Our Newsletter #28 would lead you on the following:
LEGAL UPDATE
I. Resolving issues regarding personal income tax declaration on income from capital transfers
On 30 August 2024, the General Department of Taxation issued Official Letter No. 3876/TCT-DNNCN (“Official Letter No. 3876”) resolving issues regarding personal income tax declaration on income from capital transfers with some notable points as follows:
1. The tax declaration responsibility of enterprises that have individuals transfer capital
According to Decree No. 65/2013/ND-CP, amended and supplemented by Decree No. 12/2015/ND-CP, the tax declaration responsibility of an enterprises that has individual transfer capital is regulated as follows:
- The enterprise to which the individual’s capital is transferred shall request the individual to provide documents proving full payment of tax on the transferred capital before initiating procedures for changing the list of equity members or the list of shareholders;
- If the enterprise changes the list of equity members or shareholders upon capital transfer without documents proving the capital transferor has fulfilled his/her tax obligations, the enterprise has the individual transfer capital shall pay tax instead of such individual.
In addition, Decree No. 126/2020/ND-CP also stipulates that the issuer shall declare and pay tax on behalf of individuals that transfer their capital/share when changing the list of equity members or shareholders if there are no documents proving that individuals have fulfilled their tax obligations.
2. Deadline for personal income tax declaration when an enterprise declares and pays on behalf of individuals transferring capital
According to Decree No. 126/2020/ND-CP, personal income tax declared directly by individuals or declared and paid by organizations and individuals on their behalf for income from capital transfer is tax that must be declared upon incurrence.
According to Official Letter No. 3876, the General Department of Taxation provides guidance on the deadline for personal income tax declaration when the enterprise declares and pays the personal income tax upon incurrence. Correspondingly, if there is a change in the list of equity members without documents proving the fulfillment of tax obligations, the declaration and payment of taxes on behalf of individuals must be made within the time limit prescribed by the Law on Tax Administration 2019. Specifically, the deadline for submission of tax declaration dossiers of taxes declared and paid upon incurrence is no later than the 10th day from the date the tax obligation arises.
II. Personal income tax policy for foreign individuals
On 19 August 2024, the General Department of Taxation issued Official Letter No. 3629/TCT-DNNCN (“Official Letter No. 3629”) presented opinions on the personal income tax policy foreign individuals who are heads of representative offices of foreign traders in Vietnam with some notable points as follows:
1. Location for personal income tax declaration when income is paid from abroad
Under the regulations of Decree No. 126/2020/ND-CP, the location for submitting tax declaration dossiers for taxpayers who are individuals with tax obligations arising from income paid from abroad is specified as follows:
- Resident individuals whose salaries or wages are paid from abroad must submit tax declaration dossiers to supervisory tax authorities of the areas where they work;
- If their working location is not in Vietnam, the individual must submit their tax declaration dossiers to the tax authorities of the areas where they reside.
2. Location for personal income tax declaration when having income from more than two places
Under Official Letter No. 3629, the General Department of Taxation, based on the provisions of Decree No. 126/2020/ND-CP, determines the location for submitting tax declaration dossiers when individuals have income from more than two places as follows:
- If the individual has income from salaries or wages from more than two places, including salary on which tax is declared directly and salary on which tax has been deducted by the income payer, then such individual must submit their tax finalization dossier to the tax authority of the area where the biggest source of income is located;
- If the biggest source of income cannot be determined, the individual can submit their tax finalization dossiers to the supervisory tax authority of the salary payer or the area where the individual resides.
III. Summary, Explanation, and Feedback on the draft Decree replacing Decree No. 01/2021/ND-CP on Enterprise Registration
On October 3, 2024, the Ministry of Planning and Investment issued Official Letter No. 8044/BKHDT-DKKD (“Official Letter No. 8044”) regarding the additional publication of the Draft Decree replacing Decree No. 01/2021/ND-CP on enterprise registration (the “Draft”), and attached thereto is the Summary, Explanation, and Feedback on the draft Decree replacing Decree No. 01/2021/ND-CP on Enterprise Registration (“Summary”) with some notable points as follows:
1. Regulations on writing business lines
According to the Summary, the Vietnam Chamber of Commerce and Industry (the “VCCI”) has commented that the Draft’s content is not clear, specifically as follows:
“Regarding business lines that are mentioned in neither Vietnam Standard Industrial Classification nor other legislative documents, the Business registration authority shall consider adding them to the National Enterprise Registration Database if they are not prohibited, and then request the Ministry of Planning and Investment (General Statistics Office of Vietnam) to consider adding them as new business lines”.
