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March 2024 Tax Updates: Proposal to amend the Law on Special Consumption Tax and other recent tax updates.

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March 2024 tax updates: proposal to amend the law on special consumption tax and other recent tax updates

This March 2024 publication of our Tax and Accounting Updates focuses on the proposal to amend the Law on Special Consumption Tax, updates on Investment Registration Forms from 15 February 2024, cases eligible for preserving the Unemployment Insurance contribution from 15 February 2024 and our regular review of recent Official Letters released by the tax authorities.

The proposal to amend the Law on Special Consumption Tax

On 27 February 2024, the Government issued Resolution 25/NQ-CP regarding the proposal to amend the Law on Special Consumption Tax. In alignment with the content outlined in Report 25/TTr-BTC of the Ministry of Finance, the Government has essentially concurred with the following points:

  • Research and Exclusion: The proposal does not include Policy 5 related to the development of new mixed tax calculation methods for alcohol and beer products. This decision ensures compliance with the Tax System Reform Strategy until 2030, as set forth by the Prime Minister, and adheres to Vietnam’s commitments upon joining the World Trade Organization (WTO).
  • Legislative Timeline:
    • May 2024: Submission of the Law project to the National Assembly Standing Committee during the 7th Session
    • October 2024: Presentation of the Law project to the National Assembly for comments during the 8th Session
    • May 2025: Presentation of the Law project to the National Assembly for approval during the 9th Session

Concurrently, the Government has tasked the Ministry of Finance with finalising the proposal dossier and forwarding it to the Ministry of Justice for necessary procedures.

Resolution 25/NQ-CP came into effect on 27 February 2024.

Updating Investment Registration Forms from 15 February 2024

On 31 December 2023, the Ministry of Planning and Investment issued Circular 25/2023/TT-BKHDT, pertaining to the amendment and supplementation of several articles within Circular 03/2021/TT-BKHDT dated 9 April 2021 by the Minister of Planning and Investment. This circular specifically addresses sample documents and reports related to investment activities in Vietnam, investment from Vietnam to foreign countries, and investment promotion.

The new circular supersedes the investment registration forms previously issued in Circular 03/2021/TT-BKHDT. Notably, it encompasses the following revisions:

  1. Sample Documents for Investment Activities in Vietnam
  2. Sample Documents for Investment Activities from Vietnam to Foreign Countries
  3. Sample Documents for Investment Promotion Activities

Furthermore, concerning forms related to investor information, the Circular introduces the following adjustments:

  • Vietnamese Citizens: Individual investors and legal Representatives who are Vietnamese citizens or has dual nationality but decide to use Vietnam as their nationality need only declare their full name, personal identification code, contact address, phone number, and email.
  • Foreign Citizens: Individual investors and Legal Representatives who are foreign citizens or Vietnamese citizen with dual nationality but decide to use foreign nationality must continue to declare their current information.

The Circular took effect from 15 February 2024.

Cases eligible for preserving the Unemployment Insurance contribution from 15 February 2024

On 29 December 2023, the Minister of Labour, War Invalids and Social Affairs issued Circular 15/2023/TT-BLDTBXH modifying and supplementing provisions from Circular 28/2015/TT-BLDTBXH and Decree 28/2015/ND-CP related to Unemployment Insurance (UI) under the 2013 Employment Law. Accordingly, the cases in which UI contribution periods are reserved include:

  • When the employee’s contribution month has not been resolved for receiving unemployment benefits
  • When the employee’s decision to receive unemployment benefits is canceled
  • When the employee receiving unemployment benefits has their benefits terminated
  • When the employee does not collect unemployment benefits
  • Where the employee’s Social Insurance agency confirms additional contribution time after the termination of unemployment benefits

Circular 15/2023/TT-BLDTBXH took effect from 15 February 2024.

Official Letter Released

Brokerage tax on sales to foreign individuals

On 1 March 2024, the General Department of Taxation issued Official Letter 764/TCT-DNNCN on determining taxable income from sales brokerage service contracts and product promotion.

According to the General Department of Taxation, for non-resident individuals who generate income from service contracts related to sales brokerage and product promotion with a local company, the following rules apply:

  • If the individual’s income is determined to be from independent business activities in fields or industries for which licenses or professional certificates are issued according to legal regulations, then this income is considered business income.
  • If the individual’s income is determined to be commission fees for agency sales of goods or brokerage fees, then this income is subject to taxation as salary or wages.
  • Where there are differences between provisions in international agreements and domestic tax laws, the provisions of the international agreement will apply.

