Question:
Our company is a 100% foreign-owned company that has established an investment project since 2001 (referred to as Project I), with the following operational objectives:
• Software production, development, implementation (including software, packaged software, and customer applications); software consulting services and system consulting; system analysis services; system design services; programming services; system maintenance services (industry code: 6201, CPC code: 842);
• Consulting services related to computer hardware and network installation (industry code: 6202, CPC code: 841);
• Data processing services; database services (industry code: 6311, CPC code: 843, 844).
Currently, Project I enjoys corporate income tax incentives for software production according to tax regulations. Based on the Investment Certificate of the Company, the project’s operational period is 20 years from March 28, 2001 (Project I). Therefore, the project’s expiration date will be March 28, 2021. The company is preparing to establish a new independent investment project with similar objectives as Project I, which will be issued an Investment Certificate (Project II). When Project I expires, Project II will inherit all assets. The company will use all the assets from Project I to invest in Project II.
Guidance is needed for the following questions:
1. Based on the provisions of the law, can the company determine Project II as a new independent investment project that meets the criteria of being separate from the operating Project I, belongs to the software production sector, and enjoys tax incentives according to the law?
2. Regarding the remaining losses of Project I after it expires, can the company continue to carry forward the losses when Project II becomes profitable?
Answer:
Based on Point c, Clause 5, Article 18 of Circular No. 78/2014/TT-BTC dated June 18, 2014 by the Ministry of Finance (amended and supplemented by Clause 3, Article 10 of Circular No. 96/2015/TT-BTC dated June 22, 2015 by the Ministry of Finance), which guides corporate income tax incentives for new investment projects.
Based on Article 9 of Circular No. 78/2014/TT-BTC dated June 18, 2014 by the Ministry of Finance, which guides corporate income tax regulations on loss carryforward.
1. In the case where the company is currently enjoying corporate income tax incentives for software production activities (Project I). According to the investment certificate, Project I’s implementation period ends on March 28, 2021, and it will no longer enjoy corporate income tax incentives. When Project I expires, the company can register for Project II, which is similar to Project I, and at the same time, inherit all the assets of Project I. However, Project II will not be eligible for corporate income tax incentives.
2. Regarding the losses of Project I, if they are still within the allowed loss carryforward period (5 years from the year following the year of loss), the company can deduct them from the taxable income of Project II.
