We would like to bring you tax and legal updates in December 2017 with the highlights of the effect date of the new list of vietnam’s export and import goods, rice export business, clarification on the scope of vietnam’s competition law, several updates on CIT and PIT, DTA, VAT invoice for gifts to customer on Tet holiday.
New list of Vietnam’s export and import goods shall be applied from 1 January 2018
On 01 January 2018, Circular No. 65/2017/TT-BTC dated 27 June 2017 of the Ministry of Finance promulgating list of Vietnam’s import and export goods shall take effect and replace Circular No. 103/2015/TT-BTC dated 1 July 2015. The new list will update the changes in the description, technique, technology and commodity classification in conformity with the actual situation and market demand and unify with the ASEAN Harmonized Tariff Nomenclature and Harmonized Commodity Description and Coding System (HS) of World Customs on descriptions, notes and codes of goods in the new period to facilitate the integration and trade exchanging process in the region and the world.
The changes in this Circular 65 comparing with Circular 103 mainly relate to a number of business sectors, which have development in technology or request for enhancement in environmental management, such as automobile, maritime products, woods, chemicals, machinery and equipment, etc.
Simplifying application dossier for certificate of eligibility for rice export business
On 08 December 2017, the Ministry of Industry and Trade promulgated Circular No. 28/2017/TT-BCT which will be effective from 1 January 2018. According to Article 6.1 of this Circular, Chapter IV of Circular No. 44/2010/TT-BCT detailing a number of articles of the Government’s Decree No. 109/2010/ND-CP dated 04 November 2010 on rice export business will be abrogated. It means that the original contract for leasing warehouses and mills is no longer requested in the dossier of application for grant, re-grant or modification of a certificate of eligibility for rice export business.
Clarification on the scope of Vietnam’s Competition Law
The Ministry of Industry and Trade is preparing the draft of new Competition Law to replace the current one issued in 2004. One of the most important changes in this draft is the expansion of applicable entities to include relevant Vietnamese and foreign organizations and individuals. Due to a lack of formal clarification and guidance, it is difficult to interpret whether the current Competition Law applies to a foreign business’s activities that operate outside Vietnam. In light of this clarification, foreign businesses that do not have direct operations, physical, or legal presence in Vietnam are more likely to fall within the scope of the new law on the basis of having local subsidiaries or sales into Vietnam.
The draft is expected to be approved in May 2018.
Official Letter No. 10226/CT-TTHT on Corporate Income Tax ("CIT") and Personal Income Tax ("PIT") on loans of property then using as a mortgage with bank
According to Official Letter No. 10226/CT-THHT issued by Ho Chi Minh City (“HMCM”) Tax Department on 17 October 2017, if a company borrow personal property and then using the property as a mortgage with the bank to increase the credit limit, the overall transaction is considered as a loan from individual. Therefore, the total deductible interest expenses for CIT purpose, which will be paid to banks and the individuals, are capped at 150% of the basic interest rate announced by the State Bank of Vietnam at the time of the loan.
Official Letter No. 5269/TCT-HTQT on CIT policy for providing services to foreign companies based in countries who has the agreements on avoidance of double taxation (“DTA”) with Vietnam
According to the Official Letter No. 5269/TCT-HTQT of the General Department of Tax (“GDT”) dated 15 November 2017, a company provided services to a foreign company, and was subject to CIT payment in accordance with the rules of foreign countries, not all of the cases shall be deductible for CIT purpose. If the company is exempted from paying CIT in foreign countries under the mechanism of DTA, the CIT amount which had been paid shall not be eligible to be deducted from the CIT payable in Vietnam and to be included in deductible expenses when determining CIT. The Vietnamese companies may apply DTAs for refund of the paid CIT.
Official Letter No. 10387/CT-TTHT on payment of air tickets for the employee’s relatives
According to the Official Letter No. 10387/CT-TTHT issued by the HCMC Tax Department on 20 October 2017, if a company pays the round trip airfare from Vietnam to the home country for the employee’s relatives, the expenses are not deductible for CIT purpose and must be included into employee’s taxable income for PIT purpose.
Official Letter No. 14475/BTC-TCHQ on unutilized materials, faulty products, faulty raw materials of processing contract
According to Official Letter 14475/BTC-TCHQ issued by the Ministry of Finance on 26 October 2017, as stipulated in Decree 134/2016/ND-CP, from 01 September 2016, the unutilized material, faulty products and faulty materials of less than 3% of total for each kind of material per the processing contract shall be exempted from import duty when selling domestically. However, other kind of taxes (if any) must be declared and paid to the customs authority. In case the enterprise in the above-mentioned case have declared other kinds of taxes to the inland tax offices from September 1, 2016 to the date such official letter is issued, they shall not declare or adjust again.
Official Letter No. 5475/TCT-CS on tax policy applicable to Value Added Tax ("VAT")
According to Official Letter 5475/TCT-CS issued by the GDT on 28 November 2017, in case taxpayers having creditable VAT amount however it is not qualified for applying refund, the Company must keep declaring the creditable VAT amount and not allowed to be included in deductible expenses for CIT purpose.
Official Letter No.5483/TCT-DNL about issuance of VAT invoice for gifts to customer on Tet holiday, occasions and customer conference for business purpose
According to Official Letter No. 5483/TCT-DNL issued on 28 November 2017 by GDT, in case of enterprise give away gifts (irrespective whether the value of the gift is greater or less than VND 200,000) for business purpose which customers do not request to issue invoices; then at the end of the day, enterprise shall need to issue 01 invoice with the total value of the gifts and attach together with the detailed list of the goods in accordance with the current regulations.
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