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Vietnam’s Stimulus Package—Tax Measures

The Vietnamese government has been issuing a range of incentives and financial relief to minimize the economic impact of Covid-19 and to support enterprises and individuals during these difficult times. This is in relation to:

  • compulsory insurance;
  • taxation;
  • solutions to support those who have been impacted by Covid-19;
  • fees/charges and other support.

Compulsory Insurance

Social Insurance Contributions for Occupational Diseases

  • According to Decree 58/2020/ND-CP of May 27, 2020, effective from July 15, 2020, employers operating in specified industries with a high risk of occupational diseases and accidents will be entitled to a reduction in the occupational diseases and accidents fund contribution from 0.5% to 0.3% provided that they meet the following criteria:
    • not subject to administrative or other penalties for violations of occupational safety, sanitation or social insurance (SI) in the last three years;
    • provided accurate reports and in a timely manner for occupational accidents and occupational safety in the last three years; and
    • number of occupational accidents arising in the previous year has decreased by at least 15% compared to the average for the last three years or have no occupational accidents in the last three years.
  • Employers who meet the above criteria can submit an application dossier to the Ministry of Labor, Invalids and Social Affairs for an approval. The approval will be valid for a three-year period and is renewable.

Social Insurance Premiums for Retirement and Death Funds

  • Under Official Letter No. 1511/BLDTBXH-BHXH dated May 4, 2020 and Official Letter No. 860/BHXH-BT dated March 17, 2020, employers who (i) have to suspend their business activities for more than one month due to Covid-19; and (ii) meet one of the following conditions will be entitled to the suspension to SI contribution to the retirement and death pension fund (i.e. which is 14% and 8% of contractual salary used for SI contributions applied to employers and employees, respectively):
    • (i) not enough work for employees whereby 50% or more of the total workforce who participate in the SI scheme before the business suspension must temporarily stop working;
    • (ii) suffering damage which is equivalent to at least 50% of the total value of the total assets (excluding value of land use rights);
    • (iii) completely fulfilled the SI liabilities up to January 2020 (inclusive) and because of Covid-19 having to lay-off more than 50% of participants in the SI scheme compared to January 2020.
  • Employers who fall under (i) and (ii) will be entitled to the payment suspension up to 12 months from the submission of an application form, whereas for those who fall under (iii) the payment could be suspended until June or December 2020 but not exceed 12 months. The exact entitlement period for this suspension is subject to consideration and approval of the local social department based on the application dossier of employers.

Taxation

Payment Deadline for Tax and Land Leasing Fee

Decree 41/2020/ND-CP, effective from April 8, 2020, provides for cases entitled to the extension of payment deadline for tax liabilities (including corporate income tax (CIT), value-added tax (VAT) and personal income tax (PIT)) and land leasing fees which are applicable for companies, business households and individuals who are doing business in various sectors as shown below:

  • manufacturing activities within certain business sectors such as agriculture, forestry and fishery and construction; business activities in transportation and warehousing; accommodation and related activities; education and training; medical and social assistance activities; real estate; labor and workforce; travel and tour operations; entertainment, library, sport and cinema activities; priority and key mechanical product industries; micro to small enterprises as defined by law; banking (in certain circumstances);
  • the above qualified taxpayers could apply for the extensions as below:
    • payment for VAT for March, April, May and June 2020 (for enterprises declaring VAT on a monthly basis) or Q1 and Q2 of 2020 (for enterprises declaring VAT on a quarterly basis) can be extended by five months from the statutory deadline. However, this is not applicable to payment for VAT at import stage;
    • similarly, payment for CIT payable for taxable year 2019 and provisional CIT liabilities of quarter one and quarter two of 2020 would also be extended by five months from the statutory deadline. If the company has already settled the payment for CIT payable for 2019, these amounts could be offset against other kinds of taxes;
    • for business households and individuals currently operating in the above-mentioned sectors, the deadline for payment of VAT and PIT incurred in 2020 would be extended to December 31, 2020;
    • payment of annual land leasing of 2020 is extended by five months commencing May 31, 2020 applicable for those taxpayers who directly lease the land use rights from the competent authorities with the payment term on an annual basis;
  • notable points:
    • enterprises with multiple business activities will be entitled to extensions of tax payment and land leasing fee incurred pertaining to all activities;
    • this extension is not automatically applied. Eligible companies are required to submit an application form as attached to Decree 41 to their local tax department with their monthly or quarterly tax returns by July 30, 2020. The extension will not apply if the application form is not submitted by the deadline;
    • taxpayers still have to file tax returns to the tax authorities by the statutory deadline, i.e. no extension granted for filing tax returns.

