This July 2023 publication of our Tax and Accounting Updates looks at detailed regulations for the VAT reduction to 8% from 1 July 2023, increases to Social Insurance benefits from 1 July 2023, settlement of Social Insurance benefits for employees of organisations/units that do not fully pay Social Insurance contributions, changes to registration fees and Special Consumption Tax payment deadlines for the automobile production and assembly sector, and our regular review of recent Official Letters released by the Tax Authorities.
Detailed regulations for the VAT reduction to 8% from 1 July 2023
The Vietnam Government issued Decree 44/2023/ND-CP (Decree 44) on 30 June 2023, providing detailed regulations on the VAT reduction to 8%.
According to the Decree, the VAT reduction from 10% to 8% applies from 1 July 2023 to 31 December 2023 as follows:
- Businesses using the VAT credit/deduction method are entitled to a VAT reduction for goods and services previously applying a 10% VAT, except for the following goods and services:
- Telecommunications, finance, banking, securities, insurance, trading of real estate, metals and prefabricated metal products, mining products (exclusive of coal mining), coke coal, refined petroleum, and chemical products.
- Goods and services subject to Special Consumption Tax.
- Information technology (with details in appendix 3 issued together with the Decree 44)
- The VAT reduction for each type of goods and services is consistently applied at the stages of import, production, processing and commerce.
- Businesses (including household businesses and individual businesses) that calculate VAT as a percentage of revenue (direct method) are entitled to VAT reduction by 20% when issuing sales invoices for goods and services eligible for VAT reduction.
- Where businesses have issued invoices using the unreduced VAT rate, VAT rate corrections are permitted in accordance with the law on invoices and vouchers. Based on the invoice after processing, the seller and buyer declare the adjustment of output tax and input tax respectively (if any).
Increases to Social Insurance benefits from 1 July 2023
On 29 June 2023, the Government issued Decree 42/2023/ND-CP on adjustments to pensions, Social Insurance (SI) allowances and monthly allowances.
- An increase of 12.5% – 20.8% for pensions, SI allowances and monthly allowances for periods from 1 July 2023
- For individuals receiving pensions, SI benefits or monthly allowances, after adjusting according to item (1), where their benefits are still lower than 3 million VND per month, they are entitled to a further increase of 300,000 VND per month if benefits are lower than 2.7 million VND per month and an increase to reach 3 million VND per month if their benefits are from 2.7 to 3 million VND per month.
Decree 42/2023/ND-CP takes effect on 14 August 2023.
Settlement of Social Insurance benefits for employees of organisations/units that do not fully pay Social Insurance contributions
On 21 June 2023, Vietnam Social Insurance issued Official Letter 1880/BHXH-CSXH on the implementation of SI benefits (pensions, one-time Social Insurance claims, etc.) for employees of organisations/units that do not fully pay SI (including bankrupt units).
Notable points of the Official Letter include:
For one-time SI claims:
One-time SI benefits will be settled upon the receipt of SI premiums. Where unpaid SI amounts are compensated afterwards by employers or other financial sources, and employees request for a lump-sum SI benefits for the additional period, the additional benefits will be calculated upon the new benefit rate for the total contribution period after offsetting the previous benefits the employees received.
Employees that reach the pension age and have paid SI premiums for a period from 10 years to less than 20 years (excluding the time when SI premiums were not paid), they can choose to voluntarily pay SI premiums one time for the missing years to qualify for the monthly pension.
Tax and support changes for the automobile production and assembly sector
50% reduction on registration fees for domestically produced cars from 1 July 2023
On 28 June 2023, the Government issued Decree 41/2023/ND-CP covering registration fees for cars, trailers and similar vehicles that are produced and assembled in Vietnam. Accordingly, the first-time registration fees for these vehicles are reduced by 50% from 1 July 2023 to the end of 2023. From 1 January 2024, normal fees apply.
Extensions for payments of Special Consumption Tax for domestically produced cars in 2023
In addition to the regulations reducing registration fees, on 21 June 2023, the Government issued Decree 36/2023/ND-CP on extending payment deadlines for Special Consumption Tax (SCT) for domestically manufactured or assembled automobiles.
Accordingly, the revised deadline for paying SCT for the tax periods of June, July, August, and September of 2023 is no later than 20 November 2023.
Taxpayers are required to send a written request for SCT payment deadline extension to the tax authority (one application for all the extended periods) together with (or separately) SCT declaration documents following the usual deadline, by 30 November 2023.
The following guidance covers specific cases:
- For taxpayers who supplement their tax declaration dossiers for the extended tax period leading to an increase in SCT payable and submit to the tax authorities before the extended tax payment deadline, the extended tax amounts will include the additional tax payable.
- Branches and affiliated units of companies declaring SCT separately are also eligible for the extension of SCT payments. If these branches or affiliated units do not have any automobile manufacturing or assembly activities, they are not eligible for the extensions.
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.
The General Department of Taxation released a list of 524 enterprises with invoice risks
On 16 May 2023, the General Department of Taxation issued Official Letter 1798/TCT-TTKT regarding illegal invoices and published a list of 524 enterprises with invoice risks. Following this, on 12 July 2023, the General Department of Taxation reminded and clarified some points on this issue.
Accordingly, companies having input invoices from the 524 businesses selling illegal invoices are to actively review and exclude all illegal invoices without specific accompanying goods, to adjust their tax declarations and obligations.
Where a company is detected using invoices from firms belonging to one of these 524 enterprises, the company will be required to explain and justify the use of invoices, with implications for doing so.
The General Department of Taxation attached to this Official Letter appendix, includes:
- Appendix 1: List of 524 enterprises.
- Appendix 2. List of use invoices of 524 enterprises that have declared VAT and CIT.
- Appendix 3: Summary of results of tax review and handling for the use of invoices by 524 enterprises.
See the detailed list of 524 enterprises with invoice risks here.
The General Department of Taxation has also noticed that this case of the 524 businesses selling invoices differs from those selling goods and then giving up their registered business addresses with the tax authorities.
VAT declarations for headquarters and branches
On 7 June 2023, Hanoi Department of Taxation issued Official Letter 46972/CTHN-TTHT on VAT declarations for head offices and branches.
Where a company has dependent accounting branches which are located in a different province or city of the company’s headquarters, and conducts accounting at the head office, the company is required to perform tax declarations, calculations and submission of dossiers to the tax authority managing the headquarters, and concurently allocate tax payables to each province where it does business according to the provisions of Clause 1, Article 12 of Circular 80/2021/TT-BTC.
Tax declarations, tax calculations, distribution and payment of VAT will comply with the provisions of Article 13 of Circular 80/2021/TT-BTC.
For more information on tax updates and other compliance requirements for businesses operating in Vietnam, follow our monthly releases on the website and social media channels at vietnam.acclime.com.