29 October 2020
On 25 September 2020, Vietnam issued Decree No. 114/2020/ND-CP (“Decree”), providing guidance on the implementation of a 30% reduction of corporate income tax (“CIT”) for most companies in Vietnam for 2020 as approved by the Vietnam National Assembly in June 2020. The Decree came into effect on 3 August 2020 and applies for the 2020 fiscal year. The CIT reduction is available to companies with a total revenue not exceeding VND 200 billion (approximately USD 8.58 million) for the year 2020.
The Decree clarifies that, in determining eligibility for the CIT reduction, “revenue” includes all sales, processing fees, and services charges, including surcharges, subsidies, and other amounts that the company is entitled to receive in accordance with the Law on Corporate Income Tax and implementing guidelines. Where an enterprise has not operated for a full 12 months in 2020, total actual revenue in the year 2020 CIT assessment period is divided by the number of months of operation and multiplied by 12 to determine whether the revenue condition is met. The 30% reduction applies to the CIT payable after taking into account all tax incentive entitlements.
In the event a taxpayer claims the relief but is ultimately determined ineligible, any additional tax payable must be paid and subject to fines and late payment interest.