On 12 June, the National Assembly passed the Law on the support of small and medium-sized enterprises (SMEs). The measure will help to improve the quality of growth and change the nation’s economic growth model.
Under the new law, SMEs include micro-enterprises and small- and medium-sized enterprises whose average number of employees with social insurance is less than 200 in the year. These companies must also meet one of the following two criteria:
- Total investment capital of a maximum of US $ 10 billion (US $ 4.4 million) and a total annual turnover of US $ 100 billion; or
- Companies must be operating in the fields of agriculture, forestry, fisheries, industry, construction, trade and services.
SMEs that meet these requirements can be eligible for various incentives, such as assistance with credit access, support for tax and accounting or support for the acquisition of production areas, among others. In addition, the new measures provide for specific support measures for innovative start-up companies and SMEs involved in industrial interconnection clusters and value chains in the area of production and processing.
The law will take effect from January 1, 2018.
The Vietnam E-Commerce and Information Technology Agency (“VECITA”) published a notice on 20 April 2017 on its web page aiming to promote the authentication of information on counterfeit, prohibited or restricted infringing goods on e-commerce websites.
Within the framework of the notice VECITA requests following procedures:
-Assessment, review and elimination of posting of infringing goods on e-commerce platforms;
-Procedures to prevent the posting and removal of information about infringing goods from e-commerce platforms (like blocking by keywords such as “falsification”, “super fake”, etc.); and
-Implementing procedures to handle requests and reports from brand owners or from regulatory authorities on posts on websites concerning infringing products or other illegal business practices.
The notice also provides that non-compliance with the requests for information from dealers and organizations having e-commerce platforms will result in penalties ranging from VND 40 million to VND 80 million in accordance with Article 83 of Decree 124/2015/ND-CP which regulating penalties for administrative violations in commercial activities, production and trading in counterfeit and banned goods, and protection of consumer rights.
On March 30 2017, the Ministry of Industry and Trade officially decided to levy anti-dumping duties on imported coated steel from mainland China including Hong Kong and the Republic of Korea.
Therefore, Bazhou Sanqiang Metal Products will be taxed 26.36%, BX Steel POSCO Cold Rolled Sheet 38.34 %, Bengang Steel Plates-27.36%, Tianjin Haigang Steel Coil – 26.32%, Hebei Iron & Steel Co Ltd, Tangshan Branch – 38.34%, Wuhan Iron and Steel – 33.49%.
However, Chinese Yeih Phui Technomaterial was taxed at the lowest rate of 3.17%. South Korean POSCO of the RoK will be charged 7.02% anti-dumping tax while other RoK exporters will be taxed 19%.
The decision takes effect after 15 days after the signing and will be in place for five years.
Recently, Vietnam’s tax authorities updates and published following guidance in the “official letters” regarding the corporate tax incentives schemes:
–No CIT incentive tax rate applicable for investment projects located in industrial parks:
According to official Letter, No. 292/TCT-DNL dated 23 January 2017 by the General Department of Taxation (“GDT”), investment projects located in industrial parks are not entitled to CIT incentive schemes applicable to those located in locations under difficult socio-economic circumstances, following the provisions of current CIT regulations. As such, the investment projects located in the industrial parks are only allowed to enjoy CIT exemption and CIT reduction in accordance with tax incentive policy to projects located in industrial parks. No incentive CIT tax rate is applicable.
–A company generating income from agricultural and fishery processing is not entitled to multi-CIT incentive schemes simultaneously:
Under the official Letter No. 3091/BTC- TCT dated 8 March 2017 of the Ministry of Finance (“MoF”), where a company qualifies for CIT incentives for both having income from agricultural and fishery processing activities, and other incentives at the same time, the company is allowed to choose the most optimal incentive scheme following one incentive condition. This guidance supersedes previous guidance as stipulated under Clause 2(i) of Official Letter No. 5181/TCT-CS dated 15 April 2016.
Vietnam’s Government has recently released a Transfer Pricing (“TP”) Decree No. 20/2017/ND-CP on 24 February 2017, provided that tax administration applicable to enterprises having controlled transactions’ (Decree 20), which will take effect from May 1, 2017.The new Decree 20 replaces the existing TP regulations (Circular No.66/2010/TT-BTC) and provides following new compliance requirements in Vietnam:
i) Decree 20 introduces a three-tiered TP documentation approach to collect more tax-related information on multinational companies’ (MNC) business operations.
ii) The new decree follows the approach set out in the BEPS Action Plan 13 (Guidance on TP Documentation and Country-by-Country Reporting). Specifically, a taxpayer is required to prepare and maintain three-tiered TP documentation, including a master file, local files, and Country-by-Country Reporting. Accordingly, A Vietnamese ultimate parent company with worldwide consolidated revenue in a fiscal year exceeding VND 18,000 billion must prepare a master file, a local file and a country-by-country report. Other Vietnamese companies must prepare such documents if their ultimate parent companies are required to prepare the three-tiered TP documentation in their home tax jurisdiction.
iii) Under the new decree, two entities are related if a party owns at least 25% (previously, 20%) of the equity of the other party. If related-party services are rendered, the related parties must ensure, inter alia, that the services rendered are beneficial to the recipient and that such services are not duplicative in nature.
iv) Decree 20 extends its scope beyond TP to also provide guidance on the deductibility of intercompany charges. Interest on total loans is capped at 20% of earnings before interest, taxes, depreciation and amortization.
v) For intercompany services, various criteria for tax deductibility are set out, notably, a taxpayer needs to demonstrate that the services provide economic benefit and provide evidence (supporting documents) on the reasonableness of the service charge calculation method. A tax deduction is disallowed for expenses in which the direct benefit or additional value to the taxpayer cannot be determined, such as duplicated services, shareholder costs, etc.
On 14 February 2017, the Double Taxation Agreement (DTA) between Panama and Vietnam was entered into force for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income. The treaty generally applies from 1 January 2018.
Recently, Vietnam ratified the UN agreement on contracts for the international sale of goods (CISG), which took effect on 1 January 2017. With this ratification expanding and complementing Vietnam’s existing domestic legal framework for the sale of goods between Vietnamese and foreign entities.
The contract agreement supports the commercial activities of traders in Vietnam with respect to their customers and counterparts located abroad, by providing a universally understood and applied legal framework. Before this agreement, the international sale of goods in Vietnam came under the purview of national trade laws, international best practices, and multilateral or bilateral trade agreements or treaties. Following ratification, the contracts for the international sale of goods will reflect specific information that uniformly is to be included in a goods sale and purchase contract. The agreement also specifies rules concerning the time frame in which to make a claim and remedies in the event of a breach of contract.