On April 8th, 2020, the Government issued Decree No. 41/2020/ND-CP stipulating the extension of the deadline for paying tax and land rent (“Decree 41”).
Decree 41 is based on the proposal of the Minister of Finance in the Government Report No. 3540/TTr-BTC on the Draft Decree to extend the time limit for paying tax and land rent (“Report”) and Official Dispatch No. 3915/BTC-CST reporting to the Prime Minister on receiving and explaining the comments and opinions participating in the Draft Decree (“Official Dispatch”). Fundamentally, the content of Decree 41 is similar to the proposal of the Minister of Finance; however, there are several different points, specifically as follows:
- Subjects entitled to extend prescribed in Article 2 of Decree 41
Decree 41 stipulates that enterprises, organizations, households and individuals that are manufacturers or operate a business in the following business lines to be the subjects of extension:
- Agricultural, forestry and fishery production activities;
- Production and processing of food; Manufacturing of textiles; Manufacturing of garments; Manufacturing of leather and related products; Manufacturing of wood and Manufacturing of products from wood, bamboo, rattan (except furniture); Manufacturing of products from straw and plaiting materials; Manufacturing of paper products; Manufacturing of rubber and plastic products; Manufacturing of other non-metallic mineral products; Metal production; Machining; treatment and coating of metals; Manufacturing of electronics, computers and optical products; Manufacturing of automobiles and other motor vehicles; Furniture production
- Manufacturing of supporting products prioritized for development; key mechanical products.
Prioritized supporting industry products shall be determined in accordance with the Government’s Decree No. 111/2015/ND-CP date November 3th, 2015 on development of supporting industry; key mechanical products identified under the Prime Minister’s Decision No. 319/QD-TTg dated March 15th, 2018, approving the Strategy for development of Vietnam’s mechanical engineering industry up to 2025, with a vision to 2035;
- Construction;
- The business of transport and warehousing; Business of accommodation and food services; Education and training; Human health and social work activities;
- Real estate trading;
- Employment services; Travel agencies, tour operators and support services related to tourism promotion and organization; Composing, art and entertainment; Libraries, archives, museums and other cultural activities; Sports and amusement and recreation activities; Cinemas.
Thus, compared with the Draft submitted by the Ministry of Finance, Decree 41 adds the following business lines that are subject to extension: (i) Business of transport and warehousing; Education and training; Human health and social work activities; (ii) Composing, art and entertainment; Sports activities; Cinemas.
Besides, the two more subjects prescribed in Clause 4 and Clause 5 of Article 2 are also allowed to extend the deadline for tax payment and lent rent, including:
- Small enterprises and micro-enterprises shall be determined in accordance with the Law No. 04/2017/QH14 on Assistance for Medium and Small Enterprises and the Government’s Decree No. 39/2018/ND-CP elaborating the Law on Assistance for Medium and Small Enterprises;
- Credit institutions and foreign bank branches assisting enterprises, organizations and individuals who are affected by Covid-19 as prescribed by the State bank of Vietnam (SBV) (SBV shall publish the Official List in accordance with this Decree).
- Regarding support contents:
a. Regarding Value Added Tax (VAT) (except for import VAT): The extension period is 05 months, from the due date of VAT payment in accordance with regulations of law on tax administration, for the arising VAT amounts payable in the tax periods of March, April, May and June 2020 (for cases of VAT be declared monthly) and tax period of the first and second quarter of 2020 (for cases of VAT be declared quarterly);
Hence, Decree 41 maintains the content of extension of VAT payment compared to the proposal of the Ministry of Finance.
b. Regarding Corporate Income Tax (CIT): The deferral time is 05 months, from the due date of CIT payment in accordance with regulations of law on tax administration, for the remaining payable CIT amounts according to the balance sheet of 2019 but not yet paid to the State Budget and the temporarily paid CIT amount of the first and second quarters of 2020.
In case an enterprise or organization has already paid the CIT declared in the 2019’s annual statement, it may offset the paid CIT against other unpaid taxes. In this case, the taxpayer shall make a trace request (form No. C1-11/NS attached with Circular No. 84/2016/TT-BTC), enclose it with the tax payment documents or relevant documents and submit them to the tax authority.
Therefore, in this issue, Decree 41 only adds guidance in case enterprises and organizations have paid CIT declared in 2019, other contents remain the same.
c. Regarding Personal Income Tax (PIT), VAT for households and individuals, the due date shall be extended until December 31st, 2020;
Compared to the Draft, Decree 41 only extended the deferral period by 16 days.
d. Regarding land rent: The extension period for the annual payment of rents shall be 05 months to May 31st, 2010 at the earliest, for the amount to be paid in the first period of 2020 of enterprises, organizations and individuals that are leased land under decisions and contracts of the competent authorities in the form of annual land rent payment which, on the Decision or the Contract has the purpose of production and business in the above-mentioned economic sectors.
Thus, Decree 41 only stipulates more clearly than the proposal of the Ministry of Finance about the extension of the deadline for land rent payment is 5 months from May 31st, 2010, other contents have not changed.
Note: If a taxpayer engages in the production and business activities of various business lines, including the business lines eligible for the extension, the taxpayer may extend the due date for all VAT and CIT payable.
- Regarding approval procedures
Taxpayers shall only send their Application for tax and land rent deferral (according to the form attached to this Decree) to the directly managing tax agency for all the extended periods one (01) time, on the date of submission of monthly (or quarterly) value-added tax returns in accordance with the provisions of the law on tax administration, but no later than July 30th, 2020. After July 30th, 2020, the tax payment and land rent extension will not be allowed.
The tax authority shall only inform the taxpayers, maybe during or after the extension period, who submitted the Application before July 30th 2020, when they are not eligible for extension and the taxpayer must pay the full amount of tax, land rent and late payment interest within the period time has extended to the State Budget.
Tax authority shall not charge interest for the tax amounts and land rents that have been approved for extension.
In conclusion, in terms of procedures, Decree 41 supplements the provisions related to tax authority not to charge interest for the tax amounts and land rents that have been approved for extension. Other contents have not changed compared to the Draft.
At the request of the Ministry of Finance, Decree 41 has come into effect from the date of its promulgation, on April 8th, 2020.