Vietlaw Weekly Newsletter No. 352
Non-bank enterprises are not allowed to provide loans in the form of credit provision
Official letter No. 653/NHNN-TTGSNH dated January 26th, 2018 of the State Bank of Vietnam regarding handling of administrative offences of companies/enterprises, that are not credit institutions, conduct banking operation
According to opinions of the State Bank of Vietnam, if enterprises that are not credit institutions provide financial services by regularly providing credit provision profession in the form of loan provision, such services shall be regarded as illegal financial service activities and they shall be subject to administrative penalties according to Article 2 and Clause 6 Article 4 of Decree No. 96/2014/ND-CP.
The SBV shall coordinate with Police agencies, market management authorities, tax authorities, etc. to establish inspection Teams in order to inspect as well as handle financial enterprises/ companies that provide the aforesaid loan provision profession.
CV653_26012018NHNNVN[VLO].pdf (English translation)
Amendments to some provisions pertaining to VAT, EIT and PIT
Circular No. 25/2018/TT-BTC dated March 16th, 2018 of the Ministry of Finance guiding the Government’s Decree No. 146/2017/ND-CP dated December 15th, 2017 and amending, supplementing to a number of articles of Circular No. 78/2014/TT-BTC dated June 18th, 2014 of the Ministry of Finance, Circular No. 111/2013/TT-BTC dated August 15th, 2013 of the Ministry of Finance
This Circular is to amend, supplement to some policies relating to value added tax (VAT), enterprise income tax (EIT) and personal income tax (PIT).
Accordingly, regarding VAT, the policy on refund of tax on exports derived from imported goods shall be restored. In addition, exports manufactured from natural resources, minerals which have been processed into other products or processed under a closed production process shall be entitled to apply 0% VAT.
Regarding EIT, some important regulations are amended as follows:
- With regard to fixed assets transferred under a contract of transfer of capital contributions, the transferee shall be only allowed calculate depreciated costs according to the remaining value on accounting books of the transferor.
- The level to make cost accounting for expenses of purchasing voluntary pension insurance for laborers shall be increased from VND 1 million to VND 3 million/person/month.
- However, expenses of purchasing life insurance for laborers are limited under VND 3 million/person. Under the earlier regulations, such expenses were not limited.
Regarding PIT, incomes on which tax shall be imposed in the form of “securities transfer” shall not include income from transfer of shares other than income from transfer of stocks in a joint stock company.
This Decree takes effect from May 1st, 2018.
Cases arising from February 1st, 2018 that are subject to the regulations of Decree No. 146/2017/ND-CP shall be carried out according to the regulations of Decree No. 146/2017/ND-CP and the guidelines provided in Article 1, Articles 2 and Clauses 2, 3, 4 Article 3 of this Circular.
TT25_16032018BTC[VLO].pdf (English translation)
Limits of borrowing of foreign loans in 2018
Decision No. 437/QD-TTg dated April 21st, 2018 of the Prime Minister on plans for borrowing, re-payment of the Government’s debts and limits of loan borrowing in 2018
This Decision is to approve plans for borrowing and re-payment of the Government’s debts and limits of loans guaranteed by the Government in 2018.
Accordingly, the maximum limit of foreign commercial loans of enterprises guaranteed by the Government’s is USD 700 million.
The maximum limit of foreign commercial loans of enterprises, credit institutions in respect of conventional loans is USD 5,000 million.
The maximum limit of guarantee of domestic loans (net capital withdrawal) of the Government for projects is VND 2000 billion.
This Decision takes effect from the date of its signing.
QD437_21042018TTg[VLO].pdf (English translation)
Cars - Motorcycles
Regarding import of automobiles after January 1st, 2018
Official letter No. 500/GSQL-GQ1 dated February 26th, 2018 of the General Department of Vietnam Customs regarding import of automobiles after January 1st, 2018
According to Article 31 of Decree No. 116/2017/ND-CP, from January 1st, 2018, enterprises are only allowed to import automobiles after they are granted the licenses for automobile import by the Ministry of Industry and Trade.
Accordingly, upon import of automobiles from January 1st, 2018 onwards, enterprises are compulsory to have the licenses for automobile import granted by the Ministry of Industry and Trade (if they are not exempt from the import licenses).
In case of force majeure enterprises fail to meet the regulations of the aforesaid Decree No. 116/2017/ND-CP, they may report to the Government for settlement.
