The Decree No. 68/2020/ND-CP about amending, supplementing Clause 3 Article 8 of Decree No. 20/2017/ND-CP about tax administration for enterprises engaged in the related-party transaction has taken effect since June 24th, 2020.

1. Increasing the ceiling of loan interest cost from 20% to 30%

The Decree No. 20/2017/ND-CP prescribed that taxpayer’s total loan interest cost arising within a specified tax period qualified as a deduction from income subject to corporate income tax shall not exceed 20% of total net profit generated from business activities plus loan interest costs and amortization costs arising within that period. The Decree No. 68/2020/ND-CP stipulates that total loan interest cost (excluding deposit interests and lending interests) arising within a specific tax period qualified as a deduction from income subject to corporate income tax shall not exceed 30% of total net profit generated from business activities plus loan interest costs (excluding deposit interests and lending interests) and amortization costs arising within that period. Therefore, the deductible interest expense shall not exceed 30% net profit, increasing 10% compared to the old provision.

The comparison of the deductible total loan interest cost in Decree No. 20/2017/ND-CP and Decree No. 68/2020/ND-CP

	Decree No. 20/2017/ND-CP	Decree No. 68/2020/ND-CP
Subjects of application	Gross loan interest expense	Net loan interest expense = Total interest expense - Interest of bank deposit - loan interest
The condition for total loan interest cost is deducted	The enterprise’s taxable incomes ≤ 20% EBITDA	The enterprise’s taxable incomes ≤ 30% EBITDA
	EBITDA = Total net profit generated from business activities + Net loan interest expense + Amortization + Drepreciation expense
The provision shall not apply to loans of taxpayers	They are subjects of application of the Law on Credit Institutions and the Law on Insurance Business.	They are credit institutions as defined in the Law on Credit Institutions or insurance firms as defined in Law on Insurance Business, loans on-lent by the Government from ODA loans and concessional loans, loans grated for implementing national target programs (including new-style rural area development program and sustainable poverty reduction program), and loans granted for investment in programs/projects for implementation of State social welfare policies (projects on construction of houses for relocation, housing for workers or students, and other public utility projects).

2. Effect and retroactivity

According to Decree No. 68/2020/ND-CP, taxpayers provide supplementary corporate income tax dossiers in 2017, 2018 to determine the loan interest cost, the correspondingly payable corporate income tax amount. Taxpayers must submit them to the supervisory tax authority before January 1st, 2021. After completing the additional declaration, if the total amount of CIT payable is reduced, a corresponding amount of late payment interests shall be also reduced.

If the amount of corporate income tax and late payment interest paid to the state budget is larger than the amount of corporate income tax and late payment interest re-determine, the difference shall be offset against corporate income tax in 2020. If corporate income tax in 2020 does not enough to offset against the total of inequality money, its rest will be offset against the corporate income tax in the next years but must not exceed 05 years since 2020. When ending that phase, the authority shall not refund it to the enterprise.

If the tax authority or the competent authority conducted inspection and investigation, giving tax the inspection conclusion, the tax decision according to provisions of the Law on tax administration, taxpayers will request that the supervisory tax authorities re-determine payable tax. Following the request of taxpayers and related dossiers and documents, the tax authority re-determines the payable tax, late payment interest to offset against the difference between them.

The re-determination of payable tax must conduct at the tax authorities. The tax authority does not adjust inspection conclusions and inspection decisions in 2017, 2018. In cases where penalties for administrative tax offenses were handled or are being settled according to the order of making a complaint, penalties for administrative tax offenses shall not be adjusted.

Thus, the provisions on amending, supplementing Clause 3 Article 8 of Decree No. 20/2017/ND-CP are applied since the corporate income tax period in 2019. Those only apply for late payment in the corporate income tax period in 2017 and 2018. Following Decree No. 68/2020/ND-CP, the tax authorities do not refund tax amounts that enterprises paid for them in 2017 and 2018.

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July 27th, 2020 is a big day for Asia Business Consulting when we celebrate the 5th anniversary of the company. It has been a wonderful journey altogether.

On this special event of our anniversary, we want to send a big thanks to our esteemed customers and clients whose trust and support has always been the biggest drivers for our continued growth!

Law No. 51/2019/QH14 on amendment and supplements to some articles of the Law on Entry, Exit, Transit, and Residence of Foreigners in Vietnam take effect on July 1^st, 2020. There are a lot of remarkable changes in visa regulations. One of them is the repurposed visas of foreigners.

1. The cases of permission to change visa purposes of foreigners

According to Clause 1, Article 7 the Law on Entry, Exit, Transit, and Residence off Foreigners in Vietnam No. 47/2014/QH13 issued on June 16^th, 2014 and took effect on January 01^st, 2015 as follow: “A visa may be used once or multiple times and its purpose must not be changed”. It means that the visas of foreigners in Vietnam can not repurpose. If foreigners want to alter visa purposes, they will exit Vietnam, applying for a visa with a new purpose. This results in many difficulties when foreigners want to change visa purposes.

