Tax Q&A

1. Our company was established in Thai Binh Economic Zone in 2021. As per the granted investment registration certificate, we are eligible for a corporate income tax (CIT) incentive package including a 10% CIT rate for 15 years, four years of CIT exemption and subsequent nine years of 50% CIT reduction. It is anticipated that our project would generate main revenue from October 2022 and make profit in the same year. Can we register with tax authorities to defer the CIT incentive application to 2023?

Under current CIT regulations, the incentivized CIT rate will commence from the first year of main revenue generation while CIT exemption commences from the first year of having taxable income.

However, in case the first year in which a taxpayer generates income is less than 12 months, such a taxpayer can register with tax authorities to defer the CIT exemption to next year in order to enjoy a full year of CIT exemption while paying tax for the first year at the standard CIT rate (i.e. 20%). Note that the CIT incentive deferral scheme is not applicable to the incentivized CIT rate.

2. Our company incurs some damaged material during the transportation from port to factory. Could we claim CIT deduction for the relevant cost of such damaged material?

Under current CIT regulations, material damaged during transportation is not an allowable force-majeure case. The related cost of damaged material therefore should not be deductible for CIT calculation.

3. Our company is headquartered in Hai Duong and has a representative office (RO) in Hanoi. Employees working in the RO sign a labor contract with the head office in Hai Duong and receive a monthly income from Hai Duong. How should our company declare and pay personal income tax (PIT) for these employees?

According to Article 19, Circular 80/2021/TT-BTC on tax administration, in such a case, the company is required to withhold PIT before paying net income to employees.

The PIT declaration for employees working in Hanoi will be lodged centrally with Hai Duong tax authorities while the withheld PIT will be allocated and paid to Hanoi tax authorities.

* Please email [email protected] if you have questions on tax issues.