At a glance...

This is a periodic summary of new rulings and other legal documents,

including some in draft form relating to tax, customs and legal

developments in Vietnam. Please read on for an overview of some

trending issues in Vietnam and how they may impact your business.

PwC Vietnam NewsletterQuarter 1, 2019

www.pwc.com/vn

www.pwc.com.vn

Contents

1 Some notable

proposed

regulations

2 New regulations in

Quarter 1, 20193 Interesting official

letters issued by

the tax authorities

4 PwC NewsBriefs

issued in Quarter

1, 2019

1

Table of content

Content Page

1. Some notable proposed regulations

• Special preferential import tariffs for the ASEAN and Hong Kong

Free Trade Agreement

• Implementation of the CP-TPP pact in Vietnam

• Draft circular on customs compliance ratings

• Draft decree on modification of export and import duty tariffs

• Draft Law on Insurance Business and Intellectual Property

• Draft circular on e-invoicing

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2. New regulations in Quarter 1, 2019

• New circular on importing checkpoints for automobiles

• New decree on issuance of corporate bonds

• Basic salary to be increased in July

• Restrictions on lending in foreign currency to residents

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• New decree on special sales tax

• New decree on scientific and technological enterprises

• New circular on Enterprise Registration

• New circular guiding the opening and usage of payment

accounts

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Table of content

Content Page

3. Some interesting rulings

• Technology transfer - supporting documents required for tax

deductibility

• VAT and Personal income tax treatments of coupons

• DO fees, CIC fees, container cleaning fees are not dutiable

• Extension of current regulations on importation of used

machinery

• CIT incentives for business expansion

• Capitalization of loan interest when purchasing machinery and

equipment

• VAT refunds for investment projects

• VAT and CIT disallowance for employee expenses where no

work permit in place

• Social insurance procedures for foreign employees

• Clarification of social insurance application scope

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4. PwC NewsBriefs issued in Quarter 1, 2019 12

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1. Some notable proposed regulations

Special preferential import tariffs for the ASEAN and

Hong Kong Free Trade Agreement

In November 2018, the Ministry of Finance (“MoF”)

circulated a draft decree with guidance on special

preferential import tariffs related to the implementation of

the ASEAN and Hong Kong Free Trade Agreement for

2019 to 2022.

In order to be eligible for the special preferential import

tariffs, imported goods must meet certain requirements:

i. The imported goods must belong to the list of goods

entitled to special preferential import tariffs specified

in the decree;

ii. The goods must be imported from Hong Kong or

other ASEAN countries;

iii. The goods must meet the direct consignment rule set

out in regulations issued by the Ministry of Industry

and Trade;

iv. The goods must satisfy the rules of origin set out in

the AHKFTA and be accompanied with a valid

Certificate of Origin Form AHK.

Implementation of the CP-TPP pact in Vietnam

The Comprehensive and Progressive Trans Pacific Partnership is a Free Trade Agreement

among 11 member countries, including Australia, Brunei, Canada, Chile, Japan, Malaysia,

Mexico, New Zealand, Peru, Singapore and Vietnam.

The CP-TPP FTA entered into force on 30 December 2018 after being ratified by the

governments of seven member countries, including Australia, Canada, Japan, Mexico, New

Zealand, Singapore and Vietnam. The CP-TPP officially came into effect from 14 January.

The Ministry of Finance has submitted a draft decree setting out Vietnam’s special preferential

import tariffs for implementing the CP-TPP.

On a related matter, the Ministry of Industry and Trade issued Circular no. 03/2019/TT-BCT

dated 22 January 2019 that provide the Rules of Origin agreed in the CP-TPP for goods

exported from Vietnam. Circular 03 came into force on 8 March.

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Draft circular on enterprises’

customs compliance ratings

The MoF has recently circulated a

draft circular providing guidance on

the criteria to be used in assessing

the compliance level of enterprises.