This problem is settled following Clause 2, Article 1 in the amended Law 2019 since July 01^st, 2020. The foreigner’s visa is changed purpose in the following cases:

-     He/she presents the document proving to be an investor or a representative for a foreign organization investing in Vietnam as per the law of Vietnam;

-     He/she presents the document proving his/her relationship with the person inviting or sponsoring in terms of parents, spouse, children;

-     He/she is invited or sponsored by agencies or organizations and presents work permit or confirmation of eligibility for work permit exemption according to labor laws;

-     He/she makes entry by electronic visa and presents the work permit or confirmation of eligibility for the work permit exemption according to labor laws.

2. The procedure

A visa repurposed person shall be issued with a new visa with number and time limit suitable for the new purpose.

Procedures for issuance of new visas

(1) A visa repurposed person shall request the inviting entity to follow the procedures at an immigration authority or a competent authority of the Ministry of Foreign Affairs.

(2) The inviting entity shall directly send an application for the visa enclosed with a passport or laissez-passer of the invited foreigners to the immigration authority or a competent authority of the Ministry of Foreign Affairs.

(3) Within 05 working days from the receipt of sufficient documents, the immigration authority or competent authority of the Ministry of Foreign Affairs shall consider issuing the visa.

3. Charge for the repurposed visa

The repurposed visa fees for foreigners

	Types of visa	Fee
1	A visa that is valid for one time	25 USD/a visa
2	A visa that is valid for multiple times
a	A visa that is valid for 03 months	50 USD/a visa
b	A visa that is valid from 03 months to 06 months	95 USD/a visa
c	A visa that is valid from 06 months to 01 year	135 USD/a visa
d	A visa that is valid from 01 years to 02 years	145 USD/a visa
e	A visa that is valid from 02 years to 05 years	155 USD/a visa
f	A visa that is issued to a child under 14 years of age	25 USD/a visa

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1. FTA overview

Globalization and trade liberalization are not only the most important incentive to drive the economy in the XXI century but also an inevitable tendency for the progress of production specialization and the distribution of the labour force. The incentive trade links via the bilateral and multilateral Free Trade Agreements (FTAs) are powerful motivation, attracting the attention and participation of many countries and Vietnam is no exception. Since the first FTA was signed, the number of FTAs is quickly increasing. This triggers the smooth flow of goods to move across boundaries and spaces between different countries.

The level of integration is expressed from bilateral and multilateral cooperation to global cooperation. As of 2020, there are 185 bilateral agreements and 77 multilateral agreements in the world. According to statistics of Asia Regional Integration Center, in the period 1960 to 2016, world trade increased by about 3.5% per year and the proportion of the world’s gross domestic product (GDP) rose from 24% to 56%.

Numbers of bilateral and multilateral Free Trade Agreements in the world by the end of 2018

Vietnam is a country with a high level of international economic integration. This is a result of the active participation and negotiation of Free Trade Agreements (FTAs) with other countries in the world, especially new-generation FTAs which are negotiated and signed in recent times, containing large scope and high level of liberalization.

As of June 2020, Vietnam officially joined 13 FTAs (including 7 FTAs signed as a member of ASEAN and 6 FTAs signed as an independent party), in addition, Vietnam is negotiating 3 FTAs. The total number of Vietnam’s trading partners in FTAs is 56 economies, including 55 countries and 1 territory. Vietnam’s signing of bilateral and multilateral FTAs has enabled Vietnamese enterprises to expand their markets, gaining access to regional and global markets.

Vietnam’s Integration Process into the International Economy

(Including FTA negotiations, participation within ASEAN, and other cooperation)

