In June, Vietnam’s National Assembly approved a new law on Tax Administration (Law No. 38/2019/QH14). Under the new law, tax authorities will be given more power to assess and collