Deadline for the 2020 annual financial statement submission for corporate taxpayers and tax finalisation for tax-resident individuals
31 March 2021 is the deadline for lodgement of the 2020 Financial Statements and tax finalisations for most entities in Vietnam, and 30 April 2021 is the deadline for lodging self-declared finalisations for tax-resident individuals working or doing business in Vietnam. Further to this, foreign invested enterprises and specified other enterprises are required to have their Financial Statements audited prior to lodgement to the relevant authorities.
Entities requiring audited financial statements
- Foreign invested companies;
- Credit institutions established and operating in accordance with the Law on Credit Institutions, including foreign bank branches in Vietnam; – Finance and insurance enterprises;
- Public companies, issuing organisations and securities business organisations; and
- Specified other enterprises and organisations as directed under laws by relevant authorities.
Lodgement of audited financial statements
Pursuant to Article 110, Circular 200/2014 dated 22 December 2014 issued by the Ministry of Finance (“MoF”) providing guidance on the Vietnamese Accounting System, audited Financial Statements are required to be submitted to four authorities: (i) Provincial Tax Department; (ii) Department of Planning and Investment; (iii) Department of Statistics and (iv) Department of Finance Management.
Certain businesses may also be required to submit audited reports to additional authorities (for example, those located in Industrial Parks). Unaudited Financial Statements are sufficient for taxpayers not required to prepare audited Financial Statements.
Deadline for submission of financial statements
The annual deadline for submission is the last day of the third month after the end of the Tax year, which is also the deadline for annual tax finalisation submissions i.e. Corporate Income Tax (“CIT”) and Personal Income Tax (“PIT”). Penalties imposed in form of cautions or fines range from VND 2,000,000 to VND 25,000,000 for failing to lodge audited Financial Statements, in accordance with Article 13, Decree 125/2020/ND-CP.
Reduction in corporate income tax in 2020 for small and medium taxpayers
The Vietnamese Government recently released Resolution 116/2020/QH14 dated 19 June 2020, which aims to provide small and medium sized enterprises with Corporate Income Tax (“CIT”) reductions for 2020 as a stimulus measure for the economy, following approval from the National Assembly in June.
Accordingly, enterprises in Vietnam with revenue for 2020 not exceeding VND200 billion (approx. USD8.6 million) will be entitled to a reduction in CIT of 30% for the 2020 tax year. For most eligible taxpayers, this will result in a reduction in CIT from the standard 20% on taxable profits, to a CIT rate of 14% for 2020.
Tax year finalisations for tax-resident individuals
Tax-resident individuals are subject to a calendar year as their standard tax year, other than foreign individuals that become resident during their first year in Vietnam. Employers are required to withhold PIT from employee salaries and remit monthly or quarterly (depending on the size of the employer). Other taxes are generally required to be withheld at source (ie, dividends), or self-declared on an events basis.
The Vietnamese Government formally released Resolution 954/2020/UBTVQH14 on 2 June 2020 to implement reductions in Personal Income Tax for Vietnamese taxpayers for the 2020 tax year, as part of the effort to stimulate the economy. Following the Resolution, individual taxpayers in Vietnam receive an increase in their monthly personal deduction (the amount which is excluded from Personal Income Tax) from 9m VND to 11m VND.
Personal deductions for each family dependent also increase from 3.6m VND to 4.4m VND per month.
These new rates are to be applied by employers for payrolls processed after 1 July 2020 – however the reductions apply for the entire 2020 year, meaning that employees will be expecting refunds on taxes already paid in the first half of 2020 when they finalise taxes at the end of 2020.
Within 120 days from the end of a tax year, individuals will need to determine whether they will need to undertake an annual tax finalisation.
If an individual only has income from a single employer during the year, then they can authorise their employer to finalise on their behalf. Non-residents don’t need to finalise for Personal Income Tax from Salaries and Wages.
If an individual wishes to claim a tax refund, a tax credit for future years, or has a tax liability to the tax authorities, then they must complete a tax finalisation within 120 days from the end of the tax year.
Individuals with simple tax matters, and who do not owe any taxes to the authorities, do not need to finalise. However, this may have an impact on future years if their tax affairs become complicated, therefore all taxpayers are encouraged to finalise their taxes each year.