Vietlaw Weekly Newsletter No. 378
Regulations on foreign workers’ participation in social insurance in Vietnam
Decree No. 143/2018/ND-CP dated October 15th, 2018 of the Government on elaborating on Law on Social Insurance and Law on Occupational Safety and Hygiene regarding compulsory social insurance for employees who are foreign nationals working in Vietnam
According to Clause 1 Article 2 of this Decree, foreign workers shall be required to participate in the compulsory social insurance (SI) in Vietnam when they sign employment contracts valid for at least one year and obtain work permits, practicing certificates, practicing licenses issued in Vietnam. This regulation means that any foreign worker that signs an employment contract for less than 1 year shall be exempt from participation in compulsory SI.
In addition, according to Clause 2 Article 2 of this Decree, foreign workers shall be also exempt from participation in compulsory SI in Vietnam when they are "intra-company transferees” as stipulated in Clause 1 Article 3 of Decree No. 11/2016/ND-CP or they “reach retirement age”.
SI contribution rates and benefits with regard to foreign workers are basically similar to those applied to Vietnamese workers. However, firstly, employers shall make a SI contribution in proportion to 3% of each foreign worker’s payroll, on which the social insurance payment is based, to pay into the sickness and parental insurance benefit fund and 0.5% of the payroll to pay into the occupational accident and disease benefit fund.
With regard to 22% paid into the retirement and death insurance benefit fund (employers pay 14% and foreign workers pay 8%) shall be only carried out from January 1st, 2022 (Article 13).
In case a foreign worker enters into multiple employment contracts, both the employee and the employer shall only have to pay SI contributions as agreed upon in the first employment contract. If wishing to participate in the occupational accident and disease insurance fund, the employee shall be required to pay SI contributions per each employment contract (Clause 4 Article 13)
Because foreign workers shall pay to retirement fund by 2022, thereby the retirement benefit shall be only calculated from 2022. Entitlement conditions and rates are similar to those given to Vietnamese workers. Particularly, with regard to one-off SI benefit entitlement, foreign workers must not wait for 1 year but they may receive one-off SI benefit entitlement right after their employment contracts are terminated (Article 9).
This Decree takes effect from December 1st, 2018.
The regulations provided in Article 9 (retirement benefit) and Article 10 (death benefit) of this Decree shall enter into force from January 1st, 2022.
ND143_15102018CP[ENGLISH].pdf (English translation)
It is not allowable to organize bidding for compensation and ground clearance
Official letter No. 4327/BKHDT-QLDT dated June 25th, 2018 of the Ministry of Planning and Investment regarding guidelines on implementation of the law on bidding
According to point b Clause 2 Article 36 of the Law on bidding No. 43/2013/QH13 , the work part which is not able to apply one of form of tender selection, including: operation of project management board, organization of compensation and ground clearance, commencement, inauguration, payment of loan interest.
On the other hand, according to Clause 1 Article 68 of the Law on land No. 45/2013/QH13, organizations in charge of compensation and ground clearance include public land service organizations and compensation, support and resettlement councils.
Accordingly, with regard to the work of “organization of compensation and ground clearance”, it is not allowed to organize bidding. Instead, it shall be assigned to organizations in charge of compensation and ground clearance to carry out.
CV4327_25062018BKHDT[VLO].pdf (English translation)
Regarding related-party transaction documentation
Official letter No. 48085/CT-TTHT dated July 10th, 2018 of the Department of Taxation of Ha Noi city regarding related-party transaction documentation
According to Clause 4 Article 10 of Decree No. 20/2017/ND-CP and Clause 2 Article 4 of Circular No. 41/2017/TT-BTC, in case a company has an overseas ultimate parent company, it is required submit a copy of its ultimate parent company’s country-by-country report in the related-party transaction documentation (If such ultimate parent company is required to submit this report to the host-country tax authority).
If the company fails to provide the country-by-country report of the ultimate parent company prepared within the tax period relative to its tax accounting period, the company may provide the country-by-country report of the ultimate parent company prepared in the preceding financial year instead provided that a written explanation for such failure must be attached to the related-party transaction documentation.
Ultimately, if the company cannot provide any report of the ultimate parent company, it is obligated to provide a written explanation letter specifying reasons for such failure, legal bases, and references to specific legislative regulations of the counterparty country on not providing such report or regarding parent company which is not subject to preparation of the country-by-country report.
CV48085_10072018CTHN[VLO].pdf (English translation)
New regulations on issuance and revocation of certificate of fulfillment of security requirements
Circular No. 42/2017/TT-BCA dated October 20th, 2017 of the Ministry of Pulic Security on guidelines for a number of articles of Decree No. 96/2016/ND-CP dated July 01, 2016 on providing for security requirements applied to certain business lines
This Circular regulates in details application and procedures for issuance and revocation of certificate of fulfillment of security requirements upon registration of business as well as post-issuance inspection and reporting regimes.
