Reform of Tax Sector Highly Appreciated

The General Department of Taxation (GDT) recently convened a dialogue conference in collaboration with the Vietnam Business Forum (VBF). The gathering was designed to facilitate an exchange of ideas and provide responses to proposals and recommendations within the realm of taxation.

The dialogue conference between the General Department of Taxation (GDT) and the Vietnam Business Forum (VBF)

Actively supporting businesses

Presiding over the conference, Deputy General Director of GDT Dang Ngoc Minh highlighted the rapid, complex, and unpredictable changes in the global landscape. These changes have significantly impacted the operational and business scenarios of enterprises. In line with its commitment to consistently support businesses and individuals, GDT annually processes hundreds of documents from nationwide businesses pertaining to emerging issues.

After each dialogue conference with the VBF, GDT instructed its affiliated and subordinate units to review and consolidate issues related to tax policies and administrative procedures, providing specific responses to businesses.

Furthermore, to mitigate the adverse effects of the international economic and political situation on the nation’s socio-economic development and business activities, GDT has promptly conducted research, proposed to competent authorities, and issued documents on tax, fee, and charge solutions to support individuals and businesses. These measures have been of significant value and include many unprecedented solutions. Thanks to the resilience of the business community and entrepreneurs in overcoming challenges, and the effective implementation of support solutions by management agencies, state budget revenue has seen positive outcomes. Notably, in 2023, the budget revenue managed by tax authorities exceeded VND1,500,000 trillion. By the end of the first quarter of 2024, the total budget revenue managed by tax authorities is estimated to reach VND490,196 billion, equating to 33% of the yearly estimate, a rise of 10.9% over the same period in 2023.

Promptly addressing problems

In addressing emerging issues, the attendees lauded Vietnam’s efforts to refine its legal framework and implement tax reforms. Despite these advancements, businesses, given their diverse and robust operational activities, continue to face practical challenges.

Ms. Huong Vu, Head of the VBF Tax and Customs Working Group, elaborated on a specific issue related to the corporate income tax law. She noted that one of the prerequisites for a large-scale investment project (worth VND12,000 billion) to qualify for corporate income tax incentives is the utilization of technology, as appraised under the Law on High Technology and the Law on Science and Technology. While Vietnamese enterprises have fulfilled the requirements concerning capital, revenue, products, and market, the criterion of high-technology usage requires consultation with the Ministry of Science and Technology.

In response to this matter, a representative from GDT revealed that in 2023, the Ministry of Finance issued Official Dispatch 6544/BTC-TCT to the People’s Committee of Hai Phong City and LG Display Vietnam Hai Phong Co., Ltd. The dispatch explicitly stated that the company should consult with the Ministry of Science and Technology for the appraisal of its production technology, as stipulated by the Law on Technology and the Law on Science and Technology.

The Ministry of Science and Technology issued Official Dispatch 4247/KHCN-DTG on November 17, 2023, to LG Display Vietnam Hai Phong Co., Ltd. The dispatch indicated that there was insufficient evidence to confirm that the company was not subject to technology appraisal as per the Law on High Technology or the Law on Science and Technology. To resolve this issue, businesses are advised to continue liaising with specialized ministries. If an enterprise fulfills the requirements of the Corporate Income Tax Law, the Ministry of Finance will promptly authorize the enterprise to enjoy the relevant incentives.

Addressing the query related to corporate income tax incentives for income derived from the transfer of fixed assets in investment incentive areas, a representative from GDT referenced specific provisions in Article 7, Clause 5, and Article 18 of Circular 78/2014/TT-BTC dated June 18, 2014. These guidelines issued by the Ministry of Finance clarify that if an enterprise’s investment project qualifies for corporate income tax incentives due to its preferential location, the income eligible for such incentives is the income generated from the project’s production and business activities in the preferential areas. This excludes income not eligible for incentives as per the Law on Corporate Income Tax. Income not originating from preferential areas or not included in the income from production and business activities of investment projects does not qualify for corporate income tax incentives.

In response to the proposal to supplement the Guidance Regulations on referencing bilateral Advance Pricing Agreements (APAs) signed by companies within the same taxpayer group with other foreign tax authorities performing similar functions as the taxpayer in Vietnam, a representative from the Department of Tax Administration of Large Enterprises said that current Vietnamese regulations (Tax Administration Law) already incorporate this mechanism to expedite the processing of taxpayers’ dossiers. The resolution of taxpayers’ APA dossiers necessitates the involvement of multiple relevant agencies, ministries, and branches, particularly for bilateral/multilateral dossiers involving foreign tax authorities. The processing of these documents is contingent on several factors, including the level of businesses’ compliance with legal regulations and the economic context’s fluctuations that significantly impact the production and business activities of the enterprises submitting APAs and the outcomes of implementing multilateral agreements (the results of the Action Plan on Base Erosion and Profit Shifting), especially the additional tax policy under Pillar II. Furthermore, numerous businesses have submitted APA documents to the Vietnamese tax authorities using a database of information and data provided by themselves, which have not been verified or confirmed by any organization, thereby not aligning with current legal regulations (Clause 6, Article 42 of the Law on Tax Administration 38/2019/QH14). Consequently, to expedite the resolution of bilateral and multilateral APA dossiers as recommended, businesses and associations are urged to proactively collaborate with Vietnamese tax authorities, ministries, and agencies to advise and report to competent authorities for resolution following the order and procedures for implementing international treaties prescribed in the Law on Tax Administration.

In relation to the tax treatment of invoices for businesses that vacated their registered business addresses, GDT issued Official Dispatch 1180/TCT-CS on March 25, 2024. This dispatch, addressed to the Japanese Business Association in Ho Chi Minh City, clearly explains the legal bases for businesses to adhere to.

Concerning the businesses’ suggestions on the declaration of missed input invoices, the Ministry of Finance acknowledged these recommendations and incorporated amendments and supplements into the draft of the revised Value Added Tax (VAT) Law. With respect to the issuance of electronic invoices for exported goods, the GDT will document and report to the competent authorities when amending and supplementing Decree 123/2020/ND-CP on invoices and documents. GDT also recognized VBF’s feedback on the criteria for determining expansion investment projects and investment phasing, and will consolidate and report these to the Ministry of Finance during the revision of the Corporate Income Tax Law and its guiding documents.

At the conference, Mr. Hong Sun, Chairman of the Korean Chamber of Commerce and Industry in Vietnam (KoCham), commended the cooperative spirit of the GDT in addressing all 19 questions proposed by the VBF. In this spirit, the VBF will regularly compile practical issues that arise and organize dialogues to optimize the convenience for enterprises’ production and business activities, contribute to a fair business environment, and position Vietnam as an attractive destination for investors.

In 2024, it is anticipated that the Ministry of Finance will present three significant bills to the National Assembly: the amended VAT Law, the amended Special Consumption Tax Law, and the amended Corporate Income Tax Law. Concurrently, a decree is being formulated to detail Resolution 107/2023/QH15 on the application of additional corporate income tax in accordance with regulations on preventing global tax base erosion.

By Le Hien, Vietnam Business Forum