This October 2019 publication of our Tax and Accounting Updates looks at a new Circular providing further guidance for the implementation of e-invoices, and includes our regular review of recent Official Letters released by the Tax and other Authorities.
New circular 68/2019/TT-BTC providing further guidance for the implementation of electronic invoices when providing goods and services
On 30 September 2019, the Ministry of Finance issued Circular 68/2019/TT-BTC guiding the implementation of Decree 119/2018/ND-CP on e-invoices when providing goods and services.
The Circular provides guidelines for registration, issuance and management of e-invoices, including requirements for the content of invoices, timings for issuing, the format of invoices and instructions for correcting erroneous invoices.
Significant points of this Circular include:
a. Required content on e-invoices
i) Details of goods and services (Point d.1, Clause 1, Article 3)
- It is mandatory for details of goods and services to be presented in Vietnamese on the invoice. Where an additional foreign language description is needed, the foreign language description must be in parentheses () or below the Vietnamese description and have a smaller font size than the Vietnamese description.
- If there are multiple categories of goods sold, details of each category must be included (Point d, Clause 1, Article 3).
- If goods are subject to registration for ownership or usage rights, the invoice must indicate the identification numbers of the goods (e.g. chassis number and engine number of vehicles; or address, size, and number of floors of the house).
- For services such as utilities, communication, television and insurance, which are provided for a defined period, the period of service provision must be indicated on the invoice.
ii) Buyer information
- Where goods or services are provided to foreign individual customers in Vietnam, the buyer’s address can be replaced with their passport number or immigration documents and their nationality (Point c.2, Clause 1, Article 3).
- The electronic signature of a buyer is not required, including buyers who are organisations. However, the seller and the buyer can agree to have the signature of the buyer on the e-invoices (Clause 3, Article 3).
b. E-invoices for enterprises with ‘high tax risk’
Enterprises subject to “high tax risks” as defined in the Circular must use e-invoices with Tax Authority verification codes, irrespective of the value of each sale of goods or services (Point a Clause 3, Article 6).
Enterprises with “high tax risks” are those with an equity of less than VND 15 billion and have one of the following elements (Point b, Clause 3, Article 6):
- do not own or have usage right for physical facilities, such as a factory, warehouse or store;
- have suspicious transactions through banks;
- failure to file tax returns on a timely basis; or
- changing addresses with Tax Authorities twice or more within 1 year.
Enterprises that do not meet the definition of “high tax risks” are to follow Article 12 of Decree 119/2018/ND-CP on using e-invoices, which permits the e-invoices to be issued with or without Tax Authority verification codes, depending on the nature of transactions.
c. Handling erroneous e-invoices
The Circular provides guidance for handling invoices, and the required documents, where errors are detected on the e-invoices.
In general, where there is an error with the buyer’s name and address, but the tax code and other content is correct, the seller will inform the buyer of the error and notify the Tax Office using form No. 04 (attached as an appendix to the circular) and the seller is not required to issue a new invoice for replacement.
If the error is with the buyer’s tax code, tax rate, amount, tax amount or goods specifications, the buyer and the seller are to prepare a written minute for the error and the seller is required to issue a new replacement invoice. The replaced invoice must include the content “Replacement for invoice with serial no…, invoice number … dated …”. The seller is also required to notify the Tax Office using form No. 04.
- For e-invoices issued with Tax Authority verification codes: specific guidance is presented in Article 11 and Article 12
- For e-invoices issued without Tax Authority verification codes: specific guidance is presented in Article 17
The Circular takes effect from 14 November 2019.
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.
Determination of eligible repatriated profit
On 19 August 2019, the Ho Chi Minh City Department of Taxation (“HCMDT”) issued Official Letter 8762/CT-TTHT on eligible profits for repatriation.
Foreign investors seeking to transfer profits earned in Vietnam abroad via dividends are required to comply with the instructions in Article 3 of Circular 186/2010/TT-BTC.
Accordingly, foreign investors are allowed to remit profits annually. The Official Letter details profits that can be repatriated to be determined as follows:
Profits investors are shared or earned in the financial year from direct investment activities in Vietnam based on the audited financial statements and the tax finalisation return of the enterprises where the investments are made;
Profits of previous years which have not been repatriated
Amounts the investors have used or committed to use for reinvestment in Vietnam, and the amount has been used for business operations or personal use of the foreign investors in Vietnam.
