Our July 2018 publication on Tax and Accounting updates in Vietnam covers discussion on upcoming e-invoice changes, along with changes to refunds and exemptions for importing goods. We also look at a selection of recent Official Letters released by Tax and related authorities in this publication.
DRAFT DECREE ON E-INVOICES
The Ministry of Finance has submitted a draft Decree on invoicing, with a significant focus on e-invoices, for the Government to review. The draft Decree makes e-invoices compulsory for a large number of taxpayers, and should it be approved it will replace Decrees 51/2010/ND-CP and 04/2014/ND-CP.
Under the draft Decree, e-invoices will generally be required for the following parties:
• Enterprises already using electronic invoices;
• Enterprises established after the effective date of the draft Decree and which do not buy invoices from Tax Offices; and
• Enterprises that are already using paper invoices before the effective date of the draft Decree (regardless whether the enterprise currently purchases invoices from Tax Offices or uses printed invoices) will be required to convert to e-invoices within 12 months from the effective date of the draft Decree.
However, parties that can continue to use paper invoices include:
• Organisations and individuals operating supermarkets, trade centers, consumer retail outlets, restaurants, hotels, food service outlets and retail pharmacies that connect their retail sales information to the tax office; and
• Enterprises and organisations in other industries which cannot use electronic invoices, which will be able to print invoices under Ministry of Finance approvals.
Categories of E-invoices
There are two categories in the draft Decree: e-invoices with, and e-invoices without, a verification code from the tax authorities.
• E-invoices without a verification code are to be directly connected to the tax authorities’ database. This is for enterprises operating in banking, aviation, electricity, water and telecommunications.
• E-invoices with a verification code are applicable for all other industries.
Enterprises that operate in information technology industries are generally eligible to be licensed to provide e-invoice services.
NEW PROCESSES FOR TAX EXEMPTIONS, REDUCTIONS AND REFUNDS FOR EXPORTED/IMPORTED GOODS
On 28 June 2018, the General Department of Customs released Decision 1919/QD-TCHQ regarding the process for tax exemption, reduction, tax refund, tax non-collection and handling of overpayments for imported or exported goods.
For declarations concerning the tax exemption list, these can be sent through the electronic data processing system of the Customs Office. Documents will be processed within 3 days from receipt, after which the Customs Office will advise the project owner of approvals.
For tax reduction applications, the Customs Office will not accept tax reduction documents through the electronic data processing system or online public services, with taxpayers required to lodge 3 original copies and 1 notarized copy with the application documents. Taxpayers will be advised whether their application is approved 15 days after the application date.
For tax refund applications, documents can be submitted directly or through the online customs service system. After review, refund decisions for “refund first - inspect later” cases will be issued after 6 working days, and for “inspect first - refund later” cases it is 40 working days from the lodgement date.
OFFICIAL LETTERS RELEASED
Official Letters are releases showing the Tax Authorities’ interpretation and application of Vietnam’s Taxation Laws, providing guidance to taxpayers in Vietnam.
Payment Receipts for Exports From Third Parties
On 11 June 2018, the General Department of Taxation (“GDT”) issued Official Letter 2301/TCT-CS covering bank receipts for exports paid by a third party.
Circular 219/2013/TT-BTC states that when a foreign buyer authorises a third party (which is also a foreign organisation or individual) to pay the Vietnamese exporter on its behalf, and that third party requests an organisation in Vietnam (the fourth party) to make a bank payment for the value of exported goods to the Vietnamese exporter, then provided the Vietnamese exporter has the required documents, the payment would be considered as bank payment and accepted for deduction or refund of input VAT for exported goods.
However, if a foreign buyer purchases goods from a Vietnamese exporter and authorizes a third party located in Vietnam to make payment on its behalf, the payment would not meet requirements for bank payments paid by a third party and therefore the Vietnamese enterprise cannot claim the input VAT for deduction or refund.
VAT Invoice Issuance Requirements for Lending Activities
On 7 June 2018, the Hanoi Department of Taxation issued Official Letter 38646/CT-TTHT clarifying the requirement to issue VAT invoices for lending activities.
Circular 26/2015/TT-BTC states that for lending activities, including lending to enterprises not subject to VAT, an enterprise (the lender) that declares VAT on the deduction basis must issue a VAT invoice when it receives interest payments from the borrower, except for when the interest amount is less than VND 200,000 and the borrower does not request a VAT invoice.
On the invoice, the sections including names, addresses and tax code of the borrower must be completed, and the description field is to have “loan interest” detailed, with the “tax rate” and the “VAT amount” fields crossed out.
PIT for Individuals Who Perform Work in Vietnam But Are Not Vietnam Resident
On 20 June 2018, GDT issued Official Letter 2465/TCT-TNCN regarding PIT for a foreign individual who worked for a Vietnam entity but was not a Vietnam resident.
Where a Vietnam enterprise signs a contract with an individual, who is not a Vietnam resident, to perform work for a project in Vietnam, income derived by the individual will be regarded as income arising in Vietnam and will be subject to Vietnamese PIT.
VAT and CIT on Capital Transfer Activities
On 22 February 2018, the Ho Chi Minh City Department of Taxation issued Official Letter 1474/CT-TTHT providing guidelines for VAT and CIT on capital transfers.
Under Circular 219/2013 / TT-BTC, capital transfers are not subject to VAT. When issuing VAT invoices, the price is the payment amount, with the tax rate and the VAT fields crossed out.
However, capital transfer activities must be declared for, and have CIT paid, at a rate of 20%. Calculations are to comply with Circular 78/2014/TT-BTC and Circular 96/2015/TT-BTC.
Income from capital transfers is to be recorded as “other income” at the time the ownership transfers, with enterprises paying CIT on a quarterly basis with an annual finalisation in accordance with Circular 151/2014/TT-BTC.
For further information contact:
Matthew Lourey, Managing Partner
Phan Thi Thu Thuy, Senior Manager - Accounting
Do Thi Thao, Manager - Accounting