MANAGEMENT OF BUSINESS TAXATION

2.9.1.1 The concept of Corporate

According to the Corporate Law in Viet Nam, No.60/2005/QH11 on 29/11/2005 of Vietnam's National Assembly, the Vietnamese companies is understood as an economic organization that has its own name, assets, stable transaction office, business registration in accordance with business law, for the purpose of conducting business activities, and the business is still ongoing one, some or all stages of the investment process, production and services in the market in order to profit purposes.

2.9.1.2 The role of business in the economy

According to statistics, by the end of 2012, Vietnam has around 375,000 enterprises that are registered in accordance with the Corporate Law In Viet Nam and is active. These businesses play a vital role in the sustainable development of Vietnam's economy. Especially, Vietnam is ongoing industrializing and modernizing the country.

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The roles of businesses are represented by the following aspects: (1) Creating new jobs and contributing to reducing unemployment rate; (2) Mobilizing resources and power of society in the production and business; (3) Important contribution in the exchange structure of the economy to industrialization and modernization; (4) Creating extra income for most of workers; (5) Contributing and developing between different regions is the same; (6) Contributing to solve social problems;

(7) Contributing to State’s Budget; (8) Training of management officers for the large enterprises and creating the initial economic platform for development of large enterprises in the future; (9) Along with large enterprises create efficiency linkages in the overall of the value chains and global value chains.

2.9.1.3 The need to strengthen tax collection management for businesses

The reality shows that the businesses in general execute relatively well with the obligations to state budget as well accounting regime, tax registration, tax declaration, observance of legislation tax. Besides these positive sides, there are still many issues needed to be remedied to improve the efficiency of tax collection management and state management for the businesses.

The tax management problems derived from several causes such as: tax policy mechanisms are still many limitations without regulation in detail, in particular;

the laws are not synchronization and difficult to perform the work; tax management still has weaknesses many aspects; some tax staffs do not still understand clearly professional expertise yet.... passivity, lack of determination, embarrassing, no measures rigid during resolving process. On the other hand, many businesses are not really knowledgeable about the tax policy; even some businesses do not obey regulations in tax legislation for tax evasion or tax fraud.

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Through the above analysis suggests that strengthening the tax management for businesses is necessary, it requires many new synchronization solutions to improve the efficiency of this work, contributing to reduce losses, increasing revenue, limiting violation of businesses, and help State in management and adjustment of enterprises in particular and the economy in general with true socialist orientation.

2.9.1.4 The taxes collected from enterprises.

Taxes on businesses is a kind of tax which levies on business entities including State enterprises, joint-venture enterprises, enterprises with 100% foreign investment capital, private enterprises (PTE), joint stock companies (JSC),the limited company with two members (Ltd.), the limited company with one member, partnership companies, cooperatives (COOP).

Value Added Tax (VAT)

Value Added Tax is a tax payable on the added value of goods and services arising from the process of production, circulation and consumption.

The added value = total the value of goods and services sold – the value of goods and services purchased respectively.

- The VAT taxable is goods and services for production, business and consumption.

- VAT taxpayers are organizations and production individuals, goods business and services of VAT or goods import in VAT taxable.

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- Basing on VAT calculation is the VAT calculation price and tax rate. VAT calculation price is regulated specific in Article 7 of the VAT Law applicable to each type of goods or services.

For example, the tax calculation price of goods and services is the sale price without VAT. The tax calculation price of imported goods is the import price at the border plus the import tax ... etc.

Vietnam's VAT law currently regulates the tax rate is 0%, 5%, 10% applied to the group of goods and services.

- Method of calculating VAT: there are 2 tax calculation methods; VAT deduction method and direct calculating on the added value method.

+ Tax deduction method:

Amount of tax payable = output VAT - input VAT

In which, output VAT equals tax calculation price of goods and services sold multiplied by (x) the tax rate; Input VAT = Total VAT paid which is recorded on VAT invoices to purchase goods, services or vouchers to pay VAT of imported goods.

+ Direct tax calculating method on VAT: Under this method, the amount of VAT that the taxpayer must pay = VAT on goods and services multiplied by (x) the tax rate.

Corporate income tax (CIT)

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Corporate income tax is a direct tax which is levied on the profits of the enterprises in production and business activities.

Basing on the Enterprise Income Tax Law, the enterprise income tax is provided as follows:

- Enterprise Income Taxpayers: As the organization of production and trade in goods and services has taxable income (called enterprises), including:

+ Enterprise established and operated under the regulation of the Enterprise Law, the Law on State Enterprises, the Law on Foreign Investment in Vietnam, Investment Law, the Law on Credit organizations, the Law on Insurance Business, Stock Law, petroleum Law, commercial Law and other legal documents under the form of joint-stock companies; Limited company with two members or more; Limited company with one member; partnership companies; Private enterprises; State enterprises; Counsel's Office, notarization Office; The parties inside a business cooperation contract; The parties inside the division of petroleum products contract, petroleum joint ventures companies, overall operating company.

+ The public enterprise units, besides public, there are production and business of goods and service with income in all fields;

+ The organizations were established and operated under the Cooperatives Law;

+ Enterprise was established according to foreign law (called foreign enterprises) which has a permanent establishment in Vietnam.

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+ Foreign enterprises, foreign organizations which produce business in Vietnam without the Investment Law, Enterprise Law or income arising in Vietnam have to levy enterprise income tax according to the private guidance of the Ministry of Finance.

