Answers

Applied Skills, TX – VNM December 2022 Answers

Taxation – Vietnam (TX – VNM) and Marking Scheme

Section A

1 VND500 million
VND1,800 million – VND1,300 million = VND500 million
According to Example 9, point 2.5 of Circular 78/2014, where the provision for salary fund from last year
(31 December 2020) is not fully utilised within six months from the last year end (30 June 2021), the unused
balance will be excluded from deductible compensation expenses of that year (31 December 2021).

2 Option 2
VND600,000 * 800 coupons = VND480 million
VND600,000 * 180 coupons = VND108 million
According to Article 7.3 of Circular 219 as amended by various Circulars on VAT, products exchanged in lieu of
wages would be subject to VAT on the market price of the products.

3 VND451·62 million
Monthly salary: ((VND150 million * 13 months) + (VND11 million – VND5 million))/12 months = VND163 million
Less monthly deductions: VND11 million + (VND4·4 million * 3 dependants) + (VND29·8 million * 10·5%) =
VND27·329 million
Tax calculation: (((VND163 million – VND27·329 million) * 35%) – VND9·85 million) * 12 months =
VND451·62 million

4 Option 3
(USD1,800,000 + USD120,000)/(1 – 5%) = USD2,021,053
CIT: USD2,021,053 * 5% = USD101,053
VAT: USD2,021,053/95% * 5% = USD106,371
The service is subject to 5% value added tax (VAT) and 5% corporate income tax (CIT). The total services should
be grossed up as the amounts provided are the contract price after foreign contractor tax (FCT) of 5% is paid.
CIT is chargeable on the VAT exclusive amount. The accommodation is also subject to FCT.

5 2 only
According to definition in Article 3, point 14 and 15 of the Tax Administration Law of 2019.

6 VND2,472 million
[((100 – 12) persons * 12 months) + (12 persons * 5 months) + (20 persons * 6 months)] * (VND5 million –
VND3 million) = VND2,472 million
According to point 2.11, Article 6 of Circular 78/2014 as amended by Circular 96/2015 and Circular 25/2018
amending Circular 96/2015, the voluntary pension contributions shall be capped at VND3 million per person per
month.

7 VND85 million
PIT on sales of shares: (200,000 shares/4 =50,000 shares) * VND200,000 per share * 0·1% = VND10 million
PIT on dividend: 150,000 shares * VND10,000 per share * 5% = VND75 million
Total PIT = VND10 million + VND75 million = VND85 million

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8 USD108,632
FCT on interest: USD20 million * 5%/(1 – 5%) * 5% = USD52,632
FCT on late payment: USD1·12 million * 5% = USD56,000
Total FCT = USD52,632 + USD56,000 = USD108,632
Note: Interest is on net basis, and late payment interest is on gross basis.

9 VND2,000 million
Accounting expenses: VND18,000 million/3 years = VND6,000 million
Tax expenses: VND18,000 million/5 years = VND3,600 million
Non-deductible = (VND6,000 million – VND3,600 million) * 10/12 months = VND2,000 million
According to point 6.2.2 of Circular 78/2014 (amended by Circular 96/2015), accelerated depreciation is not
allowed when a company makes losses.

10 1, 2 and 3
According to Article 5, point 2 of Decree 132/2020, all the cases are related party transactions (sub-point a, c,
and d).

11 VND0 million
According to Article 3 of Circular 111/2013 and amended Circulars, those income are all exempt from PIT.

12 USD18,947
USD360,000/(1 – 5%) * 5% = USD18,947
FCT is incurred when full payment was made in advance in 2021.

13 VND30 billion
Total interest: VND600 billion * 8% = VND48 billion
Non-deductible (shortfall in capital contribution) = (VND800 billion – VND500 billion) * 8% * 9/12 months =
VND18 billion
Deductible expenses = VND48 billion – VND18 billion = VND30 billion
According to Article 6, point 2.18 of Circular 78/2014, as amended by Circular 96/2015 and various other
amendments, interest expenses corresponding to the shortfall in capital contribution shall be non-deductible.

