TAX REVIEW

25 April 2020
 TAX ADMINISTRATION BODIES
Ministry of Finance

General Department of Taxation General Department of Customs

Local Department of Taxation Local Department of Customs

CIT, domestic VAT, PIT, withholding Import/Export duties

taxes, other taxes, etc Import VAT
 Tax legislation hierarchy

LAW (National Assembly)

COMPULSORY DECREE (Government)

CIRCULAR (Ministry of Finance)

OFFICIAL LETTERS (GDT/GDC)

REFERENCE
OFFICIAL LETTERS (Local Departments)
 OVERVIEW

Corporate Value
Income Added
Tax Tax

Foreign Personal
Contractor Income
Tax Tax
Corporation Income Tax (“CIT”)
 Corporation Income Tax (“CIT”)
LEGAL BASIS

▪ Law No. 14/2008/QH12 dated 3 June 2008

▪ Law No. 32/2013/QH13 dated 19 June 2013 amending some articles of Law No.14/2008/QH12
▪ Law No. 71/2014/QH13 dated 26 November 2014
▪ Decree 218/2013/ND-CP dated 26 December 2013
▪ Decree 91/2014/ND-CP dated 1 October 2014
▪ Circular 78/2014/TT-BTC dated 18 June 2014
▪ Circular 151/2014/TT-BTC dated 10 October 2014
▪ Circular 96/2015/TT-BTC dated 22 June 2015

→ Joint Circular 26/VBHN-BTC dated 14 September 2015 (CIT)

→ Joint Circular 18/VBHN-BTC dated 19 June 2015 (Tax Administration)
 Corporation Income Tax (“CIT”)
CIT AND ACCOUNTING TERMINOLOGIES

Accounting terms CIT terms

▪ Taxable incomes
▪ Financial Statements (Balance sheet, Profit and
Loss, Cash flow)
▪ Exempt income
▪ Trial Balance (TB)

▪ Loss carried forward

▪ General Ledgers (GL)

▪ Debit ▪ Tax incentive

▪ Credit ▪ Permanent (Temporary) Difference

 Corporation Income Tax (“CIT”)
CIT PAYERS
3 main categories of taxpayers

✓ Vietnamese organisations

▪ Enterprises incorporated and operating pursuant to Law on Enterprise, Law on Investment, Law on Credit Institutions,
Law on Insurance Business, Law on Securities, Law on Petroleum, Commercial Law

▪ Public and non-public professional entities which have taxable income in all sectors

▪ Organizations established and operating in accordance with the Law on Co-operatives

✓ Foreign entities conducting business activities through Permanent Establishment (“PE”) in Vietnam

▪ In principle, PE means a production and business establishment via which a foreign enterprise conducts all or a part
of its production and business activities in Vietnam.

✓ Foreign entities conducting business activities or having income sourced in VN

 Corporation Income Tax (“CIT”)
𝐶𝐼𝑇 𝑝𝑎𝑦𝑎𝑏𝑙𝑒 = 𝐴𝑠𝑠𝑒𝑠𝑠𝑎𝑏𝑙𝑒 𝑖𝑛𝑐𝑜𝑚𝑒 𝑥 𝑇𝑎𝑥 𝑟𝑎𝑡𝑒
CIT CALCULATION
METHOD 𝐴𝑠𝑠𝑒𝑠𝑠𝑎𝑏𝑙𝑒 𝑖𝑛𝑐𝑜𝑚𝑒 = 𝑇𝑎𝑥𝑎𝑏𝑙𝑒 𝑖𝑛𝑐𝑜𝑚𝑒 − 𝐸𝑥𝑒𝑚𝑝 𝑖𝑛𝑐𝑜𝑚𝑒 − 𝑇𝑎𝑥 𝑙𝑜𝑠𝑠𝑒𝑠 𝑐𝑎𝑟𝑟𝑖𝑒𝑑 𝑓𝑜𝑟𝑤𝑎𝑟𝑑
𝑇𝑎𝑥𝑎𝑏𝑙𝑒 𝑖𝑛𝑐𝑜𝑚𝑒 = 𝑇𝑎𝑥𝑎𝑏𝑙𝑒 𝑟𝑒𝑣𝑒𝑛𝑢𝑒 − 𝐷𝑒𝑑𝑢𝑐𝑡𝑖𝑏𝑙𝑒 𝑒𝑥𝑝𝑒𝑛𝑠𝑒 − 𝑂𝑡ℎ𝑒𝑟 𝑡𝑎𝑥𝑎𝑏𝑙𝑒 𝑖𝑛𝑐𝑜𝑚𝑒

