|
THE
MINISTRY OF FINANCE
THE MINISTRY OF LABOR, WAR INVALIDS AND SOCIAL AFFAIRS
--------
|
SOCIALIST
REPUBLIC OF VIET NAM
Independence - Freedom - Happiness
----------
|
|
No:
05-LB/TC/LDTBXH
|
Ha
Noi , JANUARY16, 1996
|
INTER-MINISTERIAL CIRCULAR
OF THE MINISTRY OF FINANCE - THE MINISTRY OF LABOR, WAR
INVALIDS AND SOCIAL AFFAIRS PROVIDING GUIDANCE ON FINANCIAL REGIME FOR THE
SENDING OF LABORERS OVERSEAS FOR TENURED WORK UNDER DECREE NO.7-CP OF JANUARY
20, 1995, OF THE GOVERNMENT
Pursuant to Decree No.7-CP of January 20,
1995, of the Government stipulating detailed provisions on a number of articles
of the Labor Code on the sending of Vietnamese laborers overseas for tenured
work, the Ministry of Finance and the Ministry of Labor, War Invalids and Social
Affairs jointly provide the following guidance on the financial regime:
A. PROVISIONS ON THE
RESPONSIBILITIES AND INTERESTS OF THE LABORERS AND ECONOMIC ORGANIZATIONS
I. THE DEPOSIT:
1. The laborer:
The laborer shall pay to the economic
organization which sends him/her overseas for a tenured job a deposit which is
meant to ensure his/her execution of the contract.
2. The economic organization:
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
The amount of the deposit and its payment
procedure shall be agreed upon between the economic organization and the laborer,
but it shall not exceed the price of a one-way air ticket for the laborer to
travel from Vietnam to his/her overseas place of work, and shall be clearly
defined in the contract for overseas work that the laborer signs with the
economic organization which sends him/her overseas.
Within one month from the date the laborer
returns home after his/her accomplishment of the contract or after the
premature termination of the contract without incurring any economic losses for
the economic organization, the economic organization shall refund the laborer
the deposits principal and its interest for untimed deposits set by the State
Bank of Vietnam.
In case the laborer infringes upon the labor
contract and causes economic losses to the economic organization, the latter is
entitled to deduct into the deposit and its untimed interest (if any) of the
laborer in line with the regime set for material compensation, on condition
that it openly informs the laborer of the reason for, and the amount of, the
deduction.
After the termination of the labor contract, if
the laborer has not yet returned to the country, he/she shall not get the
refund of the deposit; and the economic organization has the responsibility to
continue managing the deposit as provided for in Section A, Item 1, Point 2,
pending a settlement in line with the existing laws of the State.
II. THE SOCIAL INSURANCE:
1. During his/her work overseas, the laborer
shall enjoy the social insurance regime of the country where he/she works as
agreed upon and clearly indicated in the contract, which is one of the
conditions, the agreement upon which must have been solicited by the economic
organization from the foreign employer so as to ensure the interests of the
laborer from the time of his/her departure from Vietnam to the time of his/her
accomplishment of the contract and repatriation.
2. During his/her work overseas, the laborer
shall pay his/her social insurance premium to the Vietnamese social insurance
fund to cover his/her pension and death allowance.
The monthly social insurance premium is
temporarily set at 15% of twice the minimum salary set by the Vietnamese
Government for each period.
3. The economic organization has the
responsibility to deduct from the monthly salary of the laborer his/her social
insurance premium and record it separately as the laborers social insurance
payment as provided for by the Vietnamese social insurance agency.
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
III. THE SERVICE FEE:
1. The economic organization:
The service fee is the taxable income from
public utility work of the economic organization and is used to cover the
operating cost of the labor supply apparatus; recruitment; health examination;
training and test and foreign-language training; pre-departure training; labor
management at home and abroad; processing of papers from the district level and
higher related to immigration and migration procedures; and the repatriation of
the laborer to the unit where he/she was working prior to departure.
The economic organization which sends the
laborer overseas for tenured work has the right to receive from him/her a fee
which shall not exceed 12% of his/her contract income to be paid by the
employer which does not cover the expenses on meals, accommodation and
on-the-spot insurance during his/her work abroad. In case the contract also
covers meals, accommodation and insurance during the laborers work abroad, the
economic organization can charge a fee which shall not exceed 8% of the
prescribed income.
