Taxation A2

PIT:
Corporate income tax (CIT) levies directly on assessable income of corporations in a tax year
1. Explain what is meant by unincorporated organizations and give examples of these types
of organizations.
An unincorporated association is not a legal entity. It is an organization of two or more persons,

who are the members of the association. The membership may change from time to time. The
members agree, usually in a written constitution, to co-operate in furthering a common purpose.
The affairs of an unincorporated association are usually managed by a committee chosen by the
members. An unincorporated association does not have limited liability. An unincorporated
association is defined as an association of two or more persons formed for some religious,
educational, charitable, social or other non-commercial purpose. Accounts of a sole
proprietorship or a DBA are not insured under this account category.
Clubs and charities are often constituted as unincorporated associations. The members of a
management committee of a charity that is formed as an unincorporated association are likely to
be charity trustees
2. Explain what is meant by incorporated organisations and give examples of these types of
organisations.
Incorporation is the legal process used to form a corporate entity or company. A corporation is
the resulting legal entity that separates the firm's assets and income from its owners and
investors.
Corporations can be created in nearly all countries in the world and are usually identified as such
by the use of terms such as "Inc." or "Limited (Ltd.)" in their names. It is the process of legally
declaring a corporate entity as separate from its owners.
Incorporation effectively creates a protective bubble of limited liability, often called a corporate
veil, around a company's shareholders and directors. As such, incorporated businesses can take
the risks that make growth possible without exposing the shareholders, owners, and directors to
personal financial liability outside of their original investments in the company.
 C Corporation: the most common business entity. It is formed as a separate legal entity
that’s wholly controlled by company shareholders.
 S Corporation: offers liability protection to shareholders, and shareholders enjoy certain
tax breaks not offered under other business structures.
 Limited Liability Corporation: LLCs benefit from side-stepping double taxation on
corporate profits (members report profit or loss on their individual tax returns).
The company Apple, for example, was incorporated under the full name Apple Inc, while
Microsoft is formally incorporated as Microsoft Corporation.
3. Briefly explain the three principal conditions for expenses to be deductible
Principle: Business expense has to fulfill all the following conditions in order to secure a
deduction:
 the scope of expense refers to ‘outgoings and expenses’; in which outgoing encompass
business losses due to theft, defalcation of employees, bad debts and expenses refer to
disbursement and involve some sort of volition
 the expenses have to be ‘wholly and exclusively’;
 incurred;
 in the production of gross income from that business source
Condition: Expenses are deductible if they are not in the list of non-deductible expenses
stipulated by legislation and meet the following 3 conditions:
Actual expenses used for generating income or for the purpose of business; Legitimate valid
invoices, vouchers and documents stipulated by legislation and having non-cash payment
documents in the case of the purchased value of good and service are on or over 20 million VND
(including VAT).
4. Explain the difference between private and public companies and give examples of these
types of companies.
A private company is owned by the company's founders, management, or a group of private

investors. While a privately held company can’t rely on selling stocks or bonds on the public
market in order to raise cash to fund its growth. Privately held companies can use shares of
equity to attract investors. Of course, privately held companies can also borrow money, either
from banks or venture capitalists, or rely on profits to fund growth.
A public company is a company that has sold all or a portion of itself to the public via an initial
public offering.
The main advantage public companies have is their ability to tap the financial markets by selling
stock (equity) or bonds (debt) to raise capital (i.e., cash) for expansion and other projects.
One of the biggest differences between the two types of companies is how they deal with public
disclosure. The main difference between a private vs public company is that the shares of a
public company are traded on a stock exchange, while a private company’s shares are not. There
are several more important differences to understand, which this article will outline below.
A public company is a company that is listed in the well-known stock exchange and can be
traded freely. Where a private limited company is not listed on a stock exchange and it is held
privately by the member of the company.
In a private company, it is not mandatory to call a statutory meeting of members, whereas it is

