Tax UpdatesTax Updates From Domicile Corporate Services


Our September 2018 publication on Tax and Accounting updates looks at business registration changes that simply a number of procedures, along with the regular review of recent Official Letters released by the Tax Authorities. The Official Letters cover foreign dividend payments, Personal Income Tax for foreign experts, deductibility for expenses that are paid through personal bank accounts, Foreign Contractors Tax on Software, and education payment exemptions for children of foreign employees.


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On 23 August 2018, the Vietnamese Government released Decree 108/2018/ND-CP, amending elements to Decree 78/2015/ND-CP on business registrations.


Some significant amendments arising from the Decree include:

• The Authorization Letter for individuals undertaking the registration procedures is no longer required to be notarized (Clause 2 of Article 1).

• The removal of the requirement to legalize the investor Charter where the established company is registered as a single member limited liability company (LLC) and the company’s owner is a corporate (Clause 4 of Article 1).

• Additional guidance for enterprise registration when converting from a household business (Clause 6 of Article 1).

• The removal on the restriction on establishing business locations only in the province/city where the headquarters or the branch is located (Clause 9 of Article 1).

• The ability to notify the seal specimen of the enterprise can be made online without needing to submit directly to the Business Registration Office (Clause 10 of Article 1), and

• The removal of the requirement that Financial Statements be provided when seeking to decrease charter capital (Clause 14 of Article 1).


The Decree is effective from 10 October 2018.



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


Repatriating Vietnam Company Dividends to Foreign Investors

On 15 August 2018, the Hanoi Department of Taxation (“HDT”) issued Official Letter 57077/CT-TTHT providing guidelines for foreign investors when repatriating dividends earned in Vietnam.


According to Article 4 of Circular 186/2010/TT-BTC, foreign investors are entitled to repatriate dividends if the invested enterprise has completed all statutory financial obligations in Vietnam, lodged their annual Audited Financial Statements and Corporate Income Tax (“CIT”) finalisation with the Tax Authorities.

• The investor or authorised company is to complete the forms issued in Circular 186/2010/TT-BTC and submit these to the Tax Authorities, which covers the notification on repatriation of dividends, including details of the period to which the dividends relate.

• Investors decide the specific amount of repatriated dividends in accordance with the regulations in the Circular 186/2010/TT-BTC.

• Dividends can be remitted abroad 7 working days from the submission date.


PIT on Home to Work Travel Expenses of Foreign Experts

On 13 August 2018, HDT issued Official Letter 56281/CT-TTHT on Personal Income Tax (“PIT”) for transfer expenses of foreign experts.

Under Article 11 of Circular 92/2015/TT-BTC, transfer expenses between an employee’s worksite and their accommodation is exempt from PIT.

Transfer expenses for foreign experts of the offshore parent company, in accordance with the company’s regulations, are also exempt from PIT.


Deductible Interest Expenses Arising From Related Party Transactions

On 16 August 2018, HDT issued Official Letter 57305/CT-TTHT providing guidelines on the deductible interest expenses arising from related party transactions.

Under Clause 3, Article 8 of Decree No. 20/2017/ND-CP, deductible interest expenses cannot exceed 20% of the total earnings plus interest expenses and depreciation costs arising in the period.

Interest expenses also include interest arising from transactions with non-affiliated third parties.


Deductible Expenses Paid Through Employee Personal Bank Accounts

On 12 July 2018, HDT issued Official Letter 48507/CT-TTHT providing guidelines on conditions for deductible expenses paid through employee personal bank accounts.


Purchases of goods/services exceeding VND 20 million, and which are authorised by the company for its employees to pay from their personal account, will be deductible where:

• This form of payment is specified in the company’s financial policy;

• The company has supporting documents to prove that the goods/services are incurred for business operations, and that authorisation documents exist for staff to make payments on its behalf;

• VAT invoices for the goods/services are available with the company’s name and tax code; and

• Bank documents are available showing payment from the personal account and the reimbursement from the company’s account to the employee.


Foreign Contractor Tax of Foreign Software Licenses

On 14 June 2018, the Ho Chi Minh City Department of Taxation (“HCMDT”) issued Official Letter 5706/CT-TTHT regarding Foreign Contractor Tax (“FCT”) on payments for foreign software licenses.

Under Article 13 of Circular 103/2014/TT-BTC, income from software copyrights provided by an offshore party are subject to FCT. Accordingly, if a enterprise purchases a foreign software license when paying a license fee (including the initial registration fee and the annual renewal fee), it must withhold, declare and pay FCT on behalf of the foreign contractor.

In particular, the CIT portion is 10% of the total, with VAT exempted as software is not subject to VAT (following Circular 219/2013/TT-BTC).


PIT Exemption for Child Education Payments for Foreign Employees

On 31 May 2018, HCMDT issued Official Letter 5026/CT-TTHT providing guidelines on PIT exemptions for education payments.

According to Clause 2.6, Article 4 of Circular 96/2015/TT-BTC, education payments made by employers for their foreign employee’s children in Vietnam is exempt from PIT.

Foreign employees signing labour contracts stating the company will pay education fees (from pre-school to secondary school, but excluding tertiary education) for their children in Vietnam and providing sufficient invoices and documents (with the company’s name, registered address, and tax code) are available, payments will be deductible for CIT and exempt from PIT.

However, if the company does not pay directly to the school but pays the employee directly as part of the employee’s monthly salary, the allowance would be subject to PIT.


For further information contact:


Matthew Lourey, Managing Partner

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Phan Thi Thu Thuy, Senior Manager - Accounting

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Do Thi Thao, Manager - Accounting

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