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Due to the unexpected outbreak of Covid-19 pandemic in all over the country, almost enterprises have been incurring a number of expenses for prevention and fight against Covid-19 as well as supports to employees during such difficult period. The related expenditures could be listed as following:

  1. Quarantine expenses for foreign experts;
  2. Covid19 testing fee, examination and treatment expense for foreign experts;
  3. Expenses for purchasing medical devices as face masks, hand sanitizer and/or other protective equipment;
  4. Donation, sponsorship and voluntary contributions for Covid-19 prevention and vaccine fund;
  5. Allowances paid for employees who are forced to suspend their works during the social distancing and affected by Covid-19 pandemic;
  6. Depreciation of fix assets which are provisionally inactive due to the impact of Covid-19 pandemic.

Regarding concern of the taxpayer, there are notable regulations providing guidance on treatment to the aforesaid expenses. Below is our summary as brief of some relevant guidance related to Corporate Income Tax (“CIT”) and Personal Income Tax (“PIT”) treatment for your further reference.

Item CIT CIT PIT PIT Relevant Guidance

Quarantine expenses for foreign experts;

(-)

Deductible expense

Provided that there is a labor contract between the company and the employee, in which the rental charge is borne by the company such expenses are supported with sufficient valid invoices, documents

 (+)

Taxable income

Official letter No. 5032/TCT-CS dated 26 November 2020, issued by the General Tax Department

Official letter No. 97748 dated 10 November 2020 issued by Hanoi Tax Department

Covid – 19 testing fee, examination and treatment expense for foreign experts;

(-)

Deductible expense

The same as the welfare paid directly to employees

 (+)

Taxable income

Official letter No. 5032/TCT-CS dated 26 November 2020, issued by the General Tax Department

Expenses for purchasing medical devices as face masks, hand sanitizer and/or other protective equipment;

(-)

Deductible expense

The same as the welfare paid directly to employees

 (+)

Non-taxable incomein case such expenses satisfy current regulations

Official letter No. 66297/CT-TTHT dated 16 July 2020, issued by Hanoi Tax Department

Donation, sponsorship and voluntary contributions for Covid19 prevention and vaccine fund;

(-)

Deductible expense

If companies contribute to organizations who are allowed to receive support and sponsorship and have sufficient invoices and documents according to the regulation

 (?)

Yet to have clear guidelines

Decree 44/2021/ND-CP dated 31 March 2021 by the Vietnam Government

Allowances paid for employees who are forced to suspend their works during the social distancing and affected by Covid-19 pandemic;

(-)

Deductible expense

The same as the welfare paid directly to employees

 (+)

Treated as Taxable income

Official letter No. 89924 dated 9 October 2020 issued by Hanoi Tax Department

Depreciation of fix assets temporarily inactive due to the impact of Covid-19 pandemic.

(-)

Deductible expense

If fixed assets are suspended for less than 9 months during the tax period, then continue to be used for production and business activities

 (+) N/A Official letter No. 12452 dated 9 October 2020 issued by the General Department of Taxation

 

As you can see in the above, the current regulations have just covered that cost consumed for foreign experts as Covid19 epidemic quarantine and prevention would be included in the individuals’ taxable income from the employment salaries and wages while there is still not specific guidance on treatment to same expenses reserved for local staffs.

Given the fact that there is unexpected increase in cases in all over the country, the Covid-19 testing fee will be a must for employee to carry out business assignment under request by their employers, is it fair that employees, especially those who are likely to need tests on a regular basis have to bear such tax burden at this time?

It is certain that the Government will issue further guidance on how to treat expenses and benefits provided to employees during Covid19 pandemic. We will promptly keep you updated as soon as new regulation is issued. 

 

The Ministry of Finance (MoF) is proposing a 30 percent reduction in the CIT liability which enterprises must pay in 2021 in a draft resolution on budget collection solutions. The resolution is expected to be submitted to the National Assembly’s Standing Committee for approval in this August 2021.

