What is the guidance of tax authorities of Vietnam on tax exemption, reduction, or payment deadline extension due to natural disasters?

What is the guidance of tax authorities of Vietnam on tax exemption, reduction, or payment deadline extension due to natural disasters?

See the full content of Official Dispatch 4962/CTTBI-TTHT 2024 here.

In Section 1 of Official Dispatch 4962/CTTBI-TTHT 2024, guidance is provided on tax laws concerning late payment interests; tax payment deadline extension; tax exemptions, and reductions; deductible expenses when calculating Corporate Income Tax (CIT); and VAT input tax deductions related to damages due to natural disasters as follows:

According to Clause 27 Article 3 of the Law on Tax Administration 2019, cases of force majeure include taxpayers incurring material losses due to natural disasters, catastrophes, epidemics, fires, or unexpected accidents.

(1) Provisions on Late Tax Payment

Clause 8 Article 59 of the Law on Tax Administration 2019 stipulates:

Taxpayers who must pay late payment interest as prescribed in Clause 1 Article 59 of the Law on Tax Administration 2019 are exempted from late payment interest in force majeure cases due to storms (natural disasters).

(2) Provisions on Tax Payment Deadline Extension

Clause 1 Article 62 of the Law on Tax Administration 2019 stipulates tax payment deadline extension due to material damage directly affecting production and business caused by storms as follows:

- Tax payment deadline extension are considered based on requests from taxpayers incurring material damage impacting production and business.

- Taxpayers eligible for tax payment deadline extension may receive extensions for part or all the tax amount due.

- The extension period is stipulated as follows:

No more than 02 years from the due date of the tax payment in such cases.

(3) Provisions on Tax Exemptions and Reductions

Clause 1 Article 79 of the Law on Tax Administration 2019 stipulates:

Tax exemptions and reductions are implemented according to tax law and in the following cases:

- Households and individuals subject to land use tax for non-agricultural land with annual tax amounts of 50,000 VND or less;

- Individuals subject to annual personal income tax from salaries or wages with tax amounts of 50,000 VND or less after final settlement.

Regarding Excise Tax:

Article 9 of the Law on Excise Tax 2008 stipulates:

- Taxpayers producing goods subject to excise tax facing difficulties due to natural disasters or unexpected accidents are eligible for tax reductions.- The tax reduction is based on actual losses due to natural disasters or unexpected accidents but does not exceed 30% of the payable tax amount for the year of the loss and does not exceed the value of lost assets after compensation (if any).

Regarding Severance Tax:

Clause 1 Article 9 of the Law on Severance Tax 2009 stipulates:

Taxpayers subjected to natural disasters, fires, and unexpected accidents that cause losses to declared and paid resources are eligible for tax exemptions or reductions for the lost resources; if the tax has been paid, it will be refunded or deducted from the payable severance tax of the next period.

Regarding Personal Income Tax:

Article 5 of the Law on Personal Income Tax 2007 stipulates:

Taxpayers facing difficulties due to natural disasters, fires, accidents, or severe diseases affecting their tax payment capacity are eligible for tax reductions proportional to the damage extent but not exceeding the payable tax amount.

Regarding Non-agricultural Land Use Tax:

Clause 9 Article 9 of the Law on Non-agricultural Land Use Tax 2010 stipulates:

Taxpayers facing difficulties due to force majeure events, if the damages to land and property on land exceed 50% of the taxable value.

Clause 4 Article 10 of the Law on Non-agricultural Land Use Tax 2010 stipulates:

50% tax reduction for the following cases:

Taxpayers facing difficulties due to force majeure events, if the damages to land and property on land range from 20% to 50% of the taxable value.

(4) Deductible Expenses When Calculating CIT:

Clause 2 Article 9 of Decree 218/2013/ND-CP stipulates:

Non-deductible expenses when determining taxable income are implemented according to Clause 2 Article 9 of the Law on Corporate Income Tax 2008 and Clause 5 Article 1 of the Amendment Law on Corporate Income Tax 2013, with specific cases of non-deductible expenses stipulated as follows:

- Expenses that do not meet the conditions stipulated in Clause 1 Article 9 of Decree 218/2013/ND-CP, except the value of losses due to natural disasters, epidemics, fires, and other force majeure cases not compensated.

