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Official Gazette

Tuesday, March 31, 2020

Policy digest October 2013

Updated: 15:55’ - 31/10/2013

* Domestic banks long for lift in foreign holding: Many banks, especially major commercial ones, are expecting the Government to raise the foreign holding cap and coming up with plans to sell strategic stakes.

A foreign investor is currently permitted to hold no more than 20 percent of the equity capital of a domestic bank, while the total foreign holding is capped at 30 percent.

If the accumulative limit is hiked to 49 percent and the holding cap for an individual foreign bank to 30 percent like some other sectors as proposed, banks can take advantage to attract foreign investment and the banking sector will surely improve when foreign investors bring in money and governance skills.

Many foreign banks based in the country have suggested increasing the foreign holding cap for all banks instead of only for small-sized and weak banks because such may not be of too much help since these banks would not be too attractive for foreign investors.

Many domestic banks have already sold between 10 and 20 percent of their stakes to foreign investors and, with the latter’s assistance, introduced many new financial products.

* Aquatic businesses complain about problems over tax refunds: Difficulties in the value-added tax (VAT) refund and reduction have contributed to the capital shortage of aquatic producers, voiced Truong Dinh Hoe, general secretary of the Vietnam Association of Seafood Exporters and Producers (VASEP).

Meeting with the Ministry of Finance recently, Hoe said aquatic producers have faced high import duties and administrative problems over VAT for purchased input materials, which were used for export production.

He said there was no regulation on the time limit for tax agencies to verify VAT payment, thus making aquatic product exporters wait for a long time for tax refund.

He added that the requirement that aquatic product exporters must pay VAT and import duty before customs clearance posed a risk of incurring tax debts within two months if their exports were returned due to trade barriers and improper packaging specifications despite them paying VAT before.

Do Hoang Anh Tuan, Deputy Minister of Finance, said the ministry had asked tax agencies to investigate only businesses with high tax risks to prevent tax fraud and losses, while permitting others to delay tax payment, and consider specifying time limits for verification of tax payment and refund.

* APA to tackle tax administration issues: The introduction of an advance pricing agreement (APA) is expected to enhance transparency in the tax administration involving both tax agencies and taxpayers in an agreement and enabling both sides to control and address transfer pricing issues.

This argument was made at the 21st annual conference of the Asia-Oceania Tax Consultants’ Association (AOTCA) held on October 17 in Hanoi.

Vu Huong, deputy director of Ernst & Young Vietnam said that an APA should last for no longer than five years and determine tax calculation bases and pricing methods prior to the submission of corporate income tax and customs declarations, and taxpayers should carefully consider applying APAs to the management of risks related to determination of market prices in the future.

She also recommended introduction of rules specifically applicable to complicated high-risk transactions and to less complicated or low-risk transactions.

Talking about experiences in building APA programs, other conference participants said APAs resolved transfer pricing issues and reduced uncertainty arising from related party transactions.

APA applications were usually made by taxpayers on a voluntary basis through five steps, including pre-filling; formal application; analysis and evaluation; negotiation and agreement; drafting, execution and monitoring.   

Taxpayers should take the initiative in proposing methods of advance pricing for approval by tax agencies. Once approved, these methods would serve as an effective tool for preventing transfer pricing disputes.

* More than half of Vietnam quality standards are not up to international standards: As recently publicized by the Vietnam Standards and Quality Institute (VSQI), only 43 out of every 100 Vietnam quality standards are conformable with international regulations and harmonious with international ones currently in application.

In the master plan on development of national measuring standards through 2020 approved by the Government in August, the nation sets forth an objective that by 2020, some 6,000 new standards will be elaborated, in addition to current total of 6,400, of which 80-90 percent will be up to international standards.

According to VSQI, the harmony and consistency between international and national measurement and quality standards in the system of legal metrology should to be constantly promoted so as to facilitate trade, especially foreign trade.

