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GENERAL DEPARTMENT OF TAXATION
HO CHI MINH CITY TAX DEPARTMENT
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THE SOCIALIST REPUBLIC OF VIETNAM
Independence – Freedom – Happiness
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No: 10749/CT-TTHT
Re: Tax policy
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Ho Chi Minh City, October 30, 2017
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To: Techno Associe
Vietnam Company Limited
Address: 4th Floor, Building A, Business Incubators Area, Lot D1, Tan Thuan Street,
Tan Thuan Export Processing Zone, Tan Thuan Dong Ward, District 7
Tax code: 0314456805
To reply to Document No.
TAV/201709_01 dated September 28, 2017 of the Techno Associe Vietnam Company
Limited (hereinafter referred to as "TAV”) on tax policy, below are
opinions of Ho Chi Minh City Tax Department:
Pursuant to Circular No.
111/2013/TT-BTC dated August 15, 2013 of the Ministry of Finance of Vietnam on
personal income tax:
- Clause 2 Article 2: Taxable incomes from wages and
remunerations:
“Incomes from wages and
remunerations (hereinafter referred to as “wages”) are incomes paid to
employees from employers, including:
a) Wages, remunerations,
and the other amounts paid as wages or remunerations in cash or not in cash.
b) Allowances and
benefits, except for:
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- Article 18: Basis for
calculating tax incurred by non-residents who have incomes from wages:
“1. The rate of personal
income tax on incomes from wages earned by a non-resident equals the taxable
income from wages multiplied by (x) 20% tax.
2. The taxable income from wages earned by a non-resident is
similar to that of a resident guided in Clause 2 Article 8 of this Circular.
The taxable income from
wages earned in by a non-resident that works both in Vietnam and overseas
without being able to separate the income earned in Vietnam shall be calculated
as follows:
a) The foreigner is not
present in Vietnam:
Total income earned in Vietnam
=
Number of working days in Vietnam
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Pre-tax global income from wages
+
Other pre-tax taxable income earned in Vietnam
Number of working days in the year
In which: the number of
working days in the year is calculated in accordance with the Labor Code of
Vietnam.
b) The foreigner is
present in Vietnam::
Total income earned in Vietnam
=
Number of days in Vietnam
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Pre-tax global income from wages
+
Other pre-tax taxable income earned in Vietnam
365
Other pre-tax taxable
incomes earned in Vietnam mentioned in Point a and Point b above are other
benefits in cash or not in cash apart from wages that are provided for the
employee or paid on the employee’s behalf by the employer.
- Article 27: Responsibilities of Vietnamese organizations
that sign service contracts with foreign contractors that do not operate in
Vietnam:
“When an organization
established and operated within Vietnam’s law (hereinafter referred to as
“Vietnamese party”) signs a contract to purchase services of a foreign
contractor that signs labor contracts with foreign employees in Vietnam, the
Vietnam party shall notify the foreign contractor of the obligations to pay
personal income tax incurred by the foreign employees, the obligations to
provide information about the foreign employees, including their names,
nationalities, passport numbers, working duration, positions, and incomes for
the Vietnam party. The Vietnam party shall provide such information for the tax
authority at least 07 days before the foreign employee starts to work in
Vietnam.
Pursuant to Circular No.
103/2014/TT-BTC dated August 06, 2014 of the Ministry of Finance of Vietnam on
guidelines for fulfillment of tax liability of foreign entities doing business
in Vietnam or earning income in Vietnam (hereinafter referred to as “foreign
contractor withholding taxes”):
- Point a, Clause 1 of Article 12: Revenue subject to VAT:
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- Point a, Clause 1 of Article 13: Revenue subject to CIT
(corporate income tax):
“Revenue subject to CIT
is the total revenue exclusive of VAT received by the foreign contractor or
foreign sub-contractor, inclusive of taxes payable. Revenue subject to CIT
includes the costs paid by the Vietnamese entity on behalf of the foreign
contractor or foreign sub-contractor (if any).”
Pursuant to Article 4 of
Circular No. 96/2015/TT-BTC dated June 22, 2015 of the Ministry of Finance of
Vietnam on amendments to Article 6 of Circular No. 78/2014/TT-BTC dated June
18, 2014 of the Ministry of Finance of Vietnam on guidance on CIT:
“Article 6. Deductible
and non-deductible expenses for determining taxable income
1. Except expenses specified in Clause 2 of this Article,
enterprises may deduct all expenses that fully satisfy the following
conditions:
a) Actual expenses
arising in relation to production and business activities of enterprises.
b) Expenses with adequate
lawful invoices and documents as required by law;
c) For expenses for
purchase of goods or services with invoices valued at VND 20 million or more
(VAT-inclusive prices) each, there must be non- cash payment documents.
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2.37. Input value-added
tax which has been credited or refunded; input value-added tax on fixed assets
which are cars with 9 seats or under in excess of the credit level specified in
legal documents on value-added tax; CIT, except the cases in which enterprises
pay CIT for foreign contractors as agreed in the contracts with foreign
contractors or foreign subcontractors that revenues received by foreign
contractors or foreign subcontractors are exclusive of CIT; personal income
tax, except the case in which enterprises sign labor contracts which stipulate
that salaries or wages payable to laborers are exclusive of personal income
tax.”.
If TAV signs a contract
with the Techno Associe Hong Kong (foreign contractor) to provide auxiliary
services, the revenue subject to foreign contractor withholding taxes includes
the costs paid by TAV on behalf of the foreign contractor (airfare, accommodation
allowances, travel allowances and personal income tax for employees of the
foreign contractor). In case the contract stipulates that the revenue received
by the foreign contractor does not include VAT and CIT, TAV shall convert it
into VAT and CIT-inclusive revenue according to the instructions mentioned in
Clause 1, Article 12 and Clause 1 Article 13 of Circular No. 103/2014/TT-BTC.
5% VAT and CIT shall apply.
In case the foreign
contractor sends an expert (hereinafter referred to as "foreign worker”)
to assist TAV in Vietnam and the foreign contractor pays wages directly to the
foreign worker, TAV (which purchases services from the foreign contractor)
shall be responsible for notifying the foreign contractor of the liability to
pay PIT incurred by the foreign worker and the responsibility to provide
information about the foreign worker; the tax authority according to
regulations of Article 27 of Circular No. 111/2013. The foreign worker who
receives wages for the works done in Vietnam from the foreign contractor shall
directly declare tax to the tax authority of Vietnam. Basis for calculating tax
shall comply with regulations of Clause 2, Article 18 of Circular No.
111/2013/TT-BTC. In case the agreement with the foreign contractor states that
TAV has to pay PIT for the expert, TAV shall deduct 20% PIT from the taxable
income (if the expert is not a resident).
If the conditions
specified in Article 4 of Circular No. 96/2015/TT-BTC are satisfied, TAV may
record the CIT paid on behalf of the foreign contractor and the PIT paid on
behalf of the foreign expert as deductible expenses when determining the
taxable income as per the contract.
For your information and
compliance.
PP. DIRECTOR
DEPUTY DIRECTOR
Le Duy Minh
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