Attention Businesses! What Changes in the New Corporate Income Tax Law 2024?

The new Corporate Income Tax Law in 2024 brings important changes for businesses. The key points include expanding the tax base to include previously exempt income, adjusting CIT rates for oil and gas activities, and applying preferential rates for small businesses. It also emphasizes the need to enhance regulations on tax incentives and tax calculation methods, combat tax base erosion, and profit shifting. Businesses should update their accounting systems, consult tax experts, and comply with CIT regulations. Other changes include adjusting expense deduction regulations, implementing electronic declaration and payment methods, and increasing tax management responsibility. Summary, the new Corporate Income Tax, CIT, Law 2024, effective from January 1, 2024, brings about important changes for businesses. This article summarizes the five key points businesses need to grasp to comply and optimize benefits, including expand tax base, enhance regulations on tax incentives, enhance regulations on tax calculation methods, combat tax base erosion and profit shifting, some other changes. In addition, the article also provides solutions to help businesses adapt to new laws and operate efficiently. 1. Expanded tax base, some income items currently exempt from tax will be subject to CIT. Income from capital transfers, including capital transfers from land, houses, and land-attached assets. Income from lottery and electronic gaming businesses with prizes. Income from Internet and cable TV service provision. Income from fixed asset rental activities, including house and land rentals. Income from the transfer of land-use rights and rights to use land-attached assets. Adjustment of CIT rates for oil and gas exploration and exploitation activities. Apply a CIT rate of 40% to income from oil and gas exploration activities. Apply a CIT rate of 50% to income from oil and gas exploitation activities. Apply preferential CIT rates for small businesses. Businesses with average annual revenue below 200 billion Vietnamese Dongs will be subject to a CIT rate of 15%. Businesses with average annual revenue from 200 billion Vietnamese Dongs to 500 billion Vietnamese Dongs will be subject to a CIT rate of 20%. Tax incentives for businesses. Update accounting systems and tax management software. Assess the impact of the expanded tax base on business operations. Consult tax experts for appropriate solutions. Comply with CIT regulations. 2. Enhance regulations on tax incentives. Institutionalize the Party and State's guidelines and orientations for the development of priority sectors and industries. Carefully identify the sectors and industries that will benefit from tax incentives in line with the country's socio-economic development orientation. Specify the level of incentives and the duration of tax incentives for each sector and industry. Review and rearrange tax incentive policies to encourage investment. Identify investment sectors that need to be encouraged and attracted. Apply appropriate tax incentive policies to encourage investment in these sectors. Eliminate ineffective tax incentive policies to encourage investment and production in business activities in an efficient and sustainable manner. Solutions for businesses. Thoroughly understand the information on tax incentive policies. Stay updated on changes to tax incentive regulations. Prepare complete documentation to benefit from tax incentives. Consult tax experts if necessary. 3. Enhance regulations on tax calculation methods. Apply modern tax calculation methods in line with international practices. Apply the profit-based tax calculation method. Apply the percentage of turnover tax calculation method. Apply the transfer price tax calculation method. Address the shortcomings in current regulations to ensure transparency, ease of understanding, and ease of implementation. Clearly define taxable and non-taxable income items. Use the method of determining deductible reasonable expenses. Specify the method for calculating additional CIT. Solutions for businesses. Thoroughly understand the information on new tax calculation methods. Stay updated on changes to tax calculation regulations. Prepare complete documentation for tax calculation. Consult tax experts if necessary. 4. Combat tax base erosion and profit shifting, BEPS. Apply additional CIT. Businesses with their head offices in Vietnam are obliged to pay additional CIT on profits earned from transfer pricing, low-related party activities, and activities with no or little physical presence. The additional CIT rate is calculated based on the effective tax rate of the business in the country or region with a low tax rate. Implement the country-by-country reporting, CBCR, procedure. Businesses with revenue from cross-border business activities are obliged to file CBCR reports according to the Ministry of Finance's guidelines. CBCR reports include information on the organizational structure, business activities, and financial situation of the business in each country. Automatic exchange of information, AEOI. Vietnam participates in AEOI, automatically exchanging tax resident financial account information with other countries and regions. Exchanged information includes account balances, transactions, and account holder information. Solutions for businesses. Thoroughly understand the information on BEPS regulations. Consult tax experts for advice on complying with BEPS regulations. Develop a business plan in line with BEPS regulations. Prepare complete documentation for filing CBCR reports and providing AEOI information. Other changes. Adjusted expense deduction regulations. Specify the methods for determining deductible reasonable expenses. Limit the deduction of certain expenses such as financing costs, advertising expenses, and entertainment expenses. Improved declaration and payment regulations. Implement electronic declaration and payment methods. Thoroughly define declaration and payment deadlines. Regulate declaration and payment under the consolidated method. Regulations on tax management responsibility. Increase the responsibility of business heads for tax management. Regulate tax management authorization. Regulate tax violation handling procedures.