Our February 2020 publication of this Tax and Accounting Updates looks at a new Decree on preferential import tariffs for the ASEAN- Hong Kong, China Free Trade Agreement, a Decision on amendments to the management and granting of social insurance codes, and our regular review of recent Official Letters released by the Tax Authorities.
New decree on special preferential import tariffs, implementing the ASEAN-Hong Kong, China free trade agreement for 2019–2022
On 5 January 2020, the Vietnamese Government issued Decree 07/2020/ND-CP covering Vietnam’s Special Preferential Import Tariffs to implement the ASEAN – Hong Kong, China Free Trade Agreement for 2019 – 2022 (“AHKFTA Tariff”), and the conditions to be entitled to the preferential tax rates.
The special preferential tariff schedule detailed in the Decree apply to goods imported from member countries of the ASEAN-Hong Kong, China Free Trade Agreement, including:
- Brunei Darussalam
- Hong Kong
- Vietnam (ie, goods imported from a free trade zone into the domestic market)
The tariffs rates are divided into four specific periods:
- from 11 June 2019 to 31 December 2019;
- 2021; and
In order to be entitled to preferential tax rates, imported goods must have a Certificate of Origin (C/O) under AHK Form in accordance with AHKFTA and regulations from the Ministry of Foreign Trade, and must satisfy the requirements stipulated under Article 4 of the Decree.
The Decree takes effect from 20 February 2020.
Decision amending articles on management and granting of social insurance codes
On 8 January 2020, Vietnam Social Insurance Office issued Decision 22/QD-BHXH amending and supplementing a number of articles on the management and granting of Social Insurance codes for participants in Social Insurance under the Decision 346/QD-BHXH dated 28 March 2019.
In particularly, the Decision:
- Added additional steps to the process of issuing household codes and Social Insurance codes
- Amended the list of documents required to be provided/completed to receive Social Insurance codes, including
- Form 01-BD issued under Decision 346/QD-BHXH dated 28 March 2019;
- Form TK1-TS;
- ID card / ID card / Passport;
- Birth certificate;
- Household registration book; and
- Other supporting documents
- Issued a new declaration form for new registration/adjustment to Social Insurance information
The Decision took effect from 8 January 2020.
After the Decision was issued, on 16 January 2020, the Ho Chi Minh City Insurance Office released Official Letter 135/BHXH-QLT requiring employers to undertake the following when registering new employees:
- Requiring the completion of items  to  on the declaration form issued with Decision 22.
- Attach a scanned ID card / Passport, birth certificate or household registration book (or other acceptable documents) to complete the information for the issuance of Social Insurance codes (via email).
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.
Foreign contractor tax (FCT) for engaging foreign individuals to provide software development consulting services
On 21 January 2020, the Hanoi Department of Taxation (“HDT”) issued Official Letter 3353/CT-TTHT on FCT when a company engages foreign individuals to provide software development consulting services.
Where a Vietnamese company engages foreign individuals (with a foreign business registration or documents as proof of a registered foreign business, and which has been legalized for use in Vietnam) to provide software development consulting services, foreign individuals are deemed as earning income from a business in Vietnam. As a result, they are subject to FCT.
The company is responsible for withholding and declaring VAT and PIT on behalf of the foreign individuals using form 01/CNKD in Circular 92/2015/TT-BTC. Tax declaration documents are guided under Clause 4, Article 7 of Circular 95/2016/TT-BTC.
E-invoice issuance guidance for commercial discounts
On 21 January 2020, the General Department of Taxation issued Official Letter 326/TCT-CS guiding E-invoices issued for commercial discounts.
If an enterprise issues E-invoices under Circular 32/2011/TT-BTC, it must also comply with the provisions of Decree 51/2010/ND-CP and Circular 39/2014/TT-BTC for other contents on the E-invoices.
Accordingly, when an enterprise applies a commercial discount to customers, the E-invoices for discounted goods and services must comply with the guidance at Point 2.5, Appendix 4 of Circular 39/2014/TT-BTC.
This results in goods and services subject to commercial discounts, VAT invoices are to be issued showing the discounted price, VAT amount and the total invoice amount. If the discount is based on the quantity of goods and sales of services, the discount value of the goods sold should be adjusted in the last invoice or in the next period. Where the discount is finalized at the end of a discount program, the adjustment invoice would be issued with a list of invoice numbers to be adjusted, the adjusted value and adjusted VAT amount. Based on the adjusted invoice, the seller and the buyer would declare to adjust sales, output or input VAT.
Deductibility of staff business travel expenses
On 28 November 2019, HDT issued Official Letter 89342/CT-TTHT regarding the deductibility of payments for staff business travel expenses.
Under Article 6 of Circular 78/2014/TT-BTC, when a company pays business travel expenses for staff, such as for transport, accommodation and allowances, the expenses will only be deductible for Corporate Income Tax (“CIT”) purposes if they have appropriate invoices and supporting documents.
If the company pays these expenses in the form of a fixed allowance to staff, the expenses are deductible for CIT if they are mentioned in the internal financial policy of the company (Clause 2.9, Article 4 of Circular 96/2015/TT-BTC). Invoices are not required in this case.
If the expenses are deductible for CIT, they will also be deductible for Personal Income Tax (Point d.4, Clause 2, Article 2 of Circular 111/2013/TT-BTC).