Law on Corporate Income Tax Management

Reasonable expenses for calculating taxable income are expenses that an enterprise has incurred to conduct production and business in a certain period related to revenue, reflected in the enterprise's accounting report.

1.1.4.3. Determining taxable income

Taxable income in a tax period is determined by taxable income minus tax-exempt income and losses carried forward from previous years. Therefore, taxable income is a part of taxable income and normally this total income will be lower than total taxable income. Taxable income in a period is distinguished from income calculated on each occasion of income generation.

Taxable income for the period is determined according to the following formula:

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Taxable income in tax period

Taxable income

Tax-free income

Losses carried forward as prescribed

* Method of calculating corporate income tax:

Corporate income tax payable

Taxable income

Corporate income tax rate

1.1.4.4. Tax rate

Corporate income tax rates are determined as a percentage of taxable income. Currently, tax rates are divided into two types: regular tax rates and preferential tax rates.

The normal tax rate is the tax rate applied to all types of enterprises except enterprises that are eligible for tax incentives. The preferential tax rate is a tax rate that is lower than the normal tax rate, applied to a number of subjects that are eligible for incentives according to the provisions of law.

According to the current corporate income tax law, the normal tax rate applied from January 1, 2016 is 20% 6 . Previously, the tax rate applied was 22%. Socio-economic conditions are factors that affect the prescribed tax rate. For example, in the case of promoting and encouraging the production and business activities of enterprises, the tax rate will be adjusted down.

For businesses operating in the search, exploration and exploitation of oil, gas and other rare resources in Vietnam, the applicable tax rate is from 32% - 50%, depending on each project and business establishment according to Government regulations.

Preferential tax rates are applied to enterprises that are subject to preferential treatment and are usually lower than the normal tax rates and are prescribed at different levels depending on the conditions of application. Enterprises can enjoy preferential tax rates indefinitely or for a limited period, or enjoy tax exemptions indefinitely or for a limited period. For cases where preferential tax rates are applied for a limited period, current laws also provide for the extension of the period of application of tax incentives for projects that need special incentives for large-scale and high-tech investment with a period of no more than fifteen years. In addition, the Prime Minister has the right to decide to extend the preferential period for no more than fifteen years for enterprises' income from implementing investment projects in the manufacturing sector as prescribed. The application of preferential tax rates is specifically prescribed in Articles 13, 14, and 15 of the 2008 Law on Corporate Income Tax, amended and supplemented in 2013 and 2014.

1.1.4.5. Tax period

Tax period is the period within which a business must complete procedures to determine the amount of corporate income tax payable. The applicable tax period distinguishes between the business's income by year and income for each occurrence. 7

The tax period can be applied according to the calendar year or the fiscal year. In which the calendar year is calculated starting from January 1 and ending on December 31. The fiscal year is a period of time equivalent to 1 year used for accounting.

6 See Clause 3, Article 13 of the Law on Corporate Income Tax 2008, amended and supplemented in 2013 and 2014.

7 Dr. Nguyen Thi Lan Huong, Tax Law: Theory, history, current situation and comparison, op. cit., p.124.

Revenue and expenditure within an enterprise, for example: the fiscal year in some countries such as the UK, Canada, Japan... starts from April 1 of a year and ends at the end of March 31 of the following year. Enterprises can choose the tax calculation period according to the calendar year or the fiscal year but must notify the Tax authority in advance.

The current corporate income tax calculation period for each occurrence is applied to foreign enterprises with permanent establishments in Vietnam that pay tax on taxable income arising in Vietnam that is not related to the activities of the permanent establishment and foreign enterprises without permanent establishments in Vietnam that pay tax on taxable income arising in Vietnam.

1.2. General overview of corporate income tax management law

1.2.1. Concept

1.2.1.1. Tax management activities

Management is a category that refers to the relationships and interactions between management subjects and managed objects to achieve set goals in the context of environmental changes . Management has appeared since the common activities of humans. Depending on the requirements, goals and scope of research, we can understand the management subject and the managed objects to a certain extent. Management content often includes: Planning; organizing the management apparatus; training staff to establish the organization's staff for each type of work; commanding and motivating staff to work according to plans and goals; checking....

The concept of tax management can be understood in the following two meanings:

In a broad sense: tax management is state management in the field of tax, the process of building a strategy to develop the tax system, promulgating tax laws, organizing, managing, operating, inspecting, and supervising the implementation of tax laws; inspecting, examining taxes, handling violations of tax laws...

