I. LAW ON TAX ADMINISTRATION 2019
Regulations on tax administration for e-commerce activities are stipulated for the first time
Law on Tax Administration No. 38/2019/QH14 (“Law on Tax Administration 2019”) passed by the National Assembly on 13 June 2019, replacing Law on Tax Administration 2006 and Law on amending and supplementing several articles of the Law on Tax Administration 2012 (“Law on Tax Administration 2006”), takes effect as of 01 July 2020.
Accordingly, in comparison to the Law on Tax Administration 2006, the rights of taxpayers have been assured and expanded, such as (i) receiving documents from competent authorities upon inspections, reviews and audits; (ii) being informed of tax refund schedule, non-refundable tax and legal basis for non-refundable tax; (iii) accessing, seeing and printing all electronic records that taxpayers have submitted to web portals of tax authorities; etc…
Regarding the deadline for submitting personal income tax declaration dossier (“PIT”), the Law on Tax Administration 2019 allows individuals to submit their PIT declaration dossier no later than the last day of the 4th month from the end of the calendar year (01 month longer in comparison to the Law on Tax Administration 2006), instead of the 90th day from the end of the calendar year or the fiscal year for the annual declaration dossier as compared to previous regulations.
Another notable point of the Law on Tax Administration 2019 is that tax agents are now permitted to provide accounting services for micro-businesses, in addition to the on-going tax agent services. This function is in alignment with the Law on Provision of Assistance for Small and Medium Enterprises, helping micro-enterprises reduce costs when they only need one agency to perform two functions: tax consulting and accounting, instead of engaging two separate agencies.
In addition, for e-commerce activities, digital-based business and other services provided by overseas providers not having a permanent establishment in Vietnam, the overseas providers are obliged to directly or authorize others to carry out tax registration, declaration and payment in Vietnam pursuant to regulations stipulated by the Minister of Finance. This serves only as orientation but plays an important role in tax administration for e-commerce activities. In the near future, guidelines on tax management of e-commerce activities shall be promulgated.
With regulations becoming modernized and harmonized with current practices and trends of economic development, the Law on Tax Administration 2019 has contributed to building a more comprehensive legal framework, thereby improving the efficiency of state management activities.
II. LAW ON ENTRY AND EXIT OF VIETNAMESE CITIZENS 2019
There are now two types of passport: with and without electronic chips
Law on Entry and Exit of Vietnamese Citizens No. 49/2019/QH14 (“Law on Entry and Exit”) has been passed by the National Assembly on 22 November 2019, which takes effect as of 01 July 2020.
Law on Entry and Exit, with practical reforms on administrative procedures, shall create more favorable conditions for the process of entry and exit of Vietnamese citizens. Specifically:
Law on Entry and Exit does not emphasize the issue of “submission of dossier” when applying for passports, and allows citizens to fill out forms or declare via the Internet in consideration of the citizens’ convenience. Citizens may now choose to apply for passports at any local Police where it is most convenient, instead of having to contact the local police at their place of permanent residence or long-term temporary residence. Citizens applying for passports from the second time onwards will also enjoy most favorable conditions. Accordingly, citizens are also allowed to choose the agency where procedures are carried out, either at the Immigration Management Department or the Local police, and have their results delivered to the requested address. To be in consistency with the Law on Citizen Identification, the Law on Entry and Exit of Vietnamese Citizens stipulates that there shall be two types of passport: with and without electronic chips, and such passports shall be issued at the request of citizens. The use of passports with electronic chips increases the authenticity of passports, prevents the risk of counterfeiting, and allows for quick and accurate immigration procedures at border gates due to application of electronic passport control by automatic control gate (autogate).
The new regulations also allow the issuance of travel permits for citizens abroad to return home by issuing short-term ordinary passports (not exceeding 12 months) under simplified procedures to display the protection of the State towards citizens in all cases, avoiding paperworks’ complications.
In addition, the Law on Entry and Exit has supplemented regulations on the restoration of validity of lost passports if the citizens so require, thereby facilitating convenience for citizens, especially in cases of passports having valid foreign visas.
Issuance of the Law on Entry and Exit is an important step in the state management of immigration, concretizing the provisions of the Constitution 2013 on freedom of movement and residence in the country, citizens’ right to travel abroad and return from overseas. The Law on Entry and Exit has introduced many new points, improvements and simplifications in comparison with current regulations.
III. RESOLUTION 116/2020/QH14
Reducing 30% of corporate income tax payable in 2020
Law Resolution No. 116/2020/QH14 on reduction of corporate income tax payable in 2020 for enterprises, cooperatives, non-business units and other organizations has been issued by the National Assembly on 19 June 2020, which takes effect from 03 August 2020 (“Resolution 116”).