The value loss due to natural disasters, epidemics, fires, and other force majeure cases not compensated is determined by the total loss value minus (-) the value compensated by the insurer or other organizations and individuals according to the law.

(5) VAT Input Tax Deductions:

Clause 1 Article 14 of Circular 219/2013/TT-BTC stipulates:

VAT input tax for goods and services used for the production and trading of VAT-liable goods and services is fully deductible, including irreplaceable VAT input tax for VAT-liable goods lost.

Irreplaceable losses are deducted from VAT input tax, including: natural disasters, fires, uncompensated losses by insurance, goods with reduced quality, expired goods to be destroyed. Business establishments must have complete records and documents to prove uncompensated losses for VAT deduction.

What is the guidance of tax authorities of Vietnam on tax exemption, reduction, or payment deadline extension due to natural disasters? (Image from the Internet)

Law on Tax Administration: Regulations on tax declaration submission deadline extensions due to natural disasters in Vietnam

According to Article 46 of the Law on Tax Administration 2019, the stipulations are as follows:

Extension of Tax Declaration Submission

1. Taxpayers unable to file tax declarations by the due date due to natural disasters, catastrophes, epidemics, fires, or unexpected accidents are granted extensions by the head of the directly managing tax authority.

2. The extension period does not exceed 30 days for monthly, quarterly, yearly declaration filings, or filings for each arising tax obligation; 60 days for annual tax finalization filings from the declaration filing due date.

3. Taxpayers must submit to the tax authority a written request for an extension before the declaration filing due date, stating the reason and having confirmation from the commune-level People's Committee or commune-level police where the extension case arises as prescribed in Clause 1 of this Article.

4. Within 03 working days from receiving the extension request, the tax authority must respond in writing to the taxpayer about the acceptance or rejection of the extension request.

Thus, taxpayers who cannot file tax declarations on time due to natural disasters, catastrophes, epidemics, fires, or unexpected accidents are granted extensions by the head of the directly managing tax authority.

Taxpayers must submit a written request for an extension to the tax authority before the declaration filing due date, stating the reason and having confirmation from the local commune-level People's Committee or police where the extension case arises.

Note: The extension period does not exceed 30 days for monthly, quarterly Tax declaration submission from the due date.

What are cases where late payment interest shall not be charged due to natural disasters in Vietnam?

Clause 5 Article 59 of the Law on Tax Administration 2019 stipulates:

Handling Late Tax Payments

...

5. No late payment interest for the following cases:

a) Taxpayers supplying goods and services paid with state budget fund sources, including subcontractors specified in contracts with investors and directly paid by investors but not yet paid do not owe late payment interests.

The unpaid tax amount not incurring late payment interests is the total unpaid tax amount owed by the taxpayers but not exceeding the unpaid state budget amount.

b) Cases specified at point b Clause 4 Article 55 of this Law do not owe late payment interests while awaiting analysis, audit results, while the official price is not available, while the final payment amount and additional adjustments to customs value are not determined.

6. No late payment interest for cases with debt freezing as prescribed in Article 83 of this Law.

7. Taxpayers filing additional declarations reducing payable tax are adjusted to the reduced late payment interest corresponding to the difference in reduced tax amount.

8. Taxpayers incurring late payment interest as prescribed in Clause 1 of this Article are exempted from late payment interest in force majeure cases specified in Clause 27 Article 3 of this Law.

9. The Minister of Finance prescribes the handling procedure for late tax payments.

Referring to Clause 27 Article 3 of the Law on Tax Administration 2019 stipulates:

Definition of Terms

In this Law, the following terms are defined as:

...

27. Force majeure cases include:

a) Taxpayers incurring material losses due to natural disasters, catastrophes, epidemics, fires, unexpected accidents;

b) Other force majeure cases as prescribed by the Government.

Thus, taxpayers incurring late payment interest due to damages affected by natural disasters are exempted from late payment interest.