This June 2023 publication of our Tax and Accounting Updates looks at the Official Notice on 2% VAT reduction applying from 1 July 2023, increase to the Minimum Basic Wage from 1 July 2023, the Ministry of Finance’s proposal to reduce the selected fees and charges for the last 6 months of 2023, the General Department of Taxation’s action to accelerate the VAT refund process, the Tax Department’s warning on violations of using invoices, new regulations on the application of ordinary import duties and our regular review of recent Official Letters released by the Tax Authorities.
Official Notice on 2% VAT reduction applying from 1 July 2023
On 13 May 2023, the General Secretary of the National Assembly issued an Official Notice on the conclusion of the National Conference Standard Committee regarding the project of the National Assembly’s Resolution on VAT reduction.
In contrast to the Draft Policy introduced by the Ministry of Finance in April 2023, the National Assembly Standing Committee concurred on the scope of application of the VAT reduction policy as stipulated in Resolution 43/2022/QH15 dated 11 January 2022 of the National Assembly on fiscal and monetary policies to support the Program of Socio-economic Recovery and Development. Specifically, instead of applying 10% VAT to all goods and services without any exception, the goods and services that apply 10% VAT are those that are not (similar to 2022):
- Telecommunications, finance, banking, securities, insurance, real estate business, metals, refined petroleum
- Products and services subject to Special Consumption Tax
- Information technology
The application period of the Resolution is from 1 July 2023 to 31 December 2023.
Increase to the Minimum Basic Wage from 1 July 2023, and impact on salary (insurance) payments
Following the Resolution of the National Assembly on 11 November 2022 regarding the increase of the Minimum Basic Wage (base salary) from 1 July 2023, on 14 May 2023, the Government officially issued Decree 24/2023/ND-CP providing details.
Accordingly, the Minimum Basic Wage will be raised to 1.8 million VND/month, an increase of 20.8% compared to the current basic wage of 1.49 million VND/month. The changes will take effect from 1 July 2023 and will result in an increase in the maximum caps for calculating Social Insurance and Health Insurance payments, and consequently increasing the potential payments by employees and employers for these insurances.
All employers should ensure their payroll software and internal calculations are updated for all pay runs after 1 July 2023.
The Ministry of Finance’s proposal to reduce the selected fees and charges for the last 6 months of 2023
To lessen the financial burden of businesses and individuals in 2023, the Ministry of Finance issued Official Letter 4296/BTC-CST on 28 April 2023, requesting ministries and ministerial-level agencies to propose reducing fees and charges under their management (based on evaluation on the implementation of the collection, management, and use of fees and charges).
Prior to this, on 17 April 2023, the Government Office has approved for the Ministry of Finance to be proactive in implementation on its submitted plan for tax, fee, and charge exemption and reduction in 2023, in particular:
- Continue to reduce the collection of approximately 35 fees and charges.
- The application period is from July 1 through the end of 31 December 2023.
The General Department of Taxation’s action to accelerate the VAT refund process
In response to the slow and late settlement of VAT refunds causing some businesses dissatisfaction, on 26 May 2023, the General Department of Taxation released Official Letter 2099/TCT-KK, requesting the Tax Departments of provinces/cities to urgently implement the following measures to expedite VAT refunds:
- For VAT refund application dossiers which are being inspected and verified for the tax amount eligible for refund, the enterprise must be notified of the progress in processing the dossiers and the estimated time for the settlement of the tax refund.
- For the refund applications that have the results of the inspection, the tax refund will be promptly processed first, without waiting for the full verification to process the tax refund.
- For VAT refund dossiers with problems and queries from associations and businesses, the General Department of Taxation requested tax departments to organise a dialogue with associations and businesses from 29 May to 2 June 2023 to address issues and report to the General Department of Taxation. The departments then settle tax refunds according to their competence or seek guidance from higher level.
- For cases with insufficient documents, authorities must notify the enterprise in writing, clearly stating the reason for not accepting the file.
The Tax Department’s warning on violations of using invoices
On 25 April 2023, the Tax Department of Ho Chi Minh City released Official Notice 7592/TB-CTTPHCM warning violations in using invoices according to the provisions of Decree 123/2020/ND-CP and Circular 78/2021/TT-BTC.
In order to avoid tax and invoice penalties, businesses should note a number of prohibited acts as prescribed in Article 6 of the Law on Tax Administration 38/2019/QH13 and Clause 2, Article 5 of Decree 123/2020/ND-CP have been approved by the General Tax Department of Ho Chi Minh City includes:
- Prohibited acts in tax administration
- Prohibited acts in the field of invoices and vouchers
- Concepts of legal invoices and vouchers; fake invoices and vouchers
- Acts of using illegal invoices and documents
- Acts of illegal use of invoices and vouchers
- Acts of violating regulations on making invoices when selling goods and services
- Violations against regulations on transferring e-invoice data
- Responsibilities of sellers and buyers when providing goods and services purchase and sale transactions related to invoices
- Measures to reduce risks related to the illegal use of invoices (see Section III).
According to the Tax Department, in order to minimise the tax risks and invoice penalties, when purchasing goods and services (directly or online), businesses only receive goods, declare input VAT and charge them into reasonable expenses for e-invoices made by the a seller that has posted complete information about the headquarters and tax code and is consistent with the information on the order.
In addition, businesses must regularly access the e-invoice system on the tax authority’s web portal (www.hoadondientu.gdt.gov.vn) and the “Lookup invoice” mobile app of the General Department of Taxation to look up, check invoices of goods and services purchased and sold to check the validity of invoices and promptly detect illegal invoices.