Taxable revenues

✓ Revenue from sales of goods and/or provision of services:

- Under VAT credit method, revenue excludes VAT
- Under direct method, revenue includes VAT

✓ Timing for recognition of revenue

- For sales of goods: upon the ownership of goods are transferred.
- For provision of services : upon the service completion
- For other cases (e.g. Instalment sales, financial services, insurance services, commission, etc): each case
is specifically guided under the CIT regulations
 Corporation Income Tax (“CIT”)
𝐶𝐼𝑇 𝑝𝑎𝑦𝑎𝑏𝑙𝑒 = 𝐴𝑠𝑠𝑒𝑠𝑠𝑎𝑏𝑙𝑒 𝑖𝑛𝑐𝑜𝑚𝑒 𝑥 𝑇𝑎𝑥 𝑟𝑎𝑡𝑒
CIT CALCULATION
METHOD 𝐴𝑠𝑠𝑒𝑠𝑠𝑎𝑏𝑙𝑒 𝑖𝑛𝑐𝑜𝑚𝑒 = 𝑇𝑎𝑥𝑎𝑏𝑙𝑒 𝑖𝑛𝑐𝑜𝑚𝑒 − 𝐸𝑥𝑒𝑚𝑝 𝑖𝑛𝑐𝑜𝑚𝑒 − 𝑇𝑎𝑥 𝑙𝑜𝑠𝑠𝑒𝑠 𝑐𝑎𝑟𝑟𝑖𝑒𝑑 𝑓𝑜𝑟𝑤𝑎𝑟𝑑
𝑇𝑎𝑥𝑎𝑏𝑙𝑒 𝑖𝑛𝑐𝑜𝑚𝑒 = 𝑇𝑎𝑥𝑎𝑏𝑙𝑒 𝑟𝑒𝑣𝑒𝑛𝑢𝑒 − 𝐷𝑒𝑑𝑢𝑐𝑡𝑖𝑏𝑙𝑒 𝑒𝑥𝑝𝑒𝑛𝑠𝑒 − 𝑂𝑡ℎ𝑒𝑟 𝑡𝑎𝑥𝑎𝑏𝑙𝑒 𝑖𝑛𝑐𝑜𝑚𝑒

Deductible expenses

An expense will be deductible for CIT purpose if it meets all of the following conditions:
Invoices and
vouchers Expenses are supported by legitimate invoices and vouchers in accordance with regulations.

Related to business Goods/services purchased must be related to business activities

Payment Non-cash payment documents for goods and services with value of VND20 mil or more

Notes:

▪ Expenses must not fall into non-deductible categories under CIT regulations;

▪ Depending on the nature of expenses, additional documents may be required.

