Value Added Tax (VAT)

• On August 23, 2024, the Long An Provincial Tax Department issued Official Letter No. 3801/CTLAN-TTHT providing guidance on determining deductible expenses when calculating corporate income tax as follows:

In case the Company buys moon cakes to give, present, or gift to customers with an invoice price excluding VAT of VND 1,000,000, VAT of VND 100,000:

– Input VAT of goods that the Company uses to give, present, or gift to serve the production and business of goods and services subject to VAT shall be deducted according to the provisions of Clause 5, Article 14 of Circular 219/2013/TT-BTC dated December 31, 2013 of the Ministry of Finance.

– The cost of buying moon cakes to give to customers of VND 1,000,000 will be deducted from reasonable expenses when determining taxable income if it meets the conditions specified in Article 4 of Circular 96/2015/TT-BTC dated June 22, 2015 of the Ministry of Finance.

– Invoice issuance regulations: According to Clause 1, Article 4 of Decree 123/2020/ND-CP, when selling goods or providing services, the seller must issue an invoice to deliver to the buyer (including cases of goods and services used for promotion, advertising, samples; goods and services used for giving, donating, exchanging, paying in lieu of salary for employees and internal consumption (except for goods circulated internally to continue the production process); exporting goods in the form of lending, borrowing or returning goods) and must fully record the content as prescribed in Article 10 of Decree 123/2020/ND-CP. In case of using electronic invoices, it must follow the standard data format of the tax authority as prescribed in Article 12 of Decree 123/2020/ND-CP

• On August 29, 2024, the General Department of Taxation issued Official Letter No. 3855/TCT-KK provides guidance on declaration and refund of value added tax (VAT) for investment projects of Thuan Phong Agricultural Products Processing Company Limited as follows:

In case Thuan Phong Agricultural Products Processing Company Limited has an investment project “Thuan Phong Agricultural Products Processing Factory” which is a new investment project in the same province or city as the head office, the Ben Tre Provincial Tax Department is requested to specifically determine the time when the investment project “Thuan Phong Agricultural Products Processing Factory” is completed and put into operation. In case the Company declares the VAT amount requested for refund of the investment project in the tax period when the project has come into operation, it is not eligible for VAT refund for the investment project according to the provisions of Clause 1, Article 13 of the Law on VAT No. 13/2008/QH12 (amended and supplemented by Clause 3, Article 1 of Law No. 106/2016/QH13).

• On August 30, 2024, the Binh Dinh Provincial Tax Department issued Official Letter No. 3187/CTBDI-TTHT providing guidance on VAT on unpaid exported samples as follows:

In case the Company exports goods in the form of samples (not used for promotion according to the provisions of the law on commerce) to foreign customers without collecting money, when exporting goods, the Company must issue a value-added invoice and calculate output VAT as if selling goods in the domestic market.

• On August 30, 2024, the General Department of Taxation issued Official Letter No. 3879/TCT-KK providing guidance on VAT refund as follows:

– Regarding the supplementary declaration of tax declaration dossiers:

In case Tay Son Garment Joint Stock Company discovers that the tax declaration dossier submitted to the tax authority is incorrect or incomplete, it may make a supplementary declaration in accordance with the provisions of Article 47 of the Law on Tax Administration No. 38/2019/QH14 dated June 13, 2019 and Clause 4, Article 7 of Decree No. 126/2020/ND-CP dated October 19, 2020 of the Government. The Company shall base on the tax declaration dossier and supplementary declaration dossier to calculate the tax payable, additional tax payable, late payment fee (if any) and pay money to the state budget in accordance with regulations. In case the Company makes additional tax declarations when the tax authority or competent authority has announced a decision to inspect and examine taxes at the headquarters, the Company shall be subject to administrative sanctions for tax management violations specified in Articles 142 and 143 of the Law on Tax Administration.

– Regarding VAT refund periods:

In case Tay Son Garment Joint Stock Company has both exported goods and services and domestically sold goods and services, the Company must separately account for the input VAT used for the production and business of exported goods and services. In case separate accounting is not possible, the input VAT of exported goods and services shall be determined based on the ratio between the revenue of exported goods and services and the total revenue of goods and services of the VAT declaration periods calculated from the tax declaration period following the previous tax refund period to the current tax refund request period.

• On September 9, 2024, the Vinh Long Provincial Tax Department issued Official Letter No. 969/CTVLO-TTHT guiding tax policies on procedures for collecting electricity and water bills as follows:

In case the Company signs a contract with a customer to construct a project, the contract stipulates that the Company will pay the electricity and water bills on behalf of the customer. If the electricity and water bills bear the Company’s name, address, and tax code, the Company is allowed to declare and deduct input VAT and include it in deductible expenses when calculating corporate income tax if it meets the conditions prescribed by law on VAT and corporate income tax.

