Reduction of CIT taxable in 2021 who are affected by the Covid-19 epidemic

✨ On 19 October 2021, the National Assembly approved Resolution 406/NQ-UBTVQH15 introducing some policies to support enterprises and citizens affected by COVID-19 pandemic.

✨ Tax agent TASCO would like to inform customers about the reduction of CIT payable in 2021 in the article below!

1. Corporate income tax payable in 2021 is reduced for those affected by the COVID-19 epidemic

In Article 1, Resolution 406/NQ-UBTVQH15 prescribes a number of solutions on tax exemption and reduction:

• 30% reduction of Corporate Income Tax payable in the fiscal year 2021 for the enterprises whose total revenue in fiscal 2021 is not more than VND 200 billion and lower than 2019 revenue.
• The latter requirement shall not be applied for newly established enterprises and enterprises having merger, division, separation activities in 2020 and 2021

2. The objects who will be reduced 30% of corporate income tax payable in 2021?

According to the provisions of Article 1 of Decree 92/2021/ND-CP, a 30% reduction in corporate income tax payable in 2021 shall be applied to the following subjects:

✅ The reduction of corporate income tax specified in this Article applies to corporate income taxpayers who are organizations engaged in production and business activities of goods and services with taxable income as prescribed in Article 1 of Resolution No. 406/NQ-UBTVQH15, including:

• Enterprises established in accordance with the law of Vietnam.
• The organization was established under the Law on Cooperatives.
• Public service units  established in accordance with Vietnamese law.
• Other organizations established in accordance with the law of Vietnam have production and business activities with income.

3. Conditions for 30% reduction of payable corporate income tax

According to the provisions of Clause 2, Article 1 of Decree 92/2021/ND-CP:

⭐ 30% reduction of Corporate Income Tax payable in the fiscal year 2021 for the enterprises whose total revenue in fiscal 2021 is not more than VND 200 billion and lower than 2019 revenue.

⭐ Do not apply the criteria of 2021 revenue lower 2019 revenue to the enterprise which was newly established, or under acquisition, merged, divided, split-up during 2020 and 2021.

With:

📌The corporate income tax period is determined according to the calendar year, in case an enterprise applies a fiscal year different from the calendar year, the corporate income tax period is determined according to the applicable fiscal year specified in the CIT Tax Law and guiding documents.

📌Turnover in the corporate income tax period includes all sales, processing, service provision and business activities in the form of business cooperation contracts, including price subsidies and surcharges. , extras that enterprises are entitled to under the provisions of the Law on Corporate Income Tax and its guiding documents, excluding deductions from revenue, revenue from financial activities and other incomes.

• In the case of newly established enterprises, enterprise that converts its form of enterprise, ownership transformation, consolidation, merger, division, separation, dissolution, bankruptcy in the corporate income tax period, the enterprise does not operate full 12 months, the turnover of that tax period is determined by the actual turnover in the tax period divided (:) by the number of months the enterprise actually conducts production and business activities in the tax period multiplied (x) by 12. month. In case an enterprise is newly established, enterprise that converts its form of enterprise, transforms its form of ownership, merges, merges, divides, separates, dissolves or goes bankrupt within a month, the operation period shall be counted in full months.
• In case the first tax period for a newly established enterprise is 2020 or the last tax period for an enterprise that converts its form of enterprise, transforms its ownership form, consolidates, merges, or divides , separation, dissolution, bankruptcy is 2022 but the time is shorter than 03 months and the enterprise is added to the tax period 2021 to form a corporate income tax period, the determination of the reduction income tax amount will be applies only to 12 months of the tax year 2021.
• In case an enterprise has a dependent unit and a business location, the revenue in the enterprise income tax period includes the revenue of the dependent unit and business location shown in the annual financial statements.

4. How to determine the amount of corporate income tax to be reduced

✅ Complying with the provisions of Clause 3, Article 1 of Decree 92/2021/ND-CP, the way to the reduction income tax amount is as follows:

•  The reduction income tax amount of the tax period 2021 is calculated on the entire income of the enterprise, including the incomes specified in Clause 3, Article 18 of the Law on Corporate Income Tax, the reduction income tax amount is calculated on the payable corporate income tax amount of the tax period 2021, after deducting the corporate income tax that the enterprise is enjoying in accordance with the provisions of the Law on Corporate Income Tax and its guiding documents.

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