Newsletter

Circular on Issuance of Enterprise Identification Code and Assignment of Tax Authority

The Ministry of Finance issued Circular No. 127/2015/TT-BTC dated 21 August 2015 (Circular 127), providing guidance on the enterprise code and assingment of tax authority responsibile for the enterprise.

Highlights of Circular 127 are the following:

An automated enterprise registration process will be placed in service for new enterprises

From 10 October, 2015, new enterprises are required to apply for an enterprise identification code by submitting information to the National Business Registration Information System electronically. The tax registration system of General Department of Taxation (GDT), which is interfaced to the National Business Registration Information System, will automatically check completeness, accuracy and legality of the data in accordance with the provisions of Law No. 68/2014/QH13 (Law on Enterprises) and Law No. 78/2006/QH11 (Law on Tax Administration). Once the accuracy and legality of the information are confirmed, the tax registration system will automatically create an enterprise identification code and will assign a tax authority responsible for that enterprise.

Under this new system, separate application for a tax code is no longer needed. In accordance with Article 30 of Law on Enterprises, the enterprise identification code is used for “fulfilling tax obligations, following administrative procedures and performing other rights and obligations”.

Tax jurisdiction (province or district level) is clarified for assignment of tax authority.

Provincial tax departments will handle the tax administrative matters for the following enteprises:

• State-owned enterprises
• Foreign-direct-invested enterprises
• Enterprises belonging to Build-Operate-Transfer (BOT), Build-Transfer-Operate) BTO or Build-Transfer (BT) projects
• A company that operates in various industrial sectors but still yet holds only one centralized accounting book at the headquarter
• Enterprises that operate in many locations (eg. nationwide telecommunication company)
• Enterprises with large scale of operation
• Enterprises having income earned at different provinces or at different districts under the same province in accordance with the law
• Enterprises operating in specific industries with complex legal requirements such as, banking and finance, insurance, securities, accounting and auditing, law, mineral and exploitaion

District tax departments will handle tax administrative matters for the rest of the enterprises.

The National Business Registration System publishes warnings issued to tax violators in its website. 

Some of the circumstances that the National Business Registration Information System will publish warnings to enterprises in its website are the following;

• Management of the company has signs of tax violation and the case is placed under an investigation of the police in accordance with the criminal procedure and tax laws.
• Management of the Company, a member of Council, a member of Board of Directors, or a partner member previously held one of the following positions in a company which the tax authority declared it had not operated at the registered address;

• Owner of a private company
• Chairman of Member Council, Chiarman of Board of Directors, Director or General Director in a limited liability company and a joint stock company
• Partner in a partnership company
• Legal representative

• The enterprise was established in the way that had not complied with Law on Enterprises.

Circular No. 127/2015/TT-BTC becomes effective as of 10 October 2015.

Official letter confirms waiver of import duty and value added tax (VAT) on surplus materials stored in warehouses of Export Processing Enterprises (EPEs)

On 24 July 2015, the General Department of Customs issued Official Letter No. 6790/TCHQ-TXNK, providing guidance on surplus materials in stock at EPE’s warehouses.

Import duty

The surplus materials are not subject to import duty, in accordance with Decree No. 87/2010/ND-CP (Decree 87) dated 13 August 2010, if those materials are still in the warehouse and have not been sold to the domestic market. EPEs do not violate guidance per Article 39 of Law on Tax Administration.

Pursuant to Clause 1, Article 21 of Decree 29/2008/ND-CP dated 14 March 2008: “Export processing zones and enterprises may apply legal provisions applicable to non-tariff areas.”

Pursuant to Clause 3, Article 2 of Decree 87: “Goods exported from non-tariff zones to foreign countries; goods imported from foreign countries into non-tariff zones for use in non-tariff zones only; goods transported from one non-tariff zone to another” are not subjected to import duty and import duty.

Pursuant to Article 39 of Law on Tax Administration, the Customs offices shall assess taxes on imported goods and exported goods in the following cases

“a) Taxpayers use unlawful documents to declare tax bases, calculate and declare their payable tax amounts; fail to declare or declare inadequately and inaccurately tax bases to serve the tax calculation;

1. b) Taxpayers refuse, delay or prolong beyond the set time limit the supply of relevant documents to customs offices for the accurate calculation of payable tax amounts;
2. c) Customs offices have sufficient evidence that the declared values are not the actual transaction values
3. d) Taxpayers are unable to calculate the tax payable amount by themselves”

VAT

If EPEs do not violate the guidance per Article 39 of Law on Tax Administration, surplus materials shall not be subjected to VAT in accordance with Article 5 of Law No. 13/2008/QH12 (Law on VAT). Therefore, the Customs Department shall not impose VAT of those materials.

Pursuant to Clause 20, Article 5 of Law on VAT: “Goods and services traded between non-tariff zones and foreign countries or between non-tariff-zones” are not subjected to VAT

In case the EPE sells these materials to the domestic market or the enterprise commits a tax fraud or tax evasion, the Customs Department shall impose import duty and VAT.

Official letter clarifies foreign contractor tax (FCT) on goods sold from bonded warehouses to the domestic market

On 30 June 2015, the General Department of Taxation (GDT) issued Official Letter No. 2652/TCT-HTQT in regard to FCT on goods sold from bonded warehouses to the domestic market.

In accordance with Clause 5, Article 1 and Clause 5, Article 2 of Circular 103/2014/TT-BTC (Circular 103) dated 06 August 2014 issued by the Ministry of Finance:

– Entities who are subjected to FCT include:

“Any foreign entity that exercises its right to export, import, distribute goods in Vietnam, buy goods to export, or sell goods to Vietnamese traders in accordance with trading laws.”

– Entities not regulated by this Circular are:

“Any foreign entity using a bonded warehouse or inland clearance depot (ICD) as a warehouse serving international transport, transit of goods, or storage of goods to be processed by other companies.”

Pursuant to above regulations, an entity using a bonded warehouse or ICD as a warehouse serving international transport, transit of goods, or storage of goods to be processed by other companies shall not be regulated by Circular 103.

In case a foreign entity stores goods in bonded warehouses for the purpose of selling goods to customers in Vietnam, the foreign entity will be subjected to FCT prescribed in Circular 103.

Official letter on VAT and FCT payment relating to intellectual property

On 15 April 2015, the Ho Chi Minh Tax Department issued Official Letter No. 3159/CT-TTHT on VAT and FCT in regard to transfer of intellectual property and right to use intellectual property. This official letter refers to Circular 219/2013/TT-BTC dated 31 December 2013 on VAT and Circular 103 on FCT.

In case a Company signs a contract to transfer a brand name together with an intellectual property, the payment is not subjected to VAT and the Company does not need to withhold VAT on behalf of the foreign contractor. Only CIT portion of FCT needs to be withheld.

If it is a contract to transfer the right to use a brand name for a finite time period, the Company must withhold VAT in addition to CIT on behalf of the foreign contractor per Circular 103.