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Tax watch update

Issue 18
August 2012



Corporate Income Tax (CIT) 2
Value Added Tax (VAT) 4
Customs and Import duties 5
Personal Income Tax 6





August 2012 Tax Watch Update | Page 2

Corporate Income Tax (CIT)

Decree on 30% CIT exemption in 2012 issued
On 30 July 2012, the Government issued Decree 60/2012/N-CP
(Decree 60) to provide guidelines for implementation of Resolution
29/2012/QH12 on 30% reduction of CIT payable in 2012 for small,
medium enterprises and intensive-labor using enterprises in certain
industries.
Decree 60 provides amongst other things that the CIT reduction
amount is determined based on the CIT payable amount in the
quarterly returns and the residual CIT payable amount in the
annual final return.
Decree 60/2012/N-CP takes effect from 20 September 2012.
Loss on the exchange rate differences is not deductible
According to current regulations, the conversion from a foreign
currency into Vietnam Dong shall be based on actual exchange
rate of dates of the economic transactions or the averaged
inter-bank exchange rate announced by the State Bank of
Vietnam. As such, as confirmed in Official Letter 1891/TCT-CS
dated 04 June 2012, if enterprises fail to comply with this
regulation, loss on the exchange rate shall not be considered as
deductible expenses.
Tax incentives for newly-established enterprises
Pursuant to the Official Letter 1959/TCT-CS dated 11 June 2012
issued by General Department of Taxation, an enterprise which
was granted with the establishment license, after a period of
operation and then sells all of its assets to invest in another
location within the same province shall not be entitled to tax
incentives applicable to newly-established enterprises for its new
project.
CIT in respect of house leasing services
Official Letter 1893/TCT-CS dated 04 June 2012 issued by
General Department of Taxation provides that where an enterprise
(lessor) leases a house to a lessee, and exempts house rental for
certain period of time for the lessee to repair the house, after
termination of lease contract the lessee will leave the lessor all
investments made in the house, the actual repair expenses
incurred by the lesee shall be considered as the leasors revenue
from the exchange of services for goods. The leasor shall declare,
pay VAT and CIT for the revenue being the repair expenses paid
by the lesee on the basis of allocation of the expenses for the
number of exempt years.
At a glance
Under Decree 60/2012/ND-CP
implementing Resolution
29/2012/QH12 on 30% reduction of
CIT payable in 2012, the CIT
reduction amount refers to the CIT
payable amounts in the quarterly
CIT returns and the CIT residual
amount payable in the final tax
return.
Loss on exchange rate
differences shall not be
considered as deductible
expenses if conversion of
foreign currencies into Vietnam
Dong is not based on the
regulated exchange rates.
Enterprise which was granted
the establishment license, after
a period of operations and sells
all of its assets to invest in
another location within the same
province shall not be entitled to
tax incentives applicable to
newly-established enterprises
for its new project.
In case of leasing house and
house rental is exempt for
certain period for the lessee to
repair the house, the actual
repair expenses incurred by the
lessee shall be considered as
the leasors revenue and hence,
subject to VAT and CIT.
Capital transfer conducted
outside Vietnam and between
the entities located outside
Vietnam shall not be subject to
CIT in Vietnam if certain
conditions are satisfied.





August 2012 Tax Watch Update | Page 3

CIT in respect of capital transfer overseas
Official Letter 2268/TCT-CS dated 28 June 2012 of General
Department of Taxation confirms that capital transfer conducted
outside Vietnam shall not be subject to CIT in Vietnam if the
following conditions are satisfied:
Capital transfer is conducted outside the Vietnam territory and
between the entities located outside Vietnam
The capital invested by the direct foreign investor in the
Vietnam entity remains unchanged
The direct foreign investor and the Vietnam entity do not
generate any income from this capital transfer
The Investment Certificate of the Vietnam entity remains
unchanged


August 2012 Tax Watch Update | Page 4

Value Added Tax (VAT)

