DOES A MICRO-ENTERPRISE SUBMIT THE FINANCIAL STATEMENT TO THE TAX AUTHORITIES?

Posted date: 14/09/2020

My company is established in the field of supplying plant varieties. There are less than 10 employees in my company. Our annual revenue is about VND 1.8 billion. It can reach VND 2.8 billion in high season. Our corporation income tax payment is based on the revenue. I would like to ask if my company has to submit the financial statement to the tax authorities. I look forward to hearing from FDVN Law Firm soon.

Thank you.

FDVN’s opinions:

Thank you for concerning FDVN’s legal services. After researching and studying the relevant legal documents, we would like to offer our opinions:

[1]. Does a micro-enterprise submit the financial statement to the tax authorities?

Firstly, the criteria identify small and medium-sized enterprises:

According to Clause 1, Article 6 of Decree No. 39/2018/ND-CP on the guidelines for Law on support for small and medium-sized enterprises, SMEs are classified by size, including micro-enterprises, small enterprises and medium-sized enterprises. “1. A micro-enterprise in the sector of agriculture, forestry and aquaculture and industry and construction has an annual average of 10 employers or fewer who have made contributions to social insurance and total annual revenue is not more than VND 3 billion or total capital is not more than VND 3 billion.”

Therefore, based on the above regulations as well as the information provided by you such as the business line, the number of employees, the annual revenue…, your enterprise is identified as a micro-enterprise.

Secondly, financial statements:

According to Circular No. 132/2018/TT-BTC Circular providing the guidance on accounting regimes of extra-small enterprises, “Financial reports are used for providing information about financial and business situations of extra-small enterprises, and for meeting managerial requirements of owners of these enterprises and state regulatory authorities.” it provides information about a micro-enterprises, including Assets; Liabilities; Owner’s equity; Revenues and incomes; Expenses; Profit, loss and distribution of business income.

Besides, it is stipulated in Clause 1, Article 13 and Clause 2, Article 14 of Circular No. 132/2018/TT-BTC that:

“1. On an annual basis, extra-small enterprises paying CIT calculated according to the method of calculation of CIT based on assessable income shall have to formulate financial reports and addenda thereto listed hereunder: Financial reports, Financial statement, Income statement, Addenda to financial reports, Balance sheet, Review report on fulfillment of obligations to the State Budget.

2. Financial reports and addenda thereto used by extra-small enterprises must be submitted to tax authorities having direct authority over these enterprises and registration bodies not later than 90 days from the end date of a financial year, and must be deposited with these enterprises according to laws on accounting in order to serve inspection and audit activities upon the request of competent regulatory authorities.”

On the other hand, Article 18 of this Circular specifies:

“1. Extra-small enterprises paying CIT calculated according to the method of calculation of CIT based on the CIT-to-sales ratio (%) shall not be required to submit financial reports to tax authorities.

2. Extra-small enterprises CIT calculated according to the method of calculation of CIT based on the CIT-to-sales ratio (%) shall implement reports required under laws on taxes. Duration and submission of preparation of reports shall be subject to laws on taxes.

3. In addition to legislative regulations on taxes, based on information about sales, salaries, wages and other contributions associated with salaries and wages, etc., extra-small enterprises may prepare accounting reports for business management and administration purposes.

4. If extra-small enterprises CIT calculated according to the method of calculation of CIT based on the CIT-to-sales ratio (%) choose to apply the accounting regime specified in Chapter II herein to meet their demands of management of their business activities, they shall have to prepare financial reports in accordance with regulations in force. Financial reports shall not need to be submitted to tax authorities, but shall be archived and deposited in accordance with regulations in force, and shall be used by these enterprises for inspection and audit purposes upon the request of competent authorities.”

Thus, base on the above regulations and information provided by you, it is clear that your company is a micro-enterprise, in normal circumstances, this company has to make the financial statement and apply to the tax authorities. If extra-small enterprises CIT calculated according to the method of calculation of CIT based on the CIT-to-sales ratio (%) choose to apply the accounting regime, the financial statements shall not need to be submitted to tax authorities, but shall be archived and deposited. Therefore, your company does not need to submit the financial statement to the tax authorities.

Above is Fdvn Law Firm's opinions for your request based on studying the relevant legal provisions. Hopefully, our advice would be helpful to you.

Legal advisor: Dinh Thi Thong

FDVN Law Firm

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