February 2023 Tax Updates: Adjustments to procedures for registration of dependents from 1 January 2023 and other recent tax updates.

This February 2023 publication of our Tax and Accounting Updates looks at adjustments to procedures for registration of dependents from 1 January 2023, a request from the Government to amend Decree 31/2022/ND-CP providing 2% interest rate support for businesses and our regular review of recent Official Letters released by the Tax Authorities.

Adjustments to procedures for registration of dependents from 1 January 2023

On 13 January 2023 the Ministry of Finance released Decision 40/QD-BTC announcing revised and supplemented administrative procedures in the field of Taxation and Customs under the management function of the Ministry of Finance. In which, the regulation of adjustments to procedures for registration of dependents from 1 January 2023 is notable, with the following points:

For individuals paying tax through an income paying organisation (employers), employees are required to arrange and send 2 sets of dependent registration dossiers to their employers. The employers keep 1 set and submit 1 set to the tax authority at the same time as submitting the PIT declaration of that tax period (or when submitting the PIT finalisation dossier).

For individuals who directly declare and pay tax, they must submit the dependent registration dossier to the directly managing tax authority at the same time as submitting the PIT declaration of that tax period or when submitting the PIT finalisation dossier. As for other dependents specified in Item d.4, Clause 1, Article 9 of Circular 111/2013/TT-BTC (e.g., brothers, sisters, grandparents, aunts, etc.), the time limit for registration is no later than 31 December of the tax year.

In addition, during the period of calculation of dependent deduction, if there is any changes (increase/decrease) in dependent, the taxpayer must re-register the dependent with the process same as first time registration).

No later than 3 months from the date of first dependent registration, the individual must prepare documents to prove dependent according to the guidance in Article 1 of Circular 79/2022/TT-BTC and send it to the income paying organization or tax authority where the dependent registration form was first submitted.

The Decision took effect from 1 January 2023.

A Request from the Government to amend Decree 31/2022/ND-CP providing 2% interest rate support for businesses

Previously, the Government of Vietnam issued Decree 31/2022/ND-CP on 20 May 2022 regarding interest rate subsidies from the state budget for loans to enterprises, cooperatives, and household businesses. According to the Decree, the interest rate subsidy for enterprises, cooperatives, and household businesses is 2% per year on the loan balance and loan interest subsidy terms in the prescribed periods. The term for subsidising loan interest rate starts from the date of disbursement of a loan to the date on which the borrower pays off the principal in conformity with the announced funding resource for providing the interest subsidy and must not extend past 31 December 2023.

However, the decree still has matters which remain unclear and which provides obstacles to implementation. Therefore, at the regular government meeting and through Resolution 10/NQ-CP issued on 3 February 2023, the Government requested the State Bank to urgently submit a Decree amending Decree 31 in February 2023 to remove obstacles and promote disbursement of the 2% interest rate support package through the system of commercial banks.

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.

New regulations on income exempt from CIT from 1 January 2024

On 9 January 2023, the National Assembly passed the Law on Medical Examination and Treatment 2023 at the second extraordinary session.

1. New regulations on income exempt from CIT from 1 January 2024

Specifically, Article 119 of the Law on Medical Examination and Treatment 2023 has amended and supplemented Clause 10, Article 4 of the Law on CIT 2008 (amended 2013) on incomes exempt from CIT in the healthcare, education- training and other fields including:

• The part of the undivided income of the medical examination and treatment establishment that is left to invest in the development of such medical examination and treatment establishment
• The undivided income of the socialised medical establishments but not the medical examination and treatment establishments and the undivided income of the socialised establishments in the field of education and training, other areas of socialisation are left for investment and development in accordance with the provisions of specialised laws on the education – training, health care and other socialised fields
• Income forming the undivided property of the cooperative established and operating under the provisions of the Law on Cooperatives

2. Incomes exempting from current CIT

Some incomes currently exempt from CIT under the Law on CIT 2008 (amended 2013, 2014) are as follows:

• Income from cultivation, breeding, rearing, processing of agricultural and aquatic products, and salt production of cooperatives or enterprises in areas with extremely difficult socio-economic conditions; income of cooperatives operating in the fields of agriculture, forestry, fishery and salt production in areas with difficult or extremely difficult socio-economic conditions; income from fishing activities
• Income from performing technical services directly serving agriculture
• Income from the performance of contracts for scientific research and technological development and products that are in the period of trial production, products made from new technologies applied for the first time in Vietnam
• Income from production and business activities of goods and services of enterprises with 30% of the average number of employees in the year or more being disabled people, people after detoxification, people infected with viruses acquired immunodeficiency syndrome (HIV/AIDS) and having an the average number of employees in a year of twenty or more, excluding businesses operating in the financial sector and real estate business
• Income distributed from capital contribution, joint venture, association with domestic enterprises, after having paid corporate income tax as prescribed
• The undivided income of an establishment performing socialisation in the education – training, health care and other socialised fields will be left to invest in the development of such establishments in accordance with the provisions of specialised laws on this education – training, health and other socialisation fields; the part of income forming the undivided property of the cooperative established and operated under the provisions of the Law on Cooperatives

The Law on Medical Examination and Treatment 2023 is effective from 1 January 2024, replacing the 2009 Law on Medical Examination and Treatment.

