Deferred tax liabilities are corporate income taxes that will be payable in the future based on taxable temporary differences for the current year, determined as follows: Deferred inco
THEORETICAL BASIS ON CORPORATION INCOME TAX
Theoretical basis on corporation income tax
1.1.1 Concept and characteristics of corporate income tax
Throughout history, taxes have played a vital role in the establishment and growth of states, driven by the need for financial resources to support governmental functions As a key mechanism for generating budgetary revenues, corporate income tax has been utilized globally under various names, including corporate income tax and company tax The implementation of corporate income tax began in the late nineteenth century, with the UK and Japan being among the first adopters, followed by France and China in the early twentieth century.
The corporate income tax possesses the following characteristics:
Firstly, corporate income tax is a direct tax, and taxpayers include enterprises and investors from various economic sectors who generate profits, simultaneously serving as tax bearers
Corporate income tax is based on the profitability of business activities conducted by enterprises, meaning that only profitable businesses and investors are required to pay this tax.
1.1.2 Roles of corporate income tax
Corporate income tax serves several functions, including the following:
Corporate Income Tax (CIT) plays a crucial role in generating budget revenue, growing alongside the national economy As the economy develops, the capacity to mobilize financial resources for the state budget through CIT is expanding, capturing a diverse range of income sources from increasingly complex income structures Like other tax systems, CIT provides a substantial and stable revenue stream for the budget.
CIT plays a crucial role in economic restructuring by enabling the government to establish targeted tax policies that encourage investment in specific industries or regions By defining tax subjects, rates, and incentives, the government can stimulate development where it is most needed Additionally, higher taxation and reduced exemptions may be applied to industries that require production contraction, while tailored tax reductions and exemptions can support sectors that the government aims to enhance This strategic approach not only aims to leverage domestic capital but also to attract foreign investment, helping enterprises navigate challenges and foster growth.
CIT is vital for reducing economic disparities and promoting social equity, as it applies uniformly across all businesses By imposing a consistent tax rate, larger and more profitable corporations contribute a greater share of taxes, alleviating the financial burden on lower-income groups This redistribution of wealth is essential for creating a more equitable society, as it enhances public services and infrastructure, ultimately providing increased opportunities for all sectors of the community.
1.1.3 General contents of corporate income tax law in Vietnam
1.1.3.1 Characteristics and roles of corporation income tax in Vietnam
In Vietnam, corporate income tax is derived from profit tax, representing a segment of profits designated for taxation The initial corporate income tax law was enacted by the National Assembly of the Socialist Republic of Vietnam on May 10.
1997, and took effect on January 1, 1999, replacing the Profit Tax Law Currently, corporate income tax in Vietnam is regulated by the Law on Corporate Income Tax
No 14/2008/QH12 dated June 3, 2008, and its amending and supplementing laws
No 32/2013/QH13 dated June 19, 2013, and No 71/2014/QH13 dated November
26, 2014, along with guiding documents such as Circular No 78/2014/TT-BTC dated June 18, 2014, Circular No 96/2015/TT-BTC dated June 22, 2015, and other related decrees and circulars
Corporate income tax (CIT) is vital for Vietnam's state budget, encompassing all profit-making entities in the country As the market economy evolves and integrates further, the capacity to generate financial resources through CIT has significantly increased In 2021, Vietnam's total state budget revenue reached approximately VND 1,343 trillion, with a notable contribution from CIT By 2023, the projected revenue was VND 1,620,744 billion, reflecting overall growth, including CIT contributions Although specific percentages of CIT within total revenues are not detailed, its critical role in Vietnam's fiscal strategy is evident, underpinning state expenditures and development initiatives in a dynamic economic landscape.
Corporate income tax is a crucial component of Vietnam's tax legal framework, serving as a mechanism for the government to regulate economic and social activities It plays a vital role in income redistribution, promoting social equity through tax incentives for prioritized industries and economic regions This approach helps prevent imbalances within the national economy.
The 2008 Corporation Income Tax Law, along with its 2013 amendment, defines entities subject to corporation income tax as organizations involved in productive activities, commercial transactions related to goods, and the provision of services that generate taxable revenue.
Domestic enterprises in Vietnam are established in accordance with local legislation, including joint-stock companies, limited liability companies, partnership entities, and various other forms of businesses operating under the Vietnam Enterprise Law.
- Enterprises with foreign capital investment, comprising joint ventures, wholly foreign-owned entities, and alternative modes of foreign investment within Vietnam
- Other economic organizations, including non-enterprise economic organizations like cooperatives, collaborative associations, and operational units engaged in production and commerce
- Foreign organizations' business establishments within Vietnam, exemplified by representative offices or branches of overseas corporations, are obligated to remit enterprise income tax on profits accrued within Vietnam
Each category of enterprise must comply with regulations pertaining to business registration, financial oversight, and tax remittance stipulated under Vietnamese law
1.1.3.3 General principles for determining corporate income tax
Under current regulations, the corporate income tax period aligns with the fiscal year The calculation of corporate income tax payable is based on taxable income and the applicable tax rate for that fiscal year.
Taxable income in the tax period is determined as follows:
In particular, taxable income in the tax period includes income from production and trading of goods and services and other income, which is determined as follows:
Taxable income is determined by the total revenue generated from the sale of goods, processing fees, and services, including any subsidies, surcharges, and additional fees, regardless of collection status However, it does not include trade discounts, discounts, or returned goods For enterprises involved in various business activities with differing tax rates, it is essential to calculate the income from each activity separately and apply the respective tax rate accordingly.
