The contents of this
document do not constitute
legal advice and do not
necessarily reflect the
opinions of our firm or any of
our attorneys or consultants.
The document provides
general information which
may or may not be correct,
complete or current at the
time of reading. The contents
are not intended to be used as
a substitute for specific legal
advice or opinions. Please
seek appropriate legal advice
or other professional
counselling for any specific
issues you may have. We
expressly disclaim all
liabilities relating to actions
taken or not taken based on
any or all content of this
document.
VIETNAM
TAX GUIDANCE
No.1
Copyright © 2015 Le & Tran. All rights reserved.
May, 2015
Table of Contents
PERSONAL INCOME TAX (“PIT”)
PIT regarding shared profits of individual who is the owner of one member
limited liability company
PIT declaration dossier of transferring real estate under capital contribution
contract to obtain the right to buy foundation of house, house, and apartment
PIT policy on distinguishing between service contract and labor contract
Adjustment to PIT finalization of foreigner
2
2
CORPORATE INCOME TAX
CIT-exempt incomes of cooperative engaged in agriculture, forestry and
fishery
Regarding receiving foreign currency when selling goods/ services and
calculating CIT related to exchange rate difference
Guidance on CIT and PIT on housing expense of enterprise
Determining the time frame for transferring profits abroad
CIT incentives in case the renting party pays housing rent in advance for
many years
CIT incentives for newly established enterprise which inherits the assets from
old enterprise
4
4
VALUE ADDED TAX
VAT refund for investment project which is finished
Guidance on authorization to issue invoices when selling goods
Document regarding payment via bank transfer when exporting goods to be
entitled to deduct VAT
Bank address in non-cash payment documents
Issuing VAT invoives when selling goods, providing services using smart
cards
Declaration, payment of VAT regarding sale activities in different provincial
areas with the establishment of dependent branches
Guidance on VAT refund and declaration
VAT policies with regard to sales promotion by free goods or services/ sales
price reduction/ commercial discount
VAT on international transportation
Refund of VAT regarding business cooperation contract
VAT invoice regarding importing goods
8
8
8
8
13
14
14
WITHHOLDING TAX
Guiding tax policy related to foreign contractor
15
15
1/17
2
3
3
5
6
7
7
7
10
10
11
11
12
PIT declaration dossier of transferring
real estate under capital contribution
contract to obtain the right to buy
foundation of house, house, and
apartment
PERSONAL INCOME TAX
(“PIT”)
PIT regarding shared profits of
individual who is the owner of one
member limited liability company
According to guidance of Official Letter
No. 831/TCT-TNCN enacted by GDT on
March 10, 2015, PIT declaration dossier
for income from transferring real estate
under capital contribution contract to
obtain the right to buy foundation of
house, house, apartment which is signed
before the effective date of Decree
No. 71/2010/ND-CP (effective
from
August 08, 2010) shall be conducted as
guidance at Point b.1, Clause 3, Article
16 of Circular No. 156/2013/TT-BTC.
Therefore, the dossier includes (i) a PIT
declaration following the form No.
11/KK-TNCN, (ii) a copy of capital
contribution contract to obtain the right
to buy foundation of house, house,
apartment, (iii) the notarized contract
transferring the said capital contribution
contract to obtain the right to buy
foundation of house, house, apartment.
On March 17, 2015, General Department
of Taxation (“GDT”) issued Official
Letter No. 917/TCT-TNCN guiding PIT
policy of after corporate income tax
(“CIT”) profit of owner of one member
limited liability company.
Accordingly, since January 01, 2015,
based on Clause 4, Article 2 of Decree
No. 12/2015/ND-CP of the Government
on CIT, incomes from capital investment
include incomes from capital investment
in other forms, even capital contribution
in kind, by reputation, rights to use land,
patents; excluding incomes from interest
on Government bonds, incomes after
paying CIT of private enterprise or one
member limited liability company which
is owned by individual.
