Update on new regulations in August 2024

Our Newsletter #25 would lead you on the following:

LEGAL UPDATE

I. Extending the deadline for payment of value-added tax, corporate income tax, personal income tax and land rent in 2024

On 17 June 2024, the Government issued Decree No. 64/2024/ND-CP effective from 17 June 2024 to 31 December 2024, regulating the extension of the deadline for payment of value-added tax (“VAT”), corporate income tax (“CIT”), personal income tax (“PIT”) and land rent in 2024 with some notable points as follows:

1. Subjects of the extension

Subjects eligible for tax and land rent extension include:

1.1. Enterprises, organizations, households, business households, and individuals engaged in production activities in the following economic sectors:

1. Agriculture, forestry and fisheries sectors;
2. Food production and processing; weaving; clothing production; production of leather and related products; wood processing and manufacture of wood, bamboo products (except beds, cabinets, tables, chairs); manufacture of products from straw and plaiting materials; manufacture of paper and paper-based products; manufacture of rubber, plastic products; manufacture of other non-metallic minerals products; metal manufacturing; mechanical processing; metal treatment and coating; manufacture of electronic products, computers and optical products; manufacture of automobiles and other motor vehicles; manufacture of beds, cabinets, tables, chairs;
3. Construction sectors;
4. Publishing activities; cinematographic activities, television program production, recording and music producing;
5. Crude oil and natural gas extraction (does not extend the payment deadline of CIT on crude oil, condensate, and natural gas under agreements and contracts);
6. Beverage manufacturing; printing and making copies of records of all kinds; manufacture of coke and refined petroleum products; manufacture of chemicals and chemical products; manufactured products from prefabricated metal (except machinery and equipment); motorbike manufacturing; repair, maintenance and installation of machinery and equipment; and
7. Drainage and wastewater treatment.

1.2. Enterprises, organizations, households, business households, and individuals doing business in the following economic sectors:

1. Transportation and warehousing; accommodation and food services; education and training; health and social assistance activities; real estate business activities;
2. Labor and employment service activities; activities of travel agencies, tour businesses and support services related to the promotion and organization of tours;
3. Creative, artistic and entertainment activities; operations of libraries, archives, museums and other cultural activities; sports and entertainment activities; screening activities;
4. Radio and television broadcasting activities; computer programming, consulting services and other activities related to computers; information service activities; and
5. Mining support service activities.

Accordingly, Decree No. 64/2024/ND-CP stipulates the list of economic industries and professions to be extended under Item I.1.1 and Item I.1.2 determined in accordance with Decision No. 27/2018/QD-TTg;

1.3. Enterprises, organizations, households, business households, and individuals engaged in manufacturing prioritized supporting products; key mechanical products; and

1.4. Small and micro enterprises are determined in accordance with the provisions of the Law on Support for Small and Medium Enterprises 2017 and Decree No. 80/2021/ND-CP.

The economic sectors, fields of enterprises, organizations, households, business households, and individuals engaged in business specified in Item I.1.1, Item I.1.2 and Item I.1.3 are eligible for the extension of tax and land rent payments in production and business activities and revenue generated in 2023 or 2024.

2. Extension of the deadline for tax and land rent payments

The extension of tax and land rent payment deadlines is specifically guided by Decree No. 64/2024/ND-CP with the following points:

2.1. Regarding VAT (except VAT at the import stage):

1. Extension of the deadline for VAT payment for the tax amount incurred (including tax allocated to other provincial localities where the taxpayer has its headquarters, and the tax amount paid for each occurrence) in the tax period from May to September 2024 for a monthly VAT return, and the tax period of the second quarter and the third quarter of 2024 for a quarterly VAT return by enterprises and organizations in Item I.1 above. The extension period is calculated from the end date of the VAT payment deadline as stipulated by tax administration laws, specifically as follows:
   • 1. The extension period is 05 months for the VAT amount of May 2024. The deadline for VAT payment of May 2024 tax period is no later than 20 November 2024;
     2. The extension period is 05 months for the VAT amount of June 2024. The deadline for VAT payment of June 2024 tax period is no later than 20 December 2024;
     3. The extension period is 05 months for the VAT amount of the second quarter of 2024. The deadline for VAT payment of the second quarter of 2024 tax period is no later than 31 December 2024;
     4. The extension period is 04 months for the VAT amount of July 2024. The deadline for VAT payment of July 2024 tax period is no later than 20 December 2024;
     5. The extension period is 03 months for the VAT amount of August 2024. The deadline for VAT payment of August 2024 tax period is no later than 20 December 2024;
     6. The extension period is 02 months for the VAT amount of September 2024. The deadline for VAT payment of September 2024 tax period is no later than 20 December 2024; and
     7. The extension period is 02 months for the VAT amount of the third quarter of 2024. The deadline for VAT payment of the third quarter of 2024 tax period is no later than 31 December 2024.
   • Accordingly, the declaration and submission of monthly and quarterly VAT tax returns are still carried out according to current tax laws, but the VAT amount arising on the declared VAT return is not required;
2. If enterprises and organizations mentioned in Item I.1 have branches and subsidiaries that file VAT with the tax authority directly managing those branches and subsidiaries, then those branches and subsidiaries are also eligible for VAT payment extension.

