Vietnam Tax Update COVID-19 Deferral of Taxes and Land Rental Fee Payments

Vietnam Tax Update COVID-19 - Deferral of Taxes and Land Rental Fee Payments

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 immediate took effect on 8 April 2020, the primary features of which we outline below:

Eligible Taxpayers

The Decree is applicable to enterprises, individuals, and household businesses engaging in the following five areas:

1. Manufacturing and construction

1. Agriculture, and, and other;
2. 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 and other motor vehicles; production of beds, wardrobes, tables, chairs; and
3. Construction.

Services

1. Transportation and warehousing; accommodation and catering services; education and training; health services and social support activities; real estate business activities;
2. Labor and employment services; travel agencies, tour operators, and support services in relation to advertising and organizing tours; and
3. 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 accord 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.

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 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 Vietnam 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 a 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 that 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.

DECREE

TAX AND LAND RENT DEFERRAL

Published to the Law on Government Organization dated June 19, 2015;

Pursuant to the Law on Tax Administration dated November 29, 2006;

Dated to the Law dated November 20, 2012, on amendments to the Law on Tax administration;

Not to the Law dated November 26, 2014, on amendments to tax laws;

Dated to the Law dated April 06, 2016, on amendments to the Law on Value-added tax, the Law on excise duty, and the Law on Tax administration;

At the request of the Minister of Finance;

The Government promulgating a Decree on tax and land rent deferral.

Article 1. Scope

This Decree provides for the deferral of added value tax (VAT), corporate income tax (CIT), personal income tax (PIT), and land rent.

Article 2. Regulated entities

This Decree applies to:

1. Enterprises, organizations, households, and individuals (hereinafter referred to as “taxpayers”) that are manufacturers in the following business lines:
2. a) Agriculture, aquaculture;
3. b) Production and processing of food; textiles; garments; manufacture of leather and leather products; wood treatment and manufacture of products from wood, bamboo, and rattan (except furniture); manufacture of products from straw and plaiting materials; manufacture of paper products; manufacture of rubber and plastic products; manufacture of products from other non-metallic minerals; metal production; mechanical working; metal treatment and coating; manufacture of electronics, computers and optical products; manufacture of automobiles and other motor vehicles; furniture production;
4. c) Construction.
5. Taxpayers that operate in the following business lines:
6. a) Transport and warehousing; accommodation, food and drink; education and training; Healthcare and social assistance; real estate trading;
7. b) Employment services; travel agencies, tourism services, and auxiliary tourism services;
8. c) Composing, art and entertainment; library, archive, museum operation and other artistic activities; sports and entertainment; cinemas.

The business lines mentioned in Clause 1 and Clause 2 of this Article shall be determined according to the Prime Minister's Decision 27/2018 / QD-TTG dated July 06, 2018, on Vietnam Standard Industry Classification.

The industries and business lines in Appendix I of Decision 27/2018 / QD-TTG are structured in a 5-level hierarchy. When a member of the hierarchy is eligible for deferral, all of its subordinates are also eligible for deferral (eg when the level-1 business line is eligible for deferral, all of its level-2, level-3, level-4, level -5 subordinates are also eligible for deferral, and so on).

3. Taxpayers that are manufacturers of prioritized ancillary industry products or key mechanical products. Prioritized ancillary industry products shall be determined in accordance with the Government's Decree No. 111/2015 / ND-CP; key mechanical products shall be determined in accordance with the Prime Minister's Decision No. 319 / QD-TTG dated March 15, 2018.

4. Small enterprises and micro-enterprises shall be determined in accordance with Law No. 04/2017 / QH14 on Assistance for Medium and Small Enterprises and the Government's Decree No. 39/2018 / ND-CP elaborating the Law on Assistance for Medium and Small Enterprises.
5. Credit institutions and foreign bank branches (FBB) shall provide assistance for enterprises, organizations, and individuals affected by Covid-19 as prescribed by the State bank of Vietnam (SBV). SBV shall publish the list of credit institutions and FBBs that provide assistance for tax authorities to grant deferral of tax and land rent in accordance with this Decree.

The business lines of taxpayers mentioned in Clause 1, Clause 2, and Clause 3 of this Article are those the taxpayers operate in and earn revenue from in 2019 or 2020.

