Newsletter

Foreign Contractor Tax (FCT)

Consulting service via internet is subject to FCT

On 03^rd February 2020, Ho Chi Minh Department of Taxation issued Official Letter No. 801/CT-TTHT (OL 801), which handles the case that a company abroad provides logistics consulting service to the company in Vietnam via internet. This service is subject to FCT with VAT and CIT rate of 5% each (according to Article 12 and 13 of Circular No. 103/2014/TT-BTC).

In case the service fee is paid in foreign currency, the fee for calculating FCT must be converted into Vietnamese Dong using selling rate at the commercial banks at the payment date.

In case FCT is paid by the company in Vietnam on behalf of the foreign contractor, the company in Vietnam is allowed to declare VAT deductible and record CIT expense where the expenses meet the requirements stated in Article 14 and 15 of Circular No. 219/2013/TT-BTC and Clause 2.37, Article 4 of Circular No. 96/2015/TT-BTC.

Value Added Tax (VAT)

Investment project behind schedule must be adjusted before applying for VAT refund

According to Official Letter No. 1393/TCT-KK (OL 1393) issued by the General Department of Taxation on 01^st April 2020, a company having a new investment project that meets the regulation about tax and investment shall be refunded input VAT incurred in the investment period. In case the investment project is behind schedule in comparison with the schedule registered in Investment Registration Certificate, before submitting VAT refund dossier, the company must send the proposal in writing to the investment registration department in order to adjust the schedule of the investment project, according to Article 46 of Law on Investment No. 67/2014/QH13.

Corporate Income Tax (CIT)

Expenses for foreign employees without work permit

Official Letter No. 26515/CT-TTHT (OL 26515) issued on 23^rd April 2020 by Hanoi Department of Taxation has the regulation about expenses for foreign employees who have not got the work permits.

According to the OL 26515, expenses paid for foreign employees who have not got the work permit are considered as non-deductible for both VAT and CIT purpose unless these employees are internally transferred and belong to the list of 11 industries in the Vietnam – WTO commitments.

Investment

Recording of expenses paid on behalf by the investors abroad

According to the Official Letter No. 1068/CT-TTHT issued on 09^th April 2020 by Bac Ninh Department of Taxation, in order to contribute capital by cash to establish a company in Vietnam, the foreign investor must open a direct capital account at a commercial bank in Vietnam and all transactions related to the capital contribution must be conducted via this account. Accordingly, in case the parent company abroad paid some expenses before the establishment on behalf of the company in Vietnam, such as factory rent, consulting fee for establishment, … to suppliers, the payment on behalf (which shall be charged back to the company in Vietnam) is not recorded as capital contribution of the parent company since it does not meet the above requirements.

Amendments to the list of industries benefitting from investment incentives

On 30^th March 2020, the Government issued Decree No. 37/2020/ND-CP, to add some supplementations to the list of industries of small and medium enterprises (SME) benefitting from investment incentives:

1. Investment in products distribution chains of SME;
2. Investment in business incubator for SME;
3. Investment in technical support service for SME;
4. Investment in common workplace for start-up SME.

This Decree comes into effect from 15^th May 2020.

List of 65 public services provided via National Public Service Portal

On 24^th March 2020, the Prime Minister issued Decision No. 411/QD-TTg to approve the List of public service provided via National Public Service Portal. Now companies and individuals can perform some administrative procedures via this portal such as enterprise establishment registration, license fee declaration, stamp using, changing, canceling registration, work permits issuance to foreign employees, social insurance code issuance for companies, registration and adjustment for public insurance, social insurance book and  health insurance card issuance, …

This Decree comes into effect from the signing date.