May 2022 Tax Updates: Tax system reform strategy for Vietnam to 2030 & guidance for implementing rent support policies for employees.

This May 2022 publication of our Tax and Accounting Updates looks at notice of deadlines for tax registration, declaration, and payment via web portal for foreign digital suppliers without a permanent establishment in Vietnam, tax system reform strategy for Vietnam to 2030, guidance for implementing rent support policies for employees, and our regular review of recent Official Letters released by the Tax Authorities.

Notice of deadlines for tax registration, declaration, and payment via web portal for foreign digital suppliers without a permanent establishment in Vietnam

On 28 April 2022, the Large Enterprise Tax Management Department issued Official Letter 177/CT-KK reminding the deadlines for tax registration, tax declaration and tax payment via the tax web portal for foreign suppliers who do not have a permanent establishment in Vietnam and conduct e-commerce business using digital platforms and provide services to organisations and individuals in Vietnam.

According to current regulations, foreign suppliers with tax obligations in Vietnam must either directly or authorise tax agencies and organisations operating under Vietnamese law to register, declare, and pay taxes in Vietnam on its behalf.

On 21 March 2022, the General Department of Taxation officially announced the launch of the tax web portal for foreign suppliers (https://etaxvn.gdt.gov.vn) with four functions:

• Tax registration
• Tax declarations
• Search for the payment reference
• Search for submitted documents

Each function has a user manual (in English and Vietnamese), a support email address and hotline to support taxpayers’ queries.

The Large Enterprise Tax Management Department, which is the tax agency assigned to manage these foreign suppliers without a PE in Vietnam, recommends foreign suppliers register, declare and pay taxes according to regulations via the web portal. The deadline to declare and pay taxes arising in the first quarter of 2022 was 30 April 2022.

After 30 April 2022, the Large Enterprise Tax Management Department announced that they will release lists of foreign suppliers that have not fulfilled their obligations via media outlets.

Tax System Reform Strategy in Vietnam for 2030

On 23 April 2022, the Prime Minister issued Decision 508/QD-TTg approving the Tax System Reform Strategy to 2030. Several solutions announced to reform tax policy in Vietnam are as follows:

For Value Added Tax (VAT)

• Expand the tax base by reducing the group of goods and services not subject to VAT and the group of goods and services subject to the 5% tax rate
• Move towards one tax rate
• Research to increase the VAT rate according to the roadmap
• Review and adjust the revenue threshold by applying the deduction method to suit the reality
• Research and apply consistently tax calculation methods according to the percentage of revenue for taxpayers whose turnover is below the threshold or are not eligible for the deduction method
• Finalise regulations related to VAT on exported goods and services, ensuring that they reflect the true nature and international practices
• Research, amend and supplement regulations on tax deductions and VAT refunds to ensure simplicity, transparency, and synchronisation with relevant laws.

For Excise Tax

• Review, research, amend and supplement parties subject to excise tax to regulate consumption in line with the shift in consumption trends in society and the Party and the State’s orientation on protecting people’s health and the environment
• Develop a roadmap for adjusting tax increases for tobacco, beer, and alcohol products to limit production and consumption and fulfill international commitments
• Review and adjust excise tax rates on some items to suit socio-economic conditions in the 2021 – 2030 period
• Study and apply a combination of proportional tax rate and absolute tax rate to some goods and services subject to excise tax

For Import Tax and Export Tax

• Continue to reduce the number of tax rates to simplify import tariffs, strive to reduce the number of import tax rates from the current 32 levels down to about 25 levels by 2025 and 20 levels by 2030
• Study on amending and supplementing export tax and import tax policies to promote exports, encourage the increase of domestic value, and limit the export of natural resources and raw minerals
• Have appropriate preferential policies to promote the development of spearhead industries, supporting industries and priority fields, ensuring compliance with the country’s socio-economic development orientations in each period and international commitments
• Research and amend regulations on goods exported and imported on the spot and regulations related to non-tariff zones, ensuring synchronisation with relevant laws, limiting trade fraud and tax evasion.

For Corporate Income Tax (CIT)

• Review to amend or abolish tax exemptions and reduction incentives that are no longer suitable for development requirements and international integration requirements
• Minimise the integration of social policies with tax exemptions and reduction policies, ensure tax neutrality for stable application in the medium and long term
• Implement CIT incentives for small and micro enterprises, and at the same time, shift the focus of foreign investment attraction policies from quantity to quality, encourage the participation of all economic sectors in investment in key industries and trades and in areas that need to be encouraged for investment
• Expand the tax base following the country’s socio-economic context and international practices
• Implement standards of prevention and combat against transfer pricing and erosion of revenue sources according to international practices

For Personal Income Tax (PIT)

• Review additional taxable objects
• Study, amend and supplement in the direction of adjusting the amount and tax rates suitable to taxable income by the nature of each type of income, creating simple conditions in PIT finalisation for both taxpayers and tax administration agencies, preventing acts of tax evasion and avoidance
• The study, amend and supplement regulations on tax exemption and reduction following the country’s socio-economic context in each period and international practices.

Guidance for implementing rent support policies for employees

On 21 April 2022, the Ministry of Labour, War Invalids, and Social Affairs issued Official Letter 1244/LDTBXH-VL on the implementation of Decision 08/2022/QD-TTg on implementing the policy of housing rental support for employees. We have covered key points of the Decision in our Quarterly Vietnam HR & Payroll Updates in April 2022, click here to read further.

