Update on certain important policies on taxes, insurance and labor

Update on government supports for enterprises affected by Covid-19

Referring to our update in the Newsletter in March 2020, the Government has issued Directive no 11/ CT-TTg on urgent missions and solutions for assisting businesses facing difficulties and ensuring social welfare during Covid 19 outbreak. Pursuant to the Prime Minister’s Directive, some supports related to taxes and rental fees, insurance and labor are specified as below:

A. DECREE 41/2020/ND-CP ON TAX AND LAND RENT DEFERRAL

In 8 April 2020, the Government has issued Decree no 41/2020/ND-CP on tax and land rent deferral to assist enterprises affected during difficulty period. The decree takes effect from the date of signing (8 April 2020).

1) Applicable entities

i. Enterprises, organizations, households and individuals that are manufacturers in the following business lines:

• Agriculture, forestry, aquaculture;
• Production and processing of food; textiles; garments; manufacture of leather and leather products; wood treatment and manufacture of products from wood, bamboo, rattan (except furniture); manufacture of products from straw and plaiting materials; manufacture of paper products; manufacture of rubber and plastic products; manufacture of products from other non-metallic minerals; metal production; mechanical working; metal treating and coating; manufacture of electronics, computers and optical products; manufacture of automobiles and other motor vehicles; furniture production;
• Construction.

ii. Enterprises, organizations, households and individuals that operate in the following business lines:

• Transport and warehousing; accommodation, food and drink; education and training; healthcare and social assistance; real estate trading;
• Employment services; travel agencies, tourism services and auxiliary tourism services;
• Composing, art and entertainment; library, archive, museum operation and other artistic activities; sports and entertainment; cinemas.

Detailed Industry codes according to Decision 27/2018/QD-TTg are summarized in Appendix 1 of this Newsletter hereunder

iii. Taxpayers that are manufacturers of prioritized supporting industry products or key mechanical products.

iv. Small enterprises and microenterprises shall be determined under current law

v. Credit institutions and foreign bank branches providing assistance for enterprises, organizations and individuals affected by Covid-19 as prescribed by the State bank of Vietnam.

2) Deferred period for taxes and land rental

For entities satisfy the conditions for tax deferral, the specific extension time for each type of taxes is as below:

i.  Value Added Tax (VAT) except import VAT

5 months extension, specifically:

Monthly declaration:

• Deadline for March 2020 tax period: by 20 September 2020 at the latest
• Deadline for April 2020 tax period: by 20 October 2020 at the latest.
• Deadline for May 2020 tax period: by 20 November 2020 at the latest.
• Deadline for June 2020 tax period: by 20 December 2020 at the latest.

Quarterly declaration:

• Deadline for first quarter of 2020 tax period: by 30 September 2020 at the latest.
• Deadline for second quarter of 2020 tax period: by 30 December 2020 at the latest.

Enterprises should note that even if the Enterprises are eligible for tax deferral, the deferral only applicable for payment of tax. The Enterprise is required to submit their monthly or quarterly VAT declarations in accordance with applicable laws (no extension).

ii. Corporate income tax (CIT)

5 months extension, from the deadline for CIT payment prescribed by law for the following tax period:

• CIT finalization payable for FY2019.
• Provision CIT payable in the first and second quarters of 2020.

In case an enterprises has already paid the outstanding CIT in the 2019 finalization, they are allowed to offset the CIT paid other payable taxes.

iii. Land rents

5 months extension from 31 May 2020 in respect to the deadline for annual payment of land rental for the beginning period of 2020 for applicable entities.

3. Deferral application procedures

Notable points regarding deferral procedures as below:

• A taxpayer eligible for tax deferral shall submit an application for tax and land rent deferral (electronically or other method) using the form enclosed with the decree to the supervisory tax authority. The one-time application shall be applicable for all payments of tax and land rental deferred and be submitted together with the monthly (or quarterly) tax declaration.

The deadline for sending an application for tax and land rent deferral is 30 July 2020. Tax and land rental deferral shall not be applicable if the application for tax and land rent deferral is submitted after 30 July 2020.

