The temporarily paid tax amount of four quarters must be not lower than 80% of payable amount according to the annual finalization.

Regulations on temporary payment need to be revised to facilitate enterprises

Through practical implementation, the requirement that businesses must estimate the tax payable for the whole year, while there are still two months left, is not reasonable, and does not help taxpayers.

Therefore, the Ministry of Finance proposes to amend the regulations on temporary payment of quarterly corporate income tax in Point b, Clause 6, Article 8 of Decree 126/2020/ND-CP; and revise the regulations in points c and g, clause 6, Article 8 of Decree 126 on temporary payment of remaining after-tax profits after making provisional funds of state-owned enterprises holding 100% of charter capital, and temporary payment of quarterly corporate income of foreign transport companies.

Point b, Clause 6, Article 8 of Decree 126/2020/ND-CP stipulates that taxpayers must temporarily pay corporate income tax of the first three quarters, which are not less than 75% of corporate income tax payable under the annual tax finalization. If the total temporary payment is less than 75% of the tax payable for the whole year, the taxpayer will pay late payment interest for a tax amount lower than 75%.

To implement the regulations, the taxpayer needs to estimate the payable corporate income tax amount of the whole year as a basis to determine the temporary payment of the first three quarters at the deadline for payment of the third quarter.

In addition, Point C, Article 8 of Decree 126 stipulates that if the Joint Stock Company or Limited Liability Company fails to distribute dividends or profits, the parent company must notify the Ministry of Finance and the parent company’s governing body.

The time limit  for dividend and profit distribution prescribed in the Law on Enterprises is that the dividend of the joint-stock company must be paid within six months from the end of the annual general meeting of shareholders. The profit of a limit ed liability company with two or more members must only be distributed to members after the company has fulfilled their tax and other financial obligations and paid all debts and other property obligations. Therefore, the draft decree also stipulates that the taxpayer must comply with the provisions of the Enterprise Law.

The temporarily paid tax amount of 4 quarters must not be lower than 80% of the payable amount under the annual tax finalization

The draft Decree amends Point b, Clause 6, Article 8 of Decree 126/2020/ND-CP. Accordingly, the taxpayer must determine by themselves the amount of quarterly corporate income tax and is deducted from the payable amount according to the annual tax finalization.

The taxpayer subject to making quarterly financial statements will base on the quarterly financial statement and the provisions of the tax law to determine the quarterly temporary payment.

The draft specifies that the taxpayer subject to making quarterly financial statements will base on the quarterly production and business results and the provisions of tax law to determine the quarterly temporary payment.

The total amount of the tax for four quarters must not be less than 80% of the payable corporate income tax amount under the annual finalization. If the taxpayer pays less than the amount of tax payable, they must pay late payment interest calculated on the underpaid tax amount from the day following the last day of the temporary payment deadline to the payment deadline of the unpaid amount.

In case the taxpayer executes a project of investment in infrastructure or housing for transfer or lease purchase and collects progress payments from customers, provisional corporate income tax shall be paid quarterly at the rate of 1% of the amount collected. In case the project is yet to be transferred and not included in the revenue subject to corporate income tax in the year, it shall be included in the tax finalization dossier when the project is partially or fully transferred instead of the annual tax finalization dossier.