Newsletter

New Decree on penalty for administrative violations against regulation on management of prices, fees, charges and invoices.

On 27 May 2016, the Government promulgates Decree No. 49/2016/NĐ-CP providing some amendment and supplementary articles to Decree No. 109/2013/NĐ-CP on penalty for administrative violations against regulation on management of prices, fees, charges and invoices.

Important points are as follows:

• The fine for the case of lost, burnt, or damaged invoice is reduced to VND 4 million to 8 million (existing regulation: from VND 10 million to 20 million). No fine is imposed if the event is caused by natural disasters, fire or other force majeure.

• In case a seller lost a copy of invoice issued to a buyer, but both parties sign a written record of such event, the seller makes tax declaration and tax payment, and there are sufficient contracts and other supporting documents, the fine will be decided as follows:
  • If the event incurs under one extenuating circumstance, a minimum fine will be applied.
  • If the event incurs under more than one extenuating circumstance, a warning will be applied.

• In case of losing invoice during storing it except for losing a copy issued to buyers, a punishment will be decided under law on accounting.

• If a seller finds a copy of lost invoice issued to a buyer before the tax office makes any decision on administrative penalties, the seller will not be fined.

The Decree comes into force on 01 August 2016.

New Decree on penalties relating to Customs issues

On 26 May 2016, the Government issued Decree No. 45/2016/ND-CP providing new contents on penalties for administrative violations and enforcement on administrative decisions in Customs issues.

Notable points are as follows:

• A fine of 10% on (i) duty shortfall and (ii) over-claimed exemption, deduction or refund is applied for not declaring or wrongly declaring on goods’ names, types, quantities, qualities, value, goods codes, duty rates, tariffs, origin of goods during Customs clearance, where tax payers themselves detect the issue and make amendment after the Customs checked the relevant documents but before completion of Customs clearance.

• A fine of 20% on (i) duty shortfall or (ii) over-claimed exemption, deduction, or refund is applied for management of materials, supplies, machines, equipments, products under processing, export producing, which leads to a negative stock discrepancy between the actual stock and the records in the accounting books or Customs dossiers, (except for tax fraud and tax evasion)

• A penalty will be imposed on violations against management of imported and exported goods at ports and at warehouses.

• A fine up to VND 2 million is applied for missing the deadline of submission of (i) certain documents of priority enterprises; (ii) reports on goods imported for building plant facilities, and goods stored outside of the export processing enterprise’s premises; (iii) other administrative reports.

• A fine up to VND 20 million is applied for declaring imported goods under export production and processing scheme where there is no relevant manufacturing facility.

The Decree comes into force on 01 August 2016.

Official Letter No. 1906/TCT-TNCN on providing invoices to non-business households and individuals who sell goods and services irregularly

On 06 May 2016, the General Department of Taxation issued Official Letter No. 1906/TCT-TNCN on providing invoices to non-business households and individuals who sell goods and service irregularly.

According to Article 1 and Article 13 of Circular No. 39/2014/TT-BTC dated 31 March 2014 by the Ministry of Finance:

“1. Tax authorities shall provide invoices to organizations other than companies, non-business households and individuals that sell goods or services irregularly and are in need of issuing invoices to buyers.

Tax authorities shall not provide invoices if goods and services sold by the aforesaid entities are not subject to VAT or exempted from VAT.”

In case non-business households and individuals who sell goods and services irregularly incur sales below the threshold subject to VAT (VND 100 million per annum), invoices will not be provided to them by the tax authority. Enterprises which purchase goods or services from those households and individuals are allowed to prepare a list of input goods and services as Form 01/TNDN regulated in Circular No. 78/2014/TT-BTC dated 18 June 2014 by the Ministry of Finance.

Official Letter No. 1964/TCT-CS on deduction of VAT arrears

On 09 May 2016, the General Department of Taxation issued Official Letter No. 1964/TCT-CS on deduction of VAT arrears in case taxpayers are inspected by the tax office.

According to Article 14 of Circular No. 219/2013/TT-BTC dated 31 December 2013 by the Ministry of Finance on priciples for input VAT deduction:

“8. Input VAT shall be declared and deducted within the period when it is incurred regardless of whether the products are used or still in storage.

In case taxpayers find input VAT declared and deducted incorrectly, adjustments shall be made before the tax authority announces the decision on tax inspection at the taxpayer’s premises”

Accordingly, in the event that an enterprise had entered a contract with foreign contractor but has not declared and paid tax on behalf of the foreign contractor, and the tax authority conducted tax inspection at taxpayer’s premise and collected VAT arrears on behalf of foreign contractor, the taxpayer is not allowed to declare and deduct this amount of VAT arrears.

Official Letter No. 2337/TCT-CS on deducted VAT of welfare expense for employees

On 30 May 2016, the General Department of Taxation issued Official Letter No. 2337/TCT-CS providing guidance on deducted VAT of welfare expense for employees.

Regarding Corporate Income Tax (CIT):

Pursuant to Article 4 of Circular No. 96/2015/TT-BTC dated 22 June 2015 providing amendments, supplements to Article 6 of Circular No. 78/2014-BTC dated 18 June 2014, there are some noted points as follows:

• Regarding expense on foreigners’ PIT consulting service, the General Department of Taxation agrees with the proposal in Official Letter No. 410/CT-TT&HT dated 21 March 2016 of Hai Phong Tax Department, which writes this kind of expense is irrelevant to enterprise’s business operation and is not considered as welfare for employees. Therefore, this kind of expense is non-deductible expense for CIT purpose.
• Regarding consulting service expense on foreigner’s health check, it is one step in health care process from consulting to medical examination and treatment for employees. Therefore, this kind of expense is considered as welfare for employees, and deductible expense for CIT purpose.

Regarding Personal Income Tax (PIT):

Pursuant to Point dd.7, Clause 2, Article 2 of Circular No. 111/2013/TT-BTC dated 15 August 2013 by the Ministry of Finance on taxable income, if enterprises entered PIT consulting service contract for an individual or a group of individuals, this kind of expense shall be considered as taxable income for PIT purpose.

Official Letter No. 35839/CT-HTr on VAT rate of 0% for service export

On 30 May 2016, Hanoi Tax Department issued Official Letter No. 35839/CT-HTr providing guidance on conditions to apply VAT rate of 0% on service export.

According to Article 9 of Circular No. 219/2013/TT-BTC dated 31 December 2013 by the Ministry of Finance providing guidance on VAT policy:

“1. VAT rate of 0% is applied to exported goods and services; construction and installation overseas and in non-tariff areas; international transportation; exported goods and services that are not subject to VAT, except for the cases in Clause 3 of this Article.

Exported goods and services are those that are sold to overseas organizations and individuals and are consumed outside of Vietnam; sold to the entities in non-tariff areas; or sold to foreign customers as prescribed by law.

2. Conditions for application of VAT rate of 0%:

b) The documents below are compulsory for exported services:

– A service contract with an organization or individual in another country or in non-tariff areas;

– Bank payment documents for exported services and other documents prescribed by law.”

Accordingly, if an enterprise exports services to overseas organization or individual and these services are consumed outside of Vietnam, they are subject to VAT rate of 0% if all aforesaid conditions are met.