September 2022 Tax Updates: The statutory rate of 1% for Unemployment Insurance returns & Decree 53 on storing data for foreign enterprises operating in selected fields.

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September 2022 Tax Updates: The statutory rate of 1% for Unemployment Insurance returns & Decree 53 on storing data for foreign enterprises operating in selected fields

This September 2022 publication of our Tax and Accounting Updates provides a reminder that the statutory rate of 1% for Unemployment Insurance returns, Decree 53 on storing data for foreign enterprises operating in selected fields in telecommunications networks, services on the internet and value-added services in Vietnam’s cyberspace, data on taxes upon the transfer of off-plan property and our regular review of recent Official Letters released by the Tax Authorities.

Reminder for the return to the statutory rate of 1% for Unemployment Insurance

According to Resolution 116/NQ-CP issued by the Government on 24 September 2021 on utilising the Unemployment Insurance (UI) Fund to support employees and employers in difficult situations due to COVID-19, employers have been entitled to a reduction in the UI contribution rate from 1% to 0% of the monthly salary fund subject to Unemployment Insurance, for 12 months, from 1 October 2021 to 30 September 2022.

Employers need to update the Unemployment Insurance rate to 1% when preparing payroll and obligation calculations from 1 October 2022.

Foreign enterprises operating in selected fields in telecommunications networks, services on the internet and value-added services in Vietnam’s cyberspace must store data in Vietnam following Decree 53

After more than four years after the release of the 2018 Law on Cybersecurity, the guiding Decree of this law, Decree 53/2022/ND-CP (Decree 53), was finally promulgated on 15 August 2022 and is effective from 1 October 2022.

Who are subjects to the requirements?

Accordingly, foreign enterprises providing services on telecommunications networks, services on the internet and value-added services in Vietnam’s cyberspace, which meets the 3 conditions below are required to store data and set up branches or Representative Offices in Vietnam.

1) Foreign enterprises undertake activities in Vietnam related to the following 9 fields:

  • Telecommunication services
  • Storing and sharing data in cyberspace
  • Providing national or international domain names for service users in Vietnam
  • E-commerce
  • Service providers of online payments and payment intermediaries
  • Transport connectivity services through cyberspace
  • Social networks and social media
  • Online video games
  • Services providing, managing or operating other information in cyberspace in the form of messages, voice calls, video calls, email, online chat

2) There is a written decision by The Minister of Public Security on storing data and placing a branch or representative office in Vietnam. The enterprises which receive the written decision from the authorities will have a 12-month timeframe to fulfill these data storage requirements and register their branch/representative office

3) These foreign enterprises’ services are used to carry out violations concerning cybersecurity and fail to coordinate, prevent, investigate and handle that violation upon a written request by the Ministry of Public Security. Under failure of conduct due to force majeure events, foreign enterprises are required to notify the Vietnamese authorities within 3 working days and prepare a remedial plan in less than 30 days period.

Compulsory data to be stored in Vietnam

Subject enterprises are required to store 3 types of data (localised data) in Vietnam:

  • Data on the personal information of the users in Vietnam
  • Data created by users in Vietnam: service account name, service usage time, credit card information, email address, registered network address (IP) last login, logout, registered phone number associated with the account or data
  • Data on the relationship/activities of users in Vietnam: friends, groups with which the user connects or interacts.

The Localised Information is required to be stored in Vietnam for a minimum of 24 months from the time the enterprise receives the data storage request from the authorities.

Note: In case of force majeure and compliance with the requirements of the law on cyber security by foreign enterprises is not possible, the foreign enterprise would notify the Department of Cybersecurity and Crime Prevention within 3 working days to check the authenticity of the force majeure. In this case, the enterprise has 30 working days to find a solution.

We have released an article detailing requirements of the Decree 53, and offering practical insights and interpretations, click here to read the full article.

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.

Use of electronic sales invoices

On 5 September 2022, the General Department of Taxation, Hanoi Tax Department issued Official Letter 43412/CTHN-TTHT on electronic sales invoices.
According to the Government’s Decree 123/2020/ND-CP dated 19 October 2020 on invoices and documents:

  • In Article 4, regulations on the principles of making, managing and using invoices and documents: When selling goods or providing services, the seller must issue an invoice and deliver to the buyer (including cases where goods and services are used for promotion, advertising, samples, giving, exchanging, paying for employees’ wages and for internal consumption (except for goods circulating internally to continue the production process); exporting goods in the form of loans, giving borrowing or returning goods) and must write the contents in full as prescribed in Article 10 of the Decree. Where e-invoices are used, they must follow the standard data format from the tax authorities as prescribed in Article 12 of the Decree.
  • Article 8 stipulates types of sales invoices which are for organisations and individuals declaring and calculating VAT by the direct method used for the following activities:
    • Selling goods and providing services in the country
    • International transportation activities
    • Exports into the non-tariff zone and the cases are considered exports
    • Exporting goods, providing services to foreign countries, etc.

Based on the above provisions, the Hanoi Tax Department has the following comments:

In case the company uses e-invoices according to Decree 123/2020/ND-CP of the Government, when selling goods or providing services, the seller must issue an invoice and deliver to the buyer as prescribed in Clause 1, Article 4 of the Decree. Where the company declares and calculates VAT by the direct method when exporting goods or providing services abroad, the company is to use sales invoices as prescribed in Clause 2, Article 8 of this Decree.

CIT incentives for software production investment projects

On 29 August 2022, Hanoi Tax Department issued Official Letter 42537/CTHN-TTHT on CIT incentives for software production investment projects.

Based on Decree 71/2007/ND-CP, Circular 13/2020/TT-BTTTT, Circular 78/2014/TT-BTC, Circular 96/2015/TT-BTC and Official Letter 844/TCT-CS, the Hanoi Tax Department provides the following:

Where the company is implementing a new investment project in the field of software product production as prescribed by law, income from software product production is eligible for CIT incentives following regulations at Item b, Clause 1, Article 11 of Circular 96/2015/TT-BTC as follows:

  • Tax rate of 10% for 15 years from the first year of revenue from an investment project that is eligible for tax incentives
  • Tax exemption for 4 years from the first year the enterprise has taxable income from the new investment project entitled to tax incentives and a 50% reduction of tax payable for the next 9 years. If an enterprise has no taxable income for the first three years, counting from the first year of revenue from a new investment project, the tax exemption or reduction period starts from the fourth year.

CIT incentives are only applicable to enterprises that implement the accounting, invoice and voucher regime and pay CIT under deduction method.

During the CIT incentive period, if an enterprise conducts several production and business activities, it has to separate income from production and business activities entitled to CIT incentives, including tax incentives, tax exemption and reduction, and income from other business activities that are not eligible for tax incentives to declare and pay tax.

Regarding determining whether the company’s activities are the production of software products that meet the process to entitle to the above CIT incentives, the company is recommended to study and follow the instructions in Circular 13/2020/TT-BTTTT dated 3 July 2020 of the Ministry of Information and Communications.

 

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.

Last updated on October 5, 2022
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