New update on CIT, PIT and labor policies, VAT, FCT, Import Duty, Export Duty and Customs procedures and Tax administration on June 2017.
1. Corporate Income Tax (“CIT”)
(i). Circular 50/2017/TT-BTC providing guidance to the Law on Insurance Business
On 15 May 2017, Ministry of Finance (“MOF”) issued Circular 50/2017/TT-BTC providing detailed guidance on Decree 73/2016/ND-CP, related to the implementation of the amended Law on Insurance Business. Notably, Circular 50 supplements the permitted ratio of commission payment for the insurance to construction investment activities, which is capped at 5% of the actual insurance premiums. The allowable ratio of insurance commission for other activities remains unchanged compared with the preceding regulations.
Circular 50 also replaces the new forms for incorporation and operation registration for insurance companies, subsidiary of insurance companies and insurance commission companies.
Circular 50 takes effect on 1 July 2017, replacing Circular 124/2012/TT-BTC, Circular 125/2012/TT-BTC and Circular 194/2014/TT-BTC.
(ii). Amending and supplementing the list of high technology prioritized for development and high technology products encouraged for development
On 28 April 2017, the Prime Minister issued Decision 13/2017/QD-TTg supplementing Decision 66/2014/ QD-TTg on the list of high technology prioritized for development and high technology products encouraged for development. Accordingly, the list has been extended to include the Internet ofThings (IoT) technology, virtual reality (VR) technology, smart television, etc. Companies applying high technologies should take note of this Decision to determine an appropriate CIT incentive scheme where available.
Decision 13 takes effect on 15 June 2017.
2. Personal Income Tax (“PIT”) and labor regulations
(i). An individual is not required to file PIT finalization for business income
In accordance with the Official Letter No. 1864/TCTTNCN dated 9 May 2017, where an individual earns income both from employment source and business source, such individual is not required to file PIT finalisation for the business income.
(ii). Trade discount granted to an individual doing business is subject to PIT
In accordance with the Official Letter No. 1615/TCT-CS dated 25 April 2017, where a company grants cash trade discount (i.e. not to net off under the invoice) to an individual doing business, such a discount should be to PIT.
(iii). Income earned from contract breach compensation is not subject to PIT
In accordance with the Official Letter No. 1873/TCTTNCN dated 10 May 2017, the current PIT regulations stipulates 10 types of taxable income, which does not include income from contract breach compensation. As such, where a company signs a labour contract with an individual and is obliged to compensate such individual for contract breach, the individual is not required to declare PIT on such income.
3. Value Added Tax (“VAT”) and invoicing
(i). Project operation office (“POO”) of a foreign contractor providing construction and installation services to an Export and Processing Enterprise (“EPE”) is allowed to apply VAT at 0%
In accordance with Official Letter No. 1714/TCTCS dated 28 April 2017, where a POO of a foreign contractor registers to declare tax according to a hybrid method (i.e. to declare VAT on the deduction method and declare CIT on the deemed method) and provides the construction and installation services to an EPE, such a POO is allowed to apply VAT at 0% for its service provision.
(ii). Export goods having import origin is not entitled to a VAT refund
In accordance with Official Letter No. 379/TCT-CS dated 7 February 2017, where a company A imports the goods and preliminarily processes before selling to a company B for exportation, the goods are considered to have an import origin and are not subject to a VAT refund following the provision of
(iii). VAT credit for goods and service purchased under a deferred payment term
In accordance with Official Letter No. 1636/TCT-KK dated 25 April 2017 and the Official Letter No. 06/ TCT-CS dated 3 January 2017, where a company purchases the goods and services under a deferred payment term and the seller has issued an output VAT invoice and declared VAT for such output VAT but the buyer has not settled the payment as at the due date of the payment term, the buyer is still allowed to claim input VAT credit for such invoice. When the payment is actually settled and the non-cash condition is not qualified, the buyer is required to make a decrement adjustment for its input VAT credit.
(iv). Circular 37/2017/TT-BTC amending and supplementing Circular 39/2014/TT-BTC and Circular 26/2015/TT-BTC on invoicing
On 27 April 2017, MOF issued Circular 37/2017/TT-BTC amending and supplementing Circular 39/2014/TTBTC and Circular 26/2015/TT-BTC on invoicing. Some notable points are as below:
Circular 37 takes effect on 12 June 2017.
4. Import Duty, Export Duty and Customs procedures
(i). List of goods subject to customs declaration as at the import bordergate
On 12 May 2017, the Prime Minister issued Decision 15/2017/QD-TTg on the List of import goods subject to customs clearance at the import bordergate, including 17 sensitive commodity groups with a high risk level. Goods that do not fall under the list of Decision 15 may opt to declare with customs at the import bordergate or at other appointed places in accordance with the current regulations.
Decision 15 takes effect on 1 July 2017.
(ii). Enforcement for customs inspection for high risk containers
In accordance with Officiail Letter No. 3166/TCHQĐTCBL dated 12 May 2017, the General Department of Customs (“GDC”) requested local customs departments to analyse and identify key shipments displaying signs of smuggling and trade fraud for inspection, supervision and controlling. Notably:
(iii). Goods owner not having a legal entity in Vietnam must authorise a customs agency to perform the customs declaration
In accordance with Official Letter No. 776/GSQLTH dated 19 April 2017, where the owner of goods imported in Vietnam does not have a legal entity in Vietnam, the customs clearance for the imported goods must be authorised to a customs agency.
(iv). An investment project partially entitled to incentive is entitled to import duty incentive for the machineries and equipment directly used for the incentive part of the project
In accordance with Official letter No. 2888/TCHQ-TXNK dated 28 April 2017 of the GDC, where a company has a project located in an incentive location but not qualified the incentive investment sector, such company is entitled to import duty exemption for goods imported to form fixed asset for the production of the incentive project (i.e. imported goods for business activities other than the production shall not be entitedl to the exemption).
Imported goods entitled to import duty exemption must be allocated and recorded separately.
(v). Domestic companies outsourcing the goods processing to an EPE with association of material provision is not subject to import duty upon its importation of the finished goods
In accordance with Official Letter No. 6519/BTC-TCHQ dated 19 May 2017, where a domiestic company outsources the processing of goods to an EPE and such a domestic company is responsible to provide all material for processing, the reimported finished goods from the EPE shall be entitled to import duty exemption.
5. Foreign Contractor Tax (“FCT”)
(i). No tax adjustment if the taxpayer declared the income from the transfer of trademark use right as not subject to VAT
With regarding the assessment of FCT liability following the guidance of Official Letter No. 15888/BTC-CST, on 24 March 2017, MOF issued Official Letter No. 3833/BTC-CST, accordingly, if the foreign contractor derives income from the transfer of trademark use right and the Vietnam party has declared for the transaction as not subject to VAT, no tax adjustment shall be required in this case.
6. Tax administration
(i). Enforcement of tax inspection at Foreign Direct Investment (“FDI”) companies in retail business
Following the conclusion of the Government Office on the current status and solution to manage and develop Vietnam retail market, GDT issued Official Letter No. 1476/TCT-TTr dated 19 April 2017 that pushes provincial tax authorities to review and carry out tax inspection at FDI companies in the retail business. The inspection would mostly focus on the 5-year-period from 2012 to 2016. GDT also hightlights some focal points for inspection for each type of taxation.
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