Mazars in Vietnam Newsletter - Issue July 2020

We would like to bring you tax and legal updates for July 2020 with the following highlights influencing the corporate operations and payroll activities:

Operational Updates

1. Official letter 2077/CT-TTHT providing guidance for Export - Processing Enterprises ("EPEs") on their supply of warranty service to domestic market

On 22 June 2020, Hanoi Tax Department issued Official letter 2077/CT-TTHT providing guidance for EPEs on their provision of warranty service to domestic market. According to the Official letter, EPEs need to register with the competent authority for an approval to conduct the warranty service. EPEs after being granted such approval also need to make separate accounting records for the warranty service and make VAT registration and payment accordingly.

2. Official letter 13845/CT-TTHT guiding the tax administration applied to warehouses solely used for storage purpose

According to Official letter 13845/CT-TTHT issued by Binh Duong Tax Department on 15 June 2020, in case the Company's warehouses do not involve in any business activities, do not generate revenue or incur expenses as a result, and all invoices for sales transactions are issued by the Company, the Company shall not be required to make registration and tax declaration for such warehouses.

3. Official letter 14176/CT-TTHT providing guidance on land rental corresponding to the unused area for business operations

According to Official letter 14176/CT-TTHT issued by Binh Duong Tax Department on 19 June 2020, land use rights for a definite period for which the entire payment already made in a lump sum shall not be deemed as intangible fixed assets, hence the land rental is not allowed to be depreciated but needs to be allocated per regulations. For the unused area for business operations, the corresponding rental shall not be allowed to be allocated as deductible expenses.

4. Official letter 55967/CT-TTHT guiding the requirements for promotion code expenses paid to Grab to be deductible

According to Official letter 55967/CT-TTHT issued by Hanoi Tax Department on 23 June 2020, in case the Company purchases promotion codes from GRAB, GRAB needs to issue corresponding invoices per regulations at Point 7 Article 3 Circular 26/2015/TT-BTC. Without sufficient invoices and documents as per regulations, the corresponding expenses shall not be deemed as deductible.

Payroll Updates

5. Decree 58/2020/NĐ-CP amending regulations on the rates of compulsory insurance contribution to the Occupational Accident and Disease Compensation Fund

On 27 May 2020, the Government issued Decree 58/2020/NĐ-CP, which takes effect from 15 July 2020, to amend regulations on the rates of compulsory insurance contribution to the Occupational Accident and Disease Benefit Fund.

Some key amendments in the Decree are summarized as below:

Enterprises operating in industries with high risks of occupational accidents and diseases shall be entitled to apply for the new contribution rate of 0.3% instead of the standard rate of 0.5%, provided that:
- For three consecutive years prior to the application date, they have not been subject to any administrative monetary fine or any criminal prosecution for their violation against laws on occupational safety, hygiene and social insurance
- For three consecutive years prior to the application year, they have submitted periodic reports on workplace accidents, occupational safety and hygiene in an accurate, sufficient and timely manner;
- Either the rate of occupational accidents in the year preceding the application year must drop by at least 15% compared to the 3-year average rate prior to the application year, or no occupational accidens have happened for 3 consecutive years preceding the application year.

Requirements for documentation, application procedure and time limits for the lower rate are also provided in the Decree.

6. Official letter 13267/CT-TTHT providing guidance on Personal Income tax ("PIT") applied to commission fee on overseas sales paid to non-residents

According to Official letter 13267/CT-TTHT issued by Binh Duong Tax Department on 05 June 2020, commission fee on overseas sales paid to non-residents is not subject to foreign contractor tax. Therefore, the company is not required to withhold PIT on the commission fee paid out.

Our support

We do trust the above points are notable and sufficient, but should you have any question or need a deeper discussion on this issue, please do not hesitate to contact us.

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