NEWSLETTER JULY 2018
Decree No. 72/2018/NĐ-CP on statutory pay rate for public officials, public employees and armed forces’ personnel
On 15th May 2018, the Government issued Decree No. 72/2018/NĐ-CP on statutory pay rate for public officials, public employees and armed forces’ personnel, with the following contents:
From 01st July 2018, the statutory pay rate is adjusted to increase from VND 1,300,000 to VND 1,390,000 per month, which leads to the increase in salary and allowance for public officials, public employees and armed forces’ personnel. Moreover, pension, social insurance allowance, and monthly allowance which are calculated based on the statutory pay rate also increase.
In addition, the maximum salary for calculating insurance (20 months of the statutory pay rate) increases from VND 26 million to VND 27.8 million per month. Maternity allowance (2 months of the statutory pay rate) increases from VND 2.6 million to VND 2.78 million per month.
This Decree comes into force from 01st July 2018 and replaces Decree No. 47/2017/NĐ-CP dated 24th April 2017.
Official Letter No. 2781/TCT-KK (OL 2781) about VAT declaration
On 13th July 2018, General Department of Taxation issued OL 2781 about VAT declaration, with the following contents:
– The company should declare VAT of invoices received from suppliers in the VAT return form 01/GTGT of the tax period receiving the invoices.
– If the company considers that those VAT invoices do not meet the requirements for VAT deduction, the company should eliminate the VAT stated in these invoices from VAT return form 01/GTGT of the tax period receiving the invoices.
– In the next tax period, if the company obtains enough evidences to conclude that these invoices meet requirements for VAT deduction, the company should declare the VAT of those invoices in the line “Adjustment to increase deductible VAT of previous periods” of the VAT return form 01/GTGT of the current tax period.
– If the company receives VAT invoices from suppliers in this tax period but declare VAT of those invoices in VAT return form 01/GTGT of the subsequent period, that VAT shall be deductible in case the tax office has not issued the decision of tax inspection in the company.
Official Letter No. 47484/CT-TTHT (OL 47484) about PIT withholding requirements during probation
On 09th July 2018, Hanoi Department of Taxation issued OL 47484 about PIT withholding requirements during probation, with the following contents:
If a labor contract (with the term of at least 3 months) is signed after probation, the company shall withhold PIT according to the partially progressive tariff incorporating the probation period.
If the labor contract is not signed after probation, PIT withholding rate 10% is applied for the income above VND 2 million per month during the probation period.
For the employee that earns only taxable income as stated above but the total taxable income estimated after personal deductions does not reach the taxable level, the employee shall make a commitment (according to form 02/CK-TNCN of Circular No. 92/2015/TT-BTC dated 15th June 2015 by the Ministry of Finance) and send it to the company. Based on that commitment, the company shall not withhold 10% PIT rate. The employee is responsible for the commitment and must have tax code when the commitment is made. The employee shall be penalized if any fraudulence is discovered, according to the Law on Tax administration.
Official Letter No. 47485/CT-TTHT (OL 47485) about VAT deduction and expense for repairing the leased office.
On 09th July 2018, Hanoi Department of Taxation issued OL 47485 about VAT dedution and expense for reparing the leased office, with the following contents:
If the company has some costs for renovating and repairing a leased office, those costs are recorded as expenses at once or are allocated to expense with the term of allocation no more than 3 years.
Input VAT of expense for renovating and repairing the leased office is deductible if they are conformable with regulations stated at Article 15 of Circular No. 219/2013/TT-BTC, Clause 10 Article 1 of Circular No. 26/2015/TT-BTC issued by the Ministry of Finance.
Official Letter No. 48085/CT-TTHT (OL 48085) about related party transactions documentation
On 10th July 2018, Hanoi Department of Taxation issued OL 48085 about related parties transaction documentation, with the following contents:
If the ultimate parent company of the taxpayer is responsible for submitting the country by country report to the tax office of the host country, the taxpayer in Vietnam should submit the duplicate copy of that report together with the related party transactions documentation.
If the taxpayer fails to provide the country by country report of the ultimate parent company prepared for the tax period relative to the tax finalization period of the taxpayer, the tax payer must provide the country by country report of the ultimate parent company prepared for the fiscal year preceding the tax period of the taxpayer, and submit a written explanation for such failure which is attached to the taxpayer’s transfer pricing documentation.
If the taxpayer fails to provide the country by country report of the ultimate parent company, it is obliged to submit a written explanation for such failure which is attached to the taxpayer’s transfer pricing documentation. The explanation should include the legal regulations of the host country for not allowing the taxpayer to provide the country by country report of the ultimate parent company or that ultimate parent company is not subject to submitting the report according to that country’s legal regulations.
Official Letter No. 48090/CT-TTHT (OL 48090) about useful life for depreciation of financial lease assets
On 10th July 2018, Hanoi Department of Taxation issued OL 48090 about useful life for depreciation of financial lease assets, with the following contents:
The OL handles the case that the company leasing fixed assets in form of financial lease (financial lease fixed assets), at the end of the lease term, re-purchases the fixed assets. In this case, the company must depreciate the financial lease fixed assets as the fixed assets owned by the company. About the useful life for depreciation, the company must follow regulations at Article 10 Circular No. 45/2013/TT-BTC.
In case right at the starting time of the lease, the company committed not to repurchase the financial lease fixed assets, the company may depreciate the fixed assets under the leasing term stated in the lease contract.
Depreciation expense for financial lease fixed assets which is conformable with the regulation at Point 2.2 Clause 1 Article 6 Circular No. 78/2014/TT-BTC (adjusted supplemented by Article 4 Circular No. 96/2015/TT-BTC) is considered as deductible expense for CIT taxable income.
Official Letter No. 48097/CT-TTHT (OL 48097) about foreign exchange rate for FCT
On 10th July 2018, Hanoi Department of Taxation issued OL 48097 which regulates the foreign exchange rate used for calculating FCT in 2 cases as follows:
– If the foreign contractor has bank account at a commercial bank in Vietnam: the revenue in foreign currency should be converted into VND using buying exchange rate of that commercial bank on the transaction date.
– If the foreign contractor does not have bank account at a commercial bank in Vietnam but receives the revenue in US dollar via bank account of the buyer (a company in Vietnam) opened at a commercial bank in Vietnam, the foreign exchange rate that should be used for FCT calculation in VND should be the selling exchange rate of the commercial bank where buyer opens the bank account.