CIT incentives on term deposit interest and turbine performance compensation

On 22 September 2026, the Tax Department issued Official Letter No. 7022/CT-QLNT in response to Lam Dong Provincial Tax Authority (Official Letter No. 2404/LDO-KT2 dated 26 March 2026) regarding the determination of corporate income tax (CIT) incentives for two income items of a wind power enterprise: term deposit interest and compensation for the operating performance of turbines. The letter does not reach a direct conclusion on either item; instead, it sets out the governing principles and instructs the local tax authority to review the actual records. Enterprises whose projects enjoy incentives based on the investment sector (particularly in renewable energy) should take note of this approach.

1. Legal basis cited by the Tax Department

Deposit interest is other income. Under Point dd, Clause 2, Article 3 of Decree No. 218/2013/ND-CP dated 26 December 2013, income from deposit interest at credit institutions, lending interest in any form, income from the sale of foreign currency and foreign exchange differences fall within other income when determining taxable income.

Netting deposit interest against loan interest expense. Clause 7, Article 7 of Circular No. 78/2014/TT-BTC dated 18 June 2014 (as amended by Clause 1, Article 5 of Circular No. 96/2015/TT-BTC) provides that where income from deposit and lending interest exceeds loan interest expense, the difference after netting is included in other income; where it is lower, the difference is deducted from income of the main business activities.

Netting contractual penalties and compensation. Clause 13, Article 7 of Circular No. 78/2014/TT-BTC provides that penalties and compensation received from counterparties for breach of contract (or bonuses for good performance of contractual commitments) are netted against penalties and compensation paid for breach of contract; a positive difference is included in other income, a negative difference is deducted from other income (or, if no other income arises in the year, from business income). Administrative fines, and penalties or compensation already recorded as a reduction in the value of construction works during the investment phase, are excluded.

Scope of income eligible for sector-based incentives. Clause 4, Article 18 of Circular No. 78/2014/TT-BTC (as amended by Clause 2, Article 10 of Circular No. 96/2015/TT-BTC dated 22 June 2015) provides that where an enterprise enjoys incentives because it meets the conditions on preferential investment sectors, in addition to income from that sector, the following income items also enjoy incentives: disposal of scrap and by-products of products in the preferential sector; foreign exchange differences directly related to the revenue and expenses of the preferential sector; interest on non-term bank deposits; and other directly related income.

2. The Tax Department's position

On term deposit interest. The Tax Department did not conclude directly. It requested Lam Dong Provincial Tax Authority to rely on the above provisions on deposit interest (Point dd, Clause 2, Article 3 of Decree No. 218/2013/ND-CP; Clause 7, Article 7 of Circular No. 78/2014/TT-BTC), and to cross-check them against the content and figures in the enterprise's 2024 CIT finalization explanations and the actual circumstances, in order to handle the matter in accordance with the law.

Notably, the list of incentive-eligible income in Clause 4, Article 18 of Circular No. 78/2014/TT-BTC refers only to interest on non-term bank deposits. In practice, therefore, term deposit interest is generally treated by the tax authorities as other income not eligible for incentives, unless the enterprise can demonstrate a direct link to the incentivised activity.

On compensation for turbine operating performance. The Tax Department stated the principle that where an enterprise has an investment project enjoying CIT incentives because it meets the conditions on preferential investment sectors, other directly related income also enjoys CIT incentives under Clause 2, Article 10 of Circular No. 96/2015/TT-BTC.

According to the file, the Thai Hoa Wind Power Plant Project belongs to the group of power plants and renewable and clean energy production. The Tax Department requested Lam Dong Provincial Tax Authority to review whether the amount received by the company arose from the performance of the Turbine Maintenance Service Contract, is directly related to operation and is tied to the electricity generation activities of the project. The review is to be based on the CIT legal instruments, cross-checked against the turbine maintenance contract and the actual circumstances of the project, in order to determine the scope of income eligible for CIT incentives.

3. Note: the legal framework has changed from the 2025 tax period

The matter addressed in the letter concerns the 2024 CIT finalization, so the legal basis above is the law applicable to the 2024 tax period. From the 2025 tax period, the framework has changed:

• Decree No. 320/2025/ND-CP dated 15 December 2025 replaces Decree No. 218/2013/ND-CP and applies from the 2025 tax period (Clause 1, Article 24 of Decree No. 320/2025/ND-CP).
• Circular No. 20/2026/TT-BTC dated 12 March 2026 replaces Circular No. 78/2014/TT-BTC and Circular No. 96/2015/TT-BTC and applies from the 2025 tax period (Clauses 1 and 6, Article 10 of Circular No. 20/2026/TT-BTC).

💡 Recommendations for enterprises

1. Review and classify income items outside main revenue (term and non-term deposit interest, penalties, compensation, foreign exchange differences) against the "directly related" test in Clause 4, Article 18 of Circular No. 78/2014/TT-BTC.
2. For compensation received from maintenance and operation contractors: retain the contract, performance commitment clauses, damage assessment minutes and payment vouchers to demonstrate the link to electricity generation activities.
3. Account separately for incentive-eligible and non-eligible income within the year, to avoid having to re-explain at finalization.
4. Proactively re-examine finalization periods already filed if similar income items may not have been classified correctly.
5. For the 2025 tax period onwards: revisit the classification of other income under Decree No. 320/2025/ND-CP, in particular deposit interest and the loan interest netting mechanism, as the legal basis in Circular No. 78/2014/TT-BTC and Circular No. 96/2015/TT-BTC is no longer in force.

This newsletter is prepared by Crowe Vietnam for general information purposes only and does not constitute advice for any specific case. Enterprises should refer to the original legal instruments and consult professional advisors before applying the above to their particular circumstances.