What does a force majeure event mean in tax administration in Vietnam? Is tax exemption or reduction granted in such cases?

What does a force majeure event mean in tax administration in Vietnam?

According to Clause 27, Article 3 of the Law on Tax Administration 2019, the definition of force majeure events in tax administration is as follows:

Definitions

In this Law, the following terms are understood as follows:

...

24. The arm’s length principle is a principle applied in the declaration and determination of taxable prices for taxpayers engaged in related-party transactions to reflect the transaction conditions in related-party transactions equivalent to those in independent transactions.

25. The principle of substance over form determines tax obligations is a principle applied in tax administration to analyze the transactions and production and business activities of taxpayers to determine the corresponding tax obligations based on the value generated from the substance of these transactions and production and business activities.

26. The ultimate parent company of a group is the legal entity with direct or indirect ownership capital at other legal entities of a multinational group, not owned by any other legal entity, and the consolidated financial statements of the ultimate parent company are not consolidated into the financial statements of any other legal entity globally.

27. Force majeure events include:

a) Taxpayers suffering physical damage due to natural disasters, catastrophes, epidemics, fires, or unexpected accidents ;

b) Other force majeure events as prescribed by the Government of Vietnam.

Thus, according to the regulation, force majeure events in tax administration are unforeseen and unexpected circumstances including:

- Taxpayers suffering physical damage due to natural disasters, catastrophes, epidemics, fires, or unexpected accidents;

- Other force majeure events as prescribed by the Government of Vietnam.

What does a force majeure event mean in tax administration in Vietnam? Is tax exemption or reduction granted in such cases? (Image from the Internet)

Is the taxpayer granted an extension for tax payment in case of force majeure events in Vietnam?

According to Article 62 of the Law on Tax Administration 2019 on the extension of tax payment, the regulation is as follows:

Extension of tax payment

1. The extension of tax payment is considered based on the taxpayer’s request in the following cases:

a) Suffering physical damage directly affecting production and business due to a force majeure events case as specified in Clause 27, Article 3 of this Law ;

b) Having to suspend activities due to the relocation of production and business establishments at the request of competent authorities affecting production and business results.

2. The taxpayer eligible for a tax payment extension as specified in Clause 1 of this Article is granted an extension for a part or all of the payable tax amount.

3. The time for tax payment extension is specified as follows:

a) Not exceeding 2 years from the tax payment deadline in the case specified at point a, Clause 1 of this Article;

b) Not exceeding 1 year from the tax payment deadline in the case specified at point b, Clause 1 of this Article.

4. The taxpayer is not subject to fines and is not required to pay late payment interest on the tax debt during the extension period.

5. Heads of directly managing tax authorities decide on the amount of tax to be extended and the extension time based on the tax extension application.

Thus, according to the above regulation, a taxpayer encountering a force majeure events case falling into one of the cases specified in Clause 27, Article 3 of the Law on Tax Administration 2019 mentioned above, will be eligible for consideration for a tax payment extension upon request.

Is a taxpayer exempt from fines for administrative violations in tax administration in case of force majeure events in Vietnam?

According to Article 140 of the Law on Tax Administration 2019 on the exemption of fines for administrative violations in tax administration, the regulation is as follows:

Exemption of fines for administrative violations in tax administration

1. Taxpayers fined for administrative violations in tax administration but suffering damage in force majeure events, as specified in Clause 27, Article 3 of this Law, are exempt from fines. The total exempted fine amount must not exceed the value of the damaged assets or goods.

2. Fine exemption is not applied to administrative violations in tax administration that have been completely executed according to the fining decision of the tax authority or competent state authority.

3. The Government of Vietnam prescribes details of this Article.

Thus, according to the above regulation, taxpayers encountering force majeure events will be exempt from fines.

*Please note: The total exempted fine amount must not exceed the value of the damaged assets or goods.