- Expenses eligible for deduction: Enterprises are allowed to deduct all expenses if
Corporation income tax payable = Taxable income _- Science and technology fund appropriation (if any) x Corporation income tax rate
Taxed income = (Revenue - Deductible expenses) + Other income they meet the prescribed conditions and are not among the expenses ineligible for deduction when determining taxable income
Deductible expenses include those that meet the following conditions:
(1) Actual expenses incurred related to the production and business activities of the enterprise
(2) Expenses supported by adequate invoices and legal documents as required by law
Invoices for the purchase of goods or services valued at 20 million dong or more, including VAT, must include non-cash payment receipts at the time of payment.
Expenses not eligible for deduction when determining taxable income include:
(1) Expenses that do not meet the conditions for deductible expenses, except for losses due to natural disasters, epidemics, and other force majeure events not compensated for
(3) Expenses compensated from other funding sources
(4) The portion of business management expenses allocated by foreign enterprises to their permanent establishments in Vietnam exceeds the amount calculated according to the allocation method prescribed by Vietnamese law
(5) Expenditure exceeding the prescribed norms for consumption of raw materials, materials, fuels, energy, and goods for certain raw materials, materials, fuels, energy, and goods as determined by the state
Interest expenses on loans for production and business activities incurred by entities other than credit institutions or economic organizations are capped at 150% of the basic interest rate set by the State Bank of Vietnam at the time of borrowing.
(7) Incorrect depreciation of fixed assets as prescribed by law
(8) Prepaid expenses for the term, for the period until the end of the term, periods not yet incurred, or unspent periods
Salaries and wages for individual business owners and founders who are not directly involved in production or management, as well as unpaid employee remuneration that lacks proper invoices and documentation, are key considerations in business financial practices.
(10) Repayment of interest on loans corresponding to the deficient charter capital
(11) Input VAT already deducted, VAT paid by the deduction method, corporate income tax
(12) Sponsorship expenses not compliant with legal regulations or lacking documentation as required
- Other income: Other income refers to items as stipulated in the current corporate income tax guidance documents in Vietnam, which encompass 23 income categories
Some fundamental sources of other income include:
(1) Income from capital transfer, securities transfer
(2) Income from real estate transfer; investment project transfer; transfer of participation rights in investment projects; transfer of exploration, exploitation, and processing rights of minerals as regulated by law
THEORETICAL BASIS ON CORPORATION INCOME TAX
1.2.1 Responsibilities of corporate income tax accountants
Originating from the goal of providing information to users, accountants generally have several tasks:
+ Income collection, processing information, accounting data by object and content of accounting work, according to accounting standards and regulations
Effective financial oversight involves monitoring revenues and expenditures, ensuring compliance with debt obligations, and managing asset utilization This includes identifying and preventing financial and accounting discrepancies Additionally, analyzing accounting data is crucial for providing informed advice and solutions that support the management and economic decisions of the accounting unit.
+ Providing accounting information and data as prescribed by law
In addition, accountants must also determine tax obligations to meet the management requirements of the tax authorities, resulting in the need to establish tax accounting
Corporate income tax accounting encompasses the management of transactions affected by corporate income tax both in the current year and in future periods This includes the recovery or settlement of the book value of assets and liabilities recorded on the balance sheet, as well as other transactions and events documented in the financial statements for the current year.
Some tasks of corporate income tax accountants include:
+ Estimating corporate income tax and planning appropriate taxes based on the conditions of each business
+ Accounting for revenue and expenses in accordance with legal regulations
+ Compiling tax files and submitting taxes in accordance with tax management laws
+ Explaining the basis for preparing tax returns and required tax settlement reports
1.2.2 Corporate income tax accounting in accordance with international accounting standards
The International Accounting Standards (IAS), created by the International Accounting Standards Board (IASB), aim to enhance consistency in financial reporting across organizations and align national accounting standards with international financial reporting standards One notable standard is IAS 12, which pertains to Income Taxes and was issued by the IASB in July.
1979 and has been continuously revised and updated since then, being flexibly applied by many countries
IAS 12 outlines the accounting treatment for transactions impacted by corporate income taxes and how these are reflected in financial statements However, discrepancies between accounting standards and tax regulations often result in the taxable income, used to calculate corporate income taxes payable, differing from the accounting profit reported in the financial statements for the same period.
The concept of accounting profit and taxable income as mentioned in the standard is as follows:
- Accounting profit: It refers to the profit or loss of a period, before deducting corporate income taxes, determined in accordance with accounting standards and accounting principles
Taxable income refers to the income that is subject to corporate income tax during a specific period This income is determined according to the current Corporate Income Tax Law and is essential for calculating the corporate income tax that is either payable or recoverable.
IAS 12 initially permitted the use of either the deferred method or the liability method for deferred tax accounting in corporate taxation However, it now requires the exclusive use of the liability method for corporate income tax accounting While IAS 12 is based on accounting profit, it does not directly correlate with reported business results, as corporate income tax is ultimately determined by taxable income for the period, calculated as revenue minus expenses This taxable income is reflected in the change in equity from the beginning to the end of the period, excluding any capital injections or reductions Consequently, fluctuations in taxable income and corporate income tax are influenced by variations in both assets and liabilities IAS 12 further defines the tax base for assets and liabilities.
The tax base of an asset refers to the deductible amount for tax purposes that offsets any taxable economic benefits an entity receives when it recovers the asset's carrying amount.
The tax base of a liability is its carrying amount, less any amount that will be deductible for tax purposes in respect of that liability in future periods."