Accordingly, Resolution 116 allows for reduction of 30% of corporate income tax (“CIT”) payable in 2020 for enterprises having total revenue of less than 200 billion VND in 2020, which carry out production and trade of goods, services with taxable incomes in accordance with Law on Corporate Income Tax (collectively referred to as enterprise), including:
- Enterprises, public service providers;
- Organizations established in accordance with the Law on Cooperatives;
- Other organizations established and earning income from business operations.
Resolution 116 is applied to the tax period of 2020, enterprises shall determine the amount of tax to be reduced when paying taxes quarterly and upon final settlement of CIT in 2020.
IV. DECREE 58/2020/ND-CP
Enterprises are allowed to apply a lower rate of social insurance contribution (0.3%) within 03 years
Decree No. 58/2020/ND-CP (“Decree 58“) promulgated by the Government on 27 May 2020 providing for compulsory social insurance contribution rates to the Insurance Fund for Occupational Accidents and Diseases, replaces Decree 44/2017/ND-CP, renounces Article 13.1.b of Decree No. 143/2018/ND-CP, and takes effect as of 15 July 2020.
Accordingly, the ordinary contribution rate of social insurance (SI) for employees to the occupational accident and disease insurance fund is 0.5% of the salary fund as a basis for contributing social insurance (applicable to employees and civil servants of the armed forces employed by the Socialist Party and State agencies, etc.). In case the enterprise meets the prescribed conditions, the enterprise may apply a lower contribution rate of 0.3% of the salary fund as a basis for social insurance contribution.
Enterprises are allowed to apply the lower rate of social insurance contribution (0.3%), if, in 03 consecutive years preceding the proposed year, the following requirements are satisfied:
- not being fined for administrative violations, not prosecuted for criminal liabilities relating to occupational safety and sanitation, social insurance; and
- carry out periodical, accurate and adequate reports on occupational accidents, occupational safety and sanitation, and with the frequency of occupational accidents reduced by 15% or more compared with the average of the 03 preceding years prior to the proposed year.
The 0.3% contribution rate will be applied for 36 months from the effective date of the decision on applying the contribution rate. If employers wish to continue to apply the compulsory social insurance contribution rate of 0.3%, they must prepare the proposal as prescribed and submit it 60 days prior to expiration.
V. DECREE 81/2020/ND-CP
Each issuance of corporate bonds must be at least 6 months apart
Decree No. 81/2020/ND-CP (“Decree 81“) of the Government dated 09 July 2020, amending and supplementing a number of articles of Decree No. 163/2018/ND-CP dated 04 December 2018 regarding issuance of corporate bonds (“Decree 163“), takes effect as of 01 September 2020.
Decree 81 is promulgated to amend and supplement a number of articles of Decree 163 on the private placement of corporate bonds (CB) in a stricter and more prudent manner, with the aim to help the market become more transparent and control its risks.
Firstly, narrowing the volume of a private placement of CB in accordance with the enterprise’s capital capacity. Accordingly, Decree 81 has supplemented provisions to require enterprises to meet the financial safety ratio and safety ratio in operations in accordance with specialized laws. In particular, the regulation on the volume of issued bonds of the issuer must ensure that outstanding balance of corporate bonds issued privately at the time of issuance does not exceed three times the capital of the issuer according to the latest quarterly financial statements.
Secondly, limiting cases where enterprises divide the private placement of CB into different groups and batches to increase mobilization from individual investors. Decree 81 has reduced the number of bond issuances of enterprises by requiring that each issuance must be at least 6 months apart. Although enterprises may divide the issuance into multiple instances, the new regulation also requires that each instance of issuance must be completed within 90 days from the date of publication.
Thirdly, clearly defining the purpose of using capital in the private bond issuance documents: Decree 81 has supplemented the regulation that enterprises must specify the purpose of bond issuance in the issuance documents. At the same time, having obtained various opinions from the market, the time to announce information before the issuance is shortened from at least 10 working days to at least 03 working days.
Fourthly, promoting the enterprises’ professionalism and supervisory capability for the issuance of private bonds. Decree 81 requires the issuer to execute a consulting agreement with a consultant agency regarding bond issuance dossier, unless the issuer is also an organization that is authorized to provide consultancy services on bond issuance.
In general, Decree 81 has adjusted the requirements for issuing corporate bonds in a stricter manner. The issuance of corporate bonds will have to comply with the requirements of information transparency. Enterprises will have to carefully consider the issuance plan in terms of both volume and time.
VI. DECREE 61/2020/ND-CP
Employees entering into labor contracts with a term of at least 01 full month will cease to enjoy unemployment allowances
Decree No. 61/2020/ND-CP (“Decree 61“) of the Government dated 29 May 2020, amending and supplementing a number of articles of Decree No. 28/2015/ND-CP dated 12 March 2015 of the Government elaborating the implementation of a number of articles of the Law on Employment regarding unemployment insurance (“Decree 28“), takes effect as of 15 July 2020.
