Official Dispatch 4062/TCT-CS 2024 solutions to support enterprises suffering losses due to Storm No. 3

In order to implement the Prime Minister's directions in Official Telegram No. 92/CD-TTg dated September 10, 2024, on focusing on overcoming the consequences of Storm No. 3 and post-storm floods, the General Department of Taxation requests Tax Departments of provinces and cities where organizations, individuals and enterprises suffering damage caused by Storm No. 3 and post-storm floods, to provide taxpayers the following instructions:

I. Law provisions on exemption, reduction of taxes, and extension of tax payment time limits, tax policies applicable to taxpayers affected by natural disasters.

1. Regarding extension of time limits for tax payment

Clause 27, Article 3 of the Law on Tax Administration No. 38/2019/QH14 dated June 13, 2019, prescribes force majeure events as follows:

“27. Force majeure events include:

a) Cases in which taxpayers suffer material damage due to natural disasters, catastrophes, epidemics, fires, or accidents;

b) Other force majeure events as prescribed by the Government”.

Article 62 of the Law on Tax Administration No. 38/2019/QH14 dated June 13, 2019, provides regulations on extension of tax payment time limits as follows:

“1. Extension of tax payment time limits shall be considered upon request of taxpayers that fall into one of the following cases:

a) They suffer material damage in the force majeure events prescribed in Clause 27, Article 3 of this Law, thus directly affecting their production or business activities;

b) They have to suspend operation to relocate their production or business establishments at the request of competent agencies, thus affecting their production and business results.

2. Taxpayers falling into the cases eligible for extension of tax payment time limits prescribed in Clause 1 of this Article will enjoy the extended time limit for payment of part or the whole of the payable tax amount.

3. The tax payment time limit shall be extended:

a) For no more than 2 years from the date of its expiration, for the case prescribed at Point a, Clause 1 of this Article;

b) For no more than 1 year from the date of its expiration, for the case prescribed at Point b, Clause 1 of this Article.

4. Taxpayers are not subject to fines and late-payment interests on tax arrears within the extended tax payment time limit.

5. Heads of tax administration offices directly managing taxpayers shall base themselves on dossiers of request for extension of tax payment time limits to decide on the tax amounts eligible for extension of the payment time limits and the extended time limits.”

Provisions on dossiers of request for extension of tax payment time limits are provided in Article 64 of the Law on Tax Administration No. 38/2019/QH14 dated June 13, 2019, as follows:

“1. Taxpayers that fall into the cases eligible for extension of tax payment time limits under this Law shall make and send dossiers of request for extension of tax payment time limits to their managing tax administration offices.

2. A dossier of request for extension of the tax payment time limit must comprise:

a) A written request for extension of the tax payment time limit, clearly stating the reason for extension, the tax amount eligible for extension of the payment time limit, and the payment time limit;

b) Documents proving the reasons for extension of the tax payment time limit.

3. The Minister of Finance shall stipulate in detail the dossier of request for extension of the tax payment time limit.”

Dossiers of request for extension of tax payment time limits, receipt and processing of dossiers of request for extension of tax payment time limits are prescribed in Articles 64 and 65 of the Law on Administration No. 38/2019/QH14 as follows:

“1. Tax administration offices shall receive dossiers of request for extension of tax payment time limits from taxpayers:

a) Directly at their offices;

b) By post;

c) Via their portals.

2. A dossier of request for extension of the tax payment time limit shall be processed according to the following regulations:

a) In case the dossier is valid and complete and made according to a set form, the concerned tax administration office shall issue a notice of the extension of the tax payment time limit within 10 working days after receiving the dossier;

b) In case the dossier is incomplete, the concerned tax administration office shall issue a notice thereof to the taxpayer within 3 working days after receiving the dossier.”

Article 24 of the Ministry of Finance's Circular No. 80/2021/TT-BTC dated September 29, 2021, guiding the implementation of a number of articles of the Law on Tax Administration and the Government’s Decree No. 126/2020/ND-CP of October 19, 2020, provides regulations on the order, procedures and dossiers for extension of tax payment time limit.

