I. TAX POLICY
1. Revenue from deferred sales interest is not interest on deposits or loans arising during the period as prescribed in Clause 3, Article 16 of Decree 132/2020/ND-CP
Official Letter No. 42369/CTHN-TTHT of the Hanoi Tax Department on determining the discount of bills of exchange and deferred interest in the formula for calculating total interest expense
– Pursuant to Clause 14, Clause 16, Article 4 of the Law on Credit Institutions, it is stipulated that:
“14. Credit granting is an agreement for an organization or individual to use a sum of money or a commitment to allow the use of a sum of money on the principle of repayment through lending, discounting, financial leasing, factoring, bank guarantees and other credit granting operations.
16. Lending is a form of credit granting, whereby the lender transfers or commits to transfer to the customer a sum of money to be used for a specified purpose within a certain period of time as agreed upon with the principle of repayment of both principal and interest.”
– Pursuant to Article 16 of Decree 132/2020/ND-CP dated November 5, 2020 of the Government regulating the determination of costs for tax calculation for enterprises with related-party transactions:
“…3. Total interest expenses are deductible when determining taxable income for enterprises with related-party transactions:
a) Total interest expenses after deducting deposit interest and loan interest arising during the period of the taxpayer are deductible when determining taxable income for enterprise income tax does not exceed 30% of the total net profit from business activities in the period plus interest expenses after deducting deposit interest and loan interest arising during the period plus depreciation expenses arising during the period of the taxpayer;…”
Based on the above provisions, the Hanoi Tax Department has the following opinions:
In case an enterprise has related-party transactions, generating revenue from deferred sales interest, the revenue from deferred sales interest is not deposit interest or loan interest arising during the period according to the provisions of Clause 3, Article 16 of Decree 132/2020/ND-CP.
Regarding the expense of paying interest on bill discount to the Bank, the Company is requested to base on the actual business transactions and compare with the credit regulations to determine whether the nature of the discount interest is part of the interest expense as prescribed in Clause 3, Article 16 of Decree 132/2020/ND-CP mentioned above.
2. How to calculate foreign contractor tax when a foreign company sells products with copyright services to a company in Vietnam
Official Letter No. 47359/CTHN-TTHT of the Hanoi Tax Department on tax policy for foreign contractors
In response to Official Letter No. 0106/2023/CV dated June 19, 2023 of Diossoft Company Limited asking about tax policy, the Hanoi Tax Department has the following opinion:
In the case of Migun Company (Korea) – a foreign contractor with income arising in Vietnam on the basis of a contract signed with Diossoft Company Limited to provide goods which are health care products with copyright services to use products in Vietnam, Migun Company (Korea) is subject to tax for foreign contractors according to the provisions of Clause 1, Article 1 of Circular 103/2014/TT-BTC. In case the foreign contractor does not meet one of the conditions for direct tax declaration in Vietnam as stated in Article 8, Section 2, Chapter II of Circular No. 103/2014/TT-BTC, Diossoft Company Limited (the Vietnamese party) is responsible for declaring and paying tax on behalf of the foreign partner according to the instructions in Article 12, Article 13, Section 3, Chapter II of Circular No. 103/2014/TT-BTC.
– In case the value of the copyright fee and the value of the goods can be separated:
+ VAT: In case the goods are provided under the contract in the form of: the point of delivery of goods is located in the territory of Vietnam; or the provision of goods with accompanying services is carried out in Vietnam, the value of the goods is only subject to VAT at the import stage according to regulations, the value of the service is subject to VAT according to the instructions in Article 6 of Circular 103/2014/TT-BTC. If the copyright service falls under the cases specified in Clause 21, Article 4 of Circular No. 219/2013/TT-BTC, it is not subject to VAT. If it does not fall under the cases specified in Clause 21, Article 4 of Circular No. 219/2013/TT-BTC, the rate of 5% shall be applied to the taxable revenue for the service as prescribed in Clause 2, Article 12 of Circular No. 103/2014/TT-BTC.
+ Corporate income tax: apply the rate of 10% to calculate corporate income tax on income from copyright as prescribed in Clause 2, Article 13 of Circular No. 103/2014/TT-BTC.
