Annual Tax Finalization in Vietnam
Jan. 11 – At the end of the year, in addition to completing corporate income tax (CIT) finalization, enterprises must complete personal income tax (PIT) on behalf of their employees.
Following the finalization process at the end of the fiscal year, or when terminating the investment project in Vietnam, foreign investors are allowed to remit profits abroad.
Corporate Income Tax
Although corporate income tax (CIT) is declared and paid quarterly, enterprises must still conduct CIT finalization at the end of the year.
The standard tax year is the duration of one calendar year. If a different year is applied, the enterprise must inform the local tax agency.
If no tax liability arises during this period, or the enterprise is eligible for incentives and/ or tax deductions, the enterprise must still complete tax filings with the competent tax authorities in accordance with the prescribed time limit (unless tax-generated activities are terminated or the enterprise has ceased business operations and no tax responsibilities have arisen).
Taxable income includes any income from production, trading activities, services and other income, whether or not that income has been generated within Vietnam. The enterprises with production/trading activities and/or services that generate a taxable income qualify as taxpayers.
Taxpayers must calculate the payable tax, unless in special cases where the tax agency has fixed or determined the tax amount in accordance to the laws on tax management. Taxpayers are required to prepare an annual CIT return which must include a section for making adjustments between accounting profits and taxable profits. The total amount of CIT should be finalized after the addition or deduction of any elements that cannot be declared in the quarterly declaration, such as takeover of unexpected expenses or profits, and reporting losses of previous years.
If the taxpayer has depending branches in different provinces, it should submit only one CIT finalization dossier. However, manufacturing enterprises must allocate the payable tax amount to the tax agencies in provinces where the branches are located depending on the expenditure portion of each branch of the enterprise.
A CIT return should include the following:
- CIT finalization statement (form 03/TNDN) issued with Ministry of Finance Circular 28/2011/TT-BTC on February 28, 2011;
- The annual financial statements and other related documents; and
- One or more annexes enclosed with the declaration (depending on the actual arising of the enterprises).
The deadline for submission of CIT finalization paperwork is 90 days before the end of the fiscal year. The deadline for filling tax finalization for cases of operation termination, contract termination, and corporate ownership transformation is 45 days since the first day that such changes were made.
In case of unavoidable accidents such as fire, natural disasters, and any other unforeseen event that prevents the taxpayer from filling on time, the head of the tax agency can extend the deadline up to 60 days.
Outstanding CIT should be paid at the same time as the annual CIT finalization statement is submitted to the relevant tax department. If an enterprise registers a digital signature for its legal representative, the annual CIT statement can be submitted online.
Due to the difficulty of global economic crisis, the Vietnam government issued a resolution that enables enterprises to enjoy a CIT reduction for the year 2012, shown in the accompanying table.
Personal Income Tax
FOEs, as employers, are responsible for the declaration and finalization of personal income tax (PIT) for their employees which is deducted from their salaries and wages throughout the year.
The deadline for submission of the PIT finalization dossier is no later than 90 days from the end of the calendar year. The dossier must be sent to the tax officer that directly manages the enterprises; in this case it is usually the department of tax in the province/city unless a tax agency authorizes another state body to collect tax. In special cases where enterprises are consolidated or merged, they must do the PIT finalization for the deducted tax in advance of the change and provide a voucher to employees for their PIT finalization at the end of the year.
In the year 2012, the government issued another policy to support laborers by exempting PIT for the people who receive low salaries or wages for the last six months of 2012. Specifically, PIT exemptions are granted from July 1 to December 31, 2012 for individuals earning taxable incomes from salaries, wages and business that belong to the Level 1 of the partially progressive tariff regulated in PIT Laws (lower than VND5 million/month).
Profit remittance can be done following tax finalization, or when terminating the investment project in Vietnam, in cash or in kind, if the FOE has not accumulated losses. Offshore remittance of profits in cash must comply with the laws on foreign exchange management; offshore remittance of profits in kind and conversion of their value must comply with the law on import and export of goods and other relevant laws.
The relevant tax officer must be notified of the plan of profit remittance at least 7 working days before the scheduled transferring.
Portions of this article were taken from the December 2012 issue of Vietnam Briefing Magazine titled “Annual Compliance and Audit.” In this issue, we address a number of annual compliance topics relevant to foreign investors in Vietnam. Namely, annual reporting for foreign-owned enterprises and representative offices, as well as annual tax finalization (corporate income tax and personal income tax), and annual financial statements (structure, general accounting treatments, deductible expenditures, submission).
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.
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