May 2023 Tax Updates: Draft policy for 2% VAT reduction, extension of deadlines for payment of VAT, CIT, PIT in 2023, and our recent tax updates.

This May 2023 publication of our Tax and Accounting Updates looks at the draft policy for 2% VAT reduction, from the current 10% rate to 8%, in Vietnam in 2023, extension of deadlines for payment of VAT, CIT, PIT and land rental in 2023, salary for Social Insurance contributions in 2023 and our regular review of recent Official Letters released by the Tax Authorities.

Draft policy for 2% VAT reduction, from the current 10% rate to 8%, in Vietnam in 2023

On 2 May 2023, the Government issued Resolution 67/NQ-CP approving the draft on VAT reduction requested by the Ministry of Finance earlier on 28 April 2023. The 2% reduction in the VAT rate is applicable to all kinds of goods and services that are subject to 10% VAT, and is expected to take effect from the issuance date of the new policy to 31 December 2023.

According to the Ministry of Finance, the VAT reduction is to ensure the right target of stimulating consumption demand, in line with the current economic context, to promote the early recovery and development of production and business activities to contribute back to the state budget as well as the economy.

Please find further details on the draft 2% VAT reduction in our Client Alert released recently here.

Extension of deadlines for payment of VAT, CIT, PIT and land rental in 2023

Decree 12/2023/ND-CP (Decree 12) was issued by the Government on 14 April 2023, extending the deadline for paying VAT, CIT, PIT and land rental, taking effect from 14 April 2023 to 31 December 2023.

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.

Certain industries/economic sectors include below:

* Manufacturing in:

• Agriculture, forestry, and fishery
• Food processing and production of textiles, apparel, leather, wood, paper, rubber and plastic, metal, electronic appliance, computer, and optical products; automobiles etc.
• Construction
• Publishing; cinematography; television program, audio recording, music production
• Crude oil and natural gas mining
• Drink production; printing, copying records of all kinds; coke and refined petroleum product manufacturing; chemical and chemical product manufacturing; etc.
• Water drainage and wastewater treatment

* Operating business in:

• Transport and storage; accommodation and food and drink; education and training; medical and social assistance; real estate trading
• Labour and employment services; operation of travel agents, tour operators, and services assisting, relating to advertisement and organisation of travel tours
• Composing, artistic, and recreational activities; operation of libraries, archives, museums, and other cultural activities; sports and recreational activities; movie screening
• Radio and television broadcasting; computer coding, consulting services, and other activities relating to computers; communication operations
  Services assisting mining operation

Extension payment deadline of VAT (except for VAT at import stage) and provisional CIT for enterprises in 2023

Extension of payment deadline of VAT (except for VAT at the import stage) and PIT for business households/ individuals in 2023

The payment deadline for VAT and PIT of business households/ individuals in 2023 is extended by 30 December 2023.

Extension of payment deadline for land rental in 2023

50% of the land rental payable in 2023 of enterprises and business households/ individuals renting land directly from the State are entitled to 6 months extension in payment deadline, from 31 May 2023 to 30 November 2023.

Salary for Social Insurance contribution in 2023

On 28 April 2023, Ho Chi Minh City Social Insurance (SI) issued Official Letter 1952/BHXH-TST guiding on the salary used as a basis for SI contribution decided by the enterprise as follows:

(1) Salary for SI contribution of employees, including:

• Salary stated in the labour contract
• Salary allowances
• Additional amounts that can be determined specifically along with the salary agreed in the labour contract and paid regularly in each salary payment period from 1 January 2018.

(2) Monthly salary for SI contribution does not include initiative bonus, mid-shift meal, allowances for petrol, phone, travel, housing, childcare, child rearing and other specific allowances separately mentioned in the labour contract.

(3) Monthly salary for SI contribution of the enterprise’s manager is decided by the enterprise

(4) Monthly salary for SHUI contribution is not lower than the minimum monthly wage at the time of payment to employees who do the simplest job/ position under normal working conditions.

(5) Monthly salary for contribution of SI, Health Insurance and Occupational Accident and Disease Insurance is not exceeding 20 times of monthly basic salary. And monthly salary for contribution of Unemployment Insurance is not exceeding 20 times of minimum monthly wage.

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.

Instructions for electronic tax payment by ID code

Official Letter 1483/TCT-KK was issued by General Tax Department (GDT) on 24 April 2023 guiding on the implementation of tax collection and payment based on the identification (ID).

In this letter, the issuance of ID codes and electronic tax declaration and payment based on ID codes will be made online via the portal of GDT, taking effect from 10 May 2023 onwards.

The ID code will be issued to taxpayers via the notice of acceptance of electronic tax returns, notice of tax payment or notice on the GDT’s portal. Taxpayers can use ID codes to search for tax liabilities status on GDT’s portal as well.

Instructions for conversion of individual ID codes as tax codes

According to Official Letter 846/TCT-DNNCN issued by General Tax Department (GDT) on 21 March 2023, the data of individual tax codes are reviewing and standardising by GDT in order to ensure the tax database is consistent with the national database on population. In particular, individual tax codes are required to be reviewed and conversed to identification code as tax code is tax codes of

• Vietnamese citizens
• Individuals incurring taxable income and are dependent under PIT regulations
• Individuals incurring obligations in terms of tax, fee and other payables to the State Budget
• Representative of business households, who is in charge of PIT declaration

The conversion process could be declared (i) online via National Public Services Portal or GDT’s portal, or (ii) by authorising to the organisation paying income, or (iii) directly to tax authorities.

Tax arrears collection approaches of tax authorities in 2023

On 24 April 2023, General Tax Department (GDT) released Official Letter 1489/TCT-QLN guiding on approaches to collect tax arrears, even with enforcement in 2023. Specifically, province tax authorities are required to take following actions:

• For tax arrears less than 90 days, immediately calling, texting, sending email, working directly, issuing tax debt notices, etc. to taxpayers.
• For tax arrears over 90 days or subject to enforcement, immediately enforce and disclose information to collect the tax arrears.
• Strengthen suspending of exit out of Vietnam for individuals and legal representatives of enterprises, who have not completed their tax obligations to improve the effectiveness of tax arrears collection.
• Request the People’s Committee to take back the land if the lessees have not paid the land leasing fee and have not complied with the enforcement from tax authorities.

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.