Hanoi Tax Department guides tax exemption and reduction policies

Decree 15/2022 stipulates VAT reduction and determination of deductible expenses upon CIT calculation. Photo: Internet.

How to reduce value-added tax?

According to Hanoi Tax Department, the order and procedures for tax reduction are as follows: For business establishments that calculate value-added tax (VAT) by the deduction method, when making VAT invoices for selling goods and services subject to VAT reduction, on the VAT rate line, write "8%"; amount; the total amount that must be paid by the buyer.

Based on the VAT invoice, the seller and the buyer declare tax according to the regulations.

For business establishments (including business households and individuals) calculating VAT according to the percentage method on revenue, when making sales invoices for goods and services that are subject to VAT reduction, in the column “Total amount” write the full amount of goods and services before reduction, on the line “total” write the amount that has been reduced by 20% of revenue, and note “reduced amount equivalent to 20% of the percentage rate for VAT calculation”.

Business establishments shall declare goods and services eligible for VAT reduction according to Form 01 in Appendix IV issued with Decree 15/2022/ND-CP together with the VAT declaration form.

When selling goods and services, taxpayers must make separate invoices for goods and services eligible for VAT reduction. If not, the seller will not be entitled to a VAT reduction.

The VAT reduction 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.

If the business establishment has issued an invoice and declared the tax rate, or the percentage rate for calculating VAT but has not enjoyed the reduction, the seller and the buyer must make a record or have a written agreement clearly stating the error; and the seller must make a new invoice to correct errors and deliver the new invoice to the buyer. Based on the new one, the two parties shall declare the tax.

For goods sold and services provided before February 1, 2022, the tax rate of 8% is not applicable (including cases in which taxpayers make invoices until February 2022 for goods and services sold/provided before February 1, 2022).

For invoices made before February 1, 2022, in which the taxpayers identify errors since February 1, 2022, the taxpayers will make a new invoice, and the tax rate at the selling time will be applied.

For business establishments that issue invoices with the wrong tax rate but taxpayers do not make a new invoice to correct and replace the former invoice, the tax agency will inspect and handle the case.

Determining deductible expenses upon CIT calculation

In addition to guiding the VAT reduction, Hanoi Tax Department has also guided the determination of deductible expenses upon calculation of corporate income tax (CIT).

Accordingly, enterprises and organizations that are CIT payers according to the provisions of the Law on CIT, are included in the deductible expenses when determining the taxable income of 2022 for expenses for donations for Covid-19 pandemic prevention and control activities in Vietnam through donation receivers as specified in Clause 2, Article 2 of Decree 15/2022/ND-CP.

The application to determine the expenses for donation includes a written confirmation of support or sponsorship, according to Form 02 in Appendix IV issued together with Decree 15/2022 or a document (in paper or electronic form) certifying the expenditure for support, sponsorship, signed and stamped by the representative of the business or organization receiving the donations; and other legal invoices and vouchers as prescribed by law.

Hanoi Tax Department also noted that in case the parent company receives support and sponsorship from member units to conduct support and sponsorship activities, the parent company and its members shall include the donations when determining CIT.

The parent company must submit a written record or document certifying the expenditure for support and sponsorship mentioned in Clause 4, Article 2 of Decree 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.

Units receiving donations and sponsorships are responsible for using and allocating the donations for the right purposes of Covid-19 prevention and control activities. In case the donation or support is used for the wrong purpose, these receivers will be handled in accordance with the law.