Son Ha is a Vietnamese joint stock company in the field of manufacturing and selling silver products.

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Question:

Son Ha is a Vietnamese joint stock company in the field of manufacturing and selling silver products. The company is seeking your assistance with regard to their corporate income tax (CIT) for the year ended 31 December 2016.

Son Ha’s financial statements for the year 2016

	Note	VND million
Sales revenue	1	800,000
Cost of sales	2	(540,000)
Gross profit		260,000
Selling and distribution expenses	3	(120,000)
General and administration expenses	4	(80,000)
Operating profit		60,000
Financial expenses	5	(100,000)
Financial income	6	23,000
Other non-operating income	7	8,000
Net Loss		(9,000)

Note 1: Of which

Sales to TopAmerica of 1,000 units at a price of 500,000/unit (the normal sale price is 650.000/unit). In return, TopAmerica provide Son Ha an interest free loan of VND 1b for the whole year, otherwise Son Ha has to borrow from Sacombank at the rate of 10%/year

Note 2: Of which

VND12,000 million is 12 months depreciation charges of the new factory (the factory was completed and put in used on 1.10.16, but the company decides to make a full year charge for 2016)
VND200 million is depreciation charge of a machine purchased on Jan 1, 2016 by installments. Annual payment is 400 million in 3 years. Lump sum purchase price is 990 million. The useful life under circular 45 is 6 years.

Note 3: of which:

VND300 million accrued bonus for employees of Sale Department as reward for their excellent performance in the year 2016. The bonus is clearly stated in the labour contracts signed between the company and employees. Of VND300 million, VND 100 million will be paid at Lunar New Year 2017 and the rest will be paid at the Labour Day 2017. There was not any provision made for salary fund.
Payment of medical insurance premium for Sale Director VND 100 million
Advertising and sales promotion expenses of VND100,000 million

Note 4: of which:

VND 240 million international school fees for the son of the General Director. The general director is a Singapore citizen. This expense is specified in the employment contract and is supported by proper documents.
VND200 million salary paid for 2 members of board of directors who do not participate in administering activities for the company.
VND1,200 million leasing cost of a new machine paid in advance on Dec 1, 2016. The leasing contract is for the period 1 Jan 2017 to 31 Dec 2019.
Purchases of hand-made products from individual families. The total payments were VND30 million. There were no official invoices available for this expense, but the company had already prepared a list of goods purchased as per required in circular Circular 78/2013/TT-BTC accompanied by supporting documents evidencing for payments made to these sellers.

Note 5: of which

VND 16.5 million interest expense for a loan that the company had entered into on 1 Dec 2016 with its General Director. The loan amounting to VND 990 million is for a purchase of a 16 seat car for business activities. The interest rate is 20% annually and the base rate of interest announced by the State Bank of Vietnam was 10% annually in Dec.

The car was used immediately after purchased (1.12.2016), but the company decided to depreciate the car from 1.1.2017. The estimated useful life for depreciation is 5 years.

(The stipulated duration of use for road transport vehicles under circular 45 is from 6-10 years)

VND100 million of unrealized foreign exchange loss from the revaluation of long term loan.

Note 6: Financial income includes VND300 million of unrealized foreign exchange gain from the revaluation of receivables.

Note 7: of which

VND 200 million is receipts from suppliers as penalties for late delivery good
VND 300 disposal gain from an fixed assest with an original cost of VND3,000 million. The asset was purchased on Jan 1, 2010 with 3 years useful life under circular 45. The disposal was conducted on Jan 1, 2016 for the price of VND350 million and agent commission of VND50 million.

Additional information:

Proper supporting vouchers/invoices are available for all items unless otherwise stated.
All amounts not described in notes 1 to 7 are taxable/deductible in accordance with the current tax regulations.

Required:

Compute Son Ha’s total income tax liabilities for the year ended 31.12.2016.

You should start your computation with the profit before tax figure and refer to all of the items included in notes 1 to 7, indicating by the use of “0” any item for which no adjustment is required.

You should make all calculations to the nearest VND million and refer to relevant prevailing tax regulations.