CIRCULAR

ON REDUCTION AND DEFERMENT OF CORPORATE INCOME TAX PURSUANT TO RESOLUTION 30/2008/NQ-CP OF THE GOVERNMENT DATED 11 DECEMBER 2008 ON URGENT SOLUTIONS FOR ALLEVIATING THE ECONOMIC DOWNTURN BY PRESERVING ECONOMIC GROWTH AND ENSURING THE WELFARE OF SOCIETY

Pursuant to the Law on Corporate Income Tax and its implementing guidelines; Pursuant to the Law on Management of Tax and its implementing guidelines;
Pursuant to Resolution 21/2008/QH12 of the National Assembly Legislature XII on the estimated State Budget for year 2009;
Pursuant to Decree 118/2008/ND-CP of the Government dated 27 November 2008 on functions, duties, powers and organizational structure of the Ministry of Finance;
Pursuant to Resolution 30/2008/NQ-CP of the Government dated 11 December 2008 on urgent solutions for alleviating the economic downturn by preserving economic growth and ensuring the welfare of society;
The Ministry of Finance hereby provides the following guidelines on reduction and deferment of corporate income tax ["CIT"] for enterprises meeting difficulties in year 2009:

Part I

GENERAL PROVISIONS

1. The amount of CIT payable by small and medium sized-enterprises for the fourth quarter of year 2008 and for year 2009 shall be reduced by thirty per cent (30%) in accordance with the guidelines in Part II of this Circular.

An enterprise must satisfy either of the following criteria to qualify as a small or medium-sized enterprise:

- Charter capital stipulated in its business registration certificate or investment certificate effective prior to 1 January 2009 does not exceed 10 billion dong; similarly for an enterprise newly established after 1 January 2009, charter capital stipulated in its initial business registration certificate or investment certificate must not exceed 10 billion dong.

Example 1: The initial business registration certificate of Enterprise A was issued on 1 July 2007 and records charter capital at 11 billion dong, and the business registration certificate amended for the first time on 30 June 2008 records charter capital of 10 billion dong. Accordingly Enterprise A qualifies as a small or medium-sized enterprise and shall be entitled to the CIT reduction pursuant to this Circular. If the amended business registration certificate had recorded charter capital at 15 billion dong, then Enterprise A would not qualify as a small or medium-sized enterprise (unless it satisfied the condition on employees stipulated in the next paragraph) for entitlement to the reduction of CIT and the extension of time for payment of CIT pursuant to this Circular.

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In the case of an enterprise with turnover, which was newly established on or after 1 October 2008, the number of staff paid salary in the initial month (a month being a full 30 days) must not be more than 300.

Average number of employees during the fourth quarter of year 2008

=

Number of employees paid salary for the month of October 2008

+

Average number of employees as a result of increases and reductions during the fourth quarter of year 2008

The average number of employees as a result of increases and reductions during the fourth quarter of year 2008 shall be determined in accordance with the weighted average of the number of months; and the initial month or last month working for the enterprise shall be counted as a month.

Example 2: Enterprise B had 302 employees on its list of salaried staff for the month of October 2008. In November 2008 it recruited 2 more employees, and 10 employees retired in December 2008. Accordingly the average number of employees as a result of increases and reductions in the fourth quarter of year 2008 shall be determined as follows:

(2 people x 2 months - 10 people x 1 month)/3 months = (-) 2 employees.

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Example 3: Enterprise C is newly established and its initial business registration certificate was issued in October 2008. The first date on which Enterprise C had turnover was 10 December 2008. There are 295 employees on the salary list for January 2009. Accordingly Enterprise C qualifies as a small or medium-sized enterprise and is entitled to the CIT reduction and the extension of time for payment of CIT pursuant to this Circular.

2. An extension of time for payment of CIT pursuant to Part III this Circular shall apply to small and medium-sized enterprises as defined in clause I above, and also to enterprises producing or processing agricultural, forestry or seafood products, textiles and garments, footwear, and electronic components.

3. The CIT reduction and extension of time for payment stipulated in this Circular shall apply to enterprises already implementing the accounting regime on invoices and source documents, and which have registered to pay tax in accordance with their declarations.

Part II

REDUCTION OF CORPORATE INCOME TAX

1. The amount of CIT payable by small and medium sized-enterprises for the fourth quarter of year 2008 and for year 2009 shall be reduced by thirty per cent (30%), specifically as follows:

(a) The CIT reduction for the fourth quarter of year 2008 shall equal 30% of the amount of CIT payable for that quarter. Enterprises shall fix the amount of CIT payable for the fourth quarter of year 2008 as follows:

- If revenue, expenses and taxable income of the fourth quarter of year 2008 are determinable, then the amount of CIT payable for such quarter shall be fixed on the basis of the taxable income for that quarter as accountable by the enterprise in its books of accounts.

- If revenue, expenses and taxable income of the fourth quarter of year 2008 are not able to be determined, then the amount of CIT payable for that quarter shall be fixed as follows:

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=

Amount of CIT payable for year 2008

4

(b) The CIT reduction for year 2009 shall equal 30% of the amount of CIT payable for that year.

Enterprises shall themselves calculate the amount of their 30% tax reduction when they declare the amount of CIT provisionally payable for the fourth quarter of year 2008 and for each quarter of year 2009; and shall themselves determine the amount of their reduction entitlement when they conduct accounting finalization for years 2008 and 2009.

In the case of any enterprise currently entitled to CIT incentives, then the figure to be reduced by 30% shall be the remaining CIT figure after deducting the amount of preferential CIT pursuant to the law on corporate income tax.

Example 4: Enterprise X has taxable income of 500 million dong in the tax assessment period being year 2009. Enterprise X is currently entitled to the preferential tax rate of 15% and a 50% reduction of the amount of tax payable. Accordingly the remaining CIT figure shall be determined as follows:

- Amount of CIT payable at the tax rate of 15% is 500 million dong x 15% = 75 million dong.

- Amount of CIT payable after the 50% reduction is 75 million dong x 50% = 37.5 million dong.

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- Remaining amount of CIT payable is 37.5 million dong - 11.25 million dong = 26.25 million dong.

2. Enterprises shall conduct procedures for implementing the above by declaring and paying tax and by conducting CIT tax finalization on the current standard forms.

(a) Provisional self-declaration for the fourth quarter of year 2008 and for each quarter of year 2009 shall be made as follows:

Enterprises shall write the following two additional lines before the undertaking at the end of the current standard form for provisional CIT declarations:

- CIT reduced in accordance with Resolution 30 = (Tax payable in the tax assessment period x 30%).

- Remaining CIT payable in the tax assessment period = (CIT payable in the period x 70%).

Enterprises which select the method for determining the amount of CIT entitled to this reduction by accounting for their revenue, expenses and taxable income for the fourth quarter of year 2008 must lodge an additional report on their business results for the fourth quarter of year 2008 together with their tax declaration.

(b) Self-declaration of tax finalization for year 2008:

Enterprises shall write the following two additional lines before the undertaking at the end of the current standard form for tax finalization declarations:

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- CIT reduced in accordance with Resolution 30 = (CIT for the fourth quarter of year 2008 x 30%).

- Remaining CIT payable for year 2008 = (CIT payable for year 2008 less CIT reducible pursuant to Resolution 30).

- In cases where the amount of CIT in the fourth quarter of year 2008 is not accountable by the enterprise in its books of accounts:

+ CIT reduced in accordance with Resolution 30 = (CIT payable for year 2008 x 30% / 4).

+ Remaining CIT payable for year 2008 = (CIT payable for year 2008 x 92.5%).

(c) Self-declaration of tax finalization for year 2009:

Enterprises shall write the following two additional lines before the undertaking at the end of the current standard form for tax finalization declarations:

- CIT reduced in accordance with Resolution 30 = (CIT payable for year 2009 x 30%).

- Remaining CIT payable for year 2009 = (CIT payable for year 2009 x 70%).

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DEFERMENT OF TIME FOR PAYMENT OF CIT

1. The amount of CIT for which payment is deferred shall be determined as follows:

(a) In the case of small and medium-sized enterprises, it shall be the amount of provisional CIT for each quarter of year 2009 after making the reduction stipulated in this Circular.

(b) In the case of enterprises producing or processing agricultural, forestry or seafood products, textiles and garments, footwear, and electronic components, it shall be the amount of provisional CIT for each quarter of year 2009 in respect of the income from these activities.

If an enterprise is unable to determine the amount of provisional CIT on any of the above-named activities as distinct from the amount of provisional CIT payable on other activities, then the amount of provisional CIT from operations of manufacturing and processing for which payment shall be deferred shall be calculated as a percentage being total turnover from the former activities over total turnover of the enterprise in year 2008.

2. Payment shall be deferred for nine (9) months as from the last day of the period for payment pursuant to the Law on Management of Tax, and specifically as follows:

- Payment of the amount of provisional CIT assessable for the first quarter of year 2009 shall be deferred until 29 January 2010 at the latest.

- Payment of the amount of provisional CIT assessable for the second quarter of year 2009 shall be deferred until 29 April 2010 at the latest.

- Payment of the amount of provisional CIT assessable for the third quarter of year 2009 shall be deferred until 30 July 2010 at the latest.

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3. Enterprises shall implement the following procedures for deferment of tax payment: they shall prepare CIT provisional payment declarations for each quarter in accordance with the current regulations, and before the line containing the undertaking in the tax declaration they shall record the date on which they propose to make the deferred payment.

4. During the period of deferment, enterprises shall not be deemed to have committed the breach of delaying tax payment, and shall not be subject to any administrative penalty for late payment in respective of the amount of tax for which payment is deferred.

Part IV

ORGANIZATION OF IMPLEMENTATION

1. This Circular shall be of full force and effect after forty-five (45) days from the date of its signing.

2. Any problems arising during implementation should be promptly reported to the Ministry of Finance for additional guidelines.

FOR THE MINISTER OF FINANCE
DEPUTY MINISTER




Do Hoang Anh Tuan