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GENERAL DEPARTMENT
OF TAXATION
HANOI CITY DEPARTMENT OF TAXATION
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SOCIALIST
REPUBLIC OF VIETNAM
Independence – Freedom – Happiness
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No.: 53152/CT-TTHT
Re: Guidance on tax policies for capital
transfer
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Hanoi, July 31,
2018
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To: Medlac
Pharma Italy Co. Ltd.
(Address: Industrial Hi-Tech Zone I, Hoa Lac Hi-Tech Park, Thach That
District, Ha Noi City – Tax code: 0500594337)
In response to the Official Dispatch No.
340/CV-MPI/2018 dated July 03, 2018 of Medlac Pharma Italy Co. Ltd.
(hereinafter referred to as “MPI Co., Ltd.”) regarding tax policies, Hanoi City
Department of Taxation hereby provides the following guidance:
- Pursuant to the Circular No. 111/2013/TT-BTC
dated August 15, 2013 of the Ministry of Finance providing guidance on the Law
on personal income tax, the Law on amendments to the Law on personal income
tax, and the Government's Decree No. 65/2013/ND-CP providing guidance on the
implementation of the Law on personal income tax, the Law on amendments to the
Law on personal income tax;
+ Clause 4 Article 2 stipulates income from capital
transfer as follows:
“4. Income from capital transfer
Income from capital transfer is the personal
income in the form of:
a) Income from transfer of capital contributed
to a limited liability company (including single-member limited liability
company), partnership, business cooperation contract, cooperative, the people’s
credit fund, economic organization or another organization.
+ Clause 1 Article 11 introduces the basis for
calculating tax on income from stake transfer as follows:
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The basis for calculating tax on income from
stake transfer is assessable income and tax rate.
a) Assessable income: The assessable income from
the stake transfer equals to the transfer price minus the purchasing price of
the transferred capital and rational expenses related to the generation of
income from capital transfer.
…
b) Tax rate:
The rate of personal income tax (PIT) on the
income earned from capital transfer is 20% according to the Fixed-rate tax
schedule.
c) Time for determination of assessable income:
The time for determination of assessable income
is the time when the capital transfer contract comes into force. In case
an individual contributes capital to a company by his/her stake in another
company, the time for determination of assessable income from capital transfer
is the time when that individual transfers or withdraws his/her stake.
d) Tax calculation method
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=
Assessable
income
x
Tax rate of 20%
”
- Pursuant to the Circular No. 156/2013/TT-BTC
dated November 06, 2013 of the Ministry of Finance providing guidance on some
Articles of the Law on tax administration, the Law on amendments to the Law on
tax administration and the Government's Decree No. 83/2013/ND-CP dated July 22,
2013;
+ Clause 4 Article 16 stipulates declaration of tax
on income from capital transfer (except for transfer of securities) as follows:
“4. Declaration of tax on income from
capital transfer (except for transfer of securities):
a) Tax declaration rules:
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a.3) When transferring capital, if an enterprise
changes the list of contributors without having documents proving the
fulfillment of tax liability of the transferring individual, the enterprise
shall declare and pay tax on the individual’s behalf.
If the enterprise pays tax on an individual’s
behalf, it shall also declare tax on that individual’s behalf. The declarant
shall write “PP” before “Tax payer or representative of tax payer” on the tax
declaration, and then add his signature, full name, and the enterprise’s
seal. The name of the individual being the transferor (if the capital
transferred is a resident’s) or the transferee (if the capital transferred is a
non-resident’s) must be expressed as the taxpayer on the tax receipts.
b) Tax declaration dossier:
The resident that earns income from capital
transfer shall submit the following documents:
- A PIT declaration for individuals earning
income from capital transfer (form 12/KK-TNCN enclosed herewith).
- A photocopy of the capital transfer contract.
- Documents proving the value of capital
contribution according to accounting records or the contract to buy capital
contribution (if capital contribution is bought).
