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Resolution No. 116/2020/QH14 on reduction of Corporate income tax (CIT) payable in 2020 incurred by enterprises, cooperatives, non-business units and other organizations is adopted by the National Assembly on 19th June 2020.

Resolution No.116/2020/QH14 applies to CIT taxpayers that are organizations engaged in production and trading of goods and services with taxable income in accordance with the Law on Enterprise income tax (hereinafter referred to as enterprises), including:

  • Enterprises are established under the provisions of Vietnamese law;
  • Organizations are established under the Law on Cooperatives;
  • Non-business units are established under the provisions of Vietnamese law;
  • Other organizations are established under the Vietnamese law and engaged in income-generating production and business activities.

Accordingly, the National Assembly has passed a decision to reduce 30% of CIT incurred by enterprises whose revenue in 2020 is less than VND 200 billion, regardless of small or large enterprises, domestic or foreign- invested enterprises. 

Enterprises shall themselves determine reduced tax amount in their quarterly tax periods of 2020 and make the tax accounting at the end of the year.

This Resolution shall take effect from August 3rd, 2020, i.e. 45 days after the signing date (19 June 2020), just CIT calculation from quarter 3 FY2020 shall be entitled to such 30% reduction.

This Policy is only applied in 2020 exclusively.

 

To get into details for specific cases, please feel free to contact us as at:

Unit 602A, Tower A, Handi Resco Office Building

521 Kim Ma Street, Ba Dinh District, Hanoi

+ 84 24 3974 4181/ 4182

+ 84 24 3974 3090

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The Tax Administration Law 2019 (amended and supplemented) which takes effect from July 1 makes various change to tax admin procedures. One of such changes is Taxpayers are entitled more rights as of the following:

  1. Taxpayers will not be subject to admin penalties and late payment interest if they declared and paid taxes in accordance with rulings issued by the tax authorities at the time. This is a positive development as previously the ability to rely on such rulings was less clear;
  2. Taxpayers will be allowed to look up all the electronic dossier submitted to tax e-portal in accordance with this Law and the Law on electronic transactions;
  3. Taxpayers will be able to use the electronic dossiers in communication with Tax Authority and the other related competent agencies.

The other rights of taxpayers remain unchanged according to the former law, including:  

  1. To be supported and guided to pay tax liabilities; provided information and documents to perform tax obligations and benefits;
  2. To receive documents related to tax obligations from competent agencies when such agency conducts any tax inspection, examination or audit;
  3. To request Tax Authority to explain the detail of tax calculation and assessment; to request expertise of the quantity, quality and categories of export and import goods;
  4. To be kept all the information private and confidential, except for the information which must be revealed to competent authorities or published in accordance with tax law;
  5. To be entitled to tax incentives and tax refund according to the tax law; to know the deadline for resolution of tax refunds and the non-refundable tax amount as well as the legal base for the non-refundable tax amount.
  6. To sign service contracts with tax consultants, custom consultants on carrying out necessary procedures;
  7. To receive decisions on tax handling, tax examination and tax inspection records, and request to explain the detail contents of such documents; to reserve opinion in tax examination and tax inspection records; to receive written conclusions of tax examination, tax inspection and decisions on tax handling;
  8. To be compensated for damage caused by Tax Authority or Tax Agent according to the provisions of law;
  9. To request Tax Authority to certify the fulfillment of tax obligations;
  10. To do complaints and lawsuits against administrative decisions and actions related to its lawful rights and interests
  11. To denounce law-breaking acts of Tax Agent, organization or individual according to the provisions of the legislation on denunciations.

 The Tax Administration Law 2019 (amended and supplemented) replaces the Tax Administration Law 2006. 

 

To get into details for specific cases, please feel free to contact us as at:

Unit 602A, Tower A, Handi Resco Office Building

521 Kim Ma Street, Ba Dinh District, Hanoi

Tel: + 84 24 3974 4181/ 4182

Fax: + 84 24 3974 3090

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The Hanoi Tax Department has recently issued the official letter No. 44403/CT-TTHT dated 1st Jun 2020, providing guidelines of CIT and PIT treatment on expenses given to employees during the Covid-19 pandemic.

