The finalisation of Corporate Income Tax (CIT) for 2024 is currently the main focus for the majority of businesses as the financial year has just ended. The process of determining revenue, deductible expenses, and income eligible for incentives when finalising CIT are issues that are often prone to errors and need to be noted. Companies should proactively review accounting records and supporting documents to detect inconsistencies with tax declarations in order to timely adjust, supplement before the tax authorities decide to commence tax audit/inspection to avoid unnecessary tax penalties and other legal risks. Some brief notes on the 2024 corporate income tax finalisation are as follows:
Taxable revenue: Revenues for calculating taxable incomes are the total amount of money from selling goods, manufacturing, and service provision fees, including price subsidies, surcharges, and supplementing fees that enterprises receive, regardless of whether the money has been collected or not. Revenue recognition time is upon the completion of transferring ownership, right to use (for goods), provision of services or completing part of service provisions, except for the cases specified in Clause 3, Article 5 of Circular No. 78/2014/TT-BTC, Clause 1, Article 6 of Circular No. 119/2014/TT-BTC.
Deductible and non-deductible expenses: Enterprises need to review and compare actual business activities with supporting documents of transactions. Through strong understanding of the current regulations, identify and exclude any non-deductible expenses during the calculation for corporate income tax. Except for the non-deductible expenses stated in Clause 2, Article 6 of Circular No. 78/2014/TT-BTC, amended by Circular No. 96/2015/TT-BTC, generally enterprises are allowed to deduct all expenses if they meet the following conditions: expenses arising from actual production and business activities of the enterprises; expenses with sufficient legal invoices and supporting documents according to the provisions of law. Expenses with invoices for purchasing goods and services each time with a value of VND 20 million or more (including VAT) must accompanied with non-cash payment documents.
Invoices and supporting documents: Enterprises often have issues with invoices and legitimate supporting documents of expenses. Therefore, enterprises need to carefully review to ensure the legitimacy of invoices and documents, proactively eliminate transactions that do not have sufficient requirements before the tax authorities conduct tax audit/inspection.
Application of corporate income tax incentives: according to the provisions of Clause 4, Article 16 of Decree No. 218/2013/ND-CP, the tax exemption and reduction period is calculated continuously from the first year of having taxable incomes from new investment projects; in case there is no taxable income in the first three years, the tax exemption and reduction period shall start from the fourth year from the first year which enterprises start to generate revenue from the new investment projects.
Application of corporate income tax incentives to branches and business locations: according to the provisions of Point d, Clause 2, Article 11, Decree No. 126/2020/ND-CP, enterprises must separately determine the amount of corporate income tax payable for business activities having tax incentives of dependent branches/ business locations with the local tax authorities (where those dependent branches/ business locations are located); and shall not allocate or offset the incentives amount to inappropriate dependent units.
Deadline for submitting corporate income tax declarations: No later than the last day of the 3rd month from the end of the calendar or financial year for annual tax declarations.
Thus, the deadline for submitting corporate income tax finalisation dossiers for the 2024 tax period is no later than March 31, 2025 (for companies having the year ended on December 31, 2024).
For enterprises with a fiscal year other than the calendar year, the deadline is no later than the last day of the 3rd month from the end of the fiscal year.
Losses and carrying forward: Losses carrying forward shall be in full amount (after tax finalisation) and continuous to taxable incomes of the following years, but not more than 5 years from the year of incurring losses.
Error in tax declarations: upon detecting errors during the finalisation process of corporate income tax (after submission of the annual tax declarations), enterprises should prioritize amending the declaration information (correct tax payable, refund amounts, make appropriate tax payments, including late payments… etc) before they are discovered by the authorities or being audited/ inspected. To learn more details or to consult with our tax professionals regarding specific issues of Corporate Income Tax finalization, please contact Russell Bedford KTC’s Tax Department.
