We would like to bring you tax and legal updates for August 2021 with the following highlights influencing the corporate operations and payroll activities.
1. Official Letter 2076/CTBNI-TTHT, Official Letter 11952/CTBDU-TTHT and Official Letter 31557/CTHN-TTHT on CIT deductible expenses, Personal Income Tax (“PIT”) on expenses incurred related to the Covid-19 epidemic
On 22 July 2021, Bac Ninh Tax Department has issued Official Letter 2076/CTBNI-TTHT on CIT and PIT for a number of expenses to ensure safety of production activities in the implementation of measures to prevent the Covid-19 epidemic such as: the cost of accommodation arrangement and meals for employees (“EEs”) working on site, the costs of Covid-19 testing for EEs conducted on a periodical basis, before coming to work and/or returning to their locality, etc. for EEs who must stay on the enterprise’s site, with the detailed tax treatments as follows:
- CIT aspect: Expenses with sufficient invoices/supporting documents and non-cash payment evidence shall be treated as deductible expenses when calculating CIT; and
- PIT aspect: Expenses without a detailed list of the beneficiaries and being shared among the EEs collective are not included in the taxable income for PIT calculation.
Besides, according to Official Letter 11952/CTBDU-TTHT dated 23 July 2021 issued by Binh Duong Tax Department and Official Letter 31557/CTHN-TTHT dated 13 August 2021 issued by Hanoi Tax Department, the costs of testing to prevent and control Covid-19 epidemic, cost of vaccinating shall be considered shall be treated as follow:
- CIT aspect: This expense is treated as direct welfare for EEs hence it shall be included in deductible expenses for CIT calculation following the guidance for welfare expenses;
- PIT: Expenses without a detailed list of the beneficiaries and being shared among the EEs collective are not included in the taxable income for PIT calculation.
Thus, regarding CIT, currently Binh Duong/Hanoi Tax Department and Bac Ninh Tax Department have slightly different opinions on the classification of expenses, while on PIT, the viewpoint is quite similar.
2. Official Letter 11995/CTBDU-TTHT responding about tax regulations
According to the instructions in Official Letter 11995/CTBDU-TTHT issued Binh Duong Tax Department by dated 26 July 2021, when the enterprise applies the form of payment as the bank to buy back the receivables of the enterprise, it is required such form of payment is specified in the contract with a specific clause related to the agreement between the bank and the goods supplier under written form to be qualified as non-cash payment method.
3. Decree 78/2021/ND-CP on the establishment and management of natural disaster prevention and control funds (“NDPC Fund”)
On 01 August 2021, the Government issued Decree 78/2021/ND-CP (“Decree 78”) on the establishment and management of the NDPC Funds. Decree 78 will be effective from 15 September 2021 and will replace Decree 94/2014/ND-CP dated 17 October 2014 and Decree 83/2019/ND -CP dated 12 November 2019 issued by the Government. The key amendments provided in Decree 78 are as below:
(i) Decrease the compulsory contribution rate for Vietnamese citizens who are from 18 years old to retirement age
- For EEs working in agencies, organizations, public non-business units, armed forces and EEs working under labor contracts in enterprises: contribute at the level of one-half a day's salary/person/year.
- For other EEs: the compulsory contribution level is also reduced to VND10,000/person/year.
(ii) Expand the cases who are exempted, reduced, and suspended from compulsory contribution
- Cases under social protection, i.e. who are receiving monthly social allowance;
- Women who are raising children under 12 months-old.
(iii) Changes in regulations on collection management and collection plans for NDCP Funds
- For individuals, it is a one-time payment before 31 July annually; and
- For local and foreign economic organizations in the locality, it is required to settle at least 50% of the payable before 31 July, the remaining balance must be settled before 30 November of each year.
1. Official Letter 2532/TCT-DNNCN on reduction adjustment of wages and salaries incurred after the reporting period
According to Official Letter 2532/TCT-DNNCN issued by the General Department of Taxation dated 12 July 2021, if the enterprise has an adjustment to decrease the cost of wages and salaries payable to employees arising in the period following the reporting period, the enterprise shall adjust the declaration of non-deductible expenses on current year's Corporate Income Tax ("CIT") finalization dossier corresponding to the adjusted salary and wage expenses and revise annual CIT finalization dossiers under the guidance of the Law on Tax Administration.
For regulation changes and tax matters, we can provide you with assistance on:
- Registration, declaration of Personal Income Tax, Corporate Tax, VAT and Foreign Contractor Tax.
- Tax refunds assistance and representation.
- Consultancy on utilizing opportunities provided by transfer pricing.
- Customs Advisory: Compliance & Reporting; FTA and C/O; Harmonised System code classification and valuation; Inventory control; International trade arrangement; and Others.
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