Therefore, shared profits of individual
who is the owner of one member limited
liability company after paying CIT is not
subject to PIT. However, under Official
Letter No. 727/TCT-CS issued on March
03, 2015 by GDT, expenses for salaries,
wages of owner of private enterprise,
one member limited liability company
(owned by an individual, irrespectively
of whether he/she is involved or not
involved in operating its business) are
non – deductible expenses when
determining corporate taxable income.
2/17
PIT policy on distinguishing between
service contract and labor contract
Under Article 518 of Civil Code No.
33/2005/QH11 and Clause 9, Article 3 of
Commercial Law No. 36/2005/QH11,
service contract is an agreement between
the parties whereby the service provider
shall perform a task for the service hirer,
and the service hirer must pay service
charges to the service provider. As such,
in case a company signs a contract with
an individual which cleary states that the
salary will be paid weekly without being
dependent on quantity of services,
concurrently, the company bears risks
for the works, supplies working tools,
controls and bears responsibilities for the
working place for such individual, this
contract shall be considered as a labor
contract.
Thus, income of such
individual received from the company is
the income from salary, wage and the
determination of PIT responsibility
regarding such income is implemented
according to Circular No. 111/2013/TTBTC.
On March 25, 2015, GDT issued Official
Letter No. 1019/TCT-TNCN to reply to
the inquiries about PIT policy on
determining whether a contract between
an enterprise and a service provider is a
service contract or a labor contract.
According to Article 15 of Labor Code
No. 10/2012/QH13, labor contract is an
agreement between employee and
employer on a paid job, working
conditions and the rights and obligations
of each party in labor relations. Under
Clause 3, Article 31 of Circular No.
205/2013/TT-BTC, the term “employer”
is defined as the person who has rights
to products and services created by the
employee and bears responsibilities as
well as risks for such labor, and
simultaneously, has obligation of giving
instructions and supplying working
tools to the employee and is entitled to
control and bear responsibility for the
working place.
Adjustment to PIT finalization of
foreigner
According to guidance of Official Letter
No. 1076/TCT-TNCN of GDT dated
March 30, 2015, foreigner is considered
as tax resident if he/she satisfies one of
the conditions provided at Clause 1,
Article 1 of Circular No. 111/2013/TTBTC.
Therefore, in the circumstance that a
foreigner came to Vietnam in order to
work, if he/she has been present in
Vietnam for 183 days or more within the
first tax year which is the 12 consecutive
months from the date he/she arrived in
3/17
Vietnam, that individual is deemed to be
Vietnamese tax resident, and then the
Partially Progressive Tariff shall be
applied
when
conducting
PIT
finalization in the first tax year.
In the second tax year which is
calculated following a calendar year, if
this foreigner satisfies conditions of
being Vietnamese tax resident according
to the regulations, the Partially
Progressive Tariff shall be applied when
finalizing PIT. Otherwise, the Whole
Income Tariff with the tax rate of 20%
shall be applied to the taxable income
arising in Vietnam when conducting PIT
finalization.
economic conditions, simultaneously,
the cooperative meets the ratio of
providing products and services for
members
who
are
individuals,
households, legal entities operating
agriculture, forestry, fishery according to
the Cooperative Law and other guiding
regulations,
those
incomes
are
considered as CIT-exempt incomes.
CORPORATE INCOME TAX
CIT-exempt incomes of cooperative
engaged in agriculture, forestry and
fishery
On March 06, 2015, GTD issued Official
Letter No. 796/TCT-CS guiding CITexempt
incomes
of
cooperatives
operating agriculture, forestry, fishery,
and
salt
production
specifically,
cooperatives operating, exploiting and
consuming natural clams for CIT period
from 2014.
The above said cooperatives are entitled
to CIT exemption for all incomes arising
from business activities in preferred
geographical areas, except for incomes
under Clause 3, Article 18 of Circular
No. 78/2014/TT-BTC such as incomes
from transferring of capital, real estate or
investment projects, etc.
Accordingly, based on provisions of CITexempt income at Clause 1, Article 8 of
Circular No. 78/2014/TT-BTC and Clause
2, Article 1 of Decree No. 12/2015/NDCP, particularly since 2014 tax period,
where a cooperative has incomes from
agriculture,
forestry,
fishery,
salt
production in geographical areas with
difficult or especially difficult socio4/17
Regarding receiving foreign currency
when selling goods/ services and
calculating CIT related to exchange rate
difference
(a)
Regarding
receiving
foreign
currency from selling goods/
services of enterprise
Under
Official
Letter
No.