Policies for PIT and CIT related to life insurance

On 23 February 2024, the Hanoi Tax Department issued Official Letter 8974/CTHN-TTHT on Corporate Income Tax (CIT) and Personal Income Tax (PIT) policies for life insurance as below:

For Businesses: According to Circular 25/2018/TT-BTC, if a company purchases life insurance for its employees, the expenses can be counted as deductible costs when calculating CIT, provided that the expenditure does not exceed 3 million VND per month per person and meets the conditions specified in section 3 of this circular.

For Individuals:

As per Circular 111/2013/TT-BTC and Circular 92/2015/TT-BTC:

  • The money spent on purchasing life insurance is not considered mandatory insurance participation, so it is not included in the list of deductible items for calculating PIT.
  • If a company purchases life insurance for its employees and there is an accumulation of insurance premiums, the taxable income and the eligible tax deduction are determined based on the accumulated premiums. Income from life insurance contract’s interest and insurance contract’s compensation is exempt from PIT.
  • If a company purchases life insurance for its employees without any accumulation of insurance premiums, the money spent on this insurance is not considered part of the individual’s taxable income for PIT.

Guidelines for Declaring Additional Missed Invoices

On 21 February 2024, the Hanoi Tax Department issued Official Letter 8628/CTHN-TTHT, pertains to the additional declaration of VAT documents.

Where a company identifies input invoices from previous periods that were not declared, resulting in errors or omissions within the tax declaration dossier submitted to the tax authority, additional declaration dossiers must be submitted for each affected tax declaration dossier. This action aligns with the provisions outlined in Article 47 of the Law on Tax Administration and Clause 4, Article 7 of Decree 126/2020/ND-CP.

When making additional declarations, if this results in an increased amount of tax payable or a decreased amount of tax that has been refunded, the company must remit the full amount of the increased tax or the excess refunded tax, along with any applicable late payment interest.

Furthermore, if the additional declaration solely impacts the amount of VAT remaining deductible for the subsequent period, it must be declared in the current tax period. The company is permitted to additionally declare an increase in the requested tax refund amount only if the tax declaration for the next tax period has not yet been submitted and the tax refund request remains outstanding.

Penalties for Temporary Underpayment of CIT

On 17 January 2024, the General Department of Taxation issued Official Letter 230/TCT-KK concerning late payment interest for CIT. As per the provisions outlined in Clause 3, Article 1 of Decree 91/2022/ND-CP, CIT is declared and finalised annually but temporarily paid on a quarterly basis.

During each quarter, companies are required to determine and pay the provisional tax amount without submitting a separate quarterly tax declaration. The tax amount temporarily paid in each quarter must be declared on the annual settlement declaration. Crucially, this total temporary tax payment across the four quarters must not fall below 80% of the amount payable according to the annual settlement. If companies fail to meet this threshold, they will be liable to pay late payment interest calculated on the underpaid tax amount.

However, it’s important to note that the General Department of Taxation has clarified that the act of not paying or underpaying the quarterly CIT provisional amount will not result in administrative sanctions for tax understatement, as prescribed in Article 16 of Decree 125/2020/ND-CP.

Tax Debt Freezing Period

On 11 January 2024, the General Department of Taxation issued Official Letter 140/TCT-QLN, pertains to tax debt freezing. In accordance with Article 23 of Decree 126/2020/ND-CP, the freezing period for tax debt concerning dissolved enterprises commences from the date when the business registration agency posts information about the enterprise undergoing dissolution procedures on the Business Registration System.

For enterprises no longer operating at the registered business address, the tax debt freezing period is calculated from the date when the tax authority issues a nationwide written notice indicating the absence of the business at the registered address.

The frozen tax debt amount corresponds to the tax debt outstanding at the beginning of the debt freezing period. Should the enterprise incur additional tax debt after the freezing period commences, the tax authority will categorise this new debt in accordance with the guidelines outlined in Decision 1129/QD-TCT dated 20 July 2022.

Guidelines on VAT Reduction Policies for Imported Goods

On 27 December 2023, the General Department of Customs issued Official Letter 6696/TCHQ-TXNK, pertains to Value Added Tax (VAT) reduction policies in accordance with Decree 44/2023/ND-CP.

The General Department of Customs emphasises that the VAT reduction policy outlined in Decree 44/2023/ND-CP applies to groups of goods currently subject to a tax rate of 10% (reduced to 8%), with specific exceptions (i.e., telecommunications, information technology, metals, fabricated metal products, mining products (excluding coal mining), coke, refined petroleum, and chemical products. Additionally, products subject to special consumption tax are not eligible for VAT reduction.

For imported goods falling outside the scope of ineligible items, the reduced VAT rate of 8% will be applicable.

Updated on March 15, 2024
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