2.2. Regarding the CIT:

1. 1. Extend the tax payment deadline for the temporarily paid CIT in the second quarter of 2024 CIT period of enterprises and organizations mentioned in Item I.1. The extension period is 03 months from the expiration date of the tax payment period stipulated in the tax administration laws; and
   2. If enterprises and organizations mentioned in Item I.1 have branches or subsidiaries that file CIT with the tax authority directly managing those branches or subsidiaries, then these branches or subsidiaries are also eligible for CIT payment extension.

If these branches or subsidiaries of an enterprise or organization in Item I.1.1, Item I.1.2 and Item I.1.3 do not operate in the economic sectors, fields eligible for an extension period, then these branches and subsidiaries are not eligible for CIT payment extension.

2.3. Regarding the VAT, PIT of business households and individuals

Extending the deadline for paying VAT and personal income tax for tax amounts incurred in 2024 for business households and individuals operating in the economic sectors, fields mentioned in I.1.1, Item I.1.2 and Item I.1.3. Accordingly, business households and individuals must make VAT and PIT payments no later than 30 December 2024.

2.4. Regarding land rent

1. Extending the land rent payment deadline for 50% of the land rent amount incurred in 2024 (the amount due for the second term of 2024) by enterprises, organizations, households, and individuals mentioned in Item I.1 above and is being leased land directly by the State according to the Decision or Contract of a competent State authority in the form of annual land rental payment. The extension period is 02 months from 31 October 2024; and
2. This above regulation applies to enterprises, organizations, households, and individuals who have multiple Decisions or Contracts of land leased directly from the State and have activities in various economic sectors, fields mentioned in Item I.1.1, Item I.1.2 and Item I.1.3.

2.5. If an enterprise, organization, business household, or individual has production and business activities in many different economic sectors, including economic sectors and fields in Item I.1.1, Item I.1.2 and Item I.1.3, then the enterprise, organization can extend the VAT and CIT payment deadline; business households and individuals can extend the VAT and PIT payment deadline.

2.6. Extension procedure

1. Taxpayers who are directly declaring and paying taxes to the tax authority, and are subject to the extension, must submit the Tax and Land Rent Extension Request Form for the first time or as a replacement when discovering any errors to the tax authority. This submission should be done once for the entire amount of tax and land rent due in the tax periods that are extended, along with the tax return file submission on a monthly (or quarterly) basis as stipulated by tax administration laws;
2. If the Tax and Land Rent Extension Request Form is not submitted at the same time as the monthly (or quarterly) tax return submission, then the submission deadline is 30 September 2024. Accordingly, the tax authority will still extend the tax and land rent payment deadline for the periods that were granted an extension before the submission of the Tax and Land Rent Extension Request Form; and
3. If the taxpayer has amounts that are extended across different tax authorities, then the directly managing tax authority is responsible for transmitting the information and sending the Tax and Land Rent Extension Request Form to the relevant tax authorities.

II. Reviewing and handling illegal invoices

On 01 August 2024, the General Department of Taxation issued Official Letter No. 3385/TCT-TTKT regarding the review and handling of illegal invoices (“OL No. 3385”) with the following notable points:

1. List of 113 companies illegally trading invoices

OL No. 3385 presents the results of the first-instance Court of the case of illegal purchase and sale of invoices occurring in Phu Tho province and many other provinces according to Judgment No. 115/2023/HS-ST. Subsequently, in addition to the 524 companies listed in Official Letter No. 1798/TCT-TTKT, OL No. 3385 announced an additional 113 companies illegally trading invoices, with a total of 637 companies illegally trading invoices according to Judgment No. 115/2023/HS-ST.

