UPDATED NEWS ON COVID19 RELATED EXPENSES
With regard to the unexpected negative affect of the Covid-19 pandemic to the operation of Enterprises and normal lives of employees, the General Tax Department has recently issued the Official Letter No. 4110/TCT-DNNCN dated 27th Oct 2021, updating the taxation policy on the Covid-19 related expenses.
According to such Official Letter, the expenses as listed below shall be considered as deductible expense for Corporate Income Tax purpose and non-taxable income for Personal Income Tax treatment, providing that such expenses reflect actual incurrence and are supported with proper invoices and documentation as regulated by Laws:
- Quarantine expenses in Vietnam or in foreign countries in case of oversea business trips, including: personal meals, lodging fee, Covid-19 testing fee; traveling expense from place of entry to Vietnam or from place of detecting person demanded for quarantine to quarantine centres; living expenses during the quarantine period; etc.) as demanded by competent authorities;
- Covid-19 testing fee or expense for purchasing of Covid-19 testing kits for employees;
- Expenses for purchasing equipment to protect employees from the potential infection of Covid-19 during their working time;
- Meal and lodging expenses for employees at their working place following the option of “three-on-the-spot” as concurrent isolation and production arrangement;
In light of the above, we would like to update the summary of the relevant guidance related to Corporate Income Tax (“CIT”) and Personal Income Tax (“PIT”) treatment for your further reference
| Items | CIT | CIT | PIT | PIT | Relevant guidance |
| Quarantine expenses in Vietnam or in foreign countries in case of oversea business trips | (-) | 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 |
Non-taxable income
Provided that the quarantine application is as demanded by competent authorities |
Official letter No. 4110/TCT-DNNCN dated 27 October 2021 by the General Tax Department
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 or expense for purchasing of Covid-19 testing kits for employees | (-) |
Deductible expense The same as the welfare paid directly to employees |
Non-taxable income |
Official letter No. 4110/TCT-DNNCN dated 27 October 2021 by the General Tax Department Official letter No. 5032/TCT-CS dated 26 November 2020, issued by the General Tax Department |
|
| Expenses for purchasing equipment to protect employees from the potential infection of Covid-19 during their working time | (-) |
Deductible expense The same as the welfare paid directly to employees |
Non-taxable income: in case such expenses satisfy current regulations |
Official letter No. 4110/TCT-DNNCN dated 27 October 2021 by the General Tax Department Official letter No. 66297/CT-TTHT dated 16 July 2020, issued by Hanoi Tax Department |
|
| Expenses given for employees following the option of “three-on-the-spot” | (-) |
Deductible expense The same as the welfare paid directly to employees |
Non-taxable income: in case such expenses satisfy current regulations |
Official letter No. 4110/TCT-DNNCN dated 27 October 2021 by the General Tax Department |
|
|
Donation, sponsorship and voluntary contributions for Covid-19 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 |
Accordingly, it is clear that the deductible Covid-19 related expenses now cover for both foreign experts and local staff, as long as there is proper supporting documentation for the actual incurred amount. It also releases the tax burden that the employees were supposed to bear while experiencing lots of testing procedure to come back to normal life.
We shall keep you posted for any update from the Government on treatment for expenses related to the fights against the Covid-19 pandemic.
To get into details for specific cases, please feel free to contact us as at:
Unit 602A, Tower A, Handi Resco Office Building
521 Kim Ma Street, Ba Dinh District, Hanoi
+ 84 24 3974 4181/ 4182
+ 84 24 3974 3090