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Tax administration

Law on tax administration No. 38/2019/QH14

On 13^th June 2019, the National Assembly issued the Law on Tax Administration No. 38/2019/QH14 with some highlighted adjustments as follows:

a) Tax registration:

Taxpayers must apply for tax registration and receive the tax code by tax office before starting their business activities or incurring tax payables to the state budget.

b) Time for issuing tax registration certificate:

Tax office shall issue tax registration certificates to the taxpayers within 03 working days from the date when they receive enough tax registration application from the taxpayers.

c) Changes in deadline for submitting annual tax declaration dossier:

+ For tax finalization dossier: the last day of the 3^rd month from the end of the calendar year or fiscal year.

+ For tax declaration dossiers: the last day of the 1^st month from the end of the calendar year or fiscal year

+ For individuals who declare PIT directly to the tax office: deadline for PIT finalization dossier is the last day of the 4^th month from the end of the calendar year.

d) Changes in deadline for submitting quarterly tax declaration dossier: the last day of the 1^st month of the succeeding quarter.

e) Regulations on electronic documents and invoices of this Law come into force from 01^st July 2022; companies and individuals are recommended to apply regulations on electronic documents and invoices in this Law before 01^st July 2022.

This Law comes into force from 01^st July 2020.

Corporate Income Tax (CIT)

Increase the limitation for interest expense of company having related party transactions to 30%

On 24^th June 2020, Decree No. 68/2020/ND-CP (Decree 68) was issued by the Government, which contains some adjustments and supplements for Clause 3, Article 8, Decree No. 20/2017/ND-CP (Decree 20) dated 24^th February 2017 on tax administration for company having related party transactions. We highlighted some important changes as follows:

Moreover, there are some points to pay attention to:

a) After re-determining the interest expense according to Decree 68 for the fiscal year from 2017 to 2019 and there are overpaid CIT, taxpayers are allowed to net off overpaid CIT with CIT payable in a maximum consecutive period of 05 years from 2020. After this period, the remaining amount shall not be settled.

b) Taxpayers shall make amended CIT finalization dossier in 2017 and 2018 and submit them to the tax office before 01^st January 2021.

Salary expense of expats without work permits due to the Covid-19 pandemic

According to Official Letter No. 2099/CT-TTHT issued on 25^th June 2020 by Bac Ninh Department of Taxation, salary of expats who have not got the work permit due to the implementation of Resolution No. 28/NQ-CP dated 10^th  March 2020 by the Government (about suspending the issuance of new work permit for foreign individuals coming from countries and territories infected by the Covid-19 pandemic) shall be considered as deductible expense for CIT purpose if it meets the requirements stated at Article 4, Circular No. 96/2015/TT-BTC.

Purchasing code for using service from Grab must have invoices

According to Official Letter No. 55967/CT-TTHT issued by Hanoi Department of Taxation on 23^rd June 2020, the company purchasing codes for using shipping, delivery, and postal service from Grab must require Grab to issue invoice in order to consider these expenses as deductible expense for CIT purpose.

Determination of software production activity for CIT incentives

On 03^rd July 2020, the Ministry of Information and Communications issued Circular No. 13/2020/TT-BTTTT (Circular 13) which replaces the Circular No. 16/2014/TT-BTTTT dated 18^th November 2014 in order to give instruction about determination of software production activity that meet the requirements for CIT incentives. We highlighted some important contents of the Circular 13 as follows:

– Software production activity of a company meets the software production process if the company, among the seven (07) stages of the software production process, conducts at least one of the following 2 stages: “Determination of requirements” and “Analysis and design”.

– The company has responsibility to prepare the documents for CIT incentives of their software production activity and must ensure the authenticity of information in these documents.

– Detailed regulations for documents to prove their software production activity meets the software production process for CIT incentives are also stated in this Circular.

– Software production activity which was already determined to meet the software production process before this Circular comes into force is still considered to meet the process till the end of the approved term of the investment project.

Circular 13 comes into force on 19^th August 2020.

Personal income tax (PIT)

Donation to the natural disaster prevention and control funds shall be deducted from PIT taxable income

According to Official Letter No. 2014/TCT-DNNCN, in case employees of a company donate to the natural disaster prevention and control funds which are established based on Decree No. 94/2014/ND-CP dated 17^th October 2014 by the Government, this donation shall be deducted from their taxable income for PIT purpose of the employees.

Increase in personal deduction for PIT purpose

On 23^rd June 2020, the General Department of Taxation issued Official Letter No. 2546/TCT-DNNCN (OL 2546) in order to regulate the implementation of Resolution No. 954/2020/UBTVQH14 about increasing the personal deduction to VND 11 million which is applied for the tax year 2020. According to OL 2546, PIT from July 2020 shall be calculated using the new personal deduction. PIT from January to June 2020 shall be recalculated using the new personal deduction when the taxpayers do PIT finalization for the year 2020.

The General Department of Taxation also notes for the taxpayers that only PIT returns from July 2020 (submission deadline on 20^th August 2020) or PIT returns for 3^rd quarter (submission deadline on 30^th October 2020) are allowed to apply the new personal deduction.

PIT taxable income for hotel fee for expats in Covid-19 pandemic

Bac Ninh Department of Taxation issued Official Letter No. 1518/CT-TTHT on 12^th June 2020, which handles a case that in the pandemic Covid-19, according to the Instruction No. 15/CT-TTg dated 27^th March 2020 and Instruction No. 16/CT-TTg dated 31^st March 2020 of the Prime Minister about social distancing, a company requested its foreign expatriates living in Hanoi to move to Bac Ninh from 31^st March 2020 to 17^th April 2020, and paid the hotel fee for these expatriates in Bac Ninh. This expense paid by the company is not income of the expatriates, thus it shall not be considered as taxable income for PIT purpose.