Notes when presenting goods and services on e-invoices

On 6 February 2023, Hanoi Department of Taxation issued Official Letter 3869/CTHN-TTHT providing some notes regarding presenting goods and services on e-invoices.

The principle of naming goods and services on e-invoices is specified at Point a, Clause 6, Article 10 of Decree 123/2020/ND-CP. Accordingly, the names of goods and services on invoices must be written in Vietnamese; If it is necessary to be further presented in foreign language, the foreign words are placed to the right in parentheses () or right below the Vietnamese line with a smaller font size.

In addition, if the goods and services sold have regulations on product codes, the invoice must include both the goods’ names and the goods’ codes.

Where the goods have multiple categories, goods name must show details for each category; or if it is a goods subject to registration of ownership, the invoice must show the typical numbers and symbols of the goods requested when registering for ownership.

Notes about PIT when supporting benefits, giving gifts, giving rewards to employees

On 1 February 2023, Hanoi Department of Taxation issued Official Letter 3469/CTHN-TTHT on supporting benefits and giving gifts and rewards to employees. Accordingly, the authority provides some notes regarding withholding of PIT for a number of expenses for allowances, gifts, and bonuses for employees as followings:

• Where the spending is the payment on behalf for training to improve qualifications and skills suitable to the professional work of the employees, the PIT is exempted (Point dd.6 Clause 2 Article 2 of Circular 111/ 2013/TT-BTC)
• Where the spending is the payment to individuals winning in contests and the prize value is over VND 10 million, PIT must be withheld according to the instructions in Item g, Clause 1, Article 25 of Circular 111/2013/TT-BTC
• Where the spending is a benefit other than salary or wages (in cash or not in cash), PIT must be withheld according to the instructions in Item b, Clause 1, Article 25 of Circular 111/2013/TT-BTC
• Where the company give a gift in kind that is not of salary or wage nature and does not fall under the provisions of Clause 10, Article 2 of Circular 111/2013/TT-BTC, it is not required to withhold PIT

Notes when a sales branch receives a sale transfer from the company

On 13 January 2023, Hanoi Department of Taxation issued Official Letter 1841/CTHN-TTHT providing guidance when a sales branch receives a sale transfer from its company.

Invoicing for dependent accounting branches is required to comply with the provisions of Article 13 of Decree 123/2020/ND-CP. Accordingly, when selling goods that are transferred from the company, the branch must issue an invoice to deliver to the buyer, and at the same time make a list of sold goods and send it to the company as a basis for the company to issue an invoice to the branch.

The list of sold goods can be made periodically every 5 days or every 10 days if the branch has a large quantity and sales of goods sold. However, separate lists must be made for each group of goods with different VAT rates.

The branch will declare and pay VAT on the quantity of goods sold to the buyer and shall declare and deduct input VAT according to the invoice delivered by the exporting company.

Answers from the General Department of Customs on tax policies and import and export procedures

On 11 January 2023, General Department of Customs issued Official Letter 151/TCHQ-PC to answer questions and proposals beyond its authority at the Customs – Enterprise dialogue conference of the Customs Departments of provinces and cities in 2022.

The official dispatch attached to the Appendix summarises the answers of the General Department of Customs related to: customs dossiers for on-spot import and export goods; the policy of 2% VAT reduction for imported goods; customs procedures, tax policy for processed goods, export production returned and changed the purpose of use; apply for a permit to destroy scrap and processed products; roadmap to increase clinker export tax; physical inspection of goods at the border gate; import and export tax payment deadlines; etc.

Accordingly, for goods sold by EPEs to domestic enterprises, when carrying out export procedures on the spot, they can submit the ex-warehousing slip instead of invoices; However, when carrying out import procedures on the spot, an invoice must be submitted (Official Letter 8042/BTC-TCHQ dated 12/8/2022).

Where the processed or exported goods are returned for repair but cannot be repaired and are used for another processing contract or export production, they will be considered as having changed the purpose of use and must open a new customs declaration, declare and pay tax according to Clause 5, Article 25 of Decree 08/2015/ND-CP and are not eligible for import tax refund specified in Article 36 of Decree 134/2016/ND-CP if they continue to use for processing contracts, other export production.

Regarding the determination of imported goods that are and are not eligible for a 2% VAT reduction according to Decree 15/2022/ND-CP, the General Department of Customs has provided guidance in Official Letters 642/TCHQ-TXNK dated February 25 2022, 2837/TCHQ-TXNK dated 12/7/2022, and 3699/TCHQ-TXNK dated 7 September 2022.

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.