Mr. Vo Van Lan (Quang Nam) refer to Circular No. 11/2017/TT-BTC dated February 8, 2017 of the Ministry of Finance on the management and use of local budget funds entrusted through the Vietnam Bank for Social Policies (VBSP) to lend to the poor and other policy beneficiaries.

Accordingly, in Clause 7, Article 5 on management and use of loan interest, it reads: "Deducting expenses for the direction, management, synthesis, inspection, supervision and commendation of the Board of Directors. representatives of the Board of Directors of VBSP at all levels, departments, branches and units related to lending activities with the capital source entrusted by VBSP from the local budget, the maximum deduction is not more than 15% of the profit earned. Provincial-level People's Committees shall specify the benefit rates for relevant units;".

Accordingly, the Provincial People's Committee has decided to issue regulations on the management and use of local budget funds entrusted through VBSP to lend to the poor and other policy beneficiaries.

In which, the rate of deduction for the financial agency (province and district is 2%), the Department of Labor - Invalids and Social Affairs (province, district) is 3% (Department of Finance, Department of Finance at district level), Department of Labor - Invalids and Social Affairs, Division of Labor - Invalids and Social Affairs at district level)

Mr. Lan asked, is the management expense subject to 5% corporate income tax according to the provisions of the Law on Corporate Income Tax?

The Tax Department of Quang Nam province responded to this problem as follows:

Pursuant to Circular No. 78/2014/TT-BTC dated June 18, 2014 of the Ministry of Finance:

Clause 1, Article 2 provides for corporate income tax payers:

"1. Corporate income taxpayer is an organization engaged in production and trading of goods and services with taxable income (hereinafter referred to as an enterprise), including:

… b) Public and non-public non-business units that produce and trade in goods and services with taxable income in all fields.

… e) Organizations other than those mentioned at Points a, b, c and d, Clause 1 of this Article that have production and business activities of goods or services and earn taxable incomes".

Clause 2, Article 4 provides for determination of taxable income:

2. Taxable income

Taxable income in a tax period includes income from production and trading of goods and services and other incomes.

Article 7 provides for other incomes.

In Clause 9, Article 8 stipulates that incomes are exempt from tax:

"9. Incomes related to the performance of tasks assigned by the State by the Vietnam Development Bank from development investment and development credit activities, export credits; income from credit activities for the poor and other policy beneficiaries of VBSP;... and other State funds operating for non-profit purposes as prescribed by law. These funds are established and have operating mechanisms and policies in accordance with the Government's regulations. 

In case the units generate incomes other than income from activities with revenues from performing tasks assigned by the State, they must calculate and pay taxes according to regulations.

In Clause 7, Article 5 of Circular No. 11/2017/TT-BTC dated February 8, 2017 of the Ministry of Finance, stipulating the management and use of local budget funds entrusted through VBSP to lend to people. The poor and other policy beneficiaries stipulate:

"7. Management and use of loan interest

a) VBSP manages and accounts the interest earned from lending activities with local budget capital into VBSP's income and manages and uses it according to the following priority order principle:

… Expenses for directing, managing, synthesizing, inspecting, monitoring and rewarding of the Board of Directors of the Board of Directors of VBSP at all levels, departments, branches and units related to lending activities with the capital source of VBSP entrusted from the local budget. The maximum deduction is not more than 15% of the profit earned. Provincial-level People's Committees shall specify the rate of benefits for relevant units;".

Based on the above regulations, income from credit activities for the poor and other policy beneficiaries of VBSP is income exempt from corporate income tax.

In case VBSP deducts from this income to spend on relevant departments, branches and state administrative units to perform assigned tasks (according to the Regulation on management and use of local budget capital, entrusted through VBSP to lend to the poor and other policy beneficiaries of the Provincial People's Committee), this amount is not income from production and business activities and other incomes, so it is not required to be calculated and paid corporate income tax as prescribed.

According to Mai Chi (Government Newspaper)