CV500_26022018TCHQ[VLO].pdf (English translation)
Certificate of Origin (C/O)
Regarding differences between HS code, name of imports on C/O and those in customs declaration
Official letter No. 557/GSQL-GQ4 dated March 1st, 2018 of the General Department of Vietnam Customs regarding issues relating to certificate of origin (C/O)
According to Article 26 of Circular No. 38/2015/TT-BTC , if there are differences between HS code, name of goods on C/O and those written in the customs declaration and such differences do not affect nature of the imports, the customs office may consider accepting the validity of the C/O.
However, if the customs office has grounds to determine that the imports on the C/O are not the imports as declared, the C/O shall be rejected.
CV557_01032018TCHQ[VLO].pdf (English translation)
Standards on utilization of ash, gypsum as building materials
Official letter No. 243/BXD-VLXD dated February 2nd, 2018 of the Ministry of Construction regarding treatment and utilization of ash, gypsum as raw materials for production of construction materials and use in construction works
Relating to standards on utilization of ash, gypsum as building materials, the Ministry of Construction confirms that it has promulgated 10 standards below:
1. TCVN 6882:2001 Mineral admixture for cement, applicable to fly ash, bottom ash;
2. TCVN 7570: 2006 Aggregates for concrete and mortar, applicable to bottom ash;
3. TCVN 4315:2007 Granulated blast furnace slag for cement production;
4. TCVN 8262:2009 Fly ash - Methods of chemical analysis;
5. TCVN 8825:2011 Mineral admixtures for roller-compacted concrete, applicable to fly ash, bottom ash;
6. TCVN 10302:2014 Activity admixture - Fly ash for concrete, mortar and cement;
7. TCVN 11586:2016 Ground granulated blast furnace slag for concrete and mortar;
8. TCVN 11833:2017 PhosphoGypsum admixture for cement production;
9. The Guideline on iron and steel slag for use as building materials" (Decision No. 430/QD-BXD dated May 16th, 2017)
10. QCVN 16:2017/BXD National Technical Regulations on Products, Goods of Building Materials.
In addition, it expects to promulgate the following 17 standards, norms in 2018:
1. TCVN "Thermo-electric ash" - Method for determination of free lime content";
2. TCVN "Technical requirements of Thermo-electric ash as raw materials for leveling civil, industrial and technical infrastructure works ";
3. TCVN "techniques for construction and acceptance of Thermo-electric ash as materials for road foundation and road embankment"";
4. TCVN "Method for accelerated leach test for diffusive process, fractional leaching from cylindrical waste forms";
5. TCVN "Soil quality - Determination of hydraulic permeability of saturated porous materials on the elastic membrane permeability measuring device";
6. TCVN "Definitions of coal combustion products";
7. Technical guidance on construction and acceptance of roller-compacted concrete road surface using ash;
8. Technical guidance on soil foundation reinforcement by shallow-mixing method using linking substance with thermo-electric ash;
9. Technical guidance on production of concrete bricks using thermo-electric ash waste and chippings;
10. Technical guidance on mix proportion for concrete using thermo-electric fly ash;
11. Technical guidance on using recycled gypsum as materials for production of ordinary gypsum boards;
12. Technical instructions on using thermo-electric ash for leveling civil, industrial and technical infrastructure works;
13. Technical instructions on design, construction, acceptance, settlement of embankment using CFG pile;
14. Estimates norms for leveling works using materials produced from ash, slag and gypsum;
15. Norms of mix proportion for cemented concrete using additives made from ash, slag and gypsum materials;
16. Working norms for concrete road construction from ash, slag materials;
17. Working norms for gypsum plasterboard, gypsum ceiling, drywall using artificial gypsum boards made from waste gypsum.
CV243_02022018BXD[VLO].pdf (English translation)
Regarding exemption from tax on re-imported goods
Official letter No. 53/TXNK-CST dated January 3rd, 2018 of the General Department of Vietnam Customs regarding settlement of tax on re-imported good
Relating to the settlement of applications for tax cancellation with regard to goods re-imported of prioritized enterprises, the General Department of Vietnam Customs requests the enterprises to carry out according to the guidelines provided in Official letter No. 5676/TCHQ-TXNK dated August 28th, 2017.
Accordingly, goods re-imported of prioritized enterprises still have to meet the condition “goods have not been used or undergone working or processing outside Vietnam” to be exempt from import duty.