When the customer pays the electricity and water bills to the Company, the Company must issue a VAT invoice to deliver to the customer in accordance with Clause 1, Article 4 of Decree No. 123/2020/ND-CP. The Company must declare and pay VAT at the VAT rate prescribed in Clause 1, Article 10; Article 11 Circular No. 219/2013/TT-BTC. In this case, the Company records income from electricity and water bills as other income when calculating corporate income tax according to the provisions of Clause 23, Article 7 of Circular No. 78/2014/TT-BTC.

Personal Income Tax (“PIT”)

• On August 9, 2024, the General Department of Taxation issued Official Letter No. 3505/TCT-DNNCN on personal income tax policy as follows:

Individuals who generate income from real estate transfer (“RE”) are responsible for declaring and paying PIT on real estate transfer activities and individuals who register ownership and use rights of real estate must declare and pay the Registration Fee. In case an individual has only one house or land, he/she is exempted from PIT according to the provisions of Clause 2, Article 4 of the Law on PIT.

The act of using documents that do not accurately reflect the nature of the transaction or the actual transaction value to determine the amount of tax exempted is a violation of the provisions of Clause 5, Article 143 of the Law on Tax Administration. However, according to the report of Can Tho City Tax Department, in case the taxpayer is determined to be exempt from personal income tax for the transfer of a single residential house or land according to the provisions of the Law on Personal Income Tax, therefore, Can Tho City Tax Department studies the regulations on handling administrative violations of tax according to the provisions of Clause 3, Article 12 and Clause 7, Article 17 of Decree No. 125/2020/ND-CP for handling.

• On August 16, 2024, the Hai Duong Provincial Tax Department issued Official Letter No. 7183/CTHDU-TTHT providing guidance on personal income tax settlement for foreign employees as follows:

In case Ebara Pump Vietnam Co., Ltd. has 02 foreign employees who are identified as resident individuals, in the calendar year, these 02 employees are present in Vietnam for 183 days or more, the tax period of the resident individual is calculated for the entire calendar year and the individual makes family deductions from January 2022 to the end of December 2022 (12 months).

Foreign employees with income from salaries and wages who are directly subject to declaring and settling personal income tax with the Tax authority shall declare and settle personal income tax according to Form No. 02/QTT-TNCN, Form No. 02-1/BK-QTT-TNCN prescribed in Appendix 1 issued with Decree 126/2020/ND-CP dated October 19, 2020 of the Government, choosing the case of settlement according to the calendar year. In case the above 02 employees have income and have paid tax in the country that signed the Agreement with Vietnam, if in the Agreement, Vietnam commits to implementing tax deduction measures, when this resident declares income tax in Vietnam, such income will be included in taxable income in Vietnam according to the provisions of current tax laws in Vietnam and the tax amount paid in the Contracting Country will be deducted from the tax payable in Vietnam according to the provisions of Article 48 of Circular No. 205/2013/TT-BTC dated December 24, 2013 of the Ministry of Finance.

Corporate income tax

• On August 12, 2024, the Bac Giang Provincial Tax Department issued Official Letter No. 5714/CTBGI-TTHT providing guidance on corporate income tax incentives for adding additional business lines as follows:

In case the Company is enjoying corporate income tax incentives based on the locality for new investment projects located in industrial parks that are not located in areas with favorable socio-economic conditions. During its operation, the Company has added the business line “Exercising the right to export, the right to import, the right to distribute wholesale (not establishing wholesale establishments) of goods (details according to some HS codes)” in the adjusted investment certificate. If the change in the above investment certificate does not change the satisfaction of the tax incentive conditions of the investment project as prescribed in Clause 5, Article 18 of Circular No. 78/2014/TT-BTC (amended and supplemented in Clause 3, Article 10 of Circular No. 96/2015/TT-BTC), the Company will continue to enjoy corporate income tax incentives for the remaining period as prescribed in Clause 4, Article 18 of Circular No. 78/2014/TT-BTC (amended and supplemented in Clause 2, Article 10 of Circular No. 96/2015/TT-BTC).

• On August 22, 2024, the General Department of Taxation issued Official Letter No. 3684/TCT-CS guiding corporate income tax policy as follows:

Article 15, Article 16 of Decree No. 218/2013/ND-CP dated December 26, 2013 of the Government stipulates that income of enterprises from implementing new investment projects that meet preferential conditions on location (including industrial parks, economic zones, high-tech zones) is entitled to preferential corporate income tax rates and tax exemption and reduction periods.

