Is it compulsory for enterprises to donate in natural disaster prevention and control funds in Vietnam?

Is it compulsory for enterprises to donate in natural disaster prevention and control funds in Vietnam?

Pursuant to Article 10 of the Law on natural disaster prevention and control in 2013 (amended by Article 1 of the Law on amendments to the Law on Natural Disaster Management and the Law on Dikes in 2020) stipulating natural disaster prevention and control funds in Vietnam as follows:

1. Natural disaster management funds are off-budget financial funds and include central natural disaster management fund managed by the Ministry of Agriculture and Rural Development and provincial natural disaster management funds managed by the provincial People’s Committees.

2. Financial sources of natural disaster management funds:

a) Financial sources of the central natural disaster management fund include assistance and voluntary contributions of domestic and foreign organizations and individuals; are extracted from the provincial natural disaster management fund under the decision of the Prime Minister and other lawful sources;

b) Financial sources of a provincial natural disaster management fund include assistance and voluntary contributions of domestic organizations and individuals; compulsory contributions of domestic and foreign business entities within the province, Vietnamese citizens from at least 18 years of age to retirement age in normal working conditions in accordance with labor regulations; are extracted from the central natural disaster management fund, other provincial natural disaster management funds and other lawful sources.

3. Natural disaster prevention and control funds are used to support natural disaster prevention and control activities, with priority given to the following activities:

a) Providing emergency relief in food, drinking water, curative medicines and other essentials to those suffering from damage caused by natural disasters.

b) Supporting the repair of houses, health establishments and schools;

c) Handling environmental sanitation issues in natural disaster-hit areas.

4. Operating principles of a natural disaster management fund:

a) The fund operates for non-profit purposes;

b) The fund is managed and used for intended purposes, in accordance with laws and in a timely, effective, public and transparent manner;

c) The fund supports natural disaster management disaster activities that have not yet been funded by the state or have not yet satisfied demands.

5. The Government shall specify the setting up of natural disaster prevention and control funds, the levels of contributions, subjects eligible for exemption from, reduction or suspension of payment of, contributions, and the management, use, payment and finalization of those funds.

As regulations above, one of the sources of natural disaster prevention and control funds in Vietnam is from compulsory contributions of domestic and foreign business entities within the province. Therefore, your enterprise is compulsory to donate in the natural disaster prevention and control fund.

How much is the rate of compulsory contribution that enterprises must donate in natural disaster prevention and control funds in Vietnam?

Pursuant to Article 12 of the Decree 78/2021/NĐ-CP stipulating financial sources of natural disaster prevention and control funds in Vietnam as follows:

1. The rate of compulsory contribution from domestic and foreign economic organizations within a locality per year is 0.02% of total value of existing assets according to the financial statement that the paying organization makes on December 31 each year to the tax authority, is VND 500,000 at minimum and VND 100 million at maximum, and shall be accounted as that organization’s operating expenses.

2. Voluntary contributions, grants, aids and financial support given to the Fund by organizations and enterprises shall be included in CIT-deductible expenses.

3. Vietnamese citizens who are at least 18 years old or at retirement age under normal working conditions prescribed in law on labor shall make annual contributions as follows:

a) Officials, public officers, public employees, persons paid wages, salaries, allowances and employees working at agencies, organizations and non-business units of the Party, State, socio-political organizations and associations that are funded by the State budget to cover their operating expenses at the central level, in provinces and centrally-run cities, in urban/rural districts, towns, provincially-affiliated cities, cities under the central authority (district level), in communes, wards and townships (commune level), in special administrative-economic units and armed forces shall pay a half of the statutory base salary divided by the number of working days in a month.

b) Employees working under labor contracts in enterprises shall pay a half of the region-specific statutory minimum pay rate divided by the number of working days in a month as agreed upon in the labor contract. Employees who enter into multiple contracts with different enterprises shall only have to make a one-off contribution according to the labor contract of which the term is longest.

c) Other employees other than those specified at Point a and b of this Clause shall have to contribute 10,000 VND/person/year.

4. Grants, aids, voluntary contributions granted by domestic and foreign organizations and individuals.

5. Allocations granted by the VNDMF and by another provincial Fund.

6. Interest earned from deposit accounts.

7. Other legitimate finances (if any).

8. The Fund’s year-end balance which is carried forward to the subsequent year.

As regulations above, the rate of compulsory contribution of your enterprise per year is 0.02% of total value of existing assets according to the financial statement. In addition, the minimum rate is VND 500,000 and the maximum rate is VND 100 million.

Which entities are eligible for exemption of payment of contributions to natural disaster prevention and control funds in Vietnam?

Pursuant to Clause 1 Article 13 of the Decree 78/2021/NĐ-CP stipulating persons and entities eligible for exemption of payment of contributions in Vietnam as follows:

a) Persons entitled to the preferential treatment intended for people with meritorious services to the revolution according to the provisions of Article 3 of the Ordinance on Incentives for people with meritorious services to the revolution No. 02/2020/UBTVQH14 dated December 9, 2020.

b) Social protection beneficiaries that are enjoying monthly welfare;

c) Non-commissioned officers and soldiers joining the armed services within a definite term who are receiving living allowance.

d) Students and learners who are taking intensive and long-term courses at universities, colleges, secondary schools and vocational schools.

dd) Persons who are handicapped or are incapacitated at the rate of 21% or more, persons suffering from fatal diseases or mental illnesses that hold medical certificates issued by hospitals at the district or higher level.

e) Persons who are unemployed or jobless for 6 months in a year or a longer period.

g) Women that are rearing their children aged under 12 months.

h) Members of poor or near-poor households; members of households at extremely disadvantaged communes located at coastal areas, islands, region-III communes and extremely disadvantaged villages within ethnic minority or mountainous areas as referred to in Government’s Decrees, Prime Minister’s Decisions and other relevant legislative documents; members of families seriously afflicted by natural disasters, diseases, fires and accidents.

i) Cooperatives earning no revenue.

k) Domestic and foreign economic organizations that operate in the localities suffering damage to property, factories and equipment caused by natural disasters in a year to the extent that the cost incurred from repair or purchase accounts for 0.02 % of total value of their asset, or their production and business must be temporarily closed for 5 consecutive days or more as certified by the district-level People's Committees, or they are exempted from the requirement for payment of corporate income tax.

Above are entities that are eligible for exemption of payment of contributions to natural disaster prevention and control funds in Vietnam.

Best regards!