This March 2020 publication of Tax and Accounting Updates looks at a Decree amending Business License Tax payments, along with our regular review of recent Official Letters released by Tax Authorities and similar agencies.
On 24 February 2020, the Vietnamese Government issued Decree 22/2020/ND-CP amending elements of Business License Tax (“BLT”), which are currently regulated by Decree 139/2016/ND-CP dated 4 October 2016. Significant changes arising from the Decree include:
1. Parties exempted from business license tax
- The following will be exempt from Business License Tax during their first calendar year (either the first year of incorporation, or the first year of doing business if not a company):
- Newly established organisations with new enterprise or tax code;
- Households, individuals and groups of individuals that are undertaking business for the first time; and
- Branches, Representative Offices and business locations established by the above parties during their period of Business License Tax exemption.
- Small and medium-sized enterprises (“SME”) converted from business households (according to the provisions of Article 16 of the Law on Support for Small and Medium-sized Enterprises) are exempt from Business License Taxes for 3 years from the date of their initial Enterprise Registration Certificate. In addition:
- Branches, Representative Offices and business locations established by the above SMEs during their Business Licence Tax exemption period are also entitled to the same exemptions.
- Where these affiliates are established before the effective date of the Decree, the Business Licence Tax exemption period is from the effective date until the end of the exemption period of the SMEs.
- Public general education and preschool education establishments.
2. Adjusting deadlines for business license tax returns
Previously, a Business License Tax declaration must be lodged by end of the month that an organisation commences operations or within 30 days from the Enterprise Registration Certification date where an organisation has not yet commenced operations.
Under this Decree, newly established organisations are to declare Business License Tax before 30 January of the year following the year of organisations’ establishment or operation.
The deadline for annual Business License Tax payments remains as 30 January.
3. Additional regulations for the first business license tax payment by SMEs converted from business households
Where the Business License Tax exemption expires within the first 6 months of a year, the Business License Tax due is the full amount, and is payable by 30 July of that year. Where the exemption expires in the last 6 months of a year, the Business License Tax due will be 50% of the full amount, is payable by 30 January of the following year. (This includes Branches, Representative Offices, and business locations)
4. Conditions for entitlement to business license tax exemptions during a business suspension period
Organisations that temporarily cease business activities in a calendar year will be entitled to a Business License Tax exemption during their suspension period, provided that they have lodged a written request for the temporary suspension of business activities with the tax office. Requests must be lodged before payment deadlines and apply where organisations have not yet paid their Business License Tax for the year of suspension.
The Decision took effect from 25 February 2020.
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.
Notice from the Ho Chi Minh City Tax Department supporting 2019 PIT finalisations
On 2 March 2020, the Ho Chi Minh City Department of Taxation issued a notification regarding support for 2019 PIT finalisations.
The notice confirms the deadline for 2019 PIT finalisations as 30 March 2020, except those with tax refund requests which can be lodged after this deadline. The Department will provide support and answer questions on PIT finalisation through online channels such as its website, Facebook page, and instructional video clips.
Due to the outbreak of Covid-19, the Department and all 24 Tax Offices in Ho Chi Minh City will not arrange facilities for taxpayers to lodge their finalisation returns in person as in previous years. Taxpayers are therefore required to prepare tax returns and lodge online at http://thuedientu.gdt.gov.vn.
When providing original tax finalisation documents, the Department encourages taxpayers to send by post. If taxpayers choose to lodge documents directly during office hours, they must register online for an appointment with a tax officer first.
Documents for VAT refund claims on exported goods when the foreign buyer becomes insolvent
On 21 January 2020, the General Department of Taxation issued Official Letter 324/TCT-CS guiding documents for VAT refund claims on exported goods when the foreign buyer becomes insolvent.
According to Clause 3, Article 16 of Circular 219/2013/TT-BTC, where a company exports goods to a foreign buyer, which thereafter goes into insolvency, the company needs to submit a written explanation stating the reasons. The company then may use one of the following documents as an alternative for bank payment documents in their VAT refund claim.
- Registered customs declaration of the importing country indicating goods imported from Vietnam;
- Petition to a foreign court or a competent authority where the foreign buyer is located, enclosed with a document of confirmation on acceptance of the petition;
- Successful court decision by a foreign court in favour of the Company; or
- Documents from a foreign competent authority confirming that the foreign buyer is insolvent.
Applying double tax agreement for foreign contractor tax
On 23 December 2019, the Hanoi Department of Taxation (“HDT”) issued Official Letter 95768/CT-TTHT on applying a Double Tax Agreement for Foreign Contractor Tax (“FCT”).
Where a foreign company generates income from providing services to customers in Vietnam, it is subject to FCT (which includes a Value Added Tax “VAT” and a Corporate Income Tax “CIT” portion) following Circular 103/2014/TT-BTC.
Where the foreign company does not have a permanent establishment in Vietnam, and is eligible for applying the Double Tax Agreement between Vietnam and its host country, it is required to submit a notification as guided at Point b2, Clause 3, Article 20 of Circular 156/2013/TT-BTC. The tax exemption is only applicable to the CIT portion (under Article 2 of Circular 205/2013/TT-BTC).
Deductions for apartment management expenses for foreign experts
On 27 February 2020, HDT issued Official Letter 8208/CT-TTHT on CIT deductions for apartment rental expenses for expatriate experts.
Under Article 4 of Circular 96/2015/TT-BTC, if the Labour Contract between the company and expatriate states that the company is responsible for payment of apartment rent, including management service fees, then these expenses will be accepted for CIT deductions, subject to the documentation requirements under Article 4 of Circular 96/2015/TT-BTC being met.
However, the corresponding VAT of the expense is not deductible according to Clause 1, Article 14 of Circular 219/2013/TT-BTC.