CV53_03012018TCHQ[VLO].pdf (English translation)
Regarding tax incentives for projects invested in hi-tech parks
Official letter No. 6278/CT-TTHT dated February 8th, 2018 of the Department of Taxation of Ha Noi city regarding tax incentives for projects invested in hi-tech parks
“Hi-tech park” belongs to the list of areas with special socio – economic difficulties (Annex II of Decree No. 118/2015/ND-CP).
Accordingly, a project of new investment in a hi-tech park shall be exempt from non-agricultural land use tax according to Clause 1 Article 9 of the Law on non-agricultural land use tax.
In addition, the project of new investment in a hi-tech park shall be also entitled to enterprise income tax (EIT) incentives according to Article s 15, 16 of Decree No. 218/2013/ND-CP as follows: to be eligible to apply the EIT rate of 10% in a period of 15 years; to be exempted from EIT for 4 years; and to be granted a 50% reduction of payable tax amounts for 9 subsequent years.
Particularly, the project of new investment in Hoa Lac Hi-tech Park shall be eligible to apply the EIT rate of 10% for 30 years according to Article 10 of Decree No. 74/2017/ND-CP.
CV6278_08022018CTHN[VLO].pdf (English translation)
Electricity - Energy
Regarding inspection of energy efficiency of imported devices, equipment
Official letter No. 1316/BCT-TKNL dated February 12th, 2018 of the Ministry of Industry and Trade regarding inspection of minimum energy efficiency level
According to the Ministry of Industry and Trade’s opinions, the Law on economical and efficient use of energy regulates the prohibition on producing, importing and selling energy-consuming devices and equipment with energy efficiency below the minimum level. As the result, any energy-consuming device, equipment which fails to meet the minimum energy efficiency level shall be banned from import.
Regarding inspection of energy efficiency, aiming to facilitate enterprises, the Ministry of Industry and Trade agrees to allow the transfer of time point to inspect from pre-customs clearance to post - customs clearance – in other words, papers of efficiency inspection may be submitted after the import. However, the proposal to remove procedures for inspection of efficiency is not appropriate to the Law and exceeds the Ministry of Industry and Trade’s jurisdiction.
Regarding time limit for submission of efficiency inspection papers, the Ministry of Industry and Trade may prolong from 15 days (under current regulations) to 60 days in order for enterprises to have enough time to inspect particular industrial equipment.
In addition, relating to the List of goods must be undergone the efficiency inspection issued together Decision No. 78/2013/QD-TTg and Decision No. 04/2017/QD-TTg, the Ministry of Industry and Trade also proposes amendments, supplements to name of goods, HS codes to the Ministry of Finance so as to be appropriate to the List of imports and exports 2018. The details are provided in the attached Appendix.
CV1316_12022018BCT-[VLO].pdf (English translation)
Export processing enterprises
Regarding sale and purchase of goods between EPEs
Official letter No. 517/GSQL-GQ2 dated February 27th, 2018 of the General Department of Vietnam Customs regarding guidelines on customs procedure for goods of export processing enterprises (EPEs)
According to Clause 1 Article 74 of Circular No. 38/2015/TT-BTC , when EPEs sell and purchase goods each other, they may option to carry out customs procedure or not. If they select to carry out customs procedure, they shall declare the form of import/export on the spot (Clause 4 Article 75)
In addition, according to Clause 1 Article 58 of the Law on foreign trade management No. 05/2017/QH14, the purchase and sale of goods between EPEs are considered to be the purchase and sale between customs-controlled areas and they shall not be imposed measures for foreign trade management (excluding the exception regulated at Article 59).
In case EPEs (including foreign - invested EPEs) have scraps obtained in the process of goods production and are in line with their investment certificates, they are allowed to export such scraps.
CV517_27022018TCHQ[VLO].pdf (English translation)
From February 2nd, 2018: It is allowable to conduct reduced inspection towards imported food
Official letter No. 858/BCDTUVSATTP dated February 7th, 2018 of the Central Steering Committee regarding guidelines on implementation of Decree No. 15/2018/ND-CP
Relating to the inspection of food safety of imported food, the Ministry of Health requests customs offices to pay attention to deploy the implementation of new regulations on reduced inspection of imported food as prescribed Decree No. 15/2018/ND-CP (takes effect from February 2nd, 2018).
