Answers

Applied Skills, TX – VNM December 2019 Answers

Taxation – Vietnam (TX – VNM) and Marking Scheme

Section A

1 The correct answer is VND(420 million)

The irrecoverable debt written off as an expense in 2016 was denied for tax purposes, accordingly the receipt of
VND500 million is non-taxable income (an adjustment is required but it is a deduction, not an add-back). However,
the debt collection fee of VND80 million was paid in cash and thus is non-deductible. The net adjustment is
therefore 80 – 500 = VND(420 million).

2 The correct answer is VND1,300 million

VND1,300 million creditable input VAT (2,000 million * 65%)
According to Article 14.5 of Circular 219/2013, the input VAT for goods (including purchased and self-produced)
used for promotion activities for sales subject to VAT shall be fully creditable (however, the input VAT on promotional
goods used for exempt sales is non-creditable and allocation is required where the company cannot separately
account for the input VAT – Article 14.2 of same Circular).

3 The correct answer is VND25·46 million

[((120 – 9 – (3·6 * 2) – (27·8 * 10·5%)) * 35%) – 9·85] = 25·46

4 The correct answer is USD18,947

[(((USD800,000 * (1 – 55%))/(1 – 5%)) * 5%]
According to example 23 of Circular 103/2014, deliveries from overseas to Vietnam are exempt from foreign
contractor tax (FCT), and deliveries from Vietnam to overseas are taxable. Taxable income would therefore be 45%
of the allocation only. As the activities are ‘services’, the corporate income tax (CIT) rate would be 5% (with gross
up).

5 The correct answer is VND552 million

(92 days * (VND20,000 million * 0·03%))
According to the example in Article 34.2 (c) of the Circular 156/2013 (as amended in Circular 130/2016), late
payment interest is 0·03% per day (0·05% per day if the tax arose before 1 July 2016). The interest is counted
from the day following the deadline for corporate income tax (CIT) payment (i.e. from 3 April 2018), to the date of
the decision on 3 July 2018, i.e. 92 days (28 days in April + 31 days in May + 30 days in June + 3 days in July
= 92 days).

6 The correct answer is Option 2

EXT Co CIT liability VND0 million NJR Co CIT liability VND0 million
According to Article 7.22 of Circular 78/2014 as amended by Circular 96/2015, where the premium from capital
contribution belongs to the company, it is not taxable on the recipient.

7 The correct answer is VND349 million

((100,000 shares * 35,000 – 10 million) * 10%)
According to Article 16.1 (b) of Circular 111/2013, the taxable value where the inheritance is non-listed shares
is the book value of the shares immediately before ownership registration as a result of the inheritance, minus
deduction of VND10 million.

8 The correct answer is USD 0

According to Example 4 of Circular 103/2014, the handling services at Hong Kong ports are exempt from foreign
contractor tax (FCT) in Vietnam as these were consumed outside Vietnam.

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9 The correct answer is 1 and 2 only
According to Article 4.8 of the Decree 20/2017.

10 The correct answer is VND1,500 million

((10,000 – 9,000) * 10% + (12,000 – 5,000) * 20%)
According to Example 19 in Article 18, point 9 of Circular 78/2014, losses from prior years which cannot be
identified with any specific activities must be offset against the activity which is entitled to the most favourable
incentives first. Also the loss must be offset consecutively, against the first available profit. Accordingly,
VND9,000 million losses must be offset against VND10,000 million from software development activity, and the
remaining profits subject to 10% corporate income tax (CIT). The loss from securities trading can be offset against
the hardware trading profit, with the residual amount subject to the standard CIT rate of 20%.

11 The correct answer is VND68·4 million

(son (VND3·6 million * 12 months) + daughter (VND3·6 million * 7 months))
According to Article 9 of Circular 111/2013, point 1.d.1, a child above 18 years old qualifies as a dependant if
he/she is studying (in Vietnam or abroad) and has an average income of less than VND1 million per month. A child
below 18 years old qualifies as a dependant, even if they have income of more than VND1 million per month.

