Key information about corporate income tax

Corporate income tax is a tax that every business is obligated to pay according to legal regulations. In this article, let’s delve into some basic concepts related to corporate income tax.

What is corporate income tax?

Corporate income tax (CIT) is a type of tax imposed on the income of businesses, commercial organizations, or equivalent entities. This is a tax that businesses are required to pay based on their annual income. Corporate income tax is calculated on the net income (income after deductions) of the business, which means the income remaining after subtracting expenses, depreciation, and other applicable tax deductions.

Corporate income tax is one of many taxes that businesses need to pay according to the law

The tax rate that businesses must pay is typically determined by each country’s Corporate Income Tax Law. This tax can be calculated based on a fixed rate or the actual income of the business.

Roles of corporate income tax

Corporate income tax plays several essential roles and holds significance for both the nation and businesses:

• Contribution to Government budget: Corporate income tax serves as a crucial revenue source for the national budget. Taxes fund the implementation of public policies, infrastructure projects, and the provision of essential public services.
• Effective management and regulation of the national economy: By adjusting tax rates and related policies, the government can stimulate or control specific industries, fostering balanced and sustainable economic development.
• Ensuring equity through tax obligations: Businesses are responsible for paying taxes based on their income, ensuring fairness in the tax system and contributing to a more equitable economy.
• Assessing business efficiency: Classifying and calculating taxes based on income allows for the evaluation of a business’ success and profit-generating capability.

Tax is also a tool for the State to adjust the country’s economic structure

Who needs to pay corporate income tax?

According to Article 2 of the Law on Corporate Income Tax in 2008, Law No. 14/2008/QH12, the entities subject to paying tax include business organizations and service providers with taxable income. Specifically, these entities encompass the following:

• Economic organizations and enterprises established in accordance with Vietnamese laws.
• Businesses and economic organizations established according to foreign regulations, whether they have a permanent establishment in Vietnam or not.
• State-organized entities established as per state regulations.
• Organizations established under the cooperative law.
• Other organizations engaged in business activities and income generation.

All organizations within these categories are responsible for complying with corporate income tax regulations as stipulated by the law.

Entities eligible for corporate income tax incentives

Income tax exemption policies for businesses are often based on the industry and area of operation of the business

In line with the country’s development goals set forth by the Party and the State, certain sectors and fields are granted incentives regarding corporate income tax. These incentives aim to provide motivation for businesses in specific sectors to grow more robustly. Additionally, they serve as a magnet to attract foreign businesses to invest in Vietnam, fostering long-term economic development.

Fields and industries eligible for tax incentives

Businesses operating in the following fields and industries may be eligible for corporate income tax incentives as stipulated by the law:

• Enterprises engaged in research and development in science and technology.
• Industrial enterprises manufacturing high-tech products that meet international standards.
• Industrial enterprises involved in the processing or manufacturing of agricultural, forestry, or aquatic products.
• Industrial businesses engaged in the production and recycling of environmentally protective materials.
• Industrial businesses operating in clean energy production and energy-efficient practices.

Technology industries are being prioritized and promoted by the State for development

Areas eligible for corporate income tax incentives

The following areas may be eligible for corporate income tax incentives according to legal provisions:

• Border-gate economic zones.
• Seaport economic zones.
• Economic zones within special economic regions.
• Economic zones within other special regions as regulated by the law.

Note: Economic zones can encompass special economic zones, industrial zones, export-processing zones, or high-tech zones.

Example with Saigon Hi-Tech Park (located in a special economic region), businesses operating here can enjoy corporate income tax incentives as per the policies designated for Saigon Hi-Tech Park. If a business does not require manufacturing space or large premises, establishing a business in shared office spaces such as OneHub Saigon can also qualify for corporate income tax incentives designated for “special economic regions.”

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Setting up an office at OneHub Saigon, businesses will have the opportunity to enjoy attractive preferential policies of Ho Chi Minh City High-Tech Park

In reality, OneHub Saigon is an integrated business park situated at the gateway of Saigon Hi-Tech Park. It promises to become a hub that attracts new technology companies and investment projects while fostering a strong and sustainable business community. Technology centers, also known as Tech Hubs, often concentrate numerous tech-support businesses that collaboratively develop over the long term. It is evident that Integrated Business Park OneHub Saigon will be a place for business, collaboration, and sustainable development among tech enterprises in the region.

Furthermore, Integrated Business Park OneHub Saigon is highly regarded for its strategic location, top-quality Grade A offices, competitive rental prices, integrated services, and numerous other advantages. OneHub Saigon is exceptionally suitable for tech businesses looking to establish an office and engage in long-term business activities.

Conclusion

The aforementioned provides the most general information about the definition of corporate income tax. Tax is a complex yet crucial field. Leveraging tax incentives can help businesses develop more robustly and effectively in the future.

In general, certain sectors such as high technology or specially invested regions like Saigon Hi-Tech Park will have the opportunity to enjoy tax incentives, including tax exemptions, tax deferments, etc., according to State-specific policies. The conditions and criteria for enjoying these tax incentives will be clearly defined in existing legal documents.

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