Year	Description
1986	Start of economic renovation toward “socialist-oriented market economy”, transfer into a market economy
1995	Became an official member of ASEAN
1996	Participated in the Common Effective Preferential Tariff Scheme within the ASEAN Free Trade Agreement scope. Became a founding member of the Asia-Europe Meeting
1998	Became an official member of the Asia-Pacific Economic Corporation (APEC)
2002	Started FTA negotiation with China of ASEAN-China Free Trade Area (ACFTA) (As a member of ASEAN)
2003	Started FTA negotiation with Japan of ASEAN-Japan Comprehensive Economic Partnership (AJCEP) (As a member of ASEAN) Started FTA negotiation with India of ASEAN-India Free Trade Area (AIFTA) (As a member of ASEAN)
2005	Started FTA negotiation with Australia and New Zealand of ASEAN-Australia-New Zealand Free Trade Area (AANZ FTA) and Korea of ASEAN-Korea Free Trade Area (AKFTA) (As a member of ASEAN)
2006	Admitted to World Trade Organization (WTO)
2007	Completed FTA negotiation with Korea of ASEAN-Korea Free Trade Agreement (AKFTA) (commenced in July 2007)
2008	Completed negotiation with Japan of ASEAN-Japan Comprehensive Economic Partnership (AJCEP) (commenced in December 2008) Started bilateral FTA negotiation with Chile of Vietnam-Chile Free Trade Agreement (VCFTA)
2009	Completed FTA negotiation with Australia and New Zealand of ASEAN-Australia-New Zealand Free Trade Area (AANZ FTA) (commenced in January 2010) Completed FTA negotiation with India of ASEAN-India Free Trade Area (AIFTA) (commenced in June 2010)
2010	Started negotiation with Japan of Vietnam-Japan Economic Partnership Agreement (VJEPA) Started negotiation with Brunei, Chile, New Zealand, Singapore, Australia, Malaysia, Peru, America, Japan, Canada, Mexico of Trans-Pacific Strategic Economic Partnership Agreement (TPP)
2011	Completed FTA negotiation with Chile of  Vietnam-Chile Free Trade Agreement (VCFTA) (commenced in January 2014)
2012	Started FTA negotiation with Korea of Vietnam-Korea Free Trade Agreement (VKFTA) Started FTA negotiation with Australia, China, Japan, Korea, New Zealand of Regional Comprehensive Economic Partnership (RCEP) (As a member of ASEAN) Started FTA negotiation with European Free Trade Association (EFTA) Started FTA negotiation with Europe of Europe-Vietnam Free Trade Agreement (EVFTA)
2013	Started FTA negotiation with Armenia, Belarus, Kazakhstan, Nga, and Kyrgyzstan of Vietnam-Eurasian Economic Union Free Trade Agreement (VN – EAEU FTA)
2014	Started FTA negotiation with Hong Kong  of ASEAN-Hong Kong, China Free Trade Agreement (AHKFTA) (As a member of ASEAN) Completed negotiation with Armenia, Belarus, Kazakhstan, Nga, and Kyrgyzstan of Vietnam-Eurasian Economic Union Free Trade Agreement (VN – EAEU FTA) (commenced in October 2016)
2015	Signed Free Trade Agreement with Korea (commenced in December 2015) Completed negotiation of Vietnam-Europe about Europe-Vietnam Free Trade Agreement (commenced in August 2020) Started FTA negotiation with Israel
2017	Completed FTA negotiation with Hong Kong  of ASEAN-Hong Kong, China Free Trade Agreement (AHKFTA) (As a member of ASEAN) (commenced in June 2019)
2018	Signed Comprehensive and Progressive Agreement for Trans-Pacific Partnership (commenced in January 2019)
2019	Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) came into effective
2020	Europe-Vietnam Free Trade Agreement (EVFTA) comes into effective

Vietnam FTAs

Full name of FTAs	Abbreviation
ASEAN Free Trade Area	(AFTA)
ASEAN-China Free Trade Area	(ACFTA)
ASEAN-Korea Free Trade Area	(AKFTA)
ASEAN-Japan Comprehensive Economic Partnership	(AJCEP)
Vietnam-Japan Economic Partnership Agreement	(VJEPA)
ASEAN-India Free Trade Area	(AIFTA)
ASEAN-Australia-New Zealand Free Trade Area	(AANZFTA)
Vietnam-Chile Free Trade Agreement	(VCFTA)
Vietnam-Korea Free Trade Agreement	(VKFTA)
Vietnam-Eurasian Economic Union Free Trade Agreement	(VN – EAEU FTA)
Comprehensive and Progressive Agreement for Trans-Pacific Partnership	(CPTPP)
ASEAN-Hong Kong, China Free Trade Agreement	(AHKFTA)

FTA approved and will come into effect on August 1^st, 2020

Full name of FTAs	Abbreviation
Europe-Vietnam Free Trade Agreement	(EVFTA)

In Negotiation

Full name of FTAs	Abbreviation
Regional Comprehensive Economic Partnership	(RCEP)
Vietnam - European Free Trade Association	(Vietnam – EFTA)
Vietnam – Israel Free Trade Agreement	(Vietnam – Israel FTA)

Vietnam has been a member of ASEAN in July 1995. This has opened the new era of the international economic integration of the country. Since then, Vietnam has joined 13 Free Trade Agreements, as well as negotiating 3 new-generation Free Trade Agreements with not only foreign countries but also territories in the world. AFTA, a multilateral Free Trade Agreement among ASEAN countries, is the first agreement Vietnam joined. Since it took effect in 1993, Vietnam has continuously joined several FTAs both bilateral and multilateral agreements.

FTA has important contributions toward Vietnam’s export turnover. In 2007, the total import-export turnover was 111.3 billion dollars (in which export turnover was 48.5 billion dollars and import turnover was 62.7 billion dollars). In 2015, the total import-export turnover increased about 3 times, achieving 328 billion dollars (in which export turnover was 165.6 billion dollars and import turnover was 162.4 billion dollars). In 2019, the total import-export turnover reached 517.26 billion dollars (in which export turnover was 264.19 billion dollars and import turnover was 253.07 billion dollars).

Besides, FTAs have positive improvements in attracting foreign investment into Vietnam, especially CPTPP and EVFTA, those large markets provide a great deal of capital to the country. In 2006, FDI disbursement only reached 5 billion dollars. In 2019, those break a record with 20.38 billion dollars, increasing 6.7% compared to the same period in 2018. FDI projects have contributed nearly 20% of GDP. This result is an important incentive for developing the country. In addition, FTAs play an important role in promoting growth, economic transition, improving spiritual and material life for Vietnamese society. Along with that, per capita income has improved considerably compared to what it was. GDP increases from 730 dollars in 2006 to 2.786 dollars in 2019, rising about 3.6 times. The poverty rate plummeted from over 70% to 6%. Although Vietnam has harnessed integration opportunities to expand the export scale, accessing international markets, however, the ratio of export to GDP indicates that Vietnam’s economy depends on the world market. This imposes risks on market stability when the world must face the economic crisis.

