NEWSLETTER AUGUST 2018
Official Letter No. 14284/CT-TT&HT (OL 14284): requirements to treat oversea business expenses as deductible expenses for CIT
On 23rd August 2018, Binh Duong Department of Taxation issued OL 14284, which handles the case that the company assigned employees to go on a business trip oversea. This OL states the expenses incurred for the trip are considered as deductible expenses for CIT purpose if the company prepares a decision assigning employees to travel oversea, which states clearly the purpose of business trip. The Company should keep invoices and other documents for expenses incurred oversea that are conformable with regulations of the local countries. These documents must include name of employees as well as name, address and tax code of the company. Also, invoices and other documents in foreign languages must be translated into Vietnamese, according to Article 5, Decree No. 174/2016/ND-CP.
Official Letter No. 14710/CT-TT&HT (OL 14710): revenue recognition case for an EPE
On 30th August 2018, Binh Duong Department of Taxation issued OL 14710 which handles the case that an EPE sold molds to a customer in Japan and was asked by the customer to keep them and use them for production of goods that were to be sold to that customer. In this case, the OL states that the company does not have to process the customs procedures and this transaction is not subject to VAT. Revenue is recognized only when the ownership and the use-rights of the molds are transferred to the buyer.
Official Letter No. 14712/CT-TT&HT (OL 14712): foreign contractor tax (FCT) on transactions incurred in VN
On 30th August 2018, Binh Duong Department of Taxation issued OL 14712 about FCT which handles the case foreign business entities (which do not have permanent establishment in Vietnam) buy goods from a domestic company in Vietnam or hire a domestic company in Vietnam to process goods, and then sell goods/processed goods to other foreign business entities at a bonded warehouse in Vietnam. In this case, this OL states that the foreign business entity must declare and pay FCT according to Circular No. 103/2014/TT-BTC.
Official Letter No. 54475/CT-TTHT (OL 54475): tax policy on liquidation of fixed assets for EPE
On 3rd August 2018, Hanoi Department of Taxation issued OL 54475 that states what an EPE needs to do for a case an EPE disposed used fixed assets in the domestic market. In the case this OL handles, the company has already paid import tax and VAT for import by filing a change of purpose form to declare domestic consumption to the customs office. This OL states that the company should follow the instruction in Clause 3, Article 13 of Circular No. 39/2014/TT-BTC and should buy a VAT invoice from the tax office. Then, the EPE must issue the VAT invoice to the company which purchased the fixed assets. Payable VAT for this fixed assets liquidation transaction should equal to the VAT amount stated in the invoice less the VAT paid based on the form summited to the customs office.
Official Letter No. 54152/CT-TTHT (OL 54152): VAT and CIT treatment of additional taxes imposed by the customs office
On 02nd August 2018, Hanoi Department of Taxation issued OL 54152 that gave guidance how additional taxes imposed by the customs office should be treated for VAT and CIT. This OL handles a case that a company violated the regulations on tax declaration stated in Clause 5 Article 1 of Decree No. 45/2016/ND-CP, but was not considered as a tax evasion, according to Clause 10, Article 1 of Decree No. 45/2016/ND-CP. Then, it received a decision on tax assessments issued by the customs office, which increased import tax and VAT input for imported goods.
– VAT: The company shall declare and deduct total amount of VAT input paid based on the decision of the customs office if it meets the requirements for VAT deduction stated in Clause 10, Article 1 of Circular No. 96/2015/TT-BTC issued by the Ministry of Finance.
– CIT: The import tax paid based on the decision of the customs office shall be considered as deductible expense for CIT purpose if it meets requirements in Article 4 of Circular No. 96/2015/TT-BTC issued by the Ministry of Finance.
The penalty and interest on late payment (if any) shall not be considered as deductible expense for CIT purpose.