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We have pleasure in releasing our May 2018 publication on Tax and Accounting updates in Vietnam, where we also look at a selection of recent Official Letters released by Tax and related authorities.


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On 30 March 2018, the Ministry of Planning and Investment released Circular 01/2018/TT-BKHDT detailing an updated list of machinery, spare parts, transportation means, material, raw material and semi-finished products that are domestically manufactured. The circular is effective from 15 May 2018 and replaces Circular 14/2015/TT-BKHĐT.


This list is used as a basis for determining whether Value Added Tax (“VAT”) or Import Tax exemptions can be applicable for imported items, (ie where there is no domestically manufactured equivalent).


The nine categories of goods that are listed as domestically manufactured are detailed in the Appendices, namely:


1. Specialized means of transport domestically produced (Appendix I – 92 items);

2. Machinery and equipment domestically produced (Appendix II – 366 items);

3. Construction materials domestically produced (Appendix III – 113 items);

4. Materials, accessories, components and spare parts domestically manufactured (Appendix IV – 678 items);

5. Components and spare parts of automobiles domestically produced (Appendix V – 197 items);

6. Necessary materials for petroleum activities (Appendix VI – 73 items);

7. Materials, components and semi-finished products for shipbuilding (Appendix VII – 11 items);

8. Machinery, equipment, materials and components of the telecommunication - information technology, digital content and domestic software domestically manufactured (Appendix VIII – 178 items);

9. List of plant seeds, animal breeds, fertilizers and plant protection drugs (Appendix IX – 204 items).



The authorities are yet to release specific implementing regulations for the application of Social Insurance for foreign employees, which was legislated to commence in Vietnam from 1 January 2018. We have received verbal advice that specific guidance will be released shortly from the Ministry on how this will be implemented, and after which local authorities and employers will be expected to commence with compliance. It is expected that there will be a phased introduction, with full Social Insurance rates unlikely to be applied for foreign employees for a number of years.





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


VAT and CIT Declarations for “Endowments” Received From Parent Company

On 4 April 2018, the Hanoi Department of Taxation (“HDT”) issued the Official Letter 14676/CT-TTHT providing guidelines concerning VAT and CIT for “endowments” received by a Vietnamese entity from a parent company.


Under Clause 1, Article 5 of Circular 219/2013/TT-BTC, where a company is funded by its parent company for business operational support, and the funding is not repayable and does not include conditions requiring it to conduct repair, warranty, promotion or advertising services for the parent company, the endowment will be exempt from VAT declarations.


However, if there are conditions to provide repairs, warranties, promotion or advertising services for the parent company, VAT invoices and declarations must be made.


The endowments from the parent company, regardless of whether or not the service conditions are included, will be subject to Corporate Income Tax (“CIT”) (Clause 15, Article 7 of Circular 78/2014/TT-BTC).


Invoices Paid By Third Parties Before a Company is Established

On 29 March 2018, HDT issued Official Letter 12423/CT-TTHT concerning commercial expenses paid on behalf of a company before the company is established.


Where expenses were authorised by the Company for third parties to pay on its behalf (through an authorisation document issued by the founders) before establishment, the Company is entitled to use the invoices with the name of the authorised party for accounting and withholding tax, and there is no need to readjust the information onthe invoices (Point b, Clause 12, Article 14 of Circular 219/2013/TT-BTC). The company must reimburse the authorised party for payments, and the reimbursements must be made via bank transfer where invoices total twenty million VND or greater.


CIT Declarations for Dependent Branches

On 16 April 2018, HDT issued the Official Letter 17377/CT-TTHT concerning CIT applicable for a factory in another province.


For branches located outside the province where the company is registered, if they are accounted for as dependent and only perform general business functions, the branches shall be exempted from declaration and payment of CIT. The company is to declare and pay CIT via the head office for the branches operations (Article 16 of Circular 151/2014 /TT-BTC).


However, if the branch is a production establishment, including a processing and assembly facility, the company must allocate CIT to be paid in the province where the branch is located.


The CIT payable in each province is to be calculated as the total company CIT payable for the period multiplied by (x) the proportion of expenses allocated to each establishment (Article 13 of Circular 78/2014 / TT-BTC)


Where a branch declares and pays VAT separately from the parent company, and where purchases are made by the branch but paid for by the parent company, provided the payment basis is prescribed in the contract and the purchased goods meet eductible conditions, the branch is still be entitled to declare and deduct VAT.


Foreign Contractor Tax (“FCT”) for Contract Compensation

On 26 March 2018, HDT issued the Official Letter 11503/CT-TTHT providing guidelines on Foreign Contractor Tax application for contract compensation payments.


According to Circular 103/2014/TT-BTC, the compensation for breach of contract is also subject to Foreign Contractors Tax.


In this specific example, the company signed a contract to transfer shares to a foreign company but later cancelled the contract, requiring the payment of compensation to the foreign party which is subject to FCT.


Requirement for Translation of Foreign Invoices into Vietnamese

On 20 April 2018, HDT issued the Official Letter 21535/CT-TTHT regarding the foreign invoices.


Expenses incurred during foreign business travel are entitled to be deductible if they are incurred for the business operations in accordance with the regulations of the enterprise.


However, the Official Letter reconfirms that these invoices are required to be translated into Vietnamese to be deductible.



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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