Enterprises in Vietnam are going to be reduced corporate income tax deduction when spending donations for Covid-19 prevention and control

This Draft Decree applies to organizations and enterprises which are corporate income taxpayers as prescribed in the Law on Corporate Income Tax and incur expenses being grants to prevention and control of Covid-19 pandemic in Vietnam. According to Article 2 of this Draft Degree:

- An enterprise may claim a deduction from taxable corporate income for any grant in cash or in kind given to the recipients as specified in clause 2 hereof for the prevention and control of Covid-19 pandemic in Vietnam.

- Recipients of grants include: The Committees of Vietnamese Fatherland Front at all levels; health facilities; the armed force units; units and organizations tasked by competent authorities to perform duties at centralized quarantine facilities; education institutions; press agencies; Ministries, ministerial-level agencies or Governmental agencies; Communist Party organizations, youth unions, central and local trade unions; agencies affiliated to local governments that have fund-raising function; funds for prevention and control of Covid-19 pandemic at all levels; national humanitarian fund web portals; charitable and humanitarian funds, and organizations incorporated and operating under law that have fund-raising function.

Recipients of grants are responsible for using and distributing the grants received for prevention and control of Covid-19 pandemic with proper purposes.

- Dossier of grants includes: A written confirmation of grants signed by the representative of the business being the sponsor, or the representative of the unit receiving the support or sponsorship, made according to the form issued together with this Draft Decree or the other documents evidencing the support or sponsorship, together with invoices, proof of purchase of goods, delivery notes (if supported, sponsored in kind) or vouchers of money payment (if supported, sponsored in cash) or other relevant documents.

This Draft Degree comes from problems when implementing the Law on Corporate Income Tax in practice. In the past time, there are a number of expenditures for support and sponsorship in the above-mentioned Covid-19 epidemic prevention and control activities, which businesses and organizations are not allowed to account or include in deductible expenses when determining taxable income because it is not within the scope of grants that are included in deductible expenses according to the provisions of the Law on Enterprise Income Tax 2008 of Vietnam.

Therefore, in order to show the encouragement of the State for the spirit of joining hands in Covid-19 epidemic prevention and control activities of businesses and organizations, as well as encouraging businesses and organizations to continue to carry out these support and funding activities in the future, at the proposal of the Government, the National Assembly of Vietnam issued the Resolution No. 128/2020/QH14, in which Clause 8 Article 3 stipulating that the Government is assigned to “guide the calculation of deductible expenses of enterprises, organization of expenditures to support and donate for the Covid-19 epidemic prevention and control activities when determining income subject to corporate income tax”. Thus, in the near future, when the Draft Decree on guidelines for deductible expenses upon determination of income subject to corporate income tax regarding enterprise/organization’s grants to prevention and control of Covid-19 pandemic in Vietnam is approved, businesses and organizations will be entitled to corporate income tax deduction when spending donations for Covid-19 prevention and control.

View the entire Draft Decree here. 

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LeThanh

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