Circular No. 93/2017/TT-BTC (“Circular No. 93”): registration requirement of value added tax (VAT) calculation method is modified

On 19th September 2017, the Ministry of Finance issued Circular No.93 which amends and supplements several articles relating to VAT as follows;

  1. Cancel the requirement to submit Form No. 06/GTGT for registration of VAT deductible method of newly established business entities and business entities which have VAT taxable revenues less than 1 billion VND.
  2. Cancel the requirement to submit Form 06/GTGT for registration of change in VAT calculation method.
  3. Add a regulation on VAT calculation method for business entities which is guided in Article 11 of Circular 156/2013/TT-BTC (amended and supplemented in 2014 and 2015)

As a result of this release of Circular No. 93, from 5th November 2017, VAT calculation method is determined debased on the type of tax declaration dossier business entities send to the tax offices.

– Where a business entity applies VAT deductible method, it is required to send Form 01/GTGT and Form 02/GTGT to the tax office.

– Where a business entity applies VAT direct method, it is required to send Form 03/GTGT and Form 04/GTGT to tax office.

This circular comes into force as of 5th November 2017.


Official Letter No. 3977/TCT-DNL (“OL 3977”): tax policy on expenses paid by employees

On 5th September 2017, the General Department of Taxation issued OL 3977 with the following content:

This OL handles a case where a company authorizes its employee to use his/her own bank card or credit card to pay for goods and services on behalf of the Company and then allows the employee to claim reimbursement from the Company. If the purchasing transaction is supported with adequate evidence to prove that the payment was made for the company’s business purpose, the company is allowed to declare and deduct VAT input. In addition, the payment for goods and services is considered as deductible expenditure for corporate income tax (CIT). Required documents include invoices with the company’s name on them, the document authorizing the employee to make payment on purchase of goods and services for the company and allowing the employee to claim reimbursement of such expenses, and documents proving transfer of money from the company’s bank account to the employee’s bank account and from the employee’s bank account to the supplier’s bank account.


Official Letter No. 4066/TCT-DNL (“OL 4066”): foreign contractor tax (“FCT”) on warranty service

When a foreign contractor sells goods, materials, machines tools and supplies (“products”) to a company in Vietnam and delivers products at the foreign border gate or the border gate of Vietnam, the foreign contractor takes all responsibilities, expenses and risks relating to the products until the goods arrive at the shipping point and any additional services relating to the products in Vietnam is no longer required except for free warranty service if such warranty regulated in selling contract. The company in Vietnam takes all responsibilities, expenses and risks relating to receiving and delivering products from the shipping point.


Official Letter No. 60968/CT-TTHT (“OL 60968”): clarification of personal income tax (PIT) policy on expatriate employees

On 8th September 2017, Hanoi Department on Taxation issued OL 60968 about tax policy on the case where a foreigner has been assigned to work for a subsidiary in Vietnam on a long-term basis, has met the condition to be treated as a resident in Vietnam and received salary from both parent company (in Japan) and its subsidiary company in Vietnam. This OL states as follows;

– For the income paid by the subsidiary company, the subsidiary company is responsible to withhold and pay PIT on behalf of the foreigner using progressive tax rates.

– For the salary paid by parent company in Japan, the foreign employee must directly declare and pay PIT to the tax office quarterly.

If there is an agreement between both parent company and its subsidiary stating that the subsidiary pays house rental fee for the foreign employee on behalf of parent company and then the subsidiary claims reimbursement of such rental payment from parent company, this rental payment is treated as income received from parent company. Therefore, the foreign employee must directly declare and pay PIT for this income relating to rental fee. The subsidiary in Vietnam is required to use payment vouchers and receipt vouchers to record the transactions when paying the house rent and receiving reimbursement from parent company. The subsidiary should not declare and pay taxes on reimbursement received, and should not record expense for the rental payment made on behalf of the parent company.

When finalizing PIT, the foreigner must summarize all income received in the period (including house rental fee) to calculate PIT. If the foreigner paid PIT on the income in Japan, the tax paid in Japan is deducted from PIT payable balance calculated based on tax regulations in Vietnam. The deduction of PIT paid in Japan shall not exceed the PIT payable allocated to earning in Japan based on the proportion of income from Japan to the total taxable income.


Official Letter No. 4107/TCT-KK (“OL 4107”): clarification of tax policy on domestic purchase/sales activities performed by Export Processing Enterprises (EPE)

On 12th September 2017, the General Department of Taxation issued OL 4107 answering Ha Nam Department of Taxation with the following contents:

If an EPE is licensed to purchase and/or sell goods in Vietnam, this activity is subject to VAT. The EPE is required to complete tax registration and to record the revenue and expense relating to purchase and/or sales of goods in Vietnam separately from the rest of transactions. Also, the company is required to keep goods for this activity separately from the goods used for the rest of activities of the company.

The EPE is responsible to fulfill tax duties and other financial obligations for goods purchases and sales made in Vietnam as regulated by the law. Investment incentives, tax incentives and other financial preferences applied for manufacture-to-export activity of an EPE are not applicable for the purchase/sales activities in Vietnam.