On September 25, 2020, the Government issued Decree 114/2020 / ND – CP, elaborating the National Assembly’s resolution no 116/2020/QH-14 on reduction of Corporate Income Tax payable in 2020.

Hereinafter, INTERTAX summarizes the main content as follows:

  1. Specifically, to reduce 30% of enterprise income tax amount payable in the enterprise income tax period of 2020 for enterprises having total turnover no more than VND 200 billion in 2020.

At the end of the enterprise income tax period of 2020, if the enterprise’s total turnover in 2020 does not exceed VND 200 billion, such enterprise shall make a declaration of reduction of Corporate Income Tax for 2020 when settling enterprise income tax as prescribed.

Total revenue in 2020 as a basis for determining the subjects eligible for tax reduction is determined as follows:

  • Subjects eligible for tax reduction are the total revenue of the enterprise in the CIT period of 2020, including: all sales, processing fees, service charges including price subsidies, surcharges and surcharges. Enterprises are entitled to under the provisions of the Law on Corporate Income Tax and the guiding documents.
  • In case of a newly established enterprise, enterprise transformed, ownership transformation, consolidation, merger, division, separation, dissolution or bankruptcy in the CIT period of 2020, its operation is insufficient. In 12 months, the total revenue in 2020 is determined by the total actual revenue in the CIT period of 2020 divided (:) by the number of months the enterprise actually does business in the CIT period of 2020 multiplied by (x) with 12 months.
  • In case a newly established enterprise or enterprise transforms the form of enterprise, ownership, consolidation, merger, division, separation, dissolution or bankruptcy in a month, the operation period shall be counted for the full month.
  1. If the enterprise expects the total revenue in the CIT period of 2020 to not exceed 200 billion VND, it shall determine the quarterly temporary payment equal to 70% of the payable CIT amount of the quarter.

At the end of the 2020 corporate income tax period, if the total revenue in 2020 of the enterprise does not exceed VND 200 billion, the enterprise shall declare and reduce the CIT of the year 2020 upon finalization of CIT as prescribed.

The reduced corporate income tax in the 2020 CIT period 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 reduced corporate income tax is based on the CIT payable of the CIT period of 2020, after subtracting the CIT amount that the enterprise is enjoying incentives under the Law on CIT and other documents instruction form.

  1. The Corporate Income Tax calculation period is determined according to the calendar year, if the enterprise applies a fiscal year different from the calendar year, the CIT calculation period is determined according to the applicable fiscal year specified in the Law on CIT and implementation guidance documents.

If the first Corporate income tax period of a newly established enterprise is 2019 or the last enterprise income tax period of an enterprise which is converted into another form, or has it form of ownership transformed, or is consolidated, merged, split up, divided, dissolved or bankrupted is 2021, and such period is less than 03 months, then such period shall be added into the enterprise income tax period of 2020 to become an Corporate income tax period.

This Decree takes effect on August 03, 2020 and applies for the enterprise income tax period of 2020.

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