Under the new regulations, when employers meet difficulties as prescribed in Article 47.1.b of the Law on Employment, which could lead to the risk of cutting the existing number of employees by 30%, or 30 employees or more for employers who employ less than 200 employees; 50 employees or more for employers who employs 200 to 1,000 employees; or from 100 employees or more for employers who employ more than 1,000 employees, employees will be supported with funding for training, retraining and improvement of vocational skills to maintain job security for workers.
Also in the guidance of Article 47 above, Decree 61 has supplemented a new force majeure event when employers have to relocate or reduce the business location pursuant to implementation of request from one or more competent state agencies.
An important and new feature of Decree 61 is the amendment and supplement of the regulation determination of employment status of an employee, as the basis for cessation of unemployment benefits, specifically as follows:
- Having entered into an employment contract, a seasonal or work-specific labor contract with the term of at least 01 full month (the previous regulation is 03 months, according to Decree 28);
- There is a decision on employment or appointment for those who are not subject to a labor contract or an employment contract (the previous regulation in Decree 28 does not provide for the case of appointment).
- Having a business household registration certificate in case the employee is the head of a business household or having an enterprise registration certificate in case the employee is an enterprise owner.
- The employee has informed the employment service center that the employee is employed.
Thus, it could be observed that, besides amending and supplementing cases where employees are considered to be employed for cessation of unemployment benefits, Decree 61 has also supplemented cases where unemployment benefits shall also be ceased if the employee is an owner of a business household or enterprise owner.
VII. CIRCULAR 65/2020/TT-BTC
Supplementing 05 cases of exemption from license tax
Circular No. 65/2020/TT-BTC (“Circular 65“) dated 09 July 2020 of the Ministry of Finance amending Circular No. 302/2016/TT-BTC dated 04 October 2016, providing guidelines on license tax, takes effect as of 23 August 2020.
Circular 65 supplemented 05 cases of exemption from license tax (LT), specifically:
First, cooperatives, cooperative unions (including their branches, representative offices and business locations) operating in the agricultural field in accordance with the laws on agricultural cooperatives, which also include cooperatives and cooperative unions engaged in multiple fields, including agricultural field.
Second, people’s credit funds; branches, representative offices and business locations of cooperatives, cooperative unions and of sole proprietorships operating in mountainous regions.
Third, exemption of LT for the first year from the date of establishment or official commencement of production, business (from 01 January to 31 December) shall be granted to: newly established organizations (issued with new tax code, enterprise code); households, individuals or groups of individuals that commence their production, business activities for the first time.
Fourth, small and medium enterprises converted from household businesses (having continuous production and business activities for at least 01 year) shall be exempted from LT within 03 years from the date of issuance of the first enterprise registration certificate.
Fifth, public general education establishments and public pre-schools.
It can be seen that Circular 65 has partially reduced the financial burden for small and medium organizations, engaging in investment and business activities for the first time. This is especially important, as the economic situation is not really positive and in the process of recovering.
VIII. CIRCULAR 18/2020-TT-BCT
Guidances on development of solar power projects and applicable templates of power purchase agreement
On 17 July 2020, the Ministry of Industry and Trade issued Circular No. 18/2020/TT-BCT (“Circular 18”) prescribing the development of solar power projects and templates of Power Purchase Agreement applicable for solar power projects, providing further guidance on several regulations of Decision No. 13/2020/QD-TTg of the Prime Minister on incentives for development of solar power in Vietnam, which takes effect as of 31 August 2020.
Circular 18 provides guidance on the determination of the commercial operation date (COD) for applying the new Feed-in-Tariffs (FIT2), whereby COD is only achieved when a project: (i) completes initial tests with respect to the whole or part of the construction, (ii) is licensed by competent authorities to operate in electricity generation, and (iii) the power seller and the power purchaser have reached a mutual agreement on power-meters index for commencement of payment.
The template of power purchase agreement applicable to grid-connected solar power projects attached to Circular 18 also supplements several notable contents in comparison to the previous one, including elaborate regulations on inspection to ensure the accuracy of the metering system, prescribing solution for dealing with metering system in case of defects, and narrowing down the deadline for the electricity seller to officially confirm the modification of the COD from 01 to 03 months (former regulation is 06 to 12 months) prior to the intended COD.
In addition, Circular 18 has also provided for several contents to encourage the development of rooftop solar power systems, such as officially recognizing the exemption of the license on electricity operation for the power seller.
In general, Circular 18 has provided detailed guidelines to encourage the development of solar power projects in accordance with the Prime Minister’s direction towards green and sustainable energy generation, recognizing the commercialization of rooftop solar power projects for the purpose of attracting investment. However, these new regulations have not yet met the expectations of investors in the competitive electricity market, whereby it fails to furnish criteria to distinguish between grid-connected solar power projects and rooftop solar power projects for application of FIT2 scheme, as well as retains the capacity limit of the rooftop solar power system at just 01MW.
