Resolution 406: New government policies about Corporate Income Tax in Vietnam

Recently Vietnam's National Assembly approved a resolution which introduces certain tax policies to support corporate & individual taxpayers impacted by COVID-19.

In an attempt to reinforce the recovery from the aftermath of the Covid-19 pandemic on the Vietnamese economy, on October 19, 2021, the National Assembly approved Resolution 406/NQ-UBTVQH15 which introduces certain tax policies to support corporate and individual taxpayers impacted by COVID-19.

This article will look at the major clauses of this resolution and what it means for the corporate income taxpayers in Vietnam.

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The key measures of the new Corporate Income Tax policy in Vietnam

Resolution 406 is aimed at helping taxpayers recuperate from the devastating impacts of the Covid-19 pandemic. The following are some of the key measures that the new resolution stipulates: 

Corporate Income Tax (CIT)

Companies with total sales of less than 200 Billion VND (8,796,480 USD) in 2021, and not exceeding what they earned in 2019 would have their CIT obligation reduced by 30%. In some circumstances, such as freshly formed corporations and firms that have undergone a merger or demerger in 2020 or 2021, the latter criterion will not apply. 

This is to be noted that this clause applies to all foreign companies, of all types.

Personal Income Tax (PIT)

Exemption from PIT, VAT, and other taxes due in the third and fourth quarters of 2021 for business households and business individuals operating in COVID-19-affected areas (except for certain sectors such as software products and software services, digital content products and services, games, digital films, etc.). The Chairman of the Provinces or the City’s People Committee will decide which areas will be considered as impacted.

Value Added Tax (VAT)

For the period of November 1, 2021, to December 31, 2021, companies conducting business in certain sectors, such as transportation, tourism, accommodation, and catering services, cinema, sports activities, and entertainment activities, will receive a 30% reduction in the applicable VAT rates/deemed VAT rates.

Other waivers

Waiver of late payment interest on tax obligations, land usage fees, and land rental fees accrued in 2020 and 2021 for businesses (including their dependent units and commercial sites) that perished due to Covid-19 in 2020. If the late payment interest has already been paid, this will not be imposed. 

Note that to prove you have incurred a certain financial loss, you may need to produce the latest financial statement of your business.

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Eligibility

Household businesses and individual businesses that are residents and have business operations in districts, district-level towns, and district-level cities regardless of business lines, tax declaration, and payment method that is affected by Covid-19 in 2021.

Presidents of the People’s Committees of provinces and centrally affiliated cities shall promulgate lists of districts affected by Covid-19 according to 2021’s notifications of local competent authorities of termination or suspension of business operation of one or multiple household businesses and individual businesses in their areas due to Covid-19 (including lockdown, social distancing of one or multiple areas in the administrative division).

Timeline of the Resolution 406 

This Resolution became effective on October 19, 2021, the day it was signed. The government will issue instructions to ensure that people benefit from the CIT, PIT, and VAT waiver, and it will examine further steps to help businesses affected by COVID-19.

It is imperative to note that the waiver on value-added taxes would be valid for November and December 2021, however, the corporate income tax waiver in Vietnam is valid throughout the financial year of 2021.

Determination of CIT eligible for a Reduction

The enterprise’s entire revenue shall be the basis for calculation of CIT eligible for a reduction of the tax period of 2021, including the revenues specified in Clause 3 Article 18 of the Law on Corporate Income Tax. CIT eligible for reduction prescribed in this Decree shall be calculated according to the CIT payable in the tax period of 2021 minus (-) the CIT eligible for incentives according to the Law on Corporate Income Tax and its guiding documents.

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How Can Cekindo Help?

Tax compliance in Vietnam becomes a tedious task for an in-house department to execute. Having tax and accounting professionals, like Cekindo, by your side can save you a great deal of time as well as provide you with a hassle-free experience. Cekindo provides a wide spectrum of ancillary services related to company registration, like legal consultancy, license and other documents acquisition, tax and accounting, and HR services. 

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Tomas Svoboda - Cekindo - Vietnam Country Manager

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Tomas is an expansion manager responsible for Vietnam. His role is to define the key potential of the Vietnamese market and to ensure that Cekindo branch in Vietnam provides its clients with smooth and hassle-free market entry solutions.