This November 2021 publication of our Tax and Accounting Updates looks at Decree 92 on exemption and reduction of taxes for COVID-19 impacted businesses, expansion of scenarios where employers and employees are entitled to financial support under Resolution 68, guidelines for implementation of the UKVFTA Agreement on Trade Remedies, 80% reduction in security deposit requirement for travel service operators until the end of 2023 and our regular review of recent Official Letters released by the Tax Authorities.
Decree 92 on exemption and reduction of taxes for COVID-19 impacted businesses
On 27 October 2021, the Government issued Decree 92/2021/ND-CP providing detailed regulations on implementation of Resolution 406/NQ-UBTVQH15 dated 19 October 2021, regarding several measures to support enterprises and people suffering COVID-19 impacts. The Decree took effect on 19 October 2021.
Notable points of the Decree include:
Corporate Income Tax reduction
Entities operating manufacturing and trading goods and services that incur taxable income, having total revenue in 2021 (i) not exceeding 200 billion VND, and (ii) lower than the revenue in 2019 are entitled to a 30% reduction in CIT payable in 2021. The latter criteria at item (ii) does not apply to subjects that are new establishments, merged, consolidated, split up, or split off in the 2020 and 2021 tax periods.
Tax exemption for business households and individuals
Business households and individuals who are residents and engaging in business activities in locations affected by COVID-19 in 2021 are exempted from personal income tax (PIT), value-added tax (VAT), special consumption tax, natural resource tax, and environmental protection tax arising from production and business activities in Quarter 3 and Quarter 4 of 2021.
The list of locations affected by COVID-19 will be issued by the Provincial People’s Committee, according to notifications in 2021 by the competent local authority related to the Covid-19 epidemic, including the suspending production and business activities for one or more business households and individuals doing business in the locality (including the blockade and social isolation of one or more areas in the locality).
Value Added Tax reduction
The 30% reduction for VAT from 1 November 2021 to 31 December 2021 applies to the following goods and services:
Transport services (railway transport, water transport, aviation transport, other road transport); accommodation services; food and drink services; services of travel agencies, tour operators, and support services related to promotion and organisation of tours.
Publishing products and services; cinematographic services, production of television programmes, sound recording, and music publishing; works of art and composing services, arts, and entertainment; services of libraries, archives, museums, and other cultural activities; sports, recreation and entertainment services (excluding publishing software and goods and services produced and provided online).
Exemption for late payment interest
Enterprises and organisations (including dependent units, business locations) incurring a loss for the 2020 tax period are exempted from penalties for late payment of taxes, land use fees and land rental fees in 2020 and 2021. This provision does not apply to scenarios where the late payment interest has been paid.
We have released a Client Alert summarising key points of Decree 92 including eligible subjects, entitlement, and application process for tax reduction and exemption. Please read the full article here.
Expansion of scenarios where employers and employees are entitled to support under Resolution 68
On 8 October 2021, the Government issued Resolution 126/NQ-CP amending Resolution 68/NQ-CP in 2021 on several policies to subsidise employees and employers facing difficulties due to the COVID-19 pandemic.
Key points of the Resolution include:
- Adjusting the conditions for employers to entitling to deferral of contributions to retirement and survivorship funds, stipulated at Clause 2, Section II, as follows:
- Those have fully paid Social Insurance contributions or temporarily suspended contributions to the Retirement and Death Fund (one of the three funds of the compulsory Social Insurance contributions requiring 14% contribution from the employer and 8% contribution from the employee) after January 2021 (previously April 2021); and
- Those are affected by the COVID-19 pandemic, resulting in downsizing by 10% (previously 15%) of their employees participating in Social Insurance (compared to January 2021), the employers and their employees will be entitled to deferral of payment to the Retirement and Death Fund for 6 months from the submission date.
- Amending regulations at Clause 6, Section 2 on support policies for employees suspended from work as follows:
Employees entitled to one-time support of 1 million VND per person are those:
- Working under a labour contract but being suspended for 14 consecutive days or more from 1 May 2021 to 31 December 2021, by the reasons specified in Clause 3, Article 99 of the Labour Code;
- Participating in compulsory social insurance up to the time before the cessation of work and being one of the following scenarios:
- Being treated for Covid-19, in medical isolation, in blockade areas or unable to go to the workplace due to the request of state agencies following Directive 16/CT-TTg of the Prime Minister; or
- The employer has to suspend operations at the request of a competent authority or has a head office, branch, representative office in the area to conduct measures to prevent and control the epidemic according to Directive 16/CT-TTg or re-organise production and labour for epidemic prevention and control.
Previously, the regulation only applies to those subject to medical isolation or blockade areas at the request of competent authorities for 14 days or more from 1 May 2021 to 31 December 2021.
- Amending regulations at Clause 6, Section II, on allowances for employees subject to loss of employment but ineligible for unemployment benefits.
Accordingly, employees who are entitled to one-time support of 3,710,000 VND per person are those working under labour contracts and participating in compulsory social insurance but having terminated their labour contracts from 1 May 2021 to 31 December 2021, and belong to one of the following scenarios:
- Being on medical isolation, in blockade areas, or unable to go to the workplace due to the request of competent state agencies to prevent and control the COVID-19 epidemic; or
- The employer has temporarily suspended operations at the request of a competent state agency to prevent and control the COVID-19 epidemic; the employer’s head office, branch, representative office, production, and business location is in the blockade area, or the employer has re-organised production to prevent and control the COVID-19 epidemic under Directive No. 16/CT-TTg and the employees are not qualified for unemployment benefits.