Summary for the aforesaid official letter is as below:

  • Pursuant to the Article 4, Circular No. 96/2015/TT-BTC dated Jun 22, 2015, guiding on the determination of deductible and non-deductible expenses when defining taxable income for CIT calculation;
  • Pursuant to the Article 2 Circular No. 111/2013/TT-BTC dated Aug 15, 2013, regulating personal taxable income;
  • Pursuant to the Article 63 Circular No. 200/2014/TT-BTC dated Dec 22, 2014, regulating the bonus and welfare fund;

Pursuant to the above regulations, in case during the Covid-19 pandemic, there have expenses incurred for purchasing face masks, hand-washing liquid, protective clothing and expenses related to testing of infectious diseases for employees in prevention of the spread of Covid-19:

  • If the expense is given to any individual with specific name, this expense shall be treated as personal taxable income;     
  • If the expense does not specify any individual name but is spent for a collective of workers, it shall not be treated as personal taxable income. 

The above are direct expenses for the employees, which are not inclusive in the agreed salary/bonus and complied with the law to improve the living standard of the employee.  

These expenses shall be treated as deductible expenses when defining taxable income for CIT calculation in case they are complied with the regulation as of Item 1, Article 4, Circular No. 96/2015/TT-BTC mentioned above with the condition that the total welfare expenses shall not exceed the actual average 1 month's salary in the tax year. Circular 96/2015/TT guiding for profit tax

Article 4. Article 6 of Circular No. 78/2014/TT-BTC (amended in Clause 2 Article 6 of Circular No. 119/2014/TT-BTC and Article 1 of Circular No. 151/2014/TT-BTC) is amended as follows:

“Article 6. Deductible and non-deductible expenses when calculating taxable income

1. Except for the non-deductible expenses prescribed in Clause 2 of this Article, every expense is deductible if all of these following conditions are satisfied:

a) The actual expense incurred is related to the enterprise’s business operation.

b) There are sufficient and valid invoices and proof for the expense under the regulations of the law.

c) There is proof of non-cash payment for each invoice for purchase of goods/ services of VND 20 million or over (including VAT).

The proof of non-cash payment must comply with regulations of law on VAT.

 

To get into details for specific cases, please feel free to contact us as at:

Unit 602A, Tower A, Handi Resco Office Building

521 Kim Ma Street, Ba Dinh District, Hanoi

+ 84 24 3974 4181/ 4182

+ 84 24 3974 3090

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VAT input on housing allowance for expats

Many expats working in Vietnam are entitled to a lot of allowance from their Company and Housing allowance is a kind of these benefits.

For some enterprises, the housing allowance are capped at a specific amount and paid along with the monthly salary to expats staff. For others, the Company shall settle rental charge directly to the lessor.

The question is that the VAT invoice issued by the lessor for such housing allowance is deductible or not?

In accordance with the Circular 219/2013/TT-BTC providing guidance on implementation of the Law on Value Added Tax, it is regulated at the Article 14: rules for VAT input deduction that:

  • In case a foreign expert is working under labour contract or holding managerial positions with Vietnam party and entitled to a housing allowance paid by Vietnam party, the Vietnam party is not allowed to claim the VAT input on housing allowance to such expats.
  • In case the foreign expert is still under labour contract with oversea company, receive wages and benefits from the overseas company during their Vietnam assignment and the overseas company and the taxpayer in Vietnam sign a contract specifying that the Vietnam party shall cover the accommodation cost for the foreign experts while they are working in Vietnam, the VAT on such accommodation cost paid by Vietnam party shall be deductible.