Tax incentives for computer programming activities
On 19 August 2019, the Hanoi Department of Taxation issued Official Letter 65267/CT-TTHT providing guidance on tax incentives for computer programming activities.
Corporate Income Tax
According to the Official Letter, where a company operates in the computer programming sector (CPC842), if these activities meet the criteria of software production prescribed in Circular 16/2014/TT-BTTTT, and the company is established and operated in accordance with the regulations in Clause 3, Article 10 of Circular 96/2015/TT-BTC (e.g. the project obtains the first Investment Certificate after 1 January 2014 and generates its revenue after obtaining the Investment Certificate).
The income generated from the computer programming activities will be eligible for:
- An incentive CIT rate of 10% for 15 years from the first year in which the company generates revenue. (Article 15 of Decree 218/2013/ND-CP), and
- CIT exemption for 4 years from the first year the company has taxable income, and 50% reduction for the following 9 consecutive years (Article 16 of Decree 218/2013/ND-CP).
If the company has not generated any taxable income within first 3 years from the year the company first earns income, the tax incentive/exemption period is determined from the fourth year.
The CIT incentives are only applicable if the company correctly implements the regime of accounting, invoices and pays CIT as declared.
During the incentive period, if the company also operates additional/ different activities, it is required to separate income from incentive activities and non-incentive activities for separate CIT declaration.
Value Added Tax
Revenue generated from software programming activities are subject to a VAT rate of 0%.
Special Consumption Tax (SCT) determination
On 22 August 2019, HCMDT issued Official Letter 9197/CT-TTHT regarding determination for Special Consumption Tax.
Where a Company imports goods subject to SCT for sale in the Vietnam, depending on the parties that the company sells goods to or through, the taxable price for SCT calculation will be determined as follows:
- Where goods are sold to independent unrelated parties:According to Article 2 of Circular 130/2016/TT-BTC, if goods are not sold through affiliated dependent establishments or not sold to related parties (i.e. parent company/subsidiaries, or the entities in a Group), the taxable price for SCT calculation will be the selling price of the company, and is determined in accordance with regulations at Article 2, Circular 130/2016/TT-BTC.Where the selling price is not consistent with the regular market price, the tax authority is entitled to set the SCT calculation price according to the principles prescribed in law.In addition, if the company implements a promotion program in the form of discounted sale, the SCT calculation price is the actual selling price in accordance with the price registered with the Department of Industry and Trade.
In particular, for the discount programs for inventories which are not registered in a promotional program, the taxable price is the selling price but must be consistent with the regular transaction price on the market.
- Where goods are sold through affiliated dependent establishments:If the company sells goods through its affiliated dependent establishments, the taxable price for SCT calculation will be the price sold by the affiliates.
- Where goods are sold to related parties:If the company sell goods to related parties, the taxable price will not be lower than by 7% of the average selling price of the company when selling goods to unrelated independent parties.
Guidance for corrective actions when detecting differences between the imported material value and book value
On 19 June 2019, the General Department of Customs issued Official Letter 4042/TCHQ-TXNK providing guidance for corrective actions when differences between the imported material values and book values.
According to this Official Letter, where an enterprise detects a difference in the values of imported raw materials and values in the books and records, it is necessary to identify specific reasons for correcting customs procedures and recalculating tax payable.
- If the differences in imported raw materials and supplies is due to incorrect customs declaration documents, the enterprise must lodge additional declarations after customs clearance according to Article 20 of Circular 38/2015/TT-BTC and Clause 9, Article 1 of Circular 39/2018/TT-BTC.
- If the difference is due to an error in the finalisation statement, the enterprise must lodge the amended statement according to Article 60 of Circular 38/2015/TT-BTC and Clause 39, Article 1 of Circular 39/2018/TT-BTC.
- Where it is impossible to separate the sources of imported raw materials and supplies, then a proportion of exported output products is used corresponding to the type following Article 60 of Circular 38/2015/TT-BTC, supplemented by Clause 39, Article 1 of Circular 39/2018/TT-BTC. The enterprise prepares the finalization statement on usage of imported materials for exported goods under the form of import – export – balance (raw material warehouse and finished goods warehouse) for each code of materials, supplies and products being monitored in production management and have declared on the customs declaration.
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