Accounting and Tax Newsletter No. 01 – February 2025

VAT

17/01/2025: Official Letter No. 267/TCT-CS from the General Department of Taxation on VAT policy

A company with a new investment project (which is divided into multiple investment categories) in the investment phase incurs input value-added tax (VAT) on goods and services. After offsetting against the VAT payable from ongoing production and business activities (if any), if the cumulative uncredited input VAT of the investment project reaches at least VND 300 million, the company is eligible for a VAT refund.

22/01/2025: Official Dispatch No. 367/TCT-CS from the General Department of Taxation on VAT Policy

In cases where a business establishment, within a month (for monthly declarations) or a quarter (for quarterly declarations), has exported goods and services with uncredited input VAT of VND 300 million or more, it is eligible for VAT refund on a monthly or quarterly basis. If the uncredited input VAT within the month or quarter is less than VND 300 million, it shall be carried forward to the following month or quarter for credit.

If a business establishment engages in both export activities and domestic sales within the same month or quarter, it must separately account for the input VAT used for the production and business of exported goods and services. If separate accounting is not feasible, the input VAT of the goods and services shall be determined based on the proportion of export revenue to the total revenue of goods and services, calculated from the tax declaration period immediately following the last tax refund period up to the current tax refund request period.

The input VAT of exported goods and services (including the separately accounted input VAT and the input VAT allocated based on the aforementioned ratio) shall be eligible for a VAT refund if, after offsetting against the VAT payable on domestically consumed goods and services, the remaining amount is VND 300 million or more. The VAT refund amount for exported goods and services shall not exceed the export revenue multiplied by 10%.

The input VAT that has been determined for exported goods and services and qualifies for credit but has not been credited, or qualifies for a refund but has not yet been requested for refund in the previous period, shall be carried forward to the next tax period to determine the VAT refund for exported goods and services in the following refund period, provided that the stipulated conditions are met.

17/01/2025: Official Dispatch No. 302/TCT-CS from the General Department of Taxation on Tax Policy

For contracts for the supply of goods signed between a Vietnamese party and a foreign contractor under the delivery terms DDU (Delivered Duty Unpaid) and DAP (Delivered at Place), where the seller is responsible for transporting the goods to the delivery location designated by the buyer and the contract does not include any services provided in Vietnam—such as installation, commissioning, warranty, maintenance, etc. (including cases where such services are provided free of charge)—the contract shall only be subject to value-added tax (VAT) at the importation stage and subject to a corporate income tax (CIT) rate of 1% on taxable revenue.

22/01/2025: Official Dispatch No. 369/TCT-CS from the General Department of Taxation on Value-Added Tax (VAT)

In cases where a company has omitted certain input VAT invoices, the company is allowed to declare and additionally deduct the input VAT before the tax authority announces a decision on tax inspection or audit at the company’s headquarters. This is in accordance with Clause 6, Article 1 of Law No. 31/2013/QH13, Article 47 of the 2019 Law on Tax Administration, and Point b, Clause 4, Article 7 of Decree No. 126/2020/ND-CP.

Invoice

27/12/2024: Official Dispatch No. 4936/CTNTH-TTHT from the Ninh Thuan Tax Department on Handling Incorrectly Canceled E-Invoices

For e-invoices (EIs) that have been canceled and reported to the tax authority using the Notification of Incorrect E-Invoice (Form No. 04/SS-HĐĐT), those invoices are no longer valid and cannot be used for tax declaration. Therefore:

• If a bank discovers that a tax declaration submitted to the tax authority contains errors due to the seller mistakenly canceling the E-Invoice, the bank must adjust and supplement the tax declaration in accordance with Clause 4, Article 7 of Decree No. 126/2020/ND-CP. This adjustment must be made within 10 years from the deadline for submitting the tax declaration for the period in which the error occurred but before the tax authority or a competent agency announces a tax inspection or audit decision.
• If the bank’s supplementary tax declaration results in an increase in the amount of tax payable, the bank must pay late payment interest on the additional tax amount, starting from the day following the final tax payment deadline for the tax period in which the error occurred, in accordance with Article 59 of the Law on Tax Administration.
• For E-Invoices that were mistakenly canceled, the bank should request the seller to issue a new invoice in accordance with the actual economic transaction, following the provisions of Clause 1, Article 4 of Decree No. 123/2020/ND-CP, and comply with tax declaration requirements under the applicable tax laws.

