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Remitting earnings, CIT, VAT & bad debts

Released at: 14:24, 01/08/2015 TAX CONSULT

Remitting earnings, CIT, VAT & bad debts

This column is prepared in collaboration with KPMG Vietnam.

Our company is a 100 per cent foreign-invested enterprise. Can we remit our retained earnings overseas on a quarterly basis?

Current regulations provide that retained earnings shall be remitted overseas only after the company has settled its financial obligations in Vietnam, submitting audited financial statements and an annual CIT finalization return to Vietnamese tax authorities. Quarterly remittance of profit overseas is therefore not permitted.

Customs authorities recently inspected our company and deemed additional VAT payable at the importation stage. Can we claim the input VAT amount deemed by customs authorities? 

Under current VAT regulations, input VAT at the importation stage deemed by customs authorities is creditable if the company is not penalized for acts of tax evasion or tax fraud. 

Our company is located in Ho Chi Minh City. We have a dependent branch in Hanoi that declares VAT under the credit method. Can the branch claim input VAT of invoices under its name and tax code but settled by the headquarters in Ho Chi Minh City?

If the branch has input VAT invoices with its name but the payment for those invoices is settled by the company, the branch will be still allowed to declare the relevant input VAT provided that the goods and services are purchased for the branch’s operations. In addition, to declare VAT under the credit method, the branch must fully comply with Vietnamese accounting systems (i.e. recognizing revenue, opening a bank account for payments, etc.) and have supporting invoices and documents in line with current regulations.

Our company has carried out some business activities that have not yet been registered in our investment certificate. Can we claim input VAT relating to those activities? 

The company is still allowed to claim the relevant input VAT if those business activities do not fall under the list of sectors subject to restrictions or prohibition. All the required supporting documents should be in place to claim the input VAT. The company will, however, be subject to administrative penalties due to not registering the supplemental business activities.

Our company has received a notice on receiving dividends from another company where we own shares and recorded the dividend amount as a receivable. Due to financial difficulties, that company is yet to pay us the dividend, so we made an allowance for bad debts. Can we claim the allowance as deductible expenses for CIT purposes?

Under current regulations, allowances for bad debts must be made in accordance with Circular No. 228/2009/TT-BTC dated December 9, 2009. The above allowance for the dividends receivable does not satisfy the conditions required under Circular No. 229 and shall not be deductible for CIT purposes. 

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