THEORETICAL BACKGROUND OF CORPORATE INCOME TAX
Theoretical background of corporate income tax
1.1.1 Concept of corporate income tax
The XIII National Assembly approved the Law on CIT No 32/2013/QH13 on June 19, 2013 to replace the Law on CIT No 14/2008/QH12, and it went into effect on January 1, 2014 The Law on CIT has been amended and supplemented numerous times to reflect reality, ensuring that the policy is increasingly open, transparent, synchronous, and in line with international practices and regulations Vietnam's international commitments have been signed or acceded
Corporate income tax has many perspectives based on various research directions, so there are numerous CIT concepts:
- According to the CIT Law No 32/2013/QH13 of June 19, 2013, “CIT is a type of direct tax levied on taxable income of production and business establishments in the period”
Corporate income tax (CIT) is a direct tax levied on business establishments, making them both taxable entities and taxpayers The calculation of CIT is based on taxable income, which effectively reflects and regulates the efficiency of enterprise production and business operations.
Corporate Income Tax (CIT) is a tax imposed on the income generated from production, business activities, or other revenue streams of an enterprise or economic organization within a specified tax period, as outlined by Assoc Prof Dr Nguyen Thi Thanh Hoai and Dr Ton Thu Hien in their 2019 tax curriculum for the Academy of Finance.
The concept of corporate income tax encompasses the fundamental principles governing its application, distinguishing it from earlier notions It precisely identifies the income subject to taxation, which includes earnings from production, business activities, and additional sources Corporate income tax is confirmed as a levy on taxable income, extending beyond traditional businesses to encompass a broader range of income sources This highlights the importance of corporate income tax as a direct tax, illustrating its expanded scope to include various income types.
Corporate income tax (CIT) is a key element of the social products generated through economic activities, functioning primarily as a mechanism for profit distribution In this process, the State plays a crucial role alongside business owners, executives, and the workforce, as it receives a portion of the profits generated by enterprises Essentially, CIT represents the value of newly created products that the State acquires through its share in the distribution of enterprise profits.
Corporate Income Tax (CIT) is a direct tax, meaning the taxpayer bears the tax liability without the ability to transfer it This direct relationship between legal taxpayers and the taxable entity highlights its nature CIT plays a crucial role in the State's socio-economic policies by generating revenue for the budget while also regulating the economy and social income It fosters an environment for newly established enterprises to stabilize and grow, encouraging them to hire specific groups such as individuals with disabilities, children, and women to address employment and social challenges Ultimately, CIT is based on the production, business results, and profits of enterprises, directly influencing the income of legal entities.
Based on the initial concepts and arguments, the author understands and employs the concept of CIT in the following ways throughout the thesis:
Corporate income tax is a type of income tax levied on the taxable income of businesses during a specific tax period
1.1.2 Characteristics and roles of corporate income tax
1.1.2.1 Characteristics of corporate income tax
The intrinsic properties of Corporate Income Tax (CIT) define its nature and remain stable throughout the development process Research indicates that CIT possesses unique characteristics that distinguish it from other taxes and financial instruments.
First and above all else, corporate income tax is a direct tax
Corporate income taxpayers are taxable businesses and investors from various economic sectors
By Law, taxpayers are the final taxpaying citizens in a business cycle In other utterances, CIT makes it more difficult and pricey to shift the payroll tax to others
Second, corporate income tax is dependent on the performance of businesses or investors
Corporate income tax is estimated based on taxable income, so businesses but rather business investors must pay corporate income tax only when they make a profit
Third, corporate income tax is a non-criminal mandatory transmission of taxpayers to the State
Non-criminal compulsion is an inherent primary feature of taxes in general and CIT in particular; it distinguishes CIT from other forms of State budget budgetary mobilization
The Corporate Income Tax (CIT) represents a crucial economic mechanism characterized by objective monetary relations of significant social importance, mandated by the State This legally required distribution involves enterprises transferring a portion of their income to the State without any compensation In return, taxpayers may benefit from various distributions or advantages.
