NEWSLETTER JULY 2019
Official Letter No. 1155/CT-TTHT (OL 1155): tax policies on maintenance fee of apartment
According to OL 1155 issued by Bac Ninh Department of Taxation on 08th July 2019, a company purchased an apartment and uses it as a place of residence for its employees. As stated in the apartment purchase contract, the company has to pay a maintenance fee for the public area at 2% of the apartment price (according to the regulation of the Law on Housing). In this case, the maintenance fee is considered as deductible expense for CIT purpose. When receiving the maintenance fee, the apartment owner prepares cash receipt (not issue VAT invoice). The company shall record the maintenance fee based on the receipt issued by the apartment owner, apartment purchase contract and relevant documents.
In case the maintenance fee is paid to the apartment owner before the fixed asset (the apartment) is available to use, it shall be included in the historical cost of the fixed asset for depreciation.
Official Letter No. 1330/CT-TTHT (OL 1330): VAT deduction for non-commercial imported goods
On 24th July 2019, Bac Ninh Department of Taxation issued OL 1330 about VAT deduction for non-commercial imported goods, with the following content:
The company imports non-commercial goods and uses it in the production of goods and services that are subject to VAT. The company shall declare and deduct VAT input if it has enough evidences (e.g. contract) to prove that there is no payment required for the goods. Also, customs declaration for non-commercial imported goods and VAT of imported goods payment voucher must be provided. In this case, the value of imported goods is considered as deductible expense for CIT purpose.
Official Letter No. 2011/CT-TTHT (OL 2011): tax policy on expenses relating to defective materials
On 24th July 2019, Hai Phong Department of Taxation issued OL 2011, which handles the case that the company has some expenses related to defective raw materials. Due to improper operation of workers or changes in product design from clients, the raw materials are damaged or cannot be used, and then, should be disposed. In this case, the cost of disposed raw materials is not considered as deductible expense for CIT purpose.
– In case of the company having raw materials which are damaged due to unavoidable reasons such as natural disasters, epidemics, fire, … or due to the expiry of materials, it shall consider the cost of these raw materials as deductible expense for CIT purpose if the company has enough documents as regulated at Point 2.1, Clause 2, Article 6, Circular No. 78/2014/TT-BTC dated 18th June 2014 (adjusted at Article 4, Circular No. 96/2015/TT-BTC dated 22nd June 2015 by the Ministry of Finance).
– Expenses relating to the consumption norm of raw materials, materials, fuels, goods, … shall be considered as deductible expense for CIT purpose if the materials are used for the business activities of the company, and are supported by proper documents as regulated by law.
– However, the expense in excess of the consumption norm of raw materials, materials, fuels, goods, … prescribed by the State is not considered as deductible expense for CIT purpose. The regulation is also applied for consumption norm of materials used for manufacturing and processing goods for export that are already registered with the Customs Office.
Official Letter No. 1220/CT-TTHT (OL 1220): tax policy on expenses for leasing warehouse abroad
On 11th July 2019, Bac Ninh Department of Taxation issued OL 1220, which handles the case that the company hires a warehouse abroad to store its products. The company has some kinds of expenses related to the operation and management of the warehouse, such as electricity fee, water fee, insurance, … In order to pay for the fees, the company signs a contract to authorize Company A (an company abroad) to pay on behalf of the company. To record the expense as deductible expense for CIT purpose, the company should have an authorization contract with company A, which states clearly the fees company A is authorized to pay on behalf of the company; and commercial invoice issued by Company A which states the fees paid by company A. Also, the payment should be conducted via non-cash payment method, according to Clause 1, Article 6, Circular No. 78/2014/TT-BTC.
In order to supervise the warehouse abroad, the company signs a labor contract with an individual who is not living in Vietnam and pay salary directly to that individual. In this case, the income of the individual is subject to PIT in Vietnam.