Article 3. Vietnam Tax and land rent deferral

1. VAT (except VAT paid upon importation of goods)
2. a) VAT incurred by the enterprises and organizations mentioned in Article 2 of this Decree during March, April, May, and June of 2020 (for taxpayers declaring tax monthly), first and second quarter of 2020 (for taxpayers declaring tax quarterly) may be deferred for 05 months from the deadlines for VAT payment prescribed by tax administration laws.

In case a taxpayer makes a revision to the tax declaration that results in an increase in the VAT payable and submits the revised tax declaration to the tax authority by the deadline, the VAT amount eligible for deferral will include the increase in VAT payable.

Enterprises and organizations eligible for tax deferral shall submit their monthly or quarterly VAT declarations in compliance with applicable laws and may postpone payment of the VAT declared. Deferred deadlines:

The deadline for payment of VAT the in March 2020 is deferred to September 20, 2020.

The deadline for payment of VAT the in April 2020 is deferred to October 20, 2020.

The deadline for payment of VAT the in May 2020 is deferred to November 20, 2020.

The deadline for payment of VAT the in June 2020 is deferred to December 20, 2020.

The deadline for payment of VAT the in the first quarter of 2020 is deferred to September 30, 2020.

The deadline for payment of VAT the in the second quarter of 2020 is deferred to December 30, 2020.

1. b) In case an enterprise or organization mentioned in Article 2 of this Decree has a branch or affiliated unit that declares VAT separately to its supervisory tax authority, the branch or unit is also eligible for VAT deferral. The branches and units of the enterprises and organizations mentioned in Clause 1, Clause 2, and Clause 3 Article 2 of this Decree shall not be eligible for VAT deferral if none of their business lines is eligible for deferral.
2. Corporate income tax (CIT)
3. a) CIT declared in 2019's annual statement and CIT declared in the first and second quarters of 2020 by organizations and enterprises specified in Article 2 of this Decree will be deferred for 05 months from the deadline for CIT payment prescribed by tax administration.

In case an enterprise or organization has already paid the CIT declared in 2019's annual statement, it may offset the paid CIT against other unpaid taxes. In this case, the taxpayer shall complete form No. C1-11 / NS enclosed with Circular No. 84/2016 / TT-BTC), enclose it with the tax payment documents or relevant documents and submit them to the tax authority.

1. b) In case an enterprise or organization mentioned in Article 2 of this Decree has a branch or affiliated unit that declares CIT separately to its supervisory tax authority, the branch or unit is also eligible for CIT deferral. The branches and units of the enterprises and organizations mentioned in Clause 1, Clause 2, and Clause 3 Article 2 of this Decree shall not be eligible for CIT deferral if none of their business lines is eligible for deferral.
2. VAT and personal income tax (PIT) of household and individual businesses

The deadline for paying VAT and CIT Section in 2020 of household and individual businesses in the business lines specified in Clause 1, Clause 2, and Clause 3 of this Article is deferred to December 31, 2020.

4. Land rents

The deadline for an annual payment of rents that are due at the beginning of 2020 for the direct lease of land by the State to the taxpayers mentioned in Article 2 of this Article under decisions or contracts of competent authorities will be deferred for 05 months to May 31, 2010, at the earliest.

This also applies in case a taxpayer is leasing land from the State under more than one decision or contract and operates multiple business lines including those specified in Clause 1, Clause 2, Clause 3, and Clause 5 Article 2 of this Decree.

5. A taxpayer that operates in multiple business lines including those specified in Clause 1, Clause 2, Clause 3, and Clause 5 Article 2 of this Decree will have all the VAT and CIT (for organization) or PIT (for households and individuals) deferred in in accordance with this Decree.

Article 4. Deferral procedures

1. A taxpayer eligible for tax deferral shall submit an application for tax and land rent deferral (electronically or another method) using the form enclosed herewith to the supervisory tax authority. The application shall include all payments of tax and land rent deferred and be submitted together with the monthly or quarterly tax declaration as prescribed by tax administration laws. In case the application for tax and land rent deferral is not submitted together with the monthly or quarterly tax declaration, it shall be submitted by July 30, 2020. The tax authority still defers tax and land rent before the application is submitted if eligible.

In case a taxpayer leases land from the State in more than one administrative division, the taxpayer's supervisory tax authority shall send copies of the application for tax and land rent deferral to the tax authorities in charge of the areas where land is leased.

