Mazars Vietnam Newsletter - Issue September 2017

Mazars’ Vietnam editorial team is proud to present its monthly newsletter for September 2017.The issue covers tax and legal updates including strategic, operational and payroll changes in regulations relevant to Corporate Income Tax ("CIT"), Value Added Tax ("VAT"), and several updates on Personal Income Tax ("PIT").

Strategic Updates 

Official Letter No. 7985/BTC-CST on the concept of consumption outside Vietnam for export service

According to Official Letter No. 7985/BTC-CST issued by Ministry of Finance (“MOF”) on 16 June 2017, the concept of consumption outside Vietnam is divided into the following groups:

(i) Direct services related to asset which is real estate outside the territory of Vietnam;

(ii) Rental services of transportation means and other means which are used outside the territory of Vietnam;

(iii) Direct services related to goods which are stored, displayed or circulated outside the territory of Vietnam or in non-tariff zones (including isolated zones);

(iv) Services provided outside the territory of Vietnam;

(v) Services provided via electronic means.

MOF is also requesting a more detailed guidance from competent authorities on the application of 0% VAT rate for export services to avoid confusion.

Operational Updates 

Official Letter No. 2932/TCT-CS on changing purpose of renting assets to manufacture goods which are not subject to Value Added Tax (“VAT”)

According to Official Letter No. 2932/TCT-CS issued by General Department of Taxation (“GDT”) on 03 July 2017, if a company invests and rents fixed assets for a certain period of time but then uses such assets to manufacture goods not subject to VAT, the refunded VAT amount corresponding with the remaining value of the assets at the time of changing the usage purpose must be collected.

Official Letter No.3693/CT-TTHT on CIT for free-of-charge gifts/goods which are recognized as Other income

According to Official Letter No. 3693/CT-TTHT issued by Ho Chi Minh Tax Department (“HCMTD”) on 24 April 2017, if provided with products such as tools, equipment, chemicals, technical facilities, etc. free of charge from a foreign partner, the company must recognize this as other income at the same time and record them as tools, equipment, materials, etc. accordingly to include in deductible expenses for CIT purpose.

Official Letter No.3753/CT-TTHT on Personal Income Tax (“PIT”) and CIT on bonus for agency’s staff

According to Official Letter No. 3753/CT-TTHT issued by HCMTD on 25 April 2017, if a company pays bonus of VND 2 million or more to agency’s staff, it must withhold 10% PIT on the total income before paying to individuals. Such expenses if related to business activities and clearly specified in the contract with agency, satisfying the conditions specified in Article 4 of Circular No. 96/2015/TT-BTC will be considered as deductible expenses for CIT purpose.

 

Payroll Updates

Official Letter No.2700/TCT-TNCN on PIT of foreign contractor’s employees coming to Vietnam to provide services  

According to Official Letter No. 2700/TCT-TNCN issued by GDT on 21 June 2017, a foreign expert who is assigned to Vietnam to provide services by a foreign contractor can to authorize (by virtue of the Civil Code) the Vietnamese company to declare and pay tax on his/her behalf.

 

Official Letter No. 2520/TCT-TNCN on PIT of foreign experts coming to Vietnam to support humanitarian activities in Vietnam

In Official Letter No. 2520/TCT-TNCN dated on 09 June 2017, GDT agrees with the opinion of Hanoi Tax Department (“HNTD”) in Official Letter No. 30045/CT-TTHT dated 12 May 2017. In detail, Representative Office of German Red Cross in Vietnam pays business trips, meals and accommodation for foreign experts to attend international conferences organized in Vietnam to support humanitarian activities in Vietnam. Such experts do not sign contracts of supplying goods and/or services with the Office and do not generate incomes in Vietnam, hence are not subject to PIT in Vietnam.

 

Official Letter No. 2943/TCT-CS on the conversion of net income into gross income

According to Official Letter No. 2943/TCT-CS issued by GDT on 04 July 2017, if an individual is received salary net of tax and is subject to compulsory insurance contribution, the conversion of net income into taxable income shall be as follows:

- For the period before 01 July 2013: the amount of compulsory insurance contribution shall not be deducted from net income before conversion.

- From 01 July 2013: the amount of compulsory insurance contribution shall be deducted before conversion.

 

Official Letter No. 856/CT-TTHT on PIT for the additional allowance/support upon employee’s resignation

According to the Official Letter No. 856/CT-TTHT issued by HNTD on 09 January 2017,  if the labour contract is terminated on 31 December 2016 but termination procedures and final payments (including monthly salary for December 2016 and other allowances/supports) are only made in January 2017, PIT obligations shall be as follow:

- The monthly salary is subject to progressive tax rate;

- Allowances which are paid in accordance with the Labour Code and Law on Social Insurance are exempted from PIT;

- Other additional financial allowances/supports paid by the company after the labour contract termination are subject to 10% PIT.

Opinion of MOF on the effectiveness of the commiment for no PIT withholding where individuals only engage in probation contract or apprenticeship contract and then resign

In a response dated 29 August 2017 on its website, the MOF mentioned the case where individuals working under a probation or apprenticeship for less than 03 months, then do not sign labour contract with the company and would commit for no PIT withholding (i.e. the individuals only receive salary from the company for the whole year and their total income in the year shall not reach the taxability level). According to which, the MOF opines that at the time of commitment, it cannot be confirmed that such individuals only have one source of income for the whole year, hence the company is still required to withhold PIT as prescribed.

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