New regulations on the application of ordinary import duties
On 31 May 2023, the Prime Minister of Vietnam promulgated Decision 15/2023/QD-TTg on the application of ordinary import duties. Specifically, Decision 15/2023/QD-TTg provides for the application of ordinary import duties according to Point c, Clause 3, Article 5 of the Law on Export and Import Duties 2016 and regulated entities include:
- Owners of imports and exports
- Organisations and individuals with rights and obligations related to goods export and import
- Customs authorities and customs officials
- Relevant agencies, organisations, and individuals when performing policies on import and export duties according to the Law on Export and Import Duties 2016.
The ordinary import duty tariff enclosed with Decision 15/2023/QD-TTg includes:
- A list (descriptions and 8-digit codes) of goods with 0% preferential import duty rates prescribed in Sections I and II of Appendix II of Decree 26/2023/ND-CP on import tariffs and preferential import tariffs, list of goods and their fixed duties, mixed duties, and out-quota import duties.
- Ordinary import duty rates applicable to each item in the ordinary import duty tariff in the Appendix enclosed with Decision 15/2023/QD-TTg.
Regarding imports that are not included in the list of the ordinary import duty tariff in the Appendix enclosed with Decision 15/2023/QD-TTg and do not fall under the cases of imports subject to preferential duties or special preferential duties according to Points a and b, Clause 3, Article 5 of the Law on Export and Import Duties 2016, an ordinary import duty rate equal to 150% of the preferential import duty rates applicable to each corresponding item in Appendix II of Decree 26/2023/ND-CP will be applied.
The Decision will be effective from 15 July 2023.
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 dossier to apply for tax deferral for 2023 must be submitted before 1 October 2023
On 1 June 2023, the General Department of Taxation issued the Official Letter 2176/TCT-KK on organising the implementation of Decree 12/2023/ND-CP about extending the deadline for paying VAT, CIT, PIT and land rental, in order to ease financial difficulties for businesses and individuals doing business.
(Applicable entities under Decree 12 include enterprises and business households or individuals that manufacture or operate businesses in certain industries/economic sectors, and small and micro enterprises. You can find further details of Decree 12 in our May Tax Update).
- For enterprises: extended the payment of VAT for the tax period from March to August 2023 or from the first quarter to the second quarter of 2023; extending the temporary payment CIT for the first and second quarters of 2023 and extending the payment of 50% of the payable land rent in 2023.
- For business households and individuals: entitled to an extension to pay the entire payable VAT and PIT amount in 2023 and an extension to pay 50% of the payable land rent in 2023.
By 30 September 2023, businesses and individuals are required to submit a written request for a tax extension for 2023; late payment will not be extended. The General Department of Taxation has currently upgraded tax declaration applications to support businesses and individuals to submit tax deferral applications electronically.
Guideline for the issuance of 2% VAT-reduction invoices following Decree 15/2022/ND-CP
On 29 May 2023, the General Department of Taxation of Vietnam promulgated the Official Letter 2121/TCT-CS providing guidelines for issuance of 2% VAT-reduction invoices following Decree 15/2022/ND-CP (Decree 15), including:
- Where goods and services are eligible for VAT reduction under Decree 15/2022/ND-CP, after 31 December 2022, errors are detected, an invoice for adjustment or replacement are required to be issued:
- Where the error does not affect the amount payable and VAT payable or adjustments to taxable prices, the adjustment/replacement invoice will apply the VAT rate of 8%.
- Where the errors in the number of goods lead to errors in the amount payable and VAT payable, the adjustment/replacement invoice will apply the VAT rate applicable at the time of issuance of such invoice.
- Where the goods have been purchased before 1 January 2023 with an 8% tax rate but are returned after 31 December 2022 due to improper specifications or quality, the seller will issue a goods return the invoice to adjust or replace the issued invoice with an 8% VAT invoice. The invoice must be specific that the seller and buyer may agree with the return of the goods.
- Where discounts are applied to goods eligible for a 2% VAT reduction sold in 2022 but such trade discounts are only displayed in invoices issued from 1 January 2023:
- If the discount amount is given on the last purchase or a purchase after 31 December 2022, such discount will be used to adjust the taxable price. The tax rate will comply with prevailing regulations when the invoices are issued
- If the discount is given at the end of the discount program (period) after 31 December 2022, the seller will issue an adjustment invoice and apply 8% VAT at the time of sale
- Where invoices for revenues generated from 1 February 2022 to 31 December 2022 of businesses that sell goods and provide services (eligible for VAT reduction according to Decree 15) from construction, installation with acceptance and handover periods of works, construction volume, and installation completion regardless of whether the money has been received or not, are issued after 31 December 2022, such business establishments are:
- still eligible for VAT reduction under Decree 15, and
- will be fined for untimely issuance of invoices.
Vietnam to implement tax collection by payable ID numbers
On 24 April 2023, the General Department of Taxation of Vietnam promulgated Official Letter 1483/TCT-KK on tax collection by payable ID numbers.
According to the Official Letter, starting from 10 May 2023, the web portal of the General Department of Taxation of Vietnam, including eTax service and eTax Mobile, will be upgraded to allow taxpayers to:
- Track their tax obligations
- Arrange the payment order according to the Law on Tax Administration
- Prepare state budget payment records by payable ID numbers and trace and adjust information on state budget payments by payable ID numbers.
To implement Circular 19/2021/TT-BTC, the General Department of Taxation of Vietnam guides the tax collection and other state budget revenues by payable ID numbers collected by tax authorities as follows:
- Provide payable ID numbers for taxpayers and notify them of such numbers
- Provide information on payable ID numbers for organiSations cooperating in the collection
- Provide instructions on how to use payable ID numbers
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.