“Reduced inspection” means a method of document inspection of up to 5% of the shipments within 01 year randomly chosen by the customs authority.
The reduced inspection will be carried out if:
a) There is a certificate of food safety issued by the competent authority of a country that has entered a mutual recognition agreement regarding food safety inspection to which Vietnam is also a signatory; the inspection result given by the competent authority of the exporting country is satisfactory;
b) The results of 03 consecutive normal inspections within 12 months are satisfactory;
c) The manufacturer applies either GMP, HACCP, ISO 22000, IFS, BRC, FSSC 22000 or an equivalent system.
Upon carrying out procedures, goods owner have to apply for the reduced inspection according to Article 18 of Decree No. 15/2018/ND-CP .
CV858_07022018BCDTU[VLO].pdf (English translation)
Foreign Currencies - Gold
Regarding withholding tax with regard to offshore money transfer service
Official letter No. 563/TCT-DNL dated February 12th, 2018 of the General Department of Taxation regarding withholding tax with regard to the offshore money transfer service
According to the General Department of Taxation’s opinions, in case intermediate organizations outside Vietnam that are not banks earn incomes in Vietnam on the basis of contracts on performance of offshore money transfer service for clients of banks in Vietnam, they are subject to withholding tax according to Circular No. 103/2014/TT-BTC.
When making payment for charges of offshore money transfer collected on behalf of the intermediate organizations outside Vietnam, the banks must withhold and pay withholding tax on behalf of the intermediate organizations, including 5% value added tax and 5% enterprise income tax upon revenue received from the clients.
With regard to incomes Vietnamese banks receive from performance of money transfer transactions under the contracts signed with the aforesaid intermediate organizations outside Vietnam, the banks shall declare and pay tax as prescribed.
CV563_12022018TCT[VLO].pdf (English translation)
Regarding PIT incurred by foreigners who execute a company in Vietnam
Official letter No. 439/TCT-TNCN dated January 31st, 2018 of the General Department of Taxation regarding guidelines on personal income tax (PIT) policy
In case a company hires a foreign party to a joint venture to provide the service of execution of the company, thereby the foreign party earns income in Vietnam. As the result, the foreign party shall be subject to withholding tax under Circular No. 103/2014/TT-BTC.
Particularly, if foreigners who are designated to perform the service of execution of the company receive remuneration from the foreign party, they have to directly declare and PIT.
However, the company shall be responsible for providing the foreigners’ information for tax agency 7 days before they start working in Vietnam (Article 27 of Circular No. 111/2013/TT-BTC).
CV439_31012018TCT[VLO].pdf (English translation)
Import and export duties
Goods imported on the spot is not eligible to apply ATIGA duty rate
Official letter No. 1973/TCHQ-TXNK dated April 12th, 2018 of the General Department of Vietnam Customs regarding enjoyment of special preferential duty rates with regard to goods imported/exported on the spot
According to Clause 3 Article 4 of Decree No. 156/2017/ND-CP, imports which are eligible to apply duty rate under the ASEAN Trade in Goods Agreement (ATIGA) must meet the conditions “directly transported from exporting country into Vietnam”.
However, goods imported on the spot are delivered and received in Vietnam rather than being directly transported from exporting country into Vietnam, they are not eligible to enjoy ATIGA duty rate.
CV1973_12042018TCHQ[VLO].pdf (English translation)
Import and export policies
Regarding business of temporary import for re-export
Official letter No. 518/GSQL-GQ3 dated February 27th, 2018 of the General Department of Vietnam Customs regarding business of temporary import for re-export
According to the guidelines of the Ministry of Industry and Trade in Official letter No. 1311/BCT-XNK dated February 12th, 2018, a trader’s buying of goods from China to bring them into Vietnam’s territory and selling of such good to China are not the business of temporary import for re-export. In this case, the trader has to carry out procedures for import and export under current regulations.
CV518_27022018TCHQ[VLO].pdf (English translation)
Regarding temporary importation for re-exportation
Official letter No. 1311/BCT-XNK dated February 12th, 2018 of the Ministry of Industry and Trade regarding business of temporary importation for re-exportation
According to Clause 1 Article 39 of the Law on foreign trade management No. 05/2017/QH14, the business of temporary importation for re-exportation means a trader’s buying of goods from a foreign country to bring them into to the Vietnamese territory or from a customs-controlled area to bring them to domestic market and sale of these products to other countries or customs-controlled areas.
