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Vietnam Tax Update July 2017


Our July 2017 monthly Tax Updates publication from Domicile Corporate Services covers selected recent updates and releases for Vietnamese companies with regards to the compliance and operations in Vietnam.

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CHANGES TO INSURANCE MAXIMUM CAPS (AND MINIMUM “BASIC” WAGE RATES) FROM 1 JULY 2017

Changes came into force from 1 July 2017 to the Minimum Basic Wage in Vietnam, affecting the calculation of Vietnamese Social Insurance payments, following adoption of Decree 153/2016/ND-CP by the National Assembly. Specifically, the changes have resulted in an increase to the maximum caps for calculating certain Social Insurance and Health Insurance payments.

Changes to Insurance Caps from 1 July 2017

Insurances Calculation Basis Up Until 30 June 2017 Max Cap From 1 July 2017 Max Cap
Social Insurance (SI) 20 x Minimum Basic Salary 24,200,000 VND (20 x 1,210,000 VND) 26,000,000 VND (20 x 1,300,000 VND)
Health Insurance (HI) 20 x Minimum Basic Salary 24,200,000 VND (20 x 1,210,000 VND) 26,000,000 VND (20 x 1,300,000 VND)
Unemployment Insurance (UI) 20 x Minimum Monthly Wage 75,000,000 VND (20 x 3,750,000 VND*) * for Zone 1 Employees 75,000,000 VND (20 x 3,750,000 VND*) * for Zone 1 Employees

Note that although the Minimum Basic Wage is used for Social Insurance and Health Insurance Caps, it should not be confused with the Minimum Monthly Wage, which was last changed from 1 January 2017, and is applicable to most private sector employers in Vietnam based upon their relevant Zones.


OFFICIAL LETTERS RELEASED

PIT on Remuneration Paid to Representative Office Manager in Vietnam

On 29 May 2017, the Hanoi Department of Taxation (“HDT”) released Official letter 35102/CT-TTHT regarding Personal Income Tax (“PIT”) for a Non-Tax Resident individual, being employed as the Office Manager of a Vietnam Representative Office.

According to Article 2 of Circular No. 119/2014/TT-BTC, with regard to a Non-Tax Resident, PIT liable income is the income generated in Vietnam, regardless of the locations of payment and/or receipt.

As the individual was deemed Non-Tax Resident in Vietnam but was working as the Office Manager of a Representative Office in Vietnam, the income from salary and wages paid for the position of Office Manager is to be subject to PIT, regardless that the income is paid by the parent company outside of Vietnam.

Therefore, irrespective of the location of payment and/or receipt, PIT liable income is income generated in Vietnam and is subject to tax in Vietnam.


PIT Withholding for Non-Tax Residents in Receipt of Salary Outside of Vietnam from Vietnamese Source

On 23 June 2017, the General Department of Taxation (“GDT”) released Official letter No. 2755/TCT-TNCN regarding Personal Income Tax obligations of an overseas Representative Office established by a Vietnamese company when employing Non-Tax Resident employees.

Where a Vietnamese company establishes an overseas Representative Office and employs staff of the host country (outside of Vietnam) to work for the Representative Office, and where these employees are Non-Tax Residents in Vietnam, following circular 111/2013, PIT is not required to be withheld or paid in Vietnam with regard to the incomes earned at the Representative Office.

Other corporate tax liabilities of the Representative Office outside Vietnam depend on the individual situation of the Representative Office, and whether or not it is undertaking business and production activities.


PIT for a Foreign Individual Working in Vietnam Receiving Income from Domestic and Foreign Sources

On 16 June 2017, HDT released Official Letter 40672/CT-TTHT regarding PIT for a foreign General Director.

The Official Letter looked at where a Tax Resident individual receives income from two sources; from the Vietnam company and from the foreign parent company. Specifically:

• For income from the parent company, the individual must personally declare the income on a Quarterly basis to the Tax Office by filling form N.02/KK-TNCN, following Circular 92/TT-BTC.

• For income from the Vietnamese company, the company is required to withhold, declare and pay PIT as normal following Circular 111/2013/TT-BTC.

The taxpayer is required to submit their annual PIT finalization directly at the Tax Office with any additional tax payable or refunds. /p>


VAT on Housing for Foreign Employees

he ability of a Vietnamese employer to claim VAT credits for accommodation payments made for foreign managers with Work Permits as part of their employment package.

This Official Letter reconfirmed that no VAT credits are permitted in accordance with Circular 219/2013/TT-BTC. However, where a foreign expert is working in Vietnam but paid from abroad under an agreement with the foreign employer, provided the agreement clearly details the obligation for the Vietnamese party to pay accommodation costs, then the Vietnamese party can claim the VAT as creditable or deductible.

Other corporate tax liabilities of the Representative Office outside Vietnam depend on the individual situation of the Representative Office, and whether or not it is undertaking business and production activities.


VAT Invoices for Returned Products

On 5 May 2017, the Ho Chi Minh Department of Taxation released Official Letter 4053/CT-TTHT regarding issuing VAT invoices for products sold and later returned to the selling party.

Where the company has a published policy that the customer has the right to return products if they don’t meet their requirements, the customer must issue a return invoice following Article 2.8, Appendix IV of Circular 39/2014/TT-BTC. The seller is required to issue a new invoice for any replacement products which are subject to VAT and CIT as normal.




For further information contact:

Matthew Lourey, Managing Partner

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Phan Thi Thu Thuy, Senior Manager - Accounting

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Nguyen Thi Thuy, Business Manager

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