Moreover, FTAs help to enhance the business environment and institution, hence, Vietnam has opportunities to restructure toward the import-export system more balanced. Thanks to FTA, Vietnam has motivations to improve the investment environment, carrying on business toward transparency, safety for investors of all economic sectors.

Vietnam’s import and export turnover, Balance of Trade in the period of 2012 to 2019

Source: General Department of Vietnam Customs

In 2019, the average tax rate of tariff lines committed to reduce and fluctuate between 0.07% to 9.1%, of which the lowest tax rate is ASEAN (0.07%) and the highest is CPTPP (9.1%). To 2022, the average of tariff lines committed will decrease, fluctuating between 0.04% and 4.8%.

As a result of reducing tax through FTAs, Vietnam's export has gained many achievements in recent years. Due to the effectiveness of several new-generation FTAs, Vietnam's export goods have better edge competitive since tariff barriers are gradually removed. In 2019, Vietnam's export turnover increased 8% compared with one in 2018. The EU is a potential market and Vietnam's major trading partners. When EVFTA is officially effective on August 1st, 2020, the exported proportion of Vietnam to the European market will sharply rise. Up to 70% of Vietnam's goods will be decreased and the EU will commit reduction for import tax of 99.7% of tariff lines which is equivalent to 99.7% of Vietnam's exports to the EU. Trade transactions increased rapidly from 2000 to 2018, in which goods export increased rapidly (about 10 times), from 2.3 billion dollars to 13.89 billion dollars.

In the first quarter, although the global economy is affected by the Covid-19 pandemic, export goods to our main export market such as America, China, Japan,...still rise. Specifically, America was Vietnam's largest export market with export turnover reaching 24.6 billion dollars, increasing 8.2% in comparison with the same period last year. To come to China, export turnover reached 16.3 billion dollars, increasing 20.1%. Regarding Japan, it reached 8.1 billion dollars, increasing 2.2%.

2. Key FTAs: AFTA, CPTPP AND EVFTA

Among FTA that Vietnam has joined, AFTA, CPTPP and EVFTA are considered the most important agreements due to its influence on Vietnam’s economy and business environment. ASEAN was attracting a large investment capital when Vietnam joined in the AFTA, therefore, it has created many possible opportunities to industrialize and modernize the country. Meanwhile, CPTPP is considered a high-quality FTA, with the deepest level of commitment ever. CPTPP member countries constitute a huge market containing 500 million people, holding approximately 15% of GDP, accounting for about 15% of total global trade. It also pushes Vietnam’s export goods to big countries on 3 continents: Asia, America and Oceania. Regarding EVFTA, the commitments of tax and investments in this agreement help Vietnam to renovate the economic structure, improving the local business environment. All of these FTAs provide favorable conditions for the growing economy in Vietnam.

2.1. ASEAN Free Trade Area (AFTA)

ASEAN Free Trade Area (AFTA) is a multilateral free trade area among countries in the ASEAN area. Purpose of AFTA is to enhance ASEAN's comparative capability, contemporaneously encourage the attractiveness of the foreign direct investment. The road map is to gradually reduce tariffs to 0-5%, eliminating tariffs barriers of some commodity groups and remove non-tariff barriers, harmonizing procedures of member counties in AFTA. The key mechanism for carrying out AFTA is Common Effective Preferential Tariff (CEPT).

The initiative to form AFTA was rooted in Thailand. Subsequently, this agreement was signed in 1992. Initially, there are only six countries which are Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand (the general name is ASEAN-6). Cambodia, Laos, Myanmar and Vietnam (the general name is CLMV) were required participating in this group.

CEPT sketched out a detailed mechanism intending to reduce tariffs. The first stage was started on 1^st January 1993, all Member States complied with the reduction from existing tariff rates to 20%. This stage would be done within a time frame of 5 years to 8 years, which depended on the intention of each Member State. Countries were encouraged to adopt an annual rate reduction. In the second stage, tariff rates would be reduced from 20% or below within a time frame of 7 years. The rate of reduction shall be at a minimum of 5% quantum per reduction.

With the achievements of reduction tariffs because of the implementation of AFTA and CEPT, ASEAN Trade in Goods Agreement (ATIGA) signed in February 2009 and has effectiveness on May 17th, 2010. According to ATIGA, ASEAN countries would completely eliminate tariff barriers basing on the road map for ASEAN-6 countries, 99.2% of tariff lines have been removed, whereas 90.0% of tariff lines of acceding countries including Cambodia, Laos, Myanmar and Vietnam were eliminated since 2017. In 2018, the tariff elimination rate in the whole ASEAN area reached more 98.6%. For Vietnam, since January 1st, 2018, an addition (7%) tariff lines were reduced to 0%. This leads to an increase in the sum of tariff lines from ASEAN to Vietnam (97%).

2.2. Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTTP)

Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTTP) is a new-generation free trade agreement, containing 11 countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. The agreement was signed on March 8th, 2018. For Vietnam, it has been effective since January 14th, 2019. This agreement adjusts many fields, from traditional commerce to some little traditional issues as government procurement, e-commerce, or expanding some non-traditional issues as labor, environment, anti-corruption in trade and investment. The CPTTP is considered a high quality and comprehensive FTA with the deepest commitment level from the past up to now.

