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Vietnam: Tax Law Amendments Aimed at Improving Conditions for Businesses

(Sept. 12, 2016) In July 2016, the Vietnamese government issued Decree No. 100/2016/ND-CP that revises several tax-related policies. It is designed to help with the implementation of the Amended Tax Law of April 2016, which came into force on July 1. The Decree has a goal of improving conditions for businesses. (New Decree Revises a Number of Tax Regulations, VIETNAM LAW AND LEGAL FORUM (Aug. 29, 2016); Decree 100 Guiding the Amended Tax Law 106/2016/QH13 (“Law 106”), KPMG (Aug. 2016); for an English-language summary of the April tax law, see Deloitte Vietnam Tax Advisory Co., Tax Alert: Law Amending Some Articles of the Law on Value Added Tax, Law on Special Sale Tax, and Law on Tax Administration (Apr. 2016), available at AUSCHAM VIETNAM.)

General Provisions

The Decree establishes:

  • a reduction of the late tax interest payment from 0.05% to 0.03% per day for those who do not either pay on time or do not meet time limits set by extensions, tax agency notices, or settlement decisions. This late payment interest will also apply to tax debts incurred before July 1, 2016;
  • an exemption from excise tax, royalties, and personal income tax for those who cannot pay due to their suffering damage from natural disasters, fires, or accidents; and
  • an exemption from taxation for individuals and households whose annual tax due for non-agricultural land use is less than VND50,000 (about US$2.21). (New Decree Revises a Number of Tax Regulations, supra.)

In addition, the previous 275-day deadline for payment of import duties on raw materials acquired for the purpose of manufacturing products for export was removed as of September 1, 2016. (Decree 100 Guiding the Amended Tax Law 106/2016/QH13 (“Law 106”), supra.)

 Value-Added Tax (VAT) Provisions

 Exemptions from VAT will be provided for:

  • income from cultivation, husbandry, aquaculture, and fishery products not yet fully processed. In addition to not being required to make declarations for VAT calculations and payments, these businesses will be eligible for credits for input VAT (VAT a business pays on goods it purchases);
  • medical examination and treatment (including such services as transportation of patients, tests, radiography, blood and blood products supply, and services for the elderly and disabled);
  • public passenger transportation by buses or electric vehicles (New Decree Revises a Number of Tax Regulations, supra); and
  • natural resources including minerals, whether or not they have been processed into other products, as long as the value of the natural resource plus the energy used to create the product is equal to 51% or more of the product price. (Decree 100 Guiding the Amended Tax Law 106/2016/QH13 (“Law 106”),)

The Decree clarifies the procedure for investments that qualify for a VAT refund, stating that if a competent authority has performed an audit of the business involved, that audit can be the basis for resolving refund claims. For certain businesses for which licenses or certificates are required, VAT refunds will not be granted to enterprises without those documents. (Id.)

The Decree also specifies that companies that both export their goods or services and sell them within Vietnam must offset their input VAT with output VAT before they can receive refunds on input VAT over VND300 million. Furthermore, if possible, companies should track the input VAT they pay related to goods or services they export. If such separate records are not possible, the amount related to exports can be calculated based on the proportion of the company’s business that is export-based in the time period under consideration. (Id.)

Special Consumption Tax (SCT) Provisions Under the Amended Tax Law

The April 2016 Amended Tax Law changed the basis for the collection of the special consumption tax. (Nguyen Huong & Vo Kiet, New Law on Special Consumption Tax Adversely Affects Alcohol Imports, GLOBAL AGRICULTURAL INFORMATION NETWORK (May 17, 2016).) The Decree includes several provisions that clarify how the basis for the SCT is to be established:

  • The price on which the SCT is based is in most cases the sale price, but the tax authorities have the right to set the taxable price when the cost at sale is not market price;
  • A previous cap of 105% of sale price as the basis for the tax on imported automobiles sold to trading companies was eliminated.
  • The taxable price that is the basis for determining the SCT is 7% lower than the average sale price for trading companies related to the manufacturer or importer of the goods, such as subsidiaries or affiliates of the same parent enterprise. The same percentage is applicable to a related party company, defined as a company directly or indirectly holding at least 20% of the investment capital of another company. (Decree 100 Guiding the Amended Tax Law 106/2016/QH13 (“Law 106”), supra.)