Hanoi Tax Department gives instructions on tax exemption and tax reduction

Decree No. 15/2022/NĐ-CP stipulating on the VAT reduction and identification of deductible expenses when determining corporate income tax. Source: Internet

VAT reduction

According to Hanoi Tax Department’s guidance, the order and procedures of tax reduction will be carried out as follows.

For business establishments, value-added tax (VAT) will be calculated by the deduction method. When they make a VAT invoice to provide goods and services that are subject to VAT reduction, they must write "8%" in the VAT rate line; VAT money; the total amount to be paid by the buyer. Based on the VAT invoice, the seller and the buyer declare tax in accordance with the regulations.

For business establishments (including business households and individuals), they will calculate VAT by following the method of percentage on turnover. Accordingly, when making sales invoices for goods and services that are subject to VAT reduction, they must write the full amount of goods and services before the reduction in the column “Total money”, they write the amount that has been reduced by 20% of the percentage of revenue on the line “Add money for goods and services”; at the same time, they must note: “reduced… (amount) corresponds to 20% of the percentage rate for VAT calculation".

Business establishments shall declare goods and services eligible for VAT reduction following Form No. 01 in Appendix IV issued with Decree 15/2022/ND-CP together with the VAT declaration.

When selling goods and services, taxpayers must make separate invoices for goods and services eligible for VAT reduction. In case a business establishment does not issue a separate invoice for goods and services eligible for VAT reduction, it is not entitled to VAT reduction.

The reduction of VAT for each type of goods and services specified in Clause 1 of this Article shall be applied uniformly at the stages of import, production, processing, business and trade.

In the case that a business establishment has issued an invoice and declared according to the tax rate, or the percentage rate for calculating VAT that has not been reduced as prescribed in Decree 15/2022/ND-CP, the seller and the buyer must make a record or have a written agreement clearly stating the error. At the same time, the seller issues a correcting invoice and delivers the invoice to the buyer. Based on the adjusted invoice, the two parties declare tax in accordance with the regulations.

For sold goods and services that have been completed before February 1, 2022, the tax rate of 8% is not applicable (including the case that taxpayers make an invoice in February 2022 for goods and services sold/provided before February 1, 2022).

For invoices made before February 1, 2022, but the taxpayer detected the mistake since February 1, 2022, and taxpayers who issue that invoice made an adjustment or replaced invoices will still apply the tax rate at that time of selling goods and services because goods and services are sold or provided before February 1, 2022.

For business establishments that issue invoices at the wrong tax rate but taxpayers do not make adjustments or replacement invoices. When the tax agency inspects and detects them, they will be handled in accordance with regulations.

Calculating corporate income tax

Besides guiding the reduction of VAT, Hanoi Tax Department also guides the identification of deductible expenses when determining corporate income tax (CIT).

Accordingly, enterprises and organizations that pay CIT in accordance with the provisions of the Law on CIT are included in deductible expenses when determining the taxable income of the 2022 CIT period for donations and in-kind funding for Covid-19 pandemic prevention activities in Vietnam through units receiving support and sponsorship, as specified in Clause 2, Article 2 of Decree No. 15/2022/ND-CP.

The dossier to determine expenditures for support and sponsorship includes the minutes of confirmation of support or sponsorship according to Form No. 02 in Appendix IV issued together with Decree No. 15/2022/ND-CP or a document (in paper or electronic form) certifying the expenditure of support or sponsorship, signed and stamped by the representative of the business or organization that is the sponsor and the representative of the receiving unit; attached with legal invoices and vouchers as prescribed by the law of donations or sponsorships in cash or in kind.

Hanoi Tax Department also noted that in case the parent company receives support and sponsorship from member units to focus on conducting support and sponsorship activities, the parent company and member units will be included in the deductible expenses when determining CIT corresponding to the support and sponsorship of the parent company and each member unit.

The parent company must have a written record or document certifying the expenditure of support and sponsorship mentioned in Clause 4, Article 2 of Decree No. 15/2022/ND-CP. The member unit must have legal invoices and documents in accordance with the law and have a written certification of the parent company about the support and sponsorship of each member unit.

The units receiving donations and sponsorship are responsible for using and distributing donations for the right purposes. In case the donation or support unit misuses the donation or sponsorship, it will be handled in accordance with the law.