This June 2019 publication of our Tax and Accounting updates covers Decisions and Circulars on taxes and equipment, changes to Work Permit procedures, and our regular review of recent Official Letters released by the Tax Authorities.
DECISION 18/2019/QD-TTG: REGULATIONS ON THE IMPORT OF USED MACHINERY, EQUIPMENT AND TECHNOLOGY LINES
On 19 April 2019, the Vietnamese Government issued Decision 18/2019/TT-TTG on the import of used machinery, equipment and technology lines.
This Decision indicates the criteria and procedures for the import and quality inspection of used machinery and equipment. Significant elements of the Decision include:
1. Import criterion for used machinery and equipment
a. Criteria on the age of equipment
Similar to the previous regulations in Circular 23/2015/TT-BKHCN, the age of used machinery and equipment imported into Vietnam must not exceed 10 years. However, machinery and equipment for specific fields as determined in the Appendix I of the Decision, including in mechanical fields, wood production and processing, and paper and pulp production, are allowed to be imported up to 15 years of age (for equipment for drying wood, paper and paperboard) or 20 years (for machinery in mechanical fields).
b. Criteria on production standards
Items must have been manufactured following the National Technical Regulations on safety, energy saving and environment protection. In the absence of appropriate Vietnamese regulations, imported machinery and equipment must be manufactured in accordance with Vietnamese technical regulations or the national standards of one of the G7 countries (or Korea) on safety, energy saving and environment protection.
2. Import criteria for used technology lines
The import criteria for used technological lines are not based on age, but on remaining capacity. Technology lines are only permitted to be imported where their remaining capacity is at least 85% of designed capacity, and energy consumption levels do not exceed 15% of the designed usage. In addition, the technology lines must be used in at least 3 production facilities in OECD countries, and cannot be banned or restricted for transfer.
The criteria for production standards are similar to the used machinery criteria.
The Decision takes effect from 15 June 2019.
ABOLITION OF CIRCULAR 134/2014/TT-BTC ON EXTENSION OF TAX PAYMENTS AND VAT REFUNDS FOR IMPORTED MACHINES AND EQUIPMENT USED AS FIXED ASSETS FOR INVESTMENT PROJECTS
On 3 April 2019, the Ministry of Finance (“MoF”) issued Circular 18/2019/TT-BTC, which abolishes Circular 134/2014/TT-BTC on deferring tax payments and VAT refunds for imported machinery and equipment used as fixed assets in investment projects. The Circular took effect from 20 May 2019.
Previously, on 13 December 2018, the Government issued Resolution 150/NQ-CP to unify ceasing deferred tax payments and VAT refunds as detailed in Resolution 63, dated on 25 August 2014. Therefore, in order to execute this content, MoF issued Circular 18/2019/TT-BTC to fully abolish Circular 134/2014/TT-BTC from May 2019.
For deferred VAT payments on importation applications or VAT refund applications which following the provisions of Circular 134/2014/TT-BTC and which were submitted to the Customs Office before the effective date of this Circular, the Customs Office will continue to settle tax payment extensions or VAT refunds according to the provisions of Circular 134/2014/TT-BTC.
AMENDMENTS TO WORK PERMIT PROCEDURES
On 4 May 2019, the Ministry of Labor, Invalids and Social Affairs issued Decision 632/QD-LDTBXH, adjusting procedures for obtaining Work Permits.
The Decision amends various administrative procedures, including:
• Reports explaining the need for, or changing the demand for foreign employees;
• Issuing Work Permits for foreign employees working in Vietnam;
• Re-issuing Work Permits for foreign employees;
• Confirmation of Work Permit exemptions for employees not subject to Work Permits.
Compared to previous procedures, the new procedures simplify the application documents, forms, declarations, and timeframes for settlement. The Decision was effective from 4 May 2019.
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.
Vietnamese Translation Requirements for Accounting Documents in Foreign Languages
On 26 April 2019, MoF issued Official Letter 4942/BTC-QLKT on Vietnamese translation of accounting documents prepared in foreign languages.
Accounting vouchers, if written in a foreign language, when used for recording accounting records and financial statements in Vietnam, are required to be translated into Vietnamese for their major contents as prescribed in Clause 1, Article 16 of the Accounting Law. The translated copies must be attached to the original version.
For documents attached to accounting vouchers in foreign languages, such as contracts and documents attached to payment vouchers, investment project documents and finalisation reports, these are not required to be translated into Vietnamese, unless under a specific requirement of competent authorities (Clause 5 Article 5 Decree 174/2016/ND-CP).
Personal Income Tax (“PIT”) Where Employees are Transferred from a Branch to Headquarters
On 26 April 2019, the Hanoi Department of Taxation issued Official Letter 26991/CT-TTHT providing guidelines on PIT for employees transferred from a branch to an enterprise’s headquarters.
Where a company assigns employees from a branch to its head office to work for more than 3 months, the company will apply progressive PIT deductions according to the provisions of Clause 1, Article 25 of Circular 111/2013/TT-BTC, including for those who have labour contracts of more than 3 months with other employers.
Employees who are transferred to the head office for more than 3 months and do not have income from other sources during the year are eligible to authorise the company to finalise their PIT (Clause 3, Article 21 of Circular 92/2015/ TT-BTC).
Where a company transfers staff from the branch to the head office for less than 3 months, the company is to withhold PIT at 10% as prescribed in Clause 1, Article 25 of Circular 111/2013/TT-BTC, and these employees are not eligible to authorise the company to finalise their PIT.
VAT Refunds for Imported Goods Re-exported to a Third Country
On 16 May 2019, the General Department of Customs issued Official Letter 3005/TCHQ-TXNK regarding VAT refunds for imported goods re-exported to a third country.
For imported goods later re-exported to a third country, VAT refunds depend on the registration date of the customs declaration.
Where customs declarations are registered before 1 July 2016, and after 1 February 2018, the exporter is entitled to a VAT refund for import VAT under the provisions of Clause 1, Article 29 of Decree 83/2013/ND-CP (for those before 1 July 2016), and Clause 2 of Article 1 of Decree 146/2017/ND-CP (for those from 1 February 2018).
However, for customs declarations registered between 1 July 2016 and 1 February 2018, the VAT on re-exported goods is not entitled to be refunded according to the provisions of Clause 3, Article 1 of Circular 130/2016/TT-BTC.
For further information contact:
Matthew Lourey, Managing Partner
Phan Thi Thu Thuy, Director - Accounting
Do Thi Thao, Manager - Accounting