This August 2020 publication of our Tax and Accounting Updates looks at the European Union Vietnam Free Trade Agreement (“EVFTA”) that has recently come into effect, the draft EVFTA tariff implementation process, the new Vietnam Tax Administration Law which is now in force, guidelines for the adjusting prior year taxation finalisations as a result of the increase in allowable interest deductions under the Transfer Pricing regulations, along with our regular review of recent Official Letters released by Authorities.

EVFTA ENTERED INTO EFFECT FROM 1 AUGUST 2020

After many years of negotiations, the European Union Vietnam Free Trade Agreement (“EVFTA”) took effect on 1 August 2020, paving the way for increased trade between the EU and Vietnam. The EVFTA aims to liberalise tariff and non-tariff barriers for key imports on both sides over a period of 10 years.

EVFTA will eliminate almost 99% of customs duties between the EU and Vietnam. Accordingly, 65% of duties on EU exports to Vietnam are to be eliminated on implementation, with the balance gradually phased out over a period of 10 years. 71% of duties are to be eliminated on implementation on Vietnamese exports to the EU, with the balance to be eliminated over a period of 7 years. From Vietnam’s perspective, the EVFTA will provide direct benefit for key export industries such as smartphones and electronic products, textiles, footwear and agricultural products).

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