TAX GUIDELINES FOR EXPENDITURES RELATED TO COVID-19
Due to the unexpected outbreak of Covid-19 pandemic in all over the country, almost enterprises have been incurring a number of expenses for prevention and fight against Covid-19 as well as supports to employees during such difficult period. The related expenditures could be listed as following:
- Quarantine expenses for foreign experts;
- Covid19 testing fee, examination and treatment expense for foreign experts;
- Expenses for purchasing medical devices as face masks, hand sanitizer and/or other protective equipment;
- Donation, sponsorship and voluntary contributions for Covid-19 prevention and vaccine fund;
- Allowances paid for employees who are forced to suspend their works during the social distancing and affected by Covid-19 pandemic;
- Depreciation of fix assets which are provisionally inactive due to the impact of Covid-19 pandemic.
Regarding concern of the taxpayer, there are notable regulations providing guidance on treatment to the aforesaid expenses. Below is our summary as brief of some relevant guidance related to Corporate Income Tax (“CIT”) and Personal Income Tax (“PIT”) treatment for your further reference.
| Item | CIT | CIT | PIT | PIT | Relevant Guidance |
| Quarantine expenses for foreign experts; | (-) | Deductible expense
Provided that there is a labor contract between the company and the employee, in which the rental charge is borne by the company such expenses are supported with sufficient valid invoices, documents |
(+) | Taxable income | Official letter No. 5032/TCT-CS dated 26 November 2020, issued by the General Tax Department
Official letter No. 97748 dated 10 November 2020 issued by Hanoi Tax Department |
| Covid – 19 testing fee, examination and treatment expense for foreign experts; | (-) | Deductible expense
The same as the welfare paid directly to employees |
(+) | Taxable income | Official letter No. 5032/TCT-CS dated 26 November 2020, issued by the General Tax Department |
| Expenses for purchasing medical devices as face masks, hand sanitizer and/or other protective equipment; | (-) | Deductible expense
The same as the welfare paid directly to employees |
(+) | Non-taxable income: in case such expenses satisfy current regulations | Official letter No. 66297/CT-TTHT dated 16 July 2020, issued by Hanoi Tax Department |
| Donation, sponsorship and voluntary contributions for Covid19 prevention and vaccine fund; | (-) | Deductible expense
If companies contribute to organizations who are allowed to receive support and sponsorship and have sufficient invoices and documents according to the regulation |
(?) | Yet to have clear guidelines | Decree 44/2021/ND-CP dated 31 March 2021 by the Vietnam Government |
| Allowances paid for employees who are forced to suspend their works during the social distancing and affected by Covid-19 pandemic; | (-) | Deductible expense
The same as the welfare paid directly to employees |
(+) | Treated as Taxable income | Official letter No. 89924 dated 9 October 2020 issued by Hanoi Tax Department |
| Depreciation of fix assets temporarily inactive due to the impact of Covid-19 pandemic. | (-) | Deductible expense
If fixed assets are suspended for less than 9 months during the tax period, then continue to be used for production and business activities |
(+) | N/A | Official letter No. 12452 dated 9 October 2020 issued by the General Department of Taxation |
As you can see in the above, the current regulations have just covered that cost consumed for foreign experts as Covid19 epidemic quarantine and prevention would be included in the individuals’ taxable income from the employment salaries and wages while there is still not specific guidance on treatment to same expenses reserved for local staffs.
Given the fact that there is unexpected increase in cases in all over the country, the Covid-19 testing fee will be a must for employee to carry out business assignment under request by their employers, is it fair that employees, especially those who are likely to need tests on a regular basis have to bear such tax burden at this time?
It is certain that the Government will issue further guidance on how to treat expenses and benefits provided to employees during Covid19 pandemic. We will promptly keep you updated as soon as new regulation is issued.
SMART SOLUTION FOR BUSINESS COMPANY LIMITED
- Address: Unit 602A, Tower A, Handi Resco Office Building. 521 Kim Ma Street, Ba Dinh District, Hanoi
- Tel: + 84 24 3974 4181
- Email: service@s4b.com.vn