As we are welcoming 2018, We would like to bring you several special notable tax points in the targeted topic of Social Insurance ("SI").
The issue covers the following highlights:
Social Insurance (SI) applicable for foreign employees
Social Insurance Law 2014 has provided that foreign employees can participate in the Vietnam’s Social Insurance from 2018. It has, however, been unclear whether this is compulsory or voluntary (detailed guidance would be in the upcoming Decree and Circular). Per the recent Draft Decree, the contribution to Social Insurance shall be compulsory and might be made under the schedules. From 2018, foreign employee shall only be subject to contribute to the sickness and maternity fund and labour accident and occupational disease fund. Contribution to the retirement and survivorship allowance fund shall be carried out from 2020.
As a side note: this SI contribution for foreign employees should be implied that employer shall be required to pay trade union fee for foreign employees as well (employers’ contribution equaling to 2% of Social Insurance salary funds).
Types of labour contracts subject to compulsory Social Insurance contribution
Employees who have labour contracts from 1 month term (except for probation contracts as confirmed by Official Letter 1734 by Ho Chi Minh City Department of Social Insurance) shall be required to participate in Social Insurance from 01 January 2018. The requirement for Health Insurance and Unemployment Insurance contribution remains unchanged (i.e. employees with labour contracts from 03 month term).
Base to calculate Social Insurance, Health Insurance and Unemployment Insurance (SHUI)
From 01 January 2018, the salary for contribution of SHUI shall also include some “other extra payment” (apart from base salary and allowances which have already been a base to calculate SHUI from 2016). Such “other extra payments” to be included for SHUI contribution are broadly defined as payments being related to working performance of the employees’ working position; and the amount of payment is stated in labour contract, and is paid regularly along with base salary and allowances. Of note, the welfare and benefits such as bonus paid in line with Labour Code, innovative incentive, mid-shift meal allowance, and support for petrol, telephone, transportation, and housing for the employees etc. shall be stated separately in the labour contract and accordingly not included as basis to calculate SHUI contribution.
Increase in minimum regional salary
The Government has issued Decree No. 141/2017/ND-CP about new minimum regional salary which is effective from 01 January 2018 as follows:
- Region I: VND 3,980,000/month (increased by VND 230,000 as compared with the prevailing one stipulated by Government’s Decree No. 153/2016/ND-CP dated 14 November 2016).
- Region II: VND 3,530,000/month (increased by VND 210,000 as compared with the prevailing one stipulated by Decree No. 153).
- Region III: VND 3,090,000/month (increased by VND 190,000 as compared with the prevailing one stipulated by Decree No. 153).
- Region IV: VND 2,760,000/month (increased by VND 180,000 as compared with the prevailing one stipulated by Decree No. 153).
On the side note, the National Assembly had approved the Resolution of National Budget, which confirmed the increase in basic salary from 01 July 2018. The new basic salary will be VND 1,390,000/month, which increase by VND 90,000 compared with the prevailing level of VND 1,300,000/month.
Accordingly, the salary cap for compulsory insurance shall change. Specifically, the new cap for Social Insurance and Health Insurance, which is calculated as 20 times of basic salary, would be VND 27.8 million from 01 July 2018. The new cap for Unemployment Insurance, on the other hand, shall be effective from 01 January 2018 and vary for each region, since it is calculated as 20 times of minimum regional salary. The new cap for Unemployment Insurance shall be VND 79.6 million, VND 70.6 million, VND 61.8 million and VND 55.2 million, respectively for Region I to IV.
Repealing the use and submission of Form 06/GTGT
Basically there is no change in criteria to apply VAT methods (direct method vs. credit method), e.g. newly established enterprises and enterprises which have yearly taxable income less than VND 1 billion are generally subject to direct method unless voluntarily register to apply credit method. However, instead of submitting Form No. 06/GTGT to register for credit method or notify when changing VAT declaration method, Circular 93/2017/TT-BTC issued by Ministry of Finance dated 19 September 2017, provides that the tax authority would refer to the submitted VAT declaration dossier by the taxpayers which would define their chosen method of VAT calculation and declaration accordingly:
If enterprises register to apply credit method, they are required to submit VAT declaration Forms No. 01/GTGT and 02/GTGT to the managing tax authority.
If enterprises register to apply direct method, they are required to submit VAT declaration Forms No. 03/GTGT and 04/GTGT to the managing tax authority.
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