Tax Alert: Vietnam Amends Laws on Tax Administration, Special Consumption Tax, and VAT

By: Dezan Shira & Associates

On April 6^th, Vietnam’s National Assembly approved amendments to a number of tax policies relevant to those with operations throughout the country. Changes cover a wide variety of tax policies and should be followed closely to ensure compliance.

Specific policies that have seen amendment include Value Added Taxation (VAT), Special Consumption Tax (SCT), and Tax Administration. The general package of amendments is slated to become effective July 1^st, while the rollout of specific instruments will be carried out over the course of the year.

Tax Administration

For those failing to pay taxes by the dates specified within Vietnamese legislation, amendments are set to provide some relief from late payment penalties. Changes currently show interest on late payments falling to just 0.03 percent a day or around 11 percent a year.

For those with outstanding obligations to Vietnamese Authorities incurred prior to July 1^st 2016, interest is to be calculated using the aforementioned rate going forward. It should be noted, however, that the rate will not be retroactively applied to the original principal.

RELATED: Dezan Shira & Associates’ International Tax Planning Services

Special Consumption Tax

Adjustments to Special Consumption Tax (SCT) will see three major adjustments under recent amendments. The first of these changes concerns the importation of vehicles with less than 24 seats. The amendments specify several adjustments to capacity specific rates at which cars currently are taxed. Despite changes, rates applied continue to vary significantly based on the quantity of seats within a given vehicle.

The secondary area of Special Consumption Taxation to see change is that of transfer pricing for manufacturing operations. Under new amendments, floors on the taxable price of goods sold will be imposed as a means of regulating intra-company transfer pricing. The determination of exact prices will be based on a percentage of the average selling price of company’s good to all parties and will be applied to sales between entities enjoying the following relationships:

• Companies that share the same parent company
• Parent companies and their subsidiaries
• Companies enjoying a related party relationship with another company (i.e. a major shareholder in company A selling to company A)

A final area of SCT that will see change as a result of amendments is the points at which SCT is levied on goods being brought into Vietnam. From July 1^st, companies will be liable for SCT both at the time of import and sale. However, to prevent an excessive tax burden, import SCT will be creditable against SCT incurred at the point of sale.

Value Added Tax

Exemptions Expanded

Exemptions from Value Added Taxation in Vietnam have been expanded under recent changes to include the following:

• Exports with a combined natural resource and energy cost exceeding 51 percent of the good’s value will be exempted from VAT
• Care services related to the elderly or those with disabilities will be exempted from VAT


In addition to the exemptions listed above, sales of select semi-processed or un-processed cultivation or aquaculture related goods are not subject to output VAT 


Refunds Restricted

While exemptions have seen limited expansion, the ability of companies to apply for VAT refunds has been simultaneously  restricted. For those operating and exporting from Vietnam, the following changes should be noted:

• For those investing in the manufacturing sector after July 1^st, projects with combined natural resource and energy costs exceeding 51 percent of their good’s total costs will not be eligible for input VAT refunds.
• Investment projects where capital has not been fully contributed will be ineligible for VAT refunds.
• Investment projects involved in restricted sectors that are incompliant with up to date regulation will be ineligible for VAT refunds.
• Companies which have accumulated in excess of 12 months’ worth of VAT to be refunded will be prevented from doing so. Instead, this amount must be carried forward.
• For those involved in the export sector, VAT refunds accessible via the “VAT refund first, tax audit later” program will be limited to entities which have maintained a clean track record with customs and tax authorities for two years and are not deemed at tax risk by regulators.

Optimizing your Tax experience in Vietnam

Taxation in Vietnam is likely to see continued change in coming years as Vietnamese officials attempt to attract investment and promote sustainable growth within their economy. Those able to adapt and thrive within these conditions will be perfectly positioned to take advantage of Vietnam’s competitive labor rates and emerging network of international trading agreements. With a team of seasoned tax professionals bringing decades of experience in Vietnam and Asia at large to their work, Dezan Shira & Associates is perfectly positioned to assist companies in their quest to navigate Vietnam’s tax landscape. For more information on how your business may benefit from the amendments mentioned above, please get in contact with our tax professionals at vietnam@dezshira.com  or visit us online at www.dezshira.com

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