NEWSLETTER FEBRUARY 2024
Tax policy on capital transfer and capital donation activities of foreign companies not present in Vietnam
On 23 February 2024, Hanoi Tax Department issued Official Letter No. 8983/CTHN-TTHT with the main content as follows:
– In case a foreign company (without presence in Vietnam) transfers its capital contribution in a company in Vietnam to another shareholder that is a non-resident individual in Vietnam, the foreign company must declare and pay corporate income tax (CIT) on income from capital transfer activity. The declaration and tax payment shall follow the guidelines in Article 11 and Article 14 of Circular No. 78/2014/TT-BTC and Article 8 of Circular No. 96/2015/TT-BTC.
– In case the foreign company donates its capital contributions to another shareholder that is a non-resident individual in Vietnam, the capital receiver shall be responsible for declaring and paying personal income tax (PIT) on income from gifts according to the regulations in Clause 10, Article 2 of Circular No. 111/2013/TT-BTC . The tax payable shall be determined according to the guidelines in Article 23 of Circular No. 111/2013/TT-BTC (apply the tax rate of 10% on the gift value in excess of VND 10 million each time of receipt).
Request to apply the Double Taxation Avoidance Agreement (DTA) for tax amount incurred more than 3 years ago
On 23 February 2024, Hanoi Tax Department issued Official Letter No. 8973/CTHN-TTHT on foreign contractor tax as follows:
In 2019, a company signed a sea transport cooperation contract with a partner in Korea. On 20 February 2020, according to the contract and authorization of the partner, the company completed the declaration and payment of foreign contractor tax to the State budget for this contract. From 21 February 2020 until now, the tax amount has been incurred for more than 3 years, and the tax authority will refuse the request to apply the DTA as prescribed in Clause 1, Article 6 of Circular No. 205/2013/TT- BTC dated 24 December 2013 of the Ministry of Finance.
Personal income tax (PIT)
Personal income tax policy for compulsory insurance payments abroad
On 27 February 2024, the General Department of Taxation issued Official Letter No. 684/TCT-DNNCN guiding on personal income tax policy as follows:
In case a foreigner, who is assigned to Vietnam to work as an intra-company transferee, is an individual residing in Vietnam, has income from salaries and wages abroad, and pays compulsory insurance according to the regulations of the country where the individual holds nationality similar to compulsory insurance according to the provisions of Vietnamese law, such insurance premiums can be deducted when determining PIT taxable income in Vietnam.
Value Added Tax (VAT)
VAT for consulting service for export processing enterprise (EPE)
On 28 February 2024, the General Department of Taxation issued Official Letter No. 9575/CTHN-TTHT providing guidance on VAT for consulting service for EPE as follows:
In case a company provides business consulting services to EPE, and if this service is performed and consumed outside the non-tariff area, the tax rate of 10% will be applied as prescribed in Article 11 of Circular No. 219/ 2013/TT-BTC.
Value-added tax (VAT) draft law
The draft VAT law has been released by the Ministry of Finance with some notable contents as follows:
- General regulations
* Goods and services not subject to VAT
To increase the threshold of annual revenue for business households and individuals to be exempted from VAT from VND 100 million to VND 150 million.
- Tax basis and method
* Taxable price:
– The taxable price for imported goods is the import price at the border gate plus import tax plus taxes that are additional import taxes according to the provisions of law (if any), plus special consumption tax (if any) and plus environmental protection tax (if any).
– For goods and services used for promotion according to the provisions of commercial law, the taxable price is determined to be zero (0).
– Revenue to calculate VAT is the total amount of sales of goods and services recorded on the sales invoice, including surcharges and additional fees that the business is entitled to.
– Business activities, business households and individuals that do not implement or do not fully implement the accounting, invoice and document regimes as prescribed by law must pay value added tax according to the presumptive tax method stipulated in the Law on Tax Administration.
* VAT deduction and refund
For non-deductible input VAT, business establishments can account it as expenses to calculate CIT or add it into the original price of fixed assets, except for VAT amount of goods/services purchased with value of goods/services more than VND 5 million without non-cash documents.