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January 2024 Tax Updates: Resolution 107 on Global Minimum Tax from 2024, New Real Estate Business Law and other recent tax updates.

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January 2024 tax updates: resolution 107 on global minimum tax from 2024, new real estate business law and other recent tax updates

This January 2024 publication of our Tax and Accounting Updates focuses on Resolution 107 on Global Minimum Tax from 2024, Official Decree on 2% VAT reduction for the first half of 2024, New Real Estate Business Law and our regular review of recent Official Letters released by the tax authorities.

Resolution 107 on Global Minimum Tax from 2024

On 29 November 2023, the Vietnam National Assembly issued Resolution107/2023/QH15 regarding the application of top-up Corporate Income Tax (CIT) in accordance with the Global Anti-Base Erosion rules (also known as Global Minimum Tax or GMT). The resolution took effect from 1 January 2024 and applies from the tax year 2024.

Subjective taxpayers

Any constituent entities of a multinational corporation* that generate revenue from 750 million euros (EUR) and above for at least 2 of the 4 years preceding the fiscal year in the consolidated financial statements of the ultimate parent company, except for the following cases:

  • Government organisations
  • International organisations
  • Non-profit organisation
  • Pension fund
  • The investment fund is the ultimate parent company
  • The real estate investment organisation is the ultimate parent company
  • Organisations with at least 85% of asset value owned directly or indirectly through organisations specified in items from i. to vi.

* A constituent entity of a multinational corporation is any entity in the group and any permanent establishment of an entity within the group, including:

  • The ultimate parent company
  • The intermediate parent company (if any)
  • The partially owned parent company (if any)
  • Any entities, business establishments of the group

Application of GMT

The policy is implemented by the OECD’s Global Anti-Base Erosion (GloBE) or Pillar 2 rules, which consist of two main rules:

  • The Qualified Domestic Minimum Top-up Tax (QDMTT) rule applies to foreign inbound investments, meaning that Vietnamese subsidiaries of multinational corporations, whose foreign ultimate parent company has revenue of at least EUR 750 million, will have to pay a top-up tax if their group effective tax rate in Vietnam is lower than 15%.
  • The Income Inclusion Rule (IIR) rule applies to Vietnam’s outbound investments, meaning that Vietnamese ultimate parent/ intermediate parent/ partially owned parent companies, that own (directly or indirectly) a low-taxed subsidiary abroad, will have to pay a minimum amount of tax equal to its allocated share of the top-up tax of such low-taxed subsidiary.

Filling documents for QDMTT and IIR, one set for each rule, include:

  • Information declaration on the GMT
  • Revised CIT declaration together with the explanation on differences due to the adoption of different financial accounting standards

Filling deadline

The deadline for tax declaration and payment under the GMT is as follows:

  • For QDMTT, it is 12 months after the end of the financial year.
  • For IIR, it is 18 months after the end of the financial year for the first year; and 15 months after the end of the financial year for the following years.

Multinational corporations who are subject to the GMT (and at possible threshold to be subject) are recommended to review their financial situation, assess the potential impact, and estimate the top-up tax from GMT application to prepare for relevant adjustments and update their financial strategy.

Official Decree on 2% VAT reduction for the first half of 2024

On 28 December 2023, the Government and the General Department of Taxation issued Decree 94/2023/ND-CP on 2% VAT reduction for goods and services that are currently subject to a 10% VAT rate (except for certain categories of goods and services) as well as proactively propagating and disseminating to taxpayers in the area.

The VAT reduction period is from 1 January 2024 to 30 June 2024 (i.e., the first 6 months of 2024).

