Official Letter No. 8811/CT-TTHT (OL 8811): treatment of rent deposits as capital contribution

OL 8811 issued by Binh Duong Department of Taxation on 15th May 2018 handles the case that a company intends to treat rental deposits as capital contribution from the parent company. In this case, before establishment, the parent company paid the deposit of land lease to the lessor on behalf of the company via bank transfer in accordance with the land lease contract. This OL states that recording deposit payment as capital contribution from the owner is not conformable with Circular No. 19/2014/TT-NHNN issued by the State Bank of Vietnam on 11th August 2014. This OL does not state the remediation procedure, but it advises the company to contact the State Bank of Vietnam for detailed instructions.

Official Letter No. 9467/CT-TTHT (OL 9467): procedures for an EPE to sell its products domestically

OL 9467 issued on 23rd May 2018 by Binh Duong Department of Taxation states that an EPE selling its products domestically must follow the law and regulations on investment and commerce. Some of the points discussed in this OL are as follows;

– Since the sales transaction between an EPE and a domestic company is treated as an on-spot export/ import activity, the company must complete customs procedures for on-spot export/ import activities. Then, the EPE should add a sentence, “used for organizations, individuals in the non-tariff zone”, on the sales invoice for on-spot export/import transactions.

– For taxes relating to on-spot export/ import activities, the company shall contact the customs department to get detailed instruction.

– Domestic companies which buy goods from an EPE must contact the customs department for import procedures, declare and submit import tax and other regulated taxes such as VAT for imported goods, special consumption tax, and environmental protection tax.

Official Letter No. 9644/CT-TTHT (OL 9644): determination of deductible expenses during trial production period for corporate income tax (CIT) purpose

On 25th May 2018, Binh Duong Department of Taxation issued OL 9644 which states that certain expenses incurred in the initial trial production period of a factory can be treated as deductible expenses for CIT purpose if they meet conditions as regulated by the CIT law and relevant regulations. The expenses and conditions explained in this OL are as follows:

– Bonuses paid to excellent employees (in cash or in kind): (1) the bonus amount paid to employees is supported by adequate documents which are conformable with the labor contract, collective labor agreement, or salary regulations and (2) the bonus (in cash or in kind) is included in taxable income of the employees for personal income tax purpose.

– Welfare expenses paid for employees, such as annual company trip: the total welfare expenses do not exceed average 01 month salary in the current year.

– Entertainment expense: the expense must be conformable with the regulations stated in Clause 1, Article 4 of Circular No. 96/2015/TT-BTC.

– Meal allowance (meals provided by the Company or meal allowance given in cash to employees): (1) the expense must be supported by adequate invoices and accounting documents as regulated by CIT regulations and (2) the Company establishes internal regulations about meal allowance for employees documented in one of the following documents: labor contract, collective labor agreement, or financial regulations of the company.

– Other expenses for business: these expenses must be supported by adequate invoices and accounting documents as regulated by CIT regulations. In addition, expenses over VND 20 million must be supported with documents for non-cash payment.

Official Letter No. 9645/CT-TTHT (OL 9645): invoice requirements for goods used for internal research and goods used as gift

This OL issued by Binh Duong Department of Taxation on 25th May 2018 handles a case where the finished goods of a company were transferred to different departments for internal research and development of new products. In these cases, the company shall prepare an internal requisition form and a delivery note, but it is not required to issue a VAT invoice in accordance with Clause 7, Article 3 of Circular No. 26/2015/TT-BTC nor pay VAT, according to Clause 2, Article 3 of Circular No. 119/2014/TT-BTC.

This OL also handles a case where finished goods were used for advertising new products or sent to customers or employees for trial use. In this case, the company must issue VAT invoices, according to Clause 9, Article 3 of Circular No. 26/2015/TT-BTC. If the company formally registered the usage of products in advertising activities as regulated by the law, the sample price for calculating VAT is zero. Otherwise, the VAT shall be calculated in the same manner for normal sales transaction.

Official Letter No. 1992/ TCT-CS (OL 1992): VAT rate on service rendered for an EPE

OL 1992 issued by the General Department of Taxation on 24th May 2018 handles a case where the company provides consulting service to an EPE client. If the service is rendered inside the non-tariff zone and is conformable with Clause 2, Article 9 of Circular No. 219/2013/TT-BTC, the company can apply VAT rate of 0% for the service. If the service is render in Vietnam but outside the non-tariff zone, VAT rate must be 10%.

Official Letter No. 2011/TCT-CS (OL 2011): guidance on e-invoice

OL 2011 issued by the General Department of Taxation on 24th May states that if a company purchases goods or services from a supplier which uses e-invoices, it shall use the e-invoice for tax declaration, bookkeeping and financial statement reporting.

The company has responsibility to save the data of e-invoices in memory devices (flash USB, CD, DVD disks,) in order to protect the data.

If the company wants to convert e-invoice to paper invoice, the conversion must follow the regulations stated at Clause 2,3,4 Article 12 of Circular No. 32/2011/TT-BTC.

Official Letter No. 1813/TCT-CS (OL 1813): guidance on e-contract and e-invoice

On 16th May 2018, the General Department of Taxation issued OL 1813 guiding on e-contract and e-invoice. OL 1813 mentions that e-contract of providing e-invoice software is valid if it meets the requirements for e-contract regulated in E-transaction Law No. 51/2005/QH11 issued by the National Assembly.

The company which decides to use the e-invoice, before issuing the first e-invoice, it must issue a decision to apply e-invoice and send it to the tax office. The e-contract is not requested to be submitted to tax office. However, the Company must save the e-contract and show it to the tax office in case of inspection.