Value Added Tax and Personal Income Tax matters.
How are VAT declaration methods determined for companies and branches established from January 1, 2014?
On July 10, 2014 the General Department of Taxation (GDT) issued Official Letter No. 2616 to all local tax offices, providing further guidance on how to determine VAT declaration methods for companies and branches established from January 1, 2014. Notable points include: (i) where a company, which adopts a VAT credit method, sets up a branch in another city or province, such branch may adopt the same VAT declaration method as that of its headquarters; (ii) for the purpose of calculating the total asset value of a company for determining the VAT declaration method, the value of all machinery and equipment items not qualified as fixed assets that are used as capital contribution are also included; and (iii) there is no statutory deadline for submitting the notice of VAT declaration method to the tax office.
Are VAT refunds considered for investment expansion projects during the construction period?
Under Official Letter No. 2933 dated July 31, 2014 from the GDT, investment expansion projects during the construction period, when properly approved by competent licensing authorities, can be considered for VAT refunds.
Regarding the suspension of requirements on the setup of branches by export processing enterprises (EPEs) licensed to trade into Vietnam, pursuant to its Official Letter No. 10446 dated July 30, 2014, the Ministry of Finance has temporarily put on hold the requirement of these EPEs to set up a separate branch outside the export processing zone for local trade purposes, until further notice.
What are the recent updates on Personal Income Tax (PIT) under Official Letter No. 2605 issued on July 10, 2014 by GDT?
Regarding the taxable housing allowance, where an employee has multiple incomes from different employers and one of these employers pays house rental on his or her behalf, that housing allowance will be taxed at no more than 15 per cent.
Regarding taxable income when tax free allowances are included, where an employee receives net income that includes exempted income, for e.g. night shifts and overtime work, the entire income must be grossed for tax purposes. The taxable income shall be the gross amount less the exempted income items.
Regarding employers responsible for chasing outstanding PIT from expatriates that have returned home, the employer is responsible for informing the expatriate of his or her outstanding PIT obligations in Vietnam.
What is the new guidance on PIT tax refunds?
On July 8, 2014 the GDT issued Official Letter No. 2571 providing further guidance on issues relating to PIT refund claims, as follows. Individuals having incomes from different sources are responsible individually for carrying out PIT finalization and declaring all incomes earned. Where an individual is obliged to file his or her PIT finalization returns directly with the tax office, but instead authorises an income-paying employer to do so on his or her behalf, he or she will be penalised individually for any breaches of tax administration provisions. Where an individual did not authorize an employer to carry out PIT finalization procedures on his or her behalf but that employer actually did so, the employer will be penalized for any breaches of tax administration provisions. Prior to an official decision on PIT inspections, taxpayers can lodge amended PIT returns to declare additional income and tax refund considerations will be made based on the amended tax return. Tax authorities reserve the right to carry out post-refund audits within ten years of the date of tax refund approval.
This column is prepared in cooperation with KPMG Vietnam