4355/BTC-TCT of Ministry of
Finance dated April 03, 2012, in
case an enterprise is allowed to
receive foreign currency from
selling goods and providing
services under Article 22 of
Ordinance on Foreign Exchange
Control and Article 29 of Decree
No. 160/2006/ND-CP, when issuing
value added tax (“VAT”) invoices
recognizing revenue from selling
goods, providing services in
foreign currency, the items in the
invoices shall be written in foreign
currency with Vietnamese Dong
exchange rate respectively at the
average exchange rates of interbank
foreign currency market.
has already declared, paid tax and
meets the conditions for VAT
declaration and deduction in
accordance with the regulations,
the enterprise buying goods,
receiving services is permitted to
declare, deduct VAT and the value
of the bought goods, received
services shall be counted as
deductible
expenses
when
calculating CIT. In case the selling
enterprise is not permitted to sell
goods, provide services and receive
foreign currency in return, but it
did issue invoices in foreign
currency, the selling enterprise
shall be fined according to the
prevailing laws on foreign currency
control.
Thus, before April 03, 2012, in case
an enterprise bought goods,
services paid in Vietnamese Dongs
and received invoices from the
seller in foreign currency which
also state the exchange rate to
Vietnamese Dong in accordance
with
the
average
interbank
exchange rate announced by the
State Bank of Vietnam, if (i) the act
of issuing invoices really related to
the sale of goods, the provisions of
services and (ii) the enterprise
selling goods, providing services
(b)
CIT policy on currency exchange
rate difference amount in 2010
Based on Article 2 of Circular No.
177/2009/TT-BTC,
GDT
issued
Official Letter No. 1063/TCT-CS
dated March 27, 2015 guiding how
to deal with foreign currency
exchange rate in 2010. As such, if
an enterprise has a payable in
foreign currency, then its losses,
profits due to the exchange rate
5/17
Accordingly, in case the enterprise
rents two (02) floors as office, this
expense shall be counted as
deductible expense if there are
adequate documents and invoices
as mentioned above. Regarding
housing expenses of three (03)
floors for residential purpose of
employees, this expense is only
considered as deductible expense
of the enterprise if satisfying the
two following conditions: (i) in the
labor contract signed with the
employees,
this
benefit
is
specifically provided as salary,
wage to the employee and (ii) there
are adequate invoices, documents
in accordance with provisions of
law.
differences arising in the tax period
and its losses, profits due to
exchange rate differences when reevaluating the payble at the end of
the fiscal year are included in CIT
deductible expenses or taxable
incomes in the period.
Guidance on CIT and PIT on housing
expense of enterprise
GDT enacted Official Letter No.
1108/TCT-CS dated March 31, 2015
guiding tax policies on housing rent
expense. Accordingly:
(a)
Regarding CIT: Based on guidance
at Point b, Clause 2.5, Article 6 of
Circular No. 78/2014/TT-BTC, if an
enterprise pays housing rent for the
employee as agreed in their labor
contract, this expense shall be
considered as salary, wage of the
employee.
If the invoices,
documents are adequate pursuant
to Clause 2, Article 6 of Circular
No. 119/2014/TT-BTC, this expense
shall be counted as deductible
expenses
when
calculating
corporate taxable income.
*Note: Invoices, documents shall be
issued under the name of the enterprise.
(b)
Regarding PIT: Based on guidance
of Official Letter No. 5922/TCTTNCN of GDT enacted on
December 30, 2014:
In case the enterprise pays housing
rent for its employee and the
employee has no other sources of
income, has no basis to calculate
15% of total amount of taxable
income which does not include
housing rent, all of the actual
amount of housing rent which is
paid for the employee will be
counted as personal taxable
income. Thus, the housing rent
paid for the employee is calculated
as
personal
taxable
income
following PIT declaration period of
incomes from salary and wage.