2. Regarding exemption from late-payment interests

Clause 8, Article 59 of the Law on Tax Administration No. 38/2019/QH14 dated June 13, 2019, prescribes the handling of cases of late payment of tax as follows:

“8. Taxpayers that are subject to late-payment interests under Clause 1 of this Article will be exempt from late-payment interests in force majeure events prescribed in Clause 27, Article 3 of this Law.

9. The Minister of Finance shall prescribe procedures for handling cases of late payment of tax.”

The order, procedures and dossiers for exemption from late-payment interests are detailed in Article 23 of the Ministry of Finance's Circular No. 80/2021/TT-BTC dated September 29, 2021, guiding the implementation of a number of articles of the Law on Tax Administration and the Government’s Decree No. 126/2020/ND-CP of October 19, 2020.

3. Exemption from fines for tax administration-related administrative violations

Clause 1, Article 140 of the Law on Tax Administration No. 38/2019/QH14 dated June 13, 2019, prescribes the exemption from fines for tax administration-related administrative violations for:

“1. Taxpayers that are fined for their tax administration-related administrative violations and suffer damage in force majeure circumstances specified in Clause 27, Article 3 of this Law are exempted from fine. A total exempted fine amount must not exceed the value of their damaged property or goods.”

Pursuant to Article 43 of the Government’s Decree No. 125/2020/ND-CP dated October 19, 2020, on sanctioning of administrative violations related to taxes and invoices, exemption from, and reduction of, fines for tax-related administrative violations (amended under Clause 6, Article 1 of the Government’s Decree No. 102/2021/ND-CP dated November 16, 2021) are as follows:

“Article 1. Amending and supplementing a number of articles of the Government’s Decree No. 125/2020/ND-CP dated October 19, 2020, on sanctioning of administrative violations related to taxes and invoices....

6. To amend and supplement Article 43 as follows:

“Article 43. Exemption and reduction of fines for administrative violations related to tax, invoices

1. For cases of exemption or reduction of fines for administrative violations related to taxes and invoices, competence, order and procedures for exemption and reduction of fines for such administrative violations comply with the provisions of Article 77 of the Law on Handling of Administrative Violations and Clause 38, Article 1 of the Law Amending and Supplementing a Number of Articles of the Law on Handling of Administrative Violations and Clauses 2, 3, 4, 5 of this Article.

2. The maximum level of fine exemption or reduction shall be equal to the fine amount in the sanctioning decision and must not exceed the value of damaged property or goods after subtracting the insured and compensated value (if any).

3. Taxpayers suffering damage in the event of force majeure prescribed in the Law on Tax Administration, the documents proving the value of damaged property and goods and the insured and compensated value are as follows:

a) A record of inventory and determination of the material damages’ value made by the taxpayer or the taxpayer's legal representative;

b) A record determining the value of material damages issued by the organization with the function of valuation in accordance with the law provisions (an original or a notarized or certified copy), unless there is a compensation dossier prescribed at Point c of this Clause;

c) Dossier of material damage compensation accepted by insurance agencies in accordance with the law provisions (an original or a notarized or certified copy) (if any);

d) Dossier of compensation responsibility of an organization or individual in charge of compensation in accordance with the law provisions (an original or a notarized or certified copy) (if any).”

4. Regarding value-added tax credit

Clause 1, Article 14 of the Ministry of Finance's Circular No. 219/2013/TT-BTC dated December 31, 2013, provides guidance on principles of input value-added tax (VAT) credit as follows:

Input VAT on goods or services used for the production of and trading in VAT-liable goods and services may be wholly credited, including also the uncompensated input value-added tax on lost VAT-liable goods.

Input VAT on uncompensated losses, including those caused by natural disasters and fires, and uninsured losses, and poor-quality and expired goods that must be destroyed, may be credited. Business establishments must have adequate dossiers and documents proving uncompensated losses for tax credit.”