The draft resolution includes 4 proposals for tax and fee exemption and reduction:

  • A 30 % reduction in CIT payables in 2021 for businesses and organizations as applied for year 2020;
  • A 50 % reduction in tax liabilities generated in the third and fourth quarters of 2021 for business households and individuals in all business sectors, locations and methods of tax declaration and payment;
  • A 30 % reduction in VAT payables for businesses and organizations in some specified service sectors;
  • Exemption of late payment fee arising in 2020 and 2021 (02 years affected by the Covid-19 epidemic) for enterprises and organizations that incur continuous losses in the years 2018, 2019, 2020.

  1. Deadline for CIT finalization

CIT payers prepare and submit the tax finalization dossiers no later than the last day of the 3rd month from end of the calendar year or fiscal year;

In case of submission of dossiers for business dissolution, contract termination or reorganization, the deadline for submission of annual CIT dossiers is no later than the 45th day from the date of the event execution.

Note: In case there has issue with the e-portal of the tax authority on the last day of the deadline for tax return submission, the taxpayers shall submit tax return and e-tax payment documents on the next day after the web portal is active.

Extension of deadline for submission of tax return dossiers:

In case taxpayers are unable to submit their tax return on time due to natural disasters, disasters, epidemics, fires or unexpected accidents, the head of the managing tax agency shall extend the deadline for tax return submission.

The extension time limit does not exceed 60 days for tax finalization dossier from the deadline of tax return submission.

Taxpayers must send to tax authorities a proposal for extension of deadline for submission of tax return before the deadline, which clearly states the reason for the extension and such proposal should be certified by the competent authority according to the law.

  1. CIT calculation

The CIT payable is calculated as follows:

CIT payable

  =

Assessable income

   -

Amount transferred to science and

technology fund (if any)

   x     

Tax rate

In which, the assessable income is calculated as follows:

Assessable income

=

Taxable income

-

Tax-exempt income

 +

Loss carry forward

 And the taxable income is calculated as follows:

Taxable income

=

Revenue

-

Deductible expenses

+

   Other incomes


3. Deductible and non-deductible expenses

Pursuant to Article 4 Circular 96/2015/TT-BTC:

3.1. Deductible expenses

Every expense is deductible if all of these following conditions are satisfied:

- The actual expense incurred is related to the enterprise’s business operation;

- There are sufficient and valid invoices and supporting documents under the current regulations;

- There is non-cash payment evidence for any purchase of goods/ services of VND 20 million or over (including VAT).

3.2. Non-deductible expenses

- Expenditure on wages and bonuses to employees that have been included in operating costs but do not have proof of payment.

- Expenditure on employees’ clothing without invoices that exceeds VND 05 million/person/year.

- Payment for voluntary pension fund, life insurance premiums for employees that exceeds VND 03 million/person/month.

- Payment of interest on loan serving business operation which exceeds 150% of basic interest rate announced at the time of taking the loan.

- Depreciation of fixed assets that are not used for business operation, depreciation beyond the limit, depreciation without proof of ownership of the enterprise, depreciation that is not recorded in the accounting books.

- Expenditure of lease of assets from individuals without sufficient documents.

- Payment of fines for administrative violations (except for breach of contract).

- Provisions made and used against instructions of the Ministry of Finance.

- Expenditure on infrastructural development during investment phase to create fixed assets.

- Loss on exchange difference due to reassessment of foreign currency items at the end of the tax period

4. CIT finalization dossiers should include

- CIT declarations form (Form No. 03/TNDN issued under Circular 151/2014/TT-BTC);

- An annual financial statement includes:

  • Balance sheet (Form No. B01-DN issued under Circular 200/2014/TT-BTC);
  • Income Statement (Form No. B02-DNN issued under Circular 200/2014/TT-BTC);
  • Cash flow statement according to direct method and indirect method (issued under Circular 200/2014/TT-BTC);
  • The description of financial statement (Form No. B09-DN issued under Circular 200/2014/TT-BTC);

- Letter of authorization in case the preparer is not legal representative

-------------------------------------

Legal background:

- Law on Tax Administration 2019;

Circular 96/2015/TT-BTC;

Circular 151/2014/TT-BTC;

Circular 156/2013/TT-BTC.

 

Law on Enterprises 2020 has officially taken effect since Jan 1st ,2021. Accordingly, there are significant changes regarding regulations on Enterprise’s seal.

