The corporate income tax (CIT) calculation formula is an important tool to determine the amount of tax that a business must pay to the State. Understanding the formula not only helps to accurately calculate tax obligations but also provides a basis for businesses to manage costs, optimize profits and limit legal risks.
What is corporate income tax?
Corporate income tax (CIT) is a direct tax, levied on taxable income of organizations producing and trading goods and services. This is not only an important source of revenue for the state budget, but also a macro-regulatory tool, contributing to income redistribution, encouraging or restricting industries through preferential tax rate policies. Therefore, understanding the formula for calculating corporate income tax is a key factor for businesses to be proactive in cost management, building profit plans and ensuring compliance with tax laws.
Legal basis related to corporate income tax calculation formula
To accurately apply the corporate income tax calculation formula, businesses need to rely on the current legal system. The main legal bases include:
- Law on Corporate Income Tax No. 14/2008/QH12, issued by the National Assembly on June 3, 2008.
- Law No. 32/2013/QH13 amended, supplementing a number of articles of the Law on Corporate Income Tax.
- Law No. 71/2014/QH13 amended, supplementing tax laws, including corporate income tax.
- Decree 218/2013/ND-CP dated December 26, 2013 of the Government, detailing and guiding the implementation of the Law on Corporate Income Tax, along with subsequent amendments and supplements.
- Circular 78/2014/TT-BTC June 18, 2014, and amended and supplemented circulars (such as Circular 96/2015/TT-BTC, Circular 151/2014/TT-BTC).
Corporate income tax payers
In the Vietnamese legal system, all organizations that produce and trade goods and services and generate income are subject to corporate income tax (CIT). This is clearly stipulated in Article 3 of the 2025 Law on Corporate Income Tax (No. 52/2025/QH15). The goal is to ensure that all legitimate, profitable business activities contribute to the State budget, while creating a transparent competitive environment. Groups corporate income tax subject include:
Enterprises established and operating under Vietnamese law
Including joint stock companies, limited liability companies, private enterprises, partnerships, cooperatives, and public service units with business activities.
Foreign enterprises operating in Vietnam
Are organizations established under foreign law but have permanent or non-permanent establishments in Vietnam, generating taxable income from business activities in Vietnam.
Other organizations with production and business activities
These are groups of organizations such as people's credit funds, project management boards with business activities, or socio-political organizations if they generate income from commercial and service activities.
| Target group | Typical example | Tax liability |
| Domestic enterprises | Vinamilk Joint Stock Company, FPT Joint Stock Company, ABC Company Limited | Pay corporate income tax on profits generated in Vietnam |
| Foreign enterprises with permanent establishments | Samsung Electronics Vietnam | Pay corporate income tax on all income generated in Vietnam |
| Foreign enterprises without permanent establishments | Singapore software services company providing online services in Vietnam | Pay corporate income tax deducted at source |
| Other organizations with business activities | Agricultural cooperatives, public service units with income from services | Pay corporate income tax on income generated |
Thus, the scope of corporate income tax payers is quite broad, not limited to private enterprises or joint stock companies. All organizations, including foreign enterprises, if generating income in Vietnam must fulfill their tax obligations according to the law.
Corporate income tax calculation formula
In the Vietnamese financial system, the corporate income tax calculation formula is the basis for accurately determining the enterprise's budget payment obligations. This is the content stipulated in Article 6 of the Corporate Income Tax Law 2025 (No. 52/2025/QH15), which emphasizes that the amount of corporate income tax payable is determined based on taxable income and the applicable tax rate.
The standard formula is expressed as follows:
|
Corporate income tax payable = Taxable income x Corporate income tax rate |
To understand the formula, it is necessary to analyze each component. Taxable income is the difference between revenue and reasonable and valid expenses, after deducting losses carried forward from the previous year and adding other income.
Taxable revenue includes all sales and service provision arising during the period, including those from abroad but must be declared in Vietnam. Meanwhile, reasonable expenses are specified in detail in Circular 78/2021/TT-BTC, including labor costs, fixed asset depreciation, outsourcing service costs and financial costs.
An important point is that the loss is allowed to be carried forward for a maximum of 05 consecutive years from the year following the year of occurrence. In addition, the enterprise may also generate other income, such as capital transfer, real estate transfer or profit from financial activities, which must also be included in the tax base.