To accurately determine the taxable base of an asset or liability, businesses must evaluate factors like the taxable income value upon recovery of the asset and the deductible expense value when settling the liability This assessment includes considering income excluded from taxable income and future deductible values When recognizing an asset or liability in financial statements, businesses must anticipate the recovery or settlement of its carrying value, which can lead to discrepancies in corporate income tax calculations IAS 12 addresses these discrepancies, including issues with asset revaluation not adjusted for tax purposes and fair value recognition of assets and liabilities in business combinations without corresponding tax adjustments Additionally, IAS 12 introduces the concept of temporary differences.
Temporary differences occur when there is a timing discrepancy between how an enterprise recognizes income or expenses and the timing dictated by tax law for taxable income or deductible expenses Ultimately, these temporary differences will be fully reconciled as expenses and income are accounted for over time.
Temporary differences include deductible temporary differences and taxable temporary differences These discrepancies lead to the creation of deferred tax assets or liabilities in the future
Deferred tax liabilities are corporate income taxes that will be payable in the future based on taxable temporary differences for the current year, determined as follows:
Deferred income tax payable = Total taxable temporary difference during the year
Income tax rate according to current regulations x
Deferred tax liabilities are acknowledged for all taxable temporary differences, with the exception of those resulting from transactions that do not impact profit at the time of occurrence, such as the recognition of assets or liabilities, goodwill, and installment payments that are not deductible from taxable income.
Deferred tax assets represent future income tax refunds arising from deductible temporary differences, carry-forward tax losses, and unused tax credits.
Deferred tax assets from deductible temporary differences, tax losses, and unused tax credits are recognized only when it is likely that there will be enough future taxable profits to utilize these amounts.
Corporate income tax expense comprises both current income tax and deferred income tax, which collectively impact the calculation of profit or loss for a given period.
Current income tax refers to the corporate income tax that is either payable or refundable, based on taxable income and the applicable corporate income tax rate In contrast, deferred income tax is recognized as either an income or expense in the income statement, unless it stems from transactions directly recognized in equity The principle of offsetting is applied to deferred tax assets and liabilities, balancing amounts incurred in the current year with those from prior years that are now reversed According to IAS 12, deferred tax expenses must be recognized to accurately reflect the operating results for the year when deferred tax liabilities arise, except in cases involving transactions recognized directly in equity, such as adjustments to retained earnings due to changes in accounting policies or foreign currency translation differences from foreign operations.
Deferred tax assets ( Total deductible temporary difference + Deductible value of unused tax losses and incentives during the year
Income tax rate according to current regulations x
1.2.3 Corporate income tax accounting according to Vietnamese accounting standards
1.2.3.1 Corporate income tax accounting methods
Documents used in corporate income tax accounting
Corporate income tax is assessed only after the completion of the business results process, requiring the use of all accounting documents generated during the accounting activities of various entities within the enterprise.
+ Sales invoices, value-added tax invoices, specialized invoices, receipts,
+ Export-import documentation (commercial invoices, customs declarations)
+ Salary and wage documentation (payroll records, attendance sheets, insurance notifications, bonus decisions)
+ Inventory and asset documentation (internal goods issue vouchers, internal goods receipt vouchers, fixed asset documentation)
+ Corporate income tax documentation (corporate income tax return forms, payment receipts to the state budget…)
For deferred corporate income tax accounting, at the end of the fiscal year, accountants must prepare a "Temporary Deductible Differences Statement" and an
CORPORATION TAX ACCOUNTING PROCESS IN BINH
Company overview
Company’s name: Công ty TNHH Nhôm Bình Nam - Binh Nam Group
Company’s English name: Binh Nam Aluminium Company Limited
Address: Lot No CN13.2, Thuan Thanh II Industrial park, An Binh Ward, Thuan Thanh, Bac Ninh Province, Vietnam
Representative: Mr Pham Le Hoa
Founded in 2003, Binh Nam Group specializes in the production of architectural aluminum, large aluminum walls, and industrial aluminum The company utilizes modern, highly automated machinery imported from Europe to ensure high-quality manufacturing processes.
2.1.1 Characteristics of the company's business organization
The company's management structure is designed around online principles, with the Chairman of the Board of Directors also serving as the CEO, fulfilling executive management and strategic leadership roles This individual acts as the top representative of the company in various events and communications with stakeholders To support the CEO, the Legal Affairs Committee and the Assistant to the CEO are established, while the organization is divided into departments that oversee different operational and business areas.
Chart 2.1 Binh Nam Aluminum Co Ltd management structure chart
(Source: Administrative department of Binh Nam Aluminum Co Ltd)
2.2 Characteristics of the company's accounting systems
2.2.1 Characteristics of the company's accounting department
Binh Nam Aluminum Co Ltd operates on a large scale, necessitating an efficient accounting department tailored to its specific business operations This organization ensures a rational structure and clear task assignments for each accountant, optimizing performance and meeting high demand.
Chart 2.2 Binh Nam Aluminum Co Ltd accounting department structure chart
The chief accountant leads the accounting department, overseeing the accounting office and managing a team of staff members who handle various assigned accounting tasks.
- Chief accountant: Reports financial status to the leadership, devises capital utilization plans; assigns and guides accounting tasks according to prevailing regulations and prepares reports accordingly
- Treasurer: Manages cash accounts, monitors daily cash inflows and outflows, reconciles with accounting records; handles correspondence, receipt, and storage of valuable documents
Tax accountants play a crucial role in ensuring compliance with tax laws and regulations, offering expert advice on tax planning strategies to minimize liabilities and maximize benefits They are responsible for preparing and filing accurate tax returns for individuals, businesses, and organizations, while staying informed about changes in tax laws through diligent research and analysis In addition to representing clients during tax audits and disputes, tax accountants help resolve issues with tax authorities They also develop long-term tax strategies that align with financial goals and collaborate with other departments and stakeholders to address tax-related matters comprehensively.