According to the new regulations provided in Article 3 of this Circular, a branch or an affiliate whose location is different from that of the main business establishment shall submit the application to the supervisory police authority of the main business establishment or to the supervisory police authority of the branch or affiliate.
Regarding the revocation of the security certificate, if the violation that leads to the revocation of the certificate only affects one of the business establishment’s business lines or investment stages, only the certificate that covers the affected business line or investment stage shall be revoked.
Within 60 days from the issuance, replacement and re-issuance of the security certificate to the establishment, the police authority shall carry out post-issuance inspections at the enterprise. If the enterprise is detected that it fails to meet one of the security requirements, it has to suspend the operation in order to overcome within 40 days.
This Circular takes effect from December 6th, 2017 and replaces Circular No. 45/2009/TT-BCA (C11) dated July 14th, 2009 and Circular No. 33/2010/TT-BCA dated October 5th, 2010.
TT42_20102017BCA[ENGLISH].pdf (English translation)
Certificate of Origin (C/O)
Issues relating to items “Normal” and “Drawback” on C/O form D
Official letter No. 5724/TCHQ-GSQL dated October 2nd, 2018 of the General Department of Vietnam Customs regarding issues relating to certificate of origin (C/O) form D
Relating to the understanding and marking at items “Normal” and “Drawback on electronic C/O form D, the General Department of Vietnam Customs has provided guidelines in Official letter No. 620/GSQL-GQ4 dated March 6th, 2018.
However, because currently the ASEAN countries have not yet reached an agreement on format and the way to mark on such 2 items and therefore customs authorities shall not reject C/O form D because it is not marked or marked at such 2 items.
After the ASEAN countries reach an agreement on the way to mark on such 2 items, the General Department of Vietnam Customs shall provide guidelines in details for implementation in accordance with commitments.
CV5724_02102018TCHQ[VLO].pdf (English translation)
Competence to verify C/O does not belong to the Ministry of Industry and Trade
Official letter No. 1092/XNK-XXHH dated September 19th, 2018 of the Ministry of Industry and Trade regarding certificate of origin of goods (C/O)
According to Clause 2 Article 28 of Decree No. 31/2018/ND-CP, the Ministry of Finance (the General Department of Vietnam Customs) shall be competent to conduct the examination, verification of C/O of imports, exports upon carrying out customs procedure rather than the Ministry of Industry and Trade.
Accordingly, when an enterprise wishes the verification of validity of a C/O it should contact with the Ministry of Finance (the General Department of Vietnam Customs) rather than contacting with the Ministry of Industry and Trade.
CV1092_19092018BCT[VLO].pdf (English translation)
It is allowable to use a general C/O for a shipment from bonded warehouse imported several times into the inland market
Official letter No. 4178/TCHQ-GSQL dated July 16th, 2018 of the General Department of Vietnam Customs regarding the use of certificate of origin (C/O)
According to the regulations of Circular No. 38/2018/TT-BTC, with regard to a shipment brought from abroad into a bonded warehouse pending import several times into the inland market, it is allowable to use a general C/O granted to the whole shipment upon carry out procedures for import several times into the inland market.
CV4178_16072018TCHQ[VLO].pdf (English translation)
Regarding import duty of raw materials imported for manufacturing of exports
Official letter No. 5980/TXNK-CST dated October 8th, 2018 of the General Department of Vietnam Customs regarding import duty on raw materials imported for manufacturing of exports by outsourcing one or some phases
According to Clause 2 Article 12 of Decree No. 134/2016/ND-CP, one of the conditions for exemption from duty on raw materials imported for manufacturing of exports is that the enterprise must “own or have the right to use machinery and equipment at the factory which are suitable for the raw materials, supplies imported for manufacture of exports”.
According to opinions of the Department of Import and Export Duties, in case an enterprise does not directly manufacture the whole exports but it transfers part of or the whole imported goods to another enterprise for processing or manufacturing of one or some phases, it fails to meet the conditions for exemption from duty on such raw materials.
With regard to the raw materials which are processed/produced by hiring other enterprise, it is required to open a new customs declaration for change of use purpose and apply the goods management policy, tax policy at the time when the new customs declaration is registered (except for the case in which the policies have been fully implemented at the time when the initial customs declaration is registered).
In case the enterprise fail to open a customs declaration for change of use purpose, customs authority shall impose duty, calculate late payment interests and handle administrative violations (if any) with regard to such raw materials.