For ease of visualization, we can refer to a practical example. Suppose Company A in 2025 has revenue of 50 billion VND, eligible expenses of 40 billion VND, and a loss carried forward from 2024 of 2 billion VND. Then, taxable income will be:
|
50 billion – 40 billion – 2 billion = 8 billion VND |
With the applied corporate income tax rate of 20%, the amount of corporate income tax that Company A must pay is:
|
8 billion × 20% = 1.6 billion VND |
This example shows that although the formula is concise, the way to determine the related factors is quite complicated, requiring businesses to have a standard accounting system to calculate accurately.
| Ingredient | Main content | Legal basis |
| Taxable revenue | Revenue from sales and service provision | Article 7 of the 2025 Law on Corporate Income Tax |
| Reasonable cost | Labor costs, depreciation, outsourcing services | Circular 78/2021/TT-BTC |
| Losses carried forward | Carry forward for up to 5 consecutive years | Article 9 of the 2025 Law on Corporate Income Tax |
| Other income | Transfer of capital, real estate, finance | Article 10 of the 2025 Law on Corporate Income Tax |
| Corporate income tax rate | 20% general; 10–15% with preferential majors | Article 11 of the 2025 Law on Corporate Income Tax |
Thus, the corporate income tax calculation formula is both a legal framework and requires accuracy in practice. If a business does not manage its expenses well or misses the carried-over losses, the tax calculation results may be incorrect, leading to legal risks and financial losses. It can be said that this is a core tool for the State to ensure fairness, and businesses need to master it to be proactive in their financial planning.
Example illustrating the formula for calculating corporate income tax
Suppose Company A achieves total revenue of 50 billion VND in 2024. Of which, the deductible expenses according to regulations are 35 billion VND. The company also has a loss of 2 billion VND carried forward from 2022. Thus, taxable income will be determined by: 50 billion - 35 billion - 2 billion = 13 billion VND. With the common tax rate of 20%, the corporate income tax payable is 13 billion × 20% = 2.6 billion VND.
In the case of company A operating in the software sector – which is subject to tax incentives, the applicable tax rate is 10% for 15 years. At that time, the tax payable is only 13 billion × 10% = 1.3 billion VND. This example shows the same formula, but determining the correct type of business and tax incentives can significantly change tax obligations. This explains why many businesses proactively learn about and take advantage of preferential policies to optimize legal costs.
Current corporate income tax rate
According to the 2008 Corporate Income Tax Law (amended and supplemented in 2013 and 2020), the general tax rate currently applied in Vietnam is 20%. This is the general rate applied to most enterprises, except for cases with preferential or special policies. In addition, some sectors such as oil and gas or exploitation of rare resources are subject to higher tax rates, from 32% to 50%, to regulate revenue from the mining industry.
|
Business type/sector |
Applicable tax rate |
| Regular business | 20% |
| Small and medium enterprises (preferential) | 17% |
| Software, R&D (preferential) | 10% during the promotional period |
| Oil and gas exploitation | 32% – 50% |
It can be seen that, in addition to the common tax rate, the legal system also opens up many incentive frameworks for high-tech industries or small and medium-sized enterprises, helping to reduce the tax burden.
Adjustments when calculating corporate income tax
In practice, pre-tax accounting profit does not always coincide with taxable income for calculating corporate income tax. Therefore, enterprises need to make adjustments to increase or decrease taxable income according to the provisions of the Law on Corporate Income Tax and guiding documents.
Some expenses incurred during the period are recorded in the accounting books but are not deductible when calculating taxes, such as overspending, administrative fines or expenses without valid invoices and documents. Conversely, there are incomes recorded in accounting profits but not included in taxable income, such as dividends distributed from profits for which corporate income tax has been paid.
| Item | Adjustment to increase taxable income | Adjustment to reduce taxable income |
| Interest expense exceeds 30% EBITDA | Have | Are not |
| Administrative fines | Have | Are not |
| Advertising and promotion expenses exceeding 15% (applied before 2015, currently no ceiling) | Have | Are not |
| Income from dividends and profits already paid to corporate income tax | Are not | Have |
| Income from capital transfers between domestic companies eligible for tax exemption | Are not | Have |
For example, a company has a pre-tax accounting profit of VND10 billion, including VND200 million in contract violation fines and VND500 million in dividend income from a subsidiary. When determining taxable income, the company must add VND200 million (increasing adjustment) and subtract VND500 million (decreasing adjustment). Thus, taxable income will be VND9.7 billion.
