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While operating businesses during the epidemic phase, besides the management expenses, specific expenses incurred have been instructed by the tax administration as follows:

• Depreciation expense for fixed assets suspended due to the impact of the COVID-19 epidemic.
• Costs incurred during working from home, working remotely outside the company office.
• Expenses for affected employees during the period of social separation due to COVID-19.
• Cost for foreign experts’ quarantine.
• Cost of testing, examination, and treatment of COVID-19 for foreign experts.
• Expenses for support and funding for the COVID-19 epidemic prevention and control activities.

As direction to enterprises, tax administration agencies have issued official dispatches for every single situation as following:

Official Letter No. 5032/TCT-CS by The General Department of Taxation to the Tax Department of Ba Ria-Vung Tau province and Binh Duong Province related the cost of quarantine for expat employees in Covid 19 prevention:

• “Regarding the determination of deductible expenses in taxable income estimation for corporate income tax (“CIT”):
• For the cost of accommodation for quarantine of expats, in case the enterprise signs the labor contracts including payment for the housing rental, the expenses paid on behalf of expats to the quarantine vendors are included in deductible expenses when determining taxable income if there are sufficient invoices, documents and payment is made as prescribed and provided.
• For the cost of air tickets for expats, if the expenses are implemented according to the Point 2.9, Clause 2, Article 6 of Circular No. 78/2014/TT-BTC dated June 18^th, 2014 by the Ministry of Finance (as amended and supplemented in Article 4 of the Circular No. 96/2015/TT-BTC dated June 22^nd, 2015 by the Ministry of Finance), such expenses shall be included in deductible expenses after determining taxable income in CIT when there are sufficient invoices, documents, and payment is made as per regulations provided.
• The cost of Covid-19 testing for expats, which is shown as direct staff welfare payment is included in deductible expenses when determining taxable income if such expenses comply with the provisions of Point 2.30, Clause 2 of Article 6, Circular No. 78/2014/TT-BTC dated June 18^th, 2014 of the Ministry of Finance (amended and supplemented in Article 4 of the Circular No. 96/2015/TT-BTC dated June 22^nd, 2015 of the Ministry of Finance) once invoices, documents, and payment is made as per the regulation provided.
• Regarding the determination of taxable income in personal income tax (“PIT”):

In case the expats are paid for Covid-19 quarantine by the Company upon his/her entry into Vietnam, this payment is determined as the benefits in kind of employees. Hence, these payments will be subjected to the PIT in taxable income as salaries and wages

Official Letter No. 12452 dated October 9^th, 2020 of the General Department of Taxation sent to an enterprise in Hai Phong about the non-deductible expenses explains  determining taxable income in the following manner: “Due to the influence of covid-19, which led to decrease in market demand, enterprises which are facing troubles and suspended the number of fixed assets usage for less than 9 months in 2020, then keep used them for depreciating in business are considered as suspension due to seasonal production specified at Point 2.2, Clause 2, Article 4 of Circular No. 96/2015/TT-BTC of the Ministry of Finance. ”

Official Letter 97748 dated November 10^th, 2020 of Hanoi Tax Department on CIT and PIT payable for employees during Covid-19: “In this situation, if the Company during the covid-19 epidemic has paid for the General Director of a one-member limited liability company (not owned by that individual above), who is an expat working in Vietnam, performance of the quarantine in accordance with the Law , which clearly recorded and specified the name of the beneficiary shall be included in the taxable income according to the provisions of Item d.3.2, Clause 2, Article 2 of Circular 111/2013/TT-BTC.

The expenses above are determined as staff welfare paid directly to employees besides salary and bonus, and in accordance with the provisions of Law, are determined as deductible expenses in Article 4 of Circular No. 96/2014/TT-BTC, for the total amount of expenses for welfare is not more than 01-month of average actual salary incurred in the tax period.”

Are the expenses for support and funding for the COVID-19 epidemic prevention and control activities will be determined as the deductible expenses for CIT, or not ?

As per Decree 44/2021/ND-CP, enterprises are allowed to include deductible expenses when determining taxable income for donations in cash or in-kind for Covid-19 epidemic prevention and control activities in Vietnam going through any donors. Accordingly, the recipient department of support and sponsorship has determined to include:

• Vietnam Fatherland Front Committees at all levels,
• Medical facilities, armed force units,
• Educational institutions, Press Agencies, Covid-19 epidemic prevention and control funds at all levels, and charity and humanitarian funds.

As pre-conditions, the enterprises must also provide the supporting documents:

• The confirmation letter for support and sponsorship under the form attached to this Decree or documents (in paper or electronic form) confirming the donation or sponsorship with the signature and seal on both sides by the person who is the Enterprise’s representative as the supporter/ sponsor, and by the representative of Department receipt
• Enclosed with invoices and documents in accordance with the law of donations and sponsorships in cash or in kind.

Please note that at present, except for Decree 44/2021/ND-CP, which is applicable to the tax period of 2020 and 2021 mentioned above, the current regulations do not provide specific guidelines on how to handle tax treatment for each particular cost incurred. At the same time, these are guiding documents for each specific business sector and are not assumed to be applied to all enterprises. Thus, for exact determination, enterprises need to consider whether they are subject to the guidance documents mentioned above or not. Further, the conditions that the business should meet and the corresponding implementation deadlines should be considered. In necessary cases, to ensure the accuracy of the proposed tax policies, enterprises should work with experts in the taxation field and the tax administration field.