Tax Newsletters February 28, 2021

Circular 03/2021/TT-BTC guidance on Corporate Income Tax (CIT) reduction, exemption for technology and science enterprises.

On January 11, 2021, the Ministry of Finance issued Circular No. 03/2021/TT-BTC ("Circular 03") on CIT reduction, exemption for technology and science enterprises specified in Decree No. 13/2019/ND-CP of the Government.

According to Circular 03, objects which are applied, include technology and science enterprises as prescribed in the Law on Science and Technology. In case the enterprise which has a branch directly under them does independent accounting, if the branch meets the requirements of Circular 03, it will also be eligible for being applied tax incentives.

Circular 03 also emphasises the condition to apply tax incentives that the annual revenue from trading products, production activities which is formed from technological and scientific results, reaches a minimum rate of 30% of the enterprise’s total annual revenue (in which the total annual revenue is the total revenue from service, business and production activities, the revenue from financial activities and other income of the enterprise).

The duration and level of preferential CIT reduction, exemption are specified as follows:

* Tax exemption for 04 years and 50% reduction of payable tax amount for the next 9 years;
* If the enterprise has not had taxable income for the first 3 years, the incentive will start from year 4;
* If the enterprise's revenue does not meet the rate of 30% mentioned above during the year, the incentives will not be applied, but it will be deducted from the period of receiving CIT incentives;
* If the enterprise is receiving other CIT incentives and is later granted the certificate of a high-tech enterprise, the period of receiving the high-tech CIT incentive will subtract the time for CIT reduction, exemption in which the enterprise receives according to other preferential conditions;
* If the enterprise has taxable income but the time of business and production activities which are exempt from or reduced tax for the first year is less than 12 (twelve) months, the enterprise may choose to receive tax reduction, tax exemption immediately in that first year or register with the tax office the period of the commencement of tax reduction, tax exemption in the following year.

Please see the attached file for detailed information