Vietnam Tax Alert 2017/Issue 3 | KPMG | VN

Vietnam Tax Alert 2017/Issue 3

Vietnam Tax Alert 2017/Issue 3

The Circulars in effect up to 1 October 2014 provided that the supply of goods attached with warranty services performed in Vietnam shall be subject to FCT.

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From 1 October 2014, when Circular 103/2014/TT-BTC took effect, foreign contractor tax (“FCT”) has not applied to the supply of goods where goods are delivered at a foreign or Vietnamese bordergate, and that only have warranty terms as the responsibility and obligation of the seller and no other associated services that are performed in Vietnam attached.

The Circulars in effect up to 1 October 2014 provided that the supply of goods attached with warranty services performed in Vietnam shall be subject to FCT. However, the tax authorities controversially issued various guidelines stating that FCT would apply to the goods that only have warranty terms and no other associated services performed in Vietnam attached that are supplied before 1 October 2014.

To facilitate a consistent policy application, the Ministry of Finance submitted
Official Letter 4758/BTC-CST dated 12 April 2017 to the Prime Minister to report tax appeals from various enterprises regarding FCT on imported goods with free-ofcharge warranty terms attached.

On 20 April 2017, the Government issued Official Letter 4026/VPCP-KTTH (“OL 4026”) addressing the Ministries of Finance and Justice, stating that:

  1. FCT obligations on imported goods with warranty conditions enclosed, shall comply with the provisions of the law effective in each period.
  2. In cases where a tax appeal is pending against the aforementioned tax obligations, the Ministry of Finance and local tax authorities shall come to a decision in accordance with their competence and bear responsibility in each specific case as prescribed by law. If this falls beyond their competence, all authorities shall report this to the Prime Minister.

On 26 June 2017, the General Department of Taxation issued Official Letter 2776/TCT-CC to request all provincial tax departments to review all previous cases that had not been resolved in the spirit of the direction of OL 4026 to ensure the fairness of tax obligations. Accordingly, it can be interpreted that companies shall still declare and pay FCT on imported goods with warranty terms attached in periods prior to 1 October 2014.

Enterprises should note the above guidelines and review all import contracts with warranty terms attached that are concluded before 1 October 2014, in order to prepare for potential tax audits and inspections in the future. Please contact KPMG for detailed advice on and assistance with the above matter.

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