 Corporation Income Tax (“CIT”)
𝐶𝐼𝑇 𝑝𝑎𝑦𝑎𝑏𝑙𝑒 = 𝐴𝑠𝑠𝑒𝑠𝑠𝑎𝑏𝑙𝑒 𝑖𝑛𝑐𝑜𝑚𝑒 𝑥 𝑇𝑎𝑥 𝑟𝑎𝑡𝑒
CIT CALCULATION
METHOD 𝐴𝑠𝑠𝑒𝑠𝑠𝑎𝑏𝑙𝑒 𝑖𝑛𝑐𝑜𝑚𝑒 = 𝑇𝑎𝑥𝑎𝑏𝑙𝑒 𝑖𝑛𝑐𝑜𝑚𝑒 − 𝐸𝑥𝑒𝑚𝑝 𝑖𝑛𝑐𝑜𝑚𝑒 − 𝑇𝑎𝑥 𝑙𝑜𝑠𝑠𝑒𝑠 𝑐𝑎𝑟𝑟𝑖𝑒𝑑 𝑓𝑜𝑟𝑤𝑎𝑟𝑑
𝑇𝑎𝑥𝑎𝑏𝑙𝑒 𝑖𝑛𝑐𝑜𝑚𝑒 = 𝑇𝑎𝑥𝑎𝑏𝑙𝑒 𝑟𝑒𝑣𝑒𝑛𝑢𝑒 − 𝐷𝑒𝑑𝑢𝑐𝑡𝑖𝑏𝑙𝑒 𝑒𝑥𝑝𝑒𝑛𝑠𝑒 − 𝑂𝑡ℎ𝑒𝑟 𝑡𝑎𝑥𝑎𝑏𝑙𝑒 𝑖𝑛𝑐𝑜𝑚𝑒

Deductible expenses

Some of typical non-deductible expenses

✓ Loss from damaged goods/assets;

✓ Depreciation expenses;

✓ Salaries paid to founders, board members;

✓ Employment cost (salary, bonus, life insurance, tuition fee for expatriates’ children, housing rental, etc.);

✓ Welfare for employees subject to cap of 1 month salary;

✓ Uniforms allowance;

✓ Business trip expenses and per diem.

(Clause 2, Article 4, Circular 96/2015/TT-BTC)

 Corporation Income Tax (“CIT”)
𝐶𝐼𝑇 𝑝𝑎𝑦𝑎𝑏𝑙𝑒 = 𝐴𝑠𝑠𝑒𝑠𝑠𝑎𝑏𝑙𝑒 𝑖𝑛𝑐𝑜𝑚𝑒 𝑥 𝑇𝑎𝑥 𝑟𝑎𝑡𝑒
CIT CALCULATION
METHOD 𝐴𝑠𝑠𝑒𝑠𝑠𝑎𝑏𝑙𝑒 𝑖𝑛𝑐𝑜𝑚𝑒 = 𝑇𝑎𝑥𝑎𝑏𝑙𝑒 𝑖𝑛𝑐𝑜𝑚𝑒 − 𝐸𝑥𝑒𝑚𝑝 𝑖𝑛𝑐𝑜𝑚𝑒 − 𝑇𝑎𝑥 𝑙𝑜𝑠𝑠𝑒𝑠 𝑐𝑎𝑟𝑟𝑖𝑒𝑑 𝑓𝑜𝑟𝑤𝑎𝑟𝑑
𝑇𝑎𝑥𝑎𝑏𝑙𝑒 𝑖𝑛𝑐𝑜𝑚𝑒 = 𝑇𝑎𝑥𝑎𝑏𝑙𝑒 𝑟𝑒𝑣𝑒𝑛𝑢𝑒 − 𝐷𝑒𝑑𝑢𝑐𝑡𝑖𝑏𝑙𝑒 𝑒𝑥𝑝𝑒𝑛𝑠𝑒 − 𝑂𝑡ℎ𝑒𝑟 𝑡𝑎𝑥𝑎𝑏𝑙𝑒 𝑖𝑛𝑐𝑜𝑚𝑒

CIT rates

Some of typical non-deductible expenses

▪ Standard tax rate: 20% from 01 Jan 2016

▪ There are preferential tax rates from 10% to 17% are applicable to investment projects satisfying
certain conditions as prescribed under the CIT regulations, including:

✓ Conducting business in incentivised location;

✓ Conducting business in encouraged fields.

