This January 2021 publication of our Tax and Accounting Updates looks at 2020 year-end lodgements and finalisations; Decree 145 covering employment report requirements, labour relations, contracts and implementation of vietnam’s new labour code for 2021; 2021 minimum monthly wage; Decree covering foreign individuals working in vietnam and work permit provision; Decree 01/2021/ND-CP on enterprise registration; new circular on tax registration; and our regular review of recent Official Letters released by the Tax Authorities.
Reminder: 2020 year-end lodgements and finalisations
Corporate taxpayers are reminded that they are required to finalise and lodge 2020 Financial Statements, 2020 Tax Finalisation returns, and associated schedules/appendixes, with the authorities no later than the last day of the third month of the following year after year end (31 March 2021, for those taxpayers with a standard 31 December 2020 financial year end). For foreign invested entities, the financial statements are required to be audited before lodgement together with the income tax returns, so it is critical that audit and tax finalisation plans are well underway for Vietnamese enterprises.
Individual taxpayers should also ensure that their tax finalisation matters for 2020 are in hand, where (generally) (i) They have a tax liability to the state, or (ii) They wish to claim a refund or credit.
Taxpayers can authorise their employers to finalise on their behalf where the taxpayer has had only one single source of employment income during the tax year.
Otherwise, they need to undertake a self-finalisation or authorize another party (commonly a service provider or another individual) to conduct on their behalf. In this case, the finalisation returns are required to be lodged by the end date of the fourth month of the following year from year end (ie, by 30 April 2021, according to the Law on Tax Administration 38/2019/QH14).
Decree 145 covering employment report requirements, labour relations, contracts and implementation of Vietnam’s new Labour Code for 2021
On 14 December 2020, The Vietnamese Government has issued Decree 145/2020/ND-CP providing details and guidelines for the implementation of the Labour Code 2019, including changes for deadlines and respective authorities for submission of half-year and annual reports on changes to employment.
Previously, deadlines for the mid-year reports and annual reports on changes to employment were 25 May and 25 November respectively; with reports required to submitted to the Division of Labour – Invalids and Social Affairs. According to Article 4, Clause 2 of the Decree, requirements for deadlines and the authority for submission has been changed. In particular, deadlines for reports are prescribed as followings:
- Mid-Year Report on Changes to Employment: required to be submitted prior to 5 June
- Annual Report on Changes to Employment: required to be submitted prior to 5 December
The provision also clarifies that employers are allowed to choose online or direct submissions.
The reports are to be completed according to form 01/PLI enclosed in the Decree and submitted to Department of Labour, Invalids and Social Affairs (“DoLISA”) through one of following forms:
- Through the National Public Service Portal, or
- Submitting paper reports to DoLISA.
In addition, the Decree also covers guidance for:
- Dealing with Invalid Labour Contracts
- Termination of a Labour Contract
- Severance Allowance and Retrenchment (Termination) Allowance
- Dialogue in the Workplace
- Overtime Rights
- Overtime calculation
- Labour Discipline
- Policies for Female Employees
- Sexual Harassment Prevention
- Labour Dispute Resolution
We have released a Client Alert focusing on the above categories of Decree 145. Please find the article in here for your information.
2021 minimum monthly wage: No increase from 1 January, with proposed increase from 1 July 2021
- Application of minimum monthly wages from 1 January 2021
The minimum monthly wage is to be regularly adjusted by the Government from 1 January every year. However, due to the impact of the COVID-19 epidemic in 2021, the Government has not issued a specific Decree therefore minimum monthly wages for 2021 are to follow Decree 90/2019/ND-CP which were applicable from 2020. The result is that there is no increase at this stage in the 2021 minimum monthly salary from previous minimums in 2020.
- Proposal to change minimum monthly wage adjustment date
Instead of the current practice of adjusting the minimum monthly wage on 1 January every year, the Vietnam General Confederation of Labour has recently proposed to change the time of minimum monthly wage adjustment to 1 July each year (according to Notice 1/TB-VPCP of the Office of the Government released on 1 January 2021).
If this petition is approved, the 2021 minimum monthly wage will be applied through two phases:
- From 1 January – 30 June 2021: remaining the same minimum monthly wage as in 2020, and
- From 1 July 2021: to be adjusted in accordance with the new provision.
Decree covering foreign individuals working in Vietnam and work permit provision
Decree 152/2020/ND-CP was recently released by the Vietnamese Government, coming into effect from 15 February 2021, and covers foreign individuals working in Vietnam, along with Vietnamese employed by certain foreign employers. This Decree is introduced as part of the implementation of the new Labour Code that came into effect from 1 January 2021 (known as the Labour Code 2019).
