Vietnam’s General Department of Taxation had issued Official Letter 5339/TCT-TT in November 2017 directing local tax offices to create a tax audit plan for 2018. Taxation is a major component of the state budget revenues and as the country’s budget deficit increases, taxpayers and enterprises will continue to face increased scrutiny from tax authorities trying to meet their revenue targets.
Tax & Accounting
According to Vietnam’s General Department of Taxation, around 3,000 firms have started to use e-invoice for its transactions, an increase from only 656 firms in 2016. The Ministry of Finance is also drafting a new circular on e-invoice to make it compulsory for enterprises and State-owned firms to use e-invoices from July 1, 2018. E-invoices not only allow firms and tax authorities to save costs and reduce administrative burden but also helps in controlling billing frauds.
Foreign investors considering the Vietnamese market are often drawn by its competitive costs. Vietnam’s low wages have traditionally provided these cost savings; however, the country has also quietly developed one of the most competitive tax regimes throughout Southeast Asia. Vietnam’s tax incentives are a standout feature of the tax regime and are applied to a variety of industries and projects throughout the country.
Many foreign businesses delocalize their production facilities in Vietnam and charge their foreign outposts for administrative, technical, financial, and commercial services. However, financial administration teams need to be aware that their transactions must comply with the arm’s length and substance-over-form principles.
Vietnam’s Ministry of Finance (MoF) has issued Decision 1381/QD-BTC introducing a new inspection regime for Foreign-invested enterprises (FIEs). The decision is already in effect since 24 July 2017. The MoF will be coordinating with other departments such as General Department of Customs, Department of Tax Policy, Department of Finance, Department of Planning and Investment, and provincial Tax and Customs Departments to supervise and audit FIEs. The new decision is being implemented to reduce malpractices by existing FDI firms.
Vietnam’s Ministry of Finance (MoF) has introduced a draft circular to replace paper bills with electronic invoices from the start of 2018. The new draft will replace Decree No.51/2010/ND-CP and Decree No. 04/2014/ND-CP on invoices for the sale of goods and services to facilitate the implementation of electronic invoices (e-invoices). Invoices already printed will be allowed until 2018.
Vietnam’s Ministry of Finance has recently introduced a draft of amendments to various taxes such as Value Added Tax, Special Consumption Tax, Corporate Income Tax, Personal Income Tax, and Natural Resources Protection Tax. The tax hikes aim to increase tax contributions and reduce public debts. The government has allowed public feedback and will then submit it to the Ministry of Justice. The amendments will be submitted to the Government in September for final approval.
Tax officials in Ho Chi Minh City have sent tax demands to 13,500 Facebook retailers, urging online businesses to declare earnings and submit their taxes. As per the law, online retailers earning more than VND 100 million (US$4,400) a year are required to declare taxes. Taxes are required to be submitted to the municipal and trade department of the city. This move aims to target only long-term and unregistered business. With the e-commerce industry thriving, the government hopes that the taxation of online transactions will reduce the city’s tax losses.
This edition of Tax, Accounting, and Audit in Vietnam, updated for 2017, offers a comprehensive overview of the major taxes foreign investors are likely to encounter when establishing or operating a business in Vietnam, as well as other tax-relevant obligations. This concise, detailed, yet pragmatic guide is ideal for CFOs, compliance officers and heads of accounting who need to be able to navigate the complex tax and accounting landscape in Vietnam in order to effectively manage and strategically plan their Vietnam operations.
Taxation permeates business transactions in Vietnam, and a strong understanding of tax liabilities enables foreign investors to maximize the tax efficiency of their foreign investment while ensuring full compliance with all tax laws and regulations. This guide overviews taxes for businesses and individuals and discusses accounting and audit in the Vietnam business context.
Firms engaged in technology transfer in Vietnam are expected to receive tax incentives according to a recent draft amendment of the Law on Technological Transfer. Tax incentives will be applicable on the import of machinery, equipment, materials, and means of transport that are not manufactured in Vietnam, and used for research and development (R&D) activities, technological innovations, and technology transfer within Vietnam. The amendment is expected to take effect on July 1, 2017.