I. FOREIGN EMPLOYEES

1. Based on the working time in Vietnam of foreigners recorded on the contract or document assigning them to work in Vietnam to temporarily deduct personal income tax

Official letter No. 47288/CTHN-TTHT dated 21 August 2024 on declaration and calculation of personal income tax of foreign workers

Pursuant to Circular No. 105/2020/TT-BTC dated December 3, 2020 of the Ministry of Finance guiding tax registration.

+ Article 3 explains some terms:

“7. “Income paying agency” is an organization or individual that pays income from salaries and wages and registers for tax for employees and dependents of employees.”

+ Point a, Clause 9 stipulates tax registration of individuals as follows:

“…a) Individuals who pay personal income tax through the income paying agency and authorize the income paying agency to register for tax, the taxpayer shall submit the tax registration dossier to the income paying agency. In case of paying personal income tax at multiple income paying agencies in the same tax payment period, the individual only authorizes tax registration at one income paying agency to be granted a tax code by the tax authority. The individual shall notify his/her tax code to other income paying agencies for use in tax declaration and payment.”

For individuals who are foreigners working in Vietnam, the organization or individual paying the income shall base on the working time in Vietnam of the taxpayer stated in the Contract or the document assigning to work in Vietnam to temporarily deduct tax according to the Progressive Partial Table (for individuals who work in Vietnam for 183 days or more in the tax year) or according to the Full Tax Table (for individuals who work in Vietnam for less than 183 days in the tax year)”.

Based on the above provisions, in case the taxpayer has obligations to the state budget, he/she must register for tax and be granted a tax code by the tax authority. Income paying organizations paying income from salaries and wages must register taxes for employees according to Circular No. 105/2020/TT-BTC.

II. TAX POLICY

1. Interest expense exceeding 30% of EBITDA excluding interest capitalized into asset value

On 24 June 2021, Tax Department of Bac Ninh Province received Official Letter No. 236/2021/CN-CV from Cao Nguyen Bac Ninh Joint Stock Company requesting guidance on deductible expenses when capitalizing interest expenses. Regarding this issue, the Bac Ninh Provincial Tax Department has the following opinion:

For companies with related-party transactions, the total interest expense is deductible when determining taxable income for corporate income tax according to Clause 3, Article 16 of Decree No. 132/2020/ND-CP dated November 5, 2020 of the Government as follows: The total interest expense (excluding loan interest capitalized into the value of assets and investment works) after deducting deposit interest and loan interest arising during the period of the taxpayer is deductible when determining taxable income for corporate income tax does not exceed 30% of the total net profit from business activities in the period plus interest expense (excluding loan interest capitalized into the value of assets and investment works) after deducting deposit interest and loan interest arising during the period plus depreciation expense arising during the period of the taxpayer.

The portion of non-deductible interest expenses as prescribed above shall be transferred to the next tax period when determining the total deductible interest expenses in case the total deductible interest expenses arising in the next tax period are lower than the level prescribed in Point a of this Clause. The period for transferring interest expenses calculated continuously shall not exceed 05 years from the year following the year in which non-deductible interest expenses arise.

2. The Company opens an on-site export declaration that is not in accordance with the provisions of Point c, Clause 1, Article 35 of Decree No. 08/2015/ND-CP, the Tax Authority will not process a tax refund.

In Official letter No. 558/TCT-CS, the General Department of Taxation received official dispatches from the Tax Departments of Khanh Hoa, Thanh Hoa, Ha Nam, Binh Duong, Bac Ninh, Ho Chi Minh City, and Binh Phuoc asking about the VAT policy for on-site import and export activities. Regarding this issue, the General Department of Taxation has the following comments:

On July 12, 2023, the General Department of Customs issued Official Dispatch No. 3622/TCHQ-GSQL responding to concerns related to foreign traders without a presence in Vietnam. Accordingly, based on the provisions of Clause 2, Article 3 of Decree No. 90/2007/ND-CP dated May 31, 2007 of the Government on the export rights of foreign traders not present in Vietnam and Clause 5, Article 3 of the Law on Foreign Trade Management No. 05/2017/QH14 dated June 12, 2017: if it is determined that a foreign trader has had investment and business activities in Vietnam in the forms prescribed in the laws on investment, trade and enterprises; has had a representative office or branch in Vietnam according to the provisions of the laws on trade and enterprises, it is not a case of a foreign trader not having a presence in Vietnam.

In case the foreign trader is determined not to be a foreign trader without a presence in Vietnam, the goods purchased and sold between a Vietnamese enterprise and this foreign trader and assigned to another enterprise to be delivered in Vietnam are not subject to on-site export/import as prescribed in Point c, Clause 1, Article 35 of Decree No. 08/2015/ND-CP dated January 21, 2015 of the Government and Point c, Clause 1, Article 86 of Circular No. 38/2015/TT-BTC dated March 25, 2015 of the Ministry of Finance.