The issuance of this guidance shows

the willingness of the MoF and

Vietnam Customs to discuss one of

the special functions of Vietnam

Customs, i.e. risk management and

enterprise ratings, which are

fundamental in applying relevant

customs inspection measures.

Opinions are sought on this draft

circular.

Draft decree on modification of the

export and import duty tariffs

The MoF is also drafting a new

Decree amending and supplementing

Decree 125/2017/ND-CP on export

duty tariffs and preferential import

duty tariffs. One notable point in this

draft Decree is there will be a tax

incentive scheme applicable to parts

imported for the production of electric

vehicles.

The draft decree will be released

soon for comment.

Draft Law amending Law on

Insurance Business (IB Law) and

Law on Intellectual Property (IP

Law)

A draft Law amending both the IB Law

and the IP Law was recently

circulated for public comments. It

adds definitions and regulations on

“hoạt động phụ trợ bảo hiểm”

(supporting activities for insurance) to

the IB Law, which include insurance

consultancy, insurance risk

assessment, insurance calculation

services, insurance loss assessment,

insurance compensation assistance,

etc.

The Draft Law also amends certain

regulations in the IP Law regarding

inventions, geographical indications,

trademarks and IP protection

methods.

Draft circular on e-invoicing

Early this year, the GDT presented to

the MoF a first draft of a circular to

implement e-invoicing regulations,

which provided guidance on the use

of e-invoices, including:

• Types and content (compulsory

and non-compulsory items) of e-

invoices. Some compulsory items

are not required if enterprises

engage in specific sectors that

provide goods and services to

individuals and households,

including medical services,

pharmaceutical retailers, banking,

insurance, transportation,

supermarkets, etc.

• Regarding the timing of e-invoice

issuance, the draft circular

stipulates that for e-invoices

without verification codes, the

timing of e-invoice issuance will be

the time the seller electronically

signs the e-invoices, which

contradicts recent guidance in

some rulings which specify the

date of the invoice. More guidance

on the timing of the issuance of e-

invoices for real estate trading,

building houses/infrastructure for

sale is also included.

• Using e-invoices with verification

codes is required for enterprises

classified as high tax risk, including

enterprises which have in the past

been penalized for tax evasion.

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• How to handle cases where

invoices are wrongly issued after

being granted a verification code,

and guidance on the issuance of

amended e-invoices for trade

discounts.

• The transfer of e-invoice data to

the tax authorities, including

guidance on the timing and type

of data transfer. In addition,

sellers also need to upload

invoices to their websites.

• Credit institutions, banks, and

payment intermediaries need to

report banking transactions to the

tax authorities if required.

• Guidance on the use of stamps

and electronic stamps on certain

products, such as cigarettes and

alcohol.

Overall, the draft circular provides

general guidance on issuing e-

invoices, reporting to tax authorities,

etc. However, there are still myriad

unclear points which need further

guidance (e.g. the GDT will issue

guidance on the technical standards

for e-invoices, including the xml

format containing exchanging data,

connection capability). There are

also some concerns as to certain

requirements, such as a

confidentiality requirement to publish

invoices on the websites of sellers,

etc.

2. New regulations in Quarter 1, 2019

New circular on importing

checkpoints for automobiles

The Ministry of Industry and Trade

has just issued Circular no.

06/2019/TT-BCT dated 25 March

2019, which names importing

checkpoints that can handle

imported passenger automobiles

under 16 seats.

Pursuant to Circular 06, passenger

automobiles under 16 seats can only

be imported into Vietnam via the

following sea ports: Quang Ninh (Cai

Lan terminal), Hai Phong, Da Nang,

Ho Chi Minh City, and Ba Ria-Vung

Tau.

This will affect companies importing

passenger automobiles. The Circular

took effect from 8 May.

New decree on issuance of

corporate bonds

The Government issued Decree

163/2018/ND-CP dated 4 December

2018 providing regulations on the

private placement of corporate

bonds both in domestic and

international markets. Some new

points are highlighted below:

• "Green corporate bonds” are

introduced for the first time as

bonds issued to invest in

environmental protection projects

in accordance with the Law on

Environmental Protection.