Fourth, income transfer in the form of corporate income tax is not a direct return
The non-refundable nature of CIT is reflected in the following ways:
The initial transfer of income via taxation is non-countervailing, indicating that the tax rate paid by different social classes does not solely depend on the public goods and services they receive from the State Additionally, taxpayers cannot demand that the State provide specific public goods and services in exchange for the income transfers they contribute.
The income transfer through Corporate Income Tax (CIT) is not directly refundable, indicating that taxpayers will ultimately benefit from public services offered by the State to the entire community However, these services do not always equate to the amount of tax paid to the State.
Fifth, the transfer of income in the form of CIT is pre-lawfully regulated
The Corporate Income Tax (CIT) Law underscores the legality of income transfers, establishing a framework that is not arbitrary but rooted in specific legal provisions This law clearly defines the taxpayer, the tax amount due, deadlines for payment, and potential penalties, ensuring a structured approach to taxation.
In specific periods, economic, political, and social factors influence income transfers in the form of CIT
Economic factors that influence CIT are typically the national economy's growth rate, prices, markets, and fluctuations in the state budget
Political and social factors that can influence CIT are frequently the State's political institutions, the psychology and habits of the population classes, and cultural heritage
Income tax transfers in the form of corporate income tax are only authorised within national borders in which the State has legal authority over people and property
Finally, corporate income tax must be withheld before personal income tax
CIT generally utilizes flat tax rates instead of progressive tax rates Various tax rates can be applied to distinct groups of individuals or specific types of income, depending on the prevailing tax policy objectives.
1.1.2.2 Roles of corporate income tax
The CIT Law has undergone multiple revisions and is now a key macro-market management tool that applies uniformly across all economic sectors and business types This legislation fosters a fair and healthy competitive environment for both foreign and domestic enterprises, facilitating the rapid integration of the country's economy into the new economic landscape The significance of the CIT Law is particularly emphasized in its role in promoting equitable competition and economic growth.
For starters, corporate income tax is a significant source of state budget revenue
Corporate income tax applies to individuals, businesses, households, and economic organizations involved in profit-generating activities related to goods and services As our country's market economy continues to develop and stabilize, economic growth is being sustained and enhanced Those engaged in profitable production, business, and service activities are increasingly able to contribute to the State Budget through corporate income tax, effectively mobilizing financial resources for the nation.
Second, the corporate income tax is an essential tool for the Government to use in redistributing income and ensuring social justice
In our country, all economic sectors enjoy the right to operate freely and equally under the law, fostering economic growth Businesses with a skilled workforce and robust financial resources are positioned to achieve higher incomes, while those with limited capabilities may struggle to earn even minimal profits To address this disparity, the State implements a corporate income tax aimed at regulating the earnings of high-income entities, ensuring fair contributions from all business entities.
State budget are fair and reasonable
Consequently, corporate income tax is an important tool for promoting and encouraging business and production development in the direction of the State's plan, strategy, and comprehensive development
It is one of the State's important tools for performing the function of regulating socio-economic activities at each stage of economic development
The Government provides incentives and benefits to entities that invest and do business in sectors, fields, and regions where the State has priority development strategies at any given time
Theoretical background of corporate income tax compliance of
A business, according to the Institute of Statistics and Economic Research, is an economic organization whose primary function is to manufacture and sell goods and services
The Vietnam Enterprise Law, enacted by the National Assembly in 2020, defines an enterprise as an organization that possesses its own name, assets, transaction office, and is registered in accordance with the provisions outlined in the Law on Enterprises.
An enterprise is an economic organization, whether it has a legal entity or not, that conducts business activities in compliance with legal regulations to achieve defined objectives.
To start dealing, enterprises have production and business functions, which are inextricably linked and form a closed cycle in business operations
To maximize profits, businesses must focus on continuously enhancing their capacity to meet customer needs effectively.