14 VND204·60 million
Self-deduction VND11 million * 9 months + his children ((VND4·4 million * 2) * 9 months) + (Marie’s child
VND4·4 million * 6 months) = VND204·6 million
Mr Quang can claim a full month’s deduction for September 2021 (according to Article 9.1, point c.1.2 of Circular
111/2013 and various amending Circulars).

15 1 and 2
According to Article 50 of the Tax Administration Law in 2019.
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2 marks each 30
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Section B Marks

1 CPTC JSC

(a) Treatment of distribution of profits

According to Article 8.6 of Circular 78/2014, as amended by Circular 96/2015 and various other amended
Circulars (and Example 11 in the Circular), income received from distribution of dividends or profits after tax
received by a corporate shareholder shall be exempt from corporate income tax (CIT). 1·5
Where the distributing company is entitled to a tax holiday (tax exempt) or entitled to incentives (e.g. 50%
tax reduction), the income is still treated as exempt in the hands of the recipient corporate shareholder for CIT
purposes. 1·5
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(b) Calculate CIT liability of CPTC JSC in 2021

Taxable income/loss Exempt income
(VND million) (VND million)
Operating loss (15,000) 0·5
Dividend from TL JSC 20,000 0·5
Cash dividend from KTM JSC 15,000 0·5
Script dividend from KTM JSC (22 * VND1 million) 22,000 1·5
Distribution of profits from NKT Co 5,000 1
Distribution of profits from HEX Co 16,000 1
Sharing of profits from BCC with SCT Co
(VND50,000 million – VND10,000 million) 40,000 1·5
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Total 25,000 78,000
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20% CIT 5,000 0·5
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2 Ms Huong

(a) Residency status in the years 2020 and 2021

In the year 2020, Ms Huong spent 50 days in Vietnam and only visited Vietnam occasionally, without an official
assignment. 0·5

In addition, the total number of days spent in Vietnam for the 12 months period from 1 July 2020 to
30 June 2021 was only 180 days (less than 183 days). Accordingly, she is a non-resident in Vietnam in the
year 2020. 0·5

In the year 2021, she spent a total of 130 + 135 = 265 days in Vietnam and is therefore a resident. 1
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(b) Personal income tax (PIT) in the years 2020 and 2021
In year 2020
VND million
Gross income arising in Vietnam (USD150,000 * 50/365 days * 23,500 exchange rate) 482·88 1
Cash allowance (USD300 * 23,500 exchange rate * 50 days) 352·50 1
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Taxable employment income 835·38
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Tax on employment income (20% on non-resident) 167.08 0·5
Tax on investment income (VND1,000 million * 0·1% on non-resident) 1·00 0·5

In year 2021
VND million
Gross salary (USD18,000 * 12 months * 23,500 exchange rate) 5,076·00 1
Housing – lower of
– USD5,076 * 15% 761·40 0·5
– (USD3,000 * 12months * 23,500 exchange rate) 846·00 761·40 0·5
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Taxable income 5,837·40
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Monthly taxable income (VND5,837·40 million/12 months) 486·45 0·5
Self-relief (VND11 million) (11) 0·5
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Monthly assessable income 475·45
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Annual PIT ((VND475·45 million * 35%) – VND9·85 million) * 12 months 1,878·69 1
Tax on Investment income
(VND3,000 million – (VND1,500 million * 50%)) * 20% on resident) 450 1
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Tutorial note:
– 15% housing concession is not applicable for the cash allowance for hotel and meals.
– For a non-resident individual selling shares of a limited liability company, the tax rate is 0·1%.