- A photocopy, which bears the individual’s
signature, of the documents proving the expenditures on determination of income
from capital transfer…..
c) Place of submission of tax declaration
dossier:
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d) Deadline for submitting tax declarations
The tax declaration shall be submitted within 10
(ten) days from the day on which the capital transfer contract comes into
force.
If the enterprise pays tax on the individual’s
behalf, the tax declaration shall be submitted before the list of contributors
of that enterprise is changed.
dd) Deadline for paying tax
The deadline for paying tax is written on the
tax notice of the tax authority.”
- Pursuant to the Circular No. 92/2015/TT-BTC dated
June 15, 2015 of the Ministry of Finance providing guidelines for VAT and
personal income tax incurred by residents doing business, amendments to some
Articles on personal income tax of the Law No. 71/2014/QH13 on amendments to
Tax Laws and the Government's Decree No. 12/2015/ND-CP dated February 12, 2015
on guidelines for the Law on amendments to Tax Laws and Decrees on taxation;
+ Article 13 amending Article 5 of the Circular No.
111/2013/TT-BTC stipulates the conversion of taxable income into VND as
follows:
“Article 13. Amendments to Article 5 of
the Circular No. 111/2013/TT-BTC:
“Article 5. Conversion of taxable income
into VND
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Revenues and taxable incomes received in foreign
currencies must be converted into VND at the buying rate of the bank where the
person opens the transaction account at the time of earning incomes.
In case a taxpayer does not have a transaction
account in Vietnam, foreign currencies shall be converted into VND at the
buying rate of Vietcombank at the time of earning incomes.
The foreign currencies without rates of exchange
into VND shall be converted into a foreign currency that has a rate of exchange
into VND.
…””
+ Clause 7 Article 24 provides for changes and
replacement of tax forms and templates for businesspeople and PIT payers:
“….The tax forms and templates are listed
in Appendix 02 enclosed herewith”.
+ Group 04 of Appendix 02: List of tax forms for
businesspeople and PIT payers enclosed with the Circular No. 92/2015/TT-BTC
dated June 15, 2015 of the Ministry of Finance.
No.
Form No.
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Group 04 – Persons declaring tax on other
incomes
21
04/CNV-TNCN
Personal income tax declaration
(for residents that earn incomes from
capital transfer and persons that transfer securities and directly declare
tax)
- Pursuant to the Circular No. 78/2014/TT-BTC dated
June 18, 2014 of the Ministry of Finance providing guidance on implementation
of the Government’s Decree No. 218/2013/ND-CP dated December 26, 2013
prescribing and guiding the implementation of the Law on Corporate Income Tax;
+ Clause 2 Article 2 defines taxpayers as follows:
“2. Any foreign organization doing
business in Vietnam without following the Law on Investment, the Law on
Enterprises, or earns taxable income in Vietnam shall pay corporate income tax
(CIT) in accordance with separate instructions of the Ministry of Finance. In
the cases where such an organization transfers its stake, CIT shall be paid in
accordance with instructions in Article 14 Chapter IV of this Circular”
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“1. From January 01, 2014, CIT rate is
22%, except for the cases specified in Clause 2 and Clause 3 of this Article
and the cases in which preferential rates are applied.
…
From January 01, 2016, the CIT rate of 20%
shall apply to enterprises that are applying the CIT rate of 22%.”
+ Article 14 stipulates incomes from capital
transfer as follows:
“Article 14. Incomes from capital transfer
1. Scope:
Income from capital transfer of an enterprise
means income from the transfer of a part or all of that enterprise’s investment
in one or more than one entities (including selling of enterprises). Time
for determination of income from capital transfer is the time for transfer of
the capital ownership.
…
2. Basis for tax calculation
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Assessable
income
=
Transfer price
-
Purchasing
price of the transferred capital
-
Transfer cost
Where:
- The transfer price is the total value earned
by the transferor under the transfer contract.
