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CIT & PIT

Released at: 11:14, 05/01/2015 TAX CONSULT

CIT & PIT

This column is prepared in collaboration with KPMG Vietnam

Q: How will advertising and promotion (A&P) expenses be treated for CIT purposes?

A: According to Law No.71 dated November 26, 2014, amending and supplementing a number of articles in current tax laws, the 15 per cent cap on total deductible expenses for A&P items is to be removed. A&P expenses will be fully deductible for CIT purposes from January 1, 2015. 
For the 2014 tax year, the 15 per cent cap still applies on annual CIT finalization. 

Q: We plan to have a new investment project in Vietnam in manufacturing support industry products in electronics-informatics. What are the relevant CIT incentives?

A: According to Law No.71, from 2015, income derived from the following new investment projects will be subject to a 10 per cent tax rate for 15 years, a tax exemption for four years, and a 50 per cent tax reduction for nine subsequent years:

“Investment projects in manufacturing products on the list of support industry products encouraged for development of hi-tech area or production of textile, garments, footwear, electronic-informatics, automotive assembly, mechanical engineering products, which cannot be domestically manufactured up to January 1, 2015.”

The Vietnamese Government will issue a list of support industry products, and your investment project will enjoy the above CIT incentive package if your products manufactured in Vietnam are on that list. 

Q: Our company is a limited liability company and is welcoming a new member whose contribution is higher than the value of the member share in the charter capital of the company, which will be added to the company’s capital. Is this difference treated as other income or other capital? What is the tax treatment? 

A: Where the higher difference belongs to the common ownership of the company, it will be recorded as other capital and not subject to CIT. If the difference belongs to one of the former members and is not added to the company’s capital, it will be capital assignment income and subject to CIT or personal income tax (PIT). 

Q: If I use shares or rights to purchase shares in a company as capital contribution in another company, what is the PIT treatment? 

A: At the time of the capital contribution, you are not required to declare and pay PIT on capital assignment. But when you transfer your share of capital in the invested company or when the invested company is liquidated, you shall declare and pay PIT on capital assignment for:
• the income generated from making a capital contribution in the invested company; and
• the income generated from assigning your share of capital in the invested company. 
    
Q: What are PIT rates applicable to individuals doing business?

A: From 2015, individuals doing business, such as agents of insurance and multi-level marketing companies are required to declare and pay PIT at the deemed rates on revenue, instead of being based on the assessable income and progressive tax rate brackets, as previously. Individuals doing business shall not be allowed to deduct monthly relief for PIT calculation purposes.

This column is prepared in collaboration with KPMG Vietnam

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