CIT Reduction

Resolution 116/2020/QH14 dated June 19, 2020 allowed a reduction of 30% on CIT payable for taxable year 2020 applied to enterprises who have annual revenue not exceeding 200 billion dong ($8.6 million).

Enterprises will self-assess the reduced CIT amounts when determining the provisional CIT payable and CIT finalization liabilities of the taxable year 2020.

Other Solutions

Resolution No. 42/NQ-CP

The National Assembly ratified Resolution No. 42/NQ-CP on April 9, 2020 to release an assistance package to those impacted by Covid-19 as follows:

  • free interest on loans from Vietnam Social Policies Bank granted to employers (with maximum duration of 12 months) with the maximum amount of 50% regional minimum salary/month/employee for settling salary for employees who are suspended from work in the period from April to June 2020 (as long as the employers have paid 50% of the salary);
  • 1.8 million dong per month for employees who are on unpaid leave or suspension of labor contract for the period from April to June 2020;
  • 1 million dong per month for business households with revenue less than 100 million dong per year and already suspending business operations from April 1, 2020;
  • 1 million dong per month for employees whose contracts are terminated and are not eligible for severance allowance and individuals without a labor contract who lost their job between April and June 2020.

Resolution 84/NQ-CP

  • Reduces 15% of the payable land rent in 2020 for enterprises, organizations, households and individuals which the government leases, according to the contract issued by the relevant authority by way of annual rental payments, have had to cease business activities due to the impact of Covid-19.
  • Reduces 2% interest rates for direct loans, indirect loans for small- and medium-sized enterprises (SMEs) from the development fund for SMEs.
  • Reduces 50% of the registration fee when registering domestically manufactured or assembled cars until the end of 2020 to stimulate domestic consumption.
  • Extends the time for payment of special consumption tax imposed on domestically manufactured or assembled automobiles for tax payable incurred from March 2020 to December 31, 2020.
  • Allows foreign experts, enterprise managers, investors, highly skilled foreign workers working on investment and business projects in Vietnam to enter Vietnam to maintain production and business activities of enterprises, ensuring compliance with the regulations on prevention and control of epidemics. It is strictly forbidden to discriminate against foreigners living and working in Vietnam.
  • Renews work permits for professionals, enterprise managers, technical workers who are foreigners working in enterprises; issues new work permits to experts, enterprise managers, highly skilled foreign workers to replace those who are not allowed to enter or return to Vietnam.
  • Allows contributions and support of anti-epidemic activities of Covid-19 as deductible expense when calculating CIT.

Fees/Charges

  • The Ministry of Finance has also issued some Circulars to decrease the current fees/charges (they apply until December 31, 2020).
  • To ensure bankers simplify administrative procedures the State Bank of Vietnam has shortened the time for loan approvals, increased accessibility to bank loans and rescheduled debt payment.
  • The Ministry of Industry and Trade (MOIT) has reduced electricity charges by 10% for taxpayers who have business activities in traveling and accommodation, manufacturing and other impacted units.
  • Postponement of contributions of trade union fee until June 30, 2020 for enterprises which have more than 50% of their employees participating in the SI scheme suspended from work.
  • Reduction of 30% for environment protection tax for aviation fuel.
  • Exemption for 2020 business registration fee for newly-established enterprises, business household and individuals doing business which are first granted a business registration certificate and/or a new tax code in 2020.

Planning Points

Companies who meet the above conditions are eligible to submit an application form together with supporting documents (if required) to the competent authorities to be entitled to support. Companies need to ensure that business licenses are in place with registered business sectors for the support to be available to them.

Source: https://news.bloombergtax.com/daily-tax-report-international/vietnams-stimulus-package-tax-measures