6/17
Determining the time frame
transferring profits abroad
for
On March 30, 2015, GDT issued Official
Letter No. 1084/TCT-DNL in order to
affirm the period of transferring profits
abroad annually: Enterprises with 100%
foreign investment capital in Vietnam
can transfer their profits abroad annually
at the end of the fiscal year after fulfiling
following obligations: (i) completing
financial obligations to the State of
Vietnam under the provisions of law; (ii)
submitting audited financial statements
and (iii) submitting CIT finalization
declarations of such fiscal year to the tax
authorities in accordance with Clause 1,
Article 4 of Circular No. 186/2010/TTBTC.
the lumpsum payment paid in advance
for many years, the CIT of each year
which is under the tax exemption,
reduction scheme shall be calculated by
dividing the total CIT of the advance
payment by the number of years the
renting party paid in advance.
CIT incentives for newly established
enterprise which inherits the assets
from old enterprise
In order to provide further guidance on
applying CIT incentives from 2007 to
2013 for enterprise that is in the period of
being entitled to CIT incentives since
reorganizes, transfer its ownership
under Circular No. 134/2007/TT-BTC
and Circular No. 123/2012/TT-BTC, GDT
enacted Official Letter No. 1149/TCTCS dated April 02, 2015. Accordingly,
during the time of being entitled to CIT
incentives, the enterprise sets up a new
enterprise which inherits assets, business
offices and business lines of the old one
to continue its operation, the newly
established enterprise shall not be
entitled to CIT incentives as a newly
established business from investment
project but inherit CIT incentives from
the old enterprise for the remaining time
if the newly established enterprise still
meets the requirements of tax incentives
in
accordance
with
prevailing
regulations on CIT.
CIT incentives in case the renting party
pays housing rent in advance for many
years
On March 16, 2015, GDT issued Official
Letter No. 879/TCT-CS guiding the
implementation of CIT incentives policy
in case the renting party pays the rent in
advance for many years. According to
Article 5, Circular No. 78/2014/TT-BTC,
turnover used to calculate taxable income
from advance rent payment for many
years shall be allocated to the number of
years of advance payment or calculated
as income from lumpsum payment to
determine taxable income of each year.
In case the enterprise that is being
entitled to CIT incentives chooses the
method of determining the turnover for
calculating taxable income which is
7/17
business activities, if invoices delivered
to customers are not signed and sealed
by the director and the chief accountant
of the enterprise in the item “the seller”,
the person who directly sell goods can be
authorized to (i) sign and write his/her
full name on the invoices and (ii) seal on
the top left of invoices delivered to
clients. This guidance of GDT is in
accordance with the provisions under
Point d, Clause 2, Article 16 of Circular
No. 39/2014/TT-BTC guiding the item
“the seller” on invoices on sale of goods,
provision of services.
VALUE ADDED TAX
VAT refund for investment project
which is finished
On March 10, 2015, GDT issued Official
Letter No. 833/TCT-KK guiding the
VAT refund of finished investment
project. According to Clause 1, Clause 3,
Article 18 of Circular No. 219/2013/TTBTC, Decree No. 209/2013/ND-CP,
Circular No. 26/2015/TT-BTC and Decree
No. 12/2015/ND-CP, in case investment
project is finished but the input VAT of
the investment project has not been fully
deducted yet, the remaining shall be
offset against output VAT on business
activities and shall be refunded in
accordance with Article 18 of Circular
No. 219/2013/TT-BTC and Circular No.
26/2015/TT-BTC.
Document regarding payment via bank
transfer when exporting goods to be
entitled to deduct VAT
On March 10, 2015, GDT issued Official
Letter No. 834/TCT-KK guiding on
documents regarding payment via bank
transfer in case a Vietnamese enterprise
exports goods to a foreign client, in
which, they agreed that the foreign client
will make payment to another bank
account of the enterprise where
concurrently, the enterprise has a loan
contract with such bank and will make
payment by the total value of related
exported goods.