In case the Customs Authority determines that the enterprise has opened an on-site export declaration that is not in accordance with the provisions in Point c, Clause 1, Article 35 of Decree No. 08/2015/ND-CP, the Tax Authority shall not process the tax refund due to failure to meet the conditions for customs declaration as prescribed.

3. Technology transfer and transfer of intellectual property rights abroad are not subject to the 0% VAT rate

Official letter No. 2204/TCT-CS dated 24 May 2024 of the General Department of Taxation.

The General Department of Taxation received Official Letter No. 87358/CTHN-TTHT dated December 13, 2023 of the Hanoi Tax Department on VAT policy. Regarding this issue, the General Department of Taxation has the following comments:

In the case that Kalapa Joint Stock Company exports software products and software services in accordance with the provisions of law, it is subject to the VAT rate of 0% if it meets the conditions prescribed in Article 9 of Circular No. 219/2013/TT-BTC.

In case the competent authority determines that the Company has activities of transferring intellectual property rights abroad, it is not subject to the 0% VAT rate according to the provisions of Clause 2, Article 1 of Circular No. 130/2016/TT-BTC dated August 12, 2016 of the Ministry of Finance.

III. INVOICES

1. Issue electronic invoices with codes for each occurrence to taxpayers who are being forced to stop using invoices

Official letter No. 672/TCT-QLN: The General Department of Taxation received Official dispatch No. 10756/CTQNA-QLN dated 23 December 2023 from Tax Department of Quang Nam Province on the issuance of electronic invoices with codes for each occurrence in cases where taxpayers are forced to stop using invoices. Regarding this issue, the General Department of Taxation has the following opinions:

Based on the above provisions, in cases where taxpayers are being forced by tax authorities to stop using invoices and have a written request to use invoices to have a source of payment for workers’ salaries and expenses to ensure continuous production and business, the tax authority shall issue electronic invoices with codes of the tax authority for each occurrence, provided that the taxpayer must immediately pay at least 18% of the revenue on the used invoices to the state budget. The issuance of electronic invoices with tax authority codes for each occurrence is implemented according to the provisions of Decree No. 123/2020/ND-CP and the instructions in the Electronic Invoice Management Process. Accordingly, taxpayers submit a request for electronic invoices with tax authority codes to the tax authority and access the tax authority’s electronic invoice system to create electronic invoices. The data receiving department can further compare the records transferred by the Debt Management and Tax Debt Enforcement Department, including: Decision on enforcement by stopping the use of invoices, documents to pay at least 18% of the revenue on the invoice, other related documents (if any). In case of issuing electronic invoices with codes for each occurrence to taxpayers who are being forced to stop using invoices, Form No. 04-2/CC in Appendix III issued with Decree No. 126/2020/ND-CP dated October 19, 2020 of the Government shall not apply.

IV. SOCIAL INSURANCE

1. Paying social insurance for 30 years (for women) and 35 years (for men) will receive the maximum pension

How many years of social insurance contributions are required to receive a 75% pension?

Hanoi Social Insurance Law:

The monthly pension is stipulated in Article 56 of the 2014 Social Insurance Law and guided by Clause 2, Article 7 of Decree 115/2015/ND-CP.

The monthly pension of employees is calculated according to the following formula:

Monthly pension = Monthly pension rate x Average monthly salary for social insurance contributions.

In which, the monthly pension rate of employees eligible for pension is calculated as follows:

– For female employees retiring from January 1, 2018 onwards, the monthly pension rate is calculated at 45% corresponding to 15 years of social insurance contributions; then for each additional year of social insurance contributions, an additional 2% is calculated; the maximum rate is 75%.

Thus, female workers need 30 years of social insurance contributions to receive the maximum pension (75%).

– For male workers retiring from January 1, 2018 onwards, the monthly pension rate is calculated at 45% corresponding to the number of years of social insurance contributions according to the table below, then for each additional year of social insurance contributions, an additional 2% is calculated; the maximum level is 75%.

Thus, male workers need 35 years of social insurance contributions to receive the maximum pension (75%).

So, currently, if workers want to receive a pension at the maximum rate (75%), they need to meet the conditions for receiving a pension and must pay social insurance for at least 30 years for women and 35 years for men.

In addition, for employees who receive pension before the prescribed age due to reduced working capacity, the monthly pension rate (%) will also be calculated as above, but for each year of retirement before the prescribed age, it will be reduced by 2%. Source: https://laodong.vn

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