In response to the Covid-19 outbreak, the Vietnamese government has placed tax relief measures including extended due dates and reduced tax rates to help companies that are financially struggling and to boost the Vietnamese economy after the pandemic.
Corporate income tax
On 19 June 2020, the Vietnam National Assembly approved a 30% reduction in corporate income tax (CIT) for most companies in Vietnam for 2020. As a result, eligible taxpayers will have their headline CIT rate reduced from 20% to 14%.
Taxpayers with revenue of less than VND 200 billion, and less than 200 employees in 2020 will be eligible for the corporate tax reductions.
These reductions are in addition to the tax deferrals announced on 8 April 2020 (Decree 41/2020/ND-CP), which deferred value added tax (VAT) and CIT payments for the first and second quarters in 2020, for up to five months for eligible taxpayers, along with deferring the balance of 2019 CIT due in 2020 for up to five months.
The criteria for determining eligibility for the tax deferrals differs from the 30% tax reduction criteria, which included business from defined sectors and small enterprises. Therefore, taxpayers should carefully review the requirements to determine eligibility.
We expect the implementing regulations to be released for the tax reduction in the coming days.
Personal income tax
The Vietnamese government released Resolution 954/2020/UBTVQH14 on 2 June 2020, implementing reductions in personal income tax (PIT) for Vietnamese individuals for the 2020 tax year.
Individual taxpayers in Vietnam received an increase in their monthly personal deduction (the amount which is excluded from PIT) from VND 9 million to VND 11 million.
Personal deductions for each family dependent also increased from VND 3.6 million to VND 4.4 million per month.
The new rates are to be applied by employers for payrolls processed after 1 July 2020. However, the reductions apply for the entire 2020 year, meaning that employees can expect refunds on taxes already paid in the first half of 2020 when they finalise taxes at the end of the year.