The service fee which is charged by the economic
organization is a percentage of the laborers monthly income after the following
deductions:
- The single or return air ticket from Vietnam
to the country of work which must be clearly indicated as the laborers charge.
The fare is determined on the basis of the purchase price and the appropriate
itinerary (not including the baggage charges).
- The compulsory payments to the country of work
as required by that countrys law (if any).
The above-prescribed deductions from the
laborers monthly income to pay the service fee shall be determined by dividing
the total amount of the deductions by the number of months of the whole period
of work described in the contract.
Apart from the said fee, the economic
organization shall not levy any other charge on the laborer.
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
- Health examination as required by the Ministry
of Health.
- Test of foreign language and vocational skills
(including the expenses on fostering and retraining as required by the contract)
as required by the Ministry of Education and Training.
- The processing of dossiers and papers for the
laborers exit visa by the district level upward.
- The expenses related to the pre-departure
training.
The economic organization has the responsibility
to refund this temporary charge to the laborer at the time of the signing of
the official contract with him/her prior to his/her departure (as required by
the provisions in Item II, Point 2, Sub-point (c) of Guiding Circular
No.20-LDTBXH of August 3, 1995, of the Ministry of Labor, War Invalids and
Social Affairs). In case of a failure to execute the contract due to the
laborer (no longer having the need to work overseas or lacking one of the
conditions prescribed in the contract), the laborer has to bear the expenses on
the work already undertaken by the economic organization; if the failure to
execute the contract is due to the economic organization, it shall bear all the
expenses and shall immediately refund the temporarily collected sum to the laborer.
2. The laborer:
- Has the obligation to pay the monthly service
fee at the same time as he/she receives the monthly salary to the economic
organization at the rate set in Item 1.
In case the economic organization has no
condition to collect the monthly service fee because the laborer receives the
salary directly from the overseas employer, the laborer has the responsibility
to pay the service fee in the form already agreed upon between himself/herself
and the economic organization.
IV. THE TAXES ON HIGH
INCOMES:
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
As regards the individuals working in the
countries with which Vietnam has signed agreements on avoidance of double
taxation, the implementation of the content of the agreement with each country
shall prevail in line with Document No.1664-TCT/HTQT of October 11, 1994, of
the General Department of Taxation of the Ministry of Finance which provides
guidance for the implementation of agreements on avoidance of double taxation.
1. The taxable incomes:
Due to the specific character that the payer of
the tax on high-income earners is a laborer working on tenure overseas under a
concrete contract, the tax he/she shall have to pay for his/her high income
shall be determined as follows:
a/ The taxable income is the income which is
clearly indicated in the contract as the monthly salary that the overseas
employer shall pay to the laborer to cover the meals, accommodation, commuting,
insurance and other expenses during the whole period of work under contract. In
case the employer provides only part of the expenses on meals, accommodation,
commuting and social insurance, the rest of the expenses shall be deducted from
the income prescribed in the contract so as to calculate the net income in
accordance with the provision stipulated in the following Point (b).
b/ If the contract stipulates that the employer
shall pay the laborer part of the salary (net income) excluding the expenses on
meals, accommodation and insurance during the laborers period of work overseas,
the uncovered expenses shall be equivalent to the net income (in other words,
equivalent to about 50% of the total income), so as to have a ground to
calculate the taxable income.
c/ The tax-exempt expenses used to determine the
taxable income are the expenses which are substracted from the monthly income
when calculations are made of the service fee in accordance with the provisions
stipulated in Section III, Point 1, of this Circular (not excluding the tax on
high income already paid in the country of work, if any).
d/ In the contract for work overseas, the
monthly income of the laborer being considered unchanged for the whole period,
the monthly income is the mean taxable income for all the months of the year.
