Newsletter

Corporate Income Tax (“CIT”)

Exemption from Master File preparation in case the related parties do not belong to one’s multinational Group

On 30 November 2022, Hanoi Tax Office issued Official Letter No. 59003/CTHN-TTHT regarding preparation of Master file. Details are as follows:

According to Clause 4, Article 18 of Decree No. 132/2020/ND-CP, the arm’s length price (of related transactions) determination dossier includes a global profile detailing information on the business activities of the multinational group, policies/methods of profit distribution, determination of transaction prices within the Group (the “Master file”). However, in case the related parties do not belong to one’s multinational group, Master file in accordance with Appendix III of Decree No.  132/2020/ND-CP is not required.

Income eligible for tax incentives of software production

On 8 December 2022, Hanoi Tax Office issued Official Letter No. 60516/CTHN-TTHT on CIT incentives for software manufacturing enterprises. Details are as follows:

According to Clause 2, Article 10 of Circular No. 96/2015/TT-BTC, in case an enterprise is entitled to tax incentives due to satisfying conditions on preferential industry (software production), in addition to income from software production, miscellaneous incomes such as income from sales of scraps related to software products, foreign exchange gains directly related to revenue and costs of software production, interests income from on-demand deposits (in banks), and other directly related incomes are also subject to tax incentives.

Foreign Contractor Tax (“FCT”)

Use of foreign logistics suppliers is subject to 2% FCT

On 25 November 2022, Hanoi Tax Office issued Official Letter No. 57839/CTHN-TTHT guiding FCT policy related to use of foreign logistics suppliers. Details are as follows:

In case forwarding company B (overseas) generates income from providing international logistics services from Vietnam to abroad, based on a contract signed with a Vietnamese entity, company B is subject to the foreign contractor taxation obligations prescribed in Clause 1, Article 1 of Circular No. 103/2014/TT-BTC.

In case forwarding company B fails to satisfy one of the conditions mentioned in Article 8 of Circular No. 103/2014/TT-BTC, the Vietnamese entity is responsible for withholding and paying FCT on behalf of the foreign contractor, at the tax rate of 2% of income from international logistics services, as guided in Article 13 of Circular No. 103/2014/TT-BTC.

Revenue subject to CIT is the total revenue excluding VAT received by the foreign contractor/sub-contractors, excluding other tax payables. Revenue subject to CIT includes expenses paid by the Vietnamese party on behalf of the foreign contractor/sub-contractor (if any) according to the provisions of Item a, Clause 1, Article 13 of Circular No. 103/2014/TT-BTC.

Foreign airlines selling tickets directly to passengers in Vietnam are subject to FCT

On 6 December 2022, Hanoi Tax Office issued Official Letter No. 59940/CTHN-TTHT on FCT policy. Details are as follows:

In case an enterprise purchases air tickets online from a foreign airline (for its Director to go on a business trip), in case the foreign airline sells the tickets through an agent/office in Vietnam, the agent/office is responsible for withholding and paying FCT (according to Clause 2, Article 4 of Circular No. 103/2014/TT-BTC).

However, in case the foreign airline sells the tickets directly to the enterprise (not through an agent or office in Vietnam) and the foreign airline does not have tax registration in Vietnam as prescribed in Article 76, 77, 78, 79 Circular No. 80/2021/TT-BTC, or failing to meet the conditions to declare taxes directly as prescribed in Article 8 of Circular No. 103/2014/TT-BTC, the enterprise must withhold and pay FCT on behalf of the foreign airline.  Applied CIT rate is 2% of income from ticket sales (Clause 2, Article 13 of Circular No. 103/2014/TT-BTC).

Management of foreign exchange, labor, social insurance

Submission deadline of foreign loan report and foreign loans require registration with the State’s budget

On 15 November 2022, the State Bank of Vietnam (SBV) issued Circular No. 12/2022/TT-NHNN regarding foreign borrowing and loan repayment of enterprises. Details are as follows:

1. Borrowers’ reporting requirements:

Every month, no later than the 5th of the month following the reporting period, the Borrower must report the performance of short, medium and long-term loans through the online Portal. In case the Borrower cannot submit the online report because the Portal encounters technical errors, the Borrower must instead send a written report, in accordance with applicable regulations.

Circular No. 12/2022/TT-NHNN takes effect from 15 November 2022. Therefore, the first reporting period is November 2022 (the deadline for submitting the report is 5 December 2022, figures reported for November 2022 are loans occurred in October 2022 and November 2022; opening balance of the November 2022 reporting period is the ending balance of the 3^rdquarter of 2022). Violation of regulations on foreign borrowing and repayment in general, and reporting requirements in particular, shall be penalized according to applicable regulations.

2. Loans that must be registered with SBV include:

• Foreign medium and long-term loans.
• Short-term loans whose principal repayment term was extended such that total loan term is over 01 year.
• Short-term loans that have no extension agreement but have outstanding principal balance (including interests) after 01 year from the date of first disbursement, unless the Borrower completes repayment of the abovementioned balance within 30 (thirty) business days from the date of 01 year from the date of first disbursement. (Changed compared to the current Circular No. 03/2016/TT-NHNN: within 10 (ten) days from from the date of 01 year from the date of first capital withdrawal).

3. Cases in which changes of foreign loans must be registered:

A Borrower must register changes to foreign loans with SBV in case any contents registered in the loan registration/confirmation of changes to foreign loans Form (submitted to SBV) have changed, except:

• Change of loan disbursement date and principal repayment date within 10 working days compared to information registered with SBV;
• Change of the Borrower’s address but the province/city where the Borrower’s head office is located remains the same;
• Change of lender information in a syndicated loan with appointed of representatives of the lenders, (however if one lender is the representative of the other lenders, and the change of information alters the role of the representative, then it must be registered);
• Change of commercial name of the account service/secured transaction service providing bank;
• Change of interest and fee payment schedule where the method of determining interests and fees remains the same;
• Change of the loan amount, repayment amount of principal, interests and fees within 100 currency units of the foreign loan currency;
• Decrease in the disbursement amount/principal repayment amount of a given period.

Basic salary to increase to 1.8 million VND per month from 1 July 2023

Resolution No. 69/2022/QH15 dated 11 November 2022 of the National Assembly announced the State budget for 2023:

Notably, Article 3 of the Resolution has increased basic salary to VND 1.8 million/month from 1 July 2023, at the same time, increased pension and social insurance allowance for individuals paid for by the State budget by 12.5%.

2022 Report on employment of foreign workers to be submitted by 6 January 2023

On 18 November 2022, the Department of Labor – Invalids and Social Affairs of Ho Chi Minh City issued Official Letter No. 34158/SLDTBXH-ATLD on regarding the 2022 report on employment of foreign workers. Details are as follows:

Enterprises employing foreign workers in 2022 shall submit a report on employment of foreign workers according to Form No. 07/PLI (issued in Decree No. 152/2020/ND-CP) from 15 December 2022 to 5 January 2023.

Data to be reported includes those of foreign workers from 15 December 2021 to 14 December 2022.

*How to submit: use the Google Form at: https://forms.gle/kNqRgsH42Vu4evwj8 or scan the given QR Code to submit online, including the required data and a scan copy of the Report (signed and stamped) (PDF file).