Guidance on authorization to issue
invoices when selling goods
In this case, if the bank notifies the
enterprise in writing about the amount
of money received from the foreign
client regarding the related imported
goods, which is in accordance with (i)
Official Letter No. 5806/TCT-KK of GDT
dated December 24, 2014 guiding
documents regarding non-cash payment
and (ii) other information following the
contract on settling the above loan, the
enterprise might be allowed to deduct,
On March 24, 2015, GDT issued Official
Letter No. 992/TCT-DNL guiding the act
of authorizing someone to issue invoices
as follows:
Where an enterprise has established
many establishments in many localities
all over the country to carry out its
8/17
refund input VAT regarding the related
exported goods.
Non-cash payment
documents,
particularly
documents
regarding payment via bank transfer
which are considered when deducting,
refunding VAT are regulated at Official
Letter No. 5806/TCT-KK as follows:
-
•
Regarding
purchased
goods,
services: Documents from the
payer’s bank sent to the payer to
notify about the Debit of the money
transferred to the bank account of
the beneficiary.
-
•
Regarding
exported
goods,
services:
Documents from the
beneficiary’s bank sent to the
beneficiary to notify about the
Credit of the money received from
the payer.
•
To be entitled to deduct and refund
VAT,
documents
regarding
payment via bank transfer shall
include the information regulated
in Article 5 of Decision No.
1789/2005/QĐ-NHNN as follows:
-
-
Name
and
number
of
documents;
Date
when
issuing
documents;
Name, address, ID/Passport
number,
bank
account
number of the payer; Name,
address of the payer’s bank;
Name, address, ID/Passport
number, account number of
the beneficiary of the money
stated in the documents;
Name,
address
of
the
beneficiary’s bank;
9/17
Quantity, price unit and
money
amount
of
the
economic,
financial
operations stated in numbers,
the total money amount shall
be stated in both numbers and
words;
Contents of the arising
economic,
financial
operations;
Signature, full name of the
drawer, approver and people
relating to the accounting
documents;
Other information according
to the provisions of the credit
institutions (if any).
Bank address in non-cash payment
documents
On December 31, 2014, the State Bank
promulgated Circular No. 46/2014/TTNHNN, which takes effect from March
01, 2015, guiding non-cash payment
services. The Circular provides that
Payment Orders and Collection Orders
are not required to have items regarding
addresses of payer’s bank and
beneficiary’s bank.
Accordingly, on
March 12, 2015, GDT promulgated
Official Letter No. 874/TCT-KK to
provide further guidance on information
relating to bank address as follows: in
case the documents regarding payment
via bank transfer provided by the bank
to the payer or the beneficiary have no
information on bank address, but the
information on bank name already
includes the name of the branch, such
payment documents shall be considered
when deducting, refunding VAT.
electronic cash register can be used to
print and issue invoices to customers
when selling goods, providing services,
with the conditions that invoices which
are directly printed from cash register
shall fully have following items:
•
•
•
Issuing VAT invoives when selling
goods, providing services using smart
cards
•
On March, 16, 2015, GDT issued Official
Letter No. 881/TCT-CS guidance on
issuing VAT invoices when providing
goods, services using smart cards. As
such, if organizations, enterprises have
their turnover from all services recorded
by software system and it is possible to
view the reports, turnover, collected
money amounts, receivable amounts to
other buyers at any time for each type of
cards/bills, each ticket stall as well as the
number of cards/bills which are recorded
by
supervision
machines
when
customers pass the checkpoints; then,
Name, address, tax code of the
enterprise;
Name of store, counter (in case
enterprise
has
many
stores,
counters);
Name of goods, services, unit
prices, quantity, payment prices
(state clearly prices without VAT,
VAT tax rate, VAT amounts and
total amount of money); and
Name of the collector, ordinal
number of bill, date, time when
printing invoices.
Simultaneously, these invoices
satisfy the following principles:
•
•
10/17
shall
Invoices shall be delivered to
customers;
Data of invoices which is printed
from the electronic cash register
shall
be
transferred
fully,
accurately into accounting books to
record and declare VAT according
to provisions of law; and
•
Sending
notice
of
invoice
publication enclosed with a sample
of invoice to the tax authority (not
required to register the quantity of
published invoices in advance).