 Corporation Income Tax (“CIT”)
𝐶𝐼𝑇 𝑝𝑎𝑦𝑎𝑏𝑙𝑒 = 𝐴𝑠𝑠𝑒𝑠𝑠𝑎𝑏𝑙𝑒 𝑖𝑛𝑐𝑜𝑚𝑒 𝑥 𝑇𝑎𝑥 𝑟𝑎𝑡𝑒
CIT CALCULATION
METHOD 𝐴𝑠𝑠𝑒𝑠𝑠𝑎𝑏𝑙𝑒 𝑖𝑛𝑐𝑜𝑚𝑒 = 𝑇𝑎𝑥𝑎𝑏𝑙𝑒 𝑖𝑛𝑐𝑜𝑚𝑒 − 𝐸𝑥𝑒𝑚𝑝 𝑖𝑛𝑐𝑜𝑚𝑒 − 𝑇𝑎𝑥 𝑙𝑜𝑠𝑠𝑒𝑠 𝑐𝑎𝑟𝑟𝑖𝑒𝑑 𝑓𝑜𝑟𝑤𝑎𝑟𝑑
𝑇𝑎𝑥𝑎𝑏𝑙𝑒 𝑖𝑛𝑐𝑜𝑚𝑒 = 𝑇𝑎𝑥𝑎𝑏𝑙𝑒 𝑟𝑒𝑣𝑒𝑛𝑢𝑒 − 𝐷𝑒𝑑𝑢𝑐𝑡𝑖𝑏𝑙𝑒 𝑒𝑥𝑝𝑒𝑛𝑠𝑒 − 𝑂𝑡ℎ𝑒𝑟 𝑡𝑎𝑥𝑎𝑏𝑙𝑒 𝑖𝑛𝑐𝑜𝑚𝑒

CIT incentives

CIT
incentives
FY: Financial year
CY: Current year
PY: Previous year
CIT
reduction Preferential CIT
CIT rates exemption
(50%)

Project FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 Onwards

NIP/EIP 0% 10% 20%

 Corporation Income Tax (“CIT”)
CIT DECLARATION AND PAYMENTS

• From 15 November 2014, requirement on quarterly CIT declaration is removed. Only quarterly
payment is required.

• Year-end finalisation:

✓ Deadline for submission and payment is the 90th day following the fiscal year-end

✓ Late and/or incorrect declarations and payments of CIT will be subject to penalty.
 Corporation Income Tax (“CIT”)
ACCOUNTING PROFITS VS. TAXABLE INCOMES
Example: (VND)
The tax account notes some items for CIT adjustments:
(*): Administrative penalties: 0.5 and non-business expenses: 3
(**): Unrealised FX gain from revaluation of cash account: 2

Tax returns VND billion

Profit and Loss VND billion
Profit before tax per P/L 10
Revenue 100
(+) Administrative penalties 0.5
(-) COGS 40
(+) Non-business expenses 3
(-) G&A expenses 25
(-) Unrealised FX gain from revaluation of cash account 2
(-) Selling expenses 10
Taxable income 11.5
(-) Financial expenses 15
Tax rate 20%
Accounting profit/(loss) 10
CIT liabilities 2.3
Value Added Tax (“VAT”)
Value Added Tax (“VAT”)
LEGAL BASIS
 Value Added Tax (“VAT”)
VAT PRINCIPLES

▪ Value added tax: tax imposed on the added value of goods or services arising during the process from manufacture,
circulation to consumption.

▪ Taxable objects: “Good and services” used for production, trading and consumption in Vietnam (excluding objects n
ot subject to VAT)

▪ Tax payers:

✓ Organizations and individuals producing or trading goods and services subject to VAT in Vietnam; and

✓ Organizations and individuals importing goods or purchasing services subject to VAT

▪ Two methods of calculation: Credit method and Direct method

 Value Added Tax (“VAT”)
CREDIT METHOD
Fomula

VAT payable = Output VAT – Creditable Input VAT

Output VAT Creditable Input VAT

Taxable price x Applicable VAT rates Rules of input VAT creditability

 Value Added Tax (“VAT”)
CREDIT METHOD
Applicable VAT rate
10%

Not subject to VAT declaration Others 0% Exported goods/ services

/ payments

VAT rates

Not
26 groups of goods/ services subject 5% 16 groups of goods/ services
to VAT

Article 4, 5, 9, 10 and 11, Circular 219/2013/TT-BTC

 Value Added Tax (“VAT”)
RULES OF INPUT VAT CREDITABILITY

Invoices and
vouchers Expenses are supported by legitimate invoices and vouchers in accordance with regulations.

