Highlighting recent tax and customs developments in Vietnam
Tax Policy on Transfer of Mortgaged Real Estate
A local tax authority has issued new guidance regarding the tax implications of transferring mortgaged assets (Ruling No. 1641/CTDTH-TTHT, dated September 30, 2024). Enterprises that transfer assets to banks as collateral for loans are not required to issue Value Added Tax (“VAT“) invoices for these transfers. However, if the enterprise gains from the assets sold by the banks to recover debts, it is obligated to declare Corporate Income Tax (“CIT“) on those gains. While banks are responsible for selling the transferred assets, they must issue VAT invoices for the sale and declare VAT and CIT on any profits. Importantly, the guidance indicates that the tax base for calculating CIT for the enterprise differs from that of banks.
Tax Implications on Transfer of Real Estate
On October 4, 2024, a local tax authority released guidance concerning the tax implications of real estate transfers (Ruling No. 54481/CTHN-TTHT). Transfers of real estate are subject to a VAT of 10%, calculated at a price that excludes the value of the land. The land value is defined according to Item 1, Article 1 of Decree 49/2022/ND-CP dated 29 July 2022 amending Decree 209/2013/ND-CP dated 18 December 2013, which elaborates and guides the implementation of certain articles of VAT law. Additionally, gains from real estate transfers are subject to CIT at a rate of 20%. Taxable revenue and deductible expenses related to these transfers are determined per Article 17 of Circular 78/2014/TT-BTC dated 18 June 2014 guiding the implementation of Decree 218/2013/ND-CP dated 26 December 2013, which elaborates and guides the implementation of CIT Law.
Tax-Deductible Expenses for Employment Benefits
The General Department of Taxation (“GDT“) has provided guidance on tax policies regarding employment benefits (Ruling No. 4388/TCT-CS, dated October 1, 2024). This guidance references an earlier response from GDT to a local tax authority in 2015 (Ruling No. 5452/TCT-CS). In the ruling, GDT clarifies that employment benefits include subsidies for school tuition for Vietnamese employees’ children. Enterprises can deduct these subsidies from their annual CIT liabilities, provided the subsidies are documented in the enterprise’s policy and backed by proper invoices or payment vouchers. However, local tax authorities often scrutinise tax-deductible expenses that are not clearly defined in tax laws and may deny these deductions during tax audits.
If you have any queries on the above, please feel free to contact Nguyen Hung Du, Partner, Tax at du.nguyen@rajahtann.com or any of our team members below.
Disclaimer
Rajah & Tann Asia is a network of member firms with local legal practices in Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. Our Asian network also includes our regional office in China as well as regional desks focused on Brunei, Japan and South Asia. Member firms are independently constituted and regulated in accordance with relevant local requirements.
The contents of this publication are owned by Rajah & Tann Asia together with each of its member firms and are subject to all relevant protection (including but not limited to copyright protection) under the laws of each of the countries where the member firm operates and, through international treaties, other countries. No part of this publication may be reproduced, licensed, sold, published, transmitted, modified, adapted, publicly displayed, broadcast (including storage in any medium by electronic means whether or not transiently for any purpose save as permitted herein) without the prior written permission of Rajah & Tann Asia or its respective member firms.
Please note also that whilst the information in this publication is correct to the best of our knowledge and belief at the time of writing, it is only intended to provide a general guide to the subject matter and should not be treated as legal advice or a substitute for specific professional advice for any particular course of action as such information may not suit your specific business and operational requirements. You should seek legal advice for your specific situation. In addition, the information in this publication does not create any relationship, whether legally binding or otherwise. Rajah & Tann Asia and its member firms do not accept, and fully disclaim, responsibility for any loss or damage which may result from accessing or relying on the information in this publication.
