in the letter
On October 19, 2021, the Standing Committee of the National Assembly ratified Resolution No. 406 / NQ-UBTVQH15 (“Resolution No. 406“) to provide solutions to support businesses and individuals affected by the COVID-19 pandemic in fiscal 2021.
To implement Resolution No. 406 / NQ-UBTVQH15, the government issued Decree No. 92/2021 / ND-CP on October 27, 2021 (“Decree No. 92“), which leads the implementation of Resolution No. 406.
Resolution No. 406 and Resolution No. 92 will come into force on October 19, 2021.
The central theses
According to Resolution No. 406 and Resolution No. 92, companies and natural persons are granted the following tax breaks for the 2021 financial year:
- 30% reduction in corporate income tax (CIT) for the tax year 2021
- Tax exemption for commercial households and traders
- 30% VAT reduction from November 1st, 2021 to December 31st, 2021
- Exemption from late payment interest
In more detail
1. 30% CIT reduction for the tax year 2021
According to Decree No. 92, taxpayers are entitled to a reduction of 30% of the CIT:
- Companies founded under Vietnamese law
- Organizations established under the Cooperative Act
- Non-business entities established in accordance with Vietnamese law
- Other organizations established in accordance with Vietnamese laws that have manufacturing, business activities and generating income
The CIT of the above-mentioned eligible taxpayers to be paid for the tax year 2021 will be reduced by 30% if the taxpayer’s income does not exceed VND 200 billion in the tax year 2021 and if the income in 2021 is less than the income in 2019.
Companies that are newly incorporated, consolidated, merged, split and separated in the tax years 2020 and 2021 are not subject to the condition that the income in 2021 is less than the income in 2019.
Eligible income includes income from the sale of goods, toll manufacturing fees, the provision of services, business cooperation agreements, price subsidies, surcharges and extras that companies are entitled to under the CIT laws, excluding sales discounts, financial income and other income.
Taxpayers determine the provisional CIT payment themselves and pay it quarterly, taking into account the 30% CIT reduction under Decision No. 406 and Decree No. 92. After the CIT is completed, taxpayers will complete the provisional CIT paid during the year according to the Law on Tax Administration.
2. Tax exemption for commercial households and traders
Tax-exempt commercial households and tradespeople are resident natural persons who are active in all industries and who carry out business activities in the district areas that are included in the list of district areas affected by the COVID-19 pandemic Provinces.
Entrepreneurial households and tradespeople are exempt from income tax (PIT), value added tax (VAT), special consumption tax (SCT), raw materials tax and environmental protection tax, which are incurred in the third and fourth quarters of production and business activities in the year 2021.
Income and receipts from the provision of software products and services, digital entertainment content products and services, video games, digital films, digital photos, digital music and digital advertising are not exempt from tax.
If entrepreneurial households and traders have paid taxes in connection with production and business activities in the third and fourth quarters of 2021, the tax paid will be offset against the tax liabilities of the coming tax periods and, if necessary, reimbursed.
3. 30% VAT reduction from November 1, 2021 to December 31, 2021
The following goods and services are entitled to a 30% VAT reduction:
- Transportation services (including rail, waterway, air and road transportation); Accommodation services; Catering service; Travel agency, tour operator and assistance in connection with travel promotion and organization
- Publishing products and services, cinema, production of television programs, publication of recordings and music, works of art and composition services, arts and entertainment; Library services, archives, museums and other cultural activities; Sport, entertainment and relaxation
A detailed list of the above goods and services is given in Appendix I of Decree No. 92. Software publishing, production and trading of goods and services through online stores are not eligible for a 30% VAT reduction.
Companies and organizations that use the VAT credit method are entitled to a 30% discount on the VAT rate for the above goods and services.
4. Exemption from default interest
Interest charged in 2020 and 2021 on late tax payments, land use fees and land rent from companies and organizations (including dependent units and permanent establishments) are excluded if these companies had losses in the 2020 tax year.
The taxpayer must prepare an application form to apply for tax exemption and submit it to the local tax authorities. Interest on arrears paid for 2020 and 2021 is not tax-free.
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