Mazars’ Vietnam editorial team is proud to present its monthly newsletter for June 2017.The issue covers operational tax and legal updates including both operational and payroll regulations relevant to Corporate Income Tax ("CIT"), Special Consumption Tax ("SCT"), Foreign Contractor Tax ("FCT"), invoice issuance, tax administration on online trading and Personal Income Tax ("PIT") as well as updates on International financial standards.
OFFICIAL LETTER NO. 1280/TCT-CS ON SPECIAL CONSUMPTION TAX (“SCT”) FOR SELLING CAR WHICH WAS IMPORTED UNDER THE FORM OF GIFT
According to Official Letter No. 1280/TCT-CS issued by General Department of Taxation (“GDT”) on 04 April 2017, if a company imported car under the form of gift and then sold it, the company is required to declare and pay SCT as per prescribed regulations.
OFFICIAL LETTER NO. 1627/TCT-CS ON CORPORATE INCOME TAX (“CIT”) INCENTIVES THANKS TO CONDITION OF LOCATION FOR TRADING ACTIVITIES
According to Official Letter No. 1627/TCT-CS issued by GDT on 25 April 2017, if a company generates income from trading activities in an industrial zone (“IZ”), such income is entitled to CIT incentives; meanwhile if the income is from trading activities outside of the IZ (i.e. outside of the incentive location), such income shall not be entitled to CIT incentives.
OFFICIAL LETTER NO. 1101/CT-TTHT ON CIT FOR EXPENSES INCURRED TO SUPPORT CUSTOMERS
According to Official Letter No. 1101/CT-TTHT issued by Ho Chi Minh Tax Department (“HCMTD”) on 07 February 2017, if a company incurred expenses to support its customer regarding the termination of a lease contract with the existing supplier before the due date and then can buy the company’s product, such expenses will not be deductible for CIT purpose as it is not directly business-related.
OFFICIAL LETTER NO. 1832/TCT-DNL ON FOREIGN CONTRACTOR TAX (“FCT”) - RUSSIAN CONTRACTOR
According to Official Letter No. 1832/TCT-DNL issued by GDT on 08 May 2017, if a Vietnamese company pays tax on behalf of a Russian contractor, Value Added Tax (“VAT”) taxable revenue shall be the revenue received by the foreign contractor, including the taxes to be paid in Vietnam but excluding the taxes which the foreign contractor must pay on behalf of Vietnamese subcontractors in line with Russian regulations.
CIT taxable revenue shall be the revenue after deducting VAT received by the foreign contractor but excluding the taxes which the foreign contractor must pay on behalf of Vietnamese subcontractors in line with Russian regulations.
OFFICIAL LETTER NO. 1686/TCT-CS ON ISSUING INVOICES UPON THE DISTRIBUTION OF REVENUES AND EXPENSES FOR BUSINESS COOPERATION
According to Official Letter No. 1686/TCT-CS issued by GDT on 27 April 2017, if the business cooperation contract (“BCC”) specifies that the distributed revenue and expense are inclusive of VAT, the party appointed to manage the cooperative activities shall have to fulfill all VAT obligations of cooperative activities, issue VAT invoices to customers and declare VAT in accordance with regulations. Upon revenue distribution, the revenue-receiving party shall issue VAT invoices as stipulated (including the distributed revenue and the corresponding VAT amount). Upon the expenses distribution of such contracts, the expense-distributing party shall issue VAT invoices (including the proportionate expenses and the corresponding VAT amount).
If the BCC specifies that the distribution of revenue and expense are exclusive of VAT, the party appointed to manage the cooperative activities must fulfill all VAT obligations of cooperative activities, issue VAT invoices to customers and declare VAT in line with regulations. There is no VAT on the distribution of revenue and expense between the parties.
OFFICIAL LETTER NO. 2623/TCT-CS TIGHTENING TAX ADMINISTRATION ON ONLINE TRADING
Recently, along with the strong development of social networks such as Facebook, Zalo, Youtube and so on, many enterprises and individuals take advantage of these tools for their business. However, business registration, tax declaration and payment have not been properly performed in line with regulations. In relation to this, GDT issued Official Letter No. 2623/TCT-CS dated 16 June 2017 to tighten tax administration for online trading, which requested provincial tax departments to propagate and spread tax policies to all taxpayers who are engaged in online trading so they can be aware of obligation to declare and pay tax. At the same time, tax departments are responsible for cooperating with banks and transportation companies to obtain information for reviewing, examining and verifying if taxpayers have performed tax registration and declaration, based on which their revenues are adjusted if found unreasonable.
Currently, HCM and Hanoi Tax Department pilot to review and screen the accounts conducted through the social networks which have large sales volume and request for explanation on the status of business activities. Hence, in the coming time, doing business through the social networks shall be subject to stricter supervision and management from the tax authorities.
OFFICIAL LETTER NO. 1024/CT-TTHT ON PERSONAL INCOME TAX (“PIT”) FOR FOREIGN EXPERTS APPOINTED TO WORK IN VIETNAM
HCMTD issued Official Letter No. 1024/CT-TTHT on 07 February 2017 regarding a company which signs contracts or agreements with overseas companies under its group to appoint experts to work in Vietnam, who sign labour contracts and receive salary from such overseas companies. If incurred any expenses for the experts which shall be then reimbursed by the Vietnamese company, such Vietnamese company is required to withhold, declare and pay FCT on behalf of the foreign contractor before making payment. The experts are required to conduct quarterly PIT declaration by themselves but can authorise the Vietnamese company to submit their signed forms on their behalves.
OFFICIAL LETTER NO. 1057/CT-TTHT ON PIT FOR TUITION FEES OF EMPLOYEE’S CHILDREN PAID BY OVERSEAS PARENT COMPANY
According to Official Letter No. 1057/CT-TTHT issued by HCMTD on 08 February 2017, if the parent company of a 100% foreign-owned enterprise appoints its employee to work in Vietnam and pays tuition fees for such employee’s children studying in Vietnam, the tuition fee in Vietnam will be exempted for PIT purpose in Vietnam if it is for the grade from kindergarten to high school.
OFFICIAL LETTER NO. 1873/TCT-TNCN ON PIT FOR PENALTIES ON BREACH OF CONTRACT
Official Letter No. 1873/TCT-TNCN issued by GDT on 10 May 2017 stipulates the case where individuals sign sale and purchase contracts of apartments with a company. During the project implementation, due to the company’s delay and individuals ask for contract liquidation which requires a compensation and refund from the company as per the signed contract, such income will be exempted for PIT purpose in Vietnam.
BEYOND THE GAAP
No. 111. IFRS 17 – Insurance Contracts has been in the pipeline for more than ten years, and finally made its appearance during the night of 16 to 17 May 2017. On 17 May, the IASB hosted two interactive webinars on the standard, and launched a dedicated webpage to support implementation. IFRS 17 will replace the interim standard IFRS 4 from 2021, meaning insurers will no longer be able to use local accounting frameworks for insurance contracts. The new standard is therefore likely to cause substantial upheaval, with impacts varying significantly from one company to another.
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