Bills which satisfy all the above
conditions shall be considered as selfprinted invoices or invoices which are
directly printed from electronic cash
register in accordane with Article 14 of
Circular No. 39/2014/TT-BTC.
The
revenue
from
products
is
determined based on the product cost or
according to the prices of the same kind
of products in the localities where the
production facilities are located. VAT
declaration dossier is the VAT
declaration form following Form
05/GTGT issued together with Circular
No. 156/2013/TT-BTC.
Declaration, payment of VAT regarding
sale activities in different provincial
areas with the establishment of
dependent branches
Following the guidance of Official
Letter No. 1069/TCT-CS issued by GDT
on March 27, 2015 on declaration,
payment of VAT regarding sale activities
in different provincial areas with the
establishment of dependent branches,
pursuant to Point c, Point d, Clause 1,
Article 11 of Circular No. 156/2013/TTBTC, in case a company has units in
other provinces than where the
company’s headquarter is located and
these units (i) do not have accounting
system, bank account; (ii) do not have its
own invoices; (iii) have revenue but (iv)
collect sale payments and transfer
directly to the bank account of the
company, then the company shall
declare and pay VAT to the tax
authorities where the dependent units
are located with the rate of 2% (if the
goods incur 10% VAT) or with the rate of
1% (if the goods incur 5% VAT) of the
revenue excluding VAT.
Guidance on
declaration
VAT
refund
and
On March, 30, 2015, GDT issued Official
Letter No. 1094/TCT-KK guiding VAT
refund and declaration as follows:
Pursuant to Point a, Point c, Clause 5,
Article 10 of Circular No. 156/2013/TTBTC and Clause 1, Article 18, Clause 2,
Article 19 of Circular No. 219/2013/TTBTC, if the taxpayer who has already
proposed tax refund on the tax
declaration form but still not fulfilled
conditions for tax refund and not yet
made the tax refund dossier, the
taxpayer
is
allowed
to
make
supplementary declaration dossier to be
considered for tax refund. In case the
taxpayer proposes tax refund on the tax
declaration form, and simultaneously
transfers the input tax amount proposed
11/17
for refund to the input tax amount of the
following month, the taxpayer shall be
sanctioned for tax administrative
violation
from
VND1,400,000
to
VND2,000,000 under Clause 3 Article 8
of Circular No. 166/2013/TT-BTC.
free of charge to customers and must
fully notify such customers of
information on the use of such goods or
services.”
“Article 9. Sale of goods or
provision of services at prices
lower than their previous prices
1. Where sales promotion is conducted
in the form of discount, the discount
rate of promoted goods or service
applied at any time during the period
of sales promotion shall comply with
the provisions of Article 6 of this
Decree.
2. It is prohibited to discount goods or
services at the sale prices or charge
rates of which are specifically set by the
State.
3. It is prohibited to discount goods or
services to lower than the minimum
level in cases where the State has set
price frames or minimum prices for
such goods or services.
4. The total duration of sales promotion
programs conducted in the form of
discount for a certain goods or service
mark shall not exceed 90 (ninety) days
VAT policies with regard to sales
promotion by free goods, services/ sales
price reduction/ commercial discount
On March 31, 2015, GDT issued Official
Letter No. 1110/TCT-CS guiding the
determination of whether the sale
promotion activities are presenting
goods as gifts, providing services free of
charge or reducing sale prices, giving
commercial discounts in order to issue
invoices and declare, pay VAT
accordingly.
Correspondingly, the determination of
whether a sale promotion program is
presenting goods as gifts, providing
services free of charge for customers or
reducing sale prices, giving commercial
discounts shall be in accordance with
Article 8, Article 9 of Decree No.
37/2006/ND-CP, particularly:
“Article 8. Presentation of goods as
gifts or free-of-charge provision of
services to customers without
accompanied goods sale and
purchase or service provision:
Traders that conduct sales promotion
in the form of presentation of goods as
gifts or free-of-charge provision of
services
to
customers
without
accompanied goods sale and purchase
or service provision shall bear
responsibility for the quality of goods
presented as gifts or services provided
12/17
purchase.
