Newsletter

Foreign Contractor Tax (“FCT”)

Foreign contractor tax rate applied to purchase of applications on overseas platforms

On 30 August 2022, Hanoi Tax Office issued Official Letter No. 42786/CTHN-TTHT regarding foreign contractor tax rates applied to purchase of eSIM on technology platforms. Details are as follows:

– Corporate income tax (CIT) rate: Income received by a foreign contractor from providing the right to use an application on an available technology platform is deemed royalty income, as defined in Clause 3, Article 7, Circular No. 103/2014/TT- BTC dated 6 August 2014 by the Ministry of Finance; CIT rate on taxable income is 10%.

– Value-added tax (VAT) rate: Income received by a foreign contractor from providing the right to use an application (other than software services as defined in Decree No. 71/2007/ND-CP dated 3 May 2007 by the Government, and technology transfer according to the Law on Technology Transfer) is subject to VAT rate on income from services of 5%.

Invoice

Declaration of replacement and adjusted invoices

On 29 August 2022, Hanoi Tax Office issued Official Letter No. 42535/CTHN-TTHT regarding the declaration of replacement and adjusted invoices. Details are as follows:

In case a company issues an adjusted or a replacement invoice observing Clause 2, Article 19, Decree No. 123/2020/ND-CP dated 19 October 2020 by the Government, the company shall declare the adjusted/replacement invoice in the original tax period (when the original invoice was issued), based on Article 47 of the Law on Tax Administration No. 38/2019/QH14 dated 13 June 2019 by the National Assembly, and Clause 4, Article 7, Decree No. 126/2020/ND-CP dated 19 October 2020 by the Government.

In case the supplement declaration leads to an increase in tax payable amount, the company must pay the additional amount plus any late payment interests to the state budget.

Using warehouse issuance order/internal transportation order (applied to EPEs)

On 13 September 2022, the Bac Giang Tax Office issued Official Letter No. 5472/CTBGI-TTHT regarding the use of warehouse issuance order/internal transportation order applied to export processing enterprises (EPEs). Details are as follows:

In case an EPE transports export goods to a border gate or an export procedure location, it may use a warehouse issuance order/internal transportation to complete export procedures. After completing export procedures, the EPE shall issue VAT invoice for export goods.

In case of on-the-spot export, after completing the export procedures, the EPE shall issue a VAT invoice for export goods.

An EPE who sells scraps and unused raw materials to the Vietnamese domestic market and records such revenues and related expenses separately shall issue VAT invoice according to regulations set forth in Clause 1, Article 4 and Point a, Clause 1, Article 8, Decree No. 123/ND-CP of the Government.

Personal Income Tax (“PIT”)

PIT on presents received

On 16 August 2022, Hanoi Tax Office issued Official Letter No. 40222/CTHN-TTHT on determining taxable income from presents and prizes received. Details are as follows:

In case a company gives presents (actual items not money) that do not fall under the provisions of Clause 10, Article 2, Circular No. 111/2013/TT-BTC dated 15 August 2013 by the Ministry of Finance to all employees, such presents are not subject to PIT. In case the company gives a present to its employees in form of salaries/wages as prescribed in Clause 2, Article 2, Circular No. 111/2013/TT-BTC dated 15 August 2013 by the Ministry of Finance, such amount shall be taxable.

In case an employee receives a prize from participating in prize-winning games/contests and other forms of drawing organized by the company, the prize is deemed income from prize-winning according to Clause 6 Article 2, Circular No. 111/2013/TT-BTC; PIT on income from prize-winning is calculated according to Article 15, Circular No. 111/2013/TT-BTC by the Ministry of Finance.

PIT withholding during probation period

On 16 September 2022, Hai Duong Tax Office issued Official Letter No. 8853/CTHDU-TTHT on withholding PIT of probationary employees. Details are as follows:

In case after a probation period, a company continues to sign a labor contract for 03 months or more with an employee, it shall withhold PIT according to progressive tax brackets before paying salary, including salary paid during the probation period.

In case after the probation period, the company does not continue to sign a labor contract with the employee, it shall withhold PIT at the rate of 10% before paying salary, applicable to employees whose salaries during probation period exceed VND 2,000,000/payment.