After 1 year since the CPTPP agreement has been effective, in 2019, trade exchange turnover between Vietnam and Member State in CPTPP reached 77.4 billion-dollar, increasing 3.9% compared with those in 2018. Export from Vietnam to member countries in CPTPP reached 39.5 billion dollars, rising 7.2% compared with those in 2018. Remarkably, some markets as Canada and Mexico which Vietnam did not set up trade relations in the time before noted a sharp increase when CPTPP took effect. Therefore, in 2020, Vietnam had export surplus products to CPTPP member countries about 1.6 billion dollars. Earlier, in 2018, Vietnam had import surplus from those about 0.9 billion dollars.

The commitment of import tax of CPTPP countries to Vietnam

	Immediately	After 4 years	After 7 years	After 8 years	After 10 years	After 11 years	After 16 years	After 17 years
Australia	93%	100%
Brunei	92%		99.9%			100%
Canada	94.9%	96.3%
Chile	95.1%			99.9%
Malaysia	84.7%					99.9%
Mexico	77.2%				98%
New Zealand	94.6%		100%
Japan	86%					95.6%
Peru	80.7%							99.4%
Singapore	100%

CPTPP paves the way for economic growth. Base on the favorable result which CPTPP brought Vietnam during 1 year Vietnam has been a membership of CPTPP, CPTPP will help Vietnam’s GDP increase 4.7% in 2035 compared with those in 2017. Vietnam’s export turnover will have an average increase of 4.32% per year and the export market will be diversities. The total export turnover will reach 311.1 billion dollars in 2030, compared to 179.5 billion dollars in 2017. Moreover, CPTPP is expected to breed 20000 to 26000 works per year.

2.3. Europe-Vietnam Free Trade Agreement (EVFTA)

Europe-Vietnam Free Trade Agreement (EVFTA) is a new-generation free trade agreement, which is signed between Vietnam and 27 individual EU members. EVFTA and CPTPP are the largest commitment and highest commitment level of Free Trade Agreements.

On December 1st, 2015, EVFTA officially ends negotiation and on February 1st, 2016, the agreement document was announced. On June 26th, 2018, two parts unanimously approved, accordingly, EVFTA was separated two agreements: Europe-Vietnam Free Trade Agreement (EVFTA). Two agreements were signed on June 30th, 2019. On February 12nd 2020, the European Parliament approved EVFTA and EVIPA. On June 8th, 2020, Vietnam National Assembly approved these agreements. Therefore, they will be officially effective on August 1st, 2020.

The implement of EVFTA will make a breakthrough in imports and export between Vietnam and the EU. The agreement will boost exportation, commerce activities, foreign direct investment and the state budget. Specifically, experts estimate that the average of Vietnam exports to EU will rise from 4.36% to 7.27% for the first 5-year implementation period, from 10.63% to 15.4% for the subsequent 5-year implementation period and from 16.41% to 21.66% for the final 5-year implementation period.

Export and export turnover between Vietnam and EU from 2010 to 2019

 

This agreement was signed to address the demands of both parties. EU is a section occupying the large proportion of commercial relationships between Vietnam and the EU. This relationship rapidly and effectively developed, from 2000 to 2017, Vietnam-EU trade relation turnover increased more than 13.8 times, from 4.1 billion dollars in 2000 to 56.39 billion dollars in 2019, in which exports from Vietnam to EU soared 14.8 times (from 2.8 billion dollars to 41.48 billion dollars) and import from EU to Vietnam rose more than 11.5 times (from 1.3 billion dollars to 14.91 billion dollars).

With EVFTA, Vietnam will deepen its relationship with the global economy, Vietnamese goods and services to the global value chains, pushing economic growth.

Vietnam-EU FTA Signs of Progress

Year	Description
The stage before October 2012	Both parties carried out technical activities to prepare for negotiations
June 2012	Both parties declared the launch of negotiations
From October 2012 to August 2015	Both parties implemented 14 official negotiation rounds and many midterm negotiation sessions
August 4th, 2015	Both parties announced the end of basic negotiations
December 1st, 2015	Both parties proclaimed the end of DVFTA negotiations
February 1st, 2016	Both parties launched the official document of EVFTA
June 2017	Both parties completed for legal review at the technical level
June 26th, 2018	Both parties agreed with dividing EVFTA into two Agreements: Commercial Agreement (EVFTA) and Investment Protection Agreement (EVIPA), ending the legal review process of EVFTA officially
August 2018	Both parties officially completed  the legal review of EVFTA
October 17th, 2018	European Commission officially approved EVFTA and EVIPA
June 30th, 2019	Both parties officially signed EVFTA and EVIPA
December 12nd, 2020	European Parliament officially approved  EVFTA and EVIPA
June 8th, 2020	Vietnam National Assembly officially approved  EVFTA and EVIPA
August 1st, 2020	EVFTA come into effective

In conclusion, Free Trade Agreements are the key for Vietnam to connect the global trade network. Since Vietnam access the global trade system, with FTAs, the Vietnamese economy has acquired outstanding achievements. It has enhanced the country’s position in global value chains through new business and investment opportunities, facilitating stable and sustainable development. New-generation FTAs breed a lot of benefits to member States, attracting investment capital, improving administrative institutions and business environment. Nevertheless, it is a challenge to successfully implement the FTAs, as well as deploy the commitments that Vietnam has made. It’s safe to say that it requires comprehensive changes from public and private entities in order to ensure commitments that help the nation’s development.