Businesses operate within a competitive market and must embrace competition to thrive and expand To achieve this, it is essential to develop business strategies that are aligned with the specific conditions and circumstances of each era.
In the economy, there are six fundamental types of enterprises: those in the industrial sector, agriculture and fishery, commerce and trade services, transportation, construction, and various other businesses, including finance and insurance.
The Law on Vietnamese Enterprises, enacted by the National Assembly in 2020, categorizes enterprises into four primary legal forms: Private Enterprises, Limited Liability Companies, State-Owned Enterprises, Joint-Stock Companies, and Partnership Firms.
Enterprises are established and operate with the goal of generating economic benefits; however, it also plays an important role in the economy and society, specifically:
Businesses play a crucial role in generating revenue for the state budget, which is essential for funding infrastructure development, enhancing public social services, and addressing various social challenges.
Second, resolving employment issues, generating income, and improving workers' lives Established and operated businesses have created jobs for people, allowing them to have more money to live their lives
Businesses play a crucial role in driving economic growth and development As the backbone of the economy, diverse business sectors contribute to overall expansion; thus, the growth and success of businesses directly influence economic progress.
1.2.2 Concept of tax compliance and corporate income tax compliance
Tax compliance is defined in a variety of ways, differing from broad to specific concepts
Tax compliance is defined by Hamm (1995) as the timely and accurate submission of tax returns by taxpayers, ensuring they meet their obligations in accordance with tax laws and court decisions.
“Tax compliance in the simplest sense is the degree to which taxpayers comply with their tax obligations prescribed in tax law”, write James and Alley
Tax compliance, as defined by the OECD (2004), is evaluated based on the taxpayer's obligations, which encompass three key components: timely declaration, exact declaration, and the on-time fulfillment of obligations.
In the thesis research, the author adopts a tax compliance perspective through the activity approach to evaluate tax compliance This assessment is based on four key factors: tax registration, tax declaration and calculation, reporting of tax information, and adherence to tax payment obligations as stipulated by tax administration laws.
In the thesis, the author defines tax compliance as the complete adherence to tax obligations as mandated by law This definition encompasses essential activities such as taxpayer registration, declaration, reporting, and the timely payment of taxes.
1.2.2.2 Concept of corporate income tax compliance
Tax compliance for businesses entails fulfilling obligations related to tax registration, declaration, calculation, finalization, and reporting A company is deemed compliant with corporate income tax when it adheres to these responsibilities and meets its payment obligations as per current regulations.
Corporate Income Tax Compliance Classification
Depending on the type of compliance (administrative compliance versus technical compliance);
Based on the content of the compliance (compliance in tax registration, compliance in filing tax returns, compliance in reporting complete and accurate information, and compliance in tax payment);
Tax compliance varies among individuals based on their willingness and ability to adhere to regulations Some individuals demonstrate a strong commitment to compliance, while others may attempt to comply but struggle to do so consistently There are also those who may not initially want to comply but will do so if prompted or monitored Lastly, a segment of the population may consciously choose not to comply with tax obligations Understanding these differing levels of compliance is crucial for effective tax policy and enforcement strategies.
Criteria for determining whether or not a corporation is in compliance with its income tax obligations
To start, tax compliance is the level of understanding of tax law policies, particularly regulations pertaining to taxpayer rights and obligations
Taxpayer behavior towards tax law compliance is influenced by their interest and understanding of tax policies To adhere strictly to tax regulations, it is essential for taxpayers to actively learn and apply these laws Noncompliance often arises when taxpayers overlook or misunderstand tax provisions While quantifying taxpayer interest in tax regulations is challenging, surveys can effectively gauge their level of concern Engaging directly with taxpayers through questions or interviews can provide valuable insights into their attitudes towards tax compliance.
