We would like to bring you tax and legal updates for December 2020 with the following highlights influencing the corporate operations and payroll activities:
1. Official Letter 101317/CTHN-TTHT guiding Foreign Contractor Tax ("FCT") applied to income from providing data access right
According to Official Letter 101317/CTHN-TTHT issued by HNTD on 23 November 2020, the payment made to a foreign provider of data access right shall subject to FCT as below:
- Corporate Income Tax ("CIT"): Such income shall be deemed as income from royalty, hence the applicable CIT rate is 10% on taxable revenue.
- VAT: If such service is neither deemed as the transfer of technology as stipulated in Law on Technology transfer, nor transfer of Intellectual property rights as stipulated in Law on Intellectual property, nor software/software-related services, the service is subject to VAT at the rate applied to services of 5%.
2. Official Letter 4827/TCT-CS providing guidance on FCT applied to legal services provided abroad
According to Official Letter 4827/TCT-CS issued by General Department of Taxation ("GDT") on 12 November 2020, in case the company engages a Korea-based company to conduct legal services relating to the draft and preparation of documents for a loan with a Korea-based bank, income received by such Korea-based company for the mentioned legal services shall be subject to FCT.
3. Official Letter 5032/TCT-CS providing guidance on CIT, PIT applied to quarantine-related expenses for expatriates paid by the employer
According to Official Letter 5032/TCT-CS issued by GDT on 26 November 2020, tax policies for the concerned expenses shall be as follows:
- Regarding CIT:
- Hotel quarantine expenses: If it is clearly stated in the employment contract that housing costs shall be paid by the employer, expenses paid to the quarantine facilities shall be deemed as deductible if all the prevailing requirements are met.
- Covid-19 testing expenses: These expenses shall be treated as staff welfare expenses and shall be deductible if all the requirements specific to welfare expenses are met.
- Regarding PIT: Such quarantine-related expenses paid after the expatriates' entry into Vietnam shall be deemed as benefits received by such expatriates, therefore shall be treated as taxable employment income.
1. Official Letter 101326/CTHN-TTHT guiding tax liabilities applied to house rental income that an individual receives in Japan
On 23 November 2020, Hanoi Tax Department (“HNTD”) issued Official Letter 101326/CTHN-TTHT guiding the tax liabilities applied to house rental income received by an individual in Japan. Of note, the guidance provided in this Official Letter shall replace the ones previously provided by Hanoi Tax Department in Official Letter 16468/CT-TTHT issued on 31 March 2020, as below:
- Personal Income Tax ("PIT"): If the rental income from real estate located in Japan is above VND 100 million, the individual shall make PIT declaration in accordance with current regulations.
- Value Added Tax ("VAT"): Such income is not subject to VAT regulations.
- License Fee: Since the rental is treated as a business activity conducted on occasional basis and without fixed premises, the activity is exempt from License Fee.
2. Official Letter 3530/CTBNI-TTHT guiding PIT applied to profits remitted to the foreign investor of an individually-owned One-Member Limited Liability Company ("LLC")
According to Official Letter 3530/CTBNI-TTHT issued by Bac Ninh Tax Department on 19 November 2020, after-tax profits remitted to the investor of an individually-owned LLC shall not subject to PIT.
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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