A Payroll and Social Insurance Accountant is responsible for managing the payroll process for company employees, which includes determining salaries, allowances, and benefits while addressing fluctuations such as salary changes and employee status updates This role ensures compliance with legal and company regulations regarding salaries and tax matters, and prepares reports on salaries and benefits for relevant authorities and management Additionally, the accountant oversees employee social insurance contributions, calculating and processing these contributions accurately, and submits reports related to social insurance to authorities and management.
A sales accountant plays a crucial role in managing a company's financial health by calculating revenue and expenses They are responsible for overseeing sales data, which includes recording orders, sales invoices, and other sales transactions Additionally, sales accountants contribute to the preparation of reports that detail sales volume and revenue, providing valuable insights for management and finance departments.
An inventory accountant is responsible for overseeing and documenting the inflow and outflow of raw materials, supplies, and goods They manage storage systems and ensure proper organization within warehouses Additionally, they verify and reconcile actual inventory levels with accounting records to maintain data accuracy This role also involves calculating and recording various inventory costs, including procurement, storage, and depreciation expenses.
Cost aggregation and product costing involve the systematic collection and categorization of costs associated with a company's production and business activities This process includes analyzing production costs to identify key factors influencing them and calculating product costs by determining both direct and indirect expenses for each item By employing suitable cost accounting methods to compute unit costs, businesses can evaluate production efficiency and ensure accurate product cost calculations These insights are crucial for informed decision-making regarding pricing, profitability, and overall production strategy.
Binh Nam Limited Liability Company adheres to the guidelines set by the Ministry of Finance for organizing and implementing document systems, ledgers, reports, and accounting account systems, as outlined in Circular 200/2014/TT-BTC issued on September 14, 2006 The company employs specific accounting policies to ensure compliance and accuracy in its financial practices.
+ Accounting method employed: General ledger Under the general ledger accounting method, enterprises utilize consolidated accounting books including General Ledger and General Ledger Account Ledger
+ Value Added Tax (VAT) calculation method: VAT deduction method
+ Fiscal year accounting period starts on January 1st and ends on December 31st annually
+ Fixed asset depreciation principle: Depreciation of fixed assets is carried out using the straight-line method based on the estimated useful life of the assets
Inventory recognition principle: Original cost principle
End-of-period inventory valuation method: The value of ending inventory is determined using the weighted average cost method
Inventory accounting method: Regular inventory reporting method is applied to account for inventory
The company leverages advanced computer technology, particularly Bravo accounting software, to streamline its accounting operations, significantly reducing workload and enhancing information synthesis capabilities The integration of information technology into accounting processes has led to improved efficiency in data processing and the preparation of financial reports Adhering to Circular 200/2014/TT-BTC issued by the Minister of Finance, the company maintains a well-organized accounting document system that follows strict protocols for preparation, verification, storage, and preservation Additionally, the company utilizes various documents, including material and equipment requisition forms and delivery notes, to meet management requirements effectively.
Corporate income tax accounting process in Binh Nam Aluminum Co Ltd
3.3.1 Characteristics of Binh Nam Co Ltd corporate income tax
Binh Nam Limited Liability Company specializes in the manufacturing and processing of metal and aluminum products, with a focus on metal coating The Safia factory, situated in the Thuận Thành II industrial zone, has been operational since 2018 Under current tax regulations, the factory is subject to specific tax rates for income generated from its metal manufacturing and processing activities.
- From 2018 to 2019, for a period of 2 years: Exempt from corporate income tax
- From 2020 to 2023, for the subsequent 4 years: Eligible for a 50% reduction in corporate income tax
- From 2024 onwards: Subject to taxation at regular rates of 20% applicable to typical manufacturing and business activities without preferential tax rates
Other business areas as per the business registration include:
- Production of colored metals and precious metals
- Mechanical processing; metal treatment and coating
- Production of scissors, hand tools, and common metalware
- Manufacture of motors, generators, transformers, electrical distribution and control equipment
- Manufacture of household electrical appliances
- Production of other electrical equipment
- Manufacture of machine tools and metal forming machines
- Production of other specialized machinery
- Machinery, equipment, and device repair
- Installation of industrial machinery and equipment
- Installation of water supply, drainage, heating, and air conditioning systems
- Installation of other construction systems
- Wholesale of machinery, equipment, and other machine parts
- Wholesale of metals and metal ores
- Wholesale of other construction materials and installation equipment
- Warehousing and storage of goods
Business sectors classified as ordinary activities generate income that is taxed according to the prevailing corporate income tax rates established by current legislation.
In 2023, the Safia factory project celebrates its sixth year of operations, benefiting from a 50% tax reduction on income derived from metal machining and manufacturing activities However, income generated from other non-incentivized business activities is subject to a corporate income tax rate of 20% for the fiscal year.
Documents used for corporate income tax accounting:
The company employs a range of accounting documents to track revenue and income, including output value-added tax invoices, receipts, and credit notes Additionally, it maintains records of incurred expenses through input value-added tax invoices, debit notes, payment vouchers, payroll statements, and allocation sheets for tools and equipment.
For corporate income tax accounting, the company employs:
- Account 3334 "Corporate Income Tax Payable" to reflect the corporate income tax payable, paid, and yet to be paid to the State Budget
- Account 821 "Corporate Income Tax Expenses", detailed as follows: Account
8211 "Current Corporate Income Tax Expenses": Reflects the current corporate income tax expenses incurred during the year by the company
3.3.3 Corporate income tax accounting process at Binh Nam Aluminum Co Ltd
Summary of the corporate income tax accounting process at the company :
- Determine the accounting pre-tax profit
- Identify differences and eliminate permanent differences
Step 2: Determine taxable income subject to corporate income tax
Step 3: Account for and recognize current corporate income tax expenses
Step 4: Declare and pay corporate income tax
3.3.3.1 Determine the accounting pre-tax profit
Accounting method to determine total accounting profit before tax:
Accounting for transactions related to revenue and other income:
The company generates 99.9% of its revenue through the manufacturing of pre-cast metal products Daily operations in the accounting department involve utilizing VAT invoices, payment acceptance notifications, receipts, and bank credit notes to effectively record and monitor transactions.
