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Tax management

Value Added Tax (“VAT”) and Corporate Income Tax (“CIT”) incentives for computer programming activities

On 1 March 2023, Hanoi Tax Office issued Official Letter No. 8441/CTHN-TTHT guiding VAT and CIT incentives for computer programming activities:

1. Regarding VAT: In case a company manufactures software and provide software services in accordance with the law of Vietnam, revenues from such activities are not subject to VAT, according to Clause 21, Article 4, Circular No. 219/2013/TT-BTC of the Ministry of Finance.
2. Regarding CIT: In case the company implements a new project that satisfies the conditions of new investment projects set forth in Clause 18, Article 1 of Decree No. 12/2015/ND-CP of the Government, which generates income from software manufacturing according to the provisions of the law of Vietnam, CIT incentives for the project shall be determined as follows:

– Preferential tax rate: Apply preferential tax rate of 10% for a period of fifteen (15) years according to Clause 1, Article 15 of Decree No. 218/2013/ND-CP. The period of application starts from the first year the company has revenues from the new investment project entitled to the tax incentives.

– Tax exemption and reduction: CIT exemption for four (04) years , 50% CIT reduction for the next nine (09) years according to Clause 1, Article 16 of Decree No. 218/2013/ND-CP. Tax exemption and reduction period starts from the first year the Company has taxable income from the new investment project entitled to tax incentives; in case the company has no taxable income for three (03) years from the year it first generates revenues from the new investment project, the tax exemption and reduction period shall automatically start from the fourth year, according to Clause 4, Article 16 of Decree No. 218/2013/ND -CP dated 26 December 2013 by the Government.

Points to pay attention to when finalizing 2022 CIT

On 1 March 2023, Bac Ninh Tax Office issued Official Letter No. 541/CTBN-TTHT guiding CIT and PIT finalization for tax period of 2022. Following are several notable points:

1. Temporarily paid quarterly CIT

The total temporarily paid CIT of 4 Quarters must not be less than 80% of CIT payable after finalization. In case a taxpayer paid less than 80%, the taxpayer shall pay late payment interests on the underpaid CIT amount, calculated from the day following the deadline for 4^th Quarter CIT payment to the day before the day the taxpayer pays the underpaid CIT to the State’s budget.

2. Submission deadline of 2022 CIT finalization returns

For enterprises whose fiscal year ends on 31 December 2022, the deadline for submission of 2022 CIT finalization returns is 31 March 2023.

For enterprises whose fiscal year is different from the calendar year, the deadline for submission of 2022 CIT finalization returns is the last day of the 3^rd month from the end date of the fiscal year.

Personal Income Tax (PIT)

Points to pay attention to when finalizing 2022 PIT

The abovementioned Official Letter No. 541/CTBN-TTHT also discusses several notable points on 2022 PIT finalization:

1. Taxable income for income from salaries and wages is cash basis (when the income is paid by the income-paying organization/individual to the taxpayers). Income paid in a given tax year shall be reported and finalized in that year. On the other hand, determination of taxable income from accumulated insurance products shall observe Point dd.2, Clause 2, Article 2, Circular No. 111/2013/TT-BTC dated 15 August 2013 by the Ministry of Finance (taxable income arises when the insurance enterprise/voluntary pension fund management firm pays out insurance claims).
2. PIT exemption and PIT finalization exemption

– PIT exemption for individuals whose PIT (from income from salaries/wages) payable after finalization is VND 50,000 or less (the individual is not required to submit PIT finalization returns in this case).

– Individuals who are not required to finalize PIT include:

+ Individuals whose PIT payable after finalization is less than PIT paid during the year, and do not request PIT refund or carrying the overpayment to the next tax period;

+ Individuals earning incomes from salaries and wages, sign labor contracts of 3 months or longer with an enterprise, and at the same time have an extra monthly average income of less than or equal to VND 10,000,000 from other sources whose 10% PIT has been withheld, and does not wish to finalize PIT on this extra income;

+ Individuals for whom employer purchases life insurance (excluding voluntary pension insurance)/other optional insurances with accumulated premiums (the employer/insurance enterprise has withheld PIT at the rate of 10% on premium amounts paid by the employer): the individual is not required to finalize PIT on this income.

Note: Taxpayers can use the EtaxMobile application on a mobile device to look up dependent information, other PIT finalization information (such as income paying organizations, taxable income, deductible amounts and so on, for individuals with income from two or more sources) and use the PIT calculation tool which supports quickly calculation of PIT finalization.

3. Deadline for 2022 PIT finalization

– For income-paying organizations and individuals: 31 March 2023.

– For individuals who file directly with tax authorities: 4 May 2023.

– For foreigners who are residents of Vietnam, have resigned: no later than the 45 days from the date of departure.

Note: Individuals who have PIT eligible for refund may file their PIT finalization at any time (no penalties for tax administrative violation (late reporting) applied).