Decree No. 153/2016/ND-CP guiding regional minimum wage applied to employees working under employment contract

On 14th November 2016, the Government issued Decree No. 153/2016/ND-CP guiding regional minimum wage applied to employees who are working under employment contract.

– The regional minimum wage applied to employees working for an enterprise that operates within:

+ Region I: VND 3,750,000/month

+ Region II: VND 3,320,000 /month

+ Region III: VND 2,900,000/month

+ Region IV: VND 2,580,000/month

– Region I, II, III and IV are defined in the Appendix of the Decree.

–  Previously, the regional minimum wages applied to region I, II, III and IV are VND 3,500,000 /month, VND 3,100,000/month, VND 2,700,000/month, and VND 2,400,000/month, respectively.

The above regional minimum wages are the lowest wages used as a basis for any salary agreements between employers and employees. Salary paid to an employee who works under normal working condition, meets monthly working hour standards, and completes his duties must be guaranteed not less than the regional minimum wage; and at least 7% greater than the regional minimum wage in case employees have been completed training courses.

This Decree comes into force on 1st January 2017 and replaces Decree No. 122/2015/ND-CP dated 14th November 2015.


Circular No. 147/2016/TT-BTC amending Circular No. 45/2013/TT-BTC guiding management, use and depreciation of fixed assets

On 13th October 2016, the Ministry of Finance issued Circular No. 147/2016/TT-BTC (“Circular 147”) amending Circular No. 45/2013/TT-BTC (“Circular 45”) guiding the management, use and depreciation of fixed assets. There are some notable contents as follows:

– For a building complex, which is used in the business operation and also for sale and/or for lease, the enterprise must determine and separate (area) the portion held for sale and/or for lease, and that portion cannot be accounted for as a fixed asset and be depreciated. In case the enterprise cannot separate the portion for sale and/or for lease, the enterprise cannot record the property as a fixed asset and cannot depreciate it.

– Regarding classification of tangible fixed assets, tangible fixed assets shall be classified into 7 categories instead of 6 categories as stipulated in Circular 45. Circular 147 adds one category of high-value infrastructure invested and constructed by the State using the State’s budget assigned to the economic organization to manage, exploit, and use (category 6).

– The sale or disposal of fixed assets in category 6 must have the agreement in writing by the State’s representative and are accounted as the reduction of the capital resource.

– The fixed assets classified in category 6 are not depreciated, just required to open a detailed accounting book to monitor the annual amortization of each asset and not allowed to reduce the capital resource forming the fixed assets.

– The useful life of fixed assets forming from B.O.T (Build-Operation-Transfer) and B.C.C (Business Corporation Contract) projects shall be equal to the payback period of the investors.

Circular 147comes into force on 28th November 2016.


Official Letter No. 13804/BTC-TCT about management of value added tax (VAT) refund in the ending month of 2016

On 30th September 2016, the  Ministry of Finance issued Official Letter No. 13804/BTC-TCT guiding on management of VAT refund in ending months of 2016.

– For export goods/services, VAT will not be refunded in case goods are not exported at custom operating locations as regulated in the Law on Customs and Decree No. 01/2015/ND-CP dated 2nd January 2015 issued by the Government. Tax authority also will not refund VAT for imported goods and then exported.

– For investment projects, VAT will not be refunded in cases;

+ Where the charter capital of an investment project has not been adequately contributed as registered;

+ The investment project in a conditional business sector fails to satisfy all of the conditions regulated by the Law on Investment or fails to maintain the satisfaction of the conditions during its operation;

+ A natural resource or mineral extraction project which is licensed from 1st July 2016 or a manufacturing investment that produces goods in which total value of natural/mineral resources and its energy cost makes up at least 51% of its unit price;

– In case a taxpayer has accumulated input VAT during more than 12 months or 4 consecutive quarters, the tax authority will refund only for VAT that (i) incurred before July 2016 (in case of monthly declaration) or before 3rd quarter of 2016 (in case of quarterly declaration) and (ii) meets all the requirements for VAT refund as regulated in Clause 1, Article 18 of Circular No. 219/2013/TT-BTC dated 31st December 2013 of the Ministry of Finance. The tax authority will inspect all the dossier before making refund to the taxpayer.


Official Letter No. 9376/TCHQ-TXNK about tax treatment on the difference of material balance between accounting book and finalization report of export processing enterprise (EPE)

On 29th September 2016, the General Department of Customs issued Official Letter No. 9376/TCHQ–TXNK about tax treatment on the difference of material balance between accounting book and finalization report of an EPE.

The difference can be positive or negative. A positive difference happens when the material balance on accounting book is higher than that in finalization report, and vice versa for a negative difference. A negative difference might be considered that materials have been sold domestically instead of using for export production, thus import tax is assessed thereon.

The issue mainly derives from the difference between consumption norm registered with the customs authority (before 1st April 2015) and actual consumption.

According to the Office Letter, the customs authority will not assess import tax on positive difference if the materials are still in stock.

The customs authority also will not assess tax (import duty and import VAT) on negative differences where:

– This is a result of declaration of consumption norm which is lower than actually used;

–  Differences is due to measurement unit between EPE and the customs authority;

–  EPE commits not to sell materials to domestic market (local sales)

–  The customs authority cannot find any evidence of such local sales


Official Letter No. 15888/BTC-CST on foreign contractor tax (FCT) policy with regard to the transfer of right to use trademark

On 7th November 2016, the Ministry of Finance issued Official Letter No.15888/BTC-CST on foreign contractor tax policy with regard to the transfer of right to use trademark.

Where a foreign party allows a Vietnamese party to use its trademark for monetary compensation, such activity shall be considered as the transfer of right to use trademark, but distinguishes itself from the transfer of intellectual property in accordance with the Law on Intellectual Property.

The foreign party that earns income from such activity shall follow tax policies as follows:

– Corporate income tax (CIT): CIT rate is 10% (refer to Clause 3, Article 7 and Point a, Clause 2, Article 13 of Circular No. 103/2014/TT-BTC issued by the Ministry of Finance).

– Value Added Tax (VAT): VAT rate is 10% under deduction method or 5% under direct method.


Official Letter No. 4975/TCT-CS about tax assessment on transactions which do not follow the arm’s length principle

On 26th October 2016, the General Department of Taxation issued Official Letter No. 4975/TCT-CST about tax assessment on transactions which do not follow the arm’s length principle.

Where a company offers loans to other companies/individuals at interest rate of 0%, such transactions are considered not to be in accordance with the arm’s length principle, and hence shall be subject to tax assessment as regulated in Point e, Clause 1, Article 37 of Law on Tax Administration No. 78/2006/QH11 dated 29th November 2006 and other regulations.


Official Letter No. 69792/CT-HTr about determining personal income tax (PIT) on income from stationery/business/communication allowances, and so on for employees

On 10th November 2016, Hanoi tax department issued Official Letter No. 69792/CT-HTr on determining PIT on income from stationery/business/communication allowances for employees as follows:

– If such allowances are in accordance with financial regulation or other internal regulations of a company, those allowances will be recorded as deductible expenses for CIT purpose. Such allowances also are excluded from taxable income of employees when calculating PIT.

– If such allowances are higher than the regulated amount, a surplus will be added to taxable income of employees for PIT purpose.