred part, and settle the tax gap