If this is the support without conditions, without attaching requirements for performing such services as repairing, warranty, sale promotion, advertising for the parent company, the branch must not declare, calculate and pay value added tax (VAT) (Clause 1 Article 5 of Circular No. 219/2013/TT-BTC).
Accordingly, in comparison with the earlier provisions provided in Circular No. 230/2009/TT-BTC, this Circular specifies in details environmental protection activities that are eligible for EIT incentives (the details are provided in clause 1 Article 3)
Enterprises not meeting criteria for private sector involvement in the environment field are also eligible for EIT incentives (clause 2 Article 3)
However, the tax incentive policies provided in this Circular are only applied to projects of new investment. Particularly, projects of expansion investment shall comply with the common provisions of laws in EIT (clause 1, clause 3 Article 3)
Under this Circular, some deductible expenses are supplemented upon determination of EIT such as: expenditure on advertising products from activities of collection and treatment of discarded products; expenditure on provision of complimentary boots, gloves and other single-purpose tools for people for classifying daily-life wastes and discarded products at source (Article 2)
This Circular takes effect after 45 days as of the signing date and be applied to the tax period in 2016. To annul Circular No. 230/2009/TT-BTC dated December 08th, 2009.
- Party to business cooperation contract; party to petroleum product-sharing contract, oil and gas joint-venture enterprise and joint operating company;
All of the above forms, a branch is not regarded as an enterprise. Moreover, Clause 1 Article 45 of Enterprise Law on No. 68/2014/QH13 defines branch is an affiliated unit of an enterprise and is tasked to perform all or some functions of such enterprise, including acting as an authorized representative. Thus, the application of 20% of tax rate of the branch shall be based on the total revenue of the whole enterprise, including revenue of the branch.
- A Vietnamese enterprise who makes investment in a foreign country must additionally pay EIT in Vietnam if the EIT rate applied in such country is lower than that in Vietnam (except there are other regulations in the Agreement on tax)
- Time for determination of revenue for calculating taxable income from service provision is the time of completion of service provision or part of service provision, regardless of pre-made invoices
- Procedures for determining assets/goods damaged by natural disaster, epidemic, conflagration or force majeure cases are simplified
- The following fixed assets are deductible when calculating EIT: library, kindergarten, sports facilities; machinery, equipment, material facilities used in vocational education institutions
- The provision on which enterprises shall impose their own limits on consumption of raw materials are is removed
- Only the limits on consumption of some raw materials imposed by the State shall be applied
- The house rent paid for foreign experts working in Vietnam by the Vietnamese enterprise will be included in deductible expenses if there are the agreements on payment responsibilities in the contract signed with a foreign enterprise
- The limit on deductible in-kind expenditure on employee’s clothing is removed (the deductible rate is based on the actual expenditure written on invoices, receipts)
- The limit on deductible allowance for employees on business trips is removed (it is made accounting based on actual invoices)
- Invoices for business trip expenses paid via an individual’s banking card are considered meeting the requirements for non-cash payment
- The provision on EIT exemption applicable to incomes from agricultural and aquatic processing of enterprises operating in extremely difficult socio-economic localities is supplemented
- The provision on which the adjustment certificate is required from January 1st, 2014 for giving EIT incentives, applied to new projects, to a new enterprise derived from a project of investment that is granted the investment license or certificate of investment before January 1st, 2014 but still incomplete, yet to be put into operation and thus has not generated revenues is removed.
Under the aforesaid provisions, an enterprise must calculate and pay EIT for its extra-provincial dependent production establishment under the ratio of expenses incurred at the dependent establishment to its total expenses instead of allocating according to ratio of revenue.
Accordingly, there are noticeable points provided in this Circular as follows:
- Incomes from projects of investment outside Vietnam are allowable to be declared in the EIT finalization of the year when the incomes are transferred to Vietnam instead of being declared in tax finalization of the year following the fiscal year when the incomes are generated (Article 1, Article 4).
- Profits earned, losses suffered from projects of investment outside Vietnam are not allowed to be offset against domestic losses, profits (Article 1).
- Incomes from services must only be declared and pay EIT at the time of completing the service provision or completing parts of the service provision, regardless of invoices have been already made earlier (Article 3).
- Some fixed assets are deducted when determining EIT, including: libraries, kindergartens, sport areas (including internal equipment, furniture); material facilities, machinery, equipment reserved for occupational education activities (Article 4).
- Other allowances of mission-trip expenses are also accounted according to actual amount stated in invoices, receipts similarly to travelling expenses, accommodation costs instead of being subject to any limited norm (Article 4).
- Invoices, receipts of mission-trip expenses made payment via banking cards of individuals are also regarded as meeting the requirements of via-bank payment, provided that they are specified in regulations on finance or internal regulations of enterprises (Article 4).
- If an enterprise has already contributes sufficient charted capital, expenses of interest on loans for investing in other enterprises shall be also deducted (Article 4).
- Expenditures on occupational education activities, vocational training shall be accounted into reasonable expenses and shall not be subject to any limited norm (Article 4).
- Enterprises are allowed to transfer their first tax period that is eligible for EIT incentives to the next tax year if the former is under 12 months (Clause 5 Article 10).
This Circular takes effect from August 6th, 2015 and applies to EIT periods from 2015 onwards.
Point 2.21 Clause 2 Article 6, Clause 5 Article 20 of Circular No. 78/2014/TT-BTC and the contents guiding on EIT promulgated by the Ministry of Finance and branches that are not appropriate to this Circular shall be annulled.
Accordingly, when an export processing enterprise (EPE) signs a processing contract to provide service for the foreign enterprise, the EPE is the permanent establishment of such foreign enterprise
In addition, if the EPE only purchases raw materials for processing on behalf of the foreign party, the processing price unit does not include value of the raw materials bought on behalf, such raw materials are not considered to be the input expenses.