21/01/2025: Official Dispatch No. 332/TCT-KK from the General Department of Taxation on Tax Declaration for Incorrect or Erroneous Input Invoices and Documents

If a taxpayer discovers errors or inaccuracies in input invoices and documents that have been declared and deducted after the tax authority or a competent agency has announced a decision on tax inspection or audit at the taxpayer’s premises, the taxpayer must comply with the provisions outlined in Point đ, Clause 6, Article 1 of Law No. 31/2013/QH13 and Article 47 of the Law on Tax Administration No. 38/2019/QH14.

Administrative Penalties

15/01/2025: Official Dispatch No. 216/TCT-PC from the General Department of Taxation on Administrative Penalties for Violations Related to Tax and Invoices

The General Department of Taxation provides guidance on handling issues related to administrative penalties for violations concerning tax and invoices as follows:

1. If a taxpayer is subject to penalties for multiple administrative violations regarding tax procedures and invoices in the same penalty decision, only one penalty decision shall be issued, specifying the form and level of penalties for each violation committed by the individual or organization. The total penalty amount stated in the penalty decision is the sum of the specific penalties for each violation and is not limited by the maximum penalty amount specified in Points c and đ, Clause 1, Article 24 of the 2012 Law on Handling Administrative Violations (as amended and supplemented in 2020).
2.  In cases where a taxpayer commits multiple administrative violations related to invoices within the same penalty decision, and each violation is penalized separately, the aggravating circumstance of “large-scale administrative violation” shall not be applied. However, if the taxpayer commits a single administrative violation involving invoices, where the number of affected invoices is 10 or more, the taxpayer shall be penalized for one violation and be subject to the aggravating circumstance of “large-scale administrative violation.”
3. If a taxpayer commits repeated administrative violations of the same nature, and each violation is penalized separately, then from the second violation onwards, the case shall be considered an “administrative violation committed multiple times” and shall be subject to an aggravating circumstance under Point b, Clause 1, Article 10 of the 2012 Law on Handling Administrative Violations (as amended and supplemented in 2020).

Debt Offset

24/12/2024: Official Dispatch No. 4743/CTNTH-TTHT from the Ninh Thuan Tax Department on Debt Offset

In cases where a company offsets debts through a third party, it must have non-cash payment documents, specifically a tripartite debt offset agreement, as a basis for VAT deduction and for recording the expense as a deductible expense when determining taxable corporate income.

Brokerage Commission

26/11/2024: Official Dispatch No. 4294/CTNTH-TTHT from the Ninh Thuan Tax Department on Brokerage Commission Payments

If a company signs a contract with a foreign enterprise to seek and introduce customers, and this activity is carried out outside Vietnam, the foreign enterprise’s brokerage activity for selling goods falls under the category not subject to foreign contractor tax (FCT).

The brokerage commission expense can be deducted for corporate income tax (CIT) purposes if it meets all the conditions specified in Article 6 of Circular No. 78/2014/TT-BTC (as amended and supplemented by Article 4 of Circular No. 96/2015/TT-BTC).

Corporate Income Tax (CIT)

17/01/2025: Official Dispatch No. 300/TCT-CS from the General Department of Taxation on Corporate Income Tax Policy

The Certificate of Incentives for the Production of Priority Supporting Industry Products serves as the basis for applying corporate income tax (CIT) incentives under the supporting industry conditions. The effective date for applying CIT incentives to supporting industry products is determined based on the date the product is issued the Certificate of Incentives by the Ministry of Industry and Trade.

If a company’s project generates income from the production of supporting industry products (SIP) and meets the conditions for CIT incentives under the supporting industry criteria, it is eligible for tax incentives on the income derived from the SIP project, for the remaining incentive period as certified by the Ministry of Industry and Trade, in accordance with regulations.

21/01/2025: Official Dispatch No. 330/TCT-CS from the General Department of Taxation on Corporate Income Tax Policy

Current corporate income tax (CIT) regulations do not provide CIT incentives for investment projects in industrial zones at the same level as those applied to projects in economically disadvantaged areas. However, if an industrial zone is classified as a specially disadvantaged economic area, as listed in the investment incentive area category issued under Decree No. 218/2013/ND-CP and Decree No. 31/2020/ND-CP dated March 26, 2021, then according to Clause 3, Article 19 of Decree No. 218/2013/ND-CP:

“If an enterprise is eligible for multiple tax incentives for the same type of income at the same time, it may choose to apply the most favorable tax incentive.”