2. Tax rates for high incomes:
In accordance with Article 10, Section 2, of the
Ordinance on Taxes on High-Income Earners of May 19, 1994, the Vietnamese
laborer who works on tenure overseas shall pay his/her income tax as prescribed
in the following table of partially progressional tax rates:
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
Level
Mean monthly
income/person
Tax rates
Tax amount
1
Up to 5,000
0%
0
2
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
10%
TI x 10% - 500
3
Over 12,000 to
30,000
20%
TI x 20% -
1,700
4
Over 30,000 to
50,000
30%
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
5
Over 50,000 to
70,000
40%
TI x 40% -
9,700
6
Over 70,000
50%
TI x 50% -
16,700
In which: TI = Taxable income
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
3. Examples for calculation of income and
high-income taxes:
a/ Example 1:
Health expert Nguyen Van A works in Angola on a
three-year contract which clearly indicates that Mr. As total income is 1,000
USD/month. Like other Vietnamese experts in that country, he has to pay his own
return air ticket of 1,600 USD and bears his own expenses on meals,
accommodation, commuting, insurance, etc., during his stay to work under the
contract.
Mr. Nguyen Van As income which is taxable and
subject to high-income tax is calculated as follows:
- The air fare is divided evenly by the number
of months specified by the contract:
1,600 USD : 36 months = 44.44 USD/month
- The taxable income is:
1,000 USD - 44.44 USD/month = 955.56 USD/month
In Vietnam Dong at the rate of 11,000 VND to one
USD:
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
The income subject to high-income tax for a
month is:
10,511,160 VND x 10% - 500,000 VND = 551,116 VND
Equivalent to 50.1 USD (551,116 : 11,000).
Although Angola and Vietnam have not signed an
agreement on avoidance of double taxation, if the laborer produces papers
certifying that he/she has paid his/her income tax in that country, 30 USD (or
330,000 VND at the rate of 11,000 VND to one USD) for instance, he/she will
have to pay the remainder (551,116 VND - 330,000 VND) of 221,116 VND in
Vietnam. In case the tax already paid abroad is higher than the amount to be
paid in Vietnam (50.10 USD), the labor is exempt from high-income tax in
Vietnam.
b/ Example 2:
Mr. Tran Van B signs a contract to work in
country X for a period of one year. The contract clearly indicates that Mr. B
will be paid a net monthly income of 350 USD and his employer will provide for
his expenses on meals, accommodation and insurance during his whole stay to
work under the contract.
Mr. Bs income which is taxable and subject to
high-income tax is calculated as follows:
- The taxable income mentioned in Point 1,
Sub-point (b), of this Item is:
350 USD + 350 USD = 700 USD/month
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
- As specified in the contract, all the expenses
on the management of overseas labor will be substracted from the monthly income
of the laborer before it is paid to him/her, the substraction is therefore 20
USD/month.
- The taxable remaining income is:
700 USD - (30 USD + 20 USD) = 650 USD/month.
In Vietnam Dong, at the exchange rate of 11,000
VND to one USD, it is 7,150,000 VND/month.
- The income tax that Mr. B has to pay each
month is:
7,150,000 VND x 10% - 500,000 VND = 215,000 VND,
or 19.5 USD (215,000 : 11,000)
As country X has already signed with Vietnam an
agreement on avoidance of double taxation, then in accordance with the
provisions of Articles 15 and 23 of the Agreement and Document No.1664-TCT/HTQT
of October 11, 1994, of the General Department of Taxation of the Ministry of
Finance, providing guidance for the implementation of the Agreement, the
laborer has to pay income tax in both countries. In case the laborer has
already paid a high-income tax in country X at the rate of 10 USD (110,000 VND
at the exchange rate of 11,000 VND to one USD) and has all valid papers to
prove that payment, the then remaining tax he has to pay in Vietnam is 105,000
VND. In case the tax he pays in country X is higher than the tax he is due to
pay in Vietnam (19.5 USD), he will be exempted from Vietnams high-income tax.
If Mr. Tran Van B is paid a salary as specified
in the said contract, but he himself has to buy his own breakfasts and dinners
and buy his health insurance and cover these expenses in country X, at a total
cost of 110 USD/month, then his taxable income will be as follows:
- Mr. Bs net income is:
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
- The taxable income is:
(240 USD + 240 USD) - (30 USD + 20 USD) = 430
USD
At the exchange rate of 11,000 VND to one USD,
it is 4,730, 000 VND. Then, as specified in the above tax rates, Mr. B is not
subject to high-income tax.
V. The permit fees:
1. The fees:
The Ministry of Labor, War Invalids and Social
Affairs is authorized to collect and manage two fees: the fee on operating
permit and the fee on contract execution permit.
