LEGAL UPDATE ON TAXES AND INVOICES
Personal Income Tax (“PIT”) on gifts
On 03 January 2020, the Binh Duong Tax Department issues Official Letter No. 69/CT-TTHT (“OL 69”) on Personal Income Tax (“PIT”) for gifts to clients. Accordingly, OL 69 clearly regulates that in case gift value given to clients does not exceed 10 million VND each time and is not subject to registration of ownership or use rights with State agencies (E.g.: Car, motorbike, etc.), the gift is not subject to PIT.
Kindly note that in the case of gifts with the same nature as above, but the Company gives them to their employees, these gifts are at risk of being considered income from salaries, wages and are subject to PIT under laws.
The date of making and signing an e-invoice must be the same day
Binh Duong Tax Department issues Official Letter No. 800/CT-TTHT (“OL 800”) providing guidance on electronic invoices. MACTVN takes some notable contents about this OL as follows:
- A legitimate e-invoices must meet information integrity according to Circular No. 32/2011/TT-BTC dated 14 March 2011 or Decree No. 119/2018/ND-CP dated 12 September 2018;
- The content “e-invoice signing date” is not compulsory;
- If an e-invoice has “Invoice Signing Date”, the “Invoice Signing Date” and “Invoice Making Date” must be the same; and
- The “Invoice Making Date” is the date on which obligations are determined to declare, pay taxes and account as prescribed under laws.
PIT on salaries and bonuses for 2019 is paid in 2020
On 17 January 2020, Binh Duong Tax Department issues OL No. 1464/CT-TTHT (“OL 1464”) providing guidance on PIT on salaries and bonuses of 2019 but to be paid in 2020. Specifically, the salaries and bonus of 2019 paid to employees must be calculated and declared PIT according to the time of payment. Therefore, the salaries and bonuses of 2019 actually paid in 2020 must be included in the PIT finalization of 2020 instead of 2019.
Reduction of Corporate income tax (“Corporate Income Tax”) of 2020
On 25 September 2020, the Government issues Decree No. 114/2020/ND-CP (“Decree 114”) guiding the implementation of Resolution No. 116/2020/QH14 (“Resolution 116”) on CIT reduction of 2020 for enterprises, cooperatives, non-business units and other organizations. Decree 114 takes effect from the effective date of Resolution No. 116 and applies for the CIT period of 2020.
MACTVN take great pleasure to note some important contents of Decree 114 as follows:
- 30% reduction of CIT payable for the CIT period of 2020 in case the enterprise has total revenue not more than VND 200 billion in the tax year: Revenue of CIT period 2020 includes all revenue from sales, processing services, and service provision including price subsidies, collections and surcharges to which enterprises are entitled in accordance with CIT Law;
- For enterprises that are in the cases of newly establishment, type conversion, ownership transformation, consolidation, merger, division, separation, dissolution or bankruptcy in the tax period of 2020 and operating for less than 12 months, the total revenue the year 2020 is entitled to CIT incentives determined by the ratio of the number of actual operation months over 12 months. If the enterprises falls in the above cases within a month, the operation period shall be counted in full month;
- Temporarily pay CIT quarterly at the rate of 70% of quarterly CIT payable in case the enterprise estimates that their total revenue in 2020 does not exceed VND 200 billion;
- CIT reduction amount of the CIT period of 2020 includes all income of the enterprise, including income from capital transfer, real estate transfer, investment project transfer, income from dynamic search, exploration of oil, gas, precious and rare resources, mineral exploitation, etc.;
- The reduced CIT is calculated on the CIT payable of the 2020 CIT period, after subtracting the CIT incentive amount under laws;
- The CIT period eligible for tax incentives is determined according to the calendar year, if the enterprise applies a fiscal year other than the calendar year, the CIT incentive period is determined according to the applicable fiscal year specified in the CIT Law. We note that, according to unofficial viewpoint of some tax departments, in case the enterprise has a different fiscal year other than the calendar year, the tax incentives under Decree 114 will be applied to the fiscal year of which the starting year date is in calendar year 2020 (For example: For the fiscal year ending on 30 June 2020, the tax incentives are applied under Decree 114 for the fiscal year starting from 01 July 2020 to 30 June 2021). MACTVN will update valued clients when there are official instructions in writing by competent authorities;
- In case (i) the first tax period of a newly established enterprise in 2019 or (ii) the last tax year of an enterprise transforming enterprise form, ownership form, consolidation, merger, division or separation, dissolution, bankruptcy in 2021 is shorter than 03 months, it is added to the CIT period of 2020 to form one CIT period. However, the reduced CIT is only applicable to revenue of 12 months of 2020 calendar year;
- The additional CIT amount to be reduced by 30% applies to the case the enterprise additionally submits CIT declaration of the tax period 2020 or implements Tax Decision after inspection and examination by competent agencies which increases CIT payable;
- In case the enterprise makes additional CIT declarations for the tax period 2020 or executes a Tax Decision after inspection and examination by competent authority to reduce payable CIT amount, overpaid tax (if any) is handled according to regulations.
Changes in production process of an investment project do not affect CIT incentives
Binh Duong Tax Department issues Official Letter No. 4836/CT-TTHT (“OL 4836”) dated 09 March 2020 providing guidance on CIT incentives for investment project that changes production processes. Accordingly, the Tax Department provides guidance that in the case the enterprise changes production process but does not change their finished goods and still meets conditions on investment incentives of the investment projects, the enterprise’s investment projects are still entitled to CIT incentives.
UPDATE ON LABOR REGULATIONS
Exemption from union fees
On 29 July 2020, the Vietnam General Confederation of Labor issues Official Letter No. 711/TLD on exemption from union fee payment due to Covid-19 epidemic. Specifically:
- Union members whose income is lower than the basic salary are not required to pay the union fee during the period of receiving such income. The base salary applicable from the fiscal year 2020 includes 2 periods: (i) From 01 January 2020 to 30 June 2020 is VND 1,490,000/month and (ii) From 01 July 2020 onwards is VND 1,600,000/month; and
- Exemption from union fee payment due to the impact of Covid-19 epidemic is applied until the end of 31 December 2020.
Please feel free to contact us, Mact Vietnam Co., Ltd, for detailed advice:
Pham Quoc Viet, Chairman, Email: Vietpham251@gmail.com, Mobile: 0984.998.265.
Pham Minh Ngoc, Deputy General Director, Email: ngocpmmact@gmail.com, Mobile: 0349.143.257.