Understanding the adjustments helps businesses calculate correctly, avoid the risk of being charged or fined, and also take advantage of legal incentives to reduce tax obligations.
Common mistakes when applying the corporate income tax calculation formula
In the process of applying the corporate income tax calculation formula, many businesses often make mistakes. These mistakes not only increase the amount of tax payable but also lead to the risk of being charged back and fined. Below are the most common mistakes to note.
Incorrect accounting of deductible expenses
One of the biggest mistakes is to include invalid expenses in deductible expenses. For example, over-the-top entertainment expenses, expenses without legal invoices or cash salary payments without receipts. When excluded, taxable income will increase, meaning the tax payable will be higher than expected.
Mistake in taxable revenue
Accounting revenue and corporate income tax revenue do not completely coincide. Many businesses record unrealized revenue or pre-received revenue in their financial statements and consider it as the basis for tax calculation. This leads to a large difference in tax obligations, especially in businesses with export activities or long-term service provision.
Wrong tax rate applied
From October 1, 2025, the standard tax rate is 17%. However, many businesses still apply the old rate of 20% or do not distinguish between the normal tax rate and the preferential tax rate (10%, 15%). The consequence is that the declared tax amount is incorrect, leading to adjustments or penalties for incorrect declaration.
Omitted adjustment
Some businesses fail to take advantage of the maximum 5-year loss carryover right, or fail to record tax incentives based on industry and location. Conversely, some forget to adjust taxable income from invalid expenses. Both of these situations lead to inaccurate tax settlement data.
Lack of legal updates
The Vietnamese tax system changes quite frequently. Businesses that do not keep up to date are likely to make mistakes when applying the corporate income tax calculation formula, such as missing new points in the 2025 Corporate Income Tax Law and accompanying guidance documents. This is a common reason why businesses are at risk when being subject to tax inspections.
Comparison of Vietnamese and international corporate income tax calculation formulas
In the context of globalization, comparing corporate income tax (CIT) formulas between Vietnam and other countries is necessary for businesses to clearly understand their competitive position and assess the advantages or challenges of operating across borders.
In Vietnam, the formula for calculating corporate income tax is uniformly prescribed in the Corporate Income Tax Law 2025, specifically:
|
Corporate income tax payable = Taxable income × Corporate income tax rate |
In which, taxable income is determined based on revenue minus reasonable and valid expenses, plus or minus adjustments according to legal regulations. The basic tax rate commonly applied today is 20%, however there are preferential cases such as 10% or 15% for high-tech, agricultural or particularly difficult areas.
In the world, the formula for calculating corporate income tax is also based on the general principle of levying on the profit after deducting expenses, but there are differences in tax rates and adjustment regulations:
- United States: The current federal tax rate is 21%, with additional state taxes ranging from 0–12% depending on the state.
- Japan: Standard corporate income tax rate is about 23.21 TP3T, plus local surcharges, bringing the total to over 301 TP3T in many localities.
- Singapore: Applying a quite competitive tax rate of only 17%, and at the same time having many deduction and exemption policies for startups or small businesses.
| Country / Region | Basic formula | Common tax rate | Outstanding features |
| Vietnam | Taxable income × Tax rate (20%, preferential 10–15%) | 20% | There are many incentives by industry and location. |
| USA | Taxable Profit × Federal Tax Rate + State Tax | 21% + 0–12% | Stratified by state |
| Japan | Taxable profit × Corporate income tax rate + local surcharges | ~23.2% (actual >30%) | High tax burden, many additional taxes |
| Singapore | Taxable profit × Tax rate | 17% | Low tax rates, strong support for small businesses and startups |
It can be seen that the formula for calculating corporate income tax is basically not much different between countries, but tax rate and incentive policies determine the competitiveness of the investment environment. Compared to OECD countries or regional financial centers such as Singapore, Vietnam is still at an average level, maintaining a stable source of revenue for the budget while creating policy space to attract investment.