New Real Estate Business Law

The Law on Real Estate Business 2023, passed by the National Assembly on 28 November 2023, has certain regulations for real estate investors. The following are some notable points:

  • It now allows developers to collect deposits but no more than 5% of sale price of properties provided that such properties must have met all the conditions to put it into business under Law on Real Estate Business 2023. Accordingly, the deposit agreement must clearly state the selling price or lease-purchase price.
  • Payment for purchasing future-formed (off-the-plan) properties must comply with the subsequent installments consistent with construction progress and the following requirements:
    • The first payment must be no more than 30% of the contract value, including 5% of the deposit.
    • For the next installments until handover, if the developer is a foreign-owned company having foreign investment capital, the total advance must not exceed 50% of the contract value. 70% will be applied to the local developer.
    • If the developer has not been granted a certificate of land use rights and ownership of assets attached to land for such properties, it cannot collect more than 95% of the contract value.
  • Payment for leasing-purchasing future-formed (off-the-plan) properties must comply with the subsequent installments consistent with construction progress and the following requirements:
    • The first payment must be no more than 30% of the contract value, including 5% of the deposit.
    • For the next installments until handover, the total of all payments must not exceed 50% of the contract value.
    • The remaining lease-purchase payment could be made multiple times, with the remaining amount calculated as rent.
    • If the developer has not been granted a certificate of land use rights and ownership of assets attached to land for such properties, it cannot collect more than 95% of the contract value.
  • Payment in real estate transactions must be agreed upon by the parties in the contract and comply with the law.

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.

Report on occupational accidents in 2023 must be submitted before 11 January 2024

On 18 December 2023, the Department of Labour, War Invalids and Social Affairs of Ho Chi Minh City (DOLISA) released Official Letter 28788/SLDTBXH-VLATLD on reporting on the situation of occupational accidents, occupational safety and hygiene in 2023.

Accordingly, companies in Ho Chi Minh City must report the situation of occupational accidents and occupational safety and hygiene in 2023 as follows:

  • The content of the labour accident report is prescribed in Clause 1, Article 36 of the Law on Occupational Safety and Hygiene; Clause 1, Article 24 of Decree 39/2016/ND-CP and Appendix XII issued with this Decree.
  • The content of the report on occupational safety and hygiene is as prescribed in Point a, Clause 1, Article 81 of the Law on Occupational Safety and Hygiene; Clause 2, Article 10 of Circular 07/2016/TT-BLDTBXH and Appendix II issued with this Circular.

Form of report submission: Enterprises log in to the Occupational Safety and Health Data Information Management Software (https://atld-sldtbxh.tphcm.gov.vn) to submit reports following the instructions attached. Report receiving time is from 25 December 2023 to 10 January 2024.

Update personal identification information for the tax authority to standardise the personal tax codes

On 20 December 2023, the Tax Department of Ho Chi Minh City issued Notice 27273/TB-CTTPHCM on standardising personal tax code data.

Accordingly, the tax authority has been reviewing and standardising personal tax code data, aiming to use personal identification numbers as personal tax codes according to Law on Tax Management 2019. Therefore, individual taxpayers, for their own sake, are responsible for updating their changes in tax registration information to the tax authority, including the personal identification numbers, in either of two ways as follows:

  • Method 1: Declare online via the Tax Portal of the General Department of Taxation
  • Method 2: Through the income payment organisation or the individual can declare directly to the tax offices, where the individual registers permanent/temporary residence.

In case of declaration through the organization, the organisation will collect the changed information of the individual/ dependents via form 08/MST together with a copy of the chip-attached identification card and form 20/DK-NPT (issued in Circular 105/2020/TT-BTC) and update such information on https://thuedientu.gdt.gov.vn (select “Standardise personal tax code” section).

Temporarily suspension from the exit for the Legal Representative of an enterprise having tax arrears

On 24 November 2023, the General Department of Customs issued Official Letter 6084/TCHQ-TXNK on temporary exit from the country.

Where an enterprise has not fulfilled its tax obligations to the customs authority, the Legal Representative of such enterprise is subject to the temporary exit suspension according to Clause 5, Clause 6, Article 36, Law 49/2019/QH14.

Where the enterprise incurred tax arrears in the past, which have not been collected by the tax authority successfully up to now, the previous Legal Representative of the enterprise during such period is still subject to the exit suspension order according to Clause 2c, Article 21, Decree 126/2020/ND-CP.

