Tax UpdatesTax Updates From Domicile Corporate Services

 

Our January 2019 publication on Tax and Accounting updates looks at recent releases from Vietnamese authorities, looking at recent changes to accounting options for micro enterprises, along with our regular review of recent Official Letters released by the Tax Authorities.

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ACCOUNTING REGIME FOR MICRO-ENTERPRISES IN VIETNAM - DECREE 39/2018/ND-CP

On 28 December 2019, the Ministry of Finance issued Circular 132/2018/TT-BTC regarding application of accounting regimes for micro-enterprises. The Circular takes effect from 15 February 2019.

According to the Circular, micro-enterprises can choose to follow the accounting regime under this Circular or the regime for small and medium enterprises under Circular 133/2016/TT-BTC issued in 2016. However, the accounting regime chosen must remain consistent within a financial year.

The Circular provides standard templates for accounting vouchers, accounting ledgers and financial statements for micro-enterprises. These enterprises can also choose to build their own accounting voucher templates or apply the templates provided in the Circular.

According to Article 6 of Decree 39/2018/ND-CP, micro-enterprises are enterprises that meet the following criteria:

٠ For the agriculture, forestry, fishery, industrial and construction sectors:

i) the average number of employees registered for Social Insurance does not exceed 10 employees each year, and

ii) total revenue is not more than 3 billion VND per year, or the total capital is not more than VND 3 billion.

٠ For the trading and services sectors:

i) the average number of employees registered for Social Insurance does not exceed 10 employees each year, and

ii) total revenue is not more than 10 billion VND per year, or the total capital is not more than VND 3 billion.

 

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.

 

Exchange Rate To Convert Foreign Currency Salaries For The First 6 Months Of 2019, For Insurance Calculations.

On 3 January 2019, the Ho Chi Minh City Insurance Office issued Official Letter 10/BHXH-QLT on the exchange rate to convert foreign currency salaries for the first six months of 2019.

According to the Official Letter, the exchange rate for converting salary received in USD during the first six months of 2019, and applicable from 2 January 2019, is 22,825 VND/USD, an increase of 190 VND compared the previous published rate. The exchange rate is applicable in calculating insurance contributions where salaries in labour contracts are in USD.

 

Personal Income Tax (“PIT”) Finalisation for Foreign Employees

On 24 December 2018, the Hanoi Department of Taxation (“HDT”)released Official Letter 84109/CT-TTHT on PIT finalisations for foreign employees.

Under Article 2, Circular 119/2014/TT-BTC, the period in which foreign employees incur PIT obligations is from the month they enter into Vietnam until the month they terminate their labour contract and depart (determined by months).

Accordingly, the PIT finalisation period will be determined up to the month they terminate their labour contract and depart (counted as a full month) regardless of the specific date of departure.

 

Requirements For Bank Receipt Vouchers For Exported Goods

On 13 December 2018, the General Department of Taxation (“GDT”) issued Official Letter 5018/TCT-KK covering requirements for bank receipt vouchers for exported goods.

According to Articles 8 and 9, Circular 46/2014/TT-NHNN and as guided in Official Letter 5806/TCT-KK issued by GDT on 24 December 2014, bank receipt vouchers for exported goods/services are required to include the bank account number of the payer.

Accordingly, where the bank receipt vouchers for exported goods/services do not include the bank account number of the foreign payer as detailed in the commercial contract and its appendixes, the vouchers will not be accepted for deductible VAT and Corporate Income Tax.

In these cases, enterprises will be required to supplement the payer’s bank account number for tax deduction and refund purposes.

 

Payments On Behalf Of Business Cooperation Contracts

On 4 December 2018, HDT issued Official Letter 79759/CT-TTHT covering tax policy for Business Corporation Contracts (“BCC”).

Where a party to a BCC is appointed as a representative to pay branding promotion service fees and obtain VAT invoices, and then shares these costs to the other parties to the BCC, the representing party is required to issue VAT invoices.

 

Foreign Contractor Tax On Domains Transferred From Foreign Entities

On 17 December 2018, HDT issued Official Letter 82364/CT-TTHT on Foreign Contractor Tax (“FCWT”) on domains transferred from foreign entities.

Where a foreign company transfers ownership of an internet domain to an enterprise in Vietnam, the foreign entity is subject to FCWT. If the foreign entity is not eligible to declare and pay tax directly in Vietnam, the Vietnamese party will be responsible for withholding and declaring FCWT on its behalf.

Where the foreign entity and the Vietnam entity are affiliates, a domain transfer is treated as a related party transaction, and the parties are required to comply with regulations in Decree 20/2017/ND-CP on tax management for related party transactions.

 

Payments On Behalf Of Foreign Related Entities

On 11 December 2018, HDT issued Official Letter 81259/CT-TTHT providing guidelines on VAT for payments on behalf of foreign related entities.

Where an enterprise in Vietnam enters an agreement with foreign related entities (that are independent entities operating outside Vietnam) to pay the costs of employees working in Vietnam (such as salaries, bonuses, insurances, and utility costs) on behalf of the foreign entity. The Vietnamese company will issue a VAT invoice at 10% to the foreign entity when they reimburse the Vietnamese party.

 

Dates For Issuing VAT Invoices

On 13 December 2018, HDT issued Official Letter 81737/CT-TTHT regarding VAT invoice issuance dates.

According to Clause 2, Article 6 of Circular 39/2014/TT-BTC, the invoice issuance date is the date when the ownership or the right to use goods is transferred, regardless of payment date. Where a company issues a VAT invoice after the date of goods transfer, even when the invoice is issued within the month, it will be treated the incorrect issue date. The company will subject to administrative penalties which can range from 4 million VND to 8 million VND in accordance with Clause 3, Article 11 of Circular 10/2014/TT-BTC.

 

Lodgement of Value Added Tax Declarations Lodgement

On 4 December 2018, GDT issued Official Letter 4861/TCT-CS providing guidelines on lodgement of VAT declarations.

Where an enterprise lodges a notice of invoice issuance in their first quarter, and registers to use VAT invoices in the following quarter, the enterprise is not required to lodge the VAT declaration for the first quarter.

 



For further information contact:

 

Matthew Lourey, Managing Partner

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Phan Thi Thu Thuy, Director - Accounting

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Do Thi Thao, Manager - Accounting

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