12 The correct answer is 1, 3 and 4 only

According to Article 1, Example 1, Article 7.3 of Circular 103/2014.

13 The correct answer is VND133·3 million

(1,600 million cap for depreciable amount of car/6 years * 6/12 months)
The depreciable expenses of car is capped at VND1,600 million (exclusive of VAT).

14 The correct answer is VND250·2 million

((($25,000 + 30,000/12 + 4,500) * 23·5 – 9) * 35% – 9·85)
Note: All income is taxable in full (concessional treatment of 15% of gross income is not applied for housing
allowance in cash).

15 The correct answer is VAT filing and payment is due using the credit (deduction) method.
According to Article 11.1.d of Circular 156/2013, where the dependent unit accounts separately, the company is
required to register and declare VAT under the deduction method to the local tax authorities of the unit.
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2 marks each 30
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Section B Marks

1 CCBA Co

(a) Revaluation gain/loss from capital contribution in kind

According to Article 7 point 14 of Circular 78/2014 as amended by Circular 96/2015:
– Revaluation gains/losses arising from a capital contribution in the form of assets are calculated as the
difference between the revalued amount and carrying amount as at the time of the contribution, and are
taxable/deductible on the transferor in the year of contribution. 1
– For revaluation gains/losses arising from a capital contribution in the form of a land-use-right which the
recipient cannot depreciate or amortise, the transferor/contributor is allowed to defer and recognise the
taxable gain over a period of up to ten years from the year of contribution. 1·5
–
Where the contributor sells the capital contribution (containing a contributed land-use-right), the
contributor is required to realise, declare and pay tax on the full revaluation gains (if any) as a transfer of
real estate in the year of sale. 1·5
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(b) Taxable gains

Unit: VND million
(Unamortised) taxable gains Taxable gain in year
For year ended 30 September 2017
Revaluation gain (other income)
– Office building 3,000 3,000 1
(15,000 – 12,000)
– Land use right 110,000 5,500 2
(120,000 – 10,000) (110,000/10 years * 6/12 months)
For year ended 30 September 2018
Revaluation gain (other income)
– Land use right 104,500 11,000 1
(110,000 – 5,500) (110,000/10 years)
Real estate transfer income 93,500 2
(104,500 – 11,000)
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 Marks
2 Mr Quach Hoai

(a) Taxable income and tax liability for the calendar year 2018
VND million
Employment income
Annual salary (VND30 million * 12 months) 360·0 0·5
Bonus (VND30 million * 2 months) 60·0 0·5
Gross website design fee 80·0 0·5
Gross training fee (VND450 million/(1 – 10%) 500·0 1·5
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Annual taxable income 1,000·0
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Monthly taxable income (1,000/12 months) 83·3 0·5
Self-deduction (9·0 ) 0·5
Dependent relief (2 * 3·6) (7·2 ) 0·5
SHUI (27·8 * 10·5%) (2·9 ) 0·5
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Monthly assessable income 64·2 0·5
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Monthly tax liability (64·2 * 30% – 5·85) 13·4 0·5
Annual tax liability on employment income (13·4 * 12 months) 160·8 0·5
Investment income and capital transfer income
Tax on dividend (300 million * 5%) 15 0·5
Tax on sales of shares (2,000 – 100) * 20% 380 1
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Tutorial note: The website design fee and training fee must be combined into employment income according
to Article 26.2.c.4 of Circular 111/2013 as amended by Circular 119/2014, 151/2014 and 92/2015 –
individual having employment income with one organisation for more than three months and earning ad-hoc
income from other sources where personal income tax (PIT) was withheld at source at 10%: if the monthly
average income in the year is less than VND10 million, there is no need for tax finalisation. Where the
income is higher than VND10 million, tax finalisation to combine the income is required.