3 NTF Co

(a) Foreign contractor tax (FCT) treatments on licence fee payable to TMC Co
Where NTF Co provides Licence fee Technical support services
solution to
Vietnamese customers TMC Co is subject to FCT as the TMC Co is subject to FCT as the 1 mark
income arises from sales made in income arises from services provided for each
Vietnam. in Vietnam.
Foreign customers TMC Co will likely be subject It is unclear whether the services are 1 mark
to FCT, as the income is likely still consumed in Vietnam or not. As TMC license
treated as ‘arisen from Vietnam’. Co provides technical services for NTF fee,
Co to provide solution to foreign 2 marks
customers, it is arguable that services for
are ultimately consumed overseas and technical
therefore not subject to FCT in support
Vietnam. However, this should be
confirmed with the tax authority.
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(b) Foreign contractor tax (FCT) on payments to TMC Co in 2021
Corporate income tax (CIT) Value added tax (VAT)
(USD)
– Licence fee 26,478 Exempt 2
((VND70,000 million * 8% fee/23,500
exchange rate)/(1 – 10% +) * 10%)
+ FCT will be at a rate of 10% as the license fee is
treated as royalty income for CIT purposes.
– Technical services 12,631 13,296
((USD 240,000/(1 – 5%) * 5%) ((USD 240,000/(1 – 5%)/(1 – 5%) * 5% 1·5
– Online training 2,631 2,770
(taxable as online) ((USD50,000/(1 – 5%) * 5%) ((USD50,000/(1 – 5%)/(1 – 5%) * 5%) 1·5
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33,945 5
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4 Value added tax (VAT)

(a) VGF Co
(i) Taxable revenue for VAT purposes, output VAT and special sales tax (SST) payable and net revenue
VND million
– VAT taxable revenue (net of VAT and inclusive of SST)
(VND44,000 million/(1 + 10%) 40,000 1
– VAT (VND40,000 million * 10%) 4,000 0·5
– SST (VND40,000 million/(1 + 20%) * 20%)) 6,667 1
– Net revenue exclusive of taxes (VND40,000 million – VND6,667 million) 33,333 0·5
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(ii) VAT creditable on the car purchase
VND million
– Quoted price without VAT
(VND1,980 million/(1 + 10%) 1,800 0·5
– Less: Discount (VND1,800 million * 5%) (90) 0·5
– Coupon: (no effect) 0 0·5
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– Net purchase amount 1,710
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– Capped VAT-creditable value 1,600 1
– Creditable input VAT (VND1,600 million * 10%) 160 0·5
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(b) Output VAT for CST Co

Revenue Revenue
Indonesia Vietnam
VND million VND million
Taxable revenue allocation (based on costs)
(VND6,000 million * VND3,000 million/
(VND2,000 million + VND3,000 million)) 3,600 1·5
(VND6,000 million – VND3,600 million) 2,400 1
VAT rate 0% 10% 1
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Output VAT (2,400/(1 + 10%)) 0 218 0·5
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Tutorial note: This scenario is based on Example 46 in Article 9.1(b) of Circular 219/2013 as amended by
Circulars 119/2014, 151/2014 and various other Circulars on exported services.