VAT in respect of export services
According to Official Letter 2251/TCT-CS dated 27 June 2012 of
the General Department of Taxation, the advertising services to
promote global trade mark and products of the foreign entity via
Vietnamese mass media provided in Vietnam shall not be regarded
as export service under Circular 129/2008/TTBTC. Hence, the
VAT rate of 10% will be applied.
Official Letter 2251 also reiterates that from 1 March 2012, under
Circular 06/2012/TT-BTC, VAT rate of 0% shall not be applied to
advertising services performed in Vietnam for foreign organizations
and individuals.
Treatment of refunded input VAT in case of dissolution
Official Letter 2353/TCT-CS dated 3 July 2012 of the Department
of Taxation provides the tax treatment upon business dissolution
regarding the input VAT of fixed assets and materials which were
refunded as follows:
With respect to fixed assets: the tax authorities shall recollect
the refunded input VAT amount corresponding to fixed assets
net book value reflected in the accounting books at the time of
dissolution
With respect to materials, inventory: the tax authorities shall
recollect the refunded input VAT of the unused materials and
inventory at the time of dissolution
VAT declaration for services provided in the provinces
other than where the headquarter is located
According to Official Letter 2361/TCT-KK dated 4 July 2012 of the
General Department of Taxation, in case an entity provides
services in the provinces other than where its headquarter is
located and this entity has no subsidiaries in those provinces, total
VAT shall be declared at the headquarter.
Input VAT creditability of exported goods
In accordance with Official Letter 2359/TCT-KK dated 4 July 2012
of the General Department of Taxation, where an entity exported
goods without issuing VAT invoices, input VAT of the exported
goods are still deductible or refunded if the following conditions are
satisfied:
There is sale contract
It was certified in customs declaration that the goods are
actually exported
There is proof of payment made via banks
Accounting record of exported goods revenue and expenses
However, administrative penalty shall be imposed on violating the
regulations on invoice usage.
At a glance
Advertising services provided
to a foreign entity to promote
its products and trade mark in
Vietnam will not be regarded
as an export service and
hence, 10% VAT.
In case of business
dissolution, the tax authority
will recollect the refunded
input VAT of the fixed assets
and materials based on net
book value.
In case an entity provides
services in the provinces other
than where its headquarter is
located and it has no
subsidiaries in those
provinces, total VAT shall be
declared to the tax authority at
the locality of the head
quarter.
Entity exporting goods without
issuing VAT invoices is still
eligible for creditability or
refund of input VAT of goods
actually exported if certain
conditions are met.

August 2012 Tax Watch Update | Page 5

Customs and Import duties
Objects exempt from Import duties
Official Letter 3369/TCHQ-TXNK dated 5 July 2012 of the General
Department of Customs provides that goods imported to form fixed
assets of an investment project entitled to incentive do not include
machinery, equipment, means of transportation, etc., directly
imported by the financial leasing companies for leasing purposes.
Export Processing Enterprises (EPE)s norm adjustment
after exporting
According to Official Letter 3404/TCHQ-GSQL date 6 July 2012 of
the General Department of Customs, for the case of import of
goods for production of export goods, if an EPE adjusts the norm
after exporting goods, the treatment will be as follows:
Where the adjusted norm is lower than the norm registered with
the customs authorities, the EPE is allowed to use the adjusted
norm for the purposes of reporting the use of imported materials
Where the adjusted norm is higher than the norm registered
with the customs authorities, the adjusted norm shall not be
accepted if the customs authorities do not have sufficient
evidence for verification. As a result, the registered norm will be
used for the purposes of reporting the use of imported materials















At a glance
Goods imported to form fixed
assets of an investment project
entitled to incentive do not
include machinery equipment,
means of transportation, etc.
directly imported by the
financial leasing companies for
leasing purposes.
With respect to import of
goods for production of export
goods, the customs authorities
shall not accept the adjustment
to increase the norm after
exporting the goods if there is
no sufficient evidence for
verification.
August 2012 Tax Watch Update | Page 6

Personal Income Tax

Exempt per diem for overseas business trips increased
On 21 June 2012 the Ministry of Finance issued Circular
102/2012/TT-BTC providing new per diem regime for state
employees who are on short term business trips overseas. This
Circular will take effect from 10 August 2012 and replaces Circular
91/2005/TT-BTC.
Under Circular 102, the per diem (excluding hotel and
transportation expenses) shall be from USD50/person/day to
USD80/person/day depending on the position and the country they
are travelling in (under the old regulation, the per diem is from
USD40/person/day to USD65/person/day). Therefore, the
non-taxable per diem will be capped from USD100/person/day to
USD160/person/day (twice the level for state employees). Please
contact us for the specific per diem applicable to each country.

At a glance
Non-taxable per diem for
overseas travel is increased
and capped from
USD100/person/day to
USD160/person/day (twice
the level for state
employees).

August 2012 Tax Watch Update | Page 7


Contact
For more information on this Tax Watch Update and
Tax & Advisory Services of Ernst & Young Vietnam, please
contact:
Hanoi Office

Huong Vu Partner
huong.vu@vn.ey.com

Thanh Trung Nguyen Director
thanh.trung.nguyen@vn.ey.com

Trang Pham Director
trang.pham@vn.ey.com

The Gia Tran Director
the.gia.tran@vn.ey.com

J apanese Business Service

Fuyuki Anzai Manager
fuyuki.anzai@vn.ey.com



Ho Chi Minh Office

Christopher Butler Partner
christopher.butler@vn.ey.com

Nitin Jain Partner
nitin.jain@vn.ey.com

Sarah Jubb Executive Director
sarah.jubb@vn.ey.com

Thinh Xuan Than Director
thinh.xuan.than@vn.ey.com

Thy Anh Huynh Director
thy.anh.huynh@vn.ey.com

J apanese Business Service

Takahisa Onose Manager
takahisa.onose@vn.ey.com




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2012 Ernst & Young Vietnam Limited.
All Rights Reserved. FEA No. 16000264

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