Corporate Income Tax (“CIT”)
Dividend income
In accordance with Official Letter 857/TCT-CS dated 17 March 2014, the General Department of Taxation (“GDT”) provides that dividend received in the form of shares shall be exempted for CIT purpose. However, CIT is required upon sales of such shares the cost of which is determined as the value of the shares received.
CIT incentives
In line with Official Letter 733/TCT-CS dated 10 March 2014, GDT confirms that qualified new investment project in the form of a branch in Economic Zone established under the Prime Minister’s Decision shall enjoy tax incentives under Decee 218/2013/ND-CP.
Non-deductible foreign contractor contract expenses
Pursuant to Official Letter 756/TCT-CS dated 11 March 2014, if the Vietnamese enterprise fails to substantiate the scope of work for the residual value from the main contractor’s contract value after deduction of the subcontractors’ contract value, it can’t claim such difference as deductible expenses for CIT purpose.
Value Added Tax (“VAT”)
Crediting VAT for promotional goods
Pursuant to GDT’s Official Letter No.717/TCT-CS dated 10 March 2014, if suppliers issue VAT invoices for promotional goods to purchasers who do not have to pay pay the VAT charged on invoices, these purchasers can’t claim such VAT as deductible.
Foreign Contractor Tax (“FCT”)
VAT on goods under import on the spot
Official Letter 951/TCT-CS of the GDT dated 24 March 2014 confirms that the VAT portion of the FCT is not required to be paid if VAT upon importation is already paid. As such, taxpayers are required to provide evidence for the VAT paid.
Contractor contract cancellation
In accordance with Official Letter 715/TCT-CS dated 10 March 2014, if Vietnamese party and foreign contractor sign an Appendix to cancel part of work under the signed contractor contract, then FCT-able income of the foreign contractor might not include the value of the cancelled scope of work.
Taxable income deduction
Official Letter 764/TCT-KK dated 12 March 2014 reaffirms that the taxable of the foreign contractor does not include the value of the work subcontracted to the local sub-contractors or foreign sub-contractors adopting hybrid method.
FCT-able income
According to Official Letter 812/TCT-TNCN dated 13 March 2014, FCT-able income of the foreign contractors shall also include amounts paid by Vietnamese parties on their behalf for accident insurance, emergency transportation, accommodation, visa fees and PIT for foreigners working under the contract.