- Vietnam’s reformed and approved Law on Tax Administration will take effect on July 1, 2020.
- The new law will ease tax administration procedures for entities while ensuring strict enforcement to prevent tax evasion.
- Vietnam Briefing highlights seven changes that taxpayers should be aware of.
Vietnam’s new Law on Tax Administration 38/2019/QH14 will take effect on July 1, 2020. Under the new law, tax authorities have been granted additional enforcement powers. At the same time, the new law has made it a little bit easier for both individuals and entities to file taxes.
The authorities are expected to provide five decrees and eight circulars to guide its implementation. While implementation procedures remain forthcoming, taxpayers can begin to prepare by reviewing the law with their local advisors now.
Seven big changes for taxpayers
Increased enforcement and enhanced controls on related-party transactions
Under the new law, tax authorities will have additional power to collect tax, particularly in instances where individuals or companies attempt to evade tax.
This will include instances where companies fail to abide by transfer pricing requirements and transactions where entities intentionally attempt to avoid paying tax.
To help ensure compliance, Vietnamese tax authorities will increase cooperation with international jurisdictions through information exchanges.
Further, businesses that engage in transfer pricing will be required to be filed as a separate return, rather than include this information as part of the corporate income tax return.
Tax registration
Tax registration certificates will be issued in three days. This process currently takes 10 days.
Filing personal income tax
Personal income tax (PIT) return deadlines have been extended to 120 days from the current 90 days of the calendar year end. This extension is applied for individuals who finalize their annual tax returns directly with the tax authorities.
Individuals will be able to use their citizenship code to file once it has been implemented. At present, individuals are required to have a tax code and an identity card number for filing taxes.
Legal representatives
Legal representatives of an entity in Vietnam will need to ensure their companies are tax compliant. Under the new law, authorities may prevent legal representatives from leaving the country if their employer has not paid due taxes.
Audits
Business organizations will be allowed to submit additional tax declaration documents after the tax authorities have announced an audit or inspection decision.
The draft law has also introduced two types of audit: tax inspection and tax examination. A tax inspection is longer and focusses on a specific issue. A tax examination is shorter but covers wider issues or anomalies.
The tax examination period has also been increased from five to 10 days.
Increased transparency and taxpayer benefits
Taxpayers have the right to know the timeline for processing tax refunds, non-refundable amounts, and the legal basis for such non-refundable tax amounts. Further, they will not be penalized if they declare and pay taxes following the official guidance of tax authorities.
Deadlines for processing tax refunds are applied by the tax authorities. Specifically:
- Tax refund dossiers which are eligible for a refund before examination – six working days upon the receipt of the tax refund application; and
- Tax refund dossiers which are subject to examination before refund – 40 days upon the receipt of the tax refund application.
Taxpayers that want to appeal a decision are required to pay the full tax amount as well as any penalties and late payment interest. However, if the taxpayer wins the appeal, they can request the tax authorities to pay an interest of 0.03 percent per day on the refunded amount.
E-commerce, E-tax, and E-invoices
The new law stipulated that tax rules related to e-commerce activities will be implemented in July 2022. Regulations on e-commerce activities still require clarification in the present state; however, some notable highlights include:
- Commercial banks will be required to withhold and pay taxes on behalf of e-commerce companies that do business abroad, but earn income from Vietnam;
- E-commerce companies that do business on digital platforms without a permanent establishment in Vietnam will be required to make appropriate registration, declare and pay tax on Vietnam-source income, either directly or by authorization;
- Business entities that qualify for conducting e-tax transactions will be required to conduct e-tax transactions for tax purposes. This includes tax authorities as well. Further details on e-tax transactions can be found in Circular 110/2015; and
- E-invoices will be mandatory for all enterprises from November 2020.
The new law will also affect non-resident businesses that sell goods and services into Vietnam via online platforms. Further details on e-invoices and e-commerce activities can be found in Decree 119/2018/ND-CP.
Investors are advised to follow our updates on any forthcoming circulars to help guide the implementation of the new tax administration law.
This article was first published in July 2019 and has been updated to include the latest developments.