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Resolution No. 954/2020/UBTVQH14 issued by Standing Committee of the National Assembly about Changes to personal income tax reliefs comes into effect since July 1^st, 2020. This regulation is applied from July 2020 tax period.

New provisions adjust the personal income tax relief

According to the Resolution, the personal relief increases from 9 million VND/month (108 million VND/year) to 11 million VND/month (132 million VND/year) and the dependent relief increases from 3.6 million VND/month (43.2 million VND/year) to 4.4 million VND/month (52.8 million VND/year).

When taxpayers apply for the new personal income tax relief, a person who has taxed income up to 15 million VND and has one dependant must not pay tax amounts, instead of 120,000 dongs/month previously. A person who has taxed income to 20 million VND and has two dependants, he/she must only pay 10000 dongs/month instead of 190,000 dongs/month as the old provision. As a result, changes in personal income tax relief breed positive effects on taxpayers.

Content of Official dispatch of the implementing organization for the Resolution

On June 23, 2020, the General Department of Taxation issued the Official dispatch of the implementing organization for Resolution No. 954/2020/UBTVQH14 to Tax departments of centrally-affiliated cities and provinces. Their responsibility is the instruction to taxpayers in tax declaration according to the new personal income tax relief.

In this Official dispatch, the new provision is applied to taxpayers who conduct monthly tax declaration from tax declaration period in July 2020 (the deadline for submission of declaration forms shall be in August 2020) and those who conduct quarterly tax declaration from tax declaration period in the third quarter of 2020 (the deadline for submission of declaration forms shall be on October 30^th, 2020. During the tax period 2020, taxpayers temporarily paid fully their personal income tax following the provision of personal income relief in Law on personal income tax 2007, however, when they make tax finalization for all their income in 2020, they are re-determined payable personal income tax in 2020 accordance with the new personal income tax relief.

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The Law on tax administration 2019 was approved at the 7th session of the Fourteenth National Assembly on June 13rd, 2019 and it takes effect on July 01st, 2020. The law includes 17 chapters which contain 152 Articles. It provides administration of taxes, other amounts payable to the state budget, invoices, electronic records,...The Law on tax administration 2019 supplements new provisions and amends some important regulations. Some remarkably new points in the law on tax administration 2019 adjust according to the following directions:

1. The law expands the rights of taxpayers

To better protect the taxpayers’ rights, the Law on tax administration 2019 supplement some provisions of taxpayers’ rights beyond the ones mentioned in Law on tax administration 2006 and Law amending and supplementing a number of articles of the law on tax administration 2012 as follows:

-     Receive documents related to tax liabilities from competent authorities upon inspections, reviews and/or audits.

-     Be informed of tax refund schedule, non-refundable tax and legal bases of non-refundable tax.

-     Receive tax decisions, tax audit/inspection records; request explanation for contents of tax handling decisions.

-     Enjoy exemption from penalties for administrative tax offenses, exemption from late payment interest for cases where taxpayers comply with guidelines and handing decisions of tax authorities and/or state authorities on the determination of their tax liabilities.

2. The law changes the time limit for the tax registration

In provisions of the Law on tax administration 2006 and the amended Law 2012, taxpayers must make tax registration within ten working days since enterprises were granted business registration certificates and operation licenses or investment certificates or they commenced their business operation. The new provisions in the Law on tax administration 2019 stipulate that the taxpayers can be granted tax identification numbers before starting their business operation or incurring amounts payable to the state budget.

3. The law changes the time limit for the issuance of taxpayer registration certificate

Specifically, the Law on tax administration 2019 has shortened the time limit compared to the old provisions. Within three working days starting from the receipt of the adequate application, tax authorities must issue tax registration certificates to taxpayers. In case the taxpayer registration certificate or TIN notification is lost or damaged, tax authorities shall reissue it within 02 working days starting from the date of receipt of the satisfactory application from the taxpayer.

4. The law extends the time limit for applying annual personal income tax statements

For the annual personal income tax statements, the submission deadline is the last day of the 4^th month from the end of the calendar year.

5. Provisions on the suspension of exit if taxpayers have not yet fulfilled their tax liability

Taxpayers are enforced to obey administration decisions, Vietnamese citizens exiting Vietnam to reside overseas, Vietnamese people residing overseas, foreigners exiting Vietnam shall fulfill their tax liability before the exit. Otherwise, they shall be suspended from exiting Vietnam in accordance with immigration laws.

6. Provisions on cases of cancellation of outstanding tax, late payment interest and fines

Besides provisions on cases of cancellation of outstanding tax, late payment interest and fines, the Law on tax administration 2019 supplement one case: tax, late payment interest and fines in cases of natural disasters, epidemics and the other force majeure events were considered exemption of late payment and extension of tax payment but the damage has still occurred and the taxpayer’s business is still irrecoverable and thus tax, late payment interest and fines cannot be paid even after that tax deferral is granted.