- Basing on the corporate income tax is tax calculation income and tax rates:

Tax calculation income for the tax calculation period is determined by the taxable income minusing tax-exempt income and losses carried forward from previous years as prescribed.

Tax calculation income is determined by the following formula:

Tax-exempt

Taxable income is calculated as follows:

Taxable income during the tax calculation period includes income from production and trading in goods, services activities and other income.

Taxable income during the tax calculation period is determined as follows:

Deductible expenses Deductible

expenses Taxable income

Taxable income == RevenueRevenue -- ++ Other incomeOther income

Income from production and business of goods and services activities by operating revenue of the business of producing goods and services minus deductible expenses of the activity of production of goods and services.

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Enterprises with business activities apply to different tax rates, the corporate must be calculated income separately for each activity multiplied by the corresponding tax rate.

Income from the transfer of real estate must be separately accounted for declaration and payment of corporate income tax, not be offset against income or loss from other production and business activities.

- Tax rate:

The tax rate, the corporate income tax is ?% rate. Currently, the corporate income tax is 25%. Early in 2014, the corporate income tax: 22%, Cases apply to 22% tax rate in 2016 to transfer to the 20% tax rate.

Two enterprises has total revenue not exceed more than twenty billion Vietnam Dongs which applies to tax rate 20% tax from July in 2013.

Revenue determined corporate applied to tax rate 20%, in this case of revenue previous year.

The tax rate, enterprise income tax for businesses seeking activities, exploration and exploitation of petroleum and other precious resources in Vietnam from 32

% to 50 % to suit each project, each business establishment.

- Exemption or reduction of corporate income tax: Income Tax Law regulated for the exemption and reduction of corporate income tax applicable to the investment objective of production and business sectors, preferential investment fields.

Import tax and export tax

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According to the export tax, import tax laws applicable only to adjust relations arising tax collection from import and export trading of goods activities to borders. Export taxes, import taxes are indirect taxes.

- Export tax and import tax payers are organizations and individuals that are allowed to export and import goods, subject to taxable.

- Basing on calculation of export tax, import taxes include: quantity of each item recorded in the declaration of export and import goods, taxes calculation price and tax rates.

In which, tax export and import calculation price applied to particularly for each of situations. The taxable value of exported goods is the selling price to the customer at the border exclude shipping cost and insurance cost in the sales contract; The taxable value of imported goods is the customer's purchase price at the border include the cost of shipping and insurance costs in a purchase contract (CIF price) ...

- Tax rate: export tariff, import tariff includes tax rates with % rate applied to each export and import commodity.

- Exemption or reduction tax, refund of import tax, export tax:

+ Export and import products is exempted from tax in some cases such as non-refundable goods, goods temporarily imported and re-export goods...

+ Reduction tax regime is applied in some cases of good damage during transportation, loading and unloading is damaged or lost.

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+ Export tax and import tax refund in cases which products has been paid but not actually exported, not imported into Vietnam.

2.9.1.5 Special Consumption Tax (SCT)

SCT is a kind of indirect taxes though the collection of SCT regimes, State encouraged a part of consumer’s income to the State budget, and State implements guidelines and adjustment of the social consumers.

- Taxpayers: consist of organizations and production individuals or goods import and services business in special consumption taxable.

- Based on the SCT is tax calculation price of taxable goods and services and tax rate. The tax calculation value of goods produced in the country is the price which the basis of production buys at production place without SCT, for imported goods are import tax calculation price plus (+) import tax.

- Tax rate: excise tariff includes the tax rate with % rate applicable regulatory distinguish between groups of goods and services; or those goods or services in the same group in order to implement adjustment production and consumption of State.

- Exemption and reduction SCT: SCT indirect taxes having the big effects in the consumption adjustment of society. Therefore, SCT law only requires reduction tax in the some cases such as manufacturing facility of SCT taxable products being trouble caused by disaster, disease, suddenly accidents....

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2.9.1.6 Natural Resource tax

Natural resource tax is kind of tax which adjusts relation of collection and payment natural resource tax with organizations and individuals exploitation of natural resource belong to Vietnam.

- Resource tax taxpayer consist of all organizations and individuals of all economic sectors, regardless profession and forms of exploitation have fixed or mobile... exploiting natural resources belong to the Socialist Republic of Vietnam.

- Based on natural resource tax calculation is the amount of commercial resource which is exploited reality, tax calculation price and tax rate.

- Commercial resource yields exploited reality is number, weight or volume of resource which is exploited reality in the tax payment period, not dependent on resource exploitation purposes.

+ Royalty tax calculation price is the selling price in resource product unit in which the resource exploitation.

+ Resource tax tariff includes % rate tax rate applies to groups and types of resources.

- Exemption and reduction resource tax: applies to many cases in order to encourage investment, encourage production or to carry out some economic social policies of State.

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2.9.1.7 Excise tax

Excise tax is business registration tax calculated in year, State implemented the inventory and control of production and business activity in the economy through excise tax regimes. Excise tax rates applied in absolute numbers and are distinguished by two groups: economic organizations and individual business households. For enterprise (organization), excise tax rate is regulated from 1,000,000 to 3,000,000 depending on the registered capital.

2.10 DEFINITION AND CHARACTERISTICS OF TAX FOR BUSINESS