  1. Enterprises are allowed to self-determine their own seal

While the Law on Enterprises 2014 has limited the content displayed on the seal, the Law on Enterprises 2020 has abolished the mandatory regulations on information shown on the seal. According to Clause 2, Article 43, Law on Enterprises 2020, an enterprise is allowed to decide the type, quantity, form and content of their own seal.

This means that enterprises will have full discretion on the content of their seal without being bound by the law. In addition, enterprises are also fully empowered to decide the content displayed on the seal of branches, representative offices and other divisions of enterprises.

  1. Eliminate the regulation on prior notification of seal samples before using

From Jan 1st, 2021, enterprises are no longer required to carry out procedure for announcing the seal sample to the business registration office for public posting on the National Business Registration Portal.

This is considered as a new, progressive and suitable regulation in simplifying administrative procedures, which helps to save time and effort in the process of implementing business-related procedures.

  1. Changes related to the seal management, storage and usage

While Law on Enterprises 2014 stipulates that the seal must be managed in accordance with the company's charter, branches, representative offices and other divisions of enterprises now can self-promulgate regulations for using its own seal as per Clause 3, Article 43, Law on Enterprises 2020. However, it is only allowed to use the seal in transactions as prescribed by law.

In addition, according to Decree 130/2018/ND-CP, digital signature can be considered as a form of electronic signature that encrypts data and information of an enterprise and used to sign on types of digital documents of electronic transactions implemented via internet.

Accordingly, digital signature is recognized as seal of enterprises.

The inclusion of considering electronic signature as official seal of the enterprises encourage enterprises having more options in using seal instead of just using traditional engraved seal as currently.

 

To get into details for specific cases, please feel free to contact us as at:

Unit 602A, Tower A, Handi Resco Office Building

521 Kim Ma Street, Ba Dinh District, Hanoi

+ 84 24 3974 4181/ 4182

+ 84 24 3974 3090

This email address is being protected from spambots. You need JavaScript enabled to view it.

 

According to the Decree No. 114/2020/ND-CP dated Sep 25th, 2020 by the Vietnam Government, the settlement of underpaid/ overpaid CIT amount as applying the 30% reduction under the Resolution No. 116/2020/QH14 by the National Assembly shall be in accordance with the Law on Tax Administration and guiding documents. In case of finalizing and inspecting/ examining CIT, the underpayment or overpayment could be treated as below:

Case

Underpayment of CIT

Overpayment of CIT

CIT Finalization

To pay the arrears and late payment interest

in accordance with the current regulation.

The excess amount shall be handled in accordance with current regulation.

Inspection, tax audit

To pay the arrears and late payment interest

in accordance with the current regulation.

The 30% reduction specified in this Decree shall

apply to the increase in CIT.

In detail, there has specific regulation providing treatment to case of overpayment:

Pursuant to Article 33, Clause 1.a, Circular 156/2013/TT-BTC dated Nov 6th, 2013 by the Ministry of Finance, it is regulated that:

  1. An amount of tax, late payment penalties, or fines is considered overpaid when:

 “a) The tax, late payment interest, and fines paid by the taxpayer is higher than the amounts payable within 10 years from the day on which the amounts are paid to government budget. If terminal declarations must be made, the taxpayer may only determine overpaid tax when the paid tax is higher than the tax payable according to the terminal declaration.”

Accordingly, the CIT liability is considered overpaid when:

  • The tax amount paid by Taxpayers higher than payable tax amounts for each type of tax liability with the same sub-item within 10 years from the day on which the amounts are paid to government budget.
  • If terminal declarations must be made, the taxpayer may only determine overpaid tax when the paid tax is higher than the tax payable according to the terminal declaration.

Solution when overpaying provisional CIT Liability

Pursuant to Article 33, Clause 2, Circular 156/2013 / TT-BTC regulation about The taxpayer is entitled to settle the overpaid tax, late payment penalties, and fines in the following order:

“a) Offset the overpaid amount against the outstanding tax, late payment interest, or fines of the same tax according to Clause 1 Article 29 of this Circular (except for the case in Point b Clause 1 of this Article).

b) Offset the overpaid amount against the outstanding tax, late payment interest, or fines of the same tax according to Clause 1 Article 29 of this Circular (except for the case in Point b Clause 1 of this Article). If no liability is incurred after 06 months from the overpayment, instructions in Point c of this Clause shall be followed.

c) After following the instructions in Point a and Point b of this Clause, if the overpaid amount is not cleared, the taxpayer shall send a submit a claim for tax refund to the local tax authority in accordance with Chapter VII of this Circular.”

