Circular 80/2021/TT-BTC guiding implementation of a number of articles of the law on tax administration and Decree No. 126/2020/ND-CP

From the effective date of Circular 80, many circulars guiding on tax administration will expire. These include Circular 156/2013/TT-BTC guiding the Law on Tax Administration, and Decree 83/2013/ND-CP; Circular No. 99/2016/TT-BTC guiding the management of VAT refund, etc.

In this Newsletter, Crowe Vietnam would like to highlights some notable points of Circular 80 as follow.

1. Guidance on the allocation of tax payable for taxpayers who have the dependent units and business locations at different provinces:

Value Added Tax (“VAT”):

• Remove the regulation on VAT declaration for out-of-province sales to local tax authorities.
• For real estate transfer and construction activities: the allocated VAT is 1% of the revenue generated in that province reducing from the 2% previously required;
• For dependent units, the business locations which are production facilities, the allocation method remains unchanged compared to the old regulations, their allocation rate is still 1% applied for products subject to VAT rate 5 % and 2% for products subject to 10% tax. In case the production facility transfers finished or semi-finished products to other internal units for sale, the turnover of the manufactured products shall be determined on the basis of the production costs of the products.
• If the tax amount to be distributed in the provinces is larger than the total tax payable at the head office, the allocation shall be made according to the ratio of revenue (exclusive VAT) of products produced in each province to total revenue (exclusive VAT) of taxpayer’s manufactured products.

Corporate Income Tax (“CIT”):

• Allocating according to the ratio of actual incurred expenses in the period. In case production facilities are subject to CIT incentives, they shall declare tax separately as per the instruction under Decree 126;
• For real estate transfer: the allocated tax is equal to revenue multiplied by 1%. There is no longer a case of calculation using revenue minus expenses as previously prescribed.
• If the tax amount temporarily paid quarterly is larger than the tax payable according to the tax finalization, it shall be determined as the overpaid tax amount and handled as per regulations.

Personal Income Tax (“PIT”):

• Incomes from salaries and wages: Allocating according to the actual tax withheld of each individual working in each province. In case the employee is transferred, rotated, seconded, then at the time of income being paid, the incurred PIT shall be allocated for the province in which the employees work at. The paid PIT amount for each province is not re-determined at the time of finalization.

2. Tax refund:

• In comparison with the old regulation, Circular 80 requires more supporting documents in the tax refund dossier as well as supplement detail guidance for handling some specific event arising after tax refund. Details of tax refund dossiers are specified in Articles 28, 29, 30 and 31 of Circular 80.
• The remaining tax refunded at the head office will be offset against the outstanding tax liability of the dependent unit and vice versa.
• During the process of checking tax refund dossiers for the case of checking before refund, if the tax authority determines that certain tax amount is eligible for refund, this amount will be refunded to the taxpayer, no need to wait for verification of the remaining amount; for the remaining amount that needs to be checked, verified or requested by the taxpayer to explain and supplement the dossier, the tax authority shall process tax refund when fully satisfying the prescribed conditions.

3. Tax exemption and reduction under the Double Tax Agreement (“DTA”) and other international treaties:

• Circular 80 supplements the provision that the tax authority will have to issue a notice on whether the taxpayer is or is not eligible for tax exemption or reduction under a DTA or other international treaty. The deadline for issuing a notice is 30 days or 40 days (in case there is the need of carrying out tax audit) from the date of receipt of complete dossiers.

4. Tax inspection

• Annual inspection plans and topics (including post-adjusted plans and topics) must be publicized on the tax authority's website or notified to taxpayers and tax authorities directly managing them (in writing or by phone or email) within 30 working days from the date of issuance of the decision approving or adjusting the inspection plan.
• The draft tax inspection minute must be publicly announced before the inspection team and taxpayers for comments and explanations. If taxpayers have comments or explanations, they must do so within 5 working days from the date of completion of the inspection. After that, if the taxpayer still has opinions, it shall be recorded in the minutes or kept together with the minutes signed by the leader of the inspection team and the taxpayer.
• Supplement regulations on supervision of tax inspection team activities at the taxpayer's office.
• If the taxpayer meets the conditions required for information technology applications, it is not necessary to conduct the inspection at the taxpayer's office.

5. Tax administration for e-commerce, digital-based business activities and other services where overseas suppliers do not have permanent establishments in Vietnam:

• Circular 80 has provided detailed guidelines for electronic tax account registration; tax declaration and tax calculation for the income of foreign suppliers; authorization for carry out tax procedure in Vietnam.
• In case the overseas supplier fails to declare and pay tax in accordance with this regulation, the buyer who is an organization established and operating under Vietnamese law, the organization registered to operate under Vietnamese law is responsible for declaring, withholding and paying tax on behalf of overseas suppliers according to Foreign Contractor Tax regulations. If the purchaser is an individual, the commercial bank or payment intermediary service company shall be responsible for deducting and paying tax.
• The tax registration, declaration and payment for overseas suppliers specified in this Circular shall be effective when General Department of Taxation successfully implements the electronic tax system;
• Commercial banks and payment intermediary service company will declare, withhold, pay tax on behalf or track the transferred money to overseas suppliers when receiving notice from General Department of Taxation.