What You Need to Know About Late Corporate Income Tax Payments

Late corporate income tax (CIT) payments not only incur penalties and interest but also pose significant risks for Vietnamese enterprises. Understanding the latest regulations and handling procedures can help businesses minimize losses and ensure effective compliance with tax laws.

Late CIT Payments: Interest Calculation Cases and Methods

Cases Subject to Late Payment Interest

Interest on late CIT payments is applied when a business fails to fully pay the provisional or finalized CIT amount within the stipulated deadline.

How to Calculate Late Payment Interest

Interest is calculated using the formula:

Late Payment Interest = Outstanding Tax Amount × Number of Days Late × Interest Rate (%) / 365

Interest Rate: Currently set at 0.03% per day (per Decree 126/2020/ND-CP, latest update).

Risks of Late CIT Payments

1. Increased Financial Costs

Interest and penalties increase financial burdens, impacting business cash flow.

2. Reputation Damage and Challenges in Securing Loans

Late tax payments harm a company’s reputation with banks and partners, complicating loan approvals or contract agreements.

3. Legal Risks and Enforcement Actions

Prolonged delays in tax payments can lead to account freezes, asset seizures, or even business suspension.

Exemptions from Late Payment Interest

1. Damages Due to Natural Disasters or Pandemics

Businesses suffering material losses from natural disasters or pandemics (e.g., COVID-19) may receive a tax payment extension without interest for up to two years (Article 62, Tax Administration Law 2019).

2. Relocation Mandated by Authorities

Businesses halting operations due to mandatory relocation under government decisions may receive a one-year interest-free extension.

3. Errors in the Electronic Tax System

If delays are caused by technical issues in the electronic tax portal (thuedientu.gdt.gov.vn), businesses are exempt from interest if they provide evidence.

Key Information Under New Regulations

1. CIT Payment Deadlines

Under Decree 126/2020/ND-CP, businesses must adhere to specific CIT payment deadlines to avoid interest:

- Quarterly Provisional Payments: Due by the 30th of the first month of the following quarter (e.g., Q1 taxes due by April 30).

- Annual Finalization: Due by March 31 of the following year (e.g., 2024 taxes due by March 31, 2025).

- Extensions for Special Cases: Businesses can request a 30-day extension for valid reasons (e.g., bank transfer errors), but applications must be submitted before the deadline.

2. Tax Payment Methods

Businesses can use multiple channels to ensure timely payments:

- Electronic Tax System: Use thuedientu.gdt.gov.vn for fast payments and electronic record-keeping.

- Direct Submission to Tax Authorities: For businesses not using e-tax, original documents must be submitted to local tax offices.

- Bank Transfers: Ensure accurate tax codes and payment details to avoid errors.

3. Documentation and Explanations

When audited, businesses must provide complete documentation to avoid retroactive taxes or interest:

- Required Documents: Tax payment receipts, related invoices, and CIT declaration forms.

- Retention Period: At least 10 years, as mandated by the Tax Administration Law 2019, for traceability.

- Explanation Process: For delays due to objective reasons (e.g., system errors), businesses must submit an explanation with evidence within 30 days of receiving a notice.

4. Tax Audits and Notifications

Tax authorities may conduct regular or surprise audits to ensure compliance:

- Advance Notification: Tax authorities provide at least 15 days’ notice for scheduled audits, except in surprise cases.

- Audit Scope: Focuses on CIT data, payment timelines, and related documents.

- Technology Support: Businesses should use accounting software (e.g., MISA, Fast) to track deadlines and prepare reports, reducing errors.

👉 Learn more about our services here.

Contact Us for Detailed Consulting:

☎️ +84 93 594 8688

📧 Email: nam.phan@waco.com.vn

🌐 Website: https://www.waconsulting.vn/

📌 18th Floor, Vincom Center Đồng Khởi, District 1, Ho Chi Minh City

🏢 2nd Floor, Saigon Paragon Building, Tân Phú Ward, District 7, Ho Chi Minh City