Accordingly, if the taxpayer has an overpaid tax amount, the tax offset or refund can be made as follows:

- Automatically offset against the payable amount of the next tax payment of each type of tax with the same economic content (sub-items) specified in the State budget index

- Overpaid CIT shall be refunded in the following cases:

+ If over 06 months from the time the overpaid tax arises but no further payable tax arises.

+ The taxpayer has overpaid tax, late payment interest, and fines, but still has tax, late payment interest, and fines.

- A tax refund dossier includes the following documents:

+ The application for tax refund, the procedures for refunding tax and offsetting refunded tax against government revenues are specified in form No. 01 / ĐNHT enclosed with Circular 156/2013 / TT-BTC.

 

To get into details for specific cases, please feel free to contact us as at:

Unit 602A, Tower A, Handi Resco Office Building

521 Kim Ma Street, Ba Dinh District, Hanoi

+ 84 24 3974 4181/ 4182

+ 84 24 3974 3090

This email address is being protected from spambots. You need JavaScript enabled to view it.

 

Decree 114/2020/ND-CP dated Sep 25th, 2020 by the Vietnam Government has elaborated the National Assembly’s Resolution No. 116/2020/QH14 on reduction in CIT payable in 2020 by enterprises, cooperatives, public service providers and other organizations.

According to the aforesaid Decree, it is regulated that:

  • CIT payable in the fiscal year 2020 by an enterprise whose total revenue in 2020 does not exceed 200 billion VND shall be reduced by 30%;
  • The total revenue in the fiscal year 2020 including revenue from sales of goods, processing and service provision, subsidies and extra charges to which the enterprise is entitled as prescribed by the Law on Corporate Income Tax and its guiding documents.
  • For enterprises operating for less than 12 months, the total revenue in 2020 will be the total revenue earned in the fiscal year 2020 divided by (:) the number of months of actual business operation multiplied by (x) 12.
  • The CIT reduction of the fiscal year 2020 shall apply to the total revenue of the enterprise, including the amounts specified in Clause 3 Article 18 of the Law on Corporate Income Tax.
  • The 30% reduction specified in this Decree shall apply to the enterprise’s CIT payable in the fiscal year 2020 minus the CIT eligible for incentives to which the enterprise is entitled according to the Law on Corporate Income Tax and its guiding documents.

The fiscal year as mentioned is understood as below:

  • The fiscal year will be the calendar year. In case that the enterprises do not apply calendar years, the fiscal year shall be determined in accordance with the Law on Corporate Income Tax and its guiding documents.
  • In case the first fiscal year of enterprises that are established in 2019 or the last fiscal year of enterprises that undergo conversion, ownership transfer, consolidation, merger, division, dissolution, bankruptcy in 2021 is shorter than 03 months, it will be combined with the fiscal year 2020, in which case CIT reduction will only apply to the revenue earned in the fiscal year 2020 (12 months).

According to the Decree No. 114/2020/ND-CP, the settlement of underpaid/ overpaid CIT amount in case of finalizing and inspecting/ examining CIT shall be in accordance with the Law on Tax Administration and guiding documents.

 

Items Underpaid CIT amount Overpaid CIT amount
CIT Finalization

To pay the arrears and late payment interest in accordance

with the current regulation.

 

The excess amount shall be handled in accordance with current regulation.

Inspection, tax audit

To pay the arrears and late payment interest in accordance

with the current regulation.

The 30% reduction specified in this Decree shall apply to the increase in CIT.

 

To get into details for specific cases, please feel free to contact us as at:

Unit 602A, Tower A, Handi Resco Office Building

521 Kim Ma Street, Ba Dinh District, Hanoi

+ 84 24 3974 4181/ 4182

+ 84 24 3974 3090

This email address is being protected from spambots. You need JavaScript enabled to view it.