Second, tax compliance is regarded as voluntary or reluctant in nature
ACTUAL SITUATION OF CORPORATE INCOME TAX
Overview of The Northern Network Infrastructure Center
2.1.1 Foundation and development of The Northern Network Infrastructure Center
Official name: Northern net work infrastructure center
General status: In operation (has received a certificate of tax registration)
Address of the office: No 5 Simco Lane, 28 Pham Hung Street, Nam Tu Liem District, Hanoi
The Northern Network Infrastructure Center, a production and accounting unit of the Network Infrastructure Corporation, was established under Decision No 963/QD-VNPT-HDTV-TCCB on June 30, 2015, by the General Director of Vietnam Posts and Telecommunications Group It functions as an integral component of the Network Infrastructure Corporation, ensuring full compliance with organizational and operational standards.
On July 30, 2015, the Northern Network Infrastructure Center received its business registration certificate from the Department of Planning and Investment, with the Hanoi Tax Department overseeing tax administration The company is represented by Mr Nguyen Viet Khoa and primarily engages in wireless telecommunications activities.
The Northern Network Infrastructure Center operates as an economic entity accountable to both the law and the Corporation, overseeing its activities in accordance with the powers, responsibilities, and obligations specified in this regulation.
- Having policies and procedures in place for organization and operation, management, and administration;
- Create your own personalized seal;
- Be duly registered as a business as required by law;
To effectively manage capital and assets associated with the Center's operations, it is essential to establish accounts with the Treasury and banks The Corporation has appointed individuals responsible for overseeing these financial activities, ensuring accountability in achieving production and business objectives, as well as fulfilling the tasks delegated by the Corporation.
The Northern Network Infrastructure Center performs production and business activities and serves the specialized telecommunications, information, and communication technology, specifically:
VNPT is responsible for the management and operation of telecommunications networks and information technology systems, which encompass the technical infrastructure for fixed networks, broadband, mobile services, and television across various provinces and cities.
Effectively coordinate the response and resolution of system incidents within VNPT's telecommunication network infrastructure and information communication technologies in the region, ensuring compliance with the operational and incident management regulations set forth by the Corporation and VNPT.
- To plan the repair of telecommunications, information technology, communication, power sources, and auxiliary equipment;
- Coordinate the installation and repair of telecommunications, information, and communication technology, as well as the quality of services provided to customers in the region;
- Organize the installation of new construction works, as well as the installation or transfer of equipment on the network, in accordance with the Corporation's hierarchy;
- Coordinate the Corporation's and VNPT's project implementation;
- Coordinate with Corporation units to carry out network inspection and optimization to ensure network quality as prescribed;
- Proposing network planning and development in the area;
- Management organization for VNPT assets in provinces and cities, including transmission, switching, transmission, collection, and access networks;
- Management of spare materials and equipment, as well as warehousing exploitation
2.1.1.1 Northern Network Infrastructure Center's Rights
First , there is resource management and utilization
To actively organize, manage, and use capital, assets, and other resources in accordance with the Corporation's decentralization
Decentralize the management and use of the Corporation's resources to subordinate units Transfer resources between affiliated units as needed to complete the Corporation's overall plan
To manage the Center's production activities in accordance with the Corporation's regulations by utilizing a professional information system
Second, there is a business management organization and a service
Prepare plans and submit them to the Corporation's General Director for consideration and decision on the establishment, reorganization, and dissolution of affiliated units
Decide to organize the apparatus of the affiliated units in accordance with the Corporation's decentralization, in accordance with the Center's operation
Effectively oversee and operate the assigned network equipment systems while ensuring compliance with the Corporation's decentralization policies and state regulations on telecommunications and information technology Additionally, focus on the development of the telecommunications network to enhance operational efficiency and connectivity.
Management of technical and professional aspects, as well as regular and ad hoc reporting on techniques, operations, and services in accordance with the Corporation's regulations
Participate in surveying, designing, estimating, and building works and investment projects at the request of the Corporation
Engage in the research and application of science and technology, while actively participating in initiatives aimed at enhancing and innovating technology and equipment, all in alignment with the Corporation's master plans, regulations, and guidelines.
