Our Vietnam legal update #148 would lead you on 03 legal issues:
I. Execution of Law on Investment 2020
Ministry of Plan and Investment issued Official Letter No. 8909/BKHDT-PC dated 31 December 2020 on the execution of Law on Investment 2020 (“LOI 2020”) with the following main contents:
- Receiving and handling dossier, procedure according to LOI 2020:
(i) Agency that receives the application for approval of investment guidelines:
- For projects subject to the authority to approve investment guidelines of the National Assembly and Prime Minister: Ministry of Plan and Investment.
- For projects subject to the authority to approve investment guidelines of Provincial People’s Committee: Investment Registration Agency (“IRA”).
(ii) IRA and investors continue to carry out the investment procedure on National Investment Information System (formerly National Foreign Investment Information System) that has been established and operated.
(iii) Economic organizations with foreign investors investing in the form of capital contribution, share purchase, purchase of capital contributions (“EO”) must satisfy the conditions specified in Article 26 of LOI 2020 and submit 01 set of dossier to IRA where the head office is located. Dossier includes:
- Application for capital contribution, purchase of share or capital contribution;
- Copies of legal documents of individuals or organizations contributing capital, buying shares, buying capital contributions, and EO;
- Declaration of Land Use Right Certificate of EO (if any).
- Handling dossier of investment projects received before 01 January 2021:
(i) A valid dossier that has been received but the processing time has passed but no results are returned shall be continued to be processed in accordance with Law on Investment 2014.
(ii) If a valid dossier is received with a deadline to settle administrative procedures after 01 January 2021, investors shall submit additional documents (if any) or adjust the contents in dossier submitted in accordance with the LOI 2020.
II. Conditions for enterprises to being entitled to 0% VAT as providing goods and rendering services to enterprises’ foreign clients
Department of Taxation of Ba Ria – Vung Tau Province issued Official Letter No. 35/CT-TTHT dated 05 January 2021 on determining revenue and conditions for enterprises to being entitled to 0% VAT as providing goods and rendering services to enterprises’ foreign clients, with the following contents:
- In terms of the time for determining revenue for calculating taxable income, according to Article 3 of Circular No. 96/2015/TT-BTC issued by the Minister of Finance and supplemented and amended by Article 5.2 of Circular No. 78/2014/TT-BTC:
- With regard to business in selling goods, the time for determining revenue for calculating taxable income is the moment of assigning ownership rights and/or rights to enjoyment of goods to the buyer.
- With regard to business in providing services, the time for determining revenue for calculating taxable income is the moment of completing providing services fully or partly to the buyer, except for cases provided in Article 5.3 of Circular No. 78/2014/TT-BTC, Article 6.1 of Circular No. 119/2014/TT-BTC.
- Conditions for being entitled to 0% VAT, according to Article 9 of Circular No. 219/2013/TT-BTC dated 31 December 2013 issued by the Minister of Finance on 0% VAT guidance, specifically as follows:
- 0% VAT rate: be entitled to exported goods, services, except for cases of not applying 0% VAT provided in Article 9.3 of Circular No. 219/2013/TT-BTC
- Conditions for being entitled to 0% VAT rate for exported goods:
- Having a sale contract, exported merchandise processing contract; an exported entrustment contract;
- Having bank payment receipt of exported merchandise and other receipts in accordance with the laws;
- Having a custom declaration under Article 16.2 of Circular No. 219/2013/TT-BTC.
III. Guidance on remission of corporate income tax for science and technology enterprises
Ministry of Finance has recently issued the Circular No. 03/2021/TT-BTC providing instructions for granting CIT (corporate income tax) exemption and reduction incentives to science and technology enterprises as provided in the Decree No. 13/2019/ND-CP dated 01 February 2019. This Circular takes effect from 01 March 2021, with the main contents as follows:
- Conditions of science and technology enterprises for CIT exemption or reduction:
- Receiving certificates of science and technology enterprises from competent state authorities.
- Income from manufacturing and business of products created from application of scientific and technological achievements must account for at least 30% of their annual gross revenue.
- Revenue earned from services rendered by applying science and technology achievements in the information technology industry must be revenue generated from new services other than services already available on the market.
- Income generated from science and technology achievements within a tax period must be separately accounted for; if not doing so, income from production and business activities eligible for tax incentives shall be determined based on the ratio between turnover from production and business activities eligible for tax incentives and total turnover.
- Science and technology enterprises are entitled to CIT exemption for 04 years and a 50% reduction of payable for subsequent 9 years, from the time the enterprise is granted the certificate of science and technology enterprise. Besides that:
- In case an enterprise has been granted the Certificate but has not generated any revenue in the first three years, then the first year of tax exemption or reduction is counted from the fourth year;
- During the period of enjoying incentives, the rate of revenue from science and technology products does not reach 30% or more, then that year the enterprise is not entitled to incentives and still deducted from the tax incentive period of the enterprise;
- In case the enterprise has generated revenue of the first year but less than 12 months, then the enterprise is allowed to choose to register for incentives from the following year (the first year of tax declaration and payment as prescribed and not enjoying incentives);
- In case the enterprise has enjoyed or is enjoying CIT incentives under other preferential conditions, then the time for enjoying tax incentives for science and technology enterprises is equal to the CIT exemption or reduction period applicable to science and technology enterprises minus the time for CIT exemption or reduction already enjoyed under other preferential conditions.