Official Letter No.231/TCT-CS dated January 19, 2016 providing guidelines on deductible expenses for Corporate income tax (CIT)

Foreign contractor withholding tax (FCT) applies to payments Vietnamese entities make to foreign contractors (FC) on service fees in accordance with the law. Vietnamese entity is responsible to declare, withhold and pay FCT on behalf of FC. Service fees paid to FC are considered as deductible expenses for CIT, provided that:

  • These expenses are related to production and business activities of the enterprise;
  • These expenses have adequate lawful invoices and documents as required by the law;
  • These expenses meet the condition of non – cash payment as prescribed by the law.

General Department of Taxation emphasizes that only expenses related to the company’s operating activities are considered deductible expenses when the company calculates assessable income for CIT.

In case Vietnamese party and FC are related parties, Vietnamese entity shall declare and determine the tax obligations arising from related party transactions per regulations.


Circular No. 59/2015/TT-BLĐTBXH providing guidance on salary and allowances used for social insurance calculation

As we mentioned in December 2015 Newsletter, on December 29, 2015, Ministry of Labor – Invalids and Social Affairs issued Circular No. 59/2015/TT-BLDTBXH detailing and providing guidance on some articles of Law No. 58/2014/QH13 (Law on Social Insurance) and Decree No. 115/2015/ND-CP.

One of the notable changes which came into force on January 1, 2018 is that foreigners working in Vietnam under work permit, practicing license or practicing certificate which are issued by a competent authority of Vietnam are now “licensed” to participate in Social Insurances scheme.

The word “licensed” means foreign employees can choose to pay Social Insurance in Vietnam from January 01, 2018.


Official Letter providing guidance on deduction/refund of value added tax (VAT) relating to invoices of a dependent branch which does not keep accounting record independently

On January 28, 2016, General Department of Taxation issued Official Letter No. 427/TCT-KK and sent it to Bac Ninh’s Department of Taxation, providing guidance on deduction/refund of VAT relating to invoices of a dependent branch which does not keep accounting record independently.

In case the dependent branch does not keep accounting record independently and does not generate revenue at the branch, the headquarter declares taxes for such dependent branch centrally. When invoices 1) contain name, address, and tax code of the dependent branch relate to operating, manufacturing or selling activities of the branch and 3) meet the conditions to be deductible for VAT, the Company is allowed to declare and deduct VAT for such invoices of dependent branch. The Company needs to list all of the accounting documents (including VAT input invoices) that the dependent branch provides to the headquarter for accounting and taxation purpose in accordance with rules and regulations.