Tax Relief Measures For Those Affected By The Pandemic Under Decree No. 92/2021/ND-CP

Tax Relief Measures For Those Affected By The Pandemic Under Decree No. 92/2021/ND-CP
PLF_Tax Relief Measures For Those Affected By The Pandemic Under Decree No. 92/2021/ND-CP

During mid-2021, the Covid-19 pandemic re-surged in Vietnam, bringing social distancing measures and forcing many businesses to shut or suspend operations. Under those circumstances, many businesses turned bankrupt while remaining businesses are facing many difficulties and challenges even after social distancing period has ended. In response to the situation, on 19th October 2021, the National Assembly Standing Committee issued ‘Government Resolution 406’ providing solutions to support businesses and people affected by Covid-19. Later, on 27th October 2021, the government issued ‘Decree No. 92/2021/ND-CP’ detailing the implementation of government resolution 406 to quickly implement assistance measures for the supported group (“Decree 92”).

Decree 92 lays down four groups for tax exemption and reduction to help businesses and people overcome difficulties caused by the Covid-19 pandemic as set out in Government Resolution No. 406.

1. Corporate income tax reduction

A 30% reduction in corporate income tax payable in 2021 was granted under the Law on Corporate Income Tax for taxpayers earning revenues not more than VND 200 billion in 2021 provided their revenue in 2021 decreased as compared to revenue in 2019.

However, the criteria for tax reduction (revenue in 2021 must have decreased as compared to the revenue in 2019) does not apply to newly established taxpayers, consolidations, mergers, divisions, and separations during the tax period of 2020-2021.

Hence, taxpayers entitled to reduction of tax in the above cases include: all enterprises established in accordance with Vietnamese law, organizations established under the Law on Cooperatives, non-business units established in accordance with Vietnamese law and other organizations established in accordance with Vietnamese law conducting production activities to earn income.

Exempted taxable revenues are stipulated as follows: “Revenues in the corporate income tax period include all sales revenue, processing income, service provision income and income from business cooperation contracts including subsidies, ancillary revenues and extras charges that enterprises are entitled to in accordance with the Law on Corporate Income Tax and guiding documents, excluding deductions for revenues, revenues from financial activities and other incomes.

Determination of the amount of corporate income tax reduced: The reduced corporate income tax amount for the 2021 tax period is calculated based on the total income of the enterprise, including:

Incomes in Clause 3, Article 18 of the Law on Corporate Income Tax such as income from capital transfer, transfer of capital contribution rights, income from search, exploration, exploitation of oil, gas and other rare resources, income from mining activities, and income from service business subject to excise tax as prescribed by the law on excise tax.

  • The reduced amount of corporate income tax specified in Decree 92 is calculated based on the amount of corporate income tax payable in the 2021 tax period, after deducting the amount of corporate income tax for which that the enterprise is entitled for preferential treatment in accordance with the Law on Corporate Income Tax and guiding documents.

Tax reduction declaration: Enterprises must calculate revenues in 2019 and expected revenue in 2021 to determine the tax that shall be reduced when temporarily paying quarterly corporate income tax. The enterprise must determine the amount of corporate income tax officially reduced in declaration according to the issued form of declaration.

However, since the tax reduction declaration is conducted by the enterprise itself, if the tax authority inspects and finds that the enterprise is not subject to tax reduction under Decree 92 or that the payable tax amount for the tax period in 2021 is greater than the declared tax amount, the enterprise must pay full amount of tax payable after deductions in accordance with Decree 92 (if any). In such a case, there could be sanctions for administrative violations of for missing tax amount or late payment in accordance with the law on tax administration and the law on handling administrative violations.

2. Tax exemption for business households and business individuals

Business households and business individuals are individuals subject to tax declaration, and tax payment residing in industries conducting production and business activities in districts, towns, provincial cities and municipalities, and centrally-controlled cities (heretically known as district-level areas) which were affected by Covid-19 epidemic in 2021.

Accordingly, the determination of areas affected by Covid-19 will be reviewed by the President of the People’s Committees of provinces and centrally-run cities based on the announcement made in 2021 by local authorities responsible for Covid-19 measures. The determination of such areas depends upon factors like suspending production and business activities for one or many business households and individuals doing business in the area blockades and social isolation of one or more areas, etc.  in the area).

The exempt taxes include personal income tax, value-added tax, excise tax, natural resources tax, and environmental protection tax arising from production and business activities during the third and fourth quarters of 2021.

However, the tax exemption specified in this regulation shall not apply to income and revenue from the provision of software products and services, digital products and services related to entertainment, video games, digital movies, digital photos, digital music, and digital advertising.

3. Value-added tax reduction (“VAT”)

Value-added tax will be reduced from 1st November 2021 to 31st December 2021 for goods and services such as transport, products and publishing services, film services television production, recording and music publishing, works of art and services of composition, art and entertainment, libraries, archives, museums and other cultural activities, sports, and entertainment.

VAT reduction applies as follows:

  • 30% reduction for enterprises and organizations calculating value-added tax through deduction for production and trading of goods and services specified in Article 3 of Decree 92.
  • Enterprises and organizations that calculate value-added tax by percentage on revenues from production and trading of goods and services specified in this Clause are entitled to a 30% reduction in value-added tax.

4. Exemption from late tax payment

Exemption from late tax payment incurred in 2020 and 2021 on tax debts, land use levy, and land rent for enterprises and organizations (including dependent units, business locations) which incurred losses in the period of 2020.

Accordingly, taxpayers need to make a written request for exemption from late payment, clearly stating the amount of losses incurred in the tax period of 2020 in ‘Form No. 01/MTCN’ Appendix II issued together with Decree 92. It must be sent to the tax authority directly managing the tax and the tax administration agency collecting land use levy and land rent by electronic means or directly or via postal services.

Thus, the issuance of Decree 92 to implement resolution 406 contributes to supporting businesses and people in overcoming difficulties caused by Covid-19 pandemic and helping them continue operations and contribute to restoration of the country’s economy post pandemic.

The article is based on applicable law at the time noted as above and may no longer be appropriate at the time the reader approaches this article as the applicable law has changed and the specific case that the reader wishes to apply. Therefore, the article is only for reference.

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