This October 2020 publication of our Tax and Accounting Updates looks at Decree 114 implementing the National Assembly’s Resolution to reduce Corporate Income Tax in Vietnam for 2020, overview of the statute of limitations for filing a lawsuit for selected commercial business disputes, the use of digital signatures for Social Insurance related electronic documents, along with our regular review of recent Official Letters released by Authorities.
DECREE 114/2020/ND-CP ON THE NATIONAL ASSEMBLY’S RESOLUTION 116/2020/QH14 FOR THE REDUCTION IN CORPORATE INCOME TAX FOR 2020
On 25 September 2020, the Vietnamese Government released Decree 114/2020/ND-CP providing detailed guidance for the implementation of the National Assembly’s Resolution 116/2020/QH14 on Corporate Income Tax (“CIT”) reductions for 2020 covering enterprises, cooperatives, public service providers and other organizations.
1. CIT Reduction
Enterprises in Vietnam with total revenue for 2020 not exceeding VND200 billion (approx. USD8.6 million) are entitled to a 30% reduction in CIT for the 2020 tax year. The total revenue includes revenue from the sales of goods, provision of processing and other services, subsidies and extra charges to which the enterprise is entitled as prescribed by the Law on Corporate Income Tax and other guiding documents.
If an enterprise estimates its total revenue for 2020 doesn’t exceed VND200 billion, it is to make quarterly payments equivalent to 70% of the provisional CIT calculation. At the end of the tax year, if the actual revenue does not exceed VND200 billion, it declares the reduction for the 2020 tax year in the annual CIT finalisation.
If the first financial year of an enterprise established in 2019, or the last financial year of an enterprise being converted, ownership transferred, consolidated, merged, divided, dissolved, or bankrupt in 2021, that results a period shorter than 3 months for those years, the year will be combined with the 2020 financial year, in which the CIT reduction will only apply to the revenue generated in 2020.
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