(b) Income from international online channel

According to Circular 92/2015, Article 7, an individual receiving income from offshore organisations is subject
to PIT where the total amount is in excess of VND100 million a year. 1
Upon each receipt of income, the individual is required to declare tax directly (at deemed rates of 5% value
added tax (VAT) and 2% PIT on income) to the local (district level) tax authorities where he/she resides. 1
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3 SGB and TCB

(a) Foreign contractor tax (FCT) on interest swap

An interest swap is subject to FCT as a financial derivative in Vietnam. FCT will be determined based on the
‘net’ amount to be settled to the overseas party within each calendar year. Taxable revenue from an interest
swap is the difference between the interest receivable and the interest payable which the foreign contractor
receives within a calendar year. 1
(i) Where SGB receives a ‘net’ settlement (i.e. the amount which TCB must pay SGB is higher than the
amount which SGB must pay TCB) within the calendar year, the taxable revenue shall be subject to
corporate income tax (CIT) at the rate of 2%. 2
(ii) Where SGB is required to make a net settlement to TCB within the year, no FCT is payable. 1
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 Marks
(b) FCT liability
Taxable CIT Value added tax
amount (VAT)
USD USD USD
For 2016:
Net settlement by TCB to SGB (2 – 5 = –3) 0 1·5
FCT 0 Exempt
For 2017:
Net settlement by TCB to SGB (2·5 – 1)/(1 – 2%) 1,530,612 2
FCT (1·53 * 2%) 30,612 Exempt 1
For 2018:
Net settlement: no settlement in 2018, as final
settlement was on 1 September 2017 (beginning
of period). Accordingly no FCT arose in 2018. N/A N/A 1·5
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4 (a) ITC Co
Explanation Output value Creditable
added tax (VAT) input VAT
(VND million) (VND million)
Purchase laptops Fully creditable as all used for
(30 * 100 * 10%) generating VAT-taxable revenue 300 1
Issue laptops for staff use for No VAT charge required as internal
business purposes consumption for business 0 1
Issue laptops as reward to staff Must charge VAT as payment in
(15 * 30 * 10%) the nature of a bonus 45 1
Issue laptops for promotion Must charge VAT as company did
(35 * 30 * 10%) not register the promotion programmme 105 1
Build creative centre Input VAT creditable, no output VAT
(13,200/1·1 * 10%) as internal consumption for business 1,200 1
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150 1,500
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(b) ELI Co
(i) An e-invoice with the tax authority’s identification code (TIC) is an e-invoice which is assigned an
identification code by the tax authorities before the seller sends it to the buyer (Article 3.4). 1
(ii) The three types of e-invoice include: value added tax (VAT) e-invoice, sales e-invoice and other e-invoices
(including stamps, tickets, cards, receipts, goods dispatch and consignment notes in electronic forms)
(Article 5). 1
(iii) Once the vendor applies to issue e-invoices, they are required to issue e-invoices for all sales regardless
of the value of the transaction. Accordingly, ELI Co should request e-invoices for all purchases from
sellers (Article 4.1). 1
(iv) Legal e-invoices may be converted into paper invoices, however, the paper invoice would only be retained
for book-keeping and monitoring purposes, and would be invalid for transaction or payment (Article 10). 1
(v) The key conditions which need to be met by the company for it to use e-invoices without TIC include: it has
or will transact with tax authorities via electronic means; it has IT infrastructure; it uses accounting software
and e-invoicing software systems which meet the needs of e-invoicing, allow access to e-invoices, store
e-invoice data in accordance with regulations, and ensure the transfer of electronic data to buyers and
tax authorities. 1
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 Marks
5 SLT Co

