The Ministry of Finance (MoF) has proposed a draft to reduce corporate income tax by 30 per cent to support pandemic-hit businesses for the 2021 financial year.
The most important factor of the draft is that the corporate income tax cut will apply to all businesses if their total revenue does not exceed the VND200 billion (US$8.8 million) threshold in 2020. This means that most small and medium enterprises (SMEs) will be eligible for such tax breaks regardless of the number of employees and the actual financial loss due to the pandemic.
Under the draft, newly-established businesses, newly-converted companies, merger and acquisition (M&A) companies and dissolved firms in 2020 are not included in the tax reduction of the fiscal year 2021.
The ministry has also revised and supplemented regulations on how to determine the total revenue of businesses in the fiscal year 2021 to take them as a basis for businesses to be eligible for tax reductions. Notably, the total revenue of businesses will include income from sales of goods or services, or from other business activities. The total revenue will also consist of subsidised prices, surcharges and extras.
The draft stipulates that the reduction of corporate income tax in the fiscal year 2021 will be calculated based on the total revenue of businesses.
Businesses are responsible for self-determination of the tax amount to be enjoy the tax reduction. After inspecting and auditing, any businesses found not eligible for tax reduction will have to pay tax for the 2021 fiscal year and will be given penalties for administrative violations in tax procedures.
The ministry said since the outbreak of the COVID-19 pandemic, it has conducted many incentives on taxes, fees and land rent to support COVID-hit businesses and citizens.
However, the pandemic has had significant impacts on the activities of citizens and businesses, especially small and medium-sized enterprises, business households, individual businesses and companies in sectors including tourism, transport, accommodation and food services, cinemas, sports and entertainment and media.
Therefore, the Ministry of Finance said that it is essential to conduct more incentives on taxes, fees and charges for citizens and businesses affected by the COVID-19 pandemic. — VNS
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