Accounting and Tax Newsletter No. 04 – November 2024

Value-Added Tax (VAT)

November 14, 2024: Official Dispatch No. 12477/BTC-CST by the Ministry of Finance on the Proposal to Develop a National Assembly Resolution on Value-Added Tax Reduction:

Suggests a 2% reduction in the VAT rate for the first six months of 2025, applied to goods and services currently subject to the 10% VAT rate (reduced to 8%).

Exceptions: Certain goods and services are excluded from this reduction, including:

• Telecommunications, information technology, financial activities, banking, securities, and insurance services.
• Real estate business, metals, and products from fabricated metals.
• Mining products (excluding coal mining), coke, and refined petroleum products.
• Chemical products, as well as goods and services subject to special consumption tax.

November 15, 2024: Official Dispatch No. 5179/CTCTH-TTHT by the Tax Department of Cần Thơ Province Providing Guidance on Tax Policies for Export Entrustment

For companies acting as export entrustment agents:

• The company is not eligible for VAT refunds and is not required to declare VAT on the VAT return for input and output invoices related to goods received for export entrustment.

For companies entrusting the export:

• The company must use an “Internal Delivery and Transportation Note” to transfer goods to the entrusted party.
• Once the goods are exported, with customs confirmation, and based on the relevant documents verifying the quantity and value of goods actually exported as confirmed by the entrusted export party, the company must issue an electronic VAT invoice for VAT declaration, tax payment, and VAT refund, or alternatively, an electronic sales invoice.

November 19, 2024: Official Dispatch No. 22395/CTBRV-TTHT by the Tax Department of Bà Rịa – Vũng Tàu Province on Value-Added Tax (VAT) Policy

• In cases where a company engages in trading goods not subject to VAT but generates revenue from the sale of goods and services subject to VAT under tax regulations, it must file a VAT return in accordance with Circular No. 80/2021/TT-BTC dated September 29, 2021, issued by the Ministry of Finance.
• The content of the tax return must comply with the provisions of Clauses 1 and 2, Article 7 of Decree No. 126/2020/ND-CP dated October 19, 2020, by the Government.

November 21, 2024: Official Dispatch No. 1986/CTDTH-TTHT by the Tax Department of Đồng Tháp Province on Deductible Input VAT

In cases where a company applies the credit method for VAT and has deductible input VAT incurred during the period, the company may declare and deduct it when determining the payable tax amount for that period. If the input VAT has not been fully deducted in the month, it can be carried forward for deduction in the following period.

Currently, the legal documents on VAT do not provide provisions allowing enterprises to account deductible input VAT, which is eligible for deduction but not declared for deduction, as deductible expenses when determining corporate income tax (CIT) taxable income.

Accounting

November 5, 2024: Official Dispatch No. 3824/CTBPH-TTHT by the Tax Department of Bình Phước Province on Including Foreign Customers’ Bank Account Information in Contracts

Currently, tax laws do not specifically mandate the inclusion of foreign customers’ bank account information in export contracts. However, to comply with the regulations on tax deduction and refund as stipulated in Articles 14, 15, and 16 of Circular No. 219/2013/TT-BTC dated December 31, 2013 by the Ministry of Finance, and its related amendments and supplements regarding VAT, the Tax Department recommends that when drafting export contracts with foreign customers, businesses should clearly and fully include all payment terms and details for both parties.

Invoice

November 11, 2024: Official Dispatch No. 3337/CTPHY-TTHT by the Tax Department of Phú Yên Province on Issuing Invoices for Promotional Goods

If a company conducts sales transactions where gifts are given to customers as part of a promotional program that complies with the laws on commerce, the company must issue an invoice when delivering the goods. The invoice must include full details as required under Article 10 of Decree 123/2020/ND-CP, specifying the name and quantity of goods, and stating that the goods are promotional gifts. The unit price, amount, and total payment on the invoice should be recorded as zero (0).

If the promotional gifts are given to customers but the promotional program does not comply with the laws on commerce, the company must declare and pay taxes on the gifts.

15/11/2024: Official Dispatch No. 29516/CTBDU-TTHT by the Tax Department of Bình Dương Province on Units of Measurement on Value-Added Tax Invoices

Companies may determine the unit of measurement on invoices based on the characteristics and nature of the goods to ensure appropriateness. However, when displaying the unit of measurement on electronic invoices, the following guidelines must be adhered to:

• Text on the invoice must be in Vietnamese. If additional text in a foreign language is needed, it must be placed to the right within parentheses () or directly below the Vietnamese text, and must use a smaller font size than the Vietnamese text.
• If the text on the invoice is in Vietnamese without diacritics, it must ensure clarity and avoid any misunderstanding of the invoice’s content.