In case the sale price
reduction, commercial discount is made
at the end of the price reduction,
discount program, it is allowed to issue
adjustment invoices enclosed with the
list of number of invoices need adjusting,
the adjusted money, tax amounts. Based
on the adjustment invoices, the buyer
and the seller shall conduct adjustment
declaration of revenue from purchase,
sale, output tax, input tax.
in a year; the duration of a sales
promotion program must not exceed 45
(forty five) days.
5. It is prohibited to take advantage of
this form of sales promotion for
dumping price of goods and/or
services.”
Thus, after determining that it is
presenting goods as gifts, providing
services free of charge, the invoices shall
be issued under Point a, Clause 2.4
Appendix No. 04 of Circular No.
153/2010/TT-BTC.
The invoice shall
provide the name and quantity of goods,
state clearly that the goods are
promotional goods; the line of tax rate,
VAT shall not be written, only crossed
out.
VAT on international transportation
GDT issued Official Letter No. 726/TCTCS dated March 03, 2015 guiding VAT
for international transportation service.
Accordingly:
In case a company issues invoices for
freight forwarding to clients in Vietnam
who have demands for shipping goods
abroad, the VAT rate of 0% shall be
applied. After that, the foreign airline
issues invoices and gives them to the
company in order for the company to
record them as expenses; the company
declares CIT in compliance with the laws
on CIT for international transportation
business and declares, pays withholding
tax for the foreign airline.
If it is determined as reducing sale
prices, giving commercial discounts for
customers, value added taxed prices
shall be the prices after reduced,
discounted under Clause 22, Article 7 of
Circular No. 06/2012/TT-BTC. In case
the sales price reduction, commercial
discount are based on quantities or
revenues from goods, services, the
discounted, reduced prices of the goods
sold shall be calculated and adjusted on
the sales invoices of the last or next
This guidance is compliant with Law on
VAT, Decree No. 123/2008/ND-CP,
Circular No. 06/2012/TT-BTC and Official
Letter No. 3055/BTC-TCT regarding VAT
and conditions for applying VAT rate of
0%, specifically: VAT tax rate of 0%
which is applied to exported goods,
services, international transportation
stipulated in this article includes
transportation of passengers, luggage,
cargo using international routes from
13/17
Vietnam to foreign countries or from
foreign countries to Vietnam, or both
place of departure and place of arrival
are in foreign countries regardless of
directly having the transportation
vehicles or not, as well as satisfies the
condition of having contract on
transportation of luggage, passengers
and cargo between the shipper and the
shipping agency, and having payment
documents.
Refund of VAT regarding business
cooperation contract
On April 03, 2015, GDT issued Official
Letter No. 1192/TCT-KK guiding VAT
refund for the party receiving capital
contribution under business cooperation
contract in the period of 2012. According
to guidance of Circular No. 06/2012/TTBTC, Circular No. 219/2013/TT-BTC on
VAT and Circular No. 130/2008/TT-BTC
on CIT, if there is a business cooperation
contract between two parties, the capital
contributing party does not have to
declare, pay tax and the capital receiving
party is permitted to declare, deduct
VAT in the invoices of buying property
14/17
of the capital contributing party.
However, if the capital contributing
party already issued invoices to the
capital receiving party, which are in
accordance with the value of the
property and the capital receiving party
recorded this as an increase of property,
and at the same time, two parties made a
written agreement to offset this amount
of money against the capital contribution,
the capital receiving party might be
considered for VAT deduction refund if:
•
The business cooperation contract is
in compliance with the law; and
•
The capital contributing party has
already declared, paid tax in
compliance
with
regulations
regarding output invoices issued to
the capital receiving party and the
two parties have an agreement on
comparing and confirming the
offsetting the debts.
VAT invoice
goods
regarding
importing
According to guidance of Official Letter
No. 827/TCT-CS of GDT dated March 10,
2015, in case a Vietnamese enterprise
signs a contract with another Vietnamese
enterprise to supply goods which were
imported with CIF price at a port in
Vietnam, the tax rate of 0% under Clause
1, Clause 2, Article 9 of Circular No.
