Vietnam Regulatory Brief: Tax, Bidding Guidance and Tariff Lines
Decree No. 12/2015/NĐ-CP dated February 12 has further provided guidance on key changes to the implementation of the new Tax Law, which is outlined below.
Corporate Income Tax (CIT)
In line with existing withholding tax provisions and other relevant regulations, foreign entities shall be additionally subjected to CIT on transferring capital, investment projects and rights.
Expenses to be fully deductible include:
- Life insurance benefits for employees;
- Professional or technical training expenses in accordance with regulations;
- Interest incurred on loans to invest in other companies once charter capital is fully contributed;
- Cap on the deductibility of advertising and promotion expenses
- Advertising and promotion expenses
RELATED: Tax and Compliance Services from Dezan Shira & Associates
Investors may enjoy CIT preferential rate of 10 percent for 15 years, four years’ CIT exemption from the first year of revenue generation and 50 percent reduction of payable tax for the next nine years, when meeting specific requirements.
Value Added Tax (VAT)
VAT exemption shall be applied to fertilizer, livestock feed, poultry, seafood and other animals, replacing the previous VAT rate of five percent. In addition, imported cigarettes, spirits and beer that are subsequently exported are VAT exempt, while the relevant input VAT is not creditable.
Project Investor Selection
The Vietnamese government has issued detailed guidelines on the selection of investors in public-private partnership (PPP) projects and other land-using projects with high commercial value, announced in Decree No. 30/2015/NĐ-CP dated March 17, 2015. The decree clarifies further some articles in the Bidding Law No. 43/2013/QH13 and will come into effect on May 5, 2015.
Investor selection in most projects will be required to be carried out by international competitive bidding. Projects with initial investment under VND 120 billion and other specific appointment projects are required to be implemented following domestic competitive bidding only.
RELATED: Entry Strategy Advisory from Dezan Shira & Associates
Of note are caps applied for investor selection as follows:
For domestic bidding:
- A cap of VND 20 million per set on selling bidding dossiers;
- A cap of VND 5 million per set on pre-qualification invitations
For international bidding:
- A cap of VND 30 million on corresponding rates;
- A cap of VND 100 million on the development of pre-qualification invitations;
- A cap of VND 50 million on appraisal of pre-qualification invitations;
- A cap of VND 100 million on evaluation pre-qualification invitations;
- A cap of VND 50 million on evaluation of pre-qualification results
Tariff Lines Imported from Japan
Vietnam’s Ministry of Finance (MoF) has announced a range of import tariffs to be cut in Circular Nos. 24/2015/TT-BTC and 25/2015/TT-BTC, which came into effect on April 1, 2015, replacing Circular Nos. 20/2012/TT-BTC and 21/2012/TT-BTC of 2012.
Accordingly, 3,234 import tariff lines from Japan – or 33.8 percent of the total items imported – have been cut to zero percent for the 2015-2019 period, under the Japan-Vietnam Economic Partnership Agreement (JVEPA). Tariff lines of note include chemicals, footwear, garment materials, machinery, materials, pharmaceuticals, and textiles. According to the MoF’s Circular No. 25. Another 354 products outside the preferential tariff policy including chocolate, cocoa, jam, paddy harvesters and threshers, which will have their tariffs taxed according to the current Most Favored Nation (MFN) level.
RELATED: Survey Reveals Japanese Investor Confidence in Vietnam
In addition, the other Circular No. 24 has stipulated that 2,874 products imported directly from Japan – or 30 percent of total tariff lines – will be subject to zero tariffs under the ASEAN Japan Comprehensive Economic Partnership Agreement (AJCEPA) for 2015-2019.
Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email [email protected] or visit www.dezshira.com.
Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.
Import and Export: A Guide to Trade in Vietnam
In this issue of Vietnam Briefing Magazine, we provide you with a clear understanding of the current business trends related to trade in Vietnam, as well as explaining how to set up your trading business in the country. We also attempt to give perspective on what will be Vietnam’s place in the Association of Southeast Asian Nations (ASEAN) in 2015, and look at some of the country’s key import and export regulations.
Developing Your Sourcing Strategy for Vietnam
In this issue of Vietnam Briefing we explore how Vietnam’s Free Trade Agreements – and especially those via its membership in ASEAN – will affect foreign investment into Vietnam. We also go a step further and examine the specific, bilateral Double Tax Agreements that Vietnam has enacted, and how these can be further used to minimize profits and withholding taxes that would otherwise be levied upon foreign investors.
Tax, Accounting, and Audit in Vietnam 2014-2015
The first edition of Tax, Accounting, and Audit in Vietnam, published in 2014, offers a comprehensive overview of the major taxes foreign investors are likely to encounter when establishing or operating a business in Vietnam, as well as other tax-relevant obligations. This concise, detailed, yet pragmatic guide is ideal for CFOs, compliance officers and heads of accounting who need to be able to navigate the complex tax and accounting landscape in Vietnam in order to effectively manage and strategically plan their Vietnam operations.