According to the Government's Decree 126/2020 (effective from December 5, 12), if businesses pay low income tax in the first, second, or third quarter but the fourth quarter pays a high rate, especially sudden increases. The tax payment rate for the first 2020 quarters of the year is less than 1% of the total CIT payable, will be considered late.
Be careful if the fourth quarter has a sudden increase in profits for businesses with business characteristics focusing on the fourth quarter or season.
Provisions on temporary payment are under Decree 126 #
The total amount of corporate income tax temporarily paid for the first three quarters of the tax year must not be lower than 03% of the payable corporate income tax amount according to the annual settlement.
If the taxpayer underpaid the tax amount to be temporarily paid for the first 03 quarters of the year, the late payment interest shall be calculated based on the underpaid tax amount from the day following the last day of the time limit for temporary payment of corporate income tax of the third quarter. by the date of paying the outstanding tax to the State budget.
With this regulation, if the company pays low income tax in quarter 1, 2, 3 but the 4th quarter pays high rate, especially suddenly increases, making the tax payment rate in the first 3 quarters of the year lower than 75% of the total CIT payable. , will be considered late.
According to the old regulations, every quarter, businesses temporarily calculate the payable tax amount and must ensure to pay at least 80% of the settlement in the year before January 30 of the following year. Thus, businesses can be assured of production and business, speeding up at the end of the year and still comfortably pay tax according to the provisional amount, just review carefully before 1/30 next year. However, if according to Decree 1, every quarter, enterprises still temporarily pay CIT but until October 126, they must pay at least 30% of the annual settlement. If the company predicts that the fourth quarter's profit is not standard, the amount of deficits will be calculated from November 10 of that year.
This provision has two shortcomings #
First: Businesses with seasonal business activities, revenue and profit mainly focus on the fourth quarter (such as businesses selling Tet jam, Christmas sales, or manufacturing orders in the 4-2 quarter. But the 3th quarter is just finished for delivery ...), will have to spend money to pay taxes first, otherwise, interest will be penalized for late payment. equal 0,03% / day calculated on the amount of tax delayed payment while pre-sales and sales are not available.
Monday: Except for those with a good business forecast system, but most SMEs, or even large ones with seasonal characteristics, the fourth quarter's business results largely depend on the market. It is difficult to predict Q4 earnings.
Opinion from the regulator #
Responding to Decree 126, Mr. Nguyen Duc Huy, Deputy Chief of the General Department of Taxation, said that the General Department previously reported to the Ministry of Finance to submit to the Government to issue Decree 91/2014 / ND-CP (Decree 91). and submit to the Ministry of Finance for promulgation of Circular 151/2014 / TT-BTC, to abolish regulations on quarterly provisional corporate income tax declaration and annual finalization declaration, replacing with regulations on temporary payment of quarterly CIT and declaration Annual settlement declaration.
However, the Deputy Chief of the Office of the General Department of Taxation said that since the implementation of Decree 91, many enterprises do not comply and take advantage of this regulation on calculating late payment, not making quarterly temporary payment but to until the deadline for tax payment in the fourth quarter (normally on January 4 of the following year), before paying tax into the state budget. This leads to the arising CIT payable in the previous budget year being occupied and paid in the next budget year, affecting the annual state budget balance. At the same time, fairness in tax law enforcement is not ensured between well-complied enterprises and non-compliant businesses.
To overcome the above limitation, according to Mr. Huy, the Government has prescribed the calculation of late payment interest for provisional corporate income tax in the year, the year-end finalization declaration is amended at Point b, Clause 6, Article 8, Decree. Decree No. 126/2020 / ND-CP dated October 19, 10 of the Government as above.
This provision comes from the actual production and business activities of the enterprise. When doing business, enterprises all have annual production and business plans and plans, fully proactively determine / estimate the results of production and business activities in the year to implement the provisions of temporary payment. CIT in accordance with regulations.
“The official payable obligation will be determined when the company finalizes CIT at the end of the tax year. Cases in which enterprises have unusual results in production and business increase in the fourth quarter that the enterprises do not anticipate are not common ”, said Deputy Chief of the Office of the General Department of Taxation.
Regarding the validity of the above provisions, whether retroactively or not, Mr. Huy said that the General Department of Taxation will report to competent authorities for specific guidance according to the tax period (some enterprises apply the tax period according to the positive year. calendar, there are businesses from this year to 31/3 next year)