We would like to bring you tax and legal updates in December 2018 with the following highlights influencing the corporate operation and payroll amendments:
Official Letter 3544/TCT-KK on the provisional tax paid of Corporate Income Tax (“CIT”) for the money collected in accordance with schedule
According to Official Letter 3544/TCT-KK dated 19 September 2018 by General Department of Taxation (“GDT”), if enterprises provisionally declared and paid CIT upon payment per scheduled from customers, such revenue is not taxable revenue of the year. Such CIT paid should not accumulated into the total CIT payments in the year and not offset against CIT obligations on year-end CIT finalization form.
Official Letter 13245/BTC-TCDN on conversion to export processing enterprise (“EPE”)
On 29 October 2018, the Ministry of Finance issued Official Letter 13245/BTC-TCDN guiding conversion from a domestic enterprise to EPE. Accordingly, the conversion of an enterprise is not approved since such enterprise is established and operated in a high-tech zone, hence not qualified for conditions as an export processing zone, industrial zone or economic zone. Moreover, the fact that its export revenue accounted for around 75% of total revenue. As such, the enterprise is not entitled to convert into an EPE.
Official Letter 4763/TCT-CS on e-invoices for newly established enterprises
On 29 October 2018, GDT issued Official Letter 4763/TCT-CS providing guidance on invoice usage of newly established enterprises. Accordingly, during the period from 01 November 2018 to 31 October 2020, if newly established enterprises do not receive notices from the tax authority on requirement to use e-invoices, they can opt to use printed invoices, self-printed invoices, e-invoices or purchase e-invoices from the tax authority, as long as in compliance with administrative procedures as stipulated in Decree 51/2010/ND-CP and Decree 04/2014/ND-CP. If the newly established enterprises are requested to use e-invoices as per Decree 119/2018/ND-CP (“Decree 119”), however do not meet the conditions of technologies and infrastructure yet, they can use paper invoice and must send invoice data to the tax authorities per the Form 03 attached with Appendix of Decree 119.
Official Letter 3357/CT-TTHT on determination of permanent establishment in Vietnam
On 26 October 2018, Bac Ninh Tax Department issued Official Letter 3357/CT-TTHT providing guidance on determination of permanent establishment and related tax obligations in Vietnam. Accordingly, the permanent establishment shall be created if the foreign enterprise:
(i) Hires a Vietnamese enterprise to do processing and deliver/transport the finished goods to another enterprise in Vietnam as requested by such foreign enterprise; or
(ii) Purchases finished goods from a Vietnamese enterprise and then sells to another enterprise in Vietnam under the form of on-spot import and export. In such circumstances, the Vietnamese supplier is requested to acts on behalf of the foreign enterprise to conduct activities such as customs procedures, delivery, storage in Vietnam before delivery, restock of disqualified goods, etc.;
If it is the case, the foreign enterprise must allocate its business profits for the Vietnamese enterprise to declare tax on its behalf.
Official Letter 3808/TCT-CS on Value Added Tax (“VAT”) declaration and refund for investment projects
On 08 October 2018, GDT issued Official Letter 3808/TCT-CS providing guidance on VAT declaration and refund for investment projects. For this case, an enterprise has an investment project located in a different city/province from its headquarter and has completed the procedures to register its branch and branch’s tax code, but such investment project is still managed by the headquarter instead of delegated to the branch. As such, the headquarter shall still perform VAT declaration and refund for the part of such investment project.
Official Letter 66662/CT-TTHT on Personal Income Tax (“PIT”) assessment year for the expatriate’s first time arrival to Vietnam
On 02 October 2018, Hanoi Tax Department issued OL 66662/CT-TTHT on the PIT assessment year for expatriate who arrived at Vietnam for the first time. Accordingly, if an expatriate arrived at Vietnam before the start date of their assignment but not for working purposes and did not have any income in Vietnam during that period, the PIT assessment year shall be the start date of the assignment.
Guidelines for compulsory Social Insurance (“SI”) for foreign employees
Recently, Ho Chi Minh City (“HCMC”) SI Department issued OL 2426/BHXH-QLT dated 29 November 2018 and Hanoi SI Department issued OL 5251/BHXH-QLT dated 03 December 2018 guiding compulsory SI for foreign employee. Accordingly, the foreign employees participating in SI and Health insurance (“HI”) shall be managed under a separate code (i.e. the code started with “IC”), which is different from the previously issued “BW” code (for managing the foreign employees only subject to HI).
There are be differences between administrative procedures of two SI departments. While HCMC SI Department would automatically issue the new “IC” code and transfer foreign employees from “BW” code to “IC” code, Hanoi SI Department requires the employer with some procedures to apply for the new “IC” code. Of note, these dossiers and procedures might vary depending on the managing SI Department.
Update on regional minimum salary and basic salary effective from 2019
According to the Resolution 70/2018/QH14 on the State Budget for 2019 approved by Vietnam’s National Assembly on 09 November 2018, from 01 July 2019, the monthly basic salary (also known as general minimum salary) shall increase from VND 1,390,000 to VND 1,490,000 (increase of VND 100,000 per month)
On 16 November 2018, the Government issued Decree 157/2018/ND-CP on regional minimum salary applied to employees working under labour contracts, which shall take effective from 01 January 2019, as follows:
- For enterprises located in region I: VND 4,180,000/month;
- For enterprises located in region II: VND 3,710,000/month;
- For enterprises located in region III: VND 3,250,000/month;
- For enterprises located in region IV: VND 2,920,000/month;
The list of Regions I, II, III and IV are prescribed in the Appendix enclosed with this Decree 157.
Accordingly, the salary cap for compulsory insurances shall change. Specifically, the new cap for SI and HI, which is calculated as 20 times of basic salary, would be VND 29.8 million from 01 July 2019. The new cap for Unemployment Insurance (“UI”), on the other hand, shall be effective from 01 January 2019 and vary for each region, since it is calculated as 20 times of minimum regional salary. The new cap for UI shall be VND 83.6 million, VND 74.2 million, VND 65 million and VND 58.4 million, respectively for Region from I to IV.