The ease of doing business in Vietnam has increased. According to the World Bank’s ease of doing business 2020 rankings, Vietnam ranked 70th position out of 190 countries. One of the biggest improvements in doing business in Vietnam is the process of tax payment which is now supported by the advancement of information technology. Actually, it is legal for all enterprises to submit taxes when the business takes place in Vietnam. Taxation plays a significant role in funding public expenditures and implementing public programs, therefore the government establishes fiscal policies for both individuals and companies to encourage the legal obligation. This article focuses on handling tax compliances in Vietnam on the business side.
What are tax compliances?
Tax compliances refer to the awareness of taxpayers on tax-related regulation set by the government. There are two forms of tax compliances consisting of voluntary and enforcement tax compliances. Voluntary taxpayers are those who voluntarily follow the tax obligations without revenue administration’s control meanwhile enforcement tax compliances pay taxes via the management of administration to increase the tax compliances.
Updated regulation in the COVID-19 situation
According to Grant Thornton Vietnam, the Vietnamese government has amended some policies for taxpayers in the COVID-19 situation.
Regarding tax finalization deadline, based on Clause 3, Article 10, Circular 156/2013/TT-BTC: “The deadline for submission of annual tax finalization dossiers is the 90th (ninety) day from the last day of the calendar year or financial year.” As a result, taxpayers and companies have to submit the taxation dossiers including incorporate tax, personal income tax, and so on within 90 days from the last day of the fiscal year.
In terms of deductible expenses for corporate income tax (CIT) calculation, according to Clause 2, Article 4, Circular 96/2015/TT-BTC, to get the approval of CIT reducible expenses, the company should submit and present dossiers of loss or damage in case the authority requires. This dossier includes:
– A statement mentioned the value of damaged assets/ goods presented by the enterprise.
– The above statement must clarify the value of damaged assets/goods; causes of the damage; responsibilities for such damage; categories, quantity, the value of recoverable assets/goods (if any); inventory records of damaged goods certified by the legal representative of the enterprise.
– Compensation claims defended by the insurer (if any).
– Responsibilities of organizations/individuals for the provision of compensation (if any).
In the aspect of tax payment deadline deferral update, these following industries are eligible to delay tax payment:
Regarding the tax inspection and customs inspection schedule in the year of 2020, ministries, departments and agencies are required to urgently review and reduce the administrative burden and costs upon the enterprise. Furthermore, the Ministry of Finance has also requested tax agencies not to organize regular inspections in 2020 so that enterprises have time to solve difficulties on their own.
Procedures for doing tax compliances
Tax compliances should include corporate income tax, personal income tax, value-added tax, and foreign contractor withholding tax.
Corporate Income Tax
The standard corporate income tax has been 20% since 1 January 2016. Depending on the project locations and conditions, the CIT rate for enterprises working in exploration and mining of petroleum, gas, and other rare and precious natural resources shall range from 32% to 50%.
Personal Income Tax
Personal income tax may range from 5% to 35% depending on each employee’s income. The enterprise takes charge of calculating, deducting, and paying the tax on behalf of its employees at the time of salary payment.
Value Added Tax (VAT)
Value Added Tax is imposed on certain goods or services. Usually, the VAT ranges at 10% of the total bill.
Foreign Contractor Withholding Tax
Foreign Contractor Withholding Tax applies when a domestic enterprise buys certain goods and services from foreign suppliers who are not based in Vietnam. Based on the relevant service or purchase contract, the merchandise is obliged to declare and pay foreign contractor tax on behalf of the sellers at the local office. Plus, the foreign contractor withholding tax comprises of CIT and VAT.
In conclusion, taxation is a part of the contribution to public services or public programs implemented by the government. As a result, all enterprises have legal duties to handle tax compliances. This article introduces you regulations of tax compliances in the situation of COVID-19 and the procedure of doing tax compliances. Viettonkin is always ready to assist you in taxation services with the most accurate and professional consultant.