Following the Decision, the Department of Social Insurance of Ho Chi Minh City also released Official Letter 2219/BHXH-QLT guiding to confirm the list of employees requesting rent support according to this Decision.

Subjects of application

This Decision provides for the implementation of rent support policies for employees who have labour relations, are living in a room/house for rent, or working in the following areas:

1. Industrial zones or export processing zones established according to conditions, orders, and procedures prescribed in the Government’s Decree 82/2018/ND-CP on management of industrial zones and economic zones.
2. Key economic zones include:
   a. Economic zones established according to conditions, orders, and procedures prescribed in the Government’s Decree 82/2018/ND-CP on management of industrial zones and economic zones.
   b. 24 provinces and centrally affiliated cities of 4 key economic zones, which are in the master plan and established under the Prime Minister’s Decisions (including the following provinces and cities: Hanoi, Hai Phong, Quang Ninh, Hai Duong, Hung Yen, Vinh Phuc, Bac Ninh, Thua Thien Hue, Da Nang, Quang Nam, Quang Ngai, Binh Dinh, Ho Chi Minh city, Binh Phuoc, Tay Ninh, Binh Duong, Dong Nai, Ba Ria – Vung Tau, Long An, Tien Giang, Can Tho, Ca Mau, An Giang, and Kien Giang).

Process of confirming the list of employees requesting rent support

Accordingly, the list of employees requesting rent support is required to be confirmed by the Department of Social Insurance of Ho Chi Minh City. The specific process is as follows:

• The Department of Social Insurance will consider and confirm this List (Form No. 02, Form No. 03, Decision 08/2022/QD-TTg) within 2 working days if the information declared by the enterprise matches management data at the Department of Social Insurance. Otherwise, the Department will inform and request the enterprise to revise.
• Form No. 02 can be confirmed monthly or in every 2 or 3 months.
• Employees working under 2 or more labour contracts must submit forms at the enterprise that first participating of compulsory Social Insurance and receive support only once in 1 month and not more than 3 months.
• Failure to confirm participation in compulsory Social Insurance if the employees taking unpaid leave, sick leave, maternity leave, or suspending the labour contract.
• The deadline for submission is 15 August 2022.

Application form and method

Accordingly, employers can apply for rent support for their employees in the following forms:

• Direct submission
• Public postal service
• Online submission

The district-level People’s Committees will base on the list prepared by employers and certified by the Social Insurance Agency according to form No. 02 and Form No. 03 (according to Decision 08/2022/QD-TTg) to appraise and submit the list and the funding support to the Provincial People’s Committee for approval.

Official Letter 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.

Goods rented or borrowed from EPEs as temporary imports for re-export are not subject to VAT

On 21 April 2022, the General Department of Customs issued Official Letter 1400/TCHQ-TXNK on the tax treatment of goods rented and borrowed from export processing enterprises.

Clause 20, Article 5 of the 2008 VAT Laws states that: “goods temporarily imported for re-export, goods temporarily exported or re-imported… are not subject to VAT”

Accordingly, when domestic enterprises rent or borrow goods from export processing enterprises and register customs declaration as temporary imports, the goods are not subject to VAT.

In case the rent or borrowing term has expired, but the domestic enterprise continues to use those goods and does not re-export them immediately after the expiration, the domestic enterprise must declare and pay VAT together with the import tax in a new customs declaration as prescribed in Clause 12, Article 1 of Decree 59/2018/ND-CP.

During the term, if the goods are damaged and cannot be re-exported, they must be destroyed according to the provisions of law. The domestic enterprises are not required to declare and pay VAT for these goods.

Handling taxes on damaged goods due to damage or loss

On 6 April 2022, the General Department of Vietnam Customs issued Official Letter 1194/TCHQ-TXNK on the tax treatment of goods damaged by fire.

Accordingly, pursuant to Clause 1, Article 18 of the Law on Import Tax and Export Tax 107/2016/QH13 stipulates that export or imported goods that are in the process of customs supervision if damaged or lost which the agency or organisation has the authority to assess and certify, the taxes will be reduced.

Pursuant to Clause 2, Article 32 of Decree No. 134/2016/ND-CP stipulating that tax reduction documents include:

• The taxpayer’s written request for tax reduction following Form No. 08
• Insurance contract, a notice of payment of indemnity from the insurance receiving organisation (if any), in case the insurance contract does not include tax compensation term, it must be certified by the insurance organisation; contract or minutes of agreement on the compensation of the carrier if the loss caused by the carrier (if any): 1 certified copy
• Minutes of certifying the cause of damage by the competent authority in the area where the damage occurs (the record of certification of the fire by the fire prevention and fighting police agency of the locality where the fire occurred; the written document certification of the district-level People’s Committee where natural disasters, fires or unexpected accidents cause damage to imported raw materials, machinery, and equipment): 1 original copy.
• An assessment certificate of the trader providing assessment services regarding the number of lost goods or the actual loss rate of the goods: 1 original copy.

Please note that minutes and documents certifying the cause of damage and the certificate of an expert witness must be prepared within 30 days from the occurrence date of the natural disaster, fire, or unexpected accident.

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.