corporate income tax (cit) 1 value added tax … vietnam - tax update...foreign contractor tax (fct)...
TRANSCRIPT
Tax Update
February 2014
In this issue
Corporate Income Tax (CIT) 1
Value Added Tax (VAT) 1
Foreign Contractor Tax (FCT) 4
February 2014 Tax update| Page 1
Corporate Income Tax (“CIT”)
Tax reduction for SMEs
In accordance with Official Letter 78/TCT-CS dated 08 January 2014, the
General Department of Taxation (“GDT”) confirms that Small and Medium
Enterprises (“SMEs”) that transfered their owner’s capital to State Capital
Investment Corporation (“SCIC”) and met all criteria specified in Circular
154/2011/TT-BTC of the Ministry of Finance (“MoF”) are entitled to CIT
reduction for SMEs.
Provision for long-term investment
GDT in its Official Letter 238/TCT-CS dated 17 January 2014 provides
that an enterprise which contributed 100% capital to establish new
subsidiaries could make provision for such long-term investment under
regulations on provisions.
Value Added Tax (“VAT”)
Circular 219/2013/TT-BTC on VAT
The MoF officially released Circular 219/2013/TT-BTC dated 31
December 2013 (“Circular 219”) providing implementing guidelines on
VAT.
Circular 219 shall take effect from 01 January 2014, replacing Circular
06/2012/TT-BTC dated 11 January 2012 and Circular 65/2013/TT-BTC
dated 17 May 2013.
We would like to summarize some salient points of Circular 219 as
follows:
► Taxpayer
Circular 219 adds a case to the taxpayer list where the taxpayer is a
branch of an export processing enterprises (EPE), established to
conduct trading activity or activities directly relating to the sales and
purchase of goods in Vietnam in accordance with the regulations on
Industrial zones, processing & exporting zones, and economic zones.
► Objects not subject to VAT
► Fees collected from customers for activities being part of the
credit granting process according to the lending policy of the
credit institution are not subject to VAT. However, charges for
At a glance
► SMEs that transfered their
owner’s capital to SCIC
might still be entitled to tax
reduction for SMEs as
regulated if satisfying
conditions set out in
Circular 154/2011.
► An enterprise that
contributed 100% capital
to establish new
subsidiaries could make
provision for such long-
term investment under
applicable regulations.
At a glance
► Circular 219/2013/TT-
BTC on VAT dated 31
December 2013 comes
into effect from 1 January
2014.
► Decree No. 04/2014/ND-
CP dated 17 January
2014 supplementing,
amending Decree
51/2010/ND-CP on
invoices takes effect from
1 March 2014.
► Invoices with wrong
formats are still eligible for
VAT deduction and refund
(conditions apply).
February 2014 Tax update| Page 2
card transactions which are not in the credit granting process are
subject to VAT.
► Sales of collaterals for loans by credit institutions or by the
enforcement agency in accordance with the regulations on
handling collaterals for loans are not subject to VAT.
► Parts/components imported for direct use for scientific research
and technological development which are yet produced
domestically are not subject to VAT.
► Taxable price
Taxable price for goods and services used for promotion is regulated
as follows:
► For any form of promotion using sample goods, providing sample
service for trial usage without any required payment, giving
goods to the customers, providing services without payments
from the customers, the taxable prices for the sample goods and
sample services are defined to be zero.
► For sale of goods or provision of services at prices lower than
the sales price of the goods or services previously, the VAT
taxable prices will be the discounted sales prices applicable to
the period during which the promotion has been registered or
notified.
► For the form of promotion for sales of goods and provision of
services with coupons for goods or services, taxpayers are not
required to declare and calculate VAT for the given coupons.
► Conditions for applying 0% VAT rate
► For exported goods:
Apart from the conditions on contracts, evidence on payments
via bank and customs declaration, for cases of goods sold with
delivery and receipt points outside of Vietnam, the seller must
have documents proving the delivery and receipt of goods are
outside of Vietnam.
► For exported services:
Circular 219 removes the conditions on overseas organizations
being foreign organizations without permanent establishments in
Vietnam or not being VAT payers in Vietnam.
It confirms that the services provided in Vietnam for overseas
organizations and individuals associated with sales, distribution
and consumption of products and goods in Vietnam are not
entitled to 0% VAT.