5. Regarding enterprise income tax

Pursuant to Article 9 of the Law on Enterprise Income Tax and its guiding documents:

Enterprises are allowed to account the following expenses, that satisfy the conditions specified in Clause 1, Article 9 of the Law on Enterprise Income Tax, as deductible expenses for determining taxable income:

- The value of uncompensated value of losses caused by natural disasters, epidemics or other force majeure circumstances (Point a, Clause 2, Article 9 of the Law on Enterprise Income Tax). The value of uncompensated losses caused by natural disaster, epidemic, fire or other force majeure events is the total value of losses minus (-) compensations paid by insurers or other organizations and individuals in accordance with law.

For assets and goods lost due to natural disaster, epidemic or fire which may be included in deductible expenses, a dossier must comprise:

(1) The written record of inventory of the value of lost assets and goods, made by the enterprise. This written record must specify the value of lost assets and goods, the cause of loss, responsibilities of organizations and individuals for the loss; types, quantities and values of recoverable assets and goods (if any); stock movement statement of the lost goods bearing the signature of a lawful representative of the enterprise, who shall take responsibility before law for the statement.

(2) The dossier of compensation accepted by the insurer (if any).

(3) The dossier identifying responsibilities of organizations and individuals obliged to pay compensation (if any).

- Financial supports for educational, healthcare, scientific research activities and for mitigating natural disaster consequences (Point n, Clause 2, Article 9 of the Law on Enterprise Income Tax).

Documents to prove funding for the remediation of consequences of natural disasters include:

(1) Written certifications of funding signed by representatives of the funding enterprise and beneficiary that is affected by natural disaster (or agency or organization with the fund-raising function), made according to form No. 05/TNDN issued with Circular No. 78/2014/TT-BTC.

(2) Invoices and documents of goods purchase (for in-kind funding) or payment documents (for cash funding).

- Direct expenses on the workers’ welfare such as expenses for supporting employees’ families affected by natural disasters, enemy sabotage, accidents and illness (Point 2.30, Clause 2, Article 6 of Circular No. 96/2015/TT-BTC). The total welfare expenses must not exceed the average actually implemented one month’s wage in the tax year of the enterprise.

The average actually implemented one month’s wage is the implemented wage fund in a year divided (:) by 12 months. For an enterprise that has operated for under 12 months, the average actually implemented one month’s salary is the wage fund implemented in the year divided (:) by the number of months of operation.

The implemented wage fund is the total wage actually paid in the year of finalization up to the deadline for submitting the annual finalization dossier (excluding the provision for the wage fund of the previous year spent in the tax finalization year).

Enterprises may account the expenses under the above-mentioned conditions as deductible expenses, provided that such expenses fully satisfy the following conditions:

+ Actual expenses related to their production and business activities;

+ Expenses with adequate lawful invoices and documents. For expenses for purchase of goods or services valued at VND 20 million or more (VAT-inclusive prices) per invoice, non-cash payment documents are required, except for the cases required to have non-cash payment documents as prescribed by law.

6. Regarding excise tax reduction

Article 9 of the Law on Excise Tax No. 27/2008/QH12 dated November 14, 2008, provides regulations on excise tax reduction as follows:

“Taxpayers that produce excise taxable goods and face difficulties caused by natural disasters or unexpected accidents are entitled to tax reduction.

The tax reduction level shall be determined based on the actual extent of damage caused by natural disasters or unexpected accidents but must neither exceed 30% of the payable tax amount in the year the damage occurs nor exceed the balance between the value of damaged assets and the received compensation (if any).”

Dossiers for reduction of excise tax are specified in Article 52 of the Ministry of Finance's Circular No. 80/2021/TT-BTC dated September 29, 2021, as follows:

“1. For taxpayers facing difficulties due to natural disasters, a dossier for tax reduction must comprise:

a) A written request, made according to Form No. 01/MGTH provided in Appendix I to this Circular;

b) A written record on determination of the extent and value of property damage, issued by a competent agency and certified by the commune-level administration of the locality where the disaster occurs, made according to Form No. 02/MGTH provided in the Appendix I this Circular;

The agency competent to determine the extent and value of damage is a financial agency or an assessment agency that determines the extent and value of property damage.