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c) In the cases where a foreign organization
doing business in Vietnam or earning income in Vietnam without following the
Law on Investment and the Law on Enterprises (hereinafter referred to as
“foreign contractors") carries out capital transfer:
The capital transferee shall determine, declare,
withhold and pay the CIT payable by the foreign organizations on its behalf. If
the transferee is also a foreign organization that does not follow the Law on
Investment and the Law on Enterprises, the enterprise established under
Vietnam’s law in which capital is invested by that foreign organization shall
declare and pay the CIT payable by the foreign organization on its behalf.
Tax shall be declared and paid in accordance
with legislative documents on tax administration.”
- Pursuant to the Circular No. 96/2015/TT-BTC dated
June 22, 2015 of the Ministry of Finance providing guidelines for corporate income tax in the Government's Decree No.
12/2015/ND-CP dated February 12, 2015 on guidelines for the Law on amendments
to Laws on taxation and amendments to Degrees on taxation, and amendments to
some Articles of Circular No. 78/2014/TT-BTC dated June 18, 2014,
Circular No. 119/2014/TT-BTC dated August 25, 2014, and Circular
No. 151/2014/TT-BTC dated October 10, 2014 of the Ministry of Finance;
+ Article 8 provides amendments to the second
paragraph of Point a Clause 2 Article 14 of the Circular No. 78/2014/TT-BTC as
follows:
“-The purchasing price of the transferred
capital is determined on a case-by-case basis as follows:
+ In case of transfer of contributed capital for
enterprise establishment, it is the accumulated value of contributed capital up
to the date of capital transfer according to accounting books, invoices, and
other documents and is certified by investors or participants in the business
cooperation contract, or according to audit results provided by an independent
audit company if the enterprise is a foreign-owned enterprise.
If the enterprise is able to do accounting in
foreign currencies and complies with regulations of law on accounting of
capital transfer in foreign currencies, the transfer price and purchasing price
of the transferred capital shall be expressed in a foreign currency. In case
an enterprise that does accounting in VND transfers contributed capital in a
foreign currency, the transfer price must be converted into VND according to
the buying rate announced by the commercial bank where the enterprise’s account
is opened at the time of transfer.”
- Pursuant to Circular No. 151/2014/TT-BTC dated
October 10, 2014 of the Ministry of Finance providing guidance on the
Government's Decree No. 91/2014/ND-CP dated October 01, 2014 on amendments to
Decrees on taxation;
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“Article 16. Amendments to Article 12 of
the Circular No. 156/2013/TT-BTC:
“Article 12. Declaration of corporate
income tax
...2. CIT shall be declared whenever it is
incurred, annually, or when a decision on division, consolidation, merger,
conversion, dissolution, or shutdown of the enterprise is made.
…
Cases of CIT declarations whenever it is
incurred:
…
- CIT shall be declared whenever it is incurred
by any foreign organization that does business in Vietnam or earns income in
Vietnam without following the Law on Investment and the Law on Enterprises
(hereinafter referred to as “foreign contractors") and carries out capital
transfer.
…
7. CIT declarations on capital transfer
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b) CIT shall be declared whenever it is incurred
by any foreign organization that does business in Vietnam or earns income in
Vietnam without following the Law on Investment and the Law on Enterprises
(hereinafter referred to as “foreign contractors") and carries out capital
transfer.
The capital transferee shall determine, declare,
withhold and pay the CIT payable by the foreign organization on its behalf. If
the transferee is also a foreign organization that does not follow the Law on Investment
and the Law on Enterprises, the enterprise established under Vietnam’s law in
which capital is invested by that foreign organization shall declare and pay
the CIT payable by the foreign organization on its behalf.
The CIT declaration must be submitted within 10
(ten) days from the date on which the competent authority approves the capital
transfer or from the transfer date agreed by the parties and specified in the
capital transfer contract (if an approval by competent authority for the capital
transfer is not required).
CIT declaration dossier includes:
- A declaration of CIT on capital transfer (Form
No. 05/TNDN issued together with Circular No. 156/2013/TT-BTC);
- A photocopy of the transfer contract. If the
transfer contract is written in a foreign language, it must be translated into
Vietnamese and includes, inter alia, the following contents: the transferor,
the transferee, transfer date, transfer contents; rights and obligations of
each party, contract value, payment deadline, method and currency.
