NEWSLETTER NOV. 2015
New Decree on compulsory social insurance
On November 11, 2015, the Government issued Decree No. 115/2015/ND-CP detailing a number of articles in Law No.58/2014/QH13 (Law on Social Insurance).
Important points are as following:
The basis of monthly salary used for social insurance calculation
In accordance with Article 17 of this Decree,
- From January 1, 2016 to December 31, 2017, social insurance is calculated based on the salary and salary-based allowances shown in the labor contract.
- After January 1, 2018, social insurance is calculated based on the salary, salary-based allowances as well as other amounts shown in the labor contract.
Collection of compulsory social insurance payment in arrears
In accordance with Article 18 of this Decree, compulsory social insurance payments in arrears for employee and employer portions shall be collected in any of the following cases:
- Social insurance has not been paid for the increased amount of salary subject to social insurance, when there was an increase in salary
- Social insurance has not been paid for a Vietnamese employee while working abroad
Regarding the cases prescribed above, late payment interest shall not be charged to the amount in arrears. However, if payments are made after 6 months from the date the decision to increase the monthly salary used as the basis for social insurance is made or the date the labor contract of an employee working abroad is terminated, the late payment interests are charged.
Social insurance calculation for salaries shown in foreign currencies
In accordance with Article 26 of this Decree,
- Social insurance are calculated in VND. Salaries denominated in foreign currencies shall be converted into VND using the following exchange rates.
- For the first 6 months of the year, inter-bank average exchange rate of January 2nd published by the State Bank of Vietnam.
- For the last 6 months of the year, inter-bank average exchange rate of July 1st published by the State Bank of Vietnam.
- Monthly salary for social insurance payment stated in the social insurance book is the salary in VND.
This Decree takes effect as of January 1, 2016 except for the regulation on employees working under 1-month to 3-month labor contracts, which would come into effect on January 1, 2018.
Official Letter on Corporate Income Tax (CIT) policy for interests from deposits and foreign currency forward contracts
On December 26, 2015, General Department of Taxation issued Official Letter No. 5006/TCT-CS providing guidance on CIT policy applied for interests earned from deposits and foreign currency forward contracts.
This Official Letter states that interests from bank deposits and foreign currency forward contracts of a hi-tech company are not subjected to CIT incentive for hi-tech enterprises. These interests are considered as income derived from financial activities, not from hi-tech activities.
Official letter on registration of salary scales
On November 25, 2015, Ho Chi Minh City‘s Department of Labor – Invalids and Social Affairs issued Official Letter No. 25416/SLDTBXH-LD providing guidance on implementation of Decree No. 122/2015/ND-CP dated November 14, 2015 on regional minimum wage.
Department of Labor – Invalids and Social Affairs implements regional minimum wage for enterprises in Ho Chi Minh City and provides regulation on registration of salary scales as follows:
Enterprises should immediately review, amend and supplement the salary scales in order to comply with regulations on regional minimum wage. The result should be published to employees. It is necessary for
companies to communicate, negotiate and agree with executive committee of the trade union and the employees to adjust the salary scales. The adjusted salary scale need to be sent to People’s Committee of the district (Bureaus of Labor – Invalids and Social Affairs) where the enterprises locate before December 31, 2015.
Official letter on Value Added Tax for goods used as gifts
On November 5, 2015, General Department of Taxation issued Official Letter No. 4641/TCT-CS on Value Added Tax (“VAT”) applied to goods used as gifts.
This Official Letter states that companies shall issue VAT invoice with corresponding VAT rates for goods used as gifts. Company shall declare and pay output VAT of goods used as gifts and donations.
Input VAT of goods used as gifts is deductible if it meets conditions for VAT deduction prescribed per Circular No. 219/2013/TT-BTC.
The supporting regulations of above Official Letter are shown below;
In accordance with paragraph 3 of Article 7 and paragraph 5 of Article 14 in Circular No. 219/2013/TT-BTC dated December 31, 2013 on VAT,
“3. Taxable prices of the goods and services (whether bought externally or not) used as gifts, donations, or substitute for wages are the taxable prices of the same kinds or equivalent goods and services at the same time.
“5. Input VAT on the goods (whether purchased externally or produced by the taxpayer) used as gifts, used for sale promotions or advertising serving the manufacture of sale of taxable goods may be deducted.”
Pursuant to Article 15 of Circular No. 219/2013/TT-BTC, conditions for VAT to be deductible are the following;
“Legitimate VAT invoices for purchases …
Receipts for non-cash payments for the purchases (including imported goods) that cost 20 million VND or more inclusive of VAT, except for the purchases that cost below 20 million VND inclusive of VAT.
Receipts for non-cash payments include bank transfer receipts and other receipts for non-cash payments prescribed in Clause 3 and Clause 4 of this Article.
Bank transfer receipts are the documents proving the transfer of money from the buyer’s account to the seller’s account (these accounts must be registered or notified to tax authorities) opened at providers of payment services in legitimate forms …”
Official letter on tax policy applied to export processing enterprises (EPEs)
On November 20, 2015, General Department of Taxation issued Official Letter No.4922/TCT-KK on tax policy applied to EPEs.
This Official Letter states that goods and services which EPEs purchase abroad or from other non-tariff areas are not subjected to VAT.
This is in accordance with regulations providing guidance on implementation of Law No. 13/2008/QH12 (Law on VAT) and Article 5 of Law on VAT. The goods and services not subjected to VAT are the following:
“Goods transferred out of border gate or transited via the Vietnamese territory; goods temporarily imported for re-export; goods temporarily exported for re-import; raw materials imported for the production or processing of goods for export under contracts signed with foreign parties; goods and services traded between foreign countries and non-tariff areas and between non-tariff areas”
Decree No.114/2015/ND-CP (“Decree No.114”) issued by the Government on industrial areas, export processing zones and economic areas.
On November 09, 2015, the Government issued Decree No.114 which will take effect on December 25, 2015.
Decree No. 114 abrogates paragraph 9 of Article 1 in Decree No.164/2013/ND-CP dated November 12, 2013 which amends and supplements some articles in Decree No.29/2008/ND-CP dated March 14, 2008 on industrial areas, export processing zones and economic areas. The abrogated paragraph is “Export processing enterprises which have been granted permits for purchase and sales of goods and activities directly related to goods purchase and sale in Vietnam must establish separate branches outside of export processing zones to perform above mentioned activities.”
This Decree resolves the issue that content included in Article 77 of Circular 38/2015/TT-BTC conflicts with this abrogated paragraph. According to Article 77 of Circular 38/2015/TT-BTC, “EPEs that are permitted to engage in goods trading and activities directly related to goods trading in Vietnam as prescribed in the Government’s Decree No.23/2007/ND-CP dated February 12, 2007 must record them separately from manufacturing; a separate area must be provided for storing exported or imported goods by the right to import, right to export, and right to distribute.”. This new Decree clarified that establishment of branch is not necessary.