Circular No. 41/2017/TT-BTC (“Circular 41”) guiding some articles of Decree No. 20/2017/NĐ-CP (“Decree 20”) dated 24th February 2017 about tax management on transfer pricing (TP)

On 28th April 2017, the Ministry of Finance released Circular 41 to provide further guidance on some articles of Decree 20.

This circular provides guidance on comparability analysis, related transaction pricing method, TP declaration, TP documentation and exemptions which were introduced by Decree 20.

Circular 41 comes into force from 1st May 2017, replacing existing TP regulation in Circular No.66/2010/TT-BTC dated 22nd April 2010 and Form No.03-7/TNDN appended to Circular No. 156/2013/TT-BTC dated 6th November 2013 issued by the Ministry of Finance.

Official Letter No. 2564/TCT-TNCN (“OL 2564”) on determining taxable allowances

On 13rd June 2017, the General Department of Taxation (“GDT”) issued OL 2564 with the following contents:

  1. Commute allowance

In case an employee working at a representative office in Vietnam receives an allowance from oversea parent company in order to pay for transportation from his home to work place and such arrangement is stated in the company’s regulation, such allowance will not be counted as taxable income of the employee.

  1. House rental allowance

In case the employee receives a house rental allowance from oversea parent company to pay house rent by himself, the rental allowance shall be included in his taxable income based on the actual amount paid, but must not exceed 15% of his total taxable income before house rent allowance.

Official Letter No. 2678/TCT-CS (“OL 2678”) about Value Added Tax (VAT)

On 21st June 2017, the General Department of Taxation issued OL 2678 answering Long An Taxation Department on matters related to VAT refund:

In general, for an investment in conditional business lines, a business entity is not qualified for VAT refund but is allowed to transfer its investment project’s deductible VAT to the next period, if such investment had not yet satisfied all conditions of business or failed to maintain satisfaction of all conditions during its operation.

In case a Company changed its investment project in conditional business lines to project of “Household plastic products manufacturing factory”, which belongs to non-conditional business lines, provincial tax office shall, based on the actual situation of the project, consider VAT refund for this project as guided in prevailing regulations.

Official Letter No. 2810/TCT-CS (“OL 2810”) about VAT of goods used for donation purpose

On 26th June 2017, the General Department of Taxation issued OL 2810 about VAT of goods used for donation purpose with some notable point as follows:

When an enterprise uses its manufactured or purchased goods for donation, it must issue VAT invoice as well as declare VAT for these goods, using taxable prices of goods of the same kind or equivalent goods at the time of donating. The enterprise is entitled to deduct input VAT on products, goods and services related to this activity.

Official Letter No. 2872/TCT-CS (“OL 2872”) on VAT method registration

On 28th June 2017, the General Department of Taxation issued OL 2872 answering Long An Taxation Department on the following case:

In case an enterprise was established in 2016, had submitted form No. 06/GTGT to direct tax office in order to register VAT deduction method and received an approval from the tax office, the enterprise can apply registered method consistently for the year of 2016 and 2017, and does not need to re-submit form 06/GTGT for year 2017.

Official Letter No. 8121/BTC-TCHQ (“OL 8121”) about VAT of exported goods

On 19th June 2017, the Ministry of Finance released OL 8121 answering Ho Chi Minh Customs Department about VAT of exported goods, with details as follows:

In case an enterprise has raw materials or materials which had been used in production but end-products had not been exported (declared for bonded warehouses during 2013-2014), if such inventory is to be used to produce export goods, VAT shall not be imposed. Ho Chi Minh Customs Department is responsible for monitoring the enterprise’s production-for-export. In case it found such inventory no longer present in warehouses and the enterprise did not use them for producing exported goods, Ho Chi Minh customs office would be responsible for collecting additional taxes and penalizing the enterprise in conformity with legal regulations.

Official Letter No. 41157/CT-TTHT (“OL 41157”) about tax policy

Hanoi Taxation Department issued OL 41157 about tax policy with some notable points as follows:

– Value added tax (VAT)

In case a company signs software processing contract with a foreign contractor (who has no permanent establishment in Vietnam), this service is subject for VAT rate of 0%. Customs declarations are not required for deducting VAT on software exported via electronic means. The Company shall comply with the provision of Clause 2, Article 16 of Circular No. 219/2013/TT-BTC.

– Corporate income tax (CIT)

Where a newly established company has an investment project in the following areas, those activities except for computer programing (CPC 842) are not entitled for CIT incentives.

+ Computer programing (CPC 842).

+ Management consulting service (CPC 865).

+ General administrative services for the members of a Corporation

+ Market research service (CPC 864).

In regard to the income from “computer programing” activity, if this income meets the requirements stated at Article 5 and Article 6 of Circular No. 16/2014/TT-BTTTT dated 18th November 2014 issued by the Ministry of Information and Communications, such income is subject to CIT incentives at CIT rate of 10% for 15 years; tax exemption for 4 years; and a CIT reduction of 50% for 9 subsequent years. Duration of tax incentives is counted continuously from the first year that the Company has taxable income from an investment project entitled to tax incentives. In case the Company does not have taxable income in first 3 years (since the year the Company earns revenue from the project), duration of tax incentives shall be counted from the 4th year since the year it earns revenue from the project.

Official Letter No. 41162/CT-TTHT (“OL 41162”) about tax policy

According to the OL 41162 dated 19th June 2017 issued by Hanoi Taxation Department, when an international organization in Vietnam, who was appointed by donors to implement humanitarian aid or non-refundable aid projects in Vietnam, purchases goods/services for the projects at prices that include VAT, such VAT shall be refunded.

VAT refund dossier for above mentioned case includes:

– A claim form for refund (Form No. 01/DNHT)

– Written aid approval made by a competent authority (a photocopy certified by the taxpayer);

– Certificate issued by the Ministry of Finance (if the aid addressed to central budget) or Provincial Finance Department (if the aid addressed to provincial budget) of aid provided by a foreign non-governmental organization, specifying the name of the aid provider, recipient, management body, and the aid value.