- A photocopy of the decision on approval for
capital transfer issued by a competent authority (if any);
- A copy of the certificate of capital
contribution;
- Original documents proving transfer expenses.
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Place of submission of CIT declaration dossier:
CIT declaration shall be submitted to the tax authority where the foreign
organization transferring capital has registered to pay CIT.
….”"
Pursuant to the Circular No. 26/2015/TT-BTC dated
February 27, 2015 of the Ministry of Finance providing guidelines for
value-added tax and tax administration in the Government's Decree No.
12/2015/ND-CP dated February 12, 2015 on guidelines for the Law on amendments
to laws and decrees on taxations, and amendments to the Circular No.
39/2014/TT-BTC dated March 31, 2014 of the Ministry of Finance on invoices for
goods sale and service provision;
+ Clause 4 Article 2 provides amendments to Article
27 of the Circular No. 156/2013/TT-BTC dated November 06, 2013 of the Ministry
of Finance as follows:
"3. If there are revenues, expenditures,
taxable prices in foreign currencies, they must be converted into VND at the
practical exchange rates according to instructions of the Ministry of Finance
in Circular No. 200/2014/TT-BTC dated December 22, 2014 on corporate accounting
practice. To be specific:
- The practical exchange rate for revenue
statement is the buying rate announced by the commercial bank where the
taxpayer’s account is opened.
- The practical exchange rate for statement of
expenses is the selling rate announced by the commercial bank where the
taxpayer’s account is opened at the time of making the payment.
- Other particular cases shall follow
instructions of the Ministry of Finance in Circular No. 200/2014/TT-BTC dated
December 22, 2014.”
Because the Official Dispatch of MPI Co., Ltd. does
not supported by any specific documents, Hanoi City Department of Taxation,
pursuant to the regulations referred to herein, gives general response as
follows:
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Any person that earns income from transfer of capital
contributed to MPI Co., Ltd. shall declare PIT on income from capital transfer
in accordance with regulations in Clause 1 Article 11 of the Circular No.
111/2013/TT-BTC dated August 15, 2013 and Clause 4 Article 16 of the Circular
No. 156/2013/TT-BTC dated November 06, 2013 of the Ministry of Finance (however
form No. 12/KK-TNCN issued together with the Circular No. 156/2013/TT-BTC has
been replaced with form No. 04/CNV-TNCN issued together with the Circular No.
92/2015/TT-BTC).
- With regard to exchange rates for converting
foreign currencies into VND: Regulations in Article 13 of the Circular No.
92/2015/TT-BTC dated June 15, 2015 of the Ministry of Finance shall apply.
2. For organizations:
If Medlac (Italy) Co., Ltd. transfers its capital
contributed to MPI Co., Ltd. to another foreign organization that does not
located in Vietnam (Hikma Pharmaceuticals PLC that has its headquarters located
in UK), CIT on transfer of capital in Vietnam must be declared and paid as
regulated.
MPI Co., Ltd. shall declare and pay CIT on income
from capital transfer earned by Medlac (Italy) Co., Ltd. on its behalf in
accordance with regulations in Article 14 of the Circular No. 78/2014/TT-BTC
dated June 18, 2014, Article 8 of the Circular No. 96/2015/TT-BTC dated June 22,
2016 and Article 16 of the Circular No. 151/2014/TT-BTC dated October 10, 2014
of the Ministry of Finance.
- With regard to exchange rates for converting
foreign currencies into VND: Regulations in Clause 4 Article 2 of the Circular
No. 26/2015/TT-BTC dated February 27, 2015 of the Ministry of Finance shall
apply.
Any other difficulties concerning tax on capital
transfer should be reported to the Tax Inspection Division No. 1 for guidance.
For your information and compliance./.
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PP.
DIRECTOR
DEPUTY DIRECTOR
Mai Son