mandatory to have a statutory meeting in the case of a public limited company. There must be a
minimum of seven members to form and start a public company, on the other side a private
company has a limit of a minimum of two members to start the business. There is no capping for
the maximum number of members in a public limited company. But a private company cannot
have more than 200 members, subject to some conditions.
To start a public company there should be at least 3 directors and is a privately held company, the
minimum number of directors should be 2. In a public company, at least 5 members must be
present personally at the Annual general meeting (AGM) for the formation of the requisite
quorum, whereas in the private limited company at least 2 members should present in the AGM.
General Public can be invited by the company for the subscription of shares of the public limited
company. On the other hand, there is no such thing in a private limited company to invite the
general public for the subscription of share
The issuance of the prospectus is compulsory in the public limited company and for the private
limited company, there is no such instance.
In a private limited company transferability of shares is fully restricted; In contrast, the

shareholders of a public limited company can easily and freely transfer their shares.
A Private Limited Company requires the only certificate of incorporation to start the business, on
the other side a public company requires a certificate of incorporation and then the certificate of
commencement to start a business.
5. Highlight the main differences in taxation liabilities between (public, private company)
AND unincorporated organizations
Unincorporated organizations Public, Private company

Taxes payable Excise, PIT Excise, Corporate income
tax
Supporting policies When the turnover is less than Turnover of less than 3
VND 100 million a year, only billion 1 year is only
the excise tax is payable taxed 15%
Number of times taxed Once Twice
during the year
Responsible for taxes Unlimited Limited
Advantage Disadvantage
CIT - A business that fulfils its tax - In case the individual is the owner
obligations will be given of the business or the legal
preferential treatment by the representative of the business but the
government, protected with enterprise owes tax or fine arrears,
legitimate legal rights and they cannot leave.
facilitated for a favourable - Affect the company's reputation,
business lose employee's trust
-The State has facilitated - Reducing the quality of life in the
interest-free loans, tax community - Create black sources of
exemption and reduction. consumption, increase cases of tax
-For foreign partners who often evasion
require to provide financial
statements, documents showing
how much tax is paid to the
annual budget to prove the size
and efficiency of the business
- Full tax reporting and tax
payment also gives employees
peace of mind to work and
believe in the sustainable
development of the company.
PIT Individuals who do not sign a -Demonstrating the responsibility of
labor contract or sign a labor the individual to the community
contract of less than 03 months -Demonstrating the responsibility of
with a total income payment of the individual to the community –
VND 2 million / time or more No overpaid personal income tax is
must deduct tax at the rate of refunded
10% of their income before - Personal income tax finalization is
paying them. not authorized for individuals who do
- Individuals who already have not have a personal income tax code
a tax code are authorized for the
income paying organization to
settle on their behalf (if they
meet the conditions), and those
individuals without a tax code
are not authorized to do the
finalization instead, but must do
the final settlement themselves.
tax with tax authorities.
-The personal income tax
refund applied to individuals
who do not have a tax code is
not entitled to a tax refund, but
to compensate for the following
year.
Incorporated businesses can defer taxes to a later date, and if the business qualifies as a small
business, it may qualify for a small business tax deduction. Incorporated businesses must file
separate business tax returns while the unincorporated business owner can file one individual
tax return.
An unincorporated business also has some flexibility when dealing with taxes, as it can claim
personal tax credits that an incorporated business cannot. Also, owners of unincorporated
businesses can use business losses to decrease their personal income.

Taxation A2

Uploaded by

Copyright:

Available Formats

Taxation A2

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Taxation A2

Uploaded by

Copyright:

Available Formats

PIT:

An unincorporated association is not a legal entity. It is an organization of two or more persons,

A private company is owned by the company's founders, management, or a group of private

In a private company, it is not mandatory to call a statutory meeting of members, whereas it is

In a private limited company transferability of shares is fully restricted; In contrast, the

Unincorporated organizations Public, Private company

You might also like