Newsletter

Law No.106/2016/QH13 providing supplements for daily interest rate of 0.03% on late payment penalty

On 06 April 2016, the National Assembly approved Law No.106/2016/QH13 providing amendments and supplements to a number of articles of Law on VAT, Law on Special Excise Duty and Law on Tax Administration, as mentioned in Newsletter of April 2016, we draw your attention to the following notable point:

• The late payment interest is adjusted to 0.03%/day which calculated on late tax payable. Regarding tax payables incurred before 01 July 2016 that taxpayers have not paid to the State Budget, including those discovered after inspections by competent authorities shall also be applied the rate of late payment interest specified in Clause 3 of Article 3 from 01 July 2016.

This law comes into force from 01 July 2016.

New Circular providing guidance on implementation of CIT incentives

On 17 June 2016, the Ministry of Finance issued Circular No.83/2016/TT-BTC providing guidance on the implementation of corporate income tax (CIT), import tax and non-agricultural land use tax incentives.

According to this Circular, new investment project can enjoy CIT incentives, for instance:

• New investment projects of assembling motor vehicles with a maximum of 24 seats, including those used for transporting both passengers and cargoes, and designed with at least two rows and a fixed partition between passengers’ compartment and goods compartment shall be entitled to CIT incentives.
• New investment projects located in industrial parks and export processing zones shall be entitled to tax incentives at the rates imposed on those located within industrial park, export processing zones as regulated in laws on corporate income tax
• If investment projects meet various conditions for CIT incentives simultaneously, investment projects shall be entitled to the most favorable CIT incentive.

Besides, Circular No.83/2016/TT-BTC also provides specific guidance on cases eligible for import tax incentives and non-agricultural land use tax incentives.

Investment projects that have investment permits, investment certificates or equivalents before 01 July 2015 and domestic investment projects with the maximum total investment of VND 15 billion commenced before 01 July 2015 shall comply with tax incentive policies (CIT, import tax or non-agricultural land use tax) in accordance with legislative instruments before 01 July 2015.

Circular No.83/2016/TT-BTC comes into force on 01 August 2016.

Official Letter providing guidance on social insurance, health insurance and unemployment insurance contribution based on statutory pay rate as regulated in Decree No. 47/2016/ND-CP        

Pursuant to Decree No. 47/2016/ND-CP dated 26 May 2016 on the statutory pay rate for public officials, public employees and armed forces’ personnel (Decree No. 47), Vietnam Social Security provides the following guideline for social insurance (SI), health insurance (HI) and unemployment insurance (UI) contribution based on statutory pay rate. Accordingly, there are some notable points as follows:

• Officially applying the statutory pay rate of VND 1,210,000 per month as the basic for salary on which compulsory SI, HI, UI are calculated from 01 May 2016
• If the additional contributions to SI, HI and UI due to the increased statutory pay rate are claimed at least 06 months after the effective date of the Decree No. 47, the insurance payables shall include the interests on the additional contribution within claimed time.
• Voluntary SI participants can determine their monthly income level as basic for social insurance. This monthly income does not exceed 20 times the new statutory pay rate (maximum of VND 24,200,000 per month)
• For HI participants whose health insurance is fully covered by the Government, their contributions to health insurance shall be based on the new statutory pay rate from 01 May 2016

Official Letter No. 2309/TCT-KK on transferring affiliate’s VAT tax obligation 

On 30 May 2016, the General Department of Taxation issued Official Letter No. 2309/TCT-KK on transferring affiliate’s VAT tax obligation.

Pursuant Point c, Clause 1, Article 11 of Circular No. 156/2013/TT-BTC dated 06 November 2013 of Ministry of Finance on VAT declaration:

 “c) Where the taxpayer has dependent affiliate in another province than the taxpayer’s headquarter, the affiliate shall directly submit the VAT declaration to the supervisory tax authority. If the affiliate does not sell anything and thus does not earn any revenue, tax shall be declared at the taxpayer’s headquarter.”

Accordingly, if affiliate is a dependent accounting unit of the taxpayer, and incurs no revenue from establishment to liquidation, VAT shall be declared at the taxpayer’s headquarter. Regarding direct administrative expenses for operation of affiliate, if there are input VAT invoices with name, address, tax code of the affiliate, which have been declared to the supervisory tax department, the local tax department where affiliate located check its function and duty. In case there are sufficient evidence to determine these expenses are used for operation of the taxpayer’s headquarter and eligible for VAT deduction as regulated, the tax department has to confirm affiliate’s deducted tax obligations so that the affiliate can summarize and declare at its headquarter.

Official Letter No. 2385/TCT-CS on corporate income tax policy

On 01 June 2016, the General Department of Taxation issued Official Letter No. 2385/TCT-CS on CIT tax policy on expanded investment project in the period 2009-2013. There are some important points as follows:

In case a taxpayer ran expanded investment project in the period 2009-2013, and cannot specify revenue or cost of expanded investment operation to allocate as regulated in Circular No. 130/2008/TT-BTC dated 26 December 2008 and Circular No. 123/2012/TT-BTC dated 27 July 2012 by the Ministry of Finance,　the taxpayer can choose to determine the increase in income from expansion investment which is not allowed to enjoy CIT incentives by the rate expansion investment capital on the total investment capital. The equity capital in the total investment capital is owner’s equity in financial statements (including accumulated profits and losses).

