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Tax consulting: A solution to help businesses avoid Tax Risks

Tax consulting is one of the top solutions to help businesses avoid tax risks. In this article, RSM Vietnam will share the characteristics of corporate income tax laws and the tax risks that businesses may encounter. This will help businesses understand the benefits of corporate income tax consulting services.


Table of contents:

  1. Characteristics of corporate income tax law

  2. Types of taxes that businesses must pay

  3. Potential risks related to corporate taxes

  4. What can RSM Vietnam's tax advisory services offer to businesses?


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Tax Consulting

1. Characteristics of the Corporate Income Tax Law

1.1 Complex nature of Income Tax with Relatively Low Stability

Managing taxes and tax collection for corporate income tax (CIT) is relatively challenging, and the cost of managing CIT is often higher compared to other taxes. For CIT, apart from determining taxable income, it is necessary to ascertain the source of income, the location where income is generated, the duration of residency of the income owner, and the stability of income. In the process of determining taxable income, it is essential to identify reasonable deductions to ensure fairness and incentives for taxpayers.


1.2 Corporate income tax is a direct tax

In addition to its goal of generating revenue for the state budget, corporate income tax (CIT) also aims to regulate the economy and harmonize social income, often closely tied to the state's economic and social policies. Therefore, tax laws on corporate income tax in various countries often include provisions for preferential treatment, exemptions, and tax reductions to ensure the incentive function of income tax or to implement progressive tax rates for certain taxable income categories to achieve regulatory objectives.


1.3 Corporate income tax is a tax levied on the taxable income (profit) of businesses.

Taxable income subject to corporate income tax is determined as income from production, business, services, and goods, minus the deductible expenses incurred in those activities. To accurately determine taxable income and ensure fairness among CIT taxpayers, there needs to be consistency in how taxable income is determined. Taxable income must be determined in specific cases, based on a business's revenue and expenses associated with the revenue-generation process.


2. Types of taxes that businesses must pay

2.1 Business License Tax

As per the regulations in Article 17, Clause 2 of Circular 156/2013/TT-BTC:

"Article 17: Declaration of Business License Tax 2. Declaration of business license tax is carried out as follows:

  • Business license tax must be declared once when taxpayers commence their business activities, no later than the last day of the month in which business activities commence.

In the case of taxpayers establishing a business entity but not yet engaging in business activities, they must declare business license tax within 30 (thirty) days from the date of issuance of the business registration certificate and tax registration certificate or from the date of issuance of the enterprise registration certificate.


Section II, Item 1 of Document 33/VBHN-BTC also specifies the payment of the business license tax as follows:


"Business entities that are actively conducting business or newly established and have been issued a tax registration certificate and tax identification number (TIN) within the first 6 months of the year shall pay the full annual business license tax. If they are established and issued a tax registration certificate and TIN in the last 6 months of the year, they shall pay 50% of the annual business license tax. Businesses that are already in operation shall pay the business license tax in the first month of the lunar calendar year, while newly established businesses shall pay the business license tax in the month when they are issued a tax registration certificate and TIN."


2.2 Corporate Income Tax (CIT)

According to Circular 151/2014/TT-BTC dated October 10, 2014, businesses are not required to submit provisional corporate income tax returns anymore. Instead, businesses will calculate their provisional corporate income tax based on their actual production and business results. Here is the relevant provision:


"Article 17. Amendment to Article 12a of Circular No. 156/2013/TT-BTC as follows: Article 12a. Provisional payment of corporate income tax by quarter and annual tax settlement

Based on the results of production and business activities, taxpayers shall make provisional payments of corporate income tax for each quarter no later than the 30th day of the quarter following the quarter in which the tax liability arises; businesses are not required to submit provisional corporate income tax returns quarterly."


2.3 Value Added Tax (VAT)

Value Added Tax (VAT) is typically reported on a monthly basis, but there are exceptions where businesses may report on a quarterly basis, as per Circular 151/2014/TT-BTC. Here is the relevant provision:


"b.1) Taxpayers reporting VAT quarterly Reporting VAT on a quarterly basis applies to taxpayers with total revenue from the sale of goods and provision of services in the immediately preceding year of VND 50 billion or less.


In the case of new taxpayers starting business operations, VAT reporting is carried out on a quarterly basis. After conducting business operations for a complete 12 months, starting from the following calendar year, VAT reporting can be done on a monthly or quarterly basis, depending on the revenue from the sale of goods and provision of services in the immediately preceding calendar year (12 months)."


2.4 Personal Income Tax (PIT)

From Point a.1 of Article 16 of Circular 156/2013/TT-BTC:

"a.1) Organizations and individuals paying income subject to individual income tax shall declare taxes on a monthly or quarterly basis. In cases where, within a month or quarter, organizations and individuals paying income do not have any income subject to individual income tax withholding, they are not required to declare taxes."


From Point a.3 of Article 16 of Circular 156/2013/TT-BTC: "a.3) Organizations and individuals paying income falling under the category of individual income tax shall be responsible for declaring and settling individual income tax on behalf of individuals, whether or not there is income subject to tax withholding."


From Article 21 of Circular 92/2015/TT-BTC amending Point a.3 of Article 16 of Circular 156/2013/TT-BTC: "a.3) Organizations and individuals paying income subject to individual income tax for income from salaries and wages shall be responsible for declaring and settling individual income tax on behalf of individuals, whether or not there is income subject to tax withholding. In cases where organizations and individuals do not have income to pay, they are not required to declare and settle individual income tax."


In addition, depending on the nature of the business activities, several other types of taxes may arise:

  • Natural resource tax

  • Export and import taxes

  • Special consumption tax

  • Environmental protection tax

  • Non-agricultural land use tax


tu-van-thue
Tax consulting - A solution to help businesses avoid Tax Risks

3. Risks related to corporate taxes that businesses may encounter

In tandem with the constant evolution of businesses in the modern era, regulations concerning corporate income taxes (CIT) are continuously modified year by year, adapting to the government's economic and societal development strategies. However, these changes have, in many cases, posed challenges for businesses, including even large-scale enterprises with high compliance awareness, in keeping up with and adhering to these regulations promptly and accurately. Consequently, this has led to risks related to tax arrears, administrative penalties, and delayed tax payments during tax inspections. Some notable risks include:

  • Risk of late submission of corporate tax finalization returns and late payment of corporate income tax.

  • Risk of improper compliance with provisional corporate income tax requirements.

  • Risk of not adhering to the specified preferential tax rates.

  • Risk of inaccurately determining deductible expenses, particularly expenses involving high-risk elements such as transactions with related parties or interest expenses on transactions with related entities.

  • Risk of not staying up-to-date with periodic tax regulations that may come into effect mid-year or apply to previous tax periods before the effective date, resulting in improper tax planning.

  • Other qualitative risks.


4. What can RSM Vietnam's tax advisory services offer to businesses?

Understanding the risks that businesses may face, our tax experts are always ready to provide valuable services to ensure compliance while helping businesses identify potential tax risks and opportunities for tax savings. Furthermore, with years of working relationships with the Tax Department, local tax offices, and other government agencies, we also assist businesses in working more effectively with the government and tax authorities.

Our services include:

  1. Corporate income tax finalization return preparation support.

  2. In-depth tax audit services.

  3. Regular consulting services.

  4. Tax audit support services.

  5. Case-specific advisory services.

  6. Assistance in applying for Double Taxation Agreements (DTAs).

  7. Government relationship support.

>>> See more Our Corporate Income Tax Services


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