What is Corporate Income Tax Settlement?

In the increasingly complex landscape of business and ever-evolving tax regulations, understanding and carrying out corporate income tax settlement is an essential part of business operations. Tax settlement is a crucial process that helps businesses calculate, submit, and verify their income taxes by legal regulations. This article will provide an overview of corporate income tax settlement, delve into its key aspects, and offer a comprehensive insight into the process of tax settlement in today's business environment.

1. 1. What is Corporate Income Tax Settlement?

Corporate income tax settlement is the process of calculating and paying taxes by a business based on its financial activities within a fiscal year. Settling corporate income tax is one of the significant obligations of a business to the state. It is also the foundation for a business to review its operational efficiency and plan its financial strategies for the following year.

2. 2. General Principles in Business Tax Settlement

In the process of business tax settlement, several general principles need to be followed, as follows:

• - Tax settlement is based on the principle of self-declaration, and self-responsibility for the accuracy, reasonableness, and completeness of the declared figures.
• - Tax settlement is based on the principle of calculating taxes based on reasonable and legally recognized revenues and expenses, as recorded by accounting regulations.
• - Tax settlement is based on the principle of timely submission of tax settlement declarations and the required amount of tax to be paid, except for cases where tax exemptions, reductions, or deferments are allowed by law.
• - Tax settlement is based on the principle of being subject to inspection, examination, and handling of violations by the tax authority within its jurisdiction.

3. 3. Process and Procedures for Corporate Income Tax Settlement

The process of settling corporate income tax includes the following steps:

• Step 1: Prepare financial reports and business activity result reports according to legal requirements.

• Step 2: Complete the corporate income tax settlement declaration using Form 03/TNDN issued along with Circular 151/2014/TT-BTC and other forms as required by the Ministry of Finance.

• Step 3: Submit the corporate income tax settlement declaration and accompanying forms to the tax authority with jurisdiction through the tax authority's electronic information system or via public postal services.

• Step 4: Pay the required corporate income tax or request a refund of corporate income tax by the tax authority's decision.

4. 4. Some Considerations in the Business Tax Settlement Process

To efficiently carry out corporate income tax settlement and avoid legal risks, businesses need to take note of the following points:

• - Determine the correct tax assessment period and filing deadlines. As per current regulations, the tax assessment period for businesses is a fiscal year, from January 1st to December 31st. The tax return filing deadline is before March 31st of the following year. In cases where a business has a different fiscal year from the tax assessment period, the filing deadline is within 90 days from the end of the fiscal year.

• - Prepare the tax settlement declaration using Form 03/TNDN and accompanying forms. These forms include the balance sheet, business activity result report, cash flow statement, statement of changes in owner's equity, cost schedule deducted when determining taxable income, and dependent deduction calculation. These forms must be prepared by regulations, consistent with accounting figures, and bear the signatures of the legal representative and the company's chief accountant.

• - Review previously paid taxes and any exemptions, reductions, or deferred tax payments. Businesses should review taxes paid in advance during the tax assessment period, including quarterly estimated taxes and proportional revenue taxes. Additionally, they should check for any exemptions, reductions, or deferred tax payments as stipulated by the law, such as tax exemptions for newly established businesses, tax reductions for businesses operating in favored sectors, or tax deferments for businesses facing difficulties due to the Covid-19 pandemic, among others.

• - Calculate the amount of tax to be paid or refunded. After determining the taxable income of the business, the appropriate tax rate should be applied to calculate the tax amount to be paid. The general tax rate is 20%, but it can be lower for certain types of businesses or favored industries. Subsequently, any previously paid taxes and exemptions, reductions, or deferred payments should be deducted to determine the final tax amount to be paid or refunded. If the amount of taxes paid in advance exceeds the required tax payment, businesses can request a refund or carry it forward to the next tax assessment period.

Corporate income tax settlement is a complex task that demands a high level of accuracy. Businesses must adhere to legal regulations and seek assistance from accounting, auditing, and legal experts to complete this task efficiently and securely.

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