This June 2021 publication of our Tax and Accounting Updates looks at special tax supervision, preferential tariff schedules for implementation of the UKVFTA, guidelines for the implementation of Decree 18/2021 on import and export taxes, regulations on fees for issuance of visas and other documents on immigration and residence for foreign individuals and our regular review of recent Official Letters released by the Tax Authorities.
Four signs indicating special tax supervision of taxpayers
On 17 May 2021, the Ministry of Finance issued Circular 31/2021/TT-BTC stipulating risk management as part of tax administration activities. Accordingly, a taxpayer will remain under enhanced tax supervision where they have one of the following signs:
- They are selected:
a) from the list of taxpayers ranked as non-compliant with tax legislation,
b) they are on the list of taxpayers ranked as having high to very high risks, and
c) those failing to provide explanations and additional information, or those doing so but failing to meet the requirements or the deadline as stated in written notices of tax authorities.
- Their bank transactions have suspicious signs in accordance with regulations of laws on prevention and control of money laundering activities related to tax evasion or tax fraud.
- They or their legal representatives are under investigation for their violations related to taxes, invoices and documents.
- They have signs of high tax-related risk to the extent of being classified as subjects of special supervision or need to be kept under tax supervision through information collected for the tax authority’s administration.
Circular 31/2021/TT-BTC takes effect from 2 July 2021, replacing the Circular 204/2015/TT-BTC dated 21 December 2015.
Preferential tariff schedules for implementation of the UKVFTA
On 21 May 2021, the Government issued Decree 53/2021/ND-CP regarding the Preferential Export Duty Schedule and Special Preferential Import Duty Schedule for the implementation of the United Kingdom Vietnam Free Trade Agreement (“UKVFTA”) for 2021-2022. Accordingly, the Decree covers:
- The Preferential Export Duty Schedule for implementation of the UKVFTA (Appendix I), including commodity codes, description and preferential export duty rates applied to specific commodity codes for exports to the United Kingdom of Great Britain and Northern Ireland each period;
- The Special Preferential Import Duty Schedule for implementation of the UKVFTA (Appendix II), including commodity codes, description and special preferential import duty rates applied to specific commodity codes for imports into Vietnam each period from the following territories:
- United Kingdom of Great Britain and Northern Ireland;
- The Socialist Republic of Vietnam (applicable to goods imported from non-tariff zones into domestic markets).
Decree 53/2021/ND-CP enters into force as of 21 May 2021.
Guidelines for the implementation of Decree 18/2021 on import and export taxes
On 1 June 2021, the General Department of Customs issued Official Letter 2687/TCHQ-TXNK guiding the implementation of a number of articles of the import-export tax policy in Decree 18/2021/ND-CP, including implementing instructions over number of articles on imported goods for the production of exports:
1. Outsourcing domestic re-processing
Taxpayers with processing contracts, as prescribed in Decree 69/2018/ND-CP, that send part or all of imported goods, or semi-finished products processed by the taxpayers from imported goods, to another domestic organization or individual to re-process one or several or the entire production stages, shall be exempt from import tax on the re-processed imported goods if they satisfy the regulations on the basis for determination of duty-free goods.
Where the exported processed products are produced from domestic raw materials and supplies subject to export tax, upon export, the export tax must be paid on the value of domestic raw materials and supplies used to produce the exported product according to the applicable tax rates of raw materials and supplies.
As per guidance from the General Department of Customs, if the outsourcing party and the outsourced party are both domestic companies, when delivering raw materials, supplies, machinery and equipment for re-processing and when receiving the processed products and semi-finished products, they are not required to perform customs procedures but they must have documents related to the delivery and receipt of raw materials, supplies, products, machinery and equipment according to regulations of the Ministry of Finance on Vietnamese accounting compliance.
2. Outsourcing re-processing in non-tariff zones or abroad
Where taxpayers provide a part or all imported goods, or semi-finished products processed by the taxpayers from imported goods, to another organization or individual in non-tariff zones or abroad to re-process, the re-processed imported goods and semi-finished products shall be exempt from export tax.
Products that are outsourced for re-processing abroad, and those outsourced for re-processing in a non-tariff zone then imported into Vietnam, are subject to import tax.
These products follow the instructions at Point b, Clause 2, Section I of Official Letter 2687/TCHQ-TXNK for customs procedures.
Circular 25 – Regulations on fees for issuance of visas and other documents on immigration and residence for foreign individuals
From 22 May 2021, the fees for issuance of visas and other documents on immigration and residence for foreigners will comply with Circular 25/2021/TT-BTC (“Circular 25”) issued on 7 April 2021 which will replace Circular 219/2016/TT-BTC dated 10 November 2016.
Accordingly, significant changes under Circular 25 are as follows:
- Fees for issuance of passports, laissez-passers, exit permit and AB stamps: No fees apply for the following cases:
- The renewal for diplomatic and official passports which used to be 100,000VND/time.
- Supplementing or modifying contents of passports or laissez-passers, which used to be 25% of the corresponding fee of the same type.
- Children travelling with a relative holding a passport or other valid passport substitute, which used to be 25% of the corresponding fee of the same type.
- Fees for issuance of visas and other documents on immigration and residence for foreigners: some additional fees have been specified as follows:
- Same-value transfer of valid visas and temporary residence cards from old stand-alone passports (which run out of stamp spots for entry verification, exit verification, temporary residence certification, temporary residence extension) to new stand-alone passports: USD 5 per passport;
- Issuance of temporary residence cards from more than 5 years to 10 years of validity: USD 165 per card; and
- Issuance of visas based on lists of approved personnel of immigration management bodies in case of foreigners visiting, touring by seaway or transiting by seaway wish to travel inland to visit, tours under programs organized by international tourism enterprises in Vietnam; and members of foreign military watercraft travelling under official operations of visits that stretch beyond provinces and central-affiliated cities where the watercraft’s anchor: USD 5 per person.
Official letters released
Official Letters are releases showing the Tax and other Authorities’ interpretations and application of Vietnam’s Taxation Laws, providing guidance to taxpayers in Vietnam.
Proposing non-cash payments for all business transactions
The Tax Department of Ho Chi Minh City has released an Official Letter to the Government to consider and regulate the application of non-cash payments for all sales and purchases, without a limit on the total payment value.
According to the current Law on Value-Added Tax, organizations must make non-cash payments for transactions from VND20 million and higher. The proposal is that businesses would make non-cash payments for all sales and purchases, without a limit on the total value. This will assist tax authorities in controlling the revenue and expenses of organizations engaged in production and business activities, enhancing the rigor of tax administration.
In addition, the Department of Taxation has proposed that the Government regulate to compel E-commerce organizations that derive income in Vietnam including Google, Facebook, YouTube, Agoda, Booking.com and Airbnb, to fulfill tax obligations with the Vietnamese tax authorities. At the same time, they must cooperate in providing information to tax authorities on organizations and individuals in Vietnam engaging with their business activities and derive income from such engagements.
Extension of CIT according to Decree 52 when the financial year differs from the calendar year
On 24 May 2021, Hanoi Tax Department issued Official Letter 18037/CTHN-TTHT on the extension of CIT payments according to Decree 52/2021/ND-CP if the financial year differs from the calendar year.
Accordingly, CIT declared in the first and second quarters of 2021 by organisations and enterprises specified in Article 2 of the Decree will be deferred for 3 months from the deadline for CIT payment prescribed by tax administration laws.
Pursuant to the above provision, if an enterprise is eligible for an extension and has a CIT calculation period according to their financial year that does not coincide with the calendar year, the extended tax payment deadline shall be determined in accordance with the CIT calculation period of the enterprise.
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.