Why are many businesses not interested in applying for tax extensions?

Dang Ngoc Minh, Deputy Director of the General Department of Taxation

The deadline for receiving the request for tax extension under Decree No. 41/2020/ND-CP has passed. Could you please tell us the result of receiving the petition as well as the total amount of tax extended?

- According to data sent back from tax authorities across the country, as of July 30, the whole country had a total of 179,247 requests for extension, of which 125,152 requests were from enterprises and 54,095 individual requests for renewal.

On that basis, the total amount for the extension hit 53,645 billion VND. Specifically, value added tax of enterprises was 30,084 billion VND, of which, value added tax was extended in March is 5,385 billion; quarter one is 4,556 billion VND; April is 4,097 billion VND; May is 5,714 billion VND; June was 7,549 billion VND; Q2 is 2,781 billion VND.

Along with that, corporate income tax amount of the enterprises was 20,547 billion VND, of which, the corporate income tax payable under the tax finalization in 2019 is extended to be 10,268 billion VND.The extended corporate income tax amount to be temporarily paid in quarter 1/2020 is 10,279 billionVND.

In addition, land rental to be extended was 3,382 billion VND. The extended value-added tax and personal income tax amount was 629 billion VND.

As of July 30, 2020, the country had a total of 179,247 requests for extension, of which 125,152 were requested by enterprises and 54,095 requested by individuals. Source: Internet.

From the data, it can be seen that, despite the expiration of the deadline to submit the application form, the tax amount extended to taxpayers did not meet the original plan of the Ministry of Finance (180,000 billionVND). Could you tell us the cause of this?

- The number of requests for tax deferral was lower than the initial estimate for many different reasons, including:

Firstly, Decree No. 41/2020/ND-CP is just extending the tax payment deadline, not reducing the tax, so many businesses may find the amount is not large and do not apply for renewal. That is not to mention that when applying for a tax extension, it can lead to many other problems related to the financial situation of the business. Therefore, many businesses are not "interested" in the filing of tax deferral.

Second, the serious impact of the Covid-19 pandemic affects most businesses in the fields of tourism, real estate, exports and large-scale enterprises. That is, not all businesses are eligible for tax extension, incurring tax obligations. Therefore, most businesses with large amounts of tax incurred can apply for renewal. Still, businesses not seriously affected are still operating moderately, though few but still having revenue, if they are extended, will be taxed until the end of the year. This is the time when businesses have to do a lot of spending, so the pressure will be greater. The general mentality of business owners is they want to pay taxes in installments to avoid accruing them once at the end of the year because they can then lose their liquidity.

If there is an idle money source in the condition of being unable to invest in the period affected by the Covid-19 pandemic, the enterprise will choose the tax payment option, not an extension.

Third, among small and micro enterprises that fulfilled tax obligations prior to the extended period from March, not all businesses eligible for the tax extension have a tax liability. Only most enterprises with large amounts of tax incurred are required to apply for the extension.

In addition, most businesses and taxpayers have difficulties in production and business due to the impact of the pandemic, resulting in no revenue and no tax, leading to no need to request a tax extension.

Fourth, for enterprises that are obliged to pay land rent, they often sign land lease contracts under the annual land rental payment regime. Therefore, they may have already paid their land rent for this year so do not need to extend the land rental payment.

The second wave of the Covid-19 pandemic has hit Vietnam. This will definitely affect the operation, production and business situation of businesses. What measures will the tax industry take to support taxpayers?

- Over the past time, to support and reduce difficulties for enterprises and strictly comply with the provisions of law, the General Department of Taxation has submitted to the Ministry of Finance to submit to the Government for review to promulgate according to its competence many types of exemption documents, reduction of fees, charges and taxes. Specifically: reduction of fees for licensing the establishment and operation of banks, credit institutions, banking fees; exemption of license fees for small and medium enterprises and business households; tax extension according to Decree No. 41/2020/ND-CP.

On that basis, the General Department of Taxation will continue to study and review measures to support enterprises and taxpayers based on the actual situation to report to the Ministry of Finance for timely proposal to the Government and the National Assembly to issue policies to support enterprises to overcome difficulties and restore production and business.