CV5980_08102018TCHQ[VLO].pdf (English translation)
Education - Training
Procedures for licensing to establish schools shall be reduced
Circular No. 135/2018/ND-CP dated October 4th, 2018 of the Government on amending and supplementing the Government’s Decree No. 46/2017/ND-CP dated April 21, 2017 prescribing regulatory requirements for educational investment and operation
This Decree aims to reduce procedures in the applications for licenses to establish and operate some education and training institutions, such as: kindergarten, preschool or nursery school; primary school; secondary school; foreign language and computer training center.
In addition, the time limits for issuance of licenses to establish and operate education and training institutions are also reduced. Accordingly, the time limit for issuance license for establishment of a kindergarten is reduced from 15 days to 5 days; the time limit for issuance license for establishment of primary school or secondary school is reduced from 20 days to 5 days (from the day on which assessment results are given).
This Decree takes effect from November 20th, 2018.
ND135_04102018CP[ENGLISH].pdf (English translation)
Electricity - Energy
List of major energy users in 2017
Decision No. 1221/QD-TTg dated September 21st, 2018 of the Prime Minister on promulgating list of major energy users in 2017
This Decision is to promulgate the List of major energy users in 2017.
The major energy users on the list shall perform all their duties specified in the Law on Economical and Efficient Use of Energy No. 50/2010/QH12 , Decree No. 21/2011/ND-CP and other relevant legislative documents.
This Decision comes into force as from the date on which it is signed.
QD1221_21092018TTg[ENGLISH].pdf (English translation)
Import of fertilizer shall be exempt from VAT
Official letter No. 6123/TCHQ-TXNK dated October 18th, 2018 of the General Department of Vietnam Customs regarding value added tax (VAT) on fertilizer
According to the VAT Tariff applicable to imports promulgated together with Circular No. 83/2014/TT-BTC , the VAT rate applicable to chelated fertilize (HS code 2833.25.00) is 10%.
Accordingly, from 2015, upon importing chelated fertilize, enterprises must not pay VAT.
CV6123_18102018TCHQ[VLO].pdf (English translation)
FDI enterprises are allowable to sell imported goods to EPEs
Official letter No. 6119/TCHQ-GSQL dated October 18th, 2018 of the General Department of Vietnam Customs regarding sale of goods to export processing enterprises (EPEs) and enterprises in non-tariff zones
In case a company is an EPE that has the right to import and export, it shall be allowed to import goods to sell to EPEs and other enterprises in non-tariff zones.
Upon importing goods under the importation right, the Company shall use customs procedure code A41 - Import for business.
Upon exporting goods under the exportation right, if the exported goods are not derived from the import, the company shall use code B11 - Export for sale; if exporting imported goods, the company shall use code B13 - Export of imported goods.
Dossier of, procedure for duty refund with regard to goods re-sold to EPEs, enterprises in non-tariff zones shall be carried out according to Clause 2 Article 34 of Decree No. 134/2016/ND-CP and Clause 63 Article 1 of Circular No. 39/2018/TT-BTC.
CV6119_18102018TCHQ[VLO].pdf (English translation)
Regarding transport business of FDI enterprises
Official letter No. 10100/BGTVT-VT dated September 7th, 2018 of the Ministry of Transport regarding request for issuance of tokens to trucks of a foreign direct investment enterprise (FDI enterprise)
Relating to the sector of transport business, under the WTO commitments, foreign investors are only permitted to engage in this sector through business cooperation contracts or joint-ventures with the capital contribution of foreign side not exceeding 49% and not exceeding 51% after 3 years from the date of accession.
Accordingly, FDI enterprises to which the capital contribution of foreign side exceeds the aforesaid committed levels are not permitted to engage in transport business, thereby they may not apply for issuance of tokens for their trucks.
CV10100_07092018BGTVT[VLO].pdf (English translation)
Regarding PIT on incomes received outside Vietnam of a Head of a Representative Office in Vietnam
Official letter No. 2364/TCT-TNCN dated June 14th, 2018 of the General Department of Taxation regarding guidelines on declaration of personal income tax (PIT) incurred by a Head of a Representative Office in Vietnam
In case a Head of a Representative Office in Vietnam who is a foreign resident in Vietnam receives incomes from two places (the Representative Office in Vietnam and the Company outside Vietnam), PIT declaration obligations shall be performed as follows:
+ With regard to incomes received outside Vietnam, the Head of the Representative Office has to directly declare, pay and make PIT accounting according to Form No. 02/KK-TNCN and Form No. 02/QTT-TNCN issued together with Circular No. 92/2015/TT-BTC .
+ With regard to incomes paid by the Representative Office, the Representative Office shall be responsible for withholding, declaring, paying as well as making PIT accounting (in case the Head of the Representative Office in Vietnam authorizes) according to form No. 05/KK-TNCN and Form No. 05/QTT-TNCN issued together with Circular No. 92/2015/TT-BTC .
