W&A: TAX, CUSTOMS AND LEGAL NEWSLETTER - NOVEMBER 2024

In this edition of the newsletter, W&A would like to provide our readers with the latest updates on new legal regulations and important policies in the field of taxation and customs.

I. CORPORATE INCOME TAX (CIT)

1. Adjustment of CIT incentives in cases investment projects do not satisfy the conditions prescribed in the Investment Registration Certificate or the decision on Investment Policy Decision

According to Official Letter No. 4599/TCT-CS dated October 15, 2024, and Official Letter No. 4518/TCT-CS dated October 23, 2020, enterprise is eligible for an incentive CIT rate under an investment project to construct a livestock farm. However, if the farm is constructed solely for leasing purposes and the enterprise does not directly engaging in livestock farming activities, the incentive CIT rate specified in the issued Investment Registration Certificate or Investment Policy Decision will not apply.

2. Ineligibility for input Value Added Tax (VAT) deduction for construction projects without proper building permits

According to Official Letter No. 4781/TCT-CS dated October 24, 2024, the General Department of Taxation emphasizes that a company’s construction project has not been issued a construction permit, and are not exempted for a construction permit under Article 89 of the Law on Construction 2014, and lacks certification of ownership for assets attached to the land, fixed assets (projects) formed on leased land will be ineligible for input VAT deduction. Furthermore, depreciation of such assets shall not consider as deductible expenses for CIT purposes.

II. VALUE ADDED TAX (VAT)

1. Conditions for VAT refund of export production projects

According to Official Letter No. 4566/TCT-KK dated October 14, 2024 of the General Department of Taxation, in case a company has an investment project for an out-of-province manufacturing plant that has commenced operations, and instead of filing for a VAT refund on the project, the company transfers the outstanding VAT from the project to the VAT declaration form (Form 01/VAT) for business activities, the VAT refund will be considered if:

• Input VAT of exported goods, including input VAT of investment, construction, and fixed asset formation activities, in compliance with legal regulations on investment and serving the production and business activities of exported goods; and

• After offsetting with the VAT payable on domestically consumed goods and services, the remaining input VAT must be at least VND 300 million.

2. VAT rates applicable for Companies engaged in food trading business

In accordance with Official Letter No. 4662/TCT-CS issued by the General Department of Taxation on October 18, 2024, enterprises engaged in food trading business are instructed to declare VAT under the credit method as follows:

• For unprocessed or semi-processed food products sold to educational institutions: Using VAT rate of 5% for declaration and calculation of VAT payable.

• For unprocessed or semi-processed food products sold to other enterprises: not subject to VAT declaration or payment.

• For other goods: VAT is applied at the rate specific to each product.

  
  

3. VAT policy for imported agricultural products

The Hanoi Tax Department has issued several notes on the VAT policy for imported agricultural products as stipulated in Circular No. 219/2013/TT-BTC as follows:

Unprocessed or preliminarily processed imported agricultural products are exempted for VAT. When imported into Vietnam, the VAT policy is applied as follows:

• Importing enterprises (F0) selling to enterprises/cooperatives (F1) for business purposes still do not have to declare and pay VAT. This exemption continues to apply if F1 sells to F2.

• Enterprises/cooperatives pay withholding tax and sell to individuals/business organizations subject to VAT of 5%.

• Business households/enterprises that pay taxes directly on commercial sales are subject to VAT at 1% of revenue.

4. Issuance of adjustment invoices for discounts and rebates

According to Official Letter No. 4991/TCT-CS dated November 5, 2024, from the General Department of Taxation, as general rude, when trade discounts are based on the quantity or sale volume of goods and services, the discount amount for goods already sold should be adjusted on the invoice of the last purchase or the following period. If the discount amount is issued at the end of the discount program (period), an adjusted invoice should be issued, along with a list of invoices requiring adjustment, including the adjustment amount and tax adjustment. Based on the adjusted invoice, both the seller and buyer must declare the corresponding adjustments in revenue and tax.

Therefore, if a company incurs discounts or rebates as per agreements in the master contract, contract annexes, or signed sales agreements, and has sufficient supporting documentation, it is permitted to issue adjustment invoices. Based on the adjustment invoices issued, the company shall declare the adjusted sales revenue and taxes in accordance with the regulations.