– In case the copyright value and the value of goods cannot be separated:
+ VAT: apply the rate of 3% to calculate on the VAT taxable revenue of the contract;
+ Corporate income tax: apply a rate of 2% on the taxable revenue of the contract.
3. Income not related to work performed in Vietnam by non-resident individuals will not be included in taxable income in Vietnam
Official Letter No. 40818/CTHN-TTHT of Hanoi Tax Department on personal income tax and corporate income tax policies
In response to Official Letter No. 2404/2023/CV-MP of Megane Prince Company Limited (hereinafter referred to as the Company) regarding concerns about personal income tax and corporate income tax policies, Hanoi Tax Department has the following opinions:
– Pursuant to Article 1 of Circular 111/2013/TT-BTC dated August 15, 2013 of the Ministry of Finance guiding the implementation of the Law on Personal Income Tax, the Law on amending and supplementing a number of articles of the Law on Personal Income Tax and Decree No. 65/2013/ND-CP of the Government detailing a number of articles of the Law on Personal Income Tax and the Law on amending and supplementing a number of articles of the Law on Personal Income Tax individuals:
– Pursuant to Article 2 of Circular 119/2014/TT-BTC dated August 25, 2014 of the Ministry of Finance amending and supplementing Article 1 of Circular 111/2013/TT-BTC:
Pursuant to the above provisions, in case Mr. Nagahama Hiroshi and the foreign expert do not meet the conditions of being an individual residing in Vietnam as prescribed in Clause 1, Article 1 of Circular 111/2013/TT-BTC, they are determined to be non-resident individuals and the scope of determining income subject to personal income tax in Vietnam is income arising in Vietnam regardless of the place of payment and receipt of income as prescribed in Article 2 of Circular 119/2014/TT-BTC. If the income that an individual is paid in Japan is not related to the work that the individual performs in Vietnam, this income shall not be included in the income from salary and wages subject to personal income tax in Vietnam.
In case Mr. Nagahama Hiroshi and the foreign expert meet the conditions of being a resident individual as prescribed in Clause 1, Article 1 of Circular 111/2013/TT-BTC of the Ministry of Finance, the scope of determining taxable income for personal income tax is income arising within and outside the territory of Vietnam, regardless of the place of income payment according to the instructions in Article 2 of Circular 119/2014/TT-BTC. For income received from abroad, individuals shall declare and pay personal income tax directly to the Vietnamese tax authority as prescribed in Clause 3, Article 19 of Circular 80/2021/TT-BTC dated September 29, 2021 of the Ministry of Finance.
4. Regulations on tax liability allocation of taxpayers with centralized accounting who have dependent units and business locations in provinces other than the head office
Official Letter No. 56701/CTHN-TTHT of the Hanoi Tax Department on VAT declaration for inter-provincial business
The Hanoi Tax Department received an Official Letter from Vietnam Biken Company Limited (hereinafter referred to as the Company) asking about VAT declaration for inter-provincial business, the Hanoi Tax Department has the following comments:
– Pursuant to Circular No. 80/2021/TT-BTC dated September 29, 2021 of the Ministry of Finance guiding the implementation of a number of articles of the Law on Tax Administration and Decree No. 126/2020/ND-CP dated October 19, 2020 of the Government detailing a number of articles of the Law on Tax Administration:
+ Clause 1, Article 12 stipulates the allocation of tax liability of taxpayers with centralized accounting who have dependent units dependent, business location in a province other than the head office:
“1. Taxpayers with activities and business in many other provincial-level localities where the taxpayer has its head office shall perform centralized accounting at the head office according to the provisions of Clause 2, Clause 4, Article 11 of Decree No. 126/2020/ND-CP, declare tax, calculate tax and submit tax declaration dossiers to the directly managing tax authority and allocate the tax payable to each province where the business activities are conducted.”
+ Article 13 stipulates tax declaration, tax calculation, allocation and payment of value added tax:
“Article 13. Tax declaration, tax calculation, allocation and payment of value added tax
2. Allocation method:
c) Allocation of value added tax payable for construction activities:
The amount of value added tax payable for each province of construction activities is equal to (=) revenue excluding value added tax for construction activities in each province multiplied (x) by 1%.
