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.
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 organisations.
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.
Enterprises are to self-calculate the CIT reduction for their quarterly payments and their annual finalisation. Enterprises are to declare the reduction using the forms provided in Circular 151/2014/TT-BTC and its amended documents (if any) and the Declaration of CIT Eligible for Reduction under Resolution 116/2020/QH14, which is in the Appendix thereof.
When preparing the annual CIT finalisation, if the quarterly CIT is underpaid, the enterprise is required to pay the arrears and late payment interest following the Law on Tax administration and its guiding documents. If overpaid, the excess amount will be carried forward in accordance with the Law on Tax administration and its guiding documents.
The Decree came into force from 3 October 2020 and is applicable to the 2020 financial year.
The statute of limitations for filing a lawsuit against commercial business disputes
The Supreme People’s Procuracy of Vietnam issued Guideline 29/HD-VKSTC dated 25 September 2020 on supervising the settlement of commercial business disputes.
Accordingly, regarding the statute of limitations for lawsuits for commercial business disputes whose legal documents have provisions on the statute of limitations for lawsuits (inserted at the request of the parties involved), the application of the statute of limitations for lawsuits is determined in accordance with these documents.
Specific cases on the application of the statute of limitations follow:
- For disputes covering insurance business contracts, the statute of limitations for lawsuits is 3 years from the time the dispute arises.
- For requests to cancel a resolution or a part of a resolution of a General Meeting of Shareholders of a Joint Stock Company, within 90 days from the receipt date of the minutes of the General Meeting of Shareholders or the minutes of the vote-counting results, Shareholders (or Groups of Shareholders) have the right to request the Court of Arbitration to consider and cancel the resolution or a part of the content of the resolution of the General Meeting of Shareholders.
- For a request for the Court to cancel a resolution of a Members’ Council of a Limited Liability Company, the statute of limitations is 90 days from the end of a meeting of the Members’ Council if the orders, procedures and conditions of the meeting or the contents of that resolution are not properly implemented or are inconsistent with the provisions of this Law and the Company’s Charter.
- For the provision of extension of the statute of limitations in case the civil obligation performance expires and the parties agree to extend the period of performance of such obligation, the determination of the date on which the legitimate rights and interests are infringed is based on the termination date of the agreement of the parties and is implemented as guided at Points a and b, Clause 1, Article 23 of Resolution 03/2012/NQ-HDTP dated 3 December 2012 of the Council of Judges of the Supreme People’s Court guiding the implementation of a number of provisions in Part One “General provisions” of the Civil Procedure Code.
Digital signatures to be used in SI related electronic documents
On 22 September 2020, the Vietnam Social Security Agency issued Decision 1166/QD-BHXH adopting the provision, management and use of digital certificates and digital signature authentication services for the Social Insurance sector.
Accordingly, digital signatures for electronic documents in the social insurance sector will be implemented as follows:
- Electronic documents must have the digital signatures of authorised individuals or organisations in accordance with regulations.
- An electronic document with a digital signature has the same effect as a printed document with a handwritten signature.
- Digitally converted versions from printed copies of a signed and sealed document, which also has a digital signature, will have the same effect as the printed copy of a signed and sealed document before the conversion.
- Signing on behalf of a party as per an authorisation that follows regulations will be interpreted based on the signer’s title specified in the digital certificate.
Decision 1166/QD-BHXH took effect on 1 October 2020.