On September 25th, 2020, the Government issued Decree No. 114/2020/ND-CP elaborating the national assembly’s resolution No. 116/2020/QH14 on reduction in corporate income tax payable in 2020 by enterprises, cooperatives, public service providers and other organizations.
This Decree applies to corporate income tax (CIT) payers that are organizations that earn taxable income from manufacture and/or sale of goods and/or services (hereinafter referred to as “enterprises”) including Enterprises established in accordance with Vietnam’s law; Organizations established in accordance with the Law on Cooperatives; Public service providers established in accordance with Vietnam’s law; Other organizations established in accordance with Vietnam’s law and earning income from the business operation.
Accordingly, on the reduction of corporate income tax, the Decree clearly states that 30% of the payable CIT amount of the CIT period of 2020 for enterprises with total revenue in 2020 does not exceed 200 billion VND. In which, the total revenue is 2020 that is the basis for determination of eligibility for CIT reduction is the total revenue of an enterprise in the fiscal year 2020, including revenue from sales of goods, processing and service provision, subsidies and extra charges to which the enterprise is entitled as prescribed by the Law on Corporate Income Tax and its guiding documents. Thus, the Decree has covered all revenues of enterprises, while ensuring consistency with the provisions of the Law on Corporate Income Tax and current guiding documents.
The Decree also stipulates, for enterprises that are established, enterprises that undergo conversion, ownership transfer, consolidation, merger, division, dissolution, bankruptcy in the fiscal year 2020 and have operated for less than 12 months, the total revenue in 2020 will be the total revenue earned in the fiscal year 2020 divided by the number of months of actual business operation multiplied by 12.
To provide maximum support for businesses, Decree No. 114/2020/ND-CP stipulates, If the enterprise estimates that its total revenue in the fiscal year 2020 will not exceed 200 billion VND, it will pay 70% of the quarterly CIT payable.
At the end of the fiscal year 2020, if the enterprise’s total revenue in 2020 does not exceed 200 billion VND, it will declare the CIT reduction of 2020 when making the annual CIT return as per regulations.
Regarding tax reduction declaration, Decree regulating enterprises shall calculate the CIT reduction themselves when paying quarterly CIT and making the 2020’s CIT statement. When preparing tax declaration documents, enterprises declare the reduced CIT on the tax declaration forms as prescribed.
When preparing the annual CIT return, if the quarterly CIT is found to have been underpaid, the enterprise shall pay the arrears and late payment interest by the Law on Tax administration and its guiding documents. If CIT is overpaid, the excess amount shall be handled by the Law on Tax administration and its guiding documents.
In case a competent authority, through inspection, discovers that an enterprise is not eligible for CIT reduction under this Decree or the CIT payable of the fiscal year 2020 is greater than the amount paid, the enterprise shall pay the arrears, fines and late payment interest on the period after the tax payment deadline prescribed by the Law on Tax administration and its guiding documents.