The standard tax year is the calendar year. However, different accounting year-ends can be used if approval is obtained from the authorities.
The annual final CIT return and the audited financial statements must be filed no later than 90 days from the end of the financial year.
Payment of tax
Enterprises are required to make quarterly provisional CIT payments (no later than the 30th day of the next quarter) based on estimates. If the provisional quarterly CIT payments account for less than 80% of the final CIT liability, the shortfall in excess of 20% is subject to late payment interest (currently as high as 11% per annum), counting from the deadline for payment of the fourth quarter CIT liability.
Final payment of CIT is due with the final CIT return (i.e. the 90th day of the following financial year).
There are detailed regulations setting out penalties for various tax offences. These range from relatively minor administrative penalties to tax penalties amounting to various multiples of the additional tax assessed.
In practice, imposition of penalties has been arbitrary and inconsistent. However, in recent periods there has been a much tougher stance adopted by the tax authorities. Hence, where tax is paid late (e.g. as a result of a tax audit investigation), there is a significant likelihood of penalties being imposed.
Tax audit process
Tax audits are carried out regularly and often cover a number of tax years. Prior to an audit, the tax authorities send the taxpayer a written notice specifying the timing and scope of the audit inspection.
Statute of limitations
The general statute of limitations for imposing tax is ten years (effective 1 July 2013) and for penalties is five years. Where the taxpayer does not register for tax or commits evasion liable to criminal prosecution, the tax authorities can collect unpaid tax and penalties at any time.
The Ministry of Finance is gathering comments on the draft Tax Admin Law, and it is expected to be submitted for the National Assembly’s consideration in late 2018/early 2019 and to become effective in 2020.
Topics of focus for tax authorities
Transfer pricing is commonly discussed in the press, and the enterprises that are attracting the attention of the tax authority are generally multinational companies that have many inter-company transactions, have reported losses for many years, and/or are expanding businesses.
The regulations on the conditions to enjoy CIT incentives are complicated. The guidance to classify new investment and investment expansion (these are subject to different incentive regimes) is not entirely clear. In addition, the ability to apply tax incentives is conditional on compliance to the strict accounting system requirements. Taxpayers are required to self-assess their eligibility to the tax incentives. The tax authorities therefore in tax audits focus on reviewing the taxpayers’ fulfilment of the conditions.
Documentation of expenses
The tax authorities are strictly reviewing the documentation of expenses, including contracts, invoices, evidence of work done/benefit received, etc. Insufficient documentation is resulting in disallowance of input VAT credit/refund and CIT deductibility.
FCT on supply of goods
The customs authority has been requested to provide the tax authority with information of companies engaged in in-country import/export transactions in an effort to collect under-declared FCT arising from these transactions.
We have seen the tax authority seek to impose FCT on reimbursements of expatriate remuneration costs by Vietnamese entities. Companies need to ensure that supporting documents are available to show amounts have been reimbursed at cost.