The company's financial activities generate revenue through interest income from bank account balances and savings deposits To accurately record these transactions, the accounting department utilizes subsidiary ledgers and bank credit notes.
Cite some accounting documents used as a basis for accounting revenue and other income (Appendix 06)
Enterprises categorize their expenses into four main types: cost of goods sold, management expenses, selling expenses, and other expenses When an expense occurs, the accounting department evaluates its eligibility for recognition as an enterprise expense by examining original documents such as payment vouchers, debit notes, and accounting vouchers, including payroll statements and fixed asset depreciation sheets This assessment ensures that the actual sacrifice of the enterprise's benefits is accurately recorded in the Bravo software.
Cite some accounting documents used as a basis for accounting for incurred expenses (Appendix 07)
The accountant synthesizes data during the period from accounting books (ledger, detailed books)
Total revenue of finished products : 285,602,486,677 VND (Appendix 08)
Total financial revenue: 4,362,447 VND (Appendix 09)
Total selling expenses: 4,558,819,019 VND (Appendix 10)
Total management cost: 5,147,737,244 VND (Appendix 11)
Total manufacturing overhead costs: 28,626,787,462 VND (Appendix 12)
Total cost of goods sold: 270,044,202,739 VND (Appendix 13)
Determine accounting profit before tax:
Other profits = Other income - Other costs
Accounting profit before tax = Profit from business activities + Other profits
In 2023, accountant determines the following criteria:
3.3.3.2 Determine income subject to corporate income tax
At the end of the fiscal year, the accountant assesses the income liable for corporate income tax and calculates the payable amount in accordance with the current corporate income tax law as outlined in the relevant Circular.
96/2015/TT -BTC provides guidance on corporate income tax in Decree
12/2015/ND-CP and amends and supplements a number of articles of Circular
78/2014/TT-BTC, Circular 119/2014/TT-BTC, Circular 151/2014/TT-BTC
Science and technology fund appropriation (if any)
Taxable income = Taxed income – Tax-free income - Loss transfer and profit and loss offset
In 2023, the following amounts have arisen at the company:
+ Adjusted to increase total profit -
Adjusted to decrease total profit = 464,303,622 + 901,496,509 - 0
The carried forward profits and losses are carried out according to the instructions in Article 9 of Circular 78/2014/TT-BTC and Article 7 of Circular 96/2015/TT-
BTC In 2 years 2021 and 2022, the company incurred 2 losses of 191,768,460
VND and 29,760,606 VND respectively Therefore, the total of these two losses is 221,529,066 VND, which the company will transfer entirely to 2023 income
In 2023, the company did not set aside a science and technology fund
In accordance with the corporate income tax law, companies can benefit from a 50% tax reduction for the 2023 tax year, resulting in a payable corporate income tax of 114,427,106 VND for the period.
The company has made provisional payments of 50,000,000 VND for corporate income tax and carries forward an excess payment of 50,000,000 VND from the previous period Consequently, the variance between the tax payable and the tax provision for the company's business operations is calculated accordingly.
Difference between tax payable and provisional tax paid
Thus, the amount of corporate income tax remaining to be paid by the deadline for submitting the company's tax finalization declaration is:
Corporate income tax remaining to be paid in 2023
3.3.3.3 Accounting and recording current corporate income tax expenses
At the conclusion of the financial year, the accounting department of the company accurately records the corporate income tax payable, which is then classified as current corporate income tax expenses in the annual Business Activity Report As of the end of 2023, after calculating the corporate income tax payable, the accounting team inputs the necessary entries into the Bravo software.
Debit Account 8211 - Corporate Income Tax Expenses: 114,427,106
Credit Account 3334 - Corporate Income Tax Payable: 114,427,106
The software will automatically update the General Ledger, Subsidiary Ledger, and detailed accounts related to these transactions
(Source: Accounting department of Binh Nam Aluminum Co Ltd )
Table 3.2 Extract detailed ledger account 8211 - Current corporate income tax expense
(Source: Accounting department of Binh Nam Aluminum Co Ltd )
Table 3.3 Extract detailed ledger account 3334 – Corporate income tax
(Source: Accounting department of Binh Nam Aluminum Co Ltd )
At the end of the financial year, accountants can efficiently reconcile economic transactions recorded in Bravo software, which automatically generates closing entries and calculates the business results.
Debit Account 911 - Determination of Business Result: 14,427,106 VND
Credit Account 8211 - Corporate Income Tax Expense: 14,427,106 VND
Debit Account 911 - Determination of Business Result: 349,876,516 VND
Credit Account 4212 - Undistributed Profit for the Current Year: 349,876,516 VND
On the 2023 business results report, the corporate income tax payable is presented in section 17: "Tax and amounts payable to the state"
Table 3.4 Excerpt from financial statement notes in 2023
FINANCIAL STATEMENT NOTES (Model B09-DN)
(Issued according to Circular No 200/2014/TT-BTC dated December 22, 2014 of the Ministry of Finance )
(Source: Accounting department of Binh Nam Aluminum Co Ltd)
3.3.3.4 Declaring and paying corporate income tax:
Under current CIT regulations, enterprises must prepare essential settlement documents at the end of the financial year These documents include Financial Statements such as the Balance Sheet, Income Statement, and Cash Flow Statement, along with Notes to Financial Statements, a CIT settlement declaration, and a personal income tax settlement declaration.