Item Adjustment
(VND million)
Profit before tax 38,600
Add Tools and instruments 3,297 2
(4,730 – (4,730/(1 + 10% VAT) * 8/24 months))
Add Life insurance expenses in excess of cap (W1) 1,280 W1
Add Accrued bonus 0 1
Add Uniform in cash in excess of cap VND5 million per person 800 1·5
1,400 – (120 persons * VND5 million each)
Add Welfare expenses in excess of one month’s salary cap 1,180 2
(2,380 – VND15,600 million salary funds/13 months)
Deduct Severance allowance paid (1,200 ) 1·5
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Total adjusted taxable income 43,957
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Of which:
– Allocation of incentivised, i.e. exempt income (i.e. revenue from
products produced in Ha Giang) based on revenue 27,473 1
(43,957 * (50,000/(50,000 + 30,000))
– Allocation of non-incentivised income (revenue from other provinces) 16,484 0·5
(43,957 – 27,473)
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Corporate income tax (CIT) liability (16,484 * 20% + 27,473 * 0%) 3,297 0·5
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Working
(W1) Life insurance in excess of cap
VND million
If x equals the number of persons at management level, accordingly the number of
employees at staff level is x * 5
(x * 80 million) + (x * 5 * 80 million/2) = VND5,600 million 1
x * (80 + 200) = 5,600 1
x = 5,600/280 = 20 persons at management level 0·5
Staff level = 20 * 5 = 100 persons
(so total number of staff is 100 + 20 = 120 persons) 0·5
Excessive insurance fee for management level 20 persons * (VND80 million – (3 * 12 months) 880 1
Excessive insurance fee for staff level 100 persons * (VND40 million – (3 * 12 months) 400 1
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Total 1,280
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Tutorial notes:
(1) The one-month salary cap for welfare purposes is calculated based on one month’s salary actually paid.
Due to the accrued Tet payment, the total salary fund paid is 12/13 of the total salary expenses [i.e.
(VND15,600 million x 12/13)/12 = 1,200 monthly salary paid].
(2) The accrued bonus matches with 2018 revenue and is paid before the CIT finalisation deadline and is
therefore deductible.
(3) The severance allowance paid is an additional deductible expense because provision expenses were adjusted
as non-deductible in prior years.
(4) The allocation of revenue can be based on volume of production in each province because the products are
identical and are sold at the same price.

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 Marks
6 Ms Y Nguyen

(a) Personal income tax (PIT) liability for 2018

From VS JSC From WSU Co
VND million VND million
Annual salary (40 * 4)/(60 * 8) 160 480 2
Petrol allowance (20 * 4) 80 0 1
Tet bonus 120 0 0·5
13th month salary (60 * 8/12) 0 40 1
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Total taxable employment income 360 520
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Monthly taxable income (360/4 months) 90·0 0·5
(520/8 months) 65·0 0·5
Self-deduction (VND9 million) (9·0 ) (9·0 ) 0·5
Dependent deduction (VND3·6 million * 2 children) (7·2 ) (7·2 ) 0·5
Compulsory insurance [VND27·8 million * (8% + 1·5% + 1%)] (2·9 ) (2·9 ) 0·5
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Monthly assessable income 70·9 45·9
Monthly grossed-up income [(70·9 – 9·85)/0·65] 93·9 1
[45·9 – 5·85)/0·7] 57·2 1
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Total gross income from each source (93·9 * 4) | (57·2 * 8) 375·6 457·6 1
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Total monthly gross assessable income (375·6 + 457·6)/12 69·4 0·5
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Monthly tax liability (69·4 * 30% – 5·85) 15·0 1
Annual tax liabilities (15 * 12) 180 0·5
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Tutorial note: Self and other deductions can be calculated for both sources of employment income which
Ms Y Nguyen held in the year, and she is eligible to claim deduction for the whole 12 months.

(b) PIT implications of selling shares

As the shares which Ms Y Nguyen was awarded relate to her employment with VS JSC, the awards are subject
to PIT. However, the calculation of the tax liability is deferred until she sells the shares. 1
Assuming she sells the shares in 2019, she will be subject to PIT on the share awards, based on the amount
of the expense detailed in VS JSC’s records at the time of award, at progressive rates of tax as employment
income of 2019. 1
In addition, she is also subject to capital gains tax on selling the shares, at 0·1% of selling price
(VND5,000 million x 0·1% = VND5 million). 1
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