1. Our company is headquartered in Bac Ninh province. In 2022, we set up a dependent-accounting branch in Hai Phong, whose accounting record is centralized at our headquarters. The dependent-accounting branch is authorized to carry out some trading activities and consultancy services. Do we have to declare and pay corporate income tax (CIT) for such a dependent-accounting branch in Hai Phong?
Under the provision of Decree 126/2020/ND-CP, in case the company adopts a central accounting regime and the dependent branch in Hai Phong is not involved in production activities, the branch is neither required to separately file nor allocate CIT payable to Hai Phong Tax Department. All CIT declarations and payments should be centrally reported to Bac Ninh Tax Department.
2. We are a manufacturing company established and located in Dai An Industrial Park of Hai Duong province since July 2021. In January 2022, we set up a dependent-accounting branch in Yen Phong Industrial Park of Bac Ninh province. The branch generated taxable income from July 2022. How should we declare CIT for the branch in Bac Ninh in FY22?
Under current CIT regulations, the branch in Bac Ninh may enjoy a CIT incentive package of (i) two years of CIT exemption, and (ii) 50% CIT reduction within a subsequent four years. Meanwhile, as Hai Duong city is classified as a first grade city, the investment project located in Dai An industrial park is not qualified to enjoy CIT incentives based on location.
Thus, for CIT finalization, the company needs to prepare one single CIT finalization return for both its headquarters and branch, but the CIT payable for the Bac Ninh branch must be separately calculated and remitted to Bac Ninh Tax Department based on its taxable income and corresponding CIT rate (i.e. 0% CIT in the first two years and 50% CIT reduction in the subsequent four years).
After the CIT incentive period, the CIT payment of the branch to be settled to Bac Ninh Tax Department would be allocated based on the expense ratio as regulated under the Circular 80/2021/TT-BTC
3. Ours is a wholesale trading company that sells goods to tier-1 distributors. In order to push sales, our company would make some support payments to tier-2 distributors who do not have a direct sales agreement with us. Could we claim CIT deduction for the support payment made to tier-2 distributors?
Following recent private rulings, tax authorities opined that as tier-2 distributors do not have a direct sales agreement with the company, it is likely that the support payment made by the company should not be deductible for CIT purposes.