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5 KVL JSC

(a) Calculate corporate income tax (CIT) liability and loss carry forward
Item Note Adjustment
VND million
Accounting loss (18,000)
Gross profits sharing from Singapore minus net amount received
(USD5·5 million * 23,500 exchange rate/(1 – 17%) * 17%) 26,473 2
Rental income recognized in advance for tax purposes W1 11,250
Interest on loans to finance investment 0 1
Bond issuing costs W2 (3,000)
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Adjusted taxable income 16,723
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CIT at 20% 3,345 0·5
Less: tax credits for tax paid in Singapore (3,345) 1
Lower of: tax paid in Singapore: VND26,473 million
And tax payable in Vietnam for the period: VND3,345 million
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Tax payable in Vietnam 0
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Loss carry-forward 0 0·5
Tutorial notes:
– The income from Singapore was included in the accounting loss in the audited financial statement,
therefore only the tax amount should be added back.
– The interest expenses to finance investment projects should be deductible in full, accordingly there
should be no adjustment. In addition, it is based on assumption that interest expense is lower than 30%
EBITDA, given there was no reference to EBITDA in the question.
Workings:
W1 Rental income
VND million
Total rental income to be recognised for tax VND16,500 million/(1 + 10%) 15,000 0·5
Rental income recognised in audited F/S (VND15,000 million/3 years) * 9/12 months (3,750) 1
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Taxable income to be added for CIT in FY21 11,250
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W2 Bond issuing costs
Total bond issuing costs invoiced VND3,960 million/(1 + 10%) 3,600 0·5
Issuing costs recognized in audited F/S (VND3,600 million/4 years) * 8/12 months (600) 1
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Additional expenses to be deducted for CIT in FY21 3,000
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(b) Explain corporate income tax (CIT) treatments on real estate transfer and income from overseas
investment projects
(i) Real estate transfer
According to Article 4.2 of Circular 78/2014 as amended by Circular 96/2015, income from real estate
transfer is required to be accounted for separately from other activities and is subject to standard CIT rate
of 20% (not entitled to any incentives). 1
The loss from transfer of real estate can be offset with the income/gains from operating and other business 1
activities, and the residual after offsetting can be carried forward to future years (up to 5 years). 1
However, gains from real estate transfers cannot be offset with losses from operating and other business
activities. 1
(ii) Investment overseas
According to Article 3.1 of the above Circulars, income from investment overseas by a Vietnamese
company would be declared in CIT returns in Vietnam and subject to CIT at standard tax rate of 20%. 1
The Vietnamese company can claim tax credit in Vietnam for the income tax or a tax of similar nature
paid overseas. However, the amount of tax credit cannot exceed the tax liability calculated according to
CIT regulations in Vietnam. 1
In cases where the Vietnamese company repatriates the profits from overseas investment into Vietnam
without declaring this in the CIT declaration, the tax authority in Vietnam shall have the right to impose
taxable income on the overseas business operations. 1
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6 Mr Giang

(a) Taxable income and personal income tax (PIT) for the year 2021
Taxable income
VND million
Employment income
Salary (VND250 million * 12 months) 3,000·0 0·5
Cash bonus 500·0 0·5
Awards (including virtual land and Ministry award) 0·0 1
Freelancer income (VND1,800 million/(1 – 10%)) 2,000·0 0·5
––––––––
Total employment income 5,500·0
––––––––
Self-deduction (VND11 million * 12 months) (132·0) 0·5
Dependant deduction (VND4·4 million * 12 months * 4) (211·2) 1
Insurance contributions (VND29·8 million * 10·5% * 12 months) (37·5) 1
––––––––
Total annual assessable income 5,119·3
––––––––
Monthly assessable income (VND5,119·3 million/12 months) 426·6 0·5
Monthly tax liability (VND426·6 million * 35% – VND9·85 million) 139·5 1
Annual tax liabilities (VND139·5 million * 12 months) 1,674·0 0·5
Gain from sales of capital contribution
Sales proceeds for 10% share (VND70,500 million/2) 35,250 0·5
Costs of 10% shares sold (VND7,000 million/70% * 10%) (1,000) 2
––––––––
Taxable income 34,250
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PIT at 20% 6,850 0·5
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(b) Potential tax treatments of virtual land
– At the time of award, the virtual land relates to employment, so it should be treated as employment
income. However, its value is 0 at the time of award. 1
– After receiving the award, the virtual land becomes an individual asset of Mr Giang (he has the right to 1
decide what to do with it), with a historical cost of 0 to him. Any market price appreciation of the land
would be a gain to him (similar to a gain from investment in securities) but should not be taxable as it
is not realized. 1
– Accordingly, the market value of VND300 million at the year-end is not relevant for his personal income
tax (PIT) until the land is sold. Should he decide to sell the land, at the time of sale, Mr Giang should in
theory be subject to PIT. 1
–
However, in practice it is unclear whether and how PIT from the gain would be collected. There is no
specific requirement for either game operator and/or banks to withhold PIT from proceeds Mr Giang
receives from sales of such virtual land. It is assumed that Mr Giang can voluntarily declare and pay tax
on the gain, as investment income or prizes or gifts. 1
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