Newsletter

Official Letter No. 2943/TCT-TNCN (“OL 2943”): treatment of compulsory insurance payment in gross-up formula

On 4^th July 2017, the General Department of Taxation issued Official Letter 2943 with the following contents:

When an individual receives salary on a net basis, the gross-up is performed as follows:

– For the period before 1^st July 2013, compulsory insurance payment is not deducted from net income to gross up in accordance with Circular No. 84/2008/TT-BTC dated 30^th September 2008 issued by the Ministry of Finance and guiding Official Letters of the General Department of Taxation; OL No.1578/TCT-TNCN dated 28^th April 2009; OL No.3565/TCT-TNCN dated 14^th September 2010 and OL No. 336/TCT-TNCN dated 24^th January 2014.

– From 1^st July 2013, compulsory insurance payment is deducted from net income to gross up in accordance with Circular No. 111/2013/TT-BTC which amends Circular No. 84/2008/TT-BTC.

Official Letter No. 2767/TXNK-CST (“OL 2767”): exemption of import duty on scraps and discarded materials for processing contract

On 26^th July 2017, the Department of Import and Export Duties issued OL 2767 on scraps and discarded materials incurred for processing contract with the following content:

Scraps, discarded materials and excessive imported materials for processing, which does not exceed 3% of total quantity of each kind of imported materials stated in the processing contract, shall be exempted from import tax when consumed domestically and any other taxes, if applicable, are declared and paid to the customs office.

Official Letter No. 3329/TCT-TNCN (“OL 3329”): PIT of foreign employees

On 27^th July 2017, the General Department of Taxation issued OL 3329 on PIT declaration and payment of foreign employees with the following contents:

Foreign employees being resident in Vietnam are required to declare PIT directly to the tax office for salary and bonus paid by oversea parent company. The Company (employer) in Vietnam withholds PIT on income paid by the employer in Vietnam under the progressive tax system. Then, at the year end, the resident foreigners must finalize their PIT.

Official Letter No. 2935/TCT-CS (“OL 2935”): exchange rate for foreign contractor tax (FCT) calculation

On 3^rd July 2017, the General Department of Taxation issued OL 2935 with the following contents:

The exchange rate used to calculate FCT for foreign contractor who does not have a bank account at commercial banks in Vietnam is stated as follows:

– For the period from 1^st January 2015 to before 4^th January 2016: average exchange rate of the inter-bank foreign exchange market announced by the State Bank at the time of payment to the foreign contractor.

– From 4^th January 2016 until now: central rate of VND versus USD announced by the State Bank in Decision No. 2730/QĐ-NHNN at the time of payment to the foreign contractor.

Official Letter No. 46632/CT-TTHT (“OL 46632”): Export Processing Enterprise (EPE) planning to sell goods to domestic market in Vietnam

On 10^th July 2017, Hanoi Department of Taxation issued OL 46632 with the following contents:

In case an EPE company, whose products are 100% exported, plans to sell its products to domestic market, such company should contact Hanoi Industrial and Processing Zone Management Board as well as Ministry of Planning and Investment in order to determine whether the company is allowed to sell products to domestic market in accordance with law on investment and commerce.

In case, the EPE company is allowed to sell its products to domestic market, a domestic company who imports products from the EPE company must declare and pay VAT in accordance with current regulations on VAT. The EPE company (seller) is required to issue a sales invoice, which states “For organizations and individuals in non-tariff area”, to the domestic company (buyer), complying with provision of Clause 1, Article 5 Circular No. 119/2014/TT-BTC dated 25^th August 2014 issued by the Ministry of Finance.

Official Letter No. 2978/TCT-CS dated 6^th July 2017 (“OL 2978”): invoice issuance of accommodation establishments in Vietnam and Foreign Contractor Tax (FCT) matter on online room booking activities

This OL clarifies that accommodation establishment is the responsible party issuing an invoice to a customer with the full price including a commission fee payable to a foreign contractor when a customer uses a foreign contractor to reserve a room and such foreign brokers charge commission. Accommodation establishments may account commission fees paid to foreign contractors as deductible expense when calculating and paying CIT and VAT on behalf of foreign contractor.

Official Letter No. 48185/CT-TTHT (“OL 48185”) dated 18^th July 2017: tax policies on expatriate PIT

PIT on oversea income that a Company pays on behalf of foreign individuals is deductible expense for CIT purpose if an assignment agreement to appoint the foreigner from Japan to Vietnam contains an article stipulating such payment.