Circular 25/2018/TT-BTC providing guideline for Decree 146/2017/ND-CP on amendment and supplement of some regulations on Corporate Income Tax (“CIT”), Value Added Tax (“VAT”) and Personal Income Tax (“PIT”)
On 16 March 2018, Ministry of Finance issued Circular 25/2018/TT-BTC providing guidelines for Decree 146/2017/ND-CP (“Decree 146”) on amendment and supplementation of some stipulation on CIT, VAT and PIT. Below are some notable points as compared to those stipulated in the Decree 146:
- In case of transfer of a partial or full capital as stipulated, transferred assets (if any) are only allowed for depreciation if satisfying conditions for depreciation and on the remaining net book value as shown on transferor’s accounting book.
- Life insurance and voluntary pension contribution which are already capped at VND3million/person/month shall not be included into deductible welfare expenses which is capped at one-month average salary.
Official Letter 509/TCT-CS on VAT of the investment project
On 07 February 2018, General Department of Tax (“GDT”) issued Official Letter (“OL”) 509/TCT-CS on VAT refund of investment project whose actual investment capital is higher than the registered one in Investment Registration Certificate. Accordingly, if the increase of investment capital is in accordance with the Law on Investment, the project shall be eligible for VAT refund. Since this OL does not cover the case where the increase of investment capital is not compliant with the Law on Investment, it is recommended that investment projects should carefully review status of the actual investment capital before submitting VAT refund application.
Official Letter 371/TCT-DNL on VAT of software-related activities
According to OL 371/TCT-DNL issued by GDT on 25 January 2018, VAT on activities related to software is as below:
- Selling software products and providing software services as stipulated are not subject to VAT;
- Software rental which is not considered as a software service as prescribed is subject to VAT 10%;
- Providing service of software training as prescribed is not subject to VAT.
Official Letter 7285/CT-TTHT on bonus and financial support for distributors and agencies
OL 7285/CT-TTHT issued by Hanoi Tax Department on 23 February 2018 provides guidance on the financial support to distributors (which have direct business relationship with a company) and level-1 agencies (having business relationship with distributors) for market development and expansion (which is not considered as paying for services). Accordingly, this transaction is not required for VAT declaration and payment. The company shall issue Payment voucher and can include such financial support in deductible expenses if required conditions are satisfied. Of note, this is just opinion of Hanoi Tax Department, hence companies should seek for guidance of managing tax authority for prudent approach.
Official Letter 231/TCT-CS on CIT on technology transfer activities
According to OL 231/TCT-CS issued by GDT on 15 January 2018, if the Vietnamese subsidiary pays technology transfer fee for its parent company in Japan, however the parent company cannot provide official certificate/document issued by the Japanese competent authority to prove its ownership of industrial property and intellectual property provided to the Vietnamese company (technical information, production guidelines, etc.) for its production, such fee shall not be deductible for CIT purpose of the Vietnamese company.
Official Letter 9728/CT-TTHT on Personal Income Tax (“PIT”) for the expense paid for non-resident foreign experts
According to OL 9728/CT-TTHT issued by Hanoi Tax Department on 14 March 2018, if the company signs contract with a non-resident foreign expert and responsible for airfare, travelling and accommodation expenses of the expert, such payments shall be subject to PIT as prescribed.