• Taxpayers shall be responsible for self-determination of their eligibility for deferral request as prescribed in this Decree. The tax authority shall not inform the taxpayer whether the application is accepted or not. 
• In the future, if the tax authority uncovers that the taxpayer is not eligible for deferral, the taxpayer must fully pay the outstanding tax, penalty (if any) and late payment interest determined by the tax authority to the State Treasury.

This extension of tax payment will support many businesses struggling with the outbreak of Covid-19. However, the extension is based on the principle of self-declaration, so enterprises need to consider carefully to correctly determine with sufficient proofs to the tax authorities in order to avoid tax recollection and penalty by the incorrect application in future tax audit.

Currently, the tax and land rental deferral request form is available on https://thuedientu.gdt.gov.vn, Enterprises can check for application or otherwise submit the hard copy to tax authorities.

B. SUSPENSION OF CONTRIBUTION TO THE PENSION FUND AND DEATH BENEFIT FUND FOR ENTITIES AFFECTED BY COVID 19

Vietnam Social Security (VSS) has issued Official Letters No 860/BHXH-BT dated 17 March 2020 in providing guidance on suspension of social insurance contributions by entities affected by Covid-19 until the end of June or December 2020 depending on the actual situation.

1) Eligible entities for suspension

• Enterprises that operate in passenger transport, hospitality, food and drink, and other business lines affected by the pandemic
• The number of employees contributed for Social Insurance which must be temporarily lay off from 50% of the total number of employees before the business suspension; OR
• Damage of more than 50% of total assets value due to pandemic (excluding land value).

2) Applications for interest-free suspension of contribution

In this letter, it is unclear about application dossier for suspension of contribution for pension and death fund. However, the responsible authorities of each provinces and cities have gradually issued official letter detailing guidelines on dossier and application (such as guidance No. 882/HDLN-BHXH-LDTB&XH-TC of union of social insurance, Department of Labour, War Invalids and Social Affairs, Department of Finance of Hanoi City, Official Letter 9739 / SLDTBXH-LD of Department of Labour, War Invalids and Social Affairs of Ho Chi Minh City).

However, in case further detailed guidance is not yet available, enterprises need to consult with the local insurance authority before implementation.

C. DEFERRAL FOR PAYMENT OF UNION FEE FOR ENTERPRISES AFFECTED BY COVID-19

Vietnam General Federation of Labour has issued the Official Letters No. 245/TLD dated 18 March 2020 regarding extension of the deadline for payment of union fee for enterprises affected by Covid-19.

1) Entities eligible for suspension

• Enterprises with business affected by Covid-19 (Enterprises whose employees participating in the social insurance program have to temporarily quit their job account for at least 50% of total employees subject to compulsory social insurance scheme).

2) Time deferred

Enterprises affected by Covid-19 will be granted an extension of the deadline for payment of union dues for the first 6 months to 30 June 2020. If after this date, the Covid-19 outbreak is not yet subsides and enterprises continue to face difficulty, then the deadline will be extended to 31 December 2020. 

This Official Letter does not specify in details the eligible entities as well as the application dossier, so enterprises should pay attention and work directly with the trade union before applying.

D. OTHERS REGULATION ON LABOR IN RESPONSE TO COVID-19 PANDEMIC

Suspension of new Work Permit issuance

At 10 March 2020, The Government has issued resolution no 28/ ND- CP requesting the Ministry of Labor – War Invalids and Social Affairs to temporarily stop issuing new Work Permit for foreign laborers coming from countries and territories infected by the Covid-19 epidemic. Thus, based on this resolution, currently, the plans of many Companies demand for recruitment and employment of foreign workers will be temporarily interrupted due to many countries infected by Covid-19. Enterprises should pay attention to this in order to arrange suitable production and business plans.

Please contact the Grant Thornton consultants in case you need more professional advice regarding to the application of tax, accounting, transfer pricing, labor policies, investment and customs as well as other legal policy problems in the business process of enterprises.