Mazars Vietnam Newsletter - Issue January 2019

We would like to bring you tax and legal updates in January 2019 with the following highlights influencing the corporate operation and payroll amendments:

Operational update

Official Letter 4261/TCT-KK on Value Added Tax (“VAT”) refund for the scheduled investment project

On 01 November 2018, the General Department of Taxation issued Official Letter 4261/TCT-KK on VAT refund for the scheduled investment project. Accordingly, VAT input of the scheduled investment project’s finished parts, which incurred after the revenue of such parts, is ineligible for applying refund for the investment project.

Official Letter 5018/TCT-KK on non-cash payment evident

According to Official Letter 5018/TCT-KK issued by the General Department of Taxation on 13 December 2018, if the company’s bank voucher does not have the same bank information of the foreign buyer as prescribed in contract, such payment voucher does not satisfy the condition of being non-cash payment evident. Therefore, the company cannot apply for the VAT refund for the exported goods and services.

Official Letter 4574/TCT-CS on Corporate Income Tax (“CIT”) of technology transfer fee

On 20 November 2018, the General Department of Taxation issued Official Letter 4574/TCT-CS on CIT of technology transfer fee. Accordingly, such expense shall be considered as deductible expenses if the transferor is the owner of such technology. In case, there is no requirement to register the ownership of the technology under the law of transferor’s country, the Vietnamese company must provide the documents or commitments indicating the rightful ownership of the technology transferor to record such expense as deductible.

Official Letter 78552/CT-TTHT on prohibition of issuing e-invoice with list of sold goods and services in paper

According to Official Letter 78552/CT-TTHT issued by Hanoi Tax Department on 28 November 2018, the e-invoice is not allowed to be issued with the list of sold goods and services. The list of sold goods and services must be presented in the e-invoice.

Official Letter 57932/CT-TTHT on expenses of foreign employees who did not obtain work permits

According to Official Letter 57932/CT-TTHT issued by Hanoi Tax Department dated 20 August 2018, if the company recruits foreign employee without work permit or exemption certificate of work permit, the relevant expense and input VAT shall be ineligible for being CIT deductible expense and creditable input VAT.

Official Letter 61338/CT-TTHT guiding on tax payable of dependent accounting units  

According to Official Letter 61338/CT-TTHT issued by Hanoi Tax Department on 04 September 2018, the allocation of the manufacturer branch’s CIT payable amount shall be determined as follows:

-       If the branch is entitled to tax incentive, the branch’s CIT obligation shall be separately accounted and is not allowed to be allocated using proportion of deductible expenses.

-       If the branch is not entitled to CIT incentive, the branch’s CIT obligation shall be allocated using proportion of deductible expenses.

Official Letter 84097/CT-TTHT on VAT rate of processing management and quality control services of finished goods before exporting to foreign enterprises

According to Official Letter 84097/CT-TTHT issued by Hanoi Tax Department on 24 December 2018, VAT rate the processing management and quality inspection services for foreign enterprises shall be applied as follows:

-       The services of management, expedition and supervision of the processing procedures at the Vietnamese manufacturer are considered as consuming in Vietnam, and hence the applicable VAT rate of 10% must be applied.

-       Quality control services for the finished goods before exporting and technical analysis services of garment are considered as consuming outside Vietnam and hence is eligible for applying VAT rate of 0%.

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