CV2364_14062018TCT[VLO].pdf (English translation)
Import and export policies
Regarding settlement of duties on goods imported/exported on the spot
Official letter No. 5913/TXNK-CST dated October 4th, 2018 of the General Department of Vietnam Customs regarding settlement of duties on goods imported on the spot
According to Clause 1 Article 36 of Decree No. 134/2016/ND-CP, duties on goods used for export production shall be refunded only when products are exported abroad or exported to non-tariff zones.
Accordingly, if export production goods are exported on the spot, import duties on imported materials shall not be refunded.
CV5913_04102018TCHQ[VLO].pdf (English translation)
Land and Housing
Workshops shall be exempt from registration fee
Official letter No. 2400/TCT-CS dated June 18th, 2018 of the General Department of Taxation regarding policy on collection of registration fee
According to Clause 25 Article 5 of Circular No. 301/2016/TT-BTC, workshops of production establishments shall be exempt from registration fee, also including guard posts, execution buildings, production machinery and equipment storage buildings.
With regard to land leased by the State to execute a project, if the land rental is paid on the annual basis, registration fee shall be also exempt according to Clause 7 Article 5 of Circular No. 301/2016/TT-BTC.
However, if the land rental is paid once, registration fee must be paid at the rate of 0.5% (Clause 1 Article 4 of Circular No. 301/2016/TT-BTC).
CV2400_18062018TCT[VLO].pdf (English translation)
Amendments to conditions on multimodal transport business
Decree No. 144/2018/ND-CP dated October 16th, 2018 on amendments, supplements to Decrees on multimodal transport
One of the noticeable amendments of this Decree is to allow enterprises to use “alternative financial plan” in order to prove that they have minimum financial source (equivalent to SDR 80,000) when they apply for an international multimodal transport business license (Clause 2 Article 1).
The international multimodal transport business license shall be issued by the Ministry of Transport.
In addition, duration for grant of the international multimodal transport business license is reduced from 7 working days to 5 working days or 3 working days (for the case of re-grant) (Clause 3 Article 1).
ND144_16102018CP[VLO].pdf (English translation)
International ocean shipping service shall be entitled to 0% VAT
Official letter No. 2779/TCT-CS dated July 13th, 2018 of the General Department of Taxation regarding VAT refund with regard to international transportation service
In case a company provides international ocean shipping services, if the services are provided for foreign customers and consumed outside Vietnam, they are considered to be exported services and entitled to apply 0% VAT.
CV2779_13072018TCT[VLO].pdf (English translation)
Pharmaceutical - Cosmetics
List of drugs procured through centralized bidding in 2018
Decision No. 2710/QD-BYT dated April 27th, 2018 of the Ministry of Health on promulgation of 2018’s list of drugs procured through centralized bidding by national centralized drug procurement center
This List comprises 25 antineoplastics and cardiovascular drugs as follows:
4. Epirubicin hydroclorid
The List is compiled in accordance with the criteria and principles specified in Appendix V of Circular No. 09/2016/TT-BYT and the drugs listed therein must be different from those on the List of drugs procured through centralized bidding in Appendix 11 of Circular No. 09/2016/TT-BYT.
This Decision comes into force from the day on which it is signed.
QD2710_27042018BYT[ENGLISH].pdf (English translation)
Tax of Contractor
Regarding withholding tax on compensation
Official letter No. 6600/CT-TTHT dated July 6th, 2018 of the Department of Taxation of Ho Chi Minh city regarding tax policy
According to this Official letter, in case a foreign company receives an amount of compensation for breach of a sale contract from a company in Vietnam, the foreign company shall be subject to withholding tax in terms of enterprise income tax (EIT) at the tax rate of 2% (Clause 2 Article 13 of Circular No. 103/2014/TT-BTC).
With regard to value added tax (VAT), it shall be exempt because the compensation for the breach of a sale contract is exempt from VAT according to Clause 1 Article 5 of Circular No. 219/2013/TT-BTC .
In principle, the Vietnamese party that pays the compensation shall be responsible for withholding and paying withholding tax. However, if the Vietnamese party has not yet withheld tax and the foreign party authorizes a third party in Vietnam to receive the compensation on its behalf, the third party shall be responsible for withholding and paying withholding tax on behalf of the foreign party.
CV6600_06072018CTHCM[VLO].pdf (English translation)
Value Added Tax (VAT)
Regarding VAT on international transportation service
Official letter No. 4037/TCT-CS dated October 17th, 2018 of the General Department Taxation regarding value added tax (VAT) policy applicable to international transportation service
International transportation service shall be eligible to apply 0% VAT if the conditions specified in Article 9 of Circular No. 219/2013/TT-BTC are met.
This policy is also applied to service of transportation of passengers, luggage and cargoes along international routes from Vietnam abroad or from abroad to Vietnam, or both the departure and arrival are overseas.