Therefore, a company may apply the most favorable tax incentive for income derived from an investment project located in a specially disadvantaged economic area, provided it meets the actual investment incentive conditions.

However, if a company generates income from an investment project involving the construction and operation of industrial zone infrastructure, this income is classified as real estate transfer income under Article 13 of Decree No. 218/2013/ND-CP dated December 26, 2013, and does not qualify for CIT incentives.

2/01/2025: Official Dispatch No. 372/TCT-CS from the General Department of Taxation on Corporate Income Tax Policy

In cases where multinational corporate entities in Vietnam fall under the Global Minimum Tax (GMT) Regulations and meet the conditions for corporate income tax (CIT) incentives, they shall continue to enjoy CIT incentives in accordance with the prevailing CIT laws.

However, based on Articles 2 and 4 of Resolution No. 107/2023/QH15, after applying the incentives, if the effective tax rate of the multinational corporation in Vietnam is below the minimum tax rate of 15%, the entity must pay an additional CIT amount in accordance with the Global Minimum Tax Regulations.

17/01/2025: Official Dispatch No. 310/TCHQ-TXNK from the General Department of Customs on Import Tax Refund

In cases where imported raw materials, supplies, and components for export production are exempt from import tax, but are not used for the originally intended tax-exempt purpose, the company must declare a change in usage purpose and apply the relevant import tax policy based on the tax regulations in effect at the time of registering the new customs declaration.

Imported goods that have already been subject to import tax but are subsequently exported to a non-tariff zone for use within that zone may be eligible for import tax refund, provided they meet the conditions that the goods remain unused, unprocessed, and unaltered before being exported to the non-tariff zone.

Personal Income Tax (PIT)

21/01/2025: Official Dispatch No. 283/CTQNG-TTHT from the Quang Ngai Tax Department on Personal Income Tax Finalization

The Tax Department provides important guidance on PIT finalization declaration, including:

1. Deadline for Submitting PIT Finalization Declarations

According to Points a and b, Clause 2, Article 44 of the 2019 Law on Tax Administration, the deadlines for PIT finalization declarations are as follows:

• For organizations paying income: No later than the last day of the third month following the end of the calendar year or fiscal year.
• For individuals directly finalizing PIT: No later than the last day of the fourth month following the end of the calendar year.
• If the deadline falls on a public holiday or non-working day, the submission deadline is extended to the next working day as per Clause 1, Article 1 of Decree No. 91/2022/ND-CP.
• Late submission by individuals is not subject to penalties if it results in a tax refund (as per Point b, Clause 2, Article 141 of the 2019 Law on Tax Administration).

[…]

4. Notes on Family Deduction for Dependents

Conditions for Family Deduction

The conditions for applying family deduction for dependents are regulated under Clause 1, Article 9 of Circular No. 111/2013/TT-BTC, specifically:

• For children (biological, adopted, illegitimate, stepchildren):

o    Must belong to one of the following categories:

§  Under 18 years old (calculated in full months).

§  18 years old or older with disabilities, unable to work.

§  Studying in Vietnam or abroad at university, college, vocational school, or high school (including those awaiting university exam results from June to September of grade 12) with no income or an average monthly income not exceeding VND 1,000,000 from all sources.

• For other dependents (as per Points d.2, d.3, d.4, Clause 1, Article 9 of Circular No. 111/2013/TT-BTC):
  • f they are of working age, they must meet both conditions: Have a disability and are unable to work.
    Have no income or an average monthly income not exceeding VND 1,000,000.
  • If they are beyond working age, they must have no income or an average monthly income not exceeding VND 1,000,000.

Required Documentation for Dependents

• Proof of dependency follows Article 1 of Circular No. 79/2022/TT-BTC.
• Tax registration for dependents follows Clause 10, Article 7 of Circular No. 105/2020/TT-BTC, with forms specified in Circular No. 80/2021/TT-BTC.
• From February 6, 2025, tax registration for dependents will follow Article 22 of Circular No. 86/2024/TT-BTC, replacing Circular No. 105/2020/TT-BTC.

Important Notes

• If a taxpayer did not apply for the family deduction for dependents within the tax year, they can claim it retrospectively from the month they assumed financial responsibility for the dependent when finalizing PIT and registering the deduction.
• For other dependents (as per Point d.4, Clause 1, Article 9 of Circular No. 111/2013/TT-BTC), the latest deadline for registering the deduction is December 31 of the tax year. If the deadline is missed, the deduction cannot be applied for that tax year.