Mazars Vietnam Newsletter - Issue July 2018

We would like to bring you tax and legal updates in July 2018 with the following highlights influencing the corporate operation and payroll commencement:

OPERATIONAL UPDATES

Official Letter 784/ TCT-CS on Value Added Tax (“VAT”) refund for the investment project where capital is fully contributed during the VAT refund procedure

On 09 March 2018, the General Department of Tax (“GDT”) issued Official Letter 784/TCT-CS addressing the case of VAT refund of an investment project where the enterprise has only fully contributed the charter capital during the process of VAT refund. According to the response of the GDT in the Official Letter, if the company’s charter capital has been fully and timely contributed in line with schedule in the Enterprise Registration Certificate and Investment Registration Certificate, it is considered eligible for the VAT refund.

 

Official Letter 2171/TCT-CS on VAT rate of server leasing services

According to Official Letter 2171/TCT-CS issued by the GDT on 04 June 2018, if a company leases the server (which is placed in Vietnam) to a foreign customer, the server leasing service shall not be considered export service and hence subject to standard VAT rate of 10%.

 

Official Letter 3585/TCHQ-TXNK on the customs declaration value with respect to transportation expenses of imported goods

On 21 June 2018, the General Department of Customs issued Official Letter 3585/TCHQ-TXNK clarifying the expenses that are required as incremental adjustments to customs declaration value of imported goods. Accordingly, to avoid double VAT imposed at import stage and domestic stage, such incremental adjustments shall not include the following expenses:

- The transportation expenses and other related expenses that incur after the imported goods have reached the first import border gate;

- Other expenses incurred up to the first import border gate but fail to simultaneously meet all the conditions stipulated under Clause 1, Article 13, Circular 39/2015/TT-BTC.

 

Official Letter 2622/CT-TTHT on determining deductible expense for input VAT of gifts for customers and staffs

On 09 April 2018, Ho Chi Minh City Tax Department issued Official Letter 2622/CT-TTHT, according to which, for the case the Company has input VAT for gifts given to its customers and staff, and the input VAT is eligible as creditable input VAT, however the company does not declare such VAT amount but expenses it, the relevant expense shall not be deductible for CIT purpose.

 

Official Letter 42300/CT-TTHT on Foreign Contractor Tax (“FCT”) of the insurance compensation

On 20 June 2018, Hanoi Tax Department issued Official letter 42300/CT-TTHT providing guidance on FCT on insurance compensation. In case the foreign contractor has insurance over its construction project and actually receives compensation from the insurance company (even if the compensation is lower than the actual cost incurred to overcome the incidents), the compensation being received shall be subject to FCT as follows:

-        VAT: not subject to declaration and payment of VAT;

-        CIT: 2% on the amount of insurance compensation.

 

Official Letter 2331/TCT-DNL on invoicing for interest paid on behalf of the customers

According to Official Letter 2331/TCT-DNL of the GDT dated 12 June 2018, in case the commercial bank partners with the company who would provide support in terms of instalment interest to customers being credit card holders at that commercial bank, the bank shall need to issue invoice to the company for the interest being waived. The invoices shall be supporting documents for the deductible expense of the company.

 

PAYROLL UPDATES

Official Letter 2465/TCT-TNCN on Personal Income Tax (“PIT”) of non-residents earning income but not present in Vietnam

According to Official Letter 2465/TCT-TNCN issued by the GDT on 20 June 2018, if an organization in Vietnam hires a foreign individual (who is not present in Vietnam) to conduct survey and collect data overseas for a project in Vietnam, such income shall be considered Vietnam-sourced income and hence subject to PIT in Vietnam.

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