The Resolution took effect from 8 October 2021.
Guidelines for implementation of the UKVFTA Agreement on Trade Remedies
On 29 October 2021, the Minister of Industry and Trade issued Circular 14/2021/TT-BCT guiding the implementation of the Free Trade Agreement between the Socialist Republic of Vietnam and the United Kingdom of Great Britain and North Ireland on Trade Remedies (“UKVFTA”).
Accordingly, anti-dumping and anti-subsidy controls are stipulated as follows:
- Consider socio-economic benefits:
- The Ministry of Industry and Trade decides not to apply anti-dumping and anti-subsidy controls if the investigating agency concludes, based on available information during the inspection, that the application of the measure is not suitable for socio-economic interests.
- When assessing the socio-economic benefits, based on the relevant information provided, the investigating authority will consider the circumstance of the domestic manufacturing industry, importers, related associations, organisations, and individuals using and consuming the investigated goods.
- Lower tax rate rule:
- The anti-dumping and anti-subsidy duty rate must not be higher than the margin rate of dumping or the level of subsidy.
- Based on the conclusion of the investigation agency, the Ministry of Industry and Trade will consider an anti-dumping and anti-subsidy tax rate lower than the dumping margin rate or the subsidy rate if this lower tax rate is sufficient to eliminate damage to the domestic industry.
The Circular will take effect from 15 December 2021.
80% reduction in security deposit requirement for travel service operators until the end of 2023
On 28 October 2021, the Government issued Decree 94/2021/ND-CP amending Decree 168/2017/ND-CP on security deposit levels for travel service businesses.
Accordingly, the security deposit level for travel businesses is reduced by 80% until 31 December 2023 compared to the current level, specifically:
- Deposit for domestic travel service business: 20 million VND (previously 100 million VND);
- Deposit for international travel service business:
- For international tourists entering Vietnam: 50 million VND (previously 250 million VND);
- For domestic tourists going abroad: 100 million VND (previously 500 million VND);
- For both international tourists entering Vietnam and domestic tourists going abroad: 100 million VND (previously 500 million VND).
From 1 January 2024, the deposit level for travel service businesses will comply with the provisions of Clauses 1 and 2, Article 14 of Decree 168/2017/ND-CP of the Government.
Decree 94 took effect on 28 October 2021.
Official letters released
Official Letters are releases showing the Tax and other Authorities’ interpretation and application of Vietnam’s Taxation Laws, guiding taxpayers in Vietnam.
More businesses are allowed to delay paying Trade Union until 2021
The General Confederation of Labour issued Official Letter 2946/TLD-TC dated 26 October 2021 amending the subjects for deferral in payment of Trade Union Fund as follows:
- Eligible subjects are businesses affected by the COVID-19 pandemic result in a reduction of 10% or more of employees participating in Social Insurance compared to January 2021 (including employees who stop working, suspend labour contracts, or agree on unpaid leave).
- The deadline for payment of the Trade Union Fund will be postponed to 31 December 2021.
Expenses to be deducted when calculating CIT related to COVID-19
On 27 October 2021, the General Department of Taxation issued Official Letter 4110/TCT-DNNCN on tax policies for expenses on the COVID-19 epidemic.
The following expenses are included in the deductible expenses when calculating CIT but excluded in employee’s taxable income:
- Expenses for medical isolation due to the COVID-19 epidemic at home and abroad for overseas business trips (meals and accommodation expenses; COVID-19 testing costs; travel expenses) pick-up expenses from the place of entry into Vietnam or from the location where the subject must undergo medical isolation to the medical isolation facility; living expenses during the medical isolation days; and to comply with the request of a competent state agency;
- Expenses for testing for COVID-19 or buying COVID-19 test kits for employees, costs for purchasing equipment for employees to protect employees from the risk of infection during work;
- Food and accommodation expenses of employees staying at enterprises operating under the “3 on-site” option.
All of the above expenses must have all invoices and documents following current regulations.
Determining beneficiaries of financial aid under Resolution 116
On 11 October 2021, the Ministry of Labour, Invalids, and Social Affairs issued Official Letter 3535/LDTBXH-VL on determining eligible beneficiaries to receive the financial aid under Resolution 116/NQ-CP (guided in Decision 28/2021/QD-TTg dated 1 October 2021).
Accordingly, employees currently participating in Unemployment Insurance (“UI”) are determined based on the labour contract or work contract signed with the employer. As of 30 September 2021, employees who have not terminated their labour contract or work contract and whose name is on the list of UI participants registered with the social insurance agency are still considered current UI participants. Thus, they are eligible for financial aid based on the total UI contributing time but have not yet received unemployment insurance.
Therefore, the eligible beneficiaries include those temporarily suspended in terms of labour contracts or work contracts, unpaid leave, work stoppage, maternity leave, and more from 1 January 2020 to 30 September 2021 and before 1 January 2020.
For more information on tax updates and other compliance requirements for businesses operating in Vietnam, follow our monthly releases on the website and social media channels at vietnam.acclime.com.