If you do not pay provisional CIT for the first, second, and third quarters but in the fourth quarter pay 80% of the CIT payable according to the annual settlement, will you be fined?

If an enterprise does not pay provisional CIT for the first, second, and third quarters but in the fourth quarter pays 80% of the CIT amount payable according to the annual settlement, will it be fined?

Pursuant to Clause 1 of Article 55 Law on Tax Administration 2019 stipulates:

Tax payment deadline

1. In case a taxpayer calculates tax, the tax payment deadline is the last day of the tax declaration submission deadline. In case of additional tax declaration, the tax payment deadline is the deadline for submitting the tax declaration of the tax period containing errors or omissions.

For corporate income tax, temporarily pay quarterly, the tax payment deadline is the 30th of the first month of the following quarter at the latest.

And based on point b, clause 6, Article 8, Decree 126/2020/ND-CP, amended by Clause 3, Article 1 Decreeh 91/2022/ND-CP as follows:

Tax types declared monthly, quarterly, annually, each time a tax liability arises and tax finalization declaration

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6. Taxes and revenues declared in annual settlement and settlement up to the time of dissolution, bankruptcy, termination of operations, contract termination or enterprise reorganization. In case of converting the type of enterprise (excluding equitized state-owned enterprises) and the converting enterprise inherits all tax obligations of the converted enterprise, it is not required to declare tax finalization until the decision on enterprise conversion is made, the enterprise declares final settlement at the end of the year. Specifically as follows:

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b) Corporate income tax (except corporate income tax from capital transfer of foreign contractors; corporate income tax declared according to the ratio method on revenue each time it arises or monthly according to the provisions of Point dd, Clause 4 of this Article). Taxpayers must determine for themselves the amount of temporarily paid corporate income tax for the quarter (including temporarily allocating the amount of corporate income tax to the provincial area where there is a dependent unit, business location, or place with transferred real estate other than where the taxpayer is headquartered) and have the temporarily paid tax amount deducted from the amount payable according to the annual tax settlement.

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The total amount of temporarily paid corporate income tax for 04 quarters must not be lower than 80% Corporate income tax amount payable according to annual settlement. In case the taxpayer underpays the tax amount that must be temporarily paid for 04 quarters, he/she must pay late payment interest calculated on the underpaid tax amount from the day following the last day of the 4th quarter corporate income tax temporary payment deadline to the day immediately preceding the date of payment of the outstanding tax amount to the state budget.

From the above regulations, according to the Law on Tax Administration, CIT must be temporarily paid no later than the 30th day of the first month of the following quarter.

However, Decree 91/2022/ND-CP mentions that businesses determine their own temporarily paid corporate income tax, just ensuring that the total amount of temporarily paid corporate income tax for 04 quarters is not lower than 80% of the corporate income tax amount payable according to the annual settlement.

At the same time, there are currently no regulations on temporary payment of corporate income tax (enterprises calculate and temporarily pay themselves quarterly, do not require tax declaration documents when temporarily paying) and the time to calculate the potential for late payment of corporate income tax for late payment is calculated from the day following the last day of the deadline for temporary payment of corporate income tax in the fourth quarter to the day immediately preceding the date of payment of the outstanding tax amount to the state budget.

Therefore, it can be seen that if an enterprise does not pay provisional corporate income tax for the first, second, and third quarters but in the fourth quarter pays 80% of the corporate income tax payable according to the annual settlement, there is no basis to penalize the enterprise.

Which incomes are subject to corporate income tax?

The incomes subject to corporate income tax are specified in Article 3 of the Law on Corporate Income Tax 2008, amended by Clause 1, Article 1 of the Law amending Tax Laws 2014, including:

(1) Taxable income includes income from production and trading of goods and services and other income specified in Clause 2 of this Article.

(2) Other income includes: income from capital transfer, transfer of capital contribution rights; income from real estate transfer, investment project transfer, transfer of rights to participate in investment projects, transfer of rights to explore, exploit and process minerals; income from property use rights, property ownership rights, including income from intellectual property rights according to the provisions of law; income from transfer, lease, and liquidation of assets, including valuable papers; income from interest on deposits, loans, foreign currency sales; Revenues from bad debts that were written off are now recoverable; proceeds from liabilities whose owner cannot be identified; omitted business income from previous years and other income.

Vietnamese enterprises investing abroad transfer their income after paying corporate income tax abroad to Vietnam. For countries with which Vietnam has signed an Agreement to avoid double taxation, it shall comply with the provisions of the Agreement; For countries where Vietnam has not signed a Double Taxation Avoidance Agreement, in case the corporate income tax in the country to which the enterprise moves has a lower corporate income tax rate, the difference compared to the corporate income tax amount calculated according to Vietnam’s Corporate Income Tax Law will be collected.

Where is corporate income tax paid?

According to Article 12 of the Law on Corporate Income Tax 2008, enterprises pay tax at the place of headquarters.

In case an enterprise has a dependent accounting production facility operating in a province or centrally run city other than the area where the enterprise has its head office, the tax amount is calculated and paid according to the cost ratio between the place where the production facility is located and the place where the head office is located.

Decentralization, management, and use of revenue sources are carried out in accordance with the provisions of the State Budget Law.