Official Letter No. 6351/CT-TT&HT (OL 6351): expenses paid for foreign employees without work permit in Vietnam are non-deductible expenses

On 15th February 2019, Hanoi Department of Taxation issued OL 6351, which handles the case that a company paid expenses for foreign employees who did not have a valid work permit according to the detailed regulations on Labor Code. According to this OL, such expenses are not deductible expense for corporate income tax purpose. In addition, this OL clarifies that the company is not allowed to deduct input VAT of these expense.

Official Letter No. 7335/CT-TT&HT (OL 7335): requirement to inform depreciation method of land use right

On 25th February 2019, Hanoi Department of Taxation issued OL 7335, which handles a case that a company purchased an apartment for business activities along with related land use right without definite useful life. In this case, this OL states that the cost of land use right must be determined separately and be recorded as intangible fixed asset. Since the company is not allowed to depreciate intangible fixed asset (land use right) without definite useful life, the company does not need to inform the tax office about the depreciation method of the land use right.

Official Letter No. 237/CT-TT&HT (OL 237): CIT tax policies on tax incentives

On 01st February 2019, Hai Phong Department of Taxation issued OL 237, handling a specific case with the following contents:

If the company is eligible for CIT incentives for its location, the income eligible for tax incentives is the income generated from business activities conducted in such location (except for income stated at Point a, b, c of Clause 1, Article 10 of Circular No. 96/2015/TT-BTC dated 22nd June 2015 issued by the Ministry of Finance). Accordingly, this OL states as follows;

– Scrap sales (other income) from business activities is income eligible for CIT incentives.

– Rental income from leasing factory or office is real estate service; therefore, the company cannot take CIT incentives on such rental income.