Mazars Vietnam Newsletter - Issue April 2020

Operational Updates

1. Official letter 697/CT-TTHT guiding the deductibility of employment income paid for investors

According to Official letter 697/CT-TTHT issued by Bac Ninh Tax Department on 27th February 2020, a One-member Limited Liability Company invested in by a foreign company whose only owner is an individual is deemed to be owned by such individual. Hence, employment income and other salary-related benefits paid for the individual shall be deemed as non-deductible expenses for Corporate Income Tax ("CIT") purposes.

2. Official letter 4835/CT-TTHT guiding invoices issued by Export Processing Enterprises (“EPE”) in case of transfer of house ownership

According to Official letter 4835/CT-TTHT issued by Binh Duong Tax Department on 09th March 2020, the transfer of house ownership by EPEs is subject to VAT. EPEs must separately record the transaction and declare VAT as below

• If EPEs registered to applying credit method, the VAT invoice must be issued. The taxable price and applicable tax rate must follow the regulations as stipulated in Circular 219/2013/TT-BTC.
• If EPEs registered to applying direct method, the sale invoice for "Organizations and Individual in non-tariff areas" must be used. The buyer must carry out relevant custom procedures accordingly.

3. Official letter 4837/CT-TTHT guiding the application of CIT during temporary suspension of business activities

On 09th March 2020, Binh Duong Tax Department issued Official letter 4837/CT-TTHT guiding the deductibility of expenses incurred during temporary suspension of business activities due to seasonality. Specifically:

• The expenses of salary expenses, utility expenses, rental expenses and allocation expenses are considered as non-business related and hence are not deductible for CIT purposes.
• The depreciation expenses of the assets which are not employed during a period of less than 9 months but still used after the suspension shall still be deductible as regulated.

4. Official letter 1366/TCT-KK guiding the regulation on non-cash payment

On 31st March 2020, the General Department of Taxation ("GDT") issued Official letter 1366/TCT-KK providing guidance in case of a payment already being made for previous years in cash, but later return the cash and made payment via bank. In such case, the revision payment via bank is not qualified for being non-cash payment and hence the corresponding input VAT shall not be creditable and such expenses shall be deemed non-deductible for CIT purposes.

5. Official letter 1022/CT-TTHT guiding the Value Added Tax ("VAT") rate which is applicable to services provided for foreign companies

On 01st April 2020, Bac Ninh Tax Department issued Official letter 1022/CT-TTHT guiding the VAT rate applied when foreign companies sell goods to export processing enterprises ("EPEs") and engage the goods inspection services of a Vietnamese company. In such case, the goods inspection services shall be subject to 0% VAT if all conditions are qualified per regulations, and the necessary custom procedures are carried out and shows that goods are provided by and returned to EPEs before and after the inspection.

6. Official letter 1393/TCT-KK guiding VAT refund for behind-schedule projects

On 01st April 2020, GDT issued Official letter 1393/TCT-KK guiding VAT refund for projects that are behind the schedule stated in the Investment Registration Certificate (“IRC”). Specifically, the company must amend of the investment schedule in the IRC first. The local tax authority shall further consider the VAT refund in accordance with the tax and investment regulations.

7. Official letter 1033/CT-TTHT guiding the VAT applied in case of asset liquidation

On 03rd April 2019, Bac Ninh Tax Department issued Official letter 1033/CT-TTHT guiding the VAT declaration applied for the company manufacturing VAT-exempt goods when liquidation of assets. In such case, the company must make VAT declaration upon arising such transaction with VAT rate of 2% on revenue. The company shall issue sales invoices for the liquidation transaction.

Payroll Updates

8. Official letter 998/CT-TTHT guiding the requirement for one-off relocation allowance to be exempt from Personal Income Tax ("PIT")

On 30th March 2020, Bac Ninh Tax Department issued Official letter 998/CT-TTHT guiding the requirement for one-off relocation allowance paid for expatriates to be exempt from PIT. According to the Official letter, the allowance must be paid fully for first-time residing in Vietnam and in the first PIT calculation period and clearly stated in the labour contract or financial policy of the company.

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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