In a narrow sense: tax management is state administrative management of taxes, is the organization, management, and operation of the tax collection and payment process; includes administrative professional activities in the tax field; is the implementation activity according to a certain plan and order carried out by tax management agencies.

8 Assoc.Prof.Dr. Nguyen Ngoc Hung: “State Budget Management”, Statistical Publishing House, 2006, p.13.

Regulations on the form of organization and implementation of the tax system are often considered as regulations on the form of tax law, because it has the task of determining the order and procedures for tax collection and management as well as handling violations and resolving tax disputes. In the broadest sense, all regulations related to this activity can be encapsulated in the term "tax management law" and depending on the perspective of each country, they can be regulated in general in the Tax Code or tax laws, or separated into a separate law on tax management.

The Law on Tax Administration of the 11th National Assembly, 10th session, No. 78/2006/QH11 dated November 29, 2006, approaches the issue of tax administration in a narrow sense. The Law does not provide a specific concept of Tax Administration but only sets out the contents of tax administration in Article 3. The contents of tax administration include: Tax registration, tax declaration, tax payment, tax assessment; Tax refund procedures, tax exemption, tax reduction; Cancellation of tax debts, late payment fees, fines; Management of information on taxpayers; Tax inspection, tax audit; Enforcement of tax administrative decisions; Handling of violations of tax laws; Resolution of complaints and denunciations about taxes.

From this article, it can be seen that tax management law includes procedural regulations built to implement the state's tax policies.

The nature of tax management is state administrative management in the field of tax. Therefore, tax management is conducted on the basis of compliance with administrative management principles.

Subjects in tax management relationships include 2 objects:

i) Management subjects: basically, the responsibility to participate in tax management belongs to the state and all organizations and individuals. However, to ensure the implementation of tax management responsibilities, the state grants the authority and responsibility for direct tax management to tax management agencies, specifically tax agencies (including the General Department of Taxation, Tax Department, Tax Branch) and customs agencies (including the General Department of Customs, Customs Department, Customs Branch).

ii) Subjects subject to state tax management are taxpayers identified in Clause 1, Article 2 of the Law on Tax Management 2006, amended and supplemented in 2012 and 2014.

This regulation reflects the idea of socializing tax management activities of lawmakers, which is the general trend of state administrative management reform.

On the other hand, people's participation in state management is also one of the four basic pillars for good state management (the other three pillars are accountability, transparency, and predictability) 9 . However, to do this, we must first change the thinking of civil servants and build a transparent legal system.

Tax management activities have the following characteristics:

Firstly, tax administration is a sensitive and complex activity, requiring the interests of both parties: the state and taxpayers to be ensured. This characteristic requires tax administration agencies to have flexible management methods, and cannot arbitrarily set out arbitrary and oppressive regulations. History has proven that frustrations with the tax regime can lead to very fundamental political changes.

Second, tax administration is administration by law and according to law and other professional and administrative measures, in which law is the main tool, the standard that everyone must follow, whether they are tax collectors or taxpayers. Besides, public opinion also contributes significantly to tax administration in particular and to the tax sector in general.

Third, the effectiveness of tax administration depends on many factors such as: people's awareness of tax law compliance, the capacity of tax officials, the physical facilities of the tax sector, the system of economic and social management institutions (land management, business registration management, accounting regime, etc.). This characteristic requires that all tax system reforms must be carried out synchronously, with a general strategy, avoiding lame and patchwork reforms.

1.2.1.2. Law on corporate income tax management

There are countries that regulate all taxes in a general tax code, called the Tax Code. In this code, the legislator regulates both the specific content of the taxes in the tax system and the procedures for tax collection and management as well as handling violations and resolving tax disputes. This solution was applied in South Vietnam before 1975 (eg:

9. Ths. Truong Quoc Viet (2013), "Four pillars of public administration in the 21st century", Journal of Political Science , No. 4/2013.

Tax Code, copied by Nguyen Hung Truong, Saigon, 1972). Currently, this solution is also being applied in the French Republic 10 .

On the contrary, there are countries that choose to design each type of tax to be issued by a separate law, independent of each other but still ensuring compatibility with each other and at the same time separating tax management regulations by a separate law compared to tax laws. This is the solution being applied in Vietnam and some other countries in the world.

In the current world context, the general trend of countries is to seek to promulgate separate laws on each type of tax and try to separate tax administrative regulations from tax laws, by promulgating a separate law, called the Law on Tax Administration. This solution is considered more suitable for the conditions of global economic integration, and it allows lawmakers to amend, supplement and adjust the regulations in tax laws more easily, compared to putting all tax regulations in a general Tax Code.