In case of damage to goods, the taxpayer shall provide an assessment record (assessment certificate) on extent of the damage, made by an assessment agency that shall take legal responsibility for accuracy of the assessment certificate in accordance with law.

c) The financial statement (if the taxpayer is an enterprise) together with a document explaining and analyzing the determination of the amount of damage and losses caused due to the damage.”

7. Regarding royalty exemption and reduction

Royalty exemption and reduction are provided in Clause 1, Article 9 of the Law on Royalties No. 45/2009/QH12 as follows:

“1. Royalty payers that encounter natural disasters, fires or unexpected accidents, causing losses of natural resources for which royalties have been declared and paid, may be considered for exemption from or reduction of payable royalties for the lost volumes of natural resources. The paid royalty amount will be refunded or cleared against the subsequent period’s payable royalty amount.”

Procedures and dossiers for royalty exemption or reduction are detailed in Article 56 of the Ministry of Finance's Circular No. 80/2021/TT-BTC dated September 29, 2021, guiding the implementation of a number of articles of the Law on Tax Administration and the Government’s Decree No. 126/2020/ND-CP of October 19, 2020.

8. Regarding non-agricultural land use tax exemption and reduction

Clause 9, Article 9 and Clause 4, Article 10 of the Law on Non-Agricultural Land Use Tax provide regulations on tax exemption as follows: “9. Taxpayers who face difficulties due to force majeure circumstances if the value of damage related to land and houses on land accounts for over 50% of the taxable price.”

Clause 4, Article 10 of the Law on Non-Agricultural Land Use Tax provides regulations on tax reduction as follows:

“Fifty per cent reduction of the payable tax amount is applied in the following cases:

...4. Taxpayers who face difficulties due to force majeure circumstances if the value of damage related to land and houses on land accounts for between 20% and 50% of the taxable price.”

Procedures and dossiers for non-agricultural land use tax exemption or reduction are detailed in Article 57 of the Ministry of Finance's Circular No. 80/2021/TT-BTC dated September 29, 2021, guiding the implementation of a number of articles of the Law on Tax Administration and the Government’s Decree No. 126/2020/ND-CP of October 19, 2020.

II. Law provisions on exemption, reduction of taxes, charges and fees, and extension of tax, charge and fee payment time limits for business households and individuals affected by natural disasters.

1. Regarding tax reduction

Article 5 of the Law on Personal Income Tax No. 04/2007/QH12 dated December 5, 2008, provides regulations on personal income tax reduction;

Article 9 of the Law on Excise Tax No. 27/2008/QH12 dated November 14, 2008, provides regulations on excise tax reduction;

Clause 1, Article 9 of the Law on Royalties No. 45/2009/QH12 dated November 25, 2009, provides regulations on loyalty exemption and reduction;

Articles 80, 81 and 82 of the Law on Tax Administration No. 38/2019/QH14 provide provisions on dossiers for tax exemption and reduction;

Articles 52, 53, 54, 55 and 64 of the Ministry of Finance's Circular No. 80/2021/TT-BTC dated September 29, 2021, provide regulations on procedures, dossiers and cases in which tax offices notify or decide on tax exemption or reduction; procedures, dossiers and cases in which tax offices notify or decide on tax exemption or reduction; procedures and dossiers for tax reduction; time limit for, and notification of results of processing, tax exemption or reduction dossiers.

Pursuant to the aforesaid regulations, if a business household or individual faces difficulties due to natural disasters, he/she/it shall be entitled to a reduction of personal income tax, exercise tax and royalty as follows:

- The personal income tax reduction corresponds to the extent of damage but not exceeding payable tax amounts;

- The excise tax reduction level shall be determined based on the actual extent of damage caused by natural disasters or unexpected accidents but must neither exceed 30% of the payable tax amount in the year the damage occurs nor exceed the balance between the value of damaged assets and the received compensation (if any).