Accordingly, VCCI believes that the above regulation is unclear on whether the business registration authority will record the business lines in the database first before the enterprise can register the business lines, or if the business registration authority will allow the enterprise to register the new business lines first and then record them in the database. In practice, there have been cases where enterprises were temporarily instructed to remove the new business lines from the registration/notification of change dossier so that the business registration authority could record them in the national database and notify the Ministry of Planning and Investment. Only then could the enterprise proceed with registering the new business lines. This method has affected enterprise registration activities, and has impacted the spirit of facilitating business registration procedures.
Accordingly, the drafting committee for the Draft has received the above feedback, and made revisions to clarify the content of the above provisions. Specifically, in cases where the business lines are not listed in the Vietnam Standard Industrial Classification, the business registration authority will review and record the business lines for the enterprise if they are not prohibited business lines. Concurrently, they will notify the Ministry of Planning and Investment to record the new business lines.
In addition, the drafting committee for the Draft believes that, in practice, the Vietnam Standard Industrial Classification is comprehensive, covering most economic sectors and fields. Furthermore, according to the Ministry of Planning and Investment, there are currently no new economic sectors that cannot be assigned under the level-4 line in the Vietnam Standard Industrial Classification.
2. Regulations on authorization for enterprise registration procedures
The regulations on authorization for organizations to carry out enterprise registration procedures are recorded in the Draft with the following content:
“If an organization is authorized to carry out enterprise registration procedures, the application for enterprise registration must include the copy of the service contract signed with the enterprise registration service provider, the letter of introduction or a document assigning tasks from such organization to the individual directly performing the business registration procedures”.
According to the above regulations, VCCI believes that the requirement to attach the copy of the service contract signed with the enterprise registration service provider is inappropriate. Because the service contract not only records the information of the parties in the contract, the content of the service implementation, but also the content related to other legal services not related to enterprise registration, or confidential information of the service user.
Additionally, the service contract and the authorization document for the organization to carry out enterprise registration services are both documents that express the will of the enterprise/individual to authorize the organization to carry out enterprise registration procedures, reflecting the consent of the authorized party and complying with civil law. Correspondingly, VCCI suggested that the drafting committee for the Draft consider amending the Draft to approve authorization document of the enterprise for the organization to carry out business registration procedures.
With the above proposal, the drafting committee for the Draft has accepted and revised it with the following content:
“If an organization is authorized to carry out enterprise registration procedures, the application for enterprise registration must include the copy of authorization contract for the organization to carry out procedures related to enterprise registration, the letter of introduction or a document assigning tasks from such organization to the individual directly performing the business registration procedures”.
3. Regulations on documents proving the completion of transfer
According to the Summary, VCCI has presented the content of the Draft with regulations on registration/notification of changes to enterprise registration information dossiers arising from the transfer of capital contributions or shares. These dossiers must include the contract for capital contributions transfer or documents proving completion of transfer for limited liability company, the contract for shares transfer or documents proving completion of the transfer in the case of share transfers for joint-stock company.
Correspondingly, VCCI has made specific comments as follows:
- Pursuant to the above regulations, enterprises must provide one of two types of documents: The contract for capital contributions/shares transfer, or documents proving completion of capital contributions/shares transfer. However, these are two different types of documents and cannot replace each other, as the transfer contract cannot prove that the parties have completed the transfer;
- The requirement to provide documents proving completion of transfer is unclear, so in practice, business registration authorities will request different types of documents. This causes difficulties for enterprises, as in reality, payment is only made after the registration/notification of changes to enterprise registration information procedures have been completed.
After acknowledging VCCI’s feedback, the drafting committee for the Draft has revised and supplemented the Draft in the direction of regulating the types of documents proving the completion of the transfer, including:
- A copy or an extract of the member register or shareholder register;
- A copy or an original of the transfer contract liquidation minutes;
- A bank confirmation of the completion of payment;
- Other valuable documents proving the completion of the transfer of shares and capital contributions in accordance with the provisions of law.
Accordingly, enterprises only need to provide one of the above-mentioned documents to prove the completion of the transfer as stipulated in the Draft.
The above is not official advice from BLawyers Vietnam. If you have any questions or suggestions about the above, please contact us at consult@blawyersvn.com. We would love to hear from you.
Date: 28 November 2024
Writer: BLawyers Vietnam
Legal News and Update Team
PUBLISHED ARTICLES
- 04 conditions foreign investors must meet when operating restaurants and eateries in Vietnam
- 05 notes regarding incentives for selecting investors of investment projects using land
- 03 notes about implementing nuclear power projects in Vietnam in the future
- The 1958 New York Convention and challenges for the recognition and enforcement of foreign arbitral awards in Vietnam
DIGITAL AUDIO PROGRAM
PUBLISHED LEGAL NEWSLETTERS
CONTACT US
✍ Legal News and Update Team
📩 legalnews@blawyersvn.com
For Downloading:
Maybe you are interested in reading other Newsletters of BLawyers Vietnam: Legal Newsletter in July 2024/ Legal Newsletter in August 2024/ Legal Newsletter in September 2024