* Repatriating overseas Vietnamese to pay VAT for their vehicles: On October 11, the Government Office issued an official letter requesting the Ministry of Finance (MOF) to consider imposing value-added tax (VAT) on automobiles and motorcycles imported by overseas Vietnamese for use in the country.

The MOF is requested by Deputy Prime Minister Vu Van Ninh to revise and further guide regulations on VAT and excise tax on imported movable assets of overseas Vietnamese who return to their home country.

Pending revision of relevant regulations, overseas Vietnam are required to comply with the MOF’s provisional guidance on VAT and excise tax on their in-transit goods and personal effects, including automobiles and motorcycles.   

Under Joint Circular No. 27/2001/BTM-TCHQ of December 6, 2001, of the Ministry of Trade and the General Department of Customs, overseas Vietnamese’s imported automobiles are exempt from VAT and import duty and liable to excise tax only. Prices for calculation of excise tax on these automobiles are their cost prices exclusive of import duty.

* Foreign ambassadors voice their opinions against royalties hike: The Canadian, Australian and New Zealand ambassadors have recently signed and sent a joint proposal to the National Assembly (NA) leaders for keeping royalties rates unchanged.

Accepting their proposal, the NA Standing Committee decided to postpone the issuance of a resolution to approve the tax hike, pending the Prime Minister’s opinions.

Their concern was that the tax hike, once approved, would adversely impact the country’s investment environment and Trans-Pacific Partnership (TPP) free trade negotiations.

In order to realize the state policy on inhibiting export of unprocessed natural resources and minerals, the MOF and the NA’s Finance and Budget Committee have reached agreement on increasing royalties rates applicable to many minerals, including iron (from 10 to 12 percent), gold (from 15 to 17 percent), copper (from 10 to 13 percent), white limestone (6 to 9 percent), titanium (from 11 to 16 percent), pit anthracite coal (5 to 7 percent), and others.   

However, if the Prime Minister agrees with the royalties hike plan, the NA will adopt a resolution on this issue at the seventh session to be held in early 2014.

* Legal solutions for divestment from non-core business lines: In an interview with Dau Tu (Investment) newspaper, Nguyen Dinh Cung, acting director of the Central Institute for Economic Management (CIEM), admitted that delay in divestment from non-core business lines was attributable mostly to requirements on preservation of state capital in state-owned enterprises (SOEs) and that CIEM was recommending promulgation of separate regulations on divestment from non-core business lines of SOEs.

Specifically, the Ministry of Planning and Investment is proposing the use of market value of equity capital as a basic ground for evaluating the capital preservation and development by SOEs.

“The value of equity capital can be considered well preserved only when its gains at least equal the average interest rate of long-term government bonds or when market prices of shares or capital contributions of an SOE increase at least equal to government bond interests,” he explained.

He also suggested provision of clearer guidance on types of capital which can be divested and methods of divestment applicable to these types of capital, competence and procedures for issuing divestment decisions, and mechanism of valuing capital to be divested.

He proposed amendments to Decree No. 59/2011/ND-CP on conversion of wholly state-owned enterprises into joint-stock companies, aiming to broaden the scope of application to cover also attached units, sections and non-business units.

* Better notarization law to facilitate real estate transactions: The to-be-revised Civil Code, Land Law, Housing Law, etc. and their guiding documents should prescribe compulsory notarization of contracts, transactions, transfer, donation, mortgage or contribution as capital of real estate, said Minister of Justice Ha Hung Cuong in an interview with Dau Tu  newspaper on the revision of the Notarization Law.

The revised Notarization Law should provide guarantee for “legal safety” of real estate contracts and transactions, thus helping reduce social and legal burdens for the settlement of civil disputes, better protect the rights and legitimate interests of entities involved in real estate trading, and prevent real  estate-related violations, disputes and complaints.  

In order to minimize risks of notarization activities, the Ministry of Justice proposed a legal framework for establishment and operation of notarization practice organizations, notary bureaus and local notarization associations, and obligatory insurance for professional liability of notary practitioners.-


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