“Vietnam enterprises have been recovering gradually after the impact of the Covid-19 pandemic. For providing the best support to businesses, the Vietnamese government has taken drastic measures for each sector. Especially with the New policies and guidelines in Tax treatment. As a result, these actions have contributed in helping the balance of financial budget accordingly as well as creating favorable conditions for enterprises going through the difficulties in the context of Vietnam’s entry policies which have not been relaxed.”
While operating businesses during the epidemic phase, besides the management expenses, specific expenses incurred have been instructed by the tax administration as follows:
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:
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 9th, 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 10th, 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:
As pre-conditions, the enterprises must also provide the supporting documents:
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.