February 2014 Tax update| Page 3
► Input VAT deduction
► Damaged goods that are not compensated in case of natural
disaster, fire, or those not compensated by insurance, goods that
lose quality, goods over expiration date for destruction will be
eligible for VAT creditability.
► Input VAT of goods, services forming enterprises’ fixed assets
for employees in industrial zones (including canteen, recreation
site, locker rooms, parking lot, bathrooms, pools serving workers
within the production, business areas, accommodation, medical
stations) are fully deductible, including the cases where the
business establishments rent, construct or buy houses outside of
the industrial zones according to the regulation on design
standard and workers’ housing prices in the industrial zones.
► Input VAT incurred on house rents for foreign experts working in
Vietnam paid by business establishments is deductible if
conditions are satisfied.
► The amount of VAT paid in accordance with the tax assessment
decision of the customs authorities is fully deductible, unless the
customs authorities sanction the business for fraud and tax
evasion.
► For conditions on payment vouchers for transactions not using
cash for VAT deduction purposes, Circular 219 provides the
followings:
Payment documents through banks are documents evidencing
the transfer of money from the buyer's account to the seller's
accounts (the accounts of the buyers and sellers must be those
registered or notified to the local tax authority).
The amount of VAT on goods and services purchased for each
transaction valued over twenty million dongs without non-cash
payment receipts will not be accounted as expenses or will not
be included in the cost of the fixed assets.
► Some transitional cases
► Where before the January 2014 tax period (for cases of monthly
declarations) or before the Quarter 1/2014 tax period (for cases
of quarterly declarations), business establishments that meet the
conditions for tax refund according to previous Circulars are
entitled to VAT refund as specified in those Circulars.
► Where until the end of the December 2013 tax period (for cases
of monthly declarations) or until the end of the Quarter 4/2013
tax period (for cases of quarterly declarations), business
February 2014 Tax update| Page 4
establishments that have not fully deducted the input VAT which
is not eligible for refund shall be entitled to carrfy forward the
input VAT balance to the year 2014 for further deduction or
refund as regulated in Circular 219.
► For VAT invoice for fixed assets incurred before 01 January
2014, business establishment will deduct input VAT as guided in
previous Circulars.
If you have further queries regarding the above, please do not hesitate to
contact us.
Amended Decree on invoices
The Government released Decree No. 04/2014/NDD-CP dated 17
January 2014 supplementing, amending Decree 51/2010/ND-CP on
invoices, effective from 1 March 2014.
Notably, Decree 04/2014 provides that enterprises who are using self-
printed invoices, ordered-printed invoices and commiting violation activity
when using invoices and are imposed with administrative fine for the tax
fraud activity; or enterprises in the list of high risk as per regulations on
Tax Administration will not be allowed to use self-printed invoice,
ordered-printed invoice. Instead, these violating taxpayers must buy
invoices from local tax authority for a limited period.
Invoices with wrong formats
Pursuant to MoF’s Official Letter No.178/BTC-TCT dated 11 February
2014, invoices having wrong formats e.g. use of VAT invoice for on the
spot export activity, or those with abbreviated names and addresses but
correct tax code etc will still be allowed for VAT deductible and refund if found to be consistent with the accounting books, correctly reflective of
the economic nature and accompanying with non-cash payment voutcher
as required.
Foreign Contractor Tax (“FCT”)
VAT refund for foreign contract with hybrid method
Pursuant to GDT’s Official Letter 81/TCT-CS dated 08 January 2014
foreign contractor applying hybrid method shall not be eligible for VAT
refund if failing to properly maintain its accounting books as required
under accounting regulations.
At a glance
► Foreign contractors
applying hybrid method
failing to properly maintain
the accounting books shall
not be eligible for VAT
refund.
February 2014 Tax update| Page 5
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Contact
For more information on this Tax Update or our Tax &
Advisory Services of EY Vietnam, please contact:
Hanoi Office
Huong Vu Partner
Trang Pham Partner
Thanh Trung Nguyen Director
The Gia Tran Director
Japanese Business Service
Yukihiro Sato Manager
Korean Business Service
Kyung Hoon Han Manager
Ho Chi Minh Office
Christopher Butler Partner
Nhung Tran Partner
Nitin Jain Partner
Thinh Xuan Than Director
Thy Thi Anh Huynh Director
Japanese Business Service
Takahisa Onose Director