VAT News - empcom.gov.in
VAT News - empcom.gov.in
VAT News - empcom.gov.in
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<strong>VAT</strong> <strong>News</strong><br />
M<strong>in</strong>nesota<br />
Nexus of Internet vendors<br />
See California.<br />
New Jersey<br />
Small bus<strong>in</strong>esses<br />
New Jersey has expanded the eligibility of small-bus<strong>in</strong>esses<br />
for exemption under the urban enterprise zone<br />
sales tax rebate programme to <strong>in</strong>clude bus<strong>in</strong>esses with<br />
annual gross receipts up to USD 10 million.<br />
New Jersey Assembly, 2720 of 27 October 2008.<br />
North Carol<strong>in</strong>a<br />
Nexus of Internet vendors<br />
See California.<br />
From our correspondent Robert van Brederode<br />
New York University, School of Law, New York, NY<br />
Vietnam<br />
Non-resident contractors<br />
On 1 December 2008, the M<strong>in</strong>istry of F<strong>in</strong>ance issued<br />
Circular No. 1 4/2008/TT-BTC (“Circular 1 4”), which<br />
conta<strong>in</strong>s detailed provisions on the tax treatment of<br />
non-resident contractors and subcontractors, which<br />
apply from 1 January 2009. Circular 1 4 supersedes Circular<br />
No. 0 on Foreign Contractor Tax (FCT) and Circular<br />
No. 1 /1999/TT-BTC on freight tax.<br />
Circular 1 4 applies to virtually all non-resident organizations,<br />
regardless of whether or not they have a permanent<br />
establishment (PE) <strong>in</strong> Vietnam, and <strong>in</strong>dividuals that<br />
carry on a bus<strong>in</strong>ess <strong>in</strong> Vietnam or receive bus<strong>in</strong>ess<br />
<strong>in</strong>come sourced <strong>in</strong> Vietnam, either directly, on the basis<br />
of contracts with Vietnamese organizations or <strong>in</strong>dividuals,<br />
or <strong>in</strong>directly, as subcontractors.<br />
The FCT is not imposed on the mere supply of goods to<br />
Vietnam’s overseas ports or border gates, provided that<br />
the supply is not accompanied by any services performed<br />
<strong>in</strong> Vietnam. Circular 1 4 explicitly excludes<br />
non-resident organizations and <strong>in</strong>dividuals who:<br />
– provide services outside Vietnam; or<br />
– provide, outside Vietnam, the follow<strong>in</strong>g services to<br />
Vietnamese organizations or <strong>in</strong>dividuals:<br />
– repair of means of transport, mach<strong>in</strong>ery, equipment,<br />
<strong>in</strong>clud<strong>in</strong>g replacement of parts of those<br />
goods;<br />
– advertis<strong>in</strong>g and market<strong>in</strong>g services;<br />
– <strong>in</strong>vestment and trade promotion services;<br />
– brokerage services relat<strong>in</strong>g to sales of goods;<br />
– tra<strong>in</strong><strong>in</strong>g services;<br />
– freight shar<strong>in</strong>g services performed outside Vietnam;<br />
and<br />
– provision of transmission l<strong>in</strong>es and satellite<br />
bands from abroad.<br />
For the purposes of the FCT, a dist<strong>in</strong>ction must be made<br />
between corporate and <strong>in</strong>dividual non-resident contractors.<br />
As regards:<br />
– non-resident organizations, the FCT conta<strong>in</strong>s an element<br />
of <strong>VAT</strong> and an element of corporate <strong>in</strong>come<br />
tax; and<br />
– non-resident <strong>in</strong>dividuals, the FCT conta<strong>in</strong>s an element<br />
of <strong>VAT</strong> and an element of personal <strong>in</strong>come tax.<br />
The non-resident organization or <strong>in</strong>dividual must<br />
account for <strong>VAT</strong> under the “credit method” if:<br />
– it has a PE <strong>in</strong> Vietnam or is a tax resident of Vietnam;<br />
– its bus<strong>in</strong>ess operations <strong>in</strong> Vietnam have run for at<br />
least 18 days from the date the contract entered <strong>in</strong>to<br />
–<br />
effect; and<br />
it has adopted the Vietnamese account<strong>in</strong>g system.<br />
The non-resident party must file its tax returns and pay<br />
the tax directly to the tax authorities. The Vietnamese<br />
contract<strong>in</strong>g partner must notify the local tax office<br />
with<strong>in</strong> 20 days of the sign<strong>in</strong>g of the contract.<br />
This method enables the non-resident party to charge<br />
<strong>VAT</strong> to its customers <strong>in</strong> Vietnam and deduct <strong>in</strong>put <strong>VAT</strong>,<br />
if any.<br />
Where the non-resident party does not meet the criteria<br />
set out above, the <strong>VAT</strong> must be paid under the “directcalculation”<br />
method. With<strong>in</strong> 20 days of the sign<strong>in</strong>g of the<br />
contract, the Vietnamese contract<strong>in</strong>g partner must<br />
report, to the local tax office, its obligation to pay FCT on<br />
behalf of the non-resident party.<br />
<strong>VAT</strong> payable = <strong>VAT</strong> rate x “added value” of the goods or services<br />
The current standard <strong>VAT</strong> rate is 10%, although specific<br />
goods and services are subject to <strong>VAT</strong> at the rate of %.<br />
The “added value” is a fixed percentage, which, depend<strong>in</strong>g<br />
on the type of bus<strong>in</strong>ess, is either 0% or 0% of the<br />
taxable turnover, i.e. total turnover, <strong>in</strong>clud<strong>in</strong>g taxes and<br />
costs paid by the Vietnamese party.<br />
It should be noted that, <strong>in</strong> Circular 1 4, the leas<strong>in</strong>g of<br />
mach<strong>in</strong>ery and equipment is reclassified as a service<br />
(and thus subject to % <strong>VAT</strong>), whereas it was previously<br />
classified as a commercial right (exempt from <strong>VAT</strong>).<br />
Where a package of services is provided, the contract<br />
must separately identify the value of each element, and<br />
<strong>VAT</strong> must be paid accord<strong>in</strong>gly. In the absence of such a<br />
specification, the taxable turnover is the entire value of<br />
the contract at the deemed value added rate of 0%.<br />
Tax concessions<br />
On 21 January 2009, the Prime M<strong>in</strong>ister issued Decision<br />
No. 1 /2009/QD-TTg, which conta<strong>in</strong>ed tax concessions<br />
aimed at mitigat<strong>in</strong>g the consequences of the <strong>in</strong>ternational<br />
economic crisis. The concessions <strong>in</strong>clude a reduction<br />
by 0% of the <strong>VAT</strong> rate on specific goods and services,<br />
such as coal, chemicals, automobiles and<br />
automobile components, transport (with the exception<br />
of <strong>in</strong>ternational transport), tourism and hotel accommodation,<br />
etc.<br />
1 4 INTERNATIONAL <strong>VAT</strong> MONITOR MARCH/APRIL 2009 © IBFD