Our November 2018 publication on Tax and Accounting updates looks primarily at employment and labour changes this month, with a number of key changes for foreign employees arising, along with our regular review of recent Official Letters released by the Tax Authorities.
IMPLEMENTATION OF SOCIAL INSURANCE FOR FOREIGN EMPLOYEES
On 15 October 2018, the Vietnamese Government released Decree 143/2018/ND-CP providing guidance for the implementation of Social Insurance obligations for foreign employees working in Vietnam.
The Decree takes a phased-in approach to Social Insurance, with initial implementation commencing from 1 December 2018, and a full implementation from 1 January 2022. The specific contribution rates for employers and employees are indicated as follows.
• 3% of employee salaries (subject to standard contribution caps) for maternity and sick leave regimes from 1 December 2018.
• 0.5% of employee salaries (subject to standard contribution caps) for occupational health and safety from 1 December 2018.
• 14% of employee salaries (subject to standard contribution caps) for retirement fund from 1 January 2022
• 8% of their salaries for retirement fund contribution from 1 January 2022
(Please note that contribution requirements cease where individuals reach the stated Vietnamese retirement age.)
For further information regarding the implementation of Social Insurance in Vietnam for foreign employees, please refer to our Client Alert released on 17 October 2018.
AMENDMENTS TO IMPLEMENTATION OF LABOUR
On 8 October 2018, the Vietnamese Government issued Decree 140/2018/ND-CP amending certain business investment and administrative procedures for employment of foreign individuals.
Significant changes, amending Decree 11/2016/ND-CP in particular, are:
• A foreign individual responsible for establishing a commercial presence in Vietnam is now exempted from a Work Permit,
• Representative Offices are exempted from the submission of the “demand on employing foreign labour” obligations when employing a foreign individual as the head of the Representative Office, and
• The time frame for the Department of Labour (“DoLISA”) to grant a work permit (or written document of rejection) for employing foreign individuals is shortened from 7 working days to 5 working days from the submission date.
The Decree is effective from the issuance date.
CHANGES TO ADMINISTRATIVE PROCEDURES FOR EMPLOYMENT OF FOREIGN INDIVIDUALS
On 24 October 2018, the Vietnamese Government issued Decree 148/2018/ND-CP providing guidance on implementation of elements of the Labour Code.
Specific implementation changes include:
• The salary used to determine payments in-lieu for public holidays, annual leave and other leave is the monthly salary per the labour contract divided by the employer’s standard working days in the month, and is no longer not based on the salary from the previous month,
• The Legal Representative of an enterprise, or a person so authorised by them, can enter into labour contracts instead of the head of the enterprise (which was the previous requirement), and
• Notification requirements for staff disciplinary meetings have been changed so that the 5 working day notice period is removed, and instead notice simply needs to be provided prior to the meeting.
The Decree is effective from 15 December 2018.
REQUIREMENTS FOR ENTERPRISES TO SELF-EXAMINE COMPLIANCE WITH LABOUR OBLIGATIONS
Effective 1 January 2019, enterprises in Vietnam will be required to self-examine their compliance with labour obligations on an annual basis, in line with Circular 17/2018/TT-BLDTBXH issued 17 October 2018 by the Ministry of Labour, Invalids and Social Affairs.
According to the Circular, employers are required to prepare the self-assessment of their labour compliance at least once a year to assess and improve their labour compliance status. The specific date for the self-assessment is to be determined by employers, with the review period commencing from the first date of the previous year to the self-assessment date.
Employers are to establish a review team and follow the appropriate self-assessment template from http://tukiemtraphapluatlaodong.gov.vn (not yet active as at the date of this publication) to undertake the self-assessment process.
Self-assessment documents include review sheets, review conclusions, written documents on establishing the team/board and other supporting documents which are to be retained. Upon written request from the State Labour Inspectorate, employers will submit self-assessment reports online. Employers, including branches and representative offices, will submit self-checking reports to their management authority and Inspectorate of DoLISA where the branch/representative office located.
Non-compliance with the self-assessment process will result in State compliance inspections and potential penalties.
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.
Deductible Gift Expenses for Employees
On 17 October 2018, the General Department of Taxation issued Official Letter 4003/TCT-CS providing guidelines on the conditions for deductible expenses when buying gifts (mid-autumn gifts, Tet gifts, etc) for employees, and which are not paid from the company’s welfare fund.
When the company buys gifts for its employees, and does not use the company’s welfare fund, the payments will be deductible for Corporate Income Tax and VAT if the total expenses do not exceed the average of the actual monthly salary paid in the tax year. In addition, the company is required to issue a VAT invoice in accordance with the provision of the gifts to employees.
PIT Declarations for Service Contracts
On 25 July 2018, the Hanoi Department of Taxation issued Official Letter 51692/CT-TTHT regarding Personal Income Tax (“PIT”) declarations for service contracts.
Where enterprises sign service contracts with resident individuals (not registered as a business) to undertake consulting services, the enterprises are required to withhold PIT of 10% (if the income is over 2 million VND) before paying the service fees.
After the year end, the individual is responsible for finalising their annual PIT liabilities based upon their total income in the year.
For further information contact:
Matthew Lourey, Managing Partner
Phan Thi Thu Thuy, Senior Manager - Accounting
Do Thi Thao, Manager - Accounting