Guidance on applying the 30% reduction in corporate income tax (“CIT”) payable for the fiscal year 2020
Decree 114/2020/ND-CP dated Sep 25th, 2020 by the Vietnam Government has elaborated the National Assembly’s Resolution No. 116/2020/QH14 on reduction in CIT payable in 2020 by enterprises, cooperatives, public service providers and other organizations.
According to the aforesaid Decree, it is regulated that:
- CIT payable in the fiscal year 2020 by an enterprise whose total revenue in 2020 does not exceed 200 billion VND shall be reduced by 30%;
- The total revenue in the fiscal year 2020 including revenue from sales of goods, processing and service provision, subsidies and extra charges to which the enterprise is entitled as prescribed by the Law on Corporate Income Tax and its guiding documents.
- For enterprises operating for less than 12 months, the total revenue in 2020 will be the total revenue earned in the fiscal year 2020 divided by (:) the number of months of actual business operation multiplied by (x) 12.
- The CIT reduction of the fiscal year 2020 shall apply to the total revenue of the enterprise, including the amounts specified in Clause 3 Article 18 of the Law on Corporate Income Tax.
- The 30% reduction specified in this Decree shall apply to the enterprise’s CIT payable in the fiscal year 2020 minus the CIT eligible for incentives to which the enterprise is entitled according to the Law on Corporate Income Tax and its guiding documents.
The fiscal year as mentioned is understood as below:
- The fiscal year will be the calendar year. In case that the enterprises do not apply calendar years, the fiscal year shall be determined in accordance with the Law on Corporate Income Tax and its guiding documents.
- In case the first fiscal year of enterprises that are established in 2019 or the last fiscal year of enterprises that undergo conversion, ownership transfer, consolidation, merger, division, dissolution, bankruptcy in 2021 is shorter than 03 months, it will be combined with the fiscal year 2020, in which case CIT reduction will only apply to the revenue earned in the fiscal year 2020 (12 months).
According to the Decree No. 114/2020/ND-CP, the settlement of underpaid/ overpaid CIT amount in case of finalizing and inspecting/ examining CIT shall be in accordance with the Law on Tax Administration and guiding documents.
| Items | Underpaid CIT amount | Overpaid CIT amount |
| CIT Finalization | To pay the arrears and late payment interest in accordance
with the current regulation. |
The excess amount shall be handled in accordance with current regulation. |
| Inspection, tax audit | To pay the arrears and late payment interest in accordance
with the current regulation. The 30% reduction specified in this Decree shall apply to the increase in CIT. |
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