39/2014/TT-BTC shall not be applied. In
case the contract provides that the buyer
shall carry out the customs procedures to
import the goods, paying import tax,
VAT on import stage, if this is compliant
with the laws on customs, the seller shall
issue VAT invoices to the buyer, in
which taxed turnover for calculating
VAT is the value of the signed contract
minus (-) the taxed value of imported
goods following the customs declaration
forms which is declared when carrying
out customs procedures.
WITHHOLDING TAX
Guiding tax policy related to foreign
contractor
Official Letter No. 1182/TCT-HTQT
enacted by GDT on April 03, 2015
guiding withholding tax when applying
the Tax Agreement. Specifically:
a)
Principles of applying the Tax
Agreement
During their operation, foreign
contractors shall register a proposal
for applying the Tax Agreement to
the tax authorities in accordance
with the prevailing tax circular to
determine whether there is a
withholding tax exemption or not.
According to this official letter, the
entitlement to withholding tax
exemption for one period is not
applied to the next period, even
within
the
same
contract.
Therefore, foreign contractors need
to supplement the dossier to be
considered for tax exemption in
accordance with the prevailing tax
circular for each separate period.
b)
Depending on each period of
operation and the time of signing
contract,
the
circular
on
withholding tax shall be applied
accordingly.
Particularly, if the
contract was signed on May 17,
2002:
•
From 2002 - February 15, 2005:
Circular No. 169/1998/TT-BTC
shall be applied.
•
From February 16, 2005 –
January 17, 2009: continue to
apply
Circular
No.
169/1998/TT-BTC and Circular
No. 95/1999/TT-BTC because
the contract is signed before
the date from which Circular
No.
05/2005/TT-BTC
took
effect.
•
From January 18, 2009 – May
26, 2012: apply Circular No.
05/2005/TT-BTC
as
the
contract is signed before the
date from which Circular No.
134/2008/TT-BTC took effect.
•
From May 27, 2012 –
December 31, 2013: apply
Applying
the
Circular
on
withholding tax in each period in
order to determine tax liability
15/17
Circular No. 169/1998/TT-BTC
as Circular taking effect at the
time of signing contract shall
be applied.
that work was determined as
withholding taxable object in
Vietnam.
•
Besides, it depends on the place
where the contract is performed to
apply the appropriate withholding
tax circular. Particularly:
•
•
In case the contract provides
that a part of work is
performed totally outside
Vietnam by the foreign
contractor, incomes from such
part of work are not subject to
VAT and CIT. Regarding the
other parts of work which are
performed in Vietnam, such
parts of work were taxable
objects under provisions of
Circular No. 169/1998/TTBTC.
c)
In case the contract between
the company and the foreign
contractor
can
not
differentiate the partial work
performed in Vietnam by the
contractor, the total value of
the contract shall be subject to
VAT and CIT in accordance
with
the
provisions
of
Circular No. 169/1998/TTBTC.
Implementation of Tax Agreement
According to Article 5 of the Tax
Agreement, in case the foreign
contractor has construction location,
construction or installment project
satisfying
the
condition
of
permanent
establishment
in
Vietnam, the contractor has liability
to pay CIT tax in Vietnam for the
income
of
its
permanent
establishment. Specifically:
In case the contract provides
that the work would be
performed outside Vietnam,
however, in fact it was
•
performed in Vietnam, such
income from performance of
16/17
If the orders for machine,
device provision were deemed
as parts of the main contract,
according to the Protocol of
the Tax Agreement, income
from
machine,
device
provision of the permanent
establishment shall not be
allocated
to
such
establishment in Vietnam.
Therefore,
the
foreign
contractor shall be exempt
from CIT in Vietnam for
income from machine, device
provision under the main
contract.
However, this
exemption
was
merely
implemented within 3 years
from the date of submission of
dossier
according
to
regulations of Circular No.
205/2013/TT-BTC.
•
If the orders for machine,
device provision are not
deemed as parts of the main
contract,
performance
17/17
regarding those orders is
deemed
related
to
the
permanent establishment in
Vietnam; therefore, income
from those orders is income
arising
from
permanent
establishment in Vietnam and
the foreign contractor has the
liability to pay CIT for this
income.