In Clause 2, Article 19 of Decree No. 218/2013/ND-CP mentioned above and Clause 17, Article 1 of Decree No. 12/2015/ND-CP dated February 12, 2015 of the Government detailing the implementation of the Law amending and supplementing a number of articles of the Laws on tax and amending and supplementing a number of articles of the Decrees on tax stipulate the income items that are not subject to corporate income tax incentives. In Clause 2, Article 10 of Circular No. 96/2015/TT-BTC dated June 22, 2015 of the Ministry of Finance amending and supplementing Circular No. 78/2014/TT-BTC of the Ministry of Finance on corporate income tax

In case an enterprise has an investment project that is entitled to corporate income tax incentives due to meeting the preferential conditions on location, the income entitled to incentives is all income arising from the production and business activities of the investment project in the preferential location, except for income that is not entitled to incentives according to the provisions of the law on corporate income tax.

Regarding tax policy for liquidation of fixed assets of enterprises in export processing zones

On August 5, 2024, the Hanoi Tax Department issued Official Letter No. 44614/CTHN-TTHT guiding on tax policy for liquidation of fixed assets of enterprises in export processing zones as follows:

In case the Company is an export processing enterprise with only export activities and liquidates fixed assets for domestic sale according to regulations:

– Use sales invoices according to regulations in Clause 2, Article 8 of Decree 123/2020/ND-CP:

“2. Sales invoices are invoices for the following organizations and individuals:

1. b) Organizations and individuals in the duty-free zone when selling goods and providing services domestically and when selling goods and providing services between organizations and individuals in the duty-free zone, exporting goods and providing services abroad, the invoice must clearly state “For organizations and individuals in the duty-free zone.”

– Implement tax declaration according to the direct method on added value according to the provisions of Clause 2, Article 13 of Circular No. 219/2013/TT-BTC:

“2. The amount of value added tax payable according to the direct method on added value is equal to the percentage multiplied by the applicable revenue as follows:

1. b) The percentage to calculate VAT on revenue is specified for each activity as follows:

+ Distribution and supply of goods: 1%;

+ Services, construction without contracted materials: 5%;

+ Production, transportation, services associated with goods, construction with contracted materials: 3%;

+ Other business activities: 2%.

1. c) Revenue for calculating VAT is the total amount of actual sales of goods and services recorded on the sales invoice for goods and services subject to VAT, including surcharges and additional fees that the business establishment is entitled to.”

– Submit tax declaration dossiers according to the provisions of Clause 3, Article 44 of the Law on Tax Administration No. 38/2019/QH14, Clause 4, Article 8 of Decree 126/2020/ND-CP:

“Article 44. Deadline for submitting tax declaration dossiers

3. The deadline for submitting tax declaration dossiers for taxes declared and paid each time a tax obligation arises is no later than the 10th day from the date the tax obligation arises.”

Regarding contractor tax on loan interest

On August 15, 2024, the General Department of Taxation issued Official Letter No. 3602/TCT-CS on contractor tax policy on income from loan interest as follows:

In case Vina Eco Board Company Limited signed a long-term loan contract with a parent company abroad since 2014, the Contract stipulates that the principal and interest will be repaid in one lump sum after 10 years, the parent company is subject to contractor tax in Vietnam on income from loan interest according to regulations.

In case the parent company writes off the loan interest debt, if Vina Eco Board Company Limited does not incur loan interest payments to the parent company, the company does not have to declare and pay contractor tax on behalf of the parent company. The loan interest expense that the company deducts in advance each year corresponding to the written-off loan interest must be accounted for in other income to determine taxable income according to regulations.

Regarding the application of exchange rates for recording revenue and expenses

On September 10, 2024, the Tay Ninh Provincial Tax Department issued Official Letter No. 2968/CTTNI-TTHT on the application of exchange rates for recording revenue and expenses as follows:

In case the Company has activities of exporting and importing goods, the exchange rate applied to record revenue is the purchasing rate of the commercial bank where the enterprise designates the customer to make payment at the time of the transaction.

In case the exchange rate applied to record expenses is the selling rate of the commercial bank where the enterprise plans to transact at the time of the transaction.

Regarding related party transaction records

On August 27, 2024, the Thai Binh Provincial Tax Department issued Official Letter No. 4769/CTTBI-TTHT providing guidance on related party transaction records as follows:

Related party transactions within the scope of Decree No. 132/2020/ND-CP include borrowing and lending transactions as prescribed in Clause 2, Article 1 of Decree No. 132/2020/ND-CP. Companies that have related party transactions within the scope of regulation are responsible for declaring information on related party relationships and related party transactions according to Appendix I, Appendix II, Appendix III issued with Decree No. 132/2020/ND-CP and submitting them together with the Corporate Income Tax Finalization Declaration. The Company is responsible for maintaining and providing the Transfer Pricing Document. The Transfer Pricing Document is prepared before the annual corporate income tax declaration and must be maintained and presented upon request of the Tax Authority. If the conditions specified in Clause 2, Article 19 of Decree No. 132/2020/ND-CP are met, the Company is responsible for declaring and determining the transfer pricing but is exempted from preparing the Transfer Pricing Document.