HOT TOPICS AND NEW REGULATIONS - VIETNAM

May 2017

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Lazada top issues

Hot tax topics.

Work permit.
Vietnam Labor Code requires workers being foreign citizens
must have a work permit issued by the competent Vietnamese
authority and therefore, foreign citizens working in Vietnam
without a work permit shall be deported from the territory of
Vietnam in accordance with Government regulations,
meanwhile employers employing foreign citizens without work
permits to work for them shall be dealt with in accordance
with law.
CIT regulations shall rely on such labor requirements to allow
related employment cost would be deductible or not.

Sellers subsidies
Our subsidies for sellers are seen as business supports and
must have tax invoices.
However, not 100% sellers to issue tax invoice for such
Lazada top issues

Hot tax topics.

MP sellers tax evasion
Not 100% market place sellers to issue tax invoice to
customer whereas 100% transactions must be have a tax
invoice as required by laws.
Although Lazada shall not directly involve in the invoicing
process of sellers (where market place agreements already
indicated that sellers must comply with invoice regulations),
the tax authorities shall always come to us first. Our relevant
involvement cant be denied and accepted in case.

Regional billing/reimbursement
Fundamental needs of deductible expenses consist of the
business relevance and legitimate supporting documents
available.
There have no or very little evidence, well-prepared
documents for regional billing/reimbursement to be available.
Lazada top issues

Hot tax topics.

Write-off the debts
Per prevailing regulations and practices, writtenoff debts
and loans shall result in a taxable income accordingly.
We noted that the loss carryforward of 2012 shall be expired
this year and loss amounts of 2013 and 2014 has very little
chance to be offset with incoming profits.
Once our loans to be written-off and the loss carry forward of
the respective years are no longer exist, we have no loss to
offset with taxable income arising from written-off loans, were
losing money at such circumstances.
We have to be well-prepared for such case where
capitalization the loans would be a plan. Converting the loans
into investment capital to avoid the loss or continue to write-
off the loans to be considered.
Vietnam latest tax developments

New regulations
No VAT refund
With the exception of input VAT on exported goods and
service, investment projects and in other cases, a business
unit declaring tax according to the VAT credit method is not
entitled to a VAT refund. Previously, a VAT refund was
available for the input VAT not fully credited and accumulated
for 12 months or 4 quarters.
Vietnam latest tax developments

New regulations
Business license tax 2017
From 2017, License Tax shall be regulated under Law on Fees
and Charges 2015 and change its name to License Fee, with
changes in fee levels.
License Fee shall be also applied for the Representative Office
of the enterprises or organizations which are established and
operate under Vietnamese regulations.
Vietnam latest tax developments

New regulations
New transfer pricing decree released
Decree No. 20/2017/ND-CP (applicable from 1 May 2017)
New reporting and documentation requirements: It is a
lot more precise and stricter in comparison to the previous
regulations.
o Contemporaneous transfer pricing documentation revisited.
The transfer pricing documentation package includes:
o a Master File containing standardized information relevant for all
Multinational Enterprises (MNE) group members;
o a Local File referring specifically to related party transactions of the
local taxpayer; and
o a Country-by-Country Report containing certain information relating to
the MNEs income and taxes paid together with certain indicators of the
location of economic activity within the MNE group.
o For taxpayers having overseas ultimate parent company,
such taxpayers are required to submit a copy of their
ultimate parent companys CbC Report where is their
ultimate parent companys obligation to submit such CbC
Vietnam latest tax developments

New regulations
New transfer pricing decree released
New principles and rules:
o Revised related party relationship definitions:
o Eliminating 50% input/output basic;
o Increasing the threshold of some types relationship from 20% to 25%;
o Adding new types of relationship to be subject.
o Additional and new guidance for tax deduction of related
party transactions which are not in line with nature of
independent transactions, inter group services fees and
inter-company loan interest expenses
o In the absence of proper documentation, these transactions may be
considered as harmful tax practices by the local tax authorities in
Vietnam.
Vietnam latest tax developments

New regulations
New transfer pricing decree released
New principles and rules:
o The hierarchy of comparables used for benchmarking
purposes
o internal comparables of the taxpayers;
o comparables located in the same country, territory of the taxpayers;
and
o comparables located in the region which have similar industry condition
and economic development level.
o Clearer bases for the tax authorities to make transfer
pricing assessment
o The tax authorities will have clearer bases for imposing price; profit
margin; profit split ratio or imposing taxable income or tax amount
Vietnam latest tax developments

New regulations
New income tax incentives scheme (drafted only)

Taxpayers have total revenue to be less than or equal to

VND20 bil. enjoy reduced tax rate of 17% (common rate is
20%) for the period of 2017-2020.

Promoting start-ups with 17% income tax rate for the same
period

IT labour forces encouraging

Hi-tech staff working in the IT industry have their PIT reduced

by 50%. However, no guidance available.
 THANK YOU!

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