It is also regulated at Point 9 of the same Article that:

 Input VAT that is not deductible shall be aggregated with costs to calculate corporate income tax, or aggregated with costs of fixed assets, except for the VAT on any purchase that costs 20 million VND or more without receipts for non-cash payments

In light of the above, the VAT input on housing allowance for expats shall be specified in 2 cases:

  • In case that the expats are working under labour contract with Vietnam Company and/or holding a position in management board of Vietnam Company, the VAT amount for housing allowance to such expats is non-deductible but can be recorded as expense .
  • In case that the expats are working under secondment, receiving wages and salaries from oversea company while the housing allowance to such expats is paid by Vietnam party (for and with the terms which are clearly stated in the agreement between Vietnam and oversea company), the VAT amount on such housing allowance is deductible.

Above is the regulation related to case of input VAT on housing allowance.

To get into details for specific cases, please feel free to contact us as at:

Unit 602A, Tower A, Handi Resco Office Building

521 Kim Ma Street, Ba Dinh District, Hanoi

+ 84 24 3974 4181/ 4182

+ 84 24 3974 3090

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In case of arising Valued Added Tax on imported goods/services, is it such VAT liability deductible and is there any requirement implicated?

Let us share with you the related regulation for further information and reference.

In accordance with Clause 10, Article 1, Circular 26/2015/TT-BTC, the tax payer can claim for VAT deduction if can meet the below requirements:

1. Having legitimate VAT invoices for purchases or receipts for payment of VAT on imported goods, or receipts for payment of VAT on behalf of foreign organizations that do not have Vietnamese legal status and the organizations and individuals, and the foreigners that do business or earn income in Vietnam.

2. Proofs non-cash payments for the purchases (including imported goods) that cost VND 20 million or more, except for the imports that cost below VND 20 million each, purchases that cost below VND 20 million inclusive of VAT, and imports being gifts, donations from overseas entities.

3. Bank transfer receipts are documentary evidence proving the transfer of money from the buyer's account to the seller's account.

a) Proofs of the buyer's payment to the seller's account or proofs of payments in the manners that are not conformable with applicable regulations of law are not eligible for deduction and refund of VAN on purposes that cost VND 20 million or more.

b) Any purchase that cost VND 20 million or more (VAT-inclusive) shall not be deducted if there is no bank transfer receipt

c) With regard to goods purchased under a deferred payment plan or instalment plan that cost VND 20 million or more, the taxpayer shall declare and deduct input VAT according to the sale contracts, VAT invoices, and bank transfer receipt, If the bank transfer receipt is not available before the payment deadline according to the contract, the taxpayer may still deduct input VAT.

In light of the above, the VAT on imported goods/services which are used for business activities of the tax payer can be claimed for VAT deduction and the tax payer needs to maintain below documentation:

1. Payment evidence for VAT on imported goods/services or VAT liability payment;

A copy of the submitted customs declaration or declaration of foreign contractor withholding tax should be attached along with the claim package as supporting documents;

2. Proofs non-cash payments for the purchases

It means that the VAT on imported goods is only deductible and claimable when the payment for the foreign contractor is fully made.

Above is the general regulation for cases of Conditions for deducting input VAT on imported goods and services.

To get into details for specific cases, please feel free to contact us as at:

Unit 602A, Tower A, Handi Resco Office Building

521 Kim Ma Street, Ba Dinh District, Hanoi

+ 84 24 3974 4181/ 4182

+ 84 24 3974 3090

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Specific cases of Non-deductible VAT input

Under current regulations, for those tax payers who apply VAT credit method, the VAT credit method is specified as follows:

Payable VAT amount = Output VAT amount – Creditable input VAT amount

To be in detail, the creditable input VAT amount is the total VAT amount on goods or services purchased and on imported goods as indicated in VAT invoices and other relevant documents proving VAT payment.

However, in some cases, the VAT input amount is not qualified for deduction. Below are the specific cases of Non-deductible VAT input that are clearly stated in the Circulars on tax regulations, i.e. Circular 219/2013/TT-BTC, Circular 151/2014/TT-BTC, Circular 26/2015/TT-BTC by the Ministry of Finance.