Import-Export Tax

November 11, 2024: Official Dispatch No. 5556/TCHQ-TXNK by the General Department of Customs on Tax Refund for On-the-Spot Import Declarations

1. Customs Procedures

• In cases where goods are traded between Vietnamese enterprises and foreign organizations or individuals without a presence in Vietnam, and the foreign trader designates the delivery and receipt of goods to a Vietnamese enterprise, such transactions fall under the category of customs procedures for on-the-spot export and import goods.
• The determination of foreign organizations or individuals without a presence in Vietnam in such transactions is based on Clause 5, Article 3 of the Law on Foreign Trade Management and Clause 2, Article 3 of Decree No. 90/2007/ND-CP. On-the-spot import and export enterprises (customs declarants) are responsible for ensuring compliance with the determination of foreign traders without a presence in Vietnam.
• If there is information suggesting that a customs declaration is invalid, customs authorities will coordinate with relevant units to verify its validity.

2. Tax Refund for On-the-Spot Import Declarations

• Under the Law on Export and Import Taxes, a refund of paid import taxes is provided as stipulated in Article 36 of Decree No. 134/2016/ND-CP for on-the-spot imported products registered under production and business declarations. If these products are subjected to import taxes but later used in the production of export goods, and the final products are actually exported abroad or to non-tariff zones, the import tax is refundable.
• For products imported on-the-spot, registered under production and business declarations, and subjected to import taxes before being used for export production and actually exported abroad or to non-tariff zones, the paid import tax is eligible for refund under Article 36 of Decree No. 134/2016/ND-CP.
• The basis for determining eligibility for a tax refund is specified in Clause 3, Article 36 of Decree No. 134/2016/ND-CP, while the documentation and procedures for refunds are outlined in Clauses 5 and 6, Article 36 of Decree No. 134/2016/ND-CP, as amended and supplemented by Clause 18, Article 1 of Decree No. 18/2021/ND-CP, and Article 12 of Circular No. 06/2021/TT-BTC.

Contractor Tax

October 31, 2024: Official Dispatch No. 28366/CTBDU-TTHT by the Tax Department of Bình Dương Province on Contractor Tax for Brokerage Commissions

In cases where a company enters into a brokerage agreement with a foreign organization (foreign contractor) to provide brokerage services for selling the company’s goods within the territory of Vietnam, such brokerage services provided by the foreign contractor are subject to contractor tax as stipulated by law.

Corporate Income Tax (CIT)

November 19, 2024: Official Dispatch No. 2915/CTHNA-TTHT by the Tax Department of Hà Nam Province on Corporate Income Tax (CIT) Incentives

Under current laws, CIT incentives apply to new investment projects and expansion investment projects (meeting conditions for incentives based on location and sector). In principle:

• Income from machinery and equipment of a new investment project is eligible for CIT incentives as a new investment.
• Additional income from machinery and equipment of an expansion investment project is eligible for CIT incentives as an expansion investment.

If the branch purchases additional machinery and equipment after the investment project has commenced operations, and such purchases do not constitute regular investment activities or meet the conditions for expansion investment, the income generated from the additional machinery and equipment is not eligible for CIT incentives.

Personal Income Tax (PIT)

November 22, 2024: Official Dispatch No. 5341/CTCTH-TTHT by the Tax Department of Cần Thơ Province Providing Guidance on Personal Income Tax (PIT) Policies

1. For foreign employees working in Vietnam:

• Tuition Fees:
  If the company pays tuition fees for the children of foreign employees attending school in Vietnam (from kindergarten to high school), these fees are not included in the foreign employee’s taxable income for PIT purposes. If the tuition payment is stipulated in the employment contract and complies with Article 4 of Circular No. 96/2015/TT-BTC by the Ministry of Finance, the company can classify the payment as deductible expenses when determining taxable corporate income.
• Round-Trip Airfare:
  If the company pays for one round-trip airfare per year for the children of foreign employees, this amount must be included in the employee’s taxable income for PIT purposes and cannot be classified as a deductible expense when determining the company’s taxable corporate income.
• Salary/Wages:
  • For non-resident foreign employees: The company must withhold 20% of the income before payment.
  • For resident foreign employees: The company must withhold tax and handle PIT finalization for the employees.

2. For Vietnamese individuals providing consulting services:

• If the company signs a consulting service contract with a Vietnamese worker who has resided in Vietnam for 183 days or more in a calendar year:
  • Payments made for the consulting services can be classified as deductible expenses for determining taxable corporate income, provided they meet the conditions specified in Article 4 of Circular No. 96/2015/TT-BTC. The individual is not required to issue an invoice to the company.
  • Consulting service fees paid to the individual are not subject to contractor tax.
  • The company is responsible for withholding PIT and conducting PIT finalization on behalf of the individual.