Newsletter

Official Letter No. 20527/CT-TTHT (OL 20527) about VAT policy

OL 20527 issued by Binh Duong Department of Taxation about VAT on 14^th October 2019 handles the case that the company has income from acting as an agency to seek and introduce Vietnamese clients to foreign organizations or individuals. According to regulations stated in Circular No. 219/2013/TT-BTC dated 31^st December 2013 by the Ministry of Finance:

– In case the agency service is consumed abroad, and meets the requirement regulated in Clause 2, Article 9 of Circular 219, it is subject to VAT rate of 0%.

– In case the agency service is consumed in Vietnam, VAT rate should be at 10% based on Article 11 of this Circular.

Official Letter No. 2428/CT-TTHT (OL 2428) about tax policy

On 04^th September 2019, Hai Phong Department of Taxation issued OL 2428 about tax policy, with the following content:

A company, which is an EPE, exports goods to a foreign company (the 2^nd party) and imports goods from another company (the 3^rd party). The 2^nd party pays for the goods directly to the 3^rd party, instead of paying to the company. In case the payment method is stated in the exporting contract, importing contract, appendix or amendment documents of these contracts and the company has payable confirmation with 2 parties, the payment shall be considered as payment via bank, according to the regulations about VAT. In this case, the company shall consider its imported goods as deductible expense for CIT purpose.

Official Letter No. 2540/CT-TTHT (OL 2540) about FCT

OL 2540 issued by Hai Phong Department of Taxation on 09^th September 2019 handles the case that an EPE signs a contract to purchase materials from a supplier in China and these materials are delivered to the company at a bonded warehouse (located in Vietnam). In this case, the supplier should bear FCT for distributing goods in Vietnam. In case the supplier does not register to declare and pay FCT directly to the tax office in Vietnam, the EPE shall pay the CIT (FCT) on behalf of the foreign contractor (the supplier). Regulations for CIT of the foreign contractor are stated in Article 13 of Circular No. 103/2014/TT-BTC dated 06^th August 2014 by the Ministry of Finance.

Official Letter No. 79762/CT-TTHT (OL 79762) about FCT declaration for foreign individuals

On 22^nd October 2019, Hai Duong Department of Taxation issued OL 79762 to guide FCT declaration for foreign individuals who signed contracts to transfer the manufacturing technology of the new product to the company, with the following contents:

+ In case the individual is a businessperson, the income from the abovementioned contract is subject to FCT for income from business. The company has responsibility to declare VAT and PIT, then pay tax on behalf of the individual using the Form 01/CNKD in Circular No. 92/2015/TT-BTC dated 15^th June 2015 issued by the Ministry of Finance.

+ In case the individual is not a businessperson, the income from the contract shall be treated as income from salary or wages. In this case, the company must withhold PIT with tax rate of 10% in case the individual is resident in Vietnam and 20% in case he/she is non-resident. Otherwise, the company shall apply the progressive tariff for PIT in case the individual is a resident and the abovementioned contract meets the requirement of a labor contract.

Individual who is a businessperson must have business certificate or equivalent documents according to the law of the foreign country. Documents in foreign languages used in Vietnam should have consular legalization, according to regulations of Circular No. 01/2012/TT-NG dated 20^th March 2012 of the Ministry of Foreign Affairs guiding the consular legalization certificate.