The company is leveraging the free "Tax Declaration Support Software" offered by the General Department of Taxation to ensure efficient and accurate tax declaration preparation for organizations and individuals with tax obligations.
In the HTKK 5.1.8 software, accountants proceed to prepare the CIT settlement declaration by selecting the "Corporate Income Tax" section, then choosing the
To initiate the CIT settlement for the year (03/CIT), users will access a dedicated interface to select the relevant appendix and settlement year After choosing the settlement year, accountants must select the appropriate appendix that aligns with their business characteristics, such as appendix 03-1A/CIT, 03-2/CIT, or 03-3A/CIT, before clicking "Agree." This action will seamlessly transition the screen to the CIT settlement declaration interface.
Initially, accountants select the appendix and input accurate and complete data for the appendix forms An excerpt of the interface when accountants input data is as follows:
Picture 3.1 Screenshot of preparing tax declaration
(Source: Accounting department of Binh Nam Aluminum Co Ltd)
Screenshot of preparing tax declaration
(Source: Accounting department of Binh Nam Aluminum Co Ltd)
After finalizing data entry for the appendix items, the accountant selects the "Declaration Form" to prepare the 2023 CIT settlement The software automatically calculates and summarizes the necessary data from the appendix for this process.
After finalizing the declaration, the accountant converts the data into XML format and submits it online to the Tax Authority, accompanied by the Financial Statements and the personal income tax settlement declaration, both also in XML format.
Current corporate income tax expense accounting
(1) Recording the amount of corporate income tax paid by the business to the state budget
(2) Quarterly, when determining the provisional corporate income tax payable according to the Corporate Income Tax Law
When the corporate income tax payable at year-end exceeds the provisional tax payments made quarterly throughout the year, it is necessary to increase the current corporate income tax expense.
(4) Recording the difference when the provisional corporate income tax paid quarterly during the year is greater than the actual tax payable, as well as the tax reductions and exemptions
(5) Transferring the current corporate income tax expense
2.3.3.2 “Deferred corporate income tax expense” accounting
Based on the relevant documents related to deferred corporate income tax, the accountant records the arising economic transactions according to the following diagram:
Deferred corporate income tax” accounting
1a) The difference when the deferred corporate income tax liability arising during the year is greater than the deferred corporate income tax liability reversed during the year
1b) The difference when the deferred corporate income tax liability arising during the year is less than the deferred corporate income tax liability reversed during the year
2a) The difference when the deferred tax asset arising during the year is less than the deferred tax asset reversed during the year
2b) The difference when the deferred tax asset arising during the year is greater than the deferred tax asset reversed during the year
3a) Transferring the credit balance difference greater than the debit balance of account 8212
3b) Transferring the credit balance difference less than the debit balance of account
1.2.3.6 Reports related to corporate income tax accounting
To ensure effective management and evaluation of the operational and financial status of tax-paying entities, tax authorities require these entities to submit periodic tax reports in accordance with the Tax Law, as well as financial reports as mandated by the Accounting Law.
Businesses are required to prepare financial statements that comply with the current accounting standards, aiming to accurately represent the economic effects of transactions and events on their financial health and operational efficiency Key financial statements commonly utilized include the balance sheet, income statement, and cash flow statement.
- Statement of financial position: Balance sheet
- Statements reflecting changes over a period: Income statement, cash flow statement
- Notes to the financial statements
Present information related to corporate income tax on financial statements
The indicators for Corporate Income Tax include:
(1) "Deferred Income Tax Assets": The figure to be recorded in this indicator is based on the debit balance of Account 243 "Deferred Income Tax Assets" on the General Ledger
(2) "Deferred Income Tax Liabilities": The figure to be recorded in this indicator is based on the credit balance of Account 347 "Deferred Income Tax Liabilities" on the General Ledger
The "Taxes and Receivables from the Government" indicator represents the total taxes and other overpaid amounts owed to the government as of the reporting date This figure is derived from the detailed debit balance of Account 333, which pertains to "Taxes and Payables to the Government" in the accounting ledger.
The "Taxes and Payables to the Government" indicator represents the total liabilities an enterprise owes to the government as of the reporting date, encompassing taxes, fees, charges, and other payables This figure is derived from the detailed credit balance of Account 333, which specifically tracks "Taxes and Payables to the Government."
Presentation in the Statement of Income:
The "Current Corporate Income Tax Expense" indicator represents the tax expense incurred by a corporation during the reporting year This figure is derived from the total credit amount recorded in Account 8211, providing a clear reflection of the company's tax obligations for the period.
"Current Corporate Income Tax Expense," offset against the debit side of Account
The determination of business results for Account 8211 can be achieved through the detailed accounting ledger by analyzing the debit amount, which is offset against the credit side of Account 911 during the reporting period When recording this figure, it should be presented as a negative value in parentheses (…).
The "Deferred Corporate Income Tax Expense" indicator represents the deferred corporate income tax incurred during the reporting year This figure is derived from the total credit amount of Account 8212, "Deferred Corporate Income Tax Expense," offset against the debit side of Account 911, "Determination of Business Results," within the detailed accounting ledger Alternatively, it can be calculated using the debit amount of Account 8212 against the credit side of Account 911 during the reporting period, with the resulting figure recorded as a negative value in parentheses (…).
