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Our March 2018 Tax Update publication looks at Transfer Pricing obligations as we approach year-end submission deadlines, and we also look at a selection of recent Official Letters released by Tax and related authorities.

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Following the release of Transfer Pricing Decree 20/2017/ND-CP in 2017, taxpayers in Vietnam are subject to additional requirements when finalising their 2017 Corporate Income Tax (“CIT”) obligations. For most taxpayers, their 2017 finalisation is due by 31 March 2018 (90 days from year end).

When finalising 2017 CIT obligations, taxpayers need to submit a Transfer Pricing Declaration Form (“Form 1”) together with their CIT finalisation return. Unless exempted, taxpayers must also prepare up to 3 additional forms (detailed below).

Exemptions from completing these additional forms apply to taxpayers which;

1) Have total revenue less than VND 50 billion, and total related party transactions less than VND 20 billion, or

2) Have an Advanced Pricing Agreement in place with the authorities, or

3) Have total revenue less than VND 200 billion, undertake “simple” activities, and meet one of the following profit ratios (before interest and tax) on their revenue:

> a) 5% for distribution activities

> b) 10% for manufacturing activities, or

> c) 15% for processing activities

The three additional forms that are required to be submitted are:

1) Form 2, detailing the required information that is being maintained in a Local File for the Vietnamese entity

2) Form 3, detailing the required information that is being maintained in a Master File and that all the required information is being contained therein, and

3) Form 4, is for the Country by Country Report (for those companies with consolidated global revenue exceeding VND 18 trillion).


Official Letters are releases showing the Tax Authorities’ interpretation and application of Vietnam’s Taxation Laws, providing guidance to taxpayers in Vietnam.

Accrued Discount and Support Expenses for Distributors

On 14 December 2017, Ho Chi Minh City Department of Taxation (“HCMDT”) issued Official Letter 12394/CT-TTHT covering accrued discount and support expenses for distributors.

This Official Letter states that under an agreement between a company and its distributors, the company provided certain discounts and financial support to distributors if targeted sales were reached. At the end of the financial year, no invoice had yet been issued, and the company accrued these expenses for CIT calculations.

At the completion of the contract the company is to finalise the discounts and financial support expenses and adjust the deductible expenses of the current financial year accordingly.

This Official Letter shows a very relaxed view of this issue for taxpayers, as in practice local tax authorities have a tendency to apply a stricter view. Taxpayers are advised to obtain specific instructions or guidance from their local tax authority.

Trade Union Fees for Foreign Employees

Recently the Trade Union of Ba Dinh District, Hanoi issued Official Letter 19/LDLD to provide guidance to companies and organizations located within the District regarding Trade Union Fees for foreign employees as from 1 January 2018.

According to this guidance, foreign employees who have a work permit or license are subject to compulsory Social Insurance contributions and hence are also subject to Trade Union contributions. Although the contributions are subject to caps, employers should still be factoring these costs into their forecasts. Taxpayers are still awaiting further guidance by the authorities on the full implementation and payment process for Social Insurance contributions for foreign employees, and this matter will follow when the processes are clarified.

VAT on Sales of Foreign Goods Outside of Vietnam

On 8 September 2017, the Hanoi Department of Taxation (“HDT”(released Official Letter 60970/CT-TTHT regarding VAT on foreign products that are received outside of Vietnam.

According to Article 9 of Circular 219/2013/TT-BTC, transactions between Vietnamese enterprises for the supply of products which are to be delivered to locations outside Vietnam will be subject to 0% VAT.

Therefore, where a Vietnamese enterprise enters into a contract to purchase goods from a foreign entity in order to re-sell the goods to another enterprise in Vietnam, but the delivery location is outside Vietnam, the Vietnamese selling party is entitled to apply 0% VAT. Upon receiving payment, the selling party will prepare a commercial invoice for the customer, but a red VAT invoice is not required.

Withholding Tax on Loan Guarantee Charges

On 4 December 2017, the HDT released Official Letter 78543/CT-TTHT regarding withholding tax on guarantee loan charges.

According to Clause 2, Articles 12 and 13 of Circular 103/2014/TT-BTC, upon making payment for a loan guarantee charge to an organization outside Vietnam which is not a credit institution, the payer has to withhold and remit withholding tax on behalf of the foreign organisation. The 10% withholding rate is applicable, being 5% VAT and 5% CIT.

Withholding Tax on Ticket Sales by Foreign Airlines

On 4 December 2017, the HDT issued Official Letter 78542/CT-TTHT regarding the activities of airline ticket offices for foreign airlines. According to Article 9 of Circular 219/2013/TT-BTC, VAT at 0% applies to tickets sold for international routes. However, ticketing offices of foreign airlines are required to declare and pay CIT of 2% on their Vietnamese revenue (Clause 2 Article 13 of Circular No. 103/2014/TT-BTC).

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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