Moreover, the new law supplements provision as follows: An taxpayer that is individual, sole trader, householder, household business owner, sole proprietor or owner of a single-member limited liability company has had the outstanding tax, late payment interest and fines canceled before resuming the business operation or establishing a new business, thus, they must refund such debts to the state budget.

7. Legalization of electronic invoices

The electronic invoices are regulated in Decree No. 119/2018/ND-CP prescribing electronic invoices for sale goods and provision of services. In the Law on tax administration 2019, they are officially regulated in Chapter X. Although Law on tax administration 2019 comes into force since July 01st, 2020, however, provisions of electronic invoices will take effect on July 01st, 2022. During this period, individuals and organizations are recommended to apply regulation on electronic invoices in the Law before July 01st, 2022. From July 01st, 2022, the electronic invoice is compulsory for all taxpayers.

8. There are some concrete provisions of related-party transaction

To prevent price transfer and tax avoidance, the Law on tax administration 2019 bans collusion, connection, cover-up between taxpayers and tax officials, tax authorities for price transfer and/or tax evasion. It amends two principals which are regulations of independent transactions and regulations of tax liabilities determined by the nature of activities and transactions. Therefore, it helps tax authorities to prevent tax avoidance.

In order to strictly manage tax evasion through transfer pricing, the Law on tax administration 2019 gives three rules for declaring and calculating taxable prices in related-party transactions, as follows:

-     Values of related-party transactions shall be determined and declared by analyzing and comparing with independent transactions, the nature of operation and nature of the transaction, in order to determine tax liability in the same manner as that of transactions between independent parties;

-      Values of related-party transactions shall be adjusted according to independent transactions to declare tax in order that in taxable income is not decreased;

-     Taxpayers whose businesses are small in scale and pose low tax risk are exempt from compliance to provisions and may apply simplified related-party transaction declaration procedures.

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Asia Business Consulting is a boutique consulting firm specializing in corporate establishment, legal and business advisory, tax and payroll compliance, HR administration, market research to multinationals investing in Vietnam. For further information or to contact the firm, please email This email address is being protected from spambots. You need JavaScript enabled to view it. or download the company brochure. You can stay up to date with the latest business and investment news in Vietnam by subscribing to our newsletters.

The Labor Code 2019 consists of 17 chapters, 220 articles. It was approved by National Assembly on November 20th, 2019, will come into effect from January 01st, 2021. The Labor Code 2019 instead of the Labor Code 2012. The law contains a number of new provisions aimed at ensuring better rights and obligations of parties, contributing to building a progressive, harmonious, stable labor relationship to satisfy the development of market economy and international integration in Vietnam.

1. The Labor Code 2019 acknowledges an employment contract in the form of electronic data

To better protect employee’s rights, the new law supplements the form of the employment contract. Accordingly, an employment contract in the form of electronic data conformable with electronic transaction laws shall have the same value as that of a written contract.

Besides, the provision of the conclusion of an oral contract is amended. Both parties may conclude an oral contract with a term of less than 01 months, compared with the provision in the Labor Code 2012, an oral contract is applied for temporary jobs with the duration of under 3 months.

2. A change in types of employment contracts

The Labor Code 2019 only stipulates two types of employment contracts which are indefinite-term employment contracts and fixed-term employment contracts. Thus, the seasonal or work-specific labor contract that has a duration of under 12 months will not exist.

3. Amendments to provisions of probation

Regarding the probation contract, in accordance with the Labor Code 2012, employees will not have to probate if they implement their work under the seasonal employment contract. Since 2021, probation is not allowed if the employee works under an employment contract with a term of less than 01 months.

In terms of the probationary period, the Labor Code 2019 supplements provisions of the probationary period for the position of enterprise executive prescribed by the Law on Enterprises, the Law on management and the use of state investment in enterprises. The duration of this case shall not exceed 180 days.

4. Supplements to some cases of suspension of an employment contract

Besides 05 cases of suspension of an employment contract prescribed in the Labor Code 2012, the Labor Code supplement 04 cases as follows:

-     The employee is conscripted into the militia;

-     The employee is designated as the executive of a wholly state-owned single-member limited liability company;

-     The employee is authorized to represent the state investment in another enterprise;

-     The employee is authorized to represent the enterprise’s investment in another enterprise.

5. The employee unilaterally terminates the employment contract without prior notice

According to the Labor Code 2012, the employee has the rights to unilaterally terminate the employment contract for the prescribed duration. Following the Labor Code 2019, the employee has the rights to unilaterally terminate the employment contract without prior notice in the following cases.

(1) He/She is not assigned to the work or workplace or not provided with the working conditions as agreed in the employment contract, except for the case of force majeure event, the employer may assign an employee to perform a work which is not prescribed in the employment contract.

(2) He/she is not paid adequately or on schedule, except for the case of a force majeure event in which the employer is unable to pay the employee on schedule after all remedial measures have been implemented.