III. PERSONAL INCOME TAX (PIT)

1. Employees are still allowed to declare dependents when declaring PIT finalization.

According to Official Letter No. 7761/TCT-DNNCN dated October 23, 2024 issued by the General Department of Taxation on PIT policies, individuals who have not claim dependent deductions for the tax year may still do so starting from the month when the obligation to provide support arose, provided the dependent registration has been completed before tax finalization.

2. Determine whether the Company or branch is responsible for declaration and payment PIT for employees

According to Official Letter No. 4760/TCT-DNNCN dated October 23, 2024, from the General Department of Taxation, the determination of whether the company or its branch bears the responsibility for declaring and paying PIT on behalf of employees depends on the labor contract. The entity that signs the labor contract with the employee will bear this responsibility.

3. Ineligibility for Authorization of PIT finalization for employees with additional casual income

According to Official Letter No. 4846/TCT-DNNCN dated October 25, 2024 of the General Department of Taxation, individuals with income from multiple sources during the tax year, including casual income that has not been subject to PIT withholding at the rate of 10%, are ineligible to authorize tax finalization. According to Point d2, Clause 6, Article 8 of Decree 126/2020/NĐ-CP, such individuals must directly finalize PIT with the tax authority.

IV. LEGAL

1. Recognition of foreign electronic signatures in Vietnam

Circular No. 06/2024/TT-BTTTT dated July 1, 2024, issued by the Ministry of Information and Communications detailing the dossiers and procedures for recognizing foreign electronic signatures and electronic signature certificates in Vietnam and the dossiers and procedures include:

• A request form using Form No. 03 attached to the Circular;

• Technical documentation demonstrating that the foreign electronic signature and digital certificate comply with the technical standards and regulations on electronic signatures and digital certificates as prescribed by Vietnamese law or relevant international treaties;

• The digital certificate must contain the minimum information fields required under Vietnamese law to verify its status in the system;

• Documentation proving that the digital certificate was issued based on verified identification information of the foreign organization or individual;

• A notarized translation of the license or certificate verifying that the foreign electronic signature certification service provider issuing the digital certificate operates legally in the registered country.

  
  

Recognition period: 5 years, but not exceeding the validity period of the electronic signature certificate.

V. CUSTOMS DUTIES

1.     Conditions for inheriting import tax exemption incentives when transferring investment projects

The General Department of Customs emphasized in Official Letter No. 3931/TCHQ-TXNK dated August 19, 2024, to inherit import tax exemptions during the transfer of an investment project (in part or whole), the transferring project owner must notify the customs authority that issued the tax exemption list for the project. The transferee is then required to register a new customs declaration.

2. Customs procedures and import taxes for Export-Produced Goods with Subcontracted Processing

As outlined in Official Letter No. 4325/TCHQ-TXNK dated September 12, 2024, the General Department of Customs provides guidance on (i) customs procedures for raw materials and supplies imported for the production of export goods; and (ii) the responsibility to notify the Customs Sub-Department of subcontracting agreements (using the prescribed form in Clause 41, Article 62 of Circular No. 39/2018/TT-BTC) prior to delivering raw materials and supplies to subcontractors.

Import tax: Raw materials, supplies, and components imported to produce export goods are exempt from import tax.

3. Procedures for tax declaration, exemption and reduction under double taxation agreements for shipping agents representing foreign shipping lines

Official Letter 4551/TCT-KK dated October 11, 2024, the General Department of Taxation provides guidance for Companies in Vietnam authorized by foreign shipping lines to declare, pay taxes and carry out tax exemption and reduction procedures under the Double Taxation Avoidance Agreement ("Agent") as follows:

• Tax declaration: The Agent must declare and pay taxes, as well as submit tax declarations on behalf of the foreign shipping line, to the tax authority of the Agent.

• Tax exemption/reduction dossier: If the foreign shipping line is eligible for tax exemption or reduction under a Double Taxation Agreement, the Agent must submit the exemption/reduction application to the Ministry of Finance in accordance with the regulations.

Contact W&A for more detailed information:

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📧 Email: nam.phan@waco.com.vn

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