TAX ALERT AUGUST 2020
In this August Newsletter, we would like to introduce to you new policies related to tax, corporate law, labor, and other regulations including:
- Personal income tax on allowances and support when terminating labor contracts
- Exemption from personal income tax for payers under VND 50,000/year
- 30% reduction of corporate income tax for businesses with a turnover of less than VND 200 billion
- Tax administration for e-commerce
- The time limit for tax declaration and payment according to Law on Tax Administration 38/2019/QH14
- Enterprise Law 2020
1. PIT policy for allowances and support upon termination of labor contract
On May 4, 2020, the Tax Department of Ho Chi Minh City has just issued Official Letter 4236/CT-TTHT providing guidance on personal income tax for allowances and support when terminating labor contracts.
Accordingly, when the Company pays allowances and supports to employees who sign labor contracts with the company for 3 months or more, upon the termination of labor contracts:
– For severance allowances according to the provisions of the Law on Social Insurance and the Labour Code tính, they are not included in the taxable income from the employee's salary or wages.
– For the severance allowance higher than the level prescribed by the Law on Social Insurance and the Labor Code, the company shall aggregate it together with salary and wages to deduct PIT according to the progressive tax schedule of each part before paying pay.
Particularly for the financial support that the company pays additionally to the employee (in addition to the provisions of the Labor Code and the Law on Social Insurance) after the termination of the labor contract, if this payment is VND 2 million or more, the company must withholding personal income tax at the rate of 10% of total income paid.
2. PIT exemption for taxpayers under VND 50,000/year
From July 1, 2020, according to point b, clause 79 of the Law on Tax Administration 38/2019/QH14, regulations on tax exemption for individuals whose arising tax must be paid annually after the PIT finalization from July 1, 2020. salary and wages from 50,000 VND or less.
3. 30% reduction of CIT for businesses with revenue below 200 billion
On the morning of June 19, 2020, the National Assembly passed Resolution 116/2020/QH14 on a 30% reduction in corporate income tax payable in 2020 for cases where enterprises have a total revenue of not more than VND 200 billion in 2020. and apply to the tax period 2020. Enterprises shall base themselves on the above provisions to determine the tax amount to be reduced when temporarily paying corporate income tax quarterly and finalizing corporate income tax 2020.
According to Article 1 of this Resolution, the subjects applicable to corporate income taxpayers are organizations engaged in production and business activities of goods and services with taxable income under the Law on CIT Includes 4 groups:
– The enterprise is established under the law of Vietnam;
– Organizations established under the Law on Cooperatives;
– Non-business units established under Vietnamese law;
– Other organizations established under the law of Vietnam with production and business activities with income.
4. Strengthening tax administration for e-commerce
Law on Tax Administration No. 38/2019/QH14 has added regulations related to tax administration for e-commerce activities such as: For e-commerce business activities, a business based on digital platforms and services If another supplier is made by an overseas supplier without a permanent establishment in Vietnam, the overseas supplier is obliged to directly or authorize the implementation of tax registration, tax declaration and tax payment in Vietnam.
5. Time limit for tax declaration and payment according to Law on Tax Administration 38/2019/QH14
According to Article 44 of the Law on Tax Administration 38/2019/QH14, the deadline for filing a tax return from July 1, 2020, has changed in the following direction:
– Specifying the tax payment deadline is the last day of the relevant month or quarter for the convenience of taxpayers and tax authorities in determining the date of filing tax returns;
– Extend the time limit for submitting personal income tax declaration dossiers for individuals who directly finalize tax with tax authorities to have more time for individuals to compile dossiers under the tax finalization declaration dossiers. Personal income of the paying organization;
– Regulations on the deadline for submitting tax returns for taxpayers who declare tax through electronic transactions when the electronic information public of the tax authorities has problems.
6. New changes in the Enterprise Law 2020
On June 17, 2020, the National Assembly passed the Enterprise Law 59/2020/QH14. The provisions in the Enterprise Law 2020 are considered to have many new points, creating favorable conditions for enterprises in the market entry stage in particular and in the process of investment and business in general.