Experience in applying effective corporate income tax calculation formula
To effectively apply the corporate income tax calculation formula, enterprises not only need to master the legal regulations but also need to organize financial management scientifically. Many practical cases show that enterprises are subject to tax arrears, late payment penalties or are not entitled to tax incentives just because of small errors in accounting or not keeping complete documents.
First of all, businesses need to build a transparent accounting system, ensuring that all revenues and expenses are reflected in their true nature, in compliance with accounting standards. A small error, such as expenses without legal invoices or accounting in the wrong period, can lead to the expense not being included in the valid expenses when determining taxable income.
Second, regular monitoring of tax policies is mandatory. The Corporate Income Tax Law and its guiding documents have been amended and supplemented quite a lot, for example, regulations on tax incentives for high-tech industries, agriculture, or special economic zones. If businesses do not update in time, they may miss opportunities to reduce their legal tax obligations.
Third, businesses should use integrated accounting and tax software to automate calculation steps. Modern software can quickly determine pre-tax profits, deduct valid expenses, and accurately calculate corporate income tax payable. This helps reduce the risk of manual errors and facilitates timely preparation of financial statements.
Finally, one of the most important experiences is independent consulting and auditing. Consulting with tax experts not only helps businesses optimize tax obligations within the legal framework but also limits legal risks in case of being inspected or audited by tax authorities.
| Content | How to apply | Meaning |
| Transparent accounting system | Fully record revenue and expenses with legal documents | Ensure valid expenses to avoid being rejected during settlement |
| Update tax policy | Follow the Law on Corporate Income Tax, new decrees and circulars | Take advantage of tax incentives and reduce tax obligations |
| Application of technology | Use automatic accounting and tax software | Reduce errors and save calculation time |
| Consult an expert | Advice from auditors and tax lawyers | Optimize tax costs, reduce legal risks |
In short, for the corporate income tax calculation formula to be most effective, businesses must combine understanding the law, implementing the correct accounting process, applying technology and consulting experts. This approach helps to optimize tax costs while strengthening trust with shareholders, partners and state management agencies.
FAQ – Frequently Asked Questions
No. The general formula stipulated in Article 3 of the 2025 Corporate Income Tax Law applies to all enterprises. However, some specific enterprises such as those in the oil and gas and mining sectors have their own calculation method with higher tax rates (32% – 50%).
Only expenses with legal invoices and documents, serving production and business, not included in the list of non-deductible expenses according to Article 6 of Circular 78/2014/TT-BTC (and amendments) are calculated. For example: raw material costs, salaries, fixed asset depreciation.
No. In case of loss, enterprises are allowed to carry forward the loss to the following years, up to 5 years, to offset against taxable income.
High-tech industries, high-tech agriculture, renewable energy, education - healthcare, or investment in economically disadvantaged areas, enjoy low tax incentives (10%, 15%) and exemptions in the first few years.
The formula remains unchanged, but the applicable tax rate is adjusted according to the 2025 Corporate Income Tax Law, in which the basic rate is reduced to 18% for small and medium-sized enterprises, and remains at 20% for large enterprises. Does the corporate income tax formula apply to all types of businesses?
What expenses can businesses deduct when calculating taxable income?
If a business makes a loss, does it have to pay corporate income tax?
Which industries are corporate income tax incentives usually applied to?
Will the corporate income tax calculation formula change from October 1, 2025?
Conclude
The corporate income tax calculation formula is a key tool to help businesses manage finances, plan their business and comply with the law. Understanding the calculation steps, adjustments and current tax rates not only helps minimize errors in declaration but also helps businesses optimize profits. In the context of increasingly improved tax policies and international integration, proactively updating new regulations will be a decisive factor for businesses to maintain transparency and sustainable competitiveness.
If your business needs a companion to advise and guide you on how to apply the corporate income tax calculation formula accurately and effectively, please contact MAN – Master Accountant Network. With a team of experienced experts, in-depth understanding of tax laws and the application of modern management technology, MAN is committed to providing comprehensive, safe and optimal solutions for your business.
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
