The Vietnamese Prime Minister approved Decree 41/2020/ND-CP (“Decree 41”) allowing the deferral of value added tax (“VAT”), corporate income tax (“CIT”), personal income tax (“PIT”) and land rental fee payments to support enterprises, individuals and household businesses affected by the COVID-19 global pandemic.
Decree 41 took immediate effect on 8 April 2020, the primary features of which we outline below:
The Decree is applicable to enterprises, individuals and household businesses engaging in the following five areas:
1. Manufacturing and construction
- Agriculture, forestry and fisheries;
- Food production and processing; weaving; garment manufacturing; production of leather and related products; production of wood and related products of wood and cork (except for beds, wardrobes, tables, chairs); production of straw and plaiting materials; production of paper and related products; production of rubber and plastics products; production of other non-metallic mineral products; production of basic metals; mechanical processing; metals handling and coating; manufacturing of electronic products, computers and optical products; manufacturing of automobiles and other motor vehicles; production of beds, wardrobes, tables, chairs; and
- Transportation and warehousing; accommodation and catering services; education and training; health services and social support activities; real estate business activities;
- Labor and employment services; travel agencies, tour operators and support services in relation to advertising and organizing tours; and
- Creative, artistic or entertainment activities; libraries, conservation, museums and other cultural activities; sports, recreation activities; cinemas.
3. Manufacturing of supporting industry products listed as a development priority; manufacturing of key mechanical products.
4. Small and micro-enterprises, determined in accordance with Law No. 04/2017/QH14 and Decree 39/2018/ND-CP dated 11 March 2018 on the Support of Small and Medium Enterprises.
5. Credit institutions, branches of foreign banks providing support to their corporate and individual clients impacted by the COVID-19 pandemic in accordance with the State Bank of Vietnam’s provisions.
Applicable taxes and new tax payment deadlines
1. Value Added Tax:
- VAT payment deadlines have been extended by five months from the statutory deadlines for the period March to June 2020 (for monthly VAT declarations) and for the first and second quarters of 2020 (for quarterly VAT declarations). VAT return filing deadlines have not been extended however.
- These deferrals do not apply to import VAT.
- Dependent units and branches within the eligible sectors will be entitled to defer their tax payments.
2. Corporate Income Tax:
- CIT payment deadlines are extended by five months from the statutory deadlines for the 2019 CIT finalization and for the first and second business quarters of 2020 in the case of provisional CIT liabilities.
- If CIT payments for the 2019 CIT finalization were already made, these may be used to offset with other tax liabilities.
- Dependent units and branches may apply similar rules to defer VAT payments.
3. VAT and PIT of individuals and household businesses:
- The deadlines for payment of the 2020 VAT and PIT liabilities are extended to 31 December 2020 for individuals and household businesses conducting the eligible business activities.
4. Land rental fees:
- Payment deadlines are extended by five months from 31 May 2020 for the first land rental fee payments of 2020 due from taxpayers who lease land directly from the Government, pay land rental fees on an annual basis and engage in the eligible business activities described above.
Required procedures to avail of the tax deferrals
- A written notification request (in the prescribed form attached to Decree 41 – most items are in a “tick the box” format) must be submitted to the local tax department following the statutory tax filing timelines, but no later than 30 July 2020. The request submission should cover all types of taxes and land rental fees for the entirety of the eligible period.
- The notification request is on a self-assessment basis. The local tax department will only respond to taxpayers if it finds sufficient grounds to determine that the taxpayers do not qualify for deferred payments during the extended period. In such an event, the local tax department will decline the taxpayer’s payment extension request and demand payment of taxes, land rental fees and late payment interest where applicable.
- If re-assessment of the payment extension is made in a future tax audit, penalties will apply in addition to late payment interest.
We recommend that taxpayers carefully assess their eligibility to the above before applying any deferrals. Late payments of tax which are not eligible for deferral will be subject to penalties and interest. We will be pleased to assist you with any questions that you may have in relation to any of the above.
The information provided here is for information purposes only, and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.
Partner & Head of the Regional Tax Practice
Tax Director, Vietnam