Penalty for taxpayers who do not declare or have a late declaration of Personal Income Tax finalisation return

On 21 December 2023, the General Department of Taxation (GDT) issued Official Letter 5852/TCT-PC on administrative penalties for individuals who do not declare personal income tax (PIT) finalisation.

Where an individual has income from brokerage commissions, which was withheld 10% tax by the income payment entity, but is still subject to direct tax finalisation, the individual is responsible for submitting the PIT finalisation return and making full payment of the outstanding PIT amount to the State budget.

Where an individual has submitted the PIT finalisation return and fully paid the PIT and late payment interest (if any) before the tax minute for late submission over 90 days issued by the tax authority, an administrative penalty on late submission is applied for the taxpayers.

Where the tax authority issues a tax minute indicating the taxpayer (i) did not submit the PIT finalisation return or (ii) submitted the PIT finalisation return with PIT payable over 90 days late, then a penalty on tax avoidance or administrative penalty for tax avoidance signs is applied to the respective taxpayer.

Permission for submitting delivery notes instead of invoices when completing on-site export procedures

On 18 December 2023, the Ministry of Finance released Official Letter 13870/BTC-TCHQ on the use of documents to replace sales invoices of export processing enterprises (EPE).

Accordingly, at the time the EPE carries out on-site export procedures for goods selling to domestic enterprises, the sale invoice has not been issued by the EPE as the transfer of ownership or use rights of goods have not been transferred, a warehouse delivery note cum internal transportation (photocopy) is allowed to replace the sale invoice being submitted to the customs system.

When domestic enterprises carry out on-site import procedures, they must carry out customs procedures as prescribed in Clause 58, Article 1 of Circular 39/2018/TT-BTC and submit customs documents with sale invoices with the sentence “For organisations and individuals in the non-tariff zone” stating in the invoice (photocopy) to the customs system.

The policy of debt freezing and tax debt write-off according to Resolution 94/2019/QH14 has expired.

On 14 December 2023, the General Department of Taxation (GDT) issued Official Letter 5683/TCT-QLN on the cancellation of debt write-off according to Resolution 94/2019/QH14 (Resolution 94).

According to this letter, the policy of tax arrears freezing processing, writing off the late payment penalties for taxpayers who are dissolved or went bankrupt, etc. in Resolution 94 and Circular 69/2020/TT-BTC (Circular 69) are applicable for a period of 3 years from 1 July 2020. After this period, the tax authority will not freeze or write off debt according to Resolution 94 and Circular 69.

Where the tax authority discovers that the frozen debt or written-off debt is not in accordance with regulations or the taxpayer, who had his/her debt written-off, returns to business activities or establishes a new entity (except for certain cases), the tax authority will cancel the previous tax debt written-off decision and implement enforcement measures to re-collect the tax arrears.

Tax declaration for foreign investors selling companies in Vietnam

On 11 December 2023, the General Department of Taxation (GDT) issued Official Letter 5567/TCT-CS on tax policy for the transfer of all capital in one-member limited liability companies (LLC) owned by organisations.

Accordingly, in case a foreign investor transfers 100% of capital contribution in a LLC in Vietnam, if the transfer of capital contribution is attached to real estate, the corporate income tax (CIT) is paid for each time arising and declaring following form 06/TNDN issued with Circular 151/2014/TT-BTC (for capital transfer transactions before 1 January 2022) or Circular 80/2021/TT-BTC (for transactions capital transfer from 1 January 2022 onwards). Organisations and individuals receiving capital transfers are responsible for determining, declaring, deducting and paying taxes on behalf of foreign investors.

The above capital transfer activity of a foreign investor is in accordance with the law on enterprises and investment and it is not subject to VAT.

Where the transferee of foreign investor’s capital contribution changes the project’s operational objectives, if the change in project objectives is in accordance with the law and the transferee continues to implement the project to invest in the production and trading of goods and services subject to VAT, the project will not have the refunded VAT amount revoked. Otherwise, if the transferee of capital does not continue to implement the investment project in relation to the production and trading of goods and services subject to VAT, the refunded VAT amount of the project will be revoked.

 

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.

Updated on January 17, 2024
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