2. Taxpayers shall be responsible for their eligibility for deferral as prescribed in this Decree. Tax and land rent shall not be deferred if the application for tax and land rent deferral is submitted after July 30, 2020.
3. The tax authority is not required to inform the taxpayer whether the application is granted or rejected. In case the tax authority discovers that the taxpayer is not eligible for deferral after the application is granted, the tax authority shall send a written notice of ineligibility for deferral to the taxpayer and the taxpayer shall fully pay the tax and / or land rent plus late payment interest that accrues over the period from the deadline to the payment date. In case the tax authority discovers that the taxpayer is not eligible for deferral after the end of the deferral period, the taxpayer shall fully pay the outstanding tax, fine, and late payment interest determined by the tax authority.
4. Over the deferral period, the tax authority shall not charge interest on the deferred tax and land rent (even if the application for deferral is submitted after submission of the monthly or quarterly tax declaration but not later than July 30, 2020).

Article 5. Implementation and effect

1. This Decree comes into force from the day on which it is signed.
2. The Ministry of Finance shall provide instructions, organize the implementation and resolve difficulties that arise during the implementation of this Decree.
3. Ministers, Heads of ministerial agencies and government agencies, Presidents of the People's Committees of provinces, and taxpayers are responsible for the implementation of this Decision./.

APPENDIX

(Enclosed with the Government's Decree No. 41/2020 / ND-CP dated April 08, 2020)

SOCIALIST REPUBLIC OF VIETNAM

Independence - Freedom - Happiness

—————

APPLICATION FOR TAX AND LAND RENT DEFERRAL

To: Tax authority of ………………….

[01] Taxpayer's name: ………………………………………………………………………………… ..

[03] Address: ………………………………………………………………………………… ..

[04] Tel: ……………………………………………………………………………

[05] Name of tax agent (if any): ……………………………………………………………… ..

[07] Tax (es) that need deferring

1. a) □ VAT (for deals)
2. b) □ Corporate income tax (for organizations)
3. c) □ VAT and personal income tax (for household and individual businesses)
4. d) Land rent (specify the address of each plot of land eligible for land rent deferral)

- Plot 1: ………… ..

- Plot 2: ………… ..

….

[08] The taxpayer is:

1. A small enterprise / micro-enterprise

□ a) Small enterprise:

□ b) Micro-enterprise:

1. Enterprise / organization / household / individual operating in:

□ a) Agriculture, aquaculture, aquaculture;

□ b) Production and processing of food; □ c) Textiles; □ d) Garments; □ e) Manufacture of leather and leather products; □ f) Wood treatment and manufacture of products from wood, bamboo, rattan (except furniture); manufacture of products from straw and plaiting materials; □ g) Manufacture of paper products; □ h) Manufacture of rubber and plastic products; □ i) Manufacture of products from other non-metallic minerals; □ j) Metal production; □ k) Mechanical working; metal treating and coating; □ l) Manufacture of electronics, computers and optical products; □ m) Manufacture of and other motor vehicles; □ n) Furniture production;

□ p) Construction.

□ q) Transport and warehousing; □ r) Accommodation, food, and drink; □ s) Education and training; □ t) Healthcare and social assistance; □ u) Real estate trading; □ v) Employment services; □ w) Travel agencies, tourism services, and auxiliary tourism services;

□ x) Composing, art, and entertainment; □ y) Library, archive, museum operation, and other artistic activities; □ z) Sports and entertainment;

□ a1) Cinema;

□ b1) Manufacture of prioritized ancillary industry products;

□ c1) Manufacture of key mechanical products;

□ d1) Credit institution / Foreign Bank Branch;

I hereby declare that I am legally responsible for the truthfulness of the information provided herein and that I will fully pay tax by the deferred deadline./.

Notes:

- I: The taxpayer decides according to Law No. 04/2017 / QH14 on Assistance for Medium and Small Enterprises and the Government's Decree No. 39/2018 / ND-CP elaborating the Law on Assistance for Medium and Small Enterprises.

- II: The taxpayer decides according to the Prime Minister's Decision No. 27/2018 / QD-TTG dated July 6, 2018; the Government's Decree No. 111/2015 / ND-CP; the Prime Minister's Decision No. 319 / QD-TTG dated 15/3/2018; the list of credit institutions and FBBs published by SBV.

- The application shall include all payments of tax and land rent deferred. Only 01 applications shall be submitted to the supervisory tax authority. The application may be submitted:

+ Electronically on the tax authority's portal.

+ In person at the tax authority or by post.