Related to business Goods/services purchased must be related to business activities

Payment Non-cash payment documents for goods and services with value of VND20 mil or more

Notes:

For exporting goods and services, further documentation shall be required (i.e. customs declaration, contract)
Value Added Tax (“VAT”)
VAT INVOICE
Value Added Tax (“VAT”)
VAT INVOICE
 Value Added Tax (“VAT”)
DIRECT METHOD

Fomula

VAT payable = Revenue x Applicable VAT rate

Applicable VAT Rate

• Goods distribution and supply: 1%

• Services and construction without contracted supply of materials: 5%
• Production, transportation and services associated with supply of goods, constructi
on with contracted supply of materials: 3%
• Other business activities: 2%
 Value Added Tax (“VAT”)
VAT DECLARATION AND PAYMENTS

• Quarterly VAT declaration & payment for the first year (newly established company)

• For subsequent years:

✓ Monthly declaration & payment if total annual revenue of preceding year > VND50 billion
✓ Quarterly declaration & payment if total annual revenue of preceding year <= VND50 billion

• Deadline for VAT declaration and payment:

✓ Monthly: by the 20th day of the next month
✓ Quarterly: by the 30th day of the next quarter

• Supporting software for Tax Declaration (i.e. HTKK)

Personal Income Tax (“PIT”)
 Personal Income Tax (“PIT”)
LEGAL BASIS
▪ Law No. 26/2012/QH13 dated 22 November 2012 amending and supplementing a number of articles of the Law on
Personal Income Tax;
▪ Decree No. 65/2013/ND-CP of the Government dated 27 June 2013 providing details to the Law amending and
supplementing the Law on Personal Income Tax.
▪ Circular No. 111/2013/TT-BTC of the Ministry of Finance dated 15 August 2013 providing guidelines for the implementation
of the Law No. 26/2012/QH13;
▪ Circular No. 119/2014/TT-BTC of the Ministry of Finance dated 25 August 2014 provide some amendments to some
articles of the relevant circulars;
▪ Circular No. 92/2015/TT-BTC of the Ministry of Finance dated 15 June 2015 provide some amendments to some articles of
the circular on Personal Income Tax;
▪ Circular No. 156/2013/TT-BTC of the Ministry of Finance dated 6 November 2015 providing details to the Law on Tax
Administration
→ Joint Circular 05/VBHN-BTC dated 14 March 2016 (PIT)
→ Joint Circular 18/VBHN-BTC dated 19 June 2015 (Tax Administration)
 Personal Income Tax (“PIT”)
TAX PAYER
Individuals earning PIT-taxable income, including:

• Resident individuals having income both within and outside territory of Vietnam, irrespective of where income is paid.

• Non-resident individuals having income in Vietnam, irrespective of where the income is paid (Vietnam sourced income)
No. of days present in VN in a tax year (*)

183 days or more Less than 183 days

Having a leased house contract, having a No leased house contract and No permanent
permanent resident card, or temporary resident resident card and No temporary resident
card with a term of more than 182 days card with a term of more than 182 days

Can prove being Cannot prove being

tax resident of an tax resident of
other country another country

Resident Non-resident Resident Non-resident

Personal Income Tax (“PIT”)
WHAT INCOMES WILL BE TAXED?

1. Incomes from business

2. Incomes from wages and remunerations (“Employment income”)

3. Incomes from capital investment

4. Incomes from capital/securities transfer

5. Incomes from real estate transfer

6. Incomes from royalty

7. Incomes from franchising

8. Incomes from winning prizes

9. Incomes from inheritance

10. Incomes from receipt of gifts

 Personal Income Tax (“PIT”)
EMPLOYMENT INCOME
1. Taxable incomes (“Thu nhập chịu thuế”)

▪ Salary and wages (including 13th month salary);

▪ Bonus in cash (e.g. performances, sales incentives, seniority, etc.) and bonus in kind (e.g. securities, gifts, etc.);

▪ Allowance and subsidies;

▪ Commissions: agent commission, broker commission, payments for participation in a scientific or technical

project, payments for teaching, etc..;

▪ Income from participation in business associations, board of management or other associations; and

▪ Benefits in cash and benefits in kind.