- The royalty reduction corresponds to the lost volumes of natural resources. The paid royalty amount will be refunded or cleared against the subsequent period’s payable royalty amount.

The business household or individual shall submit dossier for tax reduction in accordance with Articles 53, 54 and 55 of Circular No. 80/2021/TT-BTC to the managing tax office. Within 30 days (or 40 days where necessary to conduct site inspection) after receiving a complete dossier, the concerned tax administration office shall issue a tax exemption or reduction decision or notify in writing the taxpayer of reasons for ineligibility for tax exemption or reduction.

2. Regarding extension of time limits for tax payment

Clause 27, Article 3; Articles 62, 64 and 65 of the Law on Administration No. 38/2019/QH14 provide regulations on force majeure events; extension of tax payment time limits; dossiers of request for extension of tax payment time limits; receipt and processing of dossiers of request for extension of tax payment time limits;

Article 24 of the Ministry of Finance’s Circular No. 80/2021/TT-BTC dated September 29, 2021, provides regulations order, procedures and dossiers for extension of tax payment time limit;

Articles 3, 4 and 5 of the Government’s Decree No. 64/2024/ND-CP dated June 17, 2024, provide regulations on extension of time limits for payment of VAT, enterprise income tax, personal income tax and land rental in 2024.

Pursuant to the above-mentioned regulations, business households and individuals conducting production activities in economic sectors specified in Clauses 1, 2 and 3, Article 3 of the Government’s Decree No. 64/2024/ND-CP dated June 17, 2024, shall have their time limits for VAT and personal income tax payment extended to the end of December 30, 2024.

For extension of time limits for tax payment, business households and individuals shall submit a written request for extension no latter than September 30, 2024. In the extension duration, late-payment interests will not be calculated for tax and land rental amounts eligible for extension of payment time limits (including also cases in which taxpayers submit requests for extension to tax offices after having submitted their tax declaration dossiers, and cases in which competent agencies detect through inspection and examination an increase in taxpayers’ payable tax amounts for tax periods eligible for the extension). In case tax offices have calculated late-payment interests (if any) for tax dossiers eligible for extension of time limits for tax and land rental payment under this Decree, they shall adjust but not calculate late-payment interests.

Business households suffering material damage due to natural disaster (flood), thus directly affecting their production or business activities, shall have their tax payment time limits extended for no more than 2 years from the date of expiration. Taxpayers are not subject to fines and late-payment interests on tax arrears within the extended tax payment time limit.

Dossiers of request for extension of tax payment time limits shall comply with Point a, Clause 2, Article 24 of Circular No. 80/2021/TT-BTC. Amounts eligible for extension of payment time limit are tax arrears calculated by the time such taxpayers are hit by natural disasters, catastrophes, epidemics, fires or unexpected events but not exceeding the material damage value after subtracting compensation and insurance amounts (if any) paid under regulations.

In case the dossier is valid and complete and made according to a set form, the concerned tax office shall send a notice of the extension of the tax payment time limit to the taxpayer within 10 working days after receiving the dossier. In case the dossier is incomplete as prescribed, it shall issue a notice thereof to the taxpayer within 3 working days after receiving the dossier.

Tax Departments of provinces and cities are requested to propagate, disseminate, and guide organizations, individuals, and enterprises to implement the above-mentioned support policies on tax exemption and reduction, and extension of tax payment time limits, and coordinate with relevant agencies to promptly resolve issues related to administrative procedures, provide tax records, documents kept at tax agencies related to determining the value of damage upon request and proposal of damaged organizations, individuals, and enterprises; assign officers to coordinate and act as focal points to promptly provide instructions for taxpayers; support damaged organizations, individuals, and enterprises to restore tax records (tax declaration dossiers, tax exemption and reduction dossiers, tax refund dossiers, dossiers for tax payment time limit extension, etc.) and documents serving the determination of the damage value of organizations, individuals, and enterprises according to regulations.

Any problem arising in the course of implementation should be promptly reported to the General Department of Taxation for settlement.