To enhance operational efficiency in the company's production and business activities, it is essential to implement State, VNPT, and Corporation labor and material standards for organizing scientific labor and accurate accounting in the Center.
The Center is authorized to recruit, hire, and train laborers in line with the Corporation's decentralization policies It can also manage employee rewards and disciplinary actions, excluding reprimands, in accordance with legal provisions and the Corporation's guidelines Additionally, the Center has the authority to appoint, re-appoint, and relieve cadres from duty, ensuring compliance with the Corporation's decentralization framework.
When selecting salary payment and income distribution methods for employees, it is essential to adhere to the Corporation's Regulations on salary distribution for both collectives and individuals This involves determining salary levels for employees that align with those of experts or engineers at level 8/8 or lower, as well as for workers and other staff members.
The proposal involves inviting foreign guests to collaborate with the unit on matters aligned with VNPT, the Corporation, and state management regulations, as authorized by the General Director.
Third, there is financial management
Create a financial plan based on the financial plan assigned to you by the Corporation Utilize the Center's capital and assets to meet production and business needs on time
2.1.1.2 Northern Network Infrastructure Center Obligations
Manage and use assets, capital, and other resources assigned to the Center by the State, VNPT, and the Corporation in an efficient and effective manner
Business registration and operation in accordance with the prescribed list of industries and professions Accept responsibility for the results of production and business in front of the Corporation
When approved by the Corporation, develop and submit plans for production organization, construction investment, major repair, and implementation to the Corporation's General Director
Coordinate maintenance, rescue, repair, and optimization with VNPT in the region, ensuring service quality in the area under management
We offer essential communication services for Party and State agencies, supporting national defense, security, and diplomacy Our focus includes addressing urgent communication needs and coordinating disaster prevention efforts across all levels within their jurisdictions.
To be subject to the Corporation's regulations regarding the direction and operation of telecommunications and information technology networks
VNPT is dedicated to managing and operating its telecommunications and information technology network infrastructure in the region, ensuring compliance with the corporation's stringent information quality and safety standards.
Create unit development plans based on the Corporation's strategies, master plans, and plans within the scope of the Center's functions and tasks
Create long-term, medium-term, and short-term plans for the Center in accordance with the Corporation's development strategy and goals
Innovate and modernize network equipment, technology, and management methods while building and developing the Center in accordance with the Corporation's approved plan
Ensure compliance with the Labor Code and relevant laws by fulfilling all employee obligations and benefits, while also guaranteeing employees their legal right to engage in the management of the Center.
To carry out obligations in accordance with state regulations governing natural resource protection, environmental protection, national defense, and security
Management and labor division based on the Corporation's and the Center's manning
Make expenditures in accordance with the Corporation's plan and decentralization, as well as the current financial regime
In accordance with the Corporation's regulations, implement the Finance - Accounting - Statistics regime Report to the Corporation on the Center's production, business, service, and financial activities
Subject to the Corporation's, VNPT's, and the competent State agencies' management, supervision, inspection, examination, and control in accordance with regulations
Representing the Corporation in the region in the following areas in relation to the locality:
- Comply with administrative regulations and legal obligations to State and local management agencies
- Work with local authorities to ensure the unit's safety and security in telecommunications, information technology, and communication
Assessment of the situation of corporate income tax compliance at The
The Northern Network Infrastructure Center has made significant strides in enhancing its efficiency, contributing positively to society and increasing its contributions to the state budget Recognized as one of the effective businesses, the company strictly complies with the policies and regulations set by the Tax Department of Hanoi As the company grows, its accounting system has evolved, playing a crucial role in maintaining financial stability and competitiveness in the market The company consistently applies the financial statement rules issued by the Ministry of Finance, ensuring that its accounting practices are flexible yet adhere to established principles, thereby providing accurate and timely information for effective management.