• Conditions for issuing corporate

bonds are loosened, such as

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removing the requirement that

business activities in the

preceding year(s) of the bond

issuing enterprises must be

profitable, or that enterprises

issuing bonds to the international

market must have operated for at

least three years.

• A website providing information on

corporate bond issuance will be

created and operated by the stock

exchanges.

This new Decree took effect on 1

February.

Generally, Decree 163 provides

better conditions for enterprises to

raise capital through the issuance of

bonds, and for developing the

corporate bond market in terms of

publicity, transparency and

protection for investors.

Basic salary to be increased in

July

According to Resolution 70/2018/

QH14 dated 9 November 2018, the

basic monthly salary will be raised

from VND1,390,000 to

VND1,490,000.

This will take effect from 1 July.

Accordingly, the capped monthly

salary for compulsory social and

health insurance contributions

increased from VND27.8m to

VND29.8m.

Restrictions on lending in foreign

currency to residents

The State Bank issued Circular

42/2018/TT-NHNN dated 28

December 2018 guiding lending in

foreign currency to resident

borrowers. Some key changes are

highlighted below:

• Medium- and long-term loans in

foreign currency for payments for

imports are only allowed until 30

September.

• Short-term loans in foreign

currency for payments for imports

of goods/services to implement

business plans to serve domestic

demand are allowed until 31

March.

Circular 42 came into effect on 1

January 2019. These controls are

aimed at encouraging exports and

curbing short-term foreign currency

credit growth, which increased

markedly in 2018.

Decree 14/2019/ND-CP on special

sales tax

Some key points include:

• Additional SST assessed by the

customs authorities at the import

stage (for both materials used for

production and for imported

goods) is creditable (except in the

case of tax evasion). For imported

goods, input SST which is not

creditable is deductible for CIT

purposes. This is a positive

development and consistent with

the tax treatment of import VAT

assessed by the customs

authorities.

• This new Decree also provides

clearer guidelines on SST refund

procedures and refund claims for

import duty can include import

SST.

This Decree took effect on 20

March.

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Decree No. 13/2019/ND-CP on

scientific and technological

enterprises

Decree No. 13/2019/ND-CP was

released in February providing

guidance on various incentives

applicable to scientific and

technological enterprises. Decree 13

took effect from 20 March.

According to Decree 13, a certificate

of scientific and technological

enterprise can serve as the basis for

the application of incentives, and

enterprises must satisfy certain

conditions to obtain this.

Qualified scientific and technological

enterprises will be entitled to four

years of CIT exemption and a

subsequent nine years of a 50%

reduction in CIT rates, along with other

incentives, such as exemption or

reduction of rental fees for land use

rights and credit incentives.

Circular No. 02/2019/TT-BKHDT on

Enterprise Registration

In January 2019, the Ministry of

Planning and Investment issued

Circular 02 on enterprise registration.

Amongst other changes, Circular 02

provides a range of new standard

forms and templates to be used for

enterprise registration procedures.

Circular 02 took effect on 11 March.

Enterprises should note this change

when conducting registration

procedures with the relevant local

licensing authorities from 11 March

onwards.

Circular 02/2019/TT-NHNN of SBV

guiding the opening and using of

current accounts

The State Bank issued Circular

02/2019/TT-NHNN dated 28 February

2019 amending regulations on

opening and using current accounts.

Some history…

• Circular 23/2014/TT-NHNN dated

19 August 2014 allowed individuals

and organisations to open current

accounts in Vietnam.

• On 26 December 2016, the SBV

issued Circular 32/2016/TT-NHNN

amending Circular 23. One of the

key amendments was that only

natural persons and legal persons

are allowed to open current

accounts. This meant that business

households, associations,

representative offices, NGOs and

other “organisations with non-legal

status" were not allowed to open

current accounts because they were

categorised neither as natural nor

legal persons under the Civil Code.

Circular 32/2016 stipulated that from

1 March 2018, all bank accounts of

these organisations must be closed.

