Recently, Vietnam has announced some changes in the future value added tax (VAT) and Corporate Income Tax (CIT). Therefore, S4B Vietnam will draw out some significant change in the new tax plolicy for international organiztions to take note and maintain compliance with the new regularions.

According to the Circular No.25/2018/ TT – BTC, the existiing circular on value added tax (VAT), corporate income tax (CIT) and personal income tax (PIT) will be revised and supplemented. These changes are effective from the beginning of May 2018, affecting all companies operating in Vietnam.

Value Added Tax (VAT)

  • VAT refun can be submitted for companies which have import activities in order to export directly.
  • The expenses for transportation of natural resoures and mierals with the aim to produce export goods from the original place to the processing factory are not calculated in the value.

In case the companies provide goods and services both dometically and export overseas, import activities are required to be reported input separately. However, the task of separating records of VAT input used for import can result in an addtional significant cost of time and efors. Another way applicable for companies which fail to record the input VAT separately, then than can use the proportion of import sales over total sales counted from the period of last tax refund. Under the new changes, tax payer can determine the VAT refund amount for this period in the second way. As a result, it would be a relief for many export companies in Vietnam when the circular takes effect.

Additionally, companies can flexibly claim refund for VAT for any specific period (unlike the requested full fiscal year as before). Now the period for VAT refund claim can be a quater, a year or even more than a year as long as the total amounts reaches 300 million VND.

Corporate income tax (CIT) and personal income tax (PIT)

The new requirements specify the activity of capital transfer between companies. If this activity happens, the receiving party must review the fixed asset’s remaining value. The new regulation has some new requirements for fixed asset, which are:

  • Fixed assets must bring about guaranteed economic benefit in the upcoming time
  • Fixed assets value should be clearly identified, required value before tax is from 30 million VND
  • Fixed assets’ usage period must be more than 1 year

There is also a capped total deducible amount for voluntary pension funds, life and pension insurance listed in corporate income tax, which is 3 million VND per month with the following conditions:

  • The condition and level of those amount is clearly stated in legal labor documents issued by high level leaders and aligned with the company’s finance policy.
  • The company is requested to fulfill the necessary insurance liability for its staff

For CIT, the expense for welfare is requested to be keep under at 1-month salary excludes staff insurances (life insurance and voluntary pension insurance) – values at 3 million VND per employee each month.

Following S4B Vietnam’s blog to catch up with the latest news and changes in the accounting and financial policy of Vietnam.