NEWSLETTER JANUARY 2021
Tax administration
On 26th January 2021, Bac Ninh Tax Department issued Official Letter No. 110/CTBNI-TTHT guiding VAT, PIT returns, and invoice report. According to the OL, companies having a total revenue in the preceding year (i.e. 2020) more than VND 50 billion shall declare VAT and PIT monthly. Such companies shall submit invoice report and PIT receipt quarterly. In case they are high tax risk entities, they must submit the reports monthly.
PIT on commission
Official Letter No. 164/CTBNI-TTHT issued by Bac Ninh Tax Department dated 3rd February 2021 handles a specific case in which a company hires a foreigner (non-resident of Vietnam) to provide commodity brokerage service for the company, and this service is to sell its goods abroad. In this case, the commission that an individual receives for the service will be considered as income generated outside Vietnam, therefore it is not subject to foreign contractor tax (FCT).
In case the brokerage service is to sell goods in Vietnam, the commission received will be taxed at 20% according to the current PIT law. The Company, in this case, has a responsibility to withhold, declare and pay tax to the government as guided in Point a, Clause 1, Article 25 of Circular No. 111/2013/TT-BCT issued by the Ministry of Finance.
The commission paid to an individual is considered as deductible expense for CIT purposes in case it meets the conditions prescribed in Article 4, Circular No. 96/2015/TT-BTC.
Tuition fee for children of Vietnamese citizen, who is an employee of foreign company and assigned to work in Vietnam, will be taxed for PIT
On 15th January 2021, Hanoi Tax Department issued Official Letter No. 1981/CTHN-TTHT. According to the OL, a Vietnamese person signs labor contract with a foreign company abroad and he is assigned to work in Vietnam (without signing a labor contract with a subsidiary in Vietnam) and the subsidiary in Vietnam pays tuition fee for his children in Vietnam. In this case, the tuition fee is considered as taxable income for his PIT and is not deductible for CIT purposes.
Expense to buy life insurance for clients is not deductible for CIT
According to Official Letter No. 153/TCT-CS issued by the General Department of Taxation dated 14th January 2021, there is a case a company purchases life insurance for its clients (individuals) as a gift based on promotion program. The promotion program was already registered with the Department of Industry and Trade. However, since the life insurance contract is an agreement between the an insurance company and individuals, therefore VAT invoice is billed to individuals. In this case the expense that the company pays to the insurance company (insurance fee for the first year) is not deductible for CIT purposes.
VAT on COVID quarantine expense is deductible
Official Letter No. 28/CTHYE-TTHT issued by Hung Yen Tax Department on 7th January 2021 states that in case a company incurs some expenses such as quarantine expense for expats who are assigned from a parent company to work in Vietnam (transportation expense, hotel fee,..) and these expenses are mentioned in the agreement between the company and the parent company, such expenses will be deductible for CIT purpose in case it meets the requirements prescribed in Article 4, Circular No. 96/2015/TT-BTC. As for hotel fees for expats, the company can declare VAT as deductible in case they have legal VAT invoice and meet conditions for deductibility of VAT as guided by the current law.