The Northern Network Infrastructure Center operates as a for-profit organization with a streamlined accounting team that ensures timely and accurate tax declarations in compliance with Ministry of Finance regulations Utilizing effective tax declaration support software, the company consistently submits complete monthly declarations and stays updated with the latest CIT Law changes and tax authority guidelines While the center has achieved notable success in fulfilling its tax obligations, it has also encountered certain limitations that warrant further discussion.
The company's corporate income tax compliance is supported by an accounting system staffed by 60% experienced employees, alongside rigorous oversight from tax authorities and the Hanoi State inspector The northern network infrastructure center has realized significant achievements and advantages as a result of these efforts.
Firstly, the vouchers for the initial accounting are in accordance with the
The Ministry of Finance mandates a specific form that aligns with the economic and legal standards of emerging economic activities The company has established a comprehensive Corporate Income Tax (CIT) accounting document system, which encompasses various accounting vouchers such as sales VAT invoices, credit notes, and cash receipts Additionally, it includes expenses for signing input VAT invoices, debt notices, warehouse receipts, and payment slips The detailed CIT monitoring book is updated quarterly, reflecting the production and business outcomes for each quarter and the entire year.
Secondly, monitor and record monthly and quarterly revenue and expenses in order to calculate and submit quarterly provisional CIT declarations in accordance with tax authority regulations
The Company utilizes HTKK software, developed by the General Department of Taxation, to efficiently prepare tax declarations This tax support software minimizes errors in monthly and quarterly tax filings, ensuring accuracy and compliance By streamlining the declaration process, the Company saves manpower and costs while facilitating easier inspections and monitoring by tax authorities.
In compliance with tax authority requests, the company ensures timely and complete submission of declarations while staying informed about regulatory changes to safeguard its interests.
Aside from the benefits obtained by the Company, the following drawbacks exist:
To begin with , the declaration of the basis for calculating CIT still contains errors, is unable to produce payment documents, and incorrectly declares deductible expenses
The effectiveness of the accounting system, particularly in tax accounting, remains suboptimal due to the inexperience of tax accountants handling a significant workload This often leads to errors in calculating the payable tax amount, resulting in the Company contributing a high annual tax to the state budget while still miscalculating expenses Consequently, the Finance and Accounting Department must conduct additional checks and re-accounting, which diminishes overall work efficiency and increases operational costs.
The company failed to meticulously handle documentation, with several key documents lacking necessary legal signatures from responsible parties Additionally, the accounting staff inadequately numbered original vouchers during the detailed numbering process, complicating the tasks of verification and retrieval.
Final l y, writing the incorrect invoice results in its cancellation and the re- accounting of related taxes
At the end of the fiscal year, accountants are responsible for determining payable corporate income taxes while also tracking personal income taxes for employees and other tax obligations Throughout the year, value-added tax (VAT) is generated from various revenue sources, necessitating that accountants monitor not only corporate income tax (CIT) items but also other taxable revenues such as VAT, personal income tax (PIT), and non-agricultural land tax To streamline the process, accountants are typically excluded from the CIT compliance audit.
The frequent issuance of overlapping legal documents related to tax policies creates considerable confusion for businesses When multiple regulations are released in quick succession, it becomes challenging for companies to stay current with updates or revisions This confusion significantly affects their ability to comply with and enforce tax laws effectively.
Many new accountants in the department possess limited knowledge, leading to misidentification of expenses that disrupts the declaration process Additionally, tax accountants struggle to stay updated with new regulations regarding expense determination, causing further complications.
Second, the number of transactions is high, but the accounting department's staff is inadequate, particularly the number of experienced tax accountants, which is still very limited
Third, the re-accounting of CIT from above the Corporation is the result of incorrect expense declarations, and the temporary calculation of quarterly CIT is not done well
Due to the Company's extensive customer base and numerous telecommunications stations across various provinces, the continuous buying and selling of invoices often leads to errors in invoice preparation by employees, resulting in the need for invoice deletions.
Finally, the Company lacks a process and a principle for properly, carefully, and perfectly storing documents.