We look at recent Circulars, Decrees, Government releases and Official Letter in this May 2017 monthly publication of Domicile’s Tax Updates.
BASIC WAGE INCREASE, AND CONSEQUENTIAL INCREASES TO INSURANCE CAPS
On 24 April 2017, the Vietnamese Government issued Decree 47/2017/ND-CP increasing the base salary for State Employees. From 1 July 2017, the Minimum Basic Wage increases to VND 1,300,000 per month, up from VND 1,210,000 per month.
As Social Insurance and Health Insurance payments for all employees are linked to this Minimum Basic Wage in terms of the maximum caps, employers and employees will see potentially higher insurance payments in their salary calculations.
From 1 July 2017 the maximum salary to which Social Insurance and Health Insurance applies increases to VND 26,000,000 (being 20 x VND 1,300,000), up from the previous cap of VND 24,200,000. Employers should ensure their payroll calculation software is adjusted accordingly.
(The Minimum Basic Wage applicable for State employees should not be confused with the Minimum Monthly Wage, which is presently VND 3,750,000 for Zone 1 employers).
On 14 April 2017, the Vietnamese Government issued Decree No. 44/2017/ND-CP concerning on the rate of contribution to the occupational accident and disease insurance fund for applicable employers.
Specifically, the employer premium rate to the occupational accident and disease insurance fund will decrease from 1% to 0.5% of the salary fund for the employees.
This Decree will take effect as from 1 June 2017. The Government announced that, based on capacity for balancing the insurance fund for occupational accidents and occupational diseases, the specified-above premium rate will again be reviewed and adjusted by 1 January 2020.
On 27 April 2017, the Ministry of finance (“MOF”) released Circular 37/2017/TT-BTC modifying Circular 39/2014-TT/BTC concerning invoices issued for the sale of goods and provision of services.
In this Circular, MOF states that any company established after the effective date of this Circular, has a charter capital of below VND 15 billion, and is a manufacturer or service provider that purchases fixed assets, machinery, and equipment worth VND 1 billion or more according to corresponding sale invoices, may print its own invoices to sales of goods or services when the notice of invoice publication is made.
This is subject to the condition that a written request for permission to use self-printed invoices has been granted by a supervisory tax authority. Within 2 working days (current regulation stipulates 5 working days) from the receipt of the written request for permission, the supervisory tax authority must provide written conditions for using self-printed invoices.
Within 2 working days (current regulation stipulates that 5 working days), if the supervisory tax authority does not make a written response, the enterprise may use self-printed invoices. The head of the tax authority is responsible for the unavailability of written response.
This Circular takes effect from 12 June 2017.
OFFICIAL LETTERS RELEASED
On 17 April 2017, the General Department of Taxation (“GDT”) released Official Letter 1424/TCT-CS concerning type of invoices to be used when selling goods to export processing companies or entities in free trade zones.
In this Official Letter, the tax authority confirms that local enterprises use VAT invoices or goods sale invoices when selling goods or services to export processing companies or entities in free trade zones.
In case of export of goods or services among export processing companies or entities in a free trade zone, invoices used are required to clearly state “For entities, individuals in a free trade zone“ (“Dành cho tổ chức, cá nhân trong khu phi thuế quan”).
Tax Policy & Application
On 25 April 2017, the General Department of Taxation released Official Letter 1615/TCT-CS guiding Personal Income Tax (“PIT”) and Value Added Tax (“VAT”) where certain discount programs are implemented.
This Official Letter confirms that in where individual agents receive “trade discounts” in cash, but where the discount is not detailed on the invoice, this amount is regarded as taxable income subject to PIT.
Where discount programs are applied under the laws on trade discounts, VAT taxable prices follows guidance specified in clause 5, 22 Article 7, Circular 219/2013/TT-BTC, while invoice issuance follows guidance specified in clause 9, article 3, Circular 26/2015/TT-BTC and point 2.5 clause 2 appendix 4, Circular 39/2014/TT-BTC.