The economic organization, on receiving the
operating permit, has to pay a fee in Vietnam Dong equivalent to 2,000 USD, and
on receiving the permit for contract execution, has to pay a fee in Vietnam
Dong equivalent to 5 USD/person in accordance with the number of persons
specified in the contract submitted to the Ministry of Labor, War Invalids and
Social Affairs (the Department for Management of Guest Workers).
The economic organization is authorized to
account for these two fees in the operating cost of providing labor supply.
2. The management regime:
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
- Expense on the verification of the legal
status as well as the other necessary conditions of an enterprise in sending
laborers overseas for tenured work so as to provide the basis for the issuance
of the operating permit.
- Expense on the evaluation of the contracts and
the feasibilities of the contract to send laborers overseas for work so as to
provide the basis for the issue of the permit for contract execution.
- Expenses on opening new markets, marketing
work and the networking of collaborators in areas where there is the need for
Vietnamese laborers.
- Other expenses incurred by the necessity
arising in the field of State management in some of the specific external
economic areas which are not adequately covered by the current financial
regulations of the State.
VI. ORGANIZING THE PAYMENT OF SOCIAL INSURANCE,
HIGH-INCOME TAX AND SERVICE FEES:
1. The economic organization which is empowered
to make the collection shall register with the local tax agency where it pays
its registration tax (or registers its office address) so as to receive
guidance on the procedure and method in order to collect and pay taxes as
required by law. Every month, as it makes salary payment to the laborer, the
economic organization is responsible to collect the payments for social
insurance, high-income tax and service fees. In case the overseas employer
directly pays the monthly salary to the laborer, the collection shall be made
in one of the following forms:
- Requesting the overseas employer to retain
from the monthly salary the payments for social insurance, high-income tax and
service fees before paying the salary to the laborer (in accordance with the
sums calculated by the Vietnamese economic organization) and to transfer them
into an account designated by the economic organization for subsequent
repatriation.
- Through the representative office (or a
mandated representative) to collect the monthly payments in a way conformable
to the situation and circumstances of each country and each individual case.
2. Due to the specific conditions of the
Vietnamese guest workers in which all revenues are generated overseas, the
mandated collector shall therefore be the economic organization directly in
charge of the laborer which shall have to make the collection in an accurate,
full and timely manner as required by law and shall be entitled to a commission
equal to 0.5% of the collected sum of social insurance, high-income tax.
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
VII. THE REPORTING REGIME:
1. The recording regime for accountancy:
Apart from the general provisions of the State
regime on accountancy as guided by the financial agency, the local social
insurance and tax agencies, the economic organization shall, in its capacity as
the State-mandated collector and as the organization directly in charge of the
laborer, perform the following procedures:
- Recording in logs (or register) the revenue
and payment situation of each laborer so as to have the basis of reference as
the contract expires and provide entitlement interests for the laborer.
- The logging shall be done into 02 copies, one
of which is to be kept by the economic organization in the file of the laborer
which will serve as a basis for financial statements, and the other to be kept
by the laborer (or his/her mandated representative) who shall produce and sign
it on each contact with the economic organization.
2. The regime for periodical reporting:
- Every quarter, the economic organization shall
make a report on the implementation of the collecting and paying work to the
Ministry of Finance (Department of External Finance), the Ministry of Labor,
War Invalids and Social Affairs (Department for Management of Guest Workers),
the local Tax Agency and the Agency for Social Insurance of Vietnam.
- Every year, the economic organization shall
make the following reports:
+ A report on the plan for the next year to be
compiled on the basis of the implementation of the first nine months of the
current year, with breakdowns in the number of laborers (male and female),
professions, countries of work, tenures of work, projected salary levels,
projected time for departure specified in each contract, etc.. The planning
reports shall also make recommendations to the competent authorities in the
field of cooperative labor.
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
The said annual reports shall be addressed to
the Ministry of Labor, War Invalids and Social Affairs (Department for
Management of Guest Workers), the Ministry of Finance (Department of External
Finance), the Agency for Social Insurance of Vietnam and the local Tax Agency.
The timing of the hand-over of the reports shall comply with the current
provisions of the State.
