Calculating corporate income tax is an important step to help businesses comply with the law and optimize profits. This process includes determining revenue, deductible expenses, other income, carried forward losses and applying appropriate tax rates. The current common tax rate is 20%, for oil and gas exploitation enterprises from 25% - 50%, some priority sectors apply 10% - 17%.
Understanding how to calculate corporate income tax correctly helps businesses forecast after-tax profits, balance cash flow and make effective financial plans. Correct application also helps take advantage of tax incentives, limit errors in declaration and optimize tax obligations.
Overview of business income
In business activities, every enterprise sets the main goal of making profit. Profit is the difference between revenue earned and expenses incurred during the period. This profit is not only the business result but also the basis for the state to collect taxes - specifically corporate income tax (CIT).
Corporate income is the total income that an enterprise receives from production and trading of goods and services and other income as prescribed by law. This is the source for determining tax obligations.
What is corporate income tax?
Corporate income tax (CIT) is a direct tax, which means that the State collects directly from the profits that enterprises generate in the production and business process. Simply put, after the enterprise has calculated its revenue, deducted reasonable and valid expenses, added other income and deducted the amounts exempted, reduced or carried forward as prescribed, the remaining profit will be taxable income. On that basis, the enterprise must pay a part of this profit to the State in the form of corporate income tax.
The role of corporate income tax
Corporate income tax plays a particularly important role not only for the State budget but also for the enterprises themselves:
The role of of corporate income tax for the State
Corporate income tax is a stable and sustainable source of revenue, accounting for a large proportion of total budget revenue. This revenue is used to reinvest in infrastructure, health care, education, national defense and many other public activities.
The role of corporate income tax in the economy
Corporate income tax is a macro-regulatory tool. Through tax rate policies, exemptions or incentives, the State can direct investment capital to priority sectors, fields or geographical areas for development. For example, investment projects in high-tech zones or disadvantaged areas often enjoy preferential tax rates to encourage business participation.
The role of corporate income tax for businesses
Paying corporate income tax demonstrates social responsibility and creates transparency in financial activities. A business that complies well with its tax obligations often has a higher reputation in the eyes of partners, customers and state management agencies.
The role of corporate income tax in society
Corporate income tax contributes to ensuring fairness. Enterprises that operate effectively and profitably contribute more to the budget; small or struggling enterprises will have lower tax obligations or be supported by preferential policies.
It can be seen that corporate income tax is not only a financial obligation, but also an important tool for the State to manage and regulate the economy, promote sustainable development and create fairness among business entities.
Legal basis related to corporate income tax calculation
To determine the correct way to calculate corporate income tax, businesses need to base on the current system of legal documents. This is an important legal basis to help declare, settle and pay taxes transparently, consistently and in accordance with regulations. Legal documents not only stipulate the calculation formula, tax rates but also provide detailed instructions on deductible expenses, non-deductible expenses and cases of tax exemption or reduction. Below is a summary of important legal documents related to corporate income tax:
| Legal documents | Main content | Scope of application |
| Law on Corporate Income Tax No. 14/2008/QH12 (and amended and supplemented laws) | Regulations on general principles of corporate income tax: taxpayers, taxable income, deductible expenses, tax exemptions and incentives. | All businesses operate in Vietnam. |
| Decree 218/2013/ND-CP | Detailed regulations and instructions for implementing the Law on Corporate Income Tax. As a basis for implementation in practice. | Domestic enterprises and foreign invested enterprises. |
| Circular 78/2014/TT-BTC, Circular 96/2015/TT-BTC, Circular 25/2018/TT-BTC | Detailed instructions on how to determine taxable income, tax-free income, deductible expenses, non-deductible expenses, and loss carryforward. | Enterprises perform annual tax declaration and settlement. |
| Resolution of the National Assembly on adjusting corporate income tax rates | Adjust corporate income tax rates appropriately for each period (for example, reduce the general tax rate from 25% to 20%). | Applicable to all businesses, depending on the period. |
Corporate income tax payers
According to Article 2, Law on Corporate Income Tax No. 14/2008/QH12, amended and supplemented by Law No. 32/2013/QH13 and Law No. 71/2014/QH13, those corporate income tax subject include:
Enterprises established under Vietnamese law
This group includes most common types of enterprises such as: joint stock companies, limited liability companies (single member or multi-member), partnerships, private enterprises, cooperatives and other economic organizations.
Foreign invested enterprises operating in Vietnam
Including foreign-invested 100% enterprises, joint ventures between domestic and foreign investors, as well as foreign contractors and organizations participating in business activities in Vietnam.