1. Under Circular 219/2013/TT-BTC, it is regulated that:

As at Clause 7, Article 14:

7. Input VAT on goods and services serving the manufacture or sale of taxable goods and services mentioned in Article 4 of this Circular must not be deducted, except for the following cases:

a) VAT on purchased goods and services serving the provision of goods and services for the foreign entities that use them as humanitarian aid or non-refundable aid according to Clause 19 Article 4 of this Circular shall be deducted in full.

b) Input VAT on goods and services serving petroleum exploration shall be deducted in full until the first day of extraction.

As at Clause 15, Article 14

15. Input VAT must not be deducted in the following cases:

  • The VAT invoice is not legitimate, such as VAT is not written (except for special invoices on which selling prices are VAT-inclusive);
  • The invoice does not contain or does not contain the correct name, address or TIN of the seller, thus rendering the seller unidentifiable;
  • The name, address, or tax code of the buyer on the invoice is incorrect (except for the case in Clause 12 of this Article);
  • The VAT invoice or the receipt for VAT payment is fake; the invoice is changed or fictitious (made without actual sale);
  • The invoice does not reflect the actual value of goods and services

As at Clause 3, Article 15

b) VAT on any purchase that costs 20 million VND or more (VAT-inclusive) shall not be deducted if no bank transfer receipt is presented. The taxpayer shall classify these invoices as non-deductible in the list of invoices and receipts for purchases.

2. Article 9, Circular 151/2014/TT-BTC which came into effect since 15 November 2014 regulates that:

“3. The input VAT on fixed assets, machinery, and equipment, including the input VAT on the lease of these assets, machinery, and equipment, and other input VAT relating to assets, machinery, and equipment such as warranty or repair shall be not deducted and shall be included in costs of fixed assets or the deductible expense prescribed in Law on corporate income tax and other documents providing guidance on implementation in the following cases: specialized fixed assets used for the manufacture of weapons and military equipment for security and defense; fixed assets, machinery, equipment of credit institutions, reinsurers and life insurers, securities companies, medical facilities, training institutions; civil aircraft and yachts not used for commercial cargo transport, passenger transport, tourism, or hotel operation.

With regard to fixed assets being cars with fewer than 9 seats (except for cars used for cargo transport, passenger transport, tourism, or hotel operation; cars used for display and test drive by car dealers) whose value are over VND 1.6 billion (not including VAT), the input VAT amount in proportion to the amount in excess of VND 1.6 billion shall not be deducted.”

3. Related to the allocation of VAT input amount on goods/services subject/non-subject to VAT, the Clause 9, Article 1, Circular 26/2015/TT-BTC regulates that:

2. When goods and services (including fixed assets) are purchased to serve the manufacture or sale of both the goods/services that are subject to VAT and goods/services that are not subject to VAT, only VAT on the goods and services serving the manufacture or sale of the goods/services subject to VAT shall be deducted. The taxpayer must separate the deductible input VAT from non-deductible one. Otherwise, input VAT shall be deducted according to the ratio of revenue subject to VAT, revenue not subject to VAT to the total revenue from selling goods and services, including revenue not subject to VAT that cannot be separated.

The taxpayer that sells both goods/services that are subject to VAT and goods/services that are not subject to VAT may temporarily deduct all of the VAT on purchased goods, services, and fixed assets incurred in the month/quarter. At the end of the year, the taxpayer shall determine the actual deductible input VAT in the year and adjust the amount of input VAT deducted during the year.

Above is the general regulation for cases of non-deductible VAT input.

 

To get into details for specific cases, please feel free to contact us as at:

Unit 602A, Tower A, Handi Resco Office Building

521 Kim Ma Street, Ba Dinh District, Hanoi

+ 84 24 3974 4181/ 4182

+ 84 24 3974 3090

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