One of the concerns ofthe business community is related to regulations described in point b, clause 6 of Article 8 of Decree No. 126/2020/ND-CP dated October 19, 2020 on the calculation of late payment interest for corporate income tax (CIT). Under the decree, as of October 30, enterprises must temporarily pay 75% of corporate income tax of the third quarter. Many enterprises are confused that this regulation may cause difficulties for their finance, especially in the final months of the year.

The General Department of Taxation continues to accept comments from
competent agencies and the business community. Photo: T. Linh 

Vietnam Tax Consulting Association: "This regulation is reasonable"

Responding to comments from enterprises at the dialogue conference on tax and customs policies in 2020 in the North (held on November 24 in Hanoi), Ms. Nguyen Thi Cuc, Chairman of Vietnam Tax Consulting Association (VTCA) provided specific analysis on this issue.

On the morning of November 24, the Ministry of Finance coordinated with the Vietnam Chamber of Commerce and Industry (VCCI) to organize a dialogue conference on tax and customs policies and procedures in 2020 in the Northern region.

Attending and directing the Conference, on the side of the Ministry of Finance, there were Deputy Minister Vu Thi Mai; Ms. Nguyen Thanh Hang, Deputy Director of Tax Policy Department; Mr. Dang Ngoc Minh, Deputy Director of the General Department of Taxation; Mr. Mai Xuan Thanh, Deputy Director of General Department of Customs.

On the side of VCCI, there were Mr. Hoang Quang Phong, Vice Chairman of VCCI, and nearly 500 enterprises.

"This regulationmeans that enterprises must pay CIT of four quarters of a year that is not less than 80% of the whole year’s CIT and the payment deadline is on January 30 of the following year,” said Mrs. Cuc.Specifically, Decree No. 91/2014 / ND-CP and Circular No. 151/2014 / TT-BTC removed the regulationson the declaration on quarterly temporary CIT to replace the regulation on temporary payment of quarterly CIT. Accordingly, enterprises base on the paid CIT of the previous year and the expected results of production and business in current year to determine the temporary CIT in accordance with the actual production and business results of the year.

However, in Decree 126/2020 / ND-CP detailing a number of articles of the Law on Tax Administration, effective from December 5, the total temporarily paid CIT amount for the first three quarters of the tax year is not less than 75% of the CIT payable according to the annual settlement. If the temporary CIT amount for the first three quarters is paid sufficiently, the late payment interest shall be calculated based on the sufficienttax amount from the day following the last day of the temporary CIT payment deadline in the third quarter to the date when the sufficient tax amount is paid to the State budget.

Commenting on these new regulations, Ms. Nguyen Thi Cuc expressed her support.

“In fact, some enterprisescomply with the tax payment regulations, but some others take advantage of the policy not to pay CIT in the first quarters of the year and accumulate CIT to pay at thedeadline. This affects the balance of the state budget. Therefore, Decree 126/2020 / ND-CP introduces a solution, the total temporary CIT in the first three quarters of the tax year must not be less than 75% of the CIT payable according to the annual settlement, which is completely reasonable,"said Mrs. Cuc.

In addition, another reason making the Government regulate late payment interest for the temporary CIT amount in the year and year-end finalization declaration, stated by the General Department of Taxation is that since Decree No. 91 / 2014 / ND-CP was implemented, many enterprises have not complied and took advantage of this regulation on calculating late payment interest not to make quarterly payments but to accumulate tax payable to pay at the payment deadline of the third quarter (normally on January 30 of the following year).

This leads to unfairness between enterprises that seriously fulfill their tax obligations and enterprises deliberately "delaying" their tax obligations. This affects the annual state budget balance.

In particular, according to the General Department of Taxation, the above regulation comes from the actual production and business activities of enterprises. Because enterprises have annual production and business plans and are fully active in determining or estimating the results of production and business activities in the year tocarry out the regulation on temporary CIT payment.

The regulation has not been applied in 2020

On the side of the management agency, Mr. Dang Ngoc Minh, Deputy Director of the General Department of Taxation, said that collection of local budgets, especially localities facing difficult economic conditions in recent years, shows that most of the enterprises fulfill their tax obligations to the state budget when urged by the tax agencies at the end of the year.

“According to previous regulations, if enterprises do not temporarily pay CIT of four quarters at 80% of the annual CIT amount, they will have to pay late payment interest. However, before the actual management of the budget and monitoring of some large enterprises with quarterly reports, the temporary CIT payment is in compliance with the progress. Therefore, the Ministry of Finance has reported to the Government to issue Decree 126/2020 / ND-CP,” Mr. Dang Ngoc Minh said.

The leader of the General Department of Taxation affirmed that this regulation has not been applied in 2020, in the process of developing the guiding circular, the Ministry of Finance and the General Department of Taxation will continue to receive comments from competent agencies and the business community.

However, the representative of VTCA also stated that,in fact, there may be situations where the enterprise has three quarters of high revenue due to good performance, but it is possible that in the fourth quarter, the enterprise needs to focus on production and business to exceed the plan, so the tax payable arising will be higher than the tax amount calculated at 75% of the three quarters. Thus, if the fourth quarter profits are higher, the enterprise will be fined based on the tax amount that has not arisen in the nine months.

To control this issue, Ms. Nguyen Thi Cuc proposed the temporary CIT should be not less than 80% compared to the arising amount so that some enterprises that are joint stock companies and listed companies, though do not have to declare and temporarily pay CIT, but have the quarterly financial statement. If the paid CIT amount is lower than 80% of the CIT payable shown the quarterly financial statement,the enterprise will have to pay late payment interest.