Vietnam’s Tax Administration Law Reform to Take Effect in July 2020
In June, Vietnam’s National Assembly approved a new Law on Tax Administration 38/2019/QH14. Under the new law, tax authorities have been granted additional enforcement powers. At the same time, the new law has made it a little bit easier for both individuals and entities to file taxes.
The new law will take effect from July 2020. The authorities will provide circulars and decrees with details and guidance for the new law ahead of its implementation. While implementation procedures remain forthcoming, taxpayers can begin to prepare by reviewing the law with their local advisors now.
Seven big changes for taxpayers
Under the new law, tax authorities will have additional power to collect tax, particularly in instances where individuals or companies attempt to evade tax.
This will include instances where companies fail to abide by transfer pricing requirements and transactions where entities intentionally attempt to avoid paying tax.
To help ensure compliance, Vietnamese tax authorities will increase cooperation with international jurisdictions through information exchanges.
Further, businesses that engage in transfer pricing will be required to be filed as a separate return, rather than include this information as part of the corporate income tax return.
Tax registration certificates will be issued in three days. This process currently takes 10 days.
Filing personal income tax
Personal income tax (PIT) return deadlines have been extended to 120 days from the current 90 days of the calendar year end.
The new rules allow corrected returns to be filed if mistakes are found for up to 10 years. However, this must be done before any audit by the tax authorities.
Individuals will be able to use their citizenship code to file once it has been implemented. At present, individuals are required to have a tax code and an identity card number for filing taxes.
Legal representatives of an entity in Vietnam will need to ensure their companies are tax compliant. Under the new law, authorities may prevent legal representatives from leaving the country if their employer has not paid due taxes.
Business organizations will be allowed to submit additional tax declaration documents after the tax authorities have announced an audit or inspection decision.
The draft law has also introduced two types of audit: tax inspection and tax examination. A tax inspection is longer and focusses on a specific issue. A tax examination is shorter but covers wider issues or anomalies.
The tax examination period has also been increased from five to 10 days.
Penalties against entities
Entities that want to appeal a decision are required to pay the full tax amount as well as any penalties and late payment interest. However, if the entity wins the appeal it can request the tax authorities to pay an interest of 0.03 percent per day on the refunded amount.
E-commerce, E-tax, and E-invoices
The new law stipulated that tax rules related to e-commerce activities will be implemented in July 2022. Regulations on e-commerce activities still require clarification in the present state; however, some notable highlights include:
- Commercial banks will be required to withhold and pay taxes on behalf of e-commerce companies that do business abroad, but earn income from Vietnam;
- E-commerce companies that do business on digital platforms without a permanent establishment in Vietnam will be required to register for tax in Vietnam or authorize another entity to do so.
- Business entities that qualify for conducting e-tax transactions will be required to conduct e-tax transactions for tax purposes. This includes tax authorities as well. Further details on e-tax transactions can be found in Circular 110/2015.
- E-invoices will be mandatory for all enterprises from November 2020.
The new law will also affect non-resident businesses that sell goods and services into Vietnam via online platforms. Further details on e-invoices and e-commerce activities can be found in Decree 119/2018/ND-CP.