3. The observance of the above-prescribed
reporting regime is an obligation and responsibility of the economic
organization in implementation of Point 10, Item 9, of Decree No.07-CP of
January 20, 1995, of the Government, and is one of the conditions to grant a
new the license to the economic organization to send laborers for tenured work
overseas.
B. OTHER PROVISIONS
1. In order to ensure the rights and interests of
the State, the economic organization and the laborers and to ensure the
uniformity of the implementation of the financial regime, the salary of the
laborer as specified in the labor contract shall be in terms of US dollar (USD)
or other freely convertible currencies. For each case, the payment may be done
in one of the following manners:
- For the monthly salary, the currency shall be
agreed upon by the two parties to the contract, but it must be in USD term by
the exchange rate publicized by the State Bank of the country of work at the
point of the payment.
- If the salary is paid in a local currency, the
contract should contain a provision whereby the laborer shall have the right to
request the State Bank of the country of work or the employer to exchange it
into USD in full amount or to cover his/her expenses in the country of work.
2. The currencies to be used in payment and
collection:
- The deposit placed by the laborer may be in
Vietnam Dong or US dollar (USD), depending on the mutual agreement between the
economic organization and the laborer.
- All payments of social insurance (as specified
in Item II) and of permit fees (as specified in Item V) shall be in Vietnam
Dong.
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
Converting the amount of tax in Vietnam Dong
that the laborer shall pay for his/her high income into USD (by the same
exchange rate between the USD and the Vietnam Dong applied in calculating the
tax) and the laborer shall make the payment in USD.
In collecting the high income tax as well as
service fees in foreign currencies, the economic organization shall proceed
from the practical situation of how the salary is paid: if the salary is paid
100% in USD, the payment shall then be made in USD; if it is paid partly in the
local currency, the payment shall then be made in two currencies (USD and local
currency proportional to the amount of local currency in the monthly salary).
The economic organization shall remit the payment in USD for high income tax to
the collecting agency in the country and remit the amount in local currency to
the resident Vietnamese Embassy for temporary keeping in the State budget fund.
The commission that the economic organization is entitled to in collecting
high-income tax shall be in the actually collected currency.
3. The economic organizations which send
Vietnamese laborers overseas for work in the form of bidding, project contract
and production sharing, etc., shall apply the following financial regime:
- If the laborer is paid in a foreign currency
during his/her work stay overseas in the same manner as the contract signed
with an economic organization (exported labor), the provisions of this Circular
shall apply.
- If during his/her stay for work abroad the
laborer is paid with only allowances (for food, accommodation, etc., adequately
only for him/her to work) while his/her partial salary and other financial
regimes are administered in accordance with the Vietnamese Law on Domestic Enterprises,
the laborer and the economic organization shall apply the Law on State
Enterprises of Vietnam.
C. IMPLEMENTATION
1. This Circular takes effect as from January
1st, 1996; the provisions on high-income tax apply as from June 1st, 1994. The
Inter-ministerial Circular No.05-LB/TC/LDTBXH of March 7, 1992 providing
guidance for the implementation of Decree No.370-HDBT, the Note No.2599-LDTBXH
of July 25, 1995 of the Ministry of Labor, War Invalids and Social Affairs
providing guidance for sending laborers to the Republic of Korea, and the other
documents which are contrary to this Circular are now annulled.
As regards the financial regimes for laborers
who are on tenured work overseas, which took effect prior to January 1st, 1996,
if in inplementing this Circular the economic organization fails to handle
their cases in a timely manner, it has to report to the concerned ministries
for guidance in settling each particular case.
2. Monitoring and inspecting the implementation
of the financial regimes in sending laborers for work overseas as stipulated in
this Circular is one of the important tasks of the concerned Ministries and
branches in the sphere of State management. In the course of implementation, if
a violation is detected, it shall be handled in accordance with the current
financial and accounting regulations of the Vietnamese State, or shall be
subject to administrative sanctions, depending on the degree and character of
the violation to request an early termination of the contract, or a suspension or
revocation of the license.
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
FOR THE
MINISTER OF LABOR, WAR INVALIDS AND SOCIAL AFFAIRS
VICE MINISTER
Nguyen Luong Trao
FOR THE
MINISTER OF FINANCE
VICE MINISTER
PHAM VAN TRONG