Based on the most general understanding of tax management and tax management laws, the Law on Corporate Income Tax Management can be defined as a synthesis of legal norms issued by competent state agencies to regulate social relations arising in the state's corporate income tax management activities (management relations in tax collection and payment to the state budget by competent state agencies with respect to taxpayers and other related subjects).

In general, it can be envisioned that the law on corporate income tax management includes the following basic groups of regulations:

One is: regulations on registration, declaration, tax calculation, tax payment, tax settlement, tax arrears and refund of corporate income tax; tax exemption, tax reduction and cancellation of tax debts, fines and late payment. Registration, declaration, tax calculation, tax payment, tax settlement, tax arrears and refund are important activities in the process of performing the function.

10 Michel Bouvier (2005), Introduction to general tax law and tax theory , National Political Publishing House, Hanoi, p.39.

tax administration by competent state agencies. Previously, these activities were often carried out by unilateral administrative decisions or actions of the State and regardless of the attitude of taxpayers. Currently, this process has been fundamentally changed, in the direction of giving maximum initiative to taxpayers in self-registering for tax, self-declaring, calculating tax and self-paying tax to the State, on the basis of being subject to direct and regular inspection and supervision by tax administration agencies - as representatives of the State in tax collection activities. As analyzed above, the shift to a tax collection model based on the mechanism of self-registration, self-declaration, self-calculation and self-payment is an important breakthrough in the process of tax administrative reform in countries around the world in general and in Vietnam in particular. From a legal perspective, regulations on self-registration, self-declaration, self-calculation and self-payment of taxes aim to expand the power of taxpayers, while also enhancing their sense of responsibility in the process of fulfilling their financial obligations to the State.

Second: regulations on tax inspection, examination, enforcement and handling of violations of the law on corporate income tax. These are the regulations that most clearly demonstrate the role and administrative management function of the State towards society in general and towards taxpayers in particular. Previously, tax inspection and examination activities were often conducted before enterprises fulfilled their tax payment obligations, called the "pre-inspection" mechanism. However, recently, efforts in the process of tax administrative reform have led to a shift from the "pre-inspection" mechanism to the "post-inspection" mechanism, according to which tax authorities only conduct inspections and examinations after enterprises have themselves performed the main procedures of the tax management process such as tax registration, tax declaration, tax calculation and payment, tax settlement, tax refund or request for tax exemption or reduction. Based on the results of inspection and examination, tax authorities have the right to apply sanctions to handle violations of tax laws. Regulations in this direction not only reduce the workload for tax authorities, ensure the rationality of the tax administration process, but also create conditions for tax authorities to improve professionalism in the process of tax inspection and examination - as the most effective tax administration tools.

Third: regulations on dispute resolution in the field of corporate income tax. Currently, dispute resolution in corporate income tax is carried out according to two procedures: one is the complaint procedure under the Law on Complaints and the court procedure under the Law on Administrative Procedures. Disputes in corporate income tax are an inevitable consequence of the process of performing administrative management functions, especially administrative management in the field of tax. This is because recent regulations of the Tax Law in general and Corporate Income Tax in particular tend to increase and become more and more complicated, along with the process of transition to the model of the state - rule of law and civil society. This leads to the consequence that the State must find ways to establish appropriate resolution mechanisms for disputes arising in the field of tax, thereby ensuring the rights and legitimate interests of the parties participating in the legal relationship of corporate income tax 11 .

1.2.2. Principles of corporate income tax management

The most basic goal of tax administration is to make tax laws be implemented voluntarily and seriously by taxpayers in each locality. To achieve this goal, tax administration must ensure publicity, transparency, equality; and ensure the legitimate rights and interests of taxpayers. Specifically, tax administration activities of competent State agencies must comply with certain principles below:

 Compliance with the law: This principle governs the activities of parties in tax management relations, including both State agencies and taxpayers. The content of this principle is the authority and responsibility of the management agency; the rights and obligations of taxpayers are all prescribed by law. In the management relationship, the parties involved can choose certain activities but must be within the scope of the provisions of the law on tax management.

 Ensuring effectiveness: Like all other management activities, tax management activities must comply with the principle of effectiveness. Tax management activities are carried out, management methods are selected

11 Dr. Nguyen Van Tuyen - Hanoi Law University (2008), "Basic principles of tax law and structural model of the tax law system", Journal of State and Law , No. 8(244)- 2008, pp.14-20.

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