 Personal Income Tax (“PIT”)
EMPLOYMENT INCOME
2. Regular benefits in cash and benefit in kind subject to tax:

▪ Housing rental benefit (the minimum of the actual housing benefit and 15% gross income, irrespective of where

the income is paid);

▪ Utilities;

▪ Non-compulsory insurance;

▪ Membership fees and services fees for specific individuals (i.e. golf, health care, entertainment club, sport club,

etc.);

▪ Over-capped allowances for per-diem, telephone, uniform...

▪ Allowances/expenditures for training course, professional certificates, etc. which are not relevant to business

activities and are not planned clearly.

 Personal Income Tax (“PIT”)
EMPLOYMENT INCOME
3. Regular benefit in cash/in kind exempted from PIT:

▪ Meal allowance paid by cash, telephone, uniform, per diem… within the cap (current cap of VND730,000/month);

▪ Overtime payments which are in excess of the salary per normal working hour;

▪ Telephone allowance pursuant to Company’s policy;

▪ Business trip per-diem in accordance with Company’s policy;

▪ Home leave allowance: one round-trip air tickets per year for expatriate employees (paid by the Company);

▪ Tuition fees for children of expatriate employees (from kindergarten to high-school);

▪ Annual health-check in accordance with Company’s policy and plan; and

▪ Others
 Personal Income Tax (“PIT”)
EMPLOYMENT INCOME
Allowable deduction

 Personal relief: VND 9 million/month

Family  Dependent relief (*): VND 3,6 million/
relief person/month (required to register a
nd submit supporting documents)

Allowable Compulsory
Certain charity
deduction insurance
contributions
contributions

Contributions  In accordance with regulations of

to voluntary Ministry of Finance
pension fund  Capped at VND 1 million / month
 Personal Income Tax (“PIT”)
FOMULA

Progressive tax rate

PIT payable = (Taxable income – Allowable deductions) x Progressive tax rate

Notes: grossing up NET income for converting to gross taxable income

Flat tax rate

PIT payable = Net gains or Gross sales proceeds x Flat tax rate
 Personal Income Tax (“PIT”)
PIT RATE
Progressive PIT rates
 Personal Income Tax (“PIT”)
PIT RATE
Gross-up formula for Net incomes
 Personal Income Tax (“PIT”)
PIT RATE
Non-employment incomes

Type of income Tax resident Tax non-resident

Business income Progressive tax rate 1%: sales of goods
5%: provision of services
2%: production, construction/
transportation services and others
Capital investment 5% 5%
Transfer of capital 20% on net gains 0.1% on gross sales proceeds
Transfer of securities 0.1% on gross sales pro 0.1% on gross sales proceeds
ceeds
Transfer of real estate 2% on net gains 2% on gross sales proceeds
Royalty and Franchise 5% on received payment 5% on received payment
(above VND10mil)
Winning prize - exclusive of winning prize i 10% on received payme 10% on received payment
n casino and Inheritances/gifts (above VND nt
10mil)
 Personal Income Tax (“PIT”)
PIT DECLARATION AND PAYMENTS

❑ Statutory deadline of PIT submission and PIT payments

▪ Monthly PIT declaration and PIT payment: 20th date of the following month;

▪ Quarterly PIT declaration and PIT payment: 30th date of the following quarter;

▪ Annual PIT finalisation declaration and PIT finalisation payment: 90th date of the following tax year;

▪ Termination of Assignment and leaving Vietnam (for the expatriates): 45 th date from the departure date out of Vietnam.

❑ To individuals receiving overseas income or having two sourced-income:

▪ Required to declare and pay PIT directly to tax authority under their own tax code;

▪ Annual PIT finalisation submission and payment: determination of first tax year and the portion of taxable income.
 Personal Income Tax (“PIT”)
PIT DECLARATION AND PAYMENTS

❑ To organisations who pay income:

▪ Provisional PIT declaration and payment:

▪ Annual PIT finalisation submission and payment: tax year ending 31 December
Q&A
Thank you