On 14 December 2022, General Department of Taxation (GDT) issued Instruction on implementation of obligation of advance tax on dividend distribution.

Advance tax on dividend distribution (“ATDD”)

Advance tax on dividend distribution is annual income tax that is paid in advance for distribution of dividend from incomes before paying annual income tax. ATDD shall be set as followed:

1. In accordance with article 23 (new) of law on taxation, If an enterprise distributes dividends to its domestic and foreign shareholders during the tax year, it shall withhold and pay as tax an amount equal to the product of the amount of the dividend grossed up by the tax on profit rate and multiplies by the appropriate annual tax rate as stated in new article 20 of law on taxation. ATDD in the current year that has been paid shall be allowed as tax credit for deductions with the annual income tax. If the tax credit exceeds annual income tax, the excess shall be allowed to be carried forward for deduction with the income tax of the following year.
2. Advance tax on dividend distribution shall not apply to qualified investment project (QIP) during annual income tax exemption period, including annual accumulated retained during the tax exemption period of QUIP that existed before 2020.
3. If the QIP after the annual income tax exemption period that entitled to incentive for paying annual income as per time-bound progressive rates distributes dividend from incomes before paying annual income tax to its shareholders, the QIP shall pay advance tax on dividend distribution as per the following time-bound progressive rates compared to the total tax amount to be paid:

• 25% for the 2 years
• 50% for the subsequent 2 years
• 75% for the final 2 years

4. If a company receives dividend that has paid taxes in accordance with paragraph 1, 2, and 3 above from another enterprise, the enterprise receiving the dividend shall record the amount of the dividend in its dividend account. When the enterprise distributes the dividend to its shareholders, the distributed dividend taken out of the dividend account shall be subject to ADTT.

Procedure for calculating ADTT

In the current tax year, if an enterprise distribute dividends, which come from different incomes, including from incomes during entire tax exemption period and/or during the 25%, 50% and 75% tax exemption periods and/or having paid annual income tax at a rate of 20% or 30% and/or profit in the current year, the enterprise shall follow the steps as followed:

Procedures for QIP

Step 1: Shall be taken from the retained earnings after paying annual income tax, in which the income tax was paid at a rate of 0%.

Step 2: Shall be taken from the retained earnings after paying annual income tax, as the following time-bound progressive rates compared to total income tax amount:

• 25% for the first 2 years
• 50% for the subsequent 2 years and
• 75% for the final 2 years

Step 3: Shall be taken from the retained earnings after paying annual income tax at a rate of 20% or 30%.

Step 4: Shall be taken from the income in the current year before paying annual income tax.

Procedures for enterprises other than QIP taxed at rate of 20% or 30%

Step 1: Shall be taken from the retained earnings after paying annual income tax at a rate of 20% or 30%.

Step 1: Shall be taken from the income in the current year before paying annual income tax.