Introduction

 On March 3, 2020, the General Department of Taxation (“GDT”) issued Official Letter No. 837/TCT-QLN providing guidance on qualification for extension of tax payment, exemption of late payment for taxpayers. The letter noted that due to the serious impact of the Coronavirus (COVID-19) outbreak, many businesses have suffered significant damages, faced many challenges in production and sales of goods and services, thus, struggling to pay tax on time.

In order to promptly ease difficulties for taxpayers affected by the COVID-19 and assist taxpayers to stabilize business operations and overcome their challenges, the GDT has requested Directors of Tax Departments from provinces and municipalities all over the country to defer the tax payment deadline (normally due March 31) and exempt late payment interest in accordance with the law.

  1. Tax deferral

a. Conditions for tax deferral

Tax payments may be deferred in the event of property damage caused by natural disasters, destructive fire, or accidents that affect the business.

Property damage means damage to the taxpayer’s property that can be measured monetarily, such as: machinery, equipment, supplies, goods, buildings, cash, and valuable papers. Accidents are considered unexpected incidents if they occur due to external causes, affecting the taxpayer’s business, not due to violations of law. Accidents include traffic accidents, labor accidents, epidemics that are officially declared by the competent authorities along with other force majeure circumstances.

b. Procedure and documentation for tax deferral

The taxpayer that wishes to defer tax payment shall make and send a dossier to the supervisory tax authority. The dossier consists of:

(i) A written request for tax deferral (Form 01/GHAN);

(ii) An assessment of property damage made by the taxpayer or their legal representative;

(iii) A written certification that the taxpayer suffers from damage where the natural disaster, destructive fire, or accident occurs and time. The certification must be made by either a police station, the People’s Committee of the commune, the management board of the industrial zone, export-processing zone, or economic zone where the incident occurs, or a rescue organization;

(iv) A compensation claim approved by the insurer; documents specifying the responsibilities of the compensation provider. If the taxpayer is a legal entity, the aforesaid documents must be original or copies bearing the signature of the legal representative and the company’s seal.

c. Authority to approve tax deferral

In the cases mentioned in Section 1.a, the Director of the supervisory tax authority shall have the authority to decide the amount of deferred tax and the deferral period.

  1. Exemption of late payment interest 

a. Conditions for exemption of late payment interest

It is stipulated that if the taxpayer who must pay late payment interest may request an exemption of late payment interest if the taxpayer faces a natural disaster, destructive fire, accidents, epidemic, or fatal disease, or other force majeure circumstances.

b. Application for exemption of late payment interest 

The application for exemption of late payment interest shall include:

(i) A written request for exemption made by the taxpayer, specifying the name, address of the taxpayer, basis for exemption, and amount of late payment interest being exempt;

(ii) The following documents must be provided if the damage is caused by a natural disaster, destructive fire, accident, or epidemic:

  • An assessment of property damage made by a competent agency, such as the Appraisal Council established by the Department of Finance, or professional appraisal services, or the Appraisal Centre under the Department of Finance;
  • A written certification that the taxpayer suffers from damage caused by a natural disaster, destructive fire, accidents, or epidemic and the time made by the police station of the commune, the People’s Committee of the commune, the Management Board of the industrial zone, export-processing zone, or economic zone where the natural disaster, destructive fire, accident, or epidemic occurs, or a rescue service agency;
  • A claim for compensation approved by the insurer (optional);
  • Documents specifying the responsibilities of the entities responsible for paying compensation (optional).

c. Authority to exempt late payment interest

The Director of the tax authority shall have the right to issue a decision on exemption of late payment interest using Form 01/MTCN for the tax announcement that they have made eariler.

  1. Recommendations from the GDT

The GDT suggests that all local tax authorities proactively notify this latest announcement regarding the upcoming tax session to all businesses in the area for timely submission of tax documentation. Cases outside local authority should be reported and consulted with the GDT for final decision.

Conclusion

Tax deferral and exemption of late payment interest are amongst many support measures that the State of Vietnam are taking in order to assist businesses experiencing financial difficulty, especially small and medium-sized businesses, to cope with the global pandemic of COVID-19.  The Vietnamese Government hopes to ensure that State services are tailored to the needs of the community and will work with taxpayers and tax authorities to support each individuals’ circumstance.

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This LBN newsletter are NOT legal advice. Readers are advised to retain a qualified lawyer, should they wish to seek legal advice. VCI Legal are certainly among those and happy to be retained, yet VCI Legal is not to be hold responsible should any reader choose to interpret/apply the regulations after reading this LBN without engaging a qualified lawyer.