We would like to bring you tax and legal updates in February 2018 with the following highlights influencing the corporate operation and payroll.
Official Letter 55/TXNK-CST on Import Duty exemption for materials and parts imported for repair or replacement
On 03 January 2018, General Department of Customs (“GDC”) issued Official Letter (“OL”) 55/TXNK on Import Duty exemption for imported materials and spare parts which are used for replacement purpose. If the foreign enterprise sells goods into Vietnam with warranty provision, then the imported material or parts in order to replace faulty parts which are in accordance with the contractual warranty provision and do not change the shape, usage and basic characters of the goods shall be exempted from import duty under the provision of Point 2, Article 13 of Decree 134/2016/ND-CP.
Official Letter 380/TCT-KK on Value Added Tax (“VAT”) refund of returned export goods
According to OL 380/TCT-KK issued by the General Department of Tax (“GDT”) on 25 February 2018, generally input VAT of exported goods shall be refundable if the prescribed conditions are satisfied; however, in case the exported goods are being returned, then the relevant input VAT shall not be eligible for refund.
Official Letter 3336/GSQL-GQ2 on determining the “exported” status of goods in case of on-spot export
According to OL 3336/GSQL-GQ2 issued by GDC on 27 December 2017, goods are only considered “exported” in the case of on-spot export (or also known as “in-country export”) if it is supported by both of the verified export and import declarations. If there is only verified export declaration available and no verified import declaration of the counterparty, the goods are not considered “exported” yet.
Official Letter 4996/CT-TTHT on accrued salary expense of fiscal year 2017 which is paid in fiscal year 2018
According to OL 4996/CT-TTHT issued by Hanoi Tax Department on 30 January 2018, if the company accrues for 13th month salary expenses for fiscal year 2017 and then pays to the employee in fiscal year 2018 (after the deadline of fiscal year 2017 CIT finalization), the expenses shall be recorded as deductible expense of fiscal year 2018 instead of fiscal year 2017. However, please be noted that this is opinion of Hanoi Tax Department only; companies are advised to obtain specific instruction from the managing tax authority for detailed guidelines.
Official Letter 12394/CT-TTHT on accrued discount and support expenses for distributors
On 14 December 2017, Ho Chi Minh City Tax Department issued OL 12394/CT-TTHT on accrued discount and support expenses for distributors. Per this OL, under the agreement between the company and its distributors, the company shall provide some discounts and financial supports to distributors if the targeted sales are achieved. At the end of the fiscal year, given that no invoice has been issued yet, the company has accrued for these expenses for CIT purpose. At the end of the contract, based on the supporting documents, the company must finalize the discounts and financial support expenses and adjust the deductible expenses of the current fiscal year accordingly. This OL of HCM Tax Department has provided a more relaxing view than the previous guidance. Of note, local tax authorities have tendency to apply stricter view for such accrued expenses; taxpayers are advised to obtain specific instruction from managing tax authority for prudent approach.
Official Letter 19/LDLD on Trade Union Fee for foreigner employees
Recently, the Trade Union of Ba Dinh District – Hanoi has sent Official Letter 19/LDLD in order to provide guidance to companies and organizations located within the district regarding the Trade Union Fee for foreign employees as from 01 January 2018. According to this guidance, foreign employees who have work permit or working license or working certificate granted by Vietnamese competent authorities shall be subject to the contribution of compulsory Social Insurance and hence subject to contribute 2% Trade Union Fee as well (the Trade Union Fee is calculated as 2% on the salary used for Social Insurance contribution). Of note, the implementation on Social Insurance contribution (and consequently, the TUF contribution) for foreign employees should still be subject to official guidance under the upcoming Government’s Decree and further guidance from the Ministries.
Official Letter 5979/TCT-TNCN on the deduction of tax paid in Japan
According to Official Letter 5979/TCT-TNCN issued by GDT on 29 December 2017, if the General Director received both incomes from the Vietnamese subsidiary and the parent company in Japan, and had already been withheld the Japanese resident tax, then the net income for conversion purpose to pay PIT in Vietnam shall be the income excluding the resident tax paid in Japan.
Official Letter 5749/CT-TNCN on 2017 PIT finalization and tax code registration for dependent
On 05 February 2018, Hanoi Tax Department issued OL 5749/CT-TNCN providing guidance on 2017 PIT finalization and tax code registration for dependent with some notable points as below:
- Each dependent is only allowed to be registered for one (01) taxpayer for each tax assessment year.
- Implementation of the new electronic system for receiving monthly, quarterly and finalization declaration forms as below:
- The enterprises and organizations who have digital signatures shall still declare and submit PIT declaration forms via portal http://nhantokhai.gdt.gov.vn.
- The individuals and organizations who do not have digital signatures shall declare and submit the tax declaration forms and tax code registration form for dependent via portal http://thuedientu.gdt.gov.vn (similar function on the portal http://tncnonline.com.vn shall be deactivated);
- The tax code registration forms shall still be submitted via portal http://tncnonline.com.vn until further notification.
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