• On 12 February 2018, SBV issued

Circular 02/2018 extending the

above-mentioned deadline by one

year to 1 March 2019.

Circular 02/2019 reinstates the initial

regulations under Circular 23/2014 by

allowing “organisations which are

established and operating lawfully

under Vietnamese law, including

organisations being legal entities,

private enterprises, business

households and other organisations”

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to open current accounts at banks

and foreign bank branches in

accordance with the law. In other

words, SBV has restored the right of

business households, associations

and organisations with non-legal

status (e.g. representative offices

and non-governmental

organisations) to open current

accounts and to be account holders,

which was not permitted since

Circular 32/2016 came into effect.

3. Some interesting rulings

Technology transfer supporting

documents required for tax

deductibility

A Japanese company transferred

"technical information" to a

Vietnamese company, which is

considered a technology transfer

subject to Article 8 of the Law on

Technology Transfer. As Japanese

law does not require the Japanese

company to register ownership of

the technology, the Vietnamese

company is responsible for providing

evidence that the Japanese

company is the owner of the

technology.

If the Vietnamese company can not

provide this evidence, the cost of

this technology transfer expenses is

not tax deductible.

(Official letter no. 4574/TCT-CS

dated 20 Nov 2018)

VAT and Personal income tax

treatments of coupons

The GDT refers to Official Letter No.

3612/TCT-CC dated 12/08/2016 of

GDT and provides that coupons are

considered a payment method and a

VAT invoice is not required to be

issued upon issuing coupons on the

basis that this is not a provision of

goods/services.

If a buyer gives coupons to its

employees, the coupons are

considered taxable income for PIT

purposes.

(Official letter no. 5056/TCT-CS

dated 13 Dec 2018)

DO fees, CIC fees, container

cleaning fees are not dutiable

DO fees, CIC fees and container

cleaning fees for imported goods are

not dutiable even if such fees are

paid by the importer, and are not

included in the prices of the imported

goods.

This ruling clarifies the position on

whether these local charges are

required to be added to the dutiable

values of the imported goods.

(Official letter no. 9492/TXNK-TGHQ

dated 28 December 2018)

Extension of application of

current regulations for imports of

used machinery

The General Department of

Customs requested provincial

Customs Departments to continue to

apply regulations guiding the

importation of used machinery for

customs clearance procedures for

used machinery imported into

Vietnam from 01 January 2019 until

a new regulation on this matter is

ratified. This means that the

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requirements specified in Circular

23/2015/TT-BKHCN of the Ministry

of Science and Technology must be

met when used machinery is

imported into Vietnam.

(Official letter no. 367/TCHQ-GSQL

dated 15 January 2019)

CIT incentives for business

expansion

If a company amends its Investment

Registration Certificate (“IRC”) to

add a wider scope of business, but

such amendment is not associated

with an increase in operational scale

and the capital of the current

investment project, this is not

considered as a business expansion

project and thus is not entitled to CIT

incentives applied to business

expansion.

(Official letter no. 82371/CT-TTHT

dated 17 December 2018 issued by

Hanoi Tax Department (HTD))

Capitalization of loan interest

when purchasing machinery and

equipment

Enterprises are not allowed to

capitalize interest on loans taken for

the purpose of purchasing

machinery and equipment that is

immediately put into operation. This

guidance is in line with VAS 16 -

Borrowing Costs and Article 35 of

Circular 200/2014/TT- BTC dated 22

December 2014 providing guideline

on accounting entries and financial

statements.

The MOF once again emphasized

that Circular 200/2014 is not applied

when determining the tax liabilities of

a company.

However, this appears inconsistent

with the guidance on determining the

historical cost of fixed assets where

interest is capitalised under Article 4

of Circular 45/2013/TT-BTC, guiding

the management, use and

depreciation of fixed assets.

In this regard, enterprises should

consider how each case is treated to

minimize tax risks.

