LATEST GUIDANCE ON TAX POLICY RELATING TO COVID-19 EXPENSES
The General Department of Taxation (“GDT“) and local tax authorities have issued a number of guidances on tax policies for Covid-19 related expenses. Accordingly, expenses incurred due to Covid-19 shall be considered as taxable income and subject to Personal Income Tax (“PIT”) of the employee if the name of the individual beneficiary was clearly stated upon such payment (e.g., Official Letter No. 31557/CTHN-TTHT dated August 13, 2021 of the GDT of Hanoi city on determining costs related to Covid-19 prevention).
The business community has suggested that government authorities apply a more reasonable and beneficial tax policy for businesses and employees in this regard, especially in the context of Covid-19. On October 27, 2021, the GDT issued Official Letter No. 4110/TCT-DNNCN (“OL 4110”) responding to the (i) Embassy of the Republic of Korea in Vietnam, (ii) European Chamber of Commerce in Vietnam, and (iii) Vietnam Business Forum, about the tax policy on employees’ expenses related to Covid-19 from the perspective of Corporate Income Tax (“CIT”) and PIT.
For the expenses of medical isolation due to Covid-19 at home and abroad, these costs are deductible expenses for CIT and non-taxable for PIT of employees. The costs mentioned in OL 4110 include:
• Cost of meals and accommodation, cost of Covid – 19 testing;
• Transportation costs from the place of entry to Vietnam or from the place where the individuals are required to travel to the quarantine facility;
• Expenses for living needs during quarantine medical period;
• Expenses for Covid-19 testing or buying testing kits for employees;
• The cost of purchasing protective equipment for employees to prevent the risk of infection during work;
• The expenses of meals and accommodation when employees are required to stay at the workplace in accordance with the State’s plan; and
• Other appropriate expenses.
The above expenses need to reflect the actual payment. Enterprises need to provide sufficient invoices and documents for such expenses in accordance with the law.
Enterprises should review and ensure they meet the conditions of expenses relating to Covid-19 and make corresponding adjustments to their tax declaration and payment according to the guidance of OL 4110.
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