Presentation in the Notes to the Financial Statements
In the financial statement notes, enterprises must clarify the "Deferred Income Tax Assets" by detailing deductible temporary differences, tax losses, unused tax incentives, and reversals from prior years Similarly, for "Deferred Income Tax Liabilities," explanations should address taxable temporary differences, reversals from previous years, and the associated deferred income tax liabilities.
The enterprise should explain the corporate income tax expenses, including:
The article discusses the current corporate income tax expense for the year, detailing the taxable amount and adjustments from previous years that influence this expense It outlines the total current corporate income tax expense and addresses any deferred corporate income tax expenses, including taxable temporary differences, deferral of deferred income tax assets, deductible temporary differences, tax losses, unused tax incentives, and the reversal of deferred income tax liabilities Furthermore, the enterprise is required to disclose the corporate income tax payable at both the beginning and end of the year.
Tax reports are generated following tax law regulations and submitted to tax authorities monthly, quarterly, and annually These reports enable tax authorities to update essential information regarding tax liabilities, sales revenue, invoice usage, and other relevant details in the tax management records.
Under current tax regulations, enterprises must submit an annual corporate income tax (CIT) finalization return Additionally, accountants are responsible for estimating and paying CIT on a quarterly basis, eliminating the requirement to file a quarterly CIT return.
According to Circular No 200/2014/TT-BTC from the Ministry of Finance, enterprises can create their own bookkeeping methods tailored to their operational needs, provided they ensure accurate, timely, and verifiable transactional information If a business opts not to develop its own system, it may adopt the bookkeeping methods recommended by the Ministry of Finance that align with its management and operational characteristics Various bookkeeping formats are available for enterprises to consider.
- General journal format (Appendix no 02)
- Journal-ledger format (Appendix no 03)
- Voucher journal format (Appendix no 04)
- Journal-voucher format (Appendix no 05)
The fundamental theoretical aspects of corporate income tax accounting in Vietnam are governed by the Vietnamese Accounting Standards and Circular 96/2015/TT-BTC, which outlines guidance based on Decree 12/2015/NĐ-CP This decree details the implementation of the amended Taxation Law and various other related circulars issued by the Ministry of Finance However, discrepancies between theory and practice can arise, making strict adherence to these standards challenging To effectively manage corporate income tax, businesses must adapt these theoretical principles to fit their unique characteristics, scale, and strategies, avoiding rigid applications that may conflict with their objectives.
CHAPTER 2: CORPORATION TAX ACCOUNTING PROCESS IN BINH
NAM ALUMINUM CO LTD 2.1 Company overview
Company’s name: Công ty TNHH Nhôm Bình Nam - Binh Nam Group
Company’s English name: Binh Nam Aluminium Company Limited
Address: Lot No CN13.2, Thuan Thanh II Industrial park, An Binh Ward, Thuan Thanh, Bac Ninh Province, Vietnam
Representative: Mr Pham Le Hoa
Established in 2003, Binh Nam Group specializes in the production of architectural aluminum, large aluminum walls, and industrial aluminum, utilizing modern, highly automated machinery imported from Europe.
2.1.1 Characteristics of the company's business organization
The company's management structure is designed around online principles, with the Chairman of the Board of Directors also serving as the CEO, fulfilling executive management and strategic leadership roles while representing the company at events and engaging with stakeholders Supporting this leadership are the Legal Affairs Committee and the Assistant to the CEO, ensuring effective governance Additionally, the organization is divided into departments, each responsible for specific operational and business functions.
Binh Nam Aluminum Co Ltd management structure chart
(Source: Administrative department of Binh Nam Aluminum Co Ltd)
2.2 Characteristics of the company's accounting systems
2.2.1 Characteristics of the company's accounting department
Binh Nam Aluminum Co Ltd is a sizable enterprise that prioritizes efficiency in its operations To meet the unique demands of its business, the company has structured its accounting department to align with its operational mechanisms, ensuring a logical organization and clear task assignments for each accountant.
Chart 2.2 Binh Nam Aluminum Co Ltd accounting department structure chart
The chief accountant leads the accounting department, overseeing the accounting office and managing a team of staff members who handle various assigned accounting tasks.
- Chief accountant: Reports financial status to the leadership, devises capital utilization plans; assigns and guides accounting tasks according to prevailing regulations and prepares reports accordingly
- Treasurer: Manages cash accounts, monitors daily cash inflows and outflows, reconciles with accounting records; handles correspondence, receipt, and storage of valuable documents
Tax accountants play a crucial role in ensuring compliance with tax laws and regulations, offering expert advice on tax planning strategies to minimize liabilities and enhance benefits They accurately prepare and file tax returns for individuals, businesses, and organizations while staying informed about changes in tax legislation through ongoing research In addition to representing clients during tax audits and disputes, tax accountants help resolve issues with tax authorities and develop long-term tax strategies that align with clients' financial goals Their collaborative approach with other departments and stakeholders ensures a comprehensive handling of tax-related matters.
A payroll and social insurance accountant is responsible for managing the payroll process for employees, which includes determining salaries, allowances, and benefits, while also addressing fluctuations such as salary changes and shifts in employee status This role ensures compliance with legal and internal regulations regarding salaries and tax matters, and involves preparing and submitting reports on salaries and benefits to relevant authorities and company management Additionally, the accountant manages employee social insurance contributions in accordance with legal requirements, calculates and processes these contributions accurately, and prepares reports related to social insurance for both authorities and management.
A sales accountant plays a crucial role in managing a company's financial health by accurately calculating revenue and expenses They are responsible for maintaining sales data, which includes recording orders, sales invoices, and various sales transactions Additionally, sales accountants contribute to the preparation of reports detailing sales volume and revenue, providing valuable insights for management and finance departments.
