The Ministry of Finance (MoF) is considering revising several tax regulations to create a more transparent and convenient tax system for businesses.
Extended tax finalization deadline
As proposed by the MoF in its draft amendments to the Law on Tax Administration, the corporate income tax (CIT) finalization deadline applicable to large-sized enterprises would be extended.
Under the current law, enterprises have to complete all paperwork for CIT finalization for each year within the first 90 days of the following year or by March 31 at the latest. This deadline applies for all companies, regardless of their size.
The draft revision, instead, extend this deadline by 60 days state business groups and corporations and large-sized enterprises as well as those operating in many cities and provinces.
It also gives enterprises extra grounds for cancellation of outstanding tax and fine debts.
The current law states that a bankrupt company that has made all payments as required by the Law on Bankruptcy and has no assets to pay taxes or fines will be absolved from tax and fine debts. This is also applied to persons who died, have gone missing, have lost their civil act capacity or have no assets for tax or fine payment.
Reality shows that in these cases, it is very difficult to exactly calculate payable tax or fine amounts, especially those arise as the result of objective reasons. Therefore, some tax or fine debts have arisen and consideration must be given to their elimination, but there are not yet any regulations which serve as a legal ground for tax officials to do so.
To redress this matter, the draft law stipulates that enterprises that go bankrupt, suffer losses or stop production or business operations and, therefore, become truly insolvent could be exempted from taxes and fines.
The MoF is also considering amendments to Decrees Nos. 124 and 123 of 2008 guiding corporate income tax and value-added tax.
Clearer CIT guidance on capital, securities and real estate transfer
While Decree 124/2008/ND-CP stipulates that the purchase price of a transferred capital amount may be deducted when determining taxed incomes from capital transfer, it has no provision on the equity capital gain generated when a joint-stock company conducts its initial public offering or issues additional shares for fund raising purposes.
In fact, payment for capital transfer could be made not only in cash, but also in other income-generating assets such as shares or fund certificates. The question here is whether such income would be taxed.
Furthermore, if a joint-stock company undergoes splitting, separation, consolidation or merger leading to stock swaps, whether or not shareholders of this company must pay tax on the income earned due to stock swaps.
The MoF gives clear answers to these questions in a draft decree.
Accordingly, the equity capital gain brought about by initial public offerings or additional share issuance, which is the difference between the issue price and par value price of shares, would be accounted into the surplus equity account and, therefore, not be taxed.
In case of receiving payment for capital transfer in income-generating assets, the generated income amounts would be taxable. Similarly, incomes generated from stock swaps upon enterprise splitting, separation, consolidation or merger would be liable to CIT.
Article 13 of Decree 124 stipulates “incomes from real estate transfer include income from transfer of land use rights or lease rights and income from sublease of land of real estate enterprises under the land law, regardless of attached infrastructure or architectural works.”
Financial experts argued that to assure consistency among the legal system, “real estate” must be understood in pursuance to the civil law to cover also assets attached to land such as houses and construction works which should be taken into account when determining incomes from real estate transfer.
In light of this, the draft decree stipulates: “incomes from real estate transfer include also amounts earned from transfer of houses and construction works attached to land, covering also appurtenance of these houses or construction works, regardless of whether such transfer is resulted in transfer of land use rights or lease rights; and incomes from transfer of other assets attached to land.”
More VAT-free goods and services
In addition to non-taxable objects provided in Decree 123/2008/ND-CP of December 8, 2008, businesses would not be required to declare and pay VAT for some other goods and services under another decree drafted by the MoF.
Specifically, VAT would not be imposed on goods and services that are provided overseas by Vietnam-based taxpayers. In case a service is provided both inside and outside
VAT declaration and payment would be also exempted for such services as repair of means of transport, machinery and equipment; advertising and marketing; investment and trade promotion; goods sale brokerage; training; and postal and telecommunications charge sharing, which are provided overseas to Vietnam-based producers or traders by foreign organizations without permanent establishments in Vietnam or foreigners who are not Vietnamese residents.
Also eligible for VAT exemption if the draft decree is approved are revenues received as compensations for contract cancellation; bonus for early fulfillment of a contract; financial assistance; similar revenues that do not lead to goods or service exchange in
When liquidating assets, non-business organizations and individuals that are not VAT payers would not be required to calculate and declare VAT and use goods sale invoices but receipts and documents stipulated by the MoF.
These drafts are now available at the Vietnamese business community’s website www.vibonline.vn.-