(Official letter no. 14494/BTC-QLKT

dated 21 November 2018 issued by

the Ministry of Finance (MOF))

VAT refunds for investment

projects

If a newly established enterprise has

accumulated a VAT receivable

greater than VND300m during its

investment phase, then the

enterprise can claim a VAT refund,

even if the investment period is less

than one year.

This OL has resolved the previous

concern on whether the investment

period must be longer than one year

for VAT refund entitlement.

(Official letter no. 475/TCT-CS dated

13 February 2019 issued by the

GDT)

Deductibility of VAT and CIT on

employee expenses where no

work permit in place

Payments made to expatriates who

work in Vietnam but have not been

granted work permits as regulated

under the Labor Code are not

allowed to be deducted for CIT, and

related input VAT is not creditable.

(Official letter no. 357/TCT-CS dated

30 January 2019 issued by the GDT)

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Social insurance (SI) procedures

for foreign employees

OL 679 issued by the Vietnam Social

Insurance Authority confirms the

regulations regarding SI participants,

SI contribution rate and method as

well as the salary used for

calculating SI premiums. OL 679

also guides in detail the procedures

for SI premium collection, SI book

management and sets out standard

forms in Vietnamese and English for

these purposes.

(Official letter no. 679/BHXH-BT

dated 7 March 2019 issued by

Vietnam Social Insurance Authority)

Clarification of SI application

scope

In OL 1064, MOLISA clarifies the SI

application scope whereby a

foreigner working in Vietnam will be

subject to compulsory SI contribution

when he/she meets all the following

conditions:

• is working in Vietnam under a

work permit, practising certificate or

practising licence granted by a

competent authority of Vietnam;

• is employed under a Vietnam

labour contract with an indefinite

term or a definite term of one year or

more;

• is under 60 years of age for men

and 55 years of age for women; and

• is not a group assignee.

In order to be considered as an

intra-group assignee and not subject

to compulsory SI contribution in

Vietnam, the foreigner worker must

be a manager/executive/expert/

technician who has been employed

by an offshore entity (assignor) for at

least 12 months.

(Official letter no. 1064/LĐTBXH-

BHXH dated 18 March 2019 issued

by MOLISA).

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4. PwC NewsBriefs issued in

Quarter 1, 2019

Please refer to the following links to download our NewsBriefs issued in the

first quarter.

• Update on CP-TPP and applicable rules of origin - 11 February, 2019

https://www.pwc.com/vn/en/publications/news-brief/190211-cp-tpp.html

• Notification of the National Office of Intellectual Property on

application of CP-TPP - 12 March, 2019

https://www.pwc.com/vn/en/publications/legal-news-brief/190312-

notification-1926.html

• A new decree on Internal Audit – Towards international best

practices -27 February, 2019

https://www.pwc.com/vn/en/publications/other-newsbrief/190227-internal-

audit-decree-05.html

• IFRS 15 - Revenue from Contracts with Customers - 14 March, 2019

https://www.pwc.com/vn/en/publications/other-newsbrief/190314-ifrs-

15.html

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Contact us

Nguyen Thanh Trung

Tax Partner

Tel: +84 28 3824 0103

Mobile: +84 903 003 847

Email: nguyen.thanh.trung@pwc.com

This publication has been prepared for general guidance on matters of

interest only, and does not constitute professional advice. For further

information, please reach out to us.

Richard Irwin

Tax Partner

Tel: +84 28 3824 0117

Mobile: +84 903 037 751

Email: r.j.irwin@pwc.com

At PwC Vietnam, our purpose is to build trust in society and solve important problems. We’re a member of the PwC

network of firms in 158 countries with over 250,000 people who are committed to delivering quality in assurance,

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©2019 PwC (Vietnam) Limited. All rights reserved. PwC refers to the Vietnam member firm, and may sometimes refer to

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Nguyen Huong Giang

Tax Partner

Tel: +84 24 3946 2237

Mobile: +84 979 001 783

Email: n.huong.giang@pwc.com

Ho Chi Minh City Office Hanoi Office

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