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1. Invoice issuance for goods/services used for promotions and advertising, as sample goods, for gifts, as an exchange or for paying wages to employees.

Pursuant to Clause 7, Article 3, Circular 26/2015/TT-BTC, Point b, Clause 1, of Article 16, Circular 39/2014/TT-BTC on Sales invoices is amended as follows:

b) When selling goods and services, including those used for trade promotion, advertising, samples, goods and services used for donation, exchange, or paid as salaries (except for goods internally circulated or internally used to proceed with the production), the seller must issue invoices.

Accordingly, whenever using goods/services for promotions, advertising, gifts, exchange or paid as salaries, the seller is responsible for issuing invoice for those goods/services used.

2. The Value Added Tax (“VAT”) on goods/services used for promotions, advertising or gift

2.1 The input value added tax

According to clause 5, Article 14, Circular 219/2013/TT-BTC on Value Added Tax Law providing rules for deducting input VAT, it is regulated that:

5. Input VAT on the goods (whether purchased externally or produced by the taxpayer) used as gifts, used for sale promotions or advertising serving the manufacture of sale of taxable goods may be deducted.

It means that the input VAT on the goods/services used for promotions, advertising of gifts is deductible regarding that the tax payer needs to maintain the sufficient supporting documents for those expenses.  

2.2 Value added taxable prices

As regulated at clause 3 and clause 5, Article 7, Circular 219/2013/TT-BTC, the taxable prices of the goods/services used for promotions, advertising or gift are defined as:

3. Taxable prices of the goods and services (whether bought externally or not) used as gifts, donations, or substitute for wages are the taxable prices of the same kinds or equivalent goods and services at the same time.

5. Taxable prices of goods and services used for sales promotion in accordance with trade laws are zero (0). In case they are not conformable with trade laws, tax shall be declared and paid as if they are used internally, given, or donated.

In summary, the value added taxable prices of the goods/services used for promotions are as follows:

  • Good/services used for promotions campaign which is registered with the Provincial Department of Industry and Trade are non-taxable, i.e. the taxable price is zero;
  • Good/services used for promotions campaign which is NOT registered with the Provincial Department of Industry and Trade are taxable. The taxable prices are taxable prices of the same kinds or equivalent goods and services at the same time.

Above is the general regulation on VAT applied for goods/services used for promotions and advertising, as sample goods, for gifts, as an exchange or for paying wages to employees.

 

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

This email address is being protected from spambots. You need JavaScript enabled to view it.

 

 

Legal Base

Foreign Contractor Withholding Tax (FCT) is tax liability withheld on payments to foreign contractors.

Circular No. 103/2014/TT-BTC dated August 6th, 2014 which is promulgated by the Ministry of Finance and took into effect since October 1st, 2014 has provided the detail Guidance for fulfillment of tax liabilities of foreign entities doing business in Vietnam or earning income in Vietnam (“Circular 103”).

 

Subjects of application

The foreign contractor as mentioned is described as:

  • Foreign business organizations having permanent establishments (“PE”) in Vietnam or not; foreign business individuals that are residents of Vietnam or not who do business in Vietnam or earn income in Vietnam under contracts, agreements, or commitments between the foreign contractor and a Vietnamese entity or between a foreign sub-contractor and a foreign sub-contractor to perform part of the main contract.
  • Foreign entities providing goods in Vietnam in the form of domestic export and earn income in Vietnam under contracts between them and Vietnamese companies (except for cases in which goods are processed and then returned to foreign entities) or distribute goods in Vietnam or provide goods under Incoterms rules that require the sellers to be responsible for goods that have been taken into Vietnam’s territory.

There are only few exceptions where FCWT is non-applicable as follows:

        i.            If the transaction is performed between a subsidiary and a Vietnamese counterpart.

      ii.            If the foreign vendor sells the goods based on EXW-, FCA-, FAS- or FOB. This shall not apply to cases, where the seller provides after sales services related to the product directly, i.e. under Incoterms as DAT, DAP or DDP. In this case, the FCWT is also applicable to the product itself.

    iii.            If the service is offered and rendered outside of Vietnam.

 

FCWT liability computation and declaration

FCWT is not a separate tax, and normally comprises a combination of Value Added Tax (“VAT”) and CIT, or Personal income tax (“PIT”) for income of foreign individuals.

Foreign contractors can apply to be deduction-method VAT payers if they adopt the Vietnamese accounting system. If accounting records are adequate, the foreign contractor will pay CIT on actual profits, but otherwise on a deemed-profit basis.