2. Review and handle illegal invoices

With 113 companies illegally trading invoices according to OL No. 3385, the General Department of Taxation requires Tax Departments to continue tax handling of illegal acts of trading invoices, specifically as follows:

1. Using electronic invoice data and collecting paper invoices (if any) from 113 companies that illegally traded invoices to apply tax management measures. If a taxpayer under the tax authority’s management is discovered to have used invoices from the 113 companies mentioned above to declare taxes, then consider and request the taxpayer to explain and clarify the use of invoices to deduct VAT/refund VAT, including CIT calculation costs, legalizing illegally purchased and smuggled goods; and
2. Requesting tax departments to use as a basis the actual violations and regulations in legal documents to promptly handle tax issues in accordance with Vietnamese laws or consolidate the files and transfer them to the Public Security to request handling according to legal provisions.

III. Collecting opinions to prepare a Proposal to develop the amended Law on Enterprises together with the first draft of the Summary Report and assessment of the implementation of the Law on Enterprises 2020

On 17 July 2024, the Ministry of Planning and Investment issued Official Letter No. 5595/BKHDT-QLKTTW (“OL No. 5595”) to organizations for feedback in preparation for the Proposal to develop the amended Law on Enterprises.

Accordingly, the first draft of the Summary Report and assessment of the implementation of the Law on Enterprises 2020 (the “Report”) and its Appendix issued together with OL No. 5595, have shown that ministries, industries, local provinces, authorities, organizations, citizens and enterprises still have difficulties and obstacles in implementing the provisions of the Law on Enterprises 2020 (“LOEs 2020”). These difficulties and obstacles include 03 groups of issues as follows:

1. Common difficulties and obstacles

1. The implementation of the LOEs 2020 and other related laws regarding the establishment, organization, management and operations of enterprises is not clear and consistent. For example, the issue of private bond issuance by enterprises that are not public companies;
2. The LOEs 2020 does not define the term “Related person of the executive of the enterprise”, causing difficulties in identifying and handling transactions between this person and the enterprise;
3. The regulations of the LOEs 2020 regarding the functions and duties of the legal representative of an enterprise are incomplete compared to the Civil Code 2015. Additionally, the regulations on establishing titles, appointing, dismissing, and replacing legal representatives are not clear. For example, there are opinions reflecting that the LOEs 2020 does not clearly stipulate whether an enterprise must appoint a legal representative or not;
4. The regulations on the criteria, legal status, rights, obligations, and responsibilities of social enterprises are not clearly regulated;
5. The regulations on prohibited behaviors are not specific and are incomplete, and the measures for handling violations are unclear; and
6. The regulations on supervision, inspection, and state management of enterprises after establishment registration are not strict; and have not updated management tools and forms through building, connecting, and sharing enterprise databases.

2. Regarding establishment and enterprise registration

1. The LOEs 2020 does not specifically regulate measures to prevent and handle cases of fraudulent capital contribution, virtual capital, unauthorized investment, shadow investment, falsification of dossiers and legal documents to establish an enterprise to trade invoices;
2. The implementation of regulations on capital contribution with land use rights and other assets still has difficulties and obstacles; and
3. Other regulations for establishing an enterprise are not clear enough. For example, the regulations regarding individuals who are prohibited from establishing or participating in the management of enterprises, requirements to apply personal identification numbers, electronic identification accounts when registering enterprises, and responsibility to notify when there are changes in the enterprise registration dossier.

3. Regarding enterprise management and corporate governance organizations

There are some regulations of the LOEs 2020 regarding enterprise management and corporate governance organizations are not consistent and clear, causing different interpretations. Specifically, regulations on functions, tasks, power, responsibilities, working regimes, standards, conditions, orders and procedures for passing decisions and resolutions of the Board of Members, the Chairman of the enterprise, General Meeting of Shareholders, Board of Directors, Director/General Director, Controller/Board of Controllers in limited liability companies and joint stock companies.

The above is not official advice from BLawyers Vietnam. If you have any questions or suggestions about the above, please contact us at info@blawyersvn.com. BLawyers Vietnam would love to hear from you.

Date: 29 August 2024

Writer: BLawyers Vietnam

Legal News and Update Team

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Newsletter #25 (EN version)

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