This November 2020 publication of our tax and accounting updates looks at a number of key decrees that were released recently including transfer pricing, tax administration, e-invoices and company establishment. These decrees cover a wide range of subjects, and we encourage readers to read more in our detailed “Client alerts” we have released for each of these at our publications page on our website. We also cover our regular review of recent official letters released by the tax authorities in this publication.
Decree 132 on transfer pricing in Vietnam
On 5 November 2020, the Vietnam Government released Decree 132/2020/ND-CP (Decree 132) in respect of Transfer Pricing in Vietnam, replacing Decree 20/2017/ND-CP and Decree 68/2020/ND-CP.
Decree 132 provides some significant changes to Transfer Pricing regulations in Vietnam, and although it comes into effect from 20 December 2020, it applies to the full 2020 tax year, therefore entities with related party transactions will need to ensure understanding and compliance with these regulations.
Decree 126 implementing the taxation administration law
The Vietnamese Government released Decree 126/2020/ND-CP (Decree 126) on 19 October 2020, to implement elements of the Law on Tax Administration 2019. The Decree is a comprehensive document, spanning 266 pages (including appendices), a covering broad range of tax administration and compliance in Vietnam.
Of changes implemented by Decree 126, some of the more significant relate to:
- Taxation of cross-border e-commerce activities
- Tax administration during suspension of a business
- New anti-avoidance provisions and increased penalties for taxation enforcement
- Changes to taxation lodgements and general administration
Decree 123 covering invoices and delays to compulsory e-invoices
Decree 123/2020/ND-CP (“Decree 123” or “the Decree”) was issued by the Vietnamese Government on 19 October 2020, providing guidance in relation to invoices and vouchers, including the issuance of e-invoices.
The Most significant change arising from Decree 123 is the delay to the deadline for compulsory e-invoice implementation, which has been extended from 1 November 2020 to 1 July 2022. The purpose is to provide more time for organisations operating in Vietnam to transition to the e-invoice system.
Decree 122 introducing changes to Vietnam company registration procedures
On 15 October 2020, the Vietnam Government released Decree 122/2020/ND-CP (Decree 122) regulating the procedures for company registration in Vietnam, and incorporating initial labour usage declaration, Social Insurance registration and tax invoice usage registration.
The Decree links these initial registration steps in one process under the one company registration application. The registration procedures for a company branch and representative office are also covered by Decree 122.
Following the issuance of the Decree 122 by the Agency for Business Registration (being part of the Ministry of Planning and Investment), the Government also issued Official Letter no. 117/DKKD-NV (Official Letter 117) to assist with implementing Decree 122 on amendments to the process of registering a company in Vietnam.
Official letters released
Official Letters are releases showing the Tax and other Authorities’ interpretation and application of Vietnam’s Laws, providing guidance to taxpayers in Vietnam.
Exemption of duties for goods imported for further processing and export
On 21 October 2020, the General Department of Customs issued Official Letter 6774/TCHQ-TXNK covering imported goods to be re-processed and exported, and where notification of subcontracting is not made to the Customs Department following the prescribed time limits.
The General Department of Customs assigns the provincial Customs Departments to conduct post-customs clearance inspection at taxpayers’ offices for re-processing contracts where it is determined that an enterprise:
- Engages with a foreign trader
- Has a processing contract and a processing facility to produce goods within the territory of Vietnam
- Notifies the re-processing sub-contractor, and the processing contract complies with provisions of the law on customs
- Meets other tax exemption provisions in Clause 2 Article 10 of Decree 134/2016/ND-CP
- Uses imported raw materials, supplies and components to process
Where an enterprise has sent goods to a subcontractor for re-processing but failed to notify the authorities of the subcontracting within the time limit as in Circular 38/2015/TT-BTC, the subcontractor facility will also need inspection.
Where it is determined that the subcontractor:
- Has a processing facility
- Performs the re-processing
- Has returned processed goods to the enterprise that has a processing contract with a foreign trader
- The re-processed goods are exported
Then the enterprise with the processing contract will not be subject to import tax and will be dealt with for violations for failure to notify the re-processing establishment or the re-processing contract with the Customs Department within the prescribed time limit.
If the inspection of the subcontractor facility results in a failure to satisfy the above requirements, import tax is to be collected according to regulations.
Personal and dependent deductions for foreign experts
On 28 October 2020, the General Department of Taxation released Official Letter 4590/TCT-DNNCN on deductions for personal income tax of foreign experts.
Accordingly, if taxpayers being foreign experts working in Vietnam are Vietnam tax residents finalising PIT, the deductions are applied as below:
- Personal deduction is VND 9 million per month and VND 3.6 million per month (per dependent) up to December 2019, and
- Personal deduction is VND 11 million per month and VND 4.4 million per month (per dependent) from January 2020 onwards.
These, therefore, are to be treated consistently amongst all tax resident individuals.