We would like to bring you tax and legal updates in January 2018 with the highlights of amendments & supplements on Decrees related to Corporate Income Tax ("CIT") and Value Added Tax ("VAT"); import duty exemption; interest on late payment; deductible expense on of late issued invoice; cap for loan interest deductions of companies having related party transactions as well as other Personal Income Tax ("PIT").
Decree 146/2017/ND-CP amending and supplementing a number of articles of Decree 100/2016/ND-CP and Decree 12/2015/ND-CP on Corporate Income Tax ("CIT") and Value Added Tax ("VAT")
On 15 December 2017, the Government issued Decree 146/2017/ND-CP amending and supplementing a number of articles of Decree 100/2016/ND-CP and Decree 12/2015/ND-CP on Corporate Income Tax ("CIT") and Value Added Tax ("VAT") as follows:
- Supplementing guidance on VAT applicable on exported goods which have the total value of natural resources, mineral resources and energy cost accounting for 51% or more of the product cost as follows:
- If the exported goods are directly made from natural resources, minerals, it shall be considered goods that are not subject to VAT;
- If the natural resources, minerals are processed into different products which are then continued to be processed into finished products for export, then the final exported goods shall be eligible to apply VAT rate of 0%;
- Total value of natural resources, minerals and energy costs is excluding the cost to transport the resources from the place of purchase or exploitation to the place of processing/producing.
- Input VAT of goods that are imported and then exported shall be refundable unless it is not exported at operational customs areas as regulated;
- Contribution to voluntary retirement fund, voluntary retirement insurance and life insurance for employee shall be capped at VND3 million/person/month for CIT deductible expense.
The Decree shall take effective from 01 February 2018.
Official Letter 7817/TCHQ-TXNK on Import Duty exemption for materials and parts imported for export production
On 29 November 2017, General Department of Customs issued Official Letter (“OL”) 7817/TCHQ-TXNK on Import Duty exemption for materials and parts imported for export production. Per this OL, the company had imported materials and parts for export production purpose and then transferred to its dependent branch to handle part of the production; the work-in-progress were transferred back to the company for finishing and exporting. In this case, the imported materials and parts are still eligible for import duty exemption as per Decree 134/2016/ND-CP.
Official Letter 5407/TCT-KK on interest on late payment
According to OL 5407/TCT-KK issued by the General Department of Taxation (“GDT”) on 23 November 2017, if the taxpayer has overpaid tax, and, at the same time, has additional tax obligation following a supplementary declaration of the same kind of tax and of same tax period, then the taxpayer shall only be charged interest on late payment if any excessive amount of the additional obligation.
Official Letter 11014/CT-TTHT on deductible expense on of late issued invoice
According to OL 11014/CT-TTHT issued by Ho Chi Minh City Tax Department dated 09 November 2017, the service provider must issue invoice to the company in compliance with the invoicing regulations (in this case, when the service was completed in 2013). However, the invoice was only issued in 2017, hence the purchased services shall not be deductible expense either for 2013 due to omission of invoice or for 2017 due to violation of matching principle. This expense shall only be eligible as deductible expense for CIT of 2013 if the following conditions are satisfied: (i) invoice which clearly states that the service was for 2013, (ii) dossier on administrative penalty charged by tax authority due to late issuance of invoice, and (iii) other supporting documents (if any). The VAT of this invoice (for the provided services in 2013) is not creditable though.
Official Letter 208/CT-TTHT on cap for loan interest deductions of companies having related party transactions
According to OL 208/CT-TTHT issued by Hanoi Tax Department on 03 January 2018, if a company has related party transactions, its deductible loan interest expenses shall be capped at 20% of the total net profit generated from business activities plus loan interest expenses, depreciation and amortization expenses (EBITDA) arising in the fiscal year. This cap shall be imposed on loan interests from both related parties and third parties, and applicable for the whole fiscal year 2017.
Guidance on Personal Income Tax (“PIT”) declaration for expatriate who receives income from both Vietnamese company and foreign company
Recently, Ho Chi Minh City Tax Department issued OL 6778/CT-TTHT dated 18 July 2017, OL 8856/CT-TTHT dated 14 September 2017, and Hanoi Tax Department issued OL 79003/CT-TTHT on 06 December 2017 which provide guidelines on PIT declaration for expatriates who receive income from both Vietnamese Company and foreign company:
- If the expatriate has two sources of income from the Vietnamese company and the foreign company, then the Vietnamese company must withhold and declare PIT on income that the Vietnamese company pays to the expatriate; for the income received from the foreign company, the expatriate must declare and pay PIT directly to the Vietnamese tax authority.
- If the expatriate has one source of income from Vietnam which has been paid partially by the Vietnamese company and partially by the foreign company (the foreign company will get fully reimbursed by the Vietnamese company), then the Vietnamese company must withhold and declare PIT on total income of the expatriate which is paid by both the Vietnamese and the foreign companies.
Official Letter 81381/CT-TTHT on PIT for employee who has income with both of GROSS and NET components
According to OL 81381/CT-TTHT issued by Hanoi Tax Department on 20 December 2017, if an employee receives salary which is GROSS of tax and benefit in-kind which is NET of tax, the company must convert the GROSS salary into NET amount and then aggregate altogether with the NET benefit before grossing up and calculating PIT.
Official Letter 5488/LDTBHX-BHXH on preparation for implementing some articles of Law on Social Insurance (“SI”) being effective from 2018
On 27 December 2017, Ministry of Labour – Invalid and Social Affairs issued OL 5488/LDTBXH-BHXH to request provincial SI Departments to well prepare for the implementation of some articles of the Law on SI being effective from 2018. Per this OL, foreign employees working in Vietnam shall be subject to compulsory SI contribution, however, this shall be further guided and implemented when the Government releases the Decree.
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