August 2018 Tax & Advisory Services Tax Update

Transcription

1 August 2018 Tax & Advisory Services Tax Update August 2018 Tax update Page 1

2 August 2018 Tax Update highlights the following key points: Guidance on indirect/offshore transfer of shares/capital. The Bill of Law on Tax Administration and notable amendments, supplements. August 2018 Tax update Page 2

3 Official Letter 2747/TCT-CS dated 12 July 2018 of the General Derpartment of Taxation providing guidance on indirect/offshore transfer of shares/capital. In principle, the tax authorities of Vietnam have sought to tax indirect/offshore transfer of shares/capital by foreign business organizations, however there has been a longstanding issue regarding the mechanism to tax such transactions. For example, it is unclear how to compute the income derived from the offshore transfer, and the taxing mechanism (e.g. who should be responsible to withhold and declare tax on the transfer). The General Department of Taxation ( GDT ) on 12 July 2018 issued Official Letter 2747/TCT- CS guiding Dong Nai Tax Department on the offshore transfer of shares/capital in Vietnamese enterprises. In this Official Letter, the GDT referred to Article 1, Point 1 of Decree 12/2015/ND- CP and reaffirmed that the offshore transfer of shares/capital in Vietnamese enterprises is subject to capital gain tax in Vietnam. The GDT has also provided some further clarifications regarding the computation and withholding mechanism. With respect to the computation mechanism, the GDT has provided that in principle the income derived from an offshore transfer of shares in a non-vietnam company holding shares/capital in Vietnamese enterprises is determined as the transfer price minus the purchase price of the shares/capital transferred and other related expenses. The GDT, however, fails to provide any detailed guidance on the determination of the transfer price and the cost base of an indirect investment in Vietnam. This can be particularly complex where the entity being sold holds a number of different subsidiaries, located in different locations, and not just the Vietnam company. In respect of the withholding mechanism, the onus of tax declaration and payment is put on the Vietnamese enterprises in which the capital/shares are being indirectly transferred. The GDT has instructed Dong Nai Tax Department to collect from the Vietnamese enterprises the relevant information, documents to determine the income derived from the offshore transfer of shares/capital, such as the information on determination of the transfer price and the cost of the investment in Vietnam; the shareholding structure of the group s companies prior to the transfer, the relationship between the transferor and its affiliates in Vietnam in terms of capital, business activities, assets, personnel, etc. Additionally, the GDT has suggested Dong Nai carries out a tax audit/inspection at the Vietnamese enterprise s office, and co-operates with other competent authorities if the Vietnamese enterprise fails to provide these requested information/documents to Dong Nai Tax Department. In practice, the Vietnamese enterprises may not be aware of the offshore transfer of shares/capital, and may not have obtained/maintained these requested information/documents. This guidance could therefore cause difficulties in compliance for the Vietnamese enterprises. August 2018 Tax update Page 3

4 The Bill of Law on Tax Administration, the first edition dated 27 July 2018 (Bill) providing regulations on administration of taxes and fees. The proposed changes primarily focus on enhancing the effectiveness, consistency and transparency of the tax administration. Notable changes include the following: Content and principle of the tax administration: Implement a number of new principles in the tax administration process, such as the application of the substance over form principle; the application of e-tax; the application of a risk-based approach. Duty, right, responsibility of organizations and individuals in the tax administration: Under the proposed new law, commercial banks will be responsible to declare and withhold tax on income derived from e-commerce business on behalf of enterprises/individuals carrying out and having income derived in Vietnam from that e-commerce business, and remit such withheld tax to the tax authorities. Tax registration, tax declaration, tax payment, and tax refund: The deadline for submission of the year-end personal income tax finalization return of individuals declaring tax directly with the tax authorities is extended by one month, from 90 days to 120 days. The Bill provides clear guidance on the tax refund application process, the tax authorities receipt and responses to the taxpayers tax refund application, and the levels of authority for making a decision on tax refund, inspection and audit after the refund. E-invoicing: It is proposed in the Bill that enterprises must use e-invoices/e-documents in its sales transactions. Tax inspections and audits: The Bill proposes to improve the effectiveness of tax inspections and audits by applying a risk-based approach and electronic methods in tax inspections and audits. Tax management for enterprises carrying out related party transactions: The Bill suggests legislating a number of principles regarding related-party transactions which have been regulated in Decree 20. According to the Bill, the amended Law on Tax Administration may take effect 1 January 2020 or 1 July August 2018 Tax update Page 4

5 Contact Please contact the below EY professionals from Ernst & Young Vietnam Limited for more information on this update or our Tax & Advisory Services: Ha Noi Office Huong Vu Trang Pham Nhung Nguyen Japanese Business Services Junichi Harada Executive Director Manager EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com Ernst & Young Vietnam Limited. All Rights Reserved. Korean Business Services Kyung Hoon Han kyung.hoon.han@vn.ey.com Ho Chi Minh Office Robert King robert.m.king@vn.ey.com Thinh Xuan Than thinh.xuan.than@vn.ey.com Phat Tan Nguyen phat.tan.nguyen@vn.ey.com Thy Anh Huynh thy.anh.huynh@vn.ey.com Anh Kim Ngo anh.kim.ngo@vn.ey.com Japanese Business Services Takahisa Onose takahisa.onose@vn.ey.com Korean Business Services Manager VN No ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice. ey.com Cheon Ju Lee cheon.ju.lee@vn.ey.com Director August 2018 Tax update Page 5