Newsletter

Corporate Income Tax (CIT)

Regulations in details about 30% CIT reduction for fiscal year 2020

On 25^th September 2020, the Government issued Decree No. 114/2020/ND-CP which gives details for the Resolution No. 116/2020/QH14 by the National Assembly about CIT payable of year 2020, with the following contents:

– CIT payable in the fiscal year 2020 by companies whose total revenue in 2020 does not exceed VND 200 billion shall be reduced by 30%.

– The total revenue which is the basis for determination of eligibility for CIT reduction is the total revenue in the fiscal year 2020, including revenue from sales of goods, processing and service rendering, subsidies and extra charges to which companies are entitled as prescribed by the Law on Corporate Income Tax.

– In case companies estimate the total revenue in the fiscal year 2020 will not exceed VND 200 billion, they shall pay 70% of the quarterly CIT payable.

– At the end of the fiscal year 2020, in case the total revenue does not exceed VND 200 billion, companies shall declare CIT reduction of 2020 when making the CIT finalization return as per regulations

– CIT reduction of the fiscal year 2020 shall apply to the total revenue including the amounts specified in Clause 3, Article 18 of the Law on Corporate Income Tax.

– 30% reduction specified in this Decree shall apply to CIT payables in the fiscal year 2020 minus the CIT eligible for incentives which companies entitled to according to the Law on Corporate Income Tax and its guiding documents.

– The fiscal year will be the calendar year. Fiscal year different from calendar year shall be determined in accordance with the Law on Corporate Income Tax and its guiding documents.

– Companies newly established on or after 1^st October 2019 and companies having the last fiscal year extended up to 31 March 2021 due ro conversion, ownership transfer, consolidation, merger, division, dissolution, etc, can extend the tax year up to 15 months, but they can enjoy CIT reduction only for the revenue earned in the fiscal year 2020.

– Companies shall calculate CIT reduction when paying quarterly CIT and making 2020 CIT finalization return. When preparing tax returns, companies shall specify CIT reduction on the forms of Circular No. 151/2014/TT-BTC and its amending documents (if any) and the Declaration of CIT Eligible for Reduction Under Resolution No. 116/2020/QH14, which is provided in the Appendix of this Decree.

This Decree comes into force from the effective date of Resolution No. 116/2020/QH14 and applies to the fiscal year 2020.

Tax treatment for expense paid to employees during the Covid 19 pandemic for keeping them employed

Official Letter No. 4073/TCT-CS dated 28^th September 2020 by the General Department of Taxation handles the case that due to the influence of Covid 19 pandemic, a company cannot assign jobs for employees but in order to keep them employed, the company pays for VND 2,000,000 per month. In order to determine tax treatment for this expense, the company should make clear whether this expense is welfare expense or salary for labor contract termination.

In case the said expense is staff welfare expense, it shall be deductible for CIT purpose as long as it meets the requirements stated at Article 4 of Circular No. 96/2015/TT-BTC (the total welfare expense to employees in a year may not exceed the actual average 1-month salary in the taxable year).

In case the said expense is salary for labor contract termination, the total expense shall be deductible expense for CIT purpose as long as it meets the regulations at Article 9 of Decree No. 218/2013/ND-CP (amended and supplemented by Decree No. 91/2014/ND-CP dated 01^st October 2014 and Decree No. 12/2015/ND-CP dated 12^th February 2015).

Personal Income Tax (PIT)

According to Official Letter No. 8449/CT-TTHT dated 09^th September 2020 issued by Dong Nai Department of Taxation, personal deduction for the case in which a foreign employee who is resident in Vietnam and has income and salary and wages from the company from October 2019 is as follows:

– For the 1^st taxable year (from October 2019 to September 2020), PIT finalization dossier should use the personal deduction stated in Point b, Clause 1, Article 9 of Circular No. 111/2013/TT-BTC dated 15^th August 2013 by the Ministry of Finance.

– For the 2^nd taxable year (from January 2020 to December 2020), the personal deduction based on Resolution No. 954/2020/UBTVQH14 shall be applied.

Invoice issuance and VAT treatment for goods sold under CIF term at the border gate

On 08^th September 2020, Hanoi Department of Taxation issued Official Letter No. 81763/CT-TTHT, which handles the case that a company purchases goods from an oversea supplier and sells it to a customer in Vietnam (the buyer) without importing goods to Vietnam. Goods are delivered to the buyer at a port/airport in Vietnam (under CIF); the buyer processes the import procedures and pays all tax (if any) relating to the goods. In this case, the goods shall not be subject to VAT rate 0%. The company must issue invoice, declare VAT when selling goods to the buyer in Vietnam.

In case the buyer has VAT payment voucher for the imported goods with the buyer’s name and meets the requirements for VAT deductible, input VAT on the goods shall be deductible as regulated by law.

Factory rent to EPE before the establishment date shall not be subject to VAT rate 0%

On 22^nd September 2020, Bac Ninh Department of Taxation issued Official Letter No. 3041/CT-TTHT about VAT for the factory rent to EPE, which handles the case that a factory owner rents the factory to a company abroad (“the parent company”) to process the establishment of an EPE (“the subsidiary”). After the establishment of the subsidiary in Vietnam, the factory owner signs the factory rent contract with the subsidiary with the rental period from the date when it originally rents the factory to the parent company. In this case, according to the rental contract, the factory owner issues VAT invoice with rate at 10% from the date when it rent the factory to the parent company to the establishment date of the subsidiary (the date on Enterprise Registration Certificate) since the factory rental service to the parent company is consumed in Vietnam and not inside the non-tariff area. From the date on Enterprise Registration Certificate, the owner can apply VAT rate at 0% if the rental service meets the requirement at Point b, Clause 2, Article 9 of Circular No. 219/2013/TT-BTC.