CIT Calculation Exercises for Enterprises
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Thu Phương NguyễnCIT Calculation Exercises for Enterprises
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Thu Phương Nguyễn- Exercise 1
- Exercise 2
- Exercise 3
Common questions
Powered by AIDeductible expenses for CIT purposes must be substantiated with legal invoices and executed as non-cash payments to be considered legitimate against the taxable income. This requirement ensures proper documentation and compliance with tax regulations, thus influencing the precise calculation of taxable income and tax liabilities .
Prepayments for multi-year contracts, such as asset rental fees, should be allocated over the term of the contract. For instance, in exercise 2, a 400 million dong fee paid advanced for two years should be recognized as a deductible expense for only one year amounting to 200 million dong. The remainder is recognized as an expense in the second year .
Tax penalties and fines are non-deductible expenses for corporate tax purposes. In exercise 2, a fine for tax violations of 20 million dong must be added back to the taxable income as it is not allowable as a deduction .
The interest payments on loans to employees can be deducted only up to the basic interest rate of 6% per year announced by the State Bank of Vietnam. Since the interest rate paid was 10% per year, only part of the interest corresponding to 6% is deductible. The excess interest is non-deductible and should be added back to taxable income .
Funding for the equipment for Bach Mai hospital, amounting to 200 million dong, is not deductible when determining the taxable income, as it is not related to the core business operations and doesn't fall under deductible expenses as per the provided documents .
Lack of charter capital contribution impacts taxable income by potentially affecting the company's qualification for certain tax credits or incentives linked to full capital contribution. The lack of full capital contribution might lead to a stricter scrutiny of capital adjustments in taxation, potentially increasing taxable income by not providing for expected deductible avenues .
Income from joint ventures is considered post-tax if it's received after tax has been paid at the source. For example, in exercise 3, joint venture income reported as post-tax due to a 10% tax rate is added to the taxable income without additional tax deductions needed. Meanwhile, additional taxable income would arise if joint venture income wasn't already tax-paid at the source .
Adjustments include: 1) Adding back non-deductible depreciation of expired fixed assets amounting to 200 million dong. 2) Adding back the penalty for tax violations totaling 20 million dong. 3) Removing the full depreciation of fixed assets rental paid in advance (200 million dong), instead only 50% is deductible for one year (the rest is deferred for the next year). 4) Adding back personal income taxes paid of 100 million dong as they are withheld from employees' salaries. After these adjustments, taxable income is recalculated to determine CIT .
Scientific research costs, if not supported by designated funds, might not qualify as deductible expenses impacting the tax liabilities negatively. Without dedicated funds for science and technology development, research expenses may require additional justification or fail to be deductible, adversely affecting the corporate taxable income by necessitating further add-backs to the tax base .
Foreign offshore income that has already been taxed abroad is typically considered net income after paying the foreign tax. In exercise 2, the income was received after an 18% tax was levied. This income should be included in the taxable base at its net amount, with consideration that foreign tax credits may apply, depending on international tax treaties .
