Final Payment of Annual Profit Tax for FY2020

The deadline for the final annual profit tax payment is fast approaching, are you ready?

Are you aware of the new 50% penalty on final annual profit tax payments that are in excess of 10% of the total prepaid profit tax?

What should you do to minimize the risk of penalties on the excess?

The Minister of Finance Instruction No. 0819/MoF Implementing the Income Tax Law dated 10 February 2021 (the “Instruction”) reemphasizes that the final annual profit tax payment must be declared and paid when the financial statements are submitted, i.e. by 31 March 2021.

Although the Income Tax Law and its Instruction allow taxpayers to prepay their annual profit tax in two installments based on three options (option 1 – the actual profit incurred in the first or second six months, if the accounting report can be prepared; option 2 – the annual business plan; or option 3 – 50% of the previous year’s profit tax payment), with anybalance to be paid by 31 March, the Instruction imposes a 50% penalty on the balance if it is in excess of 10% of the total profit tax prepaid in the two installments.

Does the penalty apply for FY2020, or from FY2021 onwards?

There is no clear answer to this question. However, in our informal discussions with tax officials, they suggested that taxpayers contact the tax authority where they are registered to declare and pay the balance as soon as possible, even before submitting the financial statements (by 31 March 2021) in order to minimize the risk of a penalty sanction.

For more tailored approach to your specific situation, please contact the undersigned or your usual VDB Loi adviser.