Official Dispatch No. 5032/TCT-CS dated November 26, 2020 of the General Department of Taxation regarding expenses incurred for foreign experts’ quarantine for Covid-19 prevention and control

The General Department of Taxation received the Official Dispatch No. 8901/CT-TTHT dated October 01, 2020 of Ba Ria - Vung Tau Province Tax Department and the Official Dispatch No. 24289/CT-TTHT dated October 28, 2020 of Binh Duong Province Tax Department regarding the determination of expenses incurred for foreign experts’ quarantine for Covid-19 prevention and control. The General Department of Taxation has the following comments:

1. According to Article 4 of the Ministry of Finance’s Circular No. 96/2015/TT-BTC dated June 22, 2015, amending and supplementing Article 6 of the Ministry of Finance’s Circular No. 78/2014/TT-BTC dated June 18, 2014, providing guidance on enterprise income tax:

“Article 6. Deductible and non-deductible expenses when determining taxable income

1. Except for the non-deductible expenses prescribed in Clause 2 of this Article, enterprises may deduct any expense that fully satisfies the following conditions:

a) Actual expenses related to their production and business activities;

b) Expenses with adequate lawful invoices and documents;

c) Expenses for purchase of goods or services valued at VND 20 million or more (VAT-inclusive prices) per invoice with non-cash payment documents.

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2. Non-deductible expenses for determining taxable income include:

2.6. Salaries, wages and bonuses paid to employees in one of the following cases:

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- In case the labor contract signed between an enterprise and an employee states that housing expenses shall be paid by the enterprise, which are of salary or wage nature and have adequate invoices and documents according to regulations, these expenses may be included in deductible expenses for determining taxable income.

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2.9. Travel allowances for leaves at variance with the Labor Code.

If having adequate lawful invoices and documents as prescribed, working trip allowances and travel and accommodation expenses for employees going on working trips may be included in deductible expenses for determining taxable income. If the enterprise pays for the travel, accommodation and allowances of employees going on working trips in accordance with its financial regulations or internal rules, it may include such amounts in deductible expenses.

In case an enterprise sends an employee on a working trip (at home or overseas), every payment of VND 20 million or higher and payment for air fares that are made with personal bank cards may be considered non-cash payments and included in deductible expenses if the conditions below are fully satisfied:

- There are proper invoices and documents issued by the goods supplier or service provider.

- There is a decision or document of the enterprise assigning the employee to go on a working trip.

- The enterprise’s financial regulations or internal rules allow its employees to pay working trip expenses and air fares with their personal bank cards and get reimbursed by the enterprise.

In case an enterprise has purchased air fares through an e-commerce website for its employees to go on working trips to serve its production and business activities, documents used as the basis for including such payment in deductible expenses are electronic air tickets, boarding passes and non-cash payment documents of the enterprise. If an enterprise cannot collect boarding passes from its employees, documents used as the basis for including such payment in deductible expenses are electronic air tickets, decisions or documents assigning the employees to go on working trips, and non-cash payment documents of the enterprise.

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2.30. Expenses not corresponding to taxed turnover, excluding:

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- Direct expenses on the workers’ welfare: expenses for funerals and weddings of workers and their relatives; expenses on summer holidays or medical treatment support; expenses for refresher training at training institutions; expenses for supporting employees’ families affected by natural disasters, enemy sabotage, accidents and illness; expenses for rewarding workers’ children for their study achievements; expenses for supporting workers’ traveling during holidays; payment for accident insurance, health insurance, and other voluntary insurance for workers (except life insurance mentioned at Point 2.6, and voluntary pension insurance mentioned at Point 2.11, of this Article), and other welfare expenses. The total welfare expenses must not exceed the average actually implemented one month’s wage in the tax year of the enterprise.

