Implement the “3 on the spot” option at enterprises that have received the enthusiastic response of workers while maintaining production and business and improving income, and at the same time ensuring Covid-19 prevention and safety. Many businesses have implemented and increasingly replicated this plan.
According to a recent report “Here’s how businesses in Vietnam overcome the challenges of Covid-19 with “3 on-the-spot” measures” by Vietnam Insider. Before this new option being approved by the Ministry of Health and guided by the local competent authorities, a production under “3-on-the-spot” option is conducted as per the guideline.
In addition to finance, material and food supplies, enterprises should concern the following matters for production under the “3-on-the-spot” option:
a. Set up a steering committee of COVID-19 prevention inside the enterprises.
b. Set up hygiene procedures in production and living, procedures for receiving materials, supplies, foods from outside suppliers, emergency plans when having F0 in the enterprises, etc. based on 15 criteria prescribed in Decision No. 2194.
c. Set up communication channel with Centers for Disease Control in the location where the enterprises operate.
d. Frequently update the competent authorities’ rules, guidance regarding the production under the “3-on-the-spot” option in order to solve the matters timely and properly. For instance, in Binh Duong province, the competent authorities frequently issue official dispatches ruling eligible conditions for the production under the “3-on-the-spot” option; management and supervision tasks with respect to the enterprises; procedures for an enterprise applying the production under a “3-on-the-spot” option wants to cease the operation and how to minimize risks of COVID-19 infection when the employees return to their home.
e. Enterprises’ tax-deductible expenses:
In principle, expenses are eligible to be deductible expenses if all of the following conditions are satisfied (i) expenses incurred for business purposes; (ii) have legal invoices, documents; and (iii) have a proof of payment made on a non-cash basis with respect to purchase-invoices with the value from VND20 million or more.
The current Corporate Income Tax (“CIT”) regulations provide certain exceptions:
- Expenses satisfy all of the mentioned conditions, but they are subject to subject to limitations on deduction. For instance, direct expenses paid for the employees’ welfare (e.g., expenditures on supporting employees’ families affected by natural disasters, hostilities, accidents, illness, etc.) must not exceed actual average one-month-salary in a tax year.
- Expenses that are not relevant to assessable revenue, but are treated as deductible expenses. For instance, actual expenses on HIV/AIDS prevention at workplace: expenses on provision of training in HIV/AIDS prevention for employees, fees for HIV consultation, examination and testing, and expenditure on supporting employees who are HIV sufferers.
- When enterprises purchase goods, services from business individuals, households having revenue under a threshold subject to Value Added Tax (100 million/year) that do not have legal invoices, the enterprises are allowed to prepare a list of purchased goods and services in prescribed form, these expenses are treated as deductible expenses.
During an application of the production under a “3-on-the-spot” option, in a short time, enterprises have made payments for many expenses (i) SARS-CoV-2 rapid tests; (ii) sanitizer liquids and other medical supplies; (iii) expenses paid for purchase of the employees’ belonging (such as bed nets, blankets, pillows, mats, etc.); (iv) 3 meals a day for the employees; (v) expenses paid for hotel renting, dormitories, other concentrated residences, etc.
Under the current regulations, it is unclear whether the above expenses can be considered as (i) expenses incurred for business purposes; or (ii) expenses paid for the employees’ welfare that are subject to a limitation of an actual average one-month-salary in a tax year? Should the CIT regulations provide clearly that expenses related to production, COVID-19 prevention are deductible expenses (or at least similar to the rule applicable to expenses on HIV/AIDS prevention at workplace) in order to reduce the enterprises’ tax risks?
In addition, due to strict social distancing measures, the enterprises need to buy goods, services from business individuals, households without legal invoices.
Under the CIT regulations, it is unclear whether a revenue under a threshold subject to Value Added Tax (100 million/year) means (i) a revenue applicable to business individuals, households themselves; or (ii) a yearly revenue applicable to transactions between the enterprise and business individuals, households.
If it is a revenue applicable to business individuals, households, which documents do the enterprises need to obtain from business individuals, households for presenting to the tax authorities as requested.
For further information, you may contact Ms. Uyen Tran, Partner at BR LAW FIRM (VIETNAM), email: email@example.com