Decree No.41/2020/ND-CP on extending the deadline of tax and land rent fee payments for enterprises, individuals, and business households affected by COVID-19 was issued by the government on April 8. Dr. Su Ngoc Khuong, senior director at Savills Vietnam, explains the decree’s impact on the real estate market.
|Dr. Su Ngoc Khuong, senior director at Savills Vietnam |
Real estate enterprises requesting the government to extend the deadline on tax and land rental fee payments has highlighted the difficulties they are currently facing due to the double impact of the incomplete legal system and the pandemic.
However, the new government decree will benefit real estate enterprises who are currently constructing or have put projects into operation. For projects in the pipeline this extension will not yield practical results. On the other hand, the proposal to extend tax payment deadline by one year would only solve short-term problems because the gravest difficulty is about legal procedures. The government has been providing timely policies to support the enterprise community, however, enterprises proposals should be evaluated with the aim of crafting straightforward policies in the coming time.
In addition, I hope the government will consider to thoroughly resolve the legal issues and procedural bottlenecks hampering incoming projects in order to support enterprises in the medium- and long-term.
From the international and macro-perspective, many governments around the world have been rolling out support packages to buttress business operations and development, especially giving assistance in tax, credit, and extension for loan repayments. Some 80-90 per cent of businesses in Vietnam are now small or medium-sized. This means they are the main source of contribution to the state budget. Therefore, they should be able to access practical support from the government in mechanisms, orientations, and industry strategies.
In addition, the government should also pay more focus on the private sector – the group that is filling in an increasingly important role in the development of the Vietnamese and global economy.
For real estate enterprises, this tough time is also a substantive test of their financial and crisis management capacities, and the most resilient players will be apparent by how swiftly they can revert to stable operations after the pandemic. For individual investors it is more necessary than ever to carefully consider their capital flows because the epidemic is causing the cutting of jobs, reduction of salaries, resulting in lower consumption and demand for properties.
For strong financial investors, this time could be a good opportunity to splash out and acquire more assets. However, they also need to consider longer-term plans for the times following the epidemic because the whole economy and the market will need time to recover. Investors’ profit expectations should take this timeline into calculation.
The Vietnamese government has been effectively controlling the pandemic. However, business activities and life have not yet returned to normal – social distancing is still encouraged, as well as wearing face masks and staying at home unless necessary, and many businesses are not allowed to re-open just yet.
In addition, Vietnam also has to depend on the disease control of the whole world, with many restrictions on international airlines flights in and out of Vietnam, import and export of goods and food, and foreign investment deals.
In the real estate sector, domestic consumption is not expected to turn up in the short term. I expect that it will not be until the end of this year, when the pandemic is completely under control in Vietnam and around the world, that the economy will return to stability, then gradually start developing, with positive signs again in early or mid-2021.
Notable points of Decree 41
Those eligible for the extended deadline for tax and land rental fee payment include:
- Taxpayers who have production activities in agriculture, forestry, and aquaculture; food processing; textiles; costumes; leather and related items; wood and cork, except for furniture; straw and plaiting materials; paper; rubber and plastics; production of other non-metallic mineral items; basic metals; machining; treatment and coating of metals; manufacturing of electronic items, computer and optical products; manufacturing automobiles and other motor vehicles; furniture; construction;
- Taxpayers who have business activities of transportation and storage; accommodation and catering services; education and training; health services and social support services; real estate activities; labour service and employment activities; travel agency, tour operator and support services related to advertising and organising tours; art, entertainment, and creation; libraries, archives, museum, and other cultural activities; sports, recreation; cinema;
- Taxpayers who manufacture products on the list of prioritised supporting industries; manufacturing of key mechanical products;
- Micro- and small-sized enterprises; and
- Credit institutions and branches of foreign banks which provide support to their customers in accordance with the instruction of the State Bank of Vietnam during the COVID-19 pandemic.
The deadline for tax and land rental fee payment shall be extended as below:
- VAT obligation for the period from March to June 2020 or the first and second quarters of 2020 shall be extended by five months;
- The deadline for settling corporate income tax (CIT) obligation for the 2019 fiscal year and provisional CIT for the first and second quarters of 2020 shall be extended by five months from the statutory deadline. In case they have already settled their CIT obligation for the 2019 fiscal year, taxpayers are allowed to offset other tax obligations;
- The deadline for settling VAT and personal income tax (PIT) obligations of individuals or household businesses for 2019 shall be no later than December 31, 2020; and
- The deadline for settling land rental fee obligations in the first period of 2020 shall be extended by five months from May 31, 2020.
- Taxpayers must submit the application with the form enclosed to their direct managing tax authority together with the submission of tax declaration form no later than July 30, 2020; and
- The tax authority will only respond in case taxpayers do not qualify for extension of tax payment.
Source: Mazars Vietnam