If the taxpayer is allowed to use foreign currency (USD) as monetary in accounting system by the Ministry of Finance, the taxpayer’s taxable income shall be determined by USD currency. However, when submitting tax declaration dossiers, the taxpayer has to use figures from converted financial statement denominated in Vietnamese dong (VND)

Foreign currency translation from USD into VND for financial statements for the period from 2014 and earlier shall be complied with Corporate Accounting Regime under Decision No.15/2006/QĐ-BTC dated 20 March 2006 and Circular No. 244/2009/TT-BTC dated 31 December 2009 by the Ministry of Finance, and for the period from 2015 and later, the translation shall be complied with regulations in Circular No.200/2014/TT-BTC dated 22 December 2014 by the Ministry of Finance.

Official Letter 2389/TCT-CS on foreign contractor tax policy

On 01 June 2016, the General Department of Taxation issued Official Letter No. 2389/TCT-CS on foreign contractor tax (FCT) policy related to selling activities at bonded warehouse of foreign contractor.

Pursuant to Clause 1 and Clause 5, Article 1 of Circular No. 103/2014/TT-BTC dated 06 August 2014 by the Ministry of Finance on FCT,

 “1. Foreign business organizations having permanent establishments in Vietnam or not; foreign business individuals that are residents of Vietnam or not (hereinafter referred to as foreign contractors and foreign sub-contractors) who do business in Vietnam or earn income in Vietnam under contracts, agreements, or commitments between the foreign contractor and a Vietnamese entity or between a foreign sub-contractor and a foreign sub-contractor to perform part of the main contract.

5. Any foreign entity that exercises its right to export, import, distribute goods in Vietnam, buy goods to export, or sell goods to Vietnamese traders in accordance with trading laws.”

Pursuant clause 1, Article 7 Circular No. 103/2014/TT-BTC on taxable corporate income:

 “1. Income subject to corporate income tax of foreign contractors and foreign sub-contractors are income from provision of goods, services, and services attached to goods in Vietnam under main contracts and subcontracts (except for the case in Article 2 Chapter I).”

Accordingly, with selling and buying transactions between foreign contractors and Vietnamese companies, if goods are transferred at Vietnamese bonded warehouse rented by the foreign contractors, the foreign contractors have to pay CIT in Vietnam as regulated in Circular No. 103/2014/TT-BTC. Vietnamese companies shall declare and pay tax on behalf of foreign contractors as regulated in Circular No. 156/2013/TT-BTC dated 06 November 2013 by the Ministry of Finance.

Regarding selling and buying transactions between foreign contractors which rents bonded warehouse in Vietnam and its oversea customers, if goods are transferred at its aforesaid bonded warehouse, the foreign contractors have to pay CIT in Vietnam as regulated.

Official Letter No. 2622/TCT-TNCN on the exchange rate used for converting income in foreign currency into VND

On 14 June 2016, the General Department of Taxation issued Official Letter No. 2622/TCT-TNCN on exchange rate used for converting income in foreign currency into VND.

Pursuant to Clause 4, Article 2 of Circular No.26/2015/TT-BTC dated 27 February 2015 by the Ministry of Finance and Article 13 of Circular 92/2015/TT-BTC dated 15 June 2015 by the Ministry of Finance, in case a taxpayer pays foreign currency salary for foreign employees, it shall convert the foreign currency into VND to withhold, declare and pay personal income tax at buying rate of commercial bank in which the taxpayer’s account is opened when it makes payment.

Official Letter 36600/CT-HTr by the Hanoi Tax Department on corporate income tax policy

On 01 June 2016, the Hanoi Tax Department issued Official Letter No. 36600/CT-HTr on corporate income tax policy.

Pursuant to Point a, Clause 1, Article 4 of Circular No.45/2013/TT-BTC dated 25 April 2013 by the Ministry of Finance on determining the cost of fixed asset acquisition, in case tangible fixed assets acquired by loan from bank to support the operation of taxpayers, the corresponding loan interest incurred during the time from acquisition to ready-to-use of the assets (including interest payables during the installation and test run time) shall be charged to cost of the tangible fixed assets as stipulated in Point a, Clause 01, Article 4 of Circular No.45/2013/TT-BTC dated 25 April 2013 by the Ministry of Finance.

Official Letter No. 36602/CT-HTr by the Hanoi Tax Department on sales invoice for internal transfer of fixed assets

On 01 June 2016, the Hanoi Tax Department issued Official Letter No. 36602/CT-HTr on tax policy:

Pursuant to Circular No.39/2014/TT-BTC dated 31 March 2014 by the Ministry of Finance providing guidelines for Decree No. 04/2014/NĐ-CP dated 17 January 2014 regulating on sales invoices, in case taxpayers purchase fixed assets and then transfer them to its branches for operation,

• If the branch is a dependent accounting units, the taxpayers shall prepare internal asset transfer slips enclosed with the dossiers of asset origin and do not issue invoice as stipulated in Point a and b, Clause 7, Article 5 of Circular No.219/2013/TT-BTC on 31 December 2013 issued by the Ministry of Finance
• If the branch is an independent accounting units, the taxpayers shall issue VAT invoice, declare and pay VAT as prescribed.

Official Letter No. 39782/CT-HTr by the Hanoi Tax Department on tax policy

On 14 June 2016, the Hanoi Tax Department issued Official Letter No. 39782/CT-HTr on tax policy:

A taxpayer directly enters into a service contract with customers, and then the taxpayer authorizes its branch to perform the service. When the taxpayer receives the complete service and makes payment to its branch, the branch is responsible for issuing VAT invoice to the taxpayer, declare and pay VAT as regulated.

Where the taxpayer signs minute of inspection, minute of contract liquidation and receives payment from customers, the taxpayer is responsible for issuing VAT invoice to customers, declaring and paying VAT as regulated.

In case the branch of the taxpayer issues VAT invoice to customers, two parties shall make a minute of recalling issued invoice and revoke that invoice as prescribed in Clause 2 Article 17 Decree No.51/2010/NĐ-CP dated 14 May 2010.