Mazars Vietnam Newsletter - Issue September 2019

Operational Updates

Official Letter 3214/CT-TTHT on renovation expenses of leased fixed assets

According to Official Letter 3214/CT-TTHT issued on 01 April 2019 by Ho Chi Minh City (“HCMC”) Tax Department, expenses for renovation and repair of fixed assets during the lease period shall be fully recognised or allocated over a period of up to 3 years. In case of termination prior to the lease expiry, the unallocated expenses (if any) shall be written-off and considered as Coporate Income Tax (“CIT”) deductible expenses.

Official Letter 4506/CT-TTHT and Official Letter 4231/CT-TTHT on the assets liquidation of representative offices of foreign traders ("ROs")

According to Official Letter 4506/CT-TTHT issued on 08 May 2019 and Official Letter 4231/CT-TTHT issued on 03 May 2019 by HCMC Tax Department, the sale of RO’s fixed assets shall be exempt from VAT declaration and payment. Accordingly, the tax authorities shall not issue individual tax invoices for these cases.

Official Letter 4952/CT-TTHT on the loss carryforward in case the enterprise change its’ fiscal year

On 22 May 2019, HCMC Tax Department issued Official Letter 4952/CT–TTHT providing guidelines on loss carryforward, in case the enterprise change its’ fiscal year. Accordingly, the conversion year is considered one (01) financial year in the loss-carryforward duration of up to 5 years.

Official letter No. 6117/CT-TTHT on tax policy on the reverse of science and technology development (“ScTD”) fund

According to Official Letter 6117/CT-TTHT issued on 14 June 2019 by HCMC Tax Department, if the enterprise reverse the unused ScTD fund within 05 year from the making provision date, the interest on the additional CIT payable shall not be charged. After five years duration, if the enterprise’s fund utilization is less than 70% or misused it, additional CIT and interest shall be charged as per regulations.  

Official Letter 63376/CT-TTHT on Value Added Tax (“VAT”) rate applied for of goods purchased from export processing enterprises ("EPEs") and then deliver directly to foreign customer.

On 09 August 2019, Hanoi Tax Department issued Official Letter 63376/CT-TTHT on VAT rate of goods purchased from export processing enterprises ("EPEs") and then deliver directly to foreign customer. Accordingly, if the enterprise does not make an import declaration, instead assigns the EPEs to carry out the customs procedures and deliver the goods directly to foreign customer, the goods shall be subject to the VAT rate of 0%.

Official letter 3002/TCT-DNL on interest deductibility rule stipulated by Decree 20/2017/NĐ-CP

On 01 August 2019, General Department of Tax issued Official letter 3002/TCT-DNL providing further guidance on interest deductibility that was previously introduced by Decree 20. According to the official letter:

• The amount of interest subject to this deduction limitation rule shall include all interest expenses incurred from 01 May 2017, regardless of the loan contract date. The said total interest expense refers to interest on both related-party and third-party loans, and is not allowed to offset against any interest income.
• The calculation of "Net operating profits plus loan interest expenses and depreciation expenses ("EBITDA")" is based on the actual figures if the taxpayer keeps separate record of the business performance from 01 May 2017 to the end of the financial year. Otherwise, the taxpayer must prorate the yearly figure in accordance with the remaining number of months from 01 May 2017 to the end of the financial year.

Official letter 3200/TCT-KK on tax administration for business location which is not located in the same province of the enterprise or branch

On 12 August 2019, the General Department of Taxation (GDT) issued Official Letter 3200/TCT-KK guiding the tax administration procedure for the business location which is not located in the same province of the enterprise or branch with notable points as below:

• The Tax Department shall assign the managing tax authorities to directly supervise procedures for issuance and notification of a 13-digit tax code to the business location. This 13-digit tax code is not linked to data of licensing authority.
• The enterprise or branch shall use the 13-digit tax code for making VAT declaration and payment for each business location to the managing tax authority.
• The enterprise or branch shall use the same invoice template for each business location thereof and send the invoice issuance notice to the managing tax authority of each business location.

The guidance in this Official Letter will be applied from 12 August 2019 until the amendment of Circular 95/2016/TT-BTC.

Our support

We do trust the above points are notable and sufficient, but should you have any question or need a deeper discussion on this issue, please do not hesitate to contact us.

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