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2. Clause 2, Article 2 of the Ministry of Finance’s Circular No. 111/2013/TT-BTC dated August 15, 2013, guiding the Law on Personal Income Tax and the Government’s Decree No. 65/2013/ND-CP dated June 27, 2013, detailing a number of articles of the Law on Personal Income Tax and the Law Amending and Supplementing a Number of Articles of the Law on Personal Income Tax stipulates that:

“Article 2. Taxable incomes

2. Incomes from salaries or wages

Incomes from salaries or wages are incomes received by employees from their employers, including:

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dd.4) Package payments for stationery, working-trip expenses, telephone, clothes, etc., which are higher than the levels prescribed by current regulations of the State. These package payments are not calculated as taxable income in the following cases:

dd.4.1) For cadres, civil servants and employees working in administrative and non-business agencies, Party agencies, mass organizations, societies and associations: The package payment levels comply with written guidance of the Ministry of Finance.

dd.4.2) For employees of business organizations and representative offices: The package payment levels comply with the levels for determination of enterprise income tax-liable income specified in documents guiding the Law on Enterprise Income Tax.

dd.4.3) For employees of international organizations and representative offices of foreign organizations: The package payment levels comply with regulations of such international organizations and representative offices.

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dd.7) Other benefit.

Other benefits provided by employers to their employees such as payments during weekends or holidays; charges for consultancy or tax declaration services for an individual or a group of individuals; payment of wages for chauffeurs, cooks and other household servants under contracts, etc.

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3. Point a, Article 1 of the Official Dispatch No. 7038/VPCP-KTTH dated August 24, 2020 of the Government Office on expenses for quarantine and Covid-19 treatment as follows prescribes that:

a) Regarding expenses for concentrated quarantine

- For cases that are quarantined in military barracks or military schools: Continuing to implement the regimes applicable to persons subject to concentrated quarantine measure in accordance with the Government’s Resolution No. 37/NQ-CP dated March 29, 2030, on some specific regimes in prevention and control of Covid-19 pandemic. Funds for implementation shall be guaranteed by the State budget and partially provided from the support for Covid-19 pandemic prevention and control received by the Central Committee of the Vietnam Fatherland Front.

- For cases of entry into Vietnam and subject to centralized quarantine who wish to conduct their quarantine at a hotel, resort or another establishment selected as a concentrated quarantine establishment: Individuals shall pay all expenses related to accommodation during their quarantine period for the hotel, resort or another establishment according to the rates provided by such hotel, resort or another establishment. At the same time, such persons shall comply with the testing indication at health agency's requests and pay testing costs for medical establishments at the current medical service rate, etc.”

Pursuant to the above-mentioned provisions:

- Regarding deductible expenses upon the determination of taxable incomes:

+ With regard to expenses incurred for a foreign experts’ quarantine at hotel, in case the contract signed between the enterprise and such foreign enterprise states that the enterprise shall pay accommodation expenses for foreign experts, and the enterprise has adequate invoices, documents and such expenses have been paid according to regulations, these expenses may be included in deductible expenses for determining taxable income.

+ With regard to the payment for air fares for foreign expert's working trip, if that payment is paid and implemented according to Point 2.9, Clause 2, Article 6 of the Ministry of Finance’s Circular No. 78/2014/TT-BTC dated June 18, 2014 (amended and supplemented in Article 4 of the Ministry of Finance’s Circular No. 96/2015/TT-BTC dated June 22, 2015) and the enterprise has adequate invoices and documents according to regulations, such payment may be included in deductible expenses for determining taxable income.

+ Cost of testing Covid-19 for foreign experts shall be regarded as direct expenses on the workers’ welfare, if that cost is paid and implemented according to Point 2.30, Clause 2, Article 6 of the Ministry of Finance’s Circular No. 78/2014/TT-BTC dated June 18, 2014 (amended and supplemented in Article 4 of the Ministry of Finance’s Circular No. 96/2015/TT-BTC dated June 22, 2015) and the enterprise has adequate invoices and documents according to regulations, such cost may be included in deductible expenses for determining taxable income.

- Regarding the determination of incomes liable to personal income tax:

In case expenses for foreign employees’ quarantine for Covid-19 prevention and control are paid by the company when foreign employees enter Vietnam, such expenses shall be considered as employees’ benefits. Thus, the above expenses may be included in incomes from employees’ salaries or wages that are liable to personal income tax.

The Government Office hereby informs Ba Ria - Vung Tau Province Tax Department and Binh Duong Province Tax Department in order to implement them./.