An inventory accountant is responsible for monitoring and recording the inflow and outflow of raw materials, supplies, and goods They manage storage systems and ensure the organization of items in warehouses Additionally, they check and reconcile actual inventory quantities with accounting data to maintain accuracy Their role also includes calculating and recording various inventory costs, such as procurement, storage, and depreciation expenses.
Cost aggregation and product costing involve the systematic collection and categorization of expenses associated with a company's production and business operations This process analyzes production costs, identifies key cost factors, and calculates product costs by utilizing information from cost aggregation accounting It distinguishes between direct and indirect costs for each product and determines unit costs through appropriate accounting methods Additionally, it evaluates production efficiency and ensures precise product cost calculations, which are crucial for informed decision-making regarding pricing, profitability, and production strategies.
Binh Nam Limited Liability Company adheres to the Ministry of Finance's guidelines for organizing and implementing document systems, ledgers, reports, and accounting accounts, as outlined in Circular 200/2014/TT-BTC, issued on September 14, 2006 The company employs specific accounting policies to ensure compliance and accuracy in its financial practices.
+ Accounting method employed: General ledger Under the general ledger accounting method, enterprises utilize consolidated accounting books including General Ledger and General Ledger Account Ledger
+ Value Added Tax (VAT) calculation method: VAT deduction method
+ Fiscal year accounting period starts on January 1st and ends on December 31st annually
+ Fixed asset depreciation principle: Depreciation of fixed assets is carried out using the straight-line method based on the estimated useful life of the assets
Inventory recognition principle: Original cost principle
End-of-period inventory valuation method: The value of ending inventory is determined using the weighted average cost method
Inventory accounting method: Regular inventory reporting method is applied to account for inventory
The company leverages advanced computer technology, specifically Bravo accounting software, to streamline its accounting operations, significantly reducing workload and enhancing information synthesis capabilities This integration of information technology into accounting processes has led to improved efficiency in handling data and generating financial reports The accounting document system adheres to the guidelines set forth in Circular 200/2014/TT-BTC, ensuring a well-organized management structure for the preparation, verification, storage, and preservation of documents Additionally, the company utilizes various forms, including material and equipment requisition forms and delivery notes, to fulfill management requirements effectively.
3.3 Corporate income tax accounting process in Binh Nam Aluminum Co Ltd
3.3.1 Characteristics of Binh Nam Co Ltd corporate income tax
Binh Nam Limited Liability Company specializes in the manufacturing and processing of metal, including metal coating, with a focus on aluminum products Their Safia factory, situated in the Thuận Thành II industrial zone, has been operational since 2018 In accordance with current tax regulations, the factory is subject to specific tax rates on income generated from its metal manufacturing and processing activities.
- From 2018 to 2019, for a period of 2 years: Exempt from corporate income tax
- From 2020 to 2023, for the subsequent 4 years: Eligible for a 50% reduction in corporate income tax
- From 2024 onwards: Subject to taxation at regular rates of 20% applicable to typical manufacturing and business activities without preferential tax rates
Other business areas as per the business registration include:
- Production of colored metals and precious metals
- Mechanical processing; metal treatment and coating
- Production of scissors, hand tools, and common metalware
- Manufacture of motors, generators, transformers, electrical distribution and control equipment
- Manufacture of household electrical appliances
- Production of other electrical equipment
- Manufacture of machine tools and metal forming machines
- Production of other specialized machinery
- Machinery, equipment, and device repair
- Installation of industrial machinery and equipment
- Installation of water supply, drainage, heating, and air conditioning systems
- Installation of other construction systems
- Wholesale of machinery, equipment, and other machine parts
- Wholesale of metals and metal ores
- Wholesale of other construction materials and installation equipment
- Warehousing and storage of goods
Business sectors engaged in ordinary activities generate income that is subject to the standard corporate income tax rates outlined in current tax legislation.
In 2023, the Safia factory project celebrates six years of operations, benefiting from a 50% tax reduction on income generated from metal machining and manufacturing activities However, income derived from other non-incentivized business activities is subject to a corporate income tax rate of 20% for the fiscal year.
Documents used for corporate income tax accounting:
The company employs a range of accounting documents to track revenue and income, such as output value-added tax invoices, receipts, and credit notes Additionally, it utilizes input value-added tax invoices, debit notes, payment vouchers, payroll statements, and allocation sheets for tools and equipment to document incurred expenses.
For corporate income tax accounting, the company employs:
- Account 3334 "Corporate Income Tax Payable" to reflect the corporate income tax payable, paid, and yet to be paid to the State Budget
- Account 821 "Corporate Income Tax Expenses", detailed as follows: Account
8211 "Current Corporate Income Tax Expenses": Reflects the current corporate income tax expenses incurred during the year by the company
3.3.3 Corporate income tax accounting process at Binh Nam Aluminum Co Ltd
Summary of the corporate income tax accounting process at the company :
- Determine the accounting pre-tax profit
- Identify differences and eliminate permanent differences
Step 2: Determine taxable income subject to corporate income tax
Step 3: Account for and recognize current corporate income tax expenses
Step 4: Declare and pay corporate income tax
3.3.3.1 Determine the accounting pre-tax profit
Accounting method to determine total accounting profit before tax:
Accounting for transactions related to revenue and other income:
The company generates 99.9% of its revenue through the manufacturing of pre-cast metal products The accounting department meticulously records and tracks transactions daily using VAT invoices, payment acceptance notifications, receipts, and bank credit notes.
The company's financial activities generate revenue through interest income from bank account balances and savings deposits To accurately record these transactions, the accounting department utilizes subsidiary ledgers and bank credit notes.
Cite some accounting documents used as a basis for accounting revenue and other income (Appendix 06)