TAX ALERT / Tax and Corporate Services / October 2014 | No.2

© 2014 KPMG Limited, a Vietnamese limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

TAX ALERTOctober 2014 | No.2

TAX AND CORPORATE SERVICES

Circular 151Elaborating the implementation of Decree 91

The Minister of Finance (MOF) has just issued Circular 151/2014/TT-BTC dated 10 October 2014 guiding the implementation of Decree 91/2014/ND-CP dated 1 October 2014 providing supplementations, amendments to the various articles of tax Decrees and Circulars

Basically, Circular 151 elaborates the stipulated contents of Decree 91. Please refer to our Tax Alert dated 3 October, 2014 for notable points under Decree 91.

We summarise hereunder some further notable changes under Circular 151:

1. Corporate Income Tax (“CIT”)• Circular 151 keeps affirming that staff welfare expenses

directly incurred on employees shall be deductible at the cap of actual average monthly salary for a tax year. The average monthly salary is determined by taking the actual salary fund in such year divided by 12 months. The actual salary fund equals to the actual total salary paid for such tax year up to the statutory deadline for submission of the tax finalisation return.

• Tax incentive for investment projects with different phases registered with the licensing authorities under the first investment project application: compared to Decree 91, Circular 151 clarifies that the subsequent phases of the first investment project will enjoy tax incentives for the remaining period of the first investment project counting from the time when those phases generate taxable income entitled to tax incentive. For projects which were licensed before 2014, if the subsequent phases of the first investment project have already enjoyed tax incentives in accordance with tax regulations before 1 January 2014, no adjustment of tax incentives will be allowed.

• With respect to tax incentives for regular purchase of machinery and equipment within the period from 2009 to 2013, Circular 151 clarifies that the regular addition of machinery and equipment shall be subject to tax incentives provided that those additional purchase does not constitute a new investment project or an expansion of investment project. It remains unclear how to determine whether the additional purchase of machinery and equipment constitutes an expansion of investment project.

• Enterprises which are still under the tax incentive period based on condition of export ratio but the tax incentives have been removed due to WTO commitments shall have the right to apply different combination between preferential tax rate, tax exemption and reduction to continue enjoying the tax incentives based on other conditions except for the export ratio. However, Circular 151 is silent on how to define the different combination between preferential tax rate, tax exemption and reduction.

• On the other hand, enterprises which have applied another tax incentive scheme due to the WTO commitment in accodance with previous guidance (including the cases where enterprises were audited by tax authorities) are still allowed to switch to a tax incentive scheme in accordance with Circular 151 if those tax incentives are more favourable. Enterprises shall not be subject to tax penalty for incorrect declaration due to this switching. The amount of tax overpaid shall be offset against the tax payable in the next tax period or refunded. Enterprises in the garment industry having implemented the tax incentive scheme switching due to WTO commitment under previous regulations shall not be allowed to adjust the tax incentive scheme if they have been penalised by tax authorities.

TAX ALERT / Tax and Corporate Services / October 2014 | No.2

TAX ALERTOctober 2014 | No.2

TAX AND CORPORATE SERVICES

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.

© 2014 KPMG Limited, a Vietnamese limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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2. Value Added Tax (“VAT”)• With respect to payment via bank for sale of goods or provision of services by

installment payment of more than VND20 million, Circular 151 has simplified the timing for input VAT declaration or revision of credited input VAT to be be based on payment vouchers via banks as per the contractual payment terms, instead of 31 December timeline set out under Circular 219.

3. Taxation administration• VAT declaration on a quarterly basis: Circular 151 provides detailed guidance

on the tax payers, procedures and stable period for quarterly VAT declaration. Accordingly, in addition to tax payers with previous year’s annual revenue of VND50 billion or below, newly operating tax payers will also declare VAT on a quarterly basis. The stable VAT declaration period is 3 years, except that the first period is determined from 1 October 2014 to 31 December 2016.

• For the cases of enterprise form conversion where the conversion enterprise inherits all tax obligations from the original enterprise (e.g. conversion of a limited liability company into a joint stock company or vice versa; conversion of a state-owned enterprise into a joint stock company and other cases), finalization of tax obligations will not be required at the conversion time. Enterprises are only required to finalise annual tax obligations in accordance with current regulations.

• With regard to audit of tax finalisation upon dissolution, cease of operation, Circular 151 clearly stipulates three cases not subject to tax audit. Besides, for other cases subject to tax audit, the tax authorities can use the results of tax finalization performed by independent audit firms or tax agents for their tax audit purposes.

• Personal Income Tax (PIT) finalization: in case of business dissolution and cease of operation, tax payers shall not be required to make the PIT finalisation upon dissolution and cease of operation if there is no PIT withholding. Tax payers are only required to provide the list of individuals who received income during the year.

Circular 151Elaborating the implementation of Decree 91