Newsletter

Tax administration

Focus on inspecting CIT incentive implementation in 2022 by tax authorities

On 31 December 2021, the General Department of Taxation issued Decision No. 2032/QD-TCT on tax compliance monitoring plan for 2022.

According to this plan, in 2022, the tax authorities shall carry out inspection and monitoring of the implementation of CIT incentives including regulations on CIT exemption and reduction specified in the following legal documents:

– Decree No. 218/2013/ND-CP and Circular No. 78/2014/TT-BTC;

– Decree No. 114/2020/ND-CP;

– Decree No. 59/2012/ND-CP (amended by Decree No. 32/2020/ND-CP).

The Decision takes effect from the date of signing.

Corporate Income Tax (“CIT”)                         

Case that cannot apply 30% CIT reduction

On 18 December 2021, Bac Ninh Tax Office issued Official Letter No. 4172/CTBNI-TTHT guiding CIT reduction in 2021 following Decree No. 92/2021/ND-CP. Details are as follows:

In case an enterprise’s first CIT period is tax year 2020 (from 26 November 2019 to 31 December 2020), observing the first tax year stipulated in Clause 3, Article 3 Circular No. 78/2014/TT-BTC dated 18 June 2014 issued by the Ministry of Finance and Clause 4, Article 12 of the Law on Accounting No. 88/2015/QH13 dated 20 November 2015 issued by the National Assembly, the enterprise is eligible for 30% reduction of CIT in tax year 2021 if its revenue does not exceed VND 200 billion. The requirement under which revenue of tax year 2021 must be lower than that of tax year 2019 does not apply since the enterprise’s first CIT period is 2020.

Damages from fire and explosion awaiting insurance settlement

On 31 December 2021, Bac Ninh Tax Office issued Official Letter No. 4329/CTBNI-TTHT regarding damages from fire and explosion awaiting insurance settlement. Details are as follows:

In case during the tax year, an enterprise is damaged by fire, and its claim for compensation has not been accepted by its insurance agency, the said enterprise is allowed to include its total fire damage as deductible expenses when calculating CIT. After the claim has been paid by the insurance agency, the enterprise shall include such compensation as “Other taxable income” when finalizing CIT of the tax year when it is compensated.

Income in Vietnam specified in dispatching contract of foreign expat

On 23 November 2021, Hanoi Tax Office issued Official Letter No. 48930/CTHN-TTHT regarding CIT, and PIT of foreign expats. Details are as follows:

In case a dispatching contract between a parent company and a subsidiary in Vietnam clearly stipulates that all incomes arising in Vietnam and PIT arising from payment in Japan shall be paid by the subsidiary, such expenses shall be included in the foreigner employee’s PIT taxable income from salaries and other benefits in accordance with Clause 2, Article 2, Circular No. 111/2013/ TT-BTC.

In case the above expenses satisfy conditions of Article 4, Circular No. 96/2015/TT-BTC dated 22 June 2015 by the Ministry of Finance, they shall be deductible when calculating CIT.

Personal Income Tax (“PIT”)

PIT rate applied for foreign employees who are resident of Vietnam that do not sign a labor contract, or sign a labor contract with term of less than 3 months

On 15 December 2021, Hanoi Tax Office issued Official Letter No. 54823/CTHN-TTHT on PIT and FCT policies on foreign workers. Details are as follows:

• Regarding PIT of foreign workers who are residents of Vietnam:

In case a foreign employee is a resident of Vietnam for a given tax year, has income from salaries and other benefit-in-kinds paid by a company in Vietnam, according to Clause 2, Article 2, Circular No. 111/2013/TT-BTC, the company in Vietnam must withhold PIT at the tax rate of 10% before paying income as guided at Point i, Clause 1, Article 25, Circular No. 111/2013/TT-BTC.

• Foreign Contractor Tax (FCT):

In case a foreign entity earns income in Vietnam on the basis of a contract, agreement/commitment between the said entity and an establishment in Vietnam to operate WWF projects in Vietnam, based on Clause 1, Article 1, Circular No. 103/2014/TT-BTC dated 6 August 2014 by the Ministry of Finance, such entity shall bear FCT.

Labor and Insurace

Raising the overtime limit for workers in processing and manufacturing industries

On 15 December 2021, the Ministry of Labor, Invalids and Social Affairs issued Circular No. 18/2021/TT-BLDTBXH stipulating work and rest hours of employees working jobs of seasonality/processing-to-order jobs. Accordingly, daily standard working hours and overtime limit are changed as follows:

– (The total standard working hours + overtime) must not exceed 12 hours/day;

– (The total standard working hours + overtime) must not exceed 72 hours/week (Currently 60 hours/week);

– The total overtime hours must not exceed 40 hours/month (currently 32 hours/month);

– Total number of overtime hours of each employee must not exceed 300 hours/year.

This Circular takes effect from 1 February 2022.

Increasing Social insurance premiums of foreign workers from 2022

On 22 December 2021, Ho Chi Minh City Social Insurance Agency issued Notice No. 4447/TB-BHXH on Social insurance premium rates of foreign workers from 1 January 2022. Details are as follows:

Employers and employees who are foreigners working in Vietnam shall pay Social Insurance (“SI”), Health Insurance (“HI”), Occupational Accident Insurance (“OAI”), Occupational Disease Insurance (“ODI”) on a monthly basis based on the employees’ monthly salaries as follows:

The lowest monthly salary for which compulsory social insurance is calculated equals to the regional minimum salary, with the highest equals 20 times the basis salary at the time of payment.