Newsletter

Decree No. 146/2017/ND-CP (Decree 146) amending some articles on Decree No. 100/2016/ND-CP dated 1^st July 2016 and Decree No. 12/2015/ND-CP dated 12^th February 2015

On 15^th December 2017, the Government issued Decree 146 with the following contents;

Goods and services that are not subjects for VAT

• Exported goods that are natural resources/minerals which have not been processed to other products
• Exported goods which are directly and mainly processed from natural resources/ minerals where the total value of natural resources/ mineral plus energy cost accounts for at least 51%, except for:
  • Exported goods processed from natural resources/ minerals which are either directly exploited or purchased and then processed by the trading company or by outsourcing manufacturing company, where during the manufacturing process the goods have been transformed into other products before being processed into exported goods. If the requirements stated in Point c, Clause 2, Article 12 of the Law on VAT are met, these goods are subjects for 0% VAT.
  • Exported goods that are not mainly processed from natural resources/ minerals. If the requirements stated in Point c, Clause 2, Article 12 of the Law on VAT are met, these goods are subjects for 0% VAT.

Regulation on VAT refund

• An enterprise which imports goods for re-exports with deductible input VAT balance over VND 300 million can get VAT refund monthly (in case of monthly VAT declaration) or quarterly (in case of quarterly VAT declaration).

Decree 146 also mentions that exported goods and imported goods for re-export are not entitled to VAT refund if customs procedures are not carried out at the customs office as regulated.

Non-deductible expense for CIT purpose

Life insurance for employees and contribution to pension funds/pension insurance are deductible up to VND 3 million/month/person, under the condition that contribution amount and the conditions to get these allowances are stated clearly in one of the dossiers specified in this Decree.

Decree 146 comes into force from 1^st February 2018.

Official Letter No. 78925/CT-THHT (OL 78925): Required supporting documents for expenses incurred oversea for CIT purpose

On 6^th December 2017, Hanoi Department of Taxation issued OL 78925. This OL states that expenses incurred oversea are deductible for CIT if (a) these expenses are supported by legal documents as regulated by the country where expenses incurred and (b) they meet the requirements guided in Article 4 of Circular No. 96/2015/TT-BTC issued by the Ministry of Finance. In this case, the supporting documents need to be translated into Vietnamese in accordance with Clause 4, Article 5 of Circular No. 156/2013/TT-BTC.

Official Letter No. 79331/CT-THHT (OL 79331): VAT on supporting money

According to OL 79331 issued by Hanoi Department of Taxation dated 8^th December 2017, when a company signs a contract with other company (partner) and receives supporting money to pay salary to the employees of the company, the company does not need to declare and pay output VAT for such cash receipt. The company needs to prepare receipt document as guided in Clause 1 Article 5 Circular No. 219/2013/TT-BTC.

However, in case the Company uses the money for promotion activities of products/ goods for its partner, the company is required to issue VAT invoice, declare and pay tax for the amount of cash received from the partner.

Official Letter No. 79003/CT-TTHT (OL 79003): Personal Income Tax (PIT) of foreign employees

On 6^th December 2017, Hanoi Department of Taxation issued OL 79003 that answers PIT question on a case where a foreign employee has been assigned to work in Vietnam from parent company in Japan and the salary is paid by Vietnamese company.

In this specific case, an appointment letter and an agreement between Vietnamese company and parent company in Japan state the following conditions:

(1) Vietnamese company pays part of the salary of a foreign employee by transferring money directly to his bank account in Vietnam.

(2) Japanese company pays another part of the salary of a foreign employee by transferring directly to his bank account in Japan. Then, Vietnamese company reimburses this amount to parent company.

1. PIT declaration:

Vietnamese company must withhold, declare and pay PIT on the total income of foreign employee by using form 05/KK-TNCN (Circular No. 92/2015/TT-BTC dated 15^th June 2015 issued by Ministry of Finance).

2. Consulting fee about PIT for foreigner

In case the Company signs PIT consulting contract for a foreigner or group of foreigners:

• CIT:  This expense is neither related to business activity of the company nor considered as welfare expense to employees. Therefore, the consulting fee is not deductible expense for CIT purpose.
• PIT: It is taxable income of foreigners for PIT purpose.

Official Letter No. 79109/CT-TTHT (OL 79109): VAT and CIT treatment of gifts given to employees/clients

OL 79109 issued by Hanoi Department of Taxation dated 7^th December 2017 handles tax treatment of corporate gifts given to employees/clients in Mid-autumn Festival that are stated in the internal regulations of the Company.

Value added tax: The Company must issue VAT invoices using the taxable prices of the same kind of goods or equivalent goods at the time of giving gifts to its clients/employees.

Corporate income tax: Gift expenses are deductible for CIT if all the conditions listed in Article 4 Circular No. 96/2015/TT-BTC issued by Ministory of Finance are met.

Official Letter No. 83303/CT-THHT (OL 83303): CIT incentives

On 28^th December 2017, Hanoi Department of Taxation issued OL 83303 with the following points:

This OL handles a case in which a Company has expanded a project in Thang Long Industrial Zone, Hanoi and the cost of its expansion project equals 20% as compared to the total cost of its fixed assets before expanding. The OL states, in this case, the Company can choose to get tax exemption for 2 years and tax incentives of 50% in the following 4 years on the income earned from expansion project. The detailed regulation is noted in Clause 4 Article 10 Circular No. 96/2015/TT-BTC dated 22^nd June 2015 and Article 6 Circular No. 151/2014/TT-BTC issued by the Ministry of Finance.