Based on the above provisions, in the case of Vietnam Biken Company Limited (headquartered in Hanoi) with construction activities (construction activities are determined according to the provisions of the law on the national economic sector system and the provisions of specialized laws) in another province where the Company has its head office, it shall perform centralized accounting at the head office according to the provisions of Clause 2, Clause 4, Article 11 of Decree No. 126/2020/ND-CP, declare taxes, calculate taxes and submit tax declaration dossiers to the directly managing tax authority and allocate the amount of tax payable to each province where it conducts business activities according to the provisions of Clause 1, Article 12 of Circular 80/2021/TT-BTC.
In case the construction activities take place in a non-tariff zone in a province other than the one where the Company has its head office, the VAT rate of 0% shall be applied if it satisfies the provisions in Point b, Clause 2, Article 9 of Circular 219/2013/TT-BTC and there is no VAT payable on the revenue from this construction activity, it is not required to allocate the tax payable to each province where the business activities are conducted. Therefore, the Company does not have to declare the value added tax of such construction works and construction items to the tax authority where the construction works are located according to Form 05/GTGT issued with Appendix II of Circular 80/2021/TT-BTC.
In case the Subcontractor signs a contract directly with the Main Contractor, not a contract directly with the Investor to execute a construction project in a province other than the location of the head office, the Subcontractor is not required to declare value added tax of such projects to the tax authority where the construction project is located according to the instructions in Section c.1, Point c, Clause 3, Article 13 of Circular 80/2021/TT-BTC dated September 29, 2021 of the Ministry of Finance.
II. LABOR – EMPLOYMENT
1. Employers and employees agree on the form of salary payment by time, product or contract
Ms. Nguyen Thi Hong Thanh’s company (Bac Ninh) is 100% state-owned, performing the task of providing irrigation and drainage services for agricultural production according to the production and financial plan assigned by the Provincial People’s Committee.
Every year, the company is supervised by the competent authorities in finance and labor. The company has 548 public service workers and more than 20 non-public service workers. Currently, the company pays salary in the form of time salary according to current state regulations.
The number of employees of the non-public service unit (under the company) performing the tasks assigned by the company is to regularly repair and make minor repairs to construction items, machinery and equipment, and dredging canals and ditches serving agricultural production.
These units are dependent on the company for accounting, implement product contracts, complete and exceed the assigned plan.
Ms. Thanh asked, can the company proactively negotiate and decide on the form of salary payment for non-public employees in the form of collective product salary payment? Can the company apply Article 96 of the Labor Code on the form of salary payment?
Regarding this issue, the Ministry of Labor, War Invalids and Social Affairs responded as follows:
Article 96 of the Labor Code stipulates: “Employers and employees agree on the form of salary payment by time, product or contract”.
Thus, employers have the right to negotiate and decide on the form of salary payment for employees. Source: Chinhphu.vn
2. When will employees stop receiving pensions?
Mr. Lu A M. (Thai Nguyen province) has paid social insurance for 20 years at a foreign enterprise. Mr. M. asked, when he reaches retirement age, how many years will he receive pensions?
Regarding this issue, Thai Nguyen Provincial Social Insurance responded as follows:
According to current legal regulations, employees working under normal conditions, when retiring, have paid social insurance for 20 years or more and meet the age requirement (retirement age from January 1, 2021 is 60 years and 3 months for male employees and 55 years and 4 months for female employees. After that, each year increases by 3 months for male employees until reaching 62 years old in 2028 and each year increases by 4 months for female employees until reaching 60 years old in 2035) are entitled to pension benefits.
Retirement is the most important regime in the social insurance system, pension is the legal right of employees after completing their labor obligations and paying social insurance, aiming to stabilize their lives when they reach retirement age.
Retirement includes two processes: payment and enjoyment. The payment process is carried out when the employee starts participating in social insurance and the enjoyment process begins from the time the employee stops working to receive pension until death.
Retirement beneficiaries are entitled to monthly pension for life, are issued a free health insurance card and enjoy related regimes of pensioners. Pensioners are only temporarily suspended from receiving pension when they fall into one of the following cases: Illegal exit; declared missing by the Court; there is a basis to determine that the enjoyment of social insurance is not in accordance with the provisions of law. Source: Chinhphu.vn