(3) He/she is maltreated, assaulted, physically or verbally insulted by the employer in a manner that affects the employee’s health, dignity or honor; is forced to work against his/her will;

(4) He/she is sexually harassed in the workplace;

(5) A female employee is pregnant and has to stop working. She must notify the employer that she obtains confirmation from a competent health facility which states that if she continues to work, it may adversely affect her pregnancy;

(6) He/She reaches the retirement age;

(7)He/She finds that the employer fails to provide truthful information. This affects the implementation of the employment contract.

6. Supplements to 03 cases which the employer has the right to unilaterally terminate the employment contract

The Labor Code 2019 supplement 03 cases which the employer has the right to unilaterally terminate the employment contract as follows:

-     The employee reaches the retirement age specified.

-     The employee who is absent from work without an acceptable reason for at least 05 consecutive working days;

-     The employee fails to provide truthful information during the conclusion of the employment contract. This results in an effect on recruitment.

In the case where the employee who is absent from work without an acceptable reason for at least 05 consecutive working days, the employer has the right to unilaterally terminate the employment contract without prior notice.

7. An amendment to responsibilities of the parties upon termination of an employment contract

-     According to the Labor Code 2012, the time limit for settling all payments in respect of the rights and interests of each party is stipulated as follows:

Within 07 working days from the date of employment contract termination, the employer and employee shall settle each other benefits. This time limit may be extended to up to 30 days in the following cases:

• The business operation is terminated by the employer that is not a natural person;

• The employer or employee suffers from a natural disaster, conflagration, enemy-inflicted destruction or infectious disease;

• The termination is caused by the employer’s changes in organizational structure or technology; economic causes; division, merger or consolidation of the enterprise or cooperative; transfer of the right to ownership or right to the enjoyment of assets.

The Labor Code 2019 increase the duration from 07 working days to 14 working days to the employer completes responsibility for paying all payments in respect of benefits of each other. In special cases, the maximum duration shall be maintained.

Procedures for business registration are framework laws that investors will comply with those provisions if they want to join the markets. According to Enterprise Law 2014 and legal documents of guiding the implementation, the current law regulates 8 steps of procedures and toughly 20 working days which do not include day-off and wait times. Compared with regional and international standards, Vietnam’s procedures for business are still sophisticated, wasting a lot of time and cost.

This fact has required the National Assembly to reduce unnecessary time and costs for enterprises. At the 9th session of the Fourteenth National Assembly, 90.68% of congressmen voted for the approval of the Law amending, supplementing a number of articles of the Law on enterprise which will come into effect on January 1st, 2021. This law has a lot of important changes including regulation of establishing enterprises. The amended enterprise law has the following new points:

The COVID-19 pandemic is driving a substantial realignment of global supply chains. Governments and companies are assessing whether to keep export-oriented production in China or move it elsewhere. Japan is directly subsidizing companies to move supply chains out of China and is working with the United States and others, including Korea, India, Australia and Vietnam to accelerate this process.

Much of the production is going to Southeast Asia, with Vietnam being a key location of choice. With a 6.5% growth rate in 2019, Vietnam is cost competitive and has an increasingly close relationship with the United States. Through its membership in the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), it also has free trade with Canada and Mexico.

On Wednesday, July 8, 2020, Asia Business Consulting is pleased to collaborate with Dickinson Wright PLLC, a well-established law firm based in Detroit, Michigan, U.S since 1878, to conduct the webinar that will assess this great supply chain realignment and will look in depth at what companies need to know about Vietnam as a production location and a market.

This webinar, with the participation of Ms. Hoang Thu Huyen, our President, as a key speaker will share insights on “Establishing and Operating in Vietnam: Legal, Tax and Everything Else You Need to Know” .

Date & Time: Wednesday, July 8, 2020 | 19:30 p.m - 21:00 p.m Vietnam time | 8:30 a.m.-10:00 a.m. ET

This webinar is complimentary, but registration is required on the following link: https://bit.ly/2ZsGj8O

 

We look forward to your participation.

 

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Please contact us for any further concerns related to the topic of this article.

About Us

Asia Business Consulting is a boutique consulting firm specializing in corporate establishment, legal and business advisory, tax and payroll compliance, HR administration, market research to multinationals investing in Vietnam. For further information or to contact the firm, please email This email address is being protected from spambots. You need JavaScript enabled to view it. or download the company brochure. You can stay up to date with the latest business and investment news in Vietnam by subscribing to our newsletters.                                                                                                                    

 

As the world is becoming increasingly integrated with capital, goods and services moving across borders, multinational companies often face the challenge in dealing with double taxation. Double taxation is a detrimental circumstance involving double tax payment for the same taxable subject as income or assets. For example, the company is taxed on its earnings (profits), and the shareholders are taxed again on the dividends they receive from those earnings. As this is an obstacle to international trade, countries in the world usually engaged in Double Taxation Avoidance Agreements aimed at attenuation of double taxation to ensure the rights of their citizens and investors.

Foreign investors in Vietnam need to understand the situation of the double taxation avoidance agreement between Vietnam and foreign countries, as well as conditions and provisions which foreigners have to obey to optimize their profits.

As of 2020, Vietnam has signed Double Taxation Avoidance Agreements (DTAAs) with 80 countries and territories. These treaties breed significant contributions to double taxation avoidance and prevention of tax evasion and contraband on income and property taxes. These Agreements affect subjects who are resident of the signatories of the agreement.