For direct (non-deduction-method) foreign contractors, VAT and CIT will be withheld by the contracting party at deemed rates. It means that the Vietnamese contracting party will withhold a percentage of the invoice to pay therefore to the Vietnamese Tax Authorities.

Various rates are specified according to the nature of the contract performed. For CIT, the FCWT rate varies from 0.1% to 10%. For VAT, the FCWT rate can also range from 2% to 5%. The VAT withheld by the contracting party is an allowable input credit in its VAT return.

The Vietnamese party is responsible for registration for FCWT code, preparation and submission of the FCWT declaration and making payment on behalf of the foreign contractor.

Above is the general information of FCWT implication in Vietnam. Where specific cases/transactions are being considered, definitive advice should be sought.

 

To get into details of FCWT compliance, please feel free to contact us as at:

Address: Unit 602A, Tower A, Handi Resco Office Building

521 Kim Ma Street, Ba Dinh District, Hanoi

Tel: + 84 24 3974 4181/ 4182

+ 84 24 3974 3090

Email: This email address is being protected from spambots. You need JavaScript enabled to view it.

 

 

The Decree No.119/2018/ND-CP (“Decree 119”) on the use of electronic invoices (e-invoices) for the sale of goods and services is effective since November 1, 2018 and the implementation shall be completed by enterprises, economic or other organizations, business households and individuals by November 1, 2020.

During the period from November 1, 2018 to October 31, 2020, the Decree No. 51/2010/ND-CP dated May 14, 2010 and the Decree No. 04/2014/ND-CP dated January 17, 2014 of the Government on sales and service invoices shall remain in effect and this is called the Transition Period.

Types of e-invoices

There are two (02) types of e-invoices: e-invoice and e-invoice with Tax Authorities’ verification codes.

Firms in the electricity, petroleum, telecommunication, credit financing, transportation, e-commerce, insurance, supermarkets, and trading sectors can use e-invoices without verification codes. In addition, enterprises that transact directly with the tax authorities electronically or have the technology infrastructure, accounting software, and e-invoice software as per regulations are not required using e-invoices with verification codes.

For individual and companies involved in the agriculture, forestry, fishery, industry, and construction sectors employing more than 10 labourers and having annual revenue over VND 3 billion in the preceding year must use e-invoices with verification codes. In the trade and services sector, if the individuals and companies have annual revenue of over VND 10 billion, they need to use e-invoices with verification codes.

Issuing e-invoices

Companies need to register before they use e-invoices (with or without tax verification codes) to get approval from the tax authorities through the General Department of Taxation’s website.

Business and individuals selling goods or providing services need to issue an e-invoice (with or without tax verification codes) to the buyer in a standardized format prescribed by the tax authorities. They are required to provide all the necessary information, regardless of the invoice value.

In case a POS system is used, the seller needs to register for the use of e-invoices sent by the POS system for online transfer of data with the tax department.

Conversion into paper invoices

The conversion of e-invoices into paper invoices is only for the purpose of recording and monitoring in accordance with the Law on Accounting and is not valid for executing transaction or payment.

For goods in transit, authorities or authorised persons can access the Web Portal of the GDT for detail information of the invoice.

The taxpayers who use the paper form of e-invoices as accounting voucher need to maintain the e-form of the invoice for tax and audit purposes under current regulation.

 

Transition period

During the transition period, i.e. from 1 November 2018 to 31 October 2020, taxpayers who have already self-printed their invoices or have received invoices issued by the tax authorities before November 1, 2018, can use them till the end of October 31, 2020.

During the transition period, in case a taxpayer uses up its stock of pre-printed invoices which have been notified for usage, and the taxpayer would like to continue using pre-printed invoices, the taxpayer is allowed to do so in accordance with the above decrees prior to converting to use of e-invoices pursuant to Decree 119/2018/ND-CP (under Official letter no. 4311/TCT-CS dated 5 November 2018).

In the case where the tax authorities have notified taxpayers to switch to e-invoices between November 1, 2018, and October 31, 2018, and the taxpayers fail to meet the information technology infrastructure requirements, they need to send their invoice data to the tax office. The tax office will use those invoices for their database and post them on the General Department of Taxation’s information portal.

Public organizations such as medical establishments and schools that use fee receipts are allowed to continue using the receipts but need to move to electronic receipts or e-invoices according to the roadmap of the Ministry of Finance.

 

 

Businesses in any fields also face critical challenges in aligning accounting methodologies with the demands of the comparatively stringent requirements of their target market, the government, accounting system and regulations.

 

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