Other organizations with income-generating activities in Vietnam
In particular, the Law clearly stipulates the permanent establishments of foreign enterprises. These are locations or forms of business presence through which foreign enterprises conduct part or all of their business activities in Vietnam. For example: branches, executive offices, construction works, resource exploitation locations, warehouses or exclusive agents.
How to calculate corporate income tax: definition, tax rates and formula
In corporate financial management, corporate income tax (CIT) is one of the important and mandatory obligations. Understanding how to calculate CIT not only helps businesses comply with the law but also contributes to optimizing costs, balancing profits and making effective business plans. The following article will provide a comprehensive overview from the definition, current tax rates to detailed calculation formulas, along with factors to consider when determining the amount of CIT payable.
How is corporate income tax calculated?
The calculation of corporate income tax is understood as the process of accurately determining the amount of tax that a business must pay to the State on its taxable income after deducting reasonable and valid expenses and exemptions according to legal regulations. This is not only a simple accounting procedure but also an important tool for businesses to manage their financial obligations.
Understanding how to calculate corporate income tax helps businesses be more proactive in controlling costs, forecasting after-tax profits and making long-term financial plans. When done correctly and sufficiently, businesses both ensure compliance with legal regulations and limit risks related to tax inspections and audits.
In the context of increasingly fierce competition, the calculation of corporate income tax also plays a key role in development strategy, because it directly affects cash flow, reinvestment ability as well as competitiveness in the market.
Corporate income tax rate
To master the calculation of corporate income tax, it is important to understand the current applicable tax rates and the changes from October 1, 2025. The tables below summarize the general tax rates, preferential tax rates for small and medium-sized enterprises, as well as specific tax rates for the oil and gas and rare resource exploitation industries. In addition, the comparison of the differences between the old and new tax rates will help businesses predict tax costs, optimize financial planning and apply the calculation of corporate income tax accurately.
Current corporate income tax rate
To understand how to calculate corporate income tax, businesses first need to understand the tax rates currently applied according to current regulations. Below is a summary table of common corporate income tax rates applied to each field and type of activity.
| Case | Current corporate income tax rate |
| General tax rate | 20% |
| Oil and gas exploitation | 32% – 50% |
| Exploitation of rare resources (gold, silver, precious stones, rare earths...) | 50% |
| Incentives by sector (high technology, education, healthcare…) | 10% or 17% during promotion period |
Corporate income tax rates applicable from October 1, 2025
According to the 2025 Corporate Income Tax Law, from October 1, 2025, there will be important changes that directly affect the way corporate income tax is calculated. New tax rates are added to encourage small and medium-sized enterprises, while adjusting tax rates for some specific sectors.
| Case | Corporate income tax rate from October 1, 2025 |
| General tax rate | 20% |
| Small business (revenue ≤ 3 billion VND) | 15% |
| Medium enterprises (revenue > 3 billion to ≤ 50 billion VND) | 17% |
| Oil and gas exploitation | 25% – 50% |
| Exploitation of rare resources | 50% or 40% (if ≥ 70% of the mine area is in a particularly difficult area) |
| Incentives by sector (high technology, education, healthcare…) | 10% or 17% during promotion period |
Comparison of old and new corporate income tax rates
An important factor in calculating corporate income tax is the change in tax rates between periods. Comparing the differences will help businesses predict future tax costs and develop appropriate business plans.
| Comparison content | Current tax rate | Tax rate from 1/10/2025 | Distinctive |
| General tax rate | 20% | 20% | Keep it the same |
| Small Business | Do not have | 15% | Add new offer |
| Medium Enterprise | Do not have | 17% | Add new offer |
| Oil and gas | 32% – 50% | 25% – 50% | Reduce minimum level from 32% → 25% |
| Rare resources | 50% | 50% or 40% | Additional 40% incentives for particularly difficult areas |
| Sectoral Offers | 10% or 17% | 10% or 17% | Keep it the same |
Corporate income tax calculation formula
The general formula applied is as follows:
|
Corporate income tax payable = Taxable income × Corporate income tax rate |
In which, taxable income is determined according to the formula:
|
Taxable income = Taxable revenue – Deductible expenses + Other income – Carry-forward losses – Tax exemptions |
Steps to calculate corporate income tax
To accurately determine the amount of corporate income tax payable, businesses need to follow the following 5 basic steps in sequence:
Step 1. Determine taxable revenue
Includes all revenue from sales of goods, provision of services, surcharges, subsidies and other revenues that the enterprise enjoys, regardless of whether the money has been collected or not.
Step 2. Determine deductible and non-deductible expenses
In calculating corporate income tax, the next step is to review all expenses incurred by the enterprise. Not all expenses are included in reasonable expenses when determining taxable income. Enterprises need to clearly classify deductible expenses and non-deductible expenses according to regulations:
- Deductible expenses: actually incurred related to business activities, with legal invoices and documents, paid via bank if > 20 million VND.