Decree 152 is an important document, replacing Decree 11/2016/ND-CP (along with other Decrees), and specifies how employers can employ foreign individuals in Vietnam. It should be noted that the new Labour Code introduces a broader definition of employment than previously, including deeming most “service contracts” as labour contracts, and therefore this may have a significant impact of certain employees and employers. Please find the article in here for your information.
Decree 01/2021/ND-CP on enterprise registrations
On 4 January 2021, the Government issued Decree 01/2021/ND-CP on enterprise registrations, detailing regulations on application, order and procedures for enterprise registration; regulations on business registration agencies and state management of business registration and business household registrations.
Some of significant changes prescribed in the Decree include:
The Enterprise Code is also the Social Insurance Code of an enterprise
Article 8, Clause 1 of the Decree states that:
“Each enterprise is issued with a unique Enterprise Code. This code is also the Tax Code and the Social Insurance Code of the enterprise”.
This will remove requirements for enterprises in registering for their Social Insurance Code (different codes for an enterprise to manage Vietnamese and foreign labour) which needed to be undertaken previously.
In addition, Article 8, Clause 5 also clarifies that the dependent unit code of an enterprise which is issued to the enterprise’s branch or representative office is also their tax code.
Requirements for online business registration documents
Enterprise registration documents submitted via electronic information networks are to be accepted when all the following requirements are met:
- Where all documents and contents have been fully declared according to regulations such as paper records and presented in electronic documents;
- The name of the electronic document must be corresponding to the name of the document in the paper file; the signature section in the documents can be a digital signature or signed directly and scanned;
- Information on business registrations listed on the National Information Portal on business registrations must be complete and accurate according to the information in the paper application (including information about the application’s mobile phone number and email (new regulation));
- Online registration documents must be authenticated with the digital signature or the business registration account of the person authorized to sign the application for business registration or an authorised person.
The Circular was effective from 4 January 2021.
New circular on tax registration
On 3 December 2020, the Ministry of Finance released Circular 105/2020/TT-BTC detailing the subjects of tax registration; structure of the tax code and tax registration documents, forms and procedures in accordance with the Law on Tax Administration 38/2019/QH14 and Decree 126/2020/ND-CP. The Circular takes effect from 17 January 2021.
We have released a Client Alert focusing on highlights and additions/adjustments on guidance for taxpayers as foreign organisations and individuals operating e-commerce and digital based business activities that generate income from Vietnam, along with Foreign Contractors. Please find the article in here for your information.
Official letters released
Official Letters are releases showing the Tax and other Authorities’ interpretation and application of Vietnam’s Taxation Laws, providing guidance to taxpayers in Vietnam.
Deductibility of value-added tax for expenses where payment was offset with a third party
On 28 December 2020, the Hanoi Department of Taxation (“HDT”) released Official Letter 110280/CTHN-TTHT providing guidance on VAT deductibility for expenses where payment was offset with a third party.
Pursuant to Clause 10, Article 1 of Circular 26/2015/TT-BTC dated 27 February 2015, one of the conditions for input VAT to be deductible is to have documents for non-cash payment for purchases of goods and services above 20 million VND. Where the payment method is by offsetting between the value of goods or services purchased and the value of goods or services sold and it is specifically stated in the contract, there must be reconciliation minute confirmed by both parties for the offset amount. If the offset is with a third party, there must be a tripartite offset minute as proof for VAT deduction.
Accordingly, when a parent company offset its payment for services received with a third party, in order for the VAT to be deductible, the company must satisfy the requirements of non-cash payment. Therefore, the company must have the payment offsetting agreement between the three parties.
Deductibility of year-end celebration activity expenses
On 23 December 2020, HDT released Official Letter 109325/CTHN-TTHT providing guidance on deductibility of year-end celebration activity expenses for Corporate Income Tax (“CIT”).
According to Article 4 of Circular 96/2015/TT-BTC dated 22 June 2015, non-deductible expenses include direct expenditures on the employees’ welfare such as employees’ family occasions, holiday allowances or treatment support, professional training, expenditure on supporting employees’ families affected by natural disasters and similar, rewards for employees’ children for their educational achievements, allowances for traveling during holidays, payment for unemployment, health, and other voluntary insurance (except for life insurance), and other welfare expenditures. The total amount incurred during the tax year must not exceed the average 1 month’s salary in the tax year. The average of 1 month’s salary equals the total wage paid in the year divided for 12 months.
Therefore, where a company incurs year-end celebration activities expenses for employees, if the amount is direct welfare directly paid to employees and does not exceed the average 1 month’s salary, as well as meeting the requirements under Article 4 of Circular 96/2015/TT-BTC, such amount is deductible for CIT.