Mazars in Vietnam Newsletter - Tax & legal updates - November 2020

We would like to bring you tax and legal updates for November 2020 with the following highlights influencing the corporate operations and payroll activities:

Operational Updates

1. Official Letter 12452/BTC-TCT guiding the deductibility of depreciation corresponding to fixed assets which become temporarily idle due to COVID-19 impacts

According to Official Letter 12452/BTC-TCT issued by Ministry of Finance on 09 October 2020, due to COVID-19 impacts, a decrease in market demand causes the taxpayer to temporarily suspend the operation of some fixed assets (“FAs”) for less than 9 months and the operation of these FAs will be resumed after such temporary suspension, the suspension shall be applied the same tax treatment as in the case of seasonal businesses. Following this, the FAs during the suspended period is deductible expenses for CIT calculation purpose.

2. Official Letter 94769/CT-TTHT providing guidance on Foreign Contractor Tax ("FCT") applied to cloud compute services

According to Official Letter 94769/CT-TTHT issued by Hanoi Tax Department on 29 October 2020, the applicable FCT rates shall be based on the nature of services provision. If these services are software-related ones, they will not subject to Value Added Tax ("VAT") and subject to 5% Corporate Income Tax ("CIT") only. Otherwise, if these services are not software-related ones, applicable FCT comprising of 5% VAT and 5% CIT shall be applied. In addition, if the service provision is attached with license fees charged, such fees shall subject to FCT of 10% CIT.

3. Official Letter 4073/TCT-CS guiding the deductible expenses related to employee retention during the period of labour contract suspension due to COVID-19

According to Official Letter 4073/TCT-CS issued by GDT on 28 September 2020, the deductibility of employee’s retention payment shall be treated as below:

  • If these payments are welfare in nature, such payments shall be deductible for CIT purpose provided that they meet the current conditions for welfare expenses (i.e. the total welfare expenses in a tax year do not exceed the actual average of 1-month salary incurred)
  • If these payments are salary for the suspension period of work, such payments are part of salary expenses and hence is deductible for CIT purpose.

Payroll Updates

1. Official Letter 4590/TCT-DNNCN providing guidance on family deduction for expatriates in the first tax assessment year which differs from the calendar year         

On 28 October 2020, General Department of Taxation ("GDT") issued Official Letter 4590/TCT-DNNCN guiding the applicable family deduction for expatriates applied to the first tax year which differs from the calendar year (starting in July 2019 and ending in June 2020). Accordingly, the previous family deduction level should be applied for the months of the calendar year 2019 (i.e. personal relief of VND 9 million/month and dependant relief of VND 3.6 million/month) and the prevailing family deduction level shall be applied for the months of the calendar year 2020 (i.e. personal deduction of VND 11 million/month and dependant relief of VND 4.4 million/month).


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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[VIE] Mazars Việt Nam_Tin Thuế và Luật_Tháng 11-2020
[VIE] Mazars Việt Nam_​Tin Thuế và Luật_​Tháng 11-2020
[ENG] Mazars in Vietnam_Tax & Legal Newsletter_November 2020
[ENG] Mazars in Vietnam_​Tax & Legal Newsletter_​November 2020