- Non-deductible expenses: expenses that exceed the norm, are invalid or lack documents (for example: entertainment expenses exceeding 15%, depreciation not in accordance with regulations...).
Step 3. Calculate other income
In addition to main revenue, businesses must add other income such as:
- Interest on deposits and loans.
- Interest on capital transfer, real estate.
- Income from joint venture capital.
- Other unusual income.
Step 4. Carry forward losses
If a business suffers losses in previous years, it is allowed to carry forward the losses to taxable income for the next 5 years (except for losses from real estate transfers and projects that must be accounted for separately).
Step 5. Subtract tax-exempt income
Some income is not subject to corporate income tax, for example:
- Income from cooperative farming and livestock activities.
- Income from research, science and technology activities.
- Tax exemptions under international commitments.
Example illustrating how to calculate corporate income tax
To help businesses easily visualize how to calculate corporate income tax, below are two practical examples. These cases will show how to determine revenue, deductible expenses, carried forward losses, other income as well as applicable tax rates, thereby calculating the amount of corporate income tax payable, and at the same time clearly understanding how to calculate corporate income tax in each specific situation.
Example 1: Medium-sized manufacturing enterprise
Company A operates in the field of wood furniture manufacturing, with revenue of 12 billion VND in 2024. Reasonable deductible expenses are 8 billion VND, invalid expenses are 200 million VND, there is an additional 100 million VND in other income from bank deposit interest and a loss carried forward from the previous year of 500 million VND. The company has no tax exemption.
When calculating corporate income tax, Company A subtracts valid expenses from revenue, adds other income and subtracts carried forward losses, resulting in taxable income of VND 3.6 billion. With the common tax rate of 20%, the amount of corporate income tax payable is VND 720 million.
Example 2: Small businesses enjoy preferential tax rates from October 1, 2025
Company B is a small software company, with revenue of VND 2.5 billion in 2025. Reasonable expenses are VND 1.8 billion, with a loss of VND 200 million and an exemption of VND 100 million from income from scientific research activities.
Applying the corporate income tax calculation method, the remaining taxable income is 400 million VND. According to the 2025 Corporate Income Tax Law, enterprises with revenue ≤ 3 billion VND are subject to the tax rate of 15%. Thanks to that, Company B only has to pay 60 million VND in corporate income tax, significantly lower than the previous rate of 20%, clearly demonstrating the importance of calculating corporate income tax correctly and effectively.
Important notes on corporate income tax calculation
When calculating corporate income tax, businesses need to pay attention to the following important points to declare correctly, optimize tax obligations and comply with the law.
Determine accurate taxable income
To properly apply corporate income tax, businesses must determine all revenue from sales of goods, provision of services, subsidies, surcharges and other revenues, regardless of whether they have been collected or not.
Classify reasonable and unreasonable costs
Cost classification is an important step in calculating corporate income tax:
- Deductible expenses: actually incurred related to business activities, with legal invoices and documents and paid via bank if expenses > 20 million VND.
- Non-deductible expenses: expenses exceeding the norm, illegal or lacking documents, for example, expenses for entertaining guests exceeding 15%, depreciation not in accordance with regulations.
Carry forward losses from previous years
Loss carryforward is an important part of calculating corporate income tax, helping to reduce tax payable and optimize cash flow.
Calculate other income and exemptions
Including bank interest, capital gains, extraordinary income, or tax-exempt items. This directly affects the correct calculation of corporate income tax.
Update tax rates and incentives
Enterprises need to apply the correct preferential tax rate or adjust it according to the 2025 Corporate Income Tax Law. This is a decisive factor in calculating corporate income tax, helping to reduce financial burden.
Keep complete and legal documents
Keeping invoices, expense documents, income and related records is a mandatory requirement in calculating corporate income tax, to be ready for inspection or audit from tax authorities.
Conclude
Understanding how to calculate corporate income tax is key to ensuring legal compliance, optimizing costs, and managing cash flow effectively. From determining revenue, classifying valid expenses, adding other income, deducting carried forward losses, and applying tax incentives, each step directly affects the amount of corporate income tax payable.
Understanding and correctly applying corporate income tax calculation not only helps businesses avoid legal risks but also increases the ability to reinvest and develop sustainably.
For detailed instructions, updates on tax changes and optimizing corporate income tax obligations, please contact MAN – Master Accountant Network today. We will accompany your business in every step of calculating corporate income tax, ensuring transparency and efficiency.
Contact information for corporate income tax services at MAN – Master Accountant Network
- Address: No. 19A, Street 43, Tan Thuan Ward, Ho Chi Minh City
- Mobile/Zalo: 0903 963 163 – 0903 428 622
- Email: man@man.net.vn