As the result, only when an enterprise imports goods from a foreign country and sells such goods to another country, such activities shall be considered the temporary importation for re-exportation. If the enterprise sells such goods to the initial exporting country, it shall not be regarded as the temporary importation for re-exportation.
CV1311_12022018BCT[VLO].pdf (English translation)
Labour - Employment
Issues relating to unemployment insurance, severance pay, unilateral termination of labor contract and annual leave
Official letter No. 585/LDTBXH-PC dated February 9th, 2018 the Ministry of Labor, Invalids and Social Affairs regarding reply to issues relating to unemployment insurance, severance pay of employees and the case in which employees illegally unilaterally terminate their labor contracts; and annual leave
According to Article 11 of Decree No. 28/2015/ND-CP , the following periods shall be exempt from payment to unemployment insurance: period in which an employee works under probation contract; period in which an employee takes maternity leave or sick leave for 14 working days or more within 01 month.
However, according to Article 14 of Decree No. 05/2015/ND-CP , the aforesaid periods are still considered to be the actual working periods for calculation of severance pay.
Enterprises are entitled to claim for compensation if employees illegally unilaterally terminate labor contract (Article 43 of the Labor Code).
An employee that illegally unilaterally terminates the labor contract is the person who exercises the right to unilaterally terminate the labor contract contrary to the cases specified in Clause 1 Article 37 of the Labor Code; or contrary to the advance notice time prescribed in Clause 2 Article 37 of the Labor Code; or contrary to both Clauses.
In another case, if an employee quits his job willingly totally 05 days in 01 month or 20 days totally in 01 year without any proper reason, the employer has the right to apply the form of disciplinary dismissal to such employee according to Clause 3 Article 126 of the Labor Code. However, the employee who is dismissed by the employer does not belong to the employees' cases of unilateral termination of the labor contract.
Regarding annual leave, according to Clause 2 Article 111 of the Labor Code, if an enterprise wishes to change its annual leave schedule, it has to consult with its employees and has to give notice to the employees in advance.
CV585_09022018BLDTBXH[VLO].pdf (English translation)
Oil and Gas
Regarding import duty exemption given to imports serving petroleum activities
Official letter No. 920/TCHQ-TXNK dated February 9th, 2018 of the General Department of Vietnam Customs regarding imports serving petroleum activities
According Clause 15 Article 16 of the Law on import and export duties No. 107/2016/QH13, imports serving petroleum activities exempt from duty include:
a) Machinery, equipment, components, means of transport necessary for petroleum activities, including those temporarily imported for re-export;
b) Components, parts, spare parts for assembly or operation of machinery and equipment; raw materials for manufacture of machinery and equipment, components, parts, or spare parts of machinery and equipment necessary for petroleum activities;
c) Supplies necessary for petroleum activities, which cannot be manufactured domestically.
Accordingly, only “supplies necessary for petroleum activities” have to meet the conditions on which they cannot be domestically produced upon consideration for import duty exemption.
With regard to machinery, equipment, components, means of transport and components for assembly, manufacture of machinery and equipment necessary for petroleum activities, they shall be exempt from duty regardless of whether they can be manufactured domestically or not.
CV920_09022018TCHQ[VLO].pdf (English translation)
Tax of Contractor
How to calculate withholding tax when value of machinery is separated from value of installment and warranty services
Official letter No. 13409/CT-TTHT dated April 2nd, 2018 of the Department of Taxation of Ha Noi city regarding withholding tax policy.
In case a company signs a contract with a foreign contractor, in which value of machinery is separated from value of services of transport, installment, warranty, etc. and revenue does not include value added tax (VAT) and enterprise income tax (EIT), it is required to convert the revenue into tax – inclusive revenue upon declaring and paying withholding tax.
The percentage for calculation of withholding tax shall be as follows:
- With regard to special - use machinery, equipment, devices and provisions for warranty: To pay only 1% EIT. Particularly, VAT shall be paid at the customs office upon carrying out customs procedure.
- With regard to transport service: To pay 2% EIT and 3% VAT.
- With regard to services of construction, installment: To pay 2% EIT and 5% VAT (if these services do not include materials, machinery, and equipment) of pay 2% VAT (if these services include materials, machinery, and equipment).
- With regard to services of construction design, testing and trial operation, training, warranty, package management and other services: To pay 5% EIT and 5% VAT.