On March 16, 2018, the Ministry of Finance issued Circular No. 25/2018/TT-BTC (“Circular 25”) providing guidelines on Decree 146/2017/ND-CP and making amendments to Circular 219/2013/TT-BTC, Circular 78/2014/TT-BTC, and Circular 111/2013/TT-BTC.

New Regulations Regarding VAT

According to Article 2 of Circular 25, amending and supplementing Article 18 of Circular 219/2013/TT-BTC dated December 31, 2013, goods and services imported for re-export to customs-controlled areas, and goods and services imported and then exported overseas are VAT refundable.

Accordingly, for enterprises with the amount of VAT input not yet deducted greater than or equal to 300 million VND shall have the tax refunded on a monthly or quarterly basis, and if not, the amount can be claimed in the following month or quarter. Companies are required to keep a separate record of VAT for export goods and services if they have trading activities in both domestic and overseas markets,  otherwise, VAT for export goods and services will be estimated based on the ratio of turnover from export activities to the company’s total revenues.

It should be noted that VAT is non-refundable for goods and services imported and then exported and not in the customs-controlled areas as per Vietnamese Law on Customs.

Circular 25 also lists out a number of goods and services not subject to VAT, including:

1) export products which are resources and minerals not processed into other products, and

2) export products which are processed directly from resources and minerals with the  total cost of the natural resources and minerals together with energy expenditure accounting for more than 51% of the total production cost, except for some cases clarified at Clause 1, Article 1, Decree 146/2017/ND-CP.

The detailed calculation for the ratio of 51% and which expenses are included in natural resources and minerals costs, energy costs, and production costs are specified. In particular, general and administrative expenses, selling expenses, and financial expenses are not included in the total production costs.

Other Regulations Regarding CIT and PIT

According to Circular 25, depreciation expenses of fixed assets of companies receiving the capital transfer from other companies are now CIT deductible if certain conditions are met.

Furthermore, Circular 25 sets the new limit on the amount of voluntary insurance expenses for employees to be CIT deductible. The amount is now up to 3 million VND/person/month (compared to the old cap of 1 million/person/month). The eligibility and the benefits of the voluntary employee insurance scheme must be presented in one of the following documents: Labor Contract, Financial Charter, or Collective Labor Agreement, and authorized by the Chairman or General Director of the company.

However, it is noted that if the enterprises do not comply with the regulations on compulsory employees’ social, health, and unemployment insurance, a voluntary insurance scheme will be treated as non-deductible.

Regarding PIT, income from securities transfers is taxable, including income from the transfer of stocks, rights, call options, put options, futures and other types of securities clarified in Clause 1, Article 6 of the Law on Securities. Income from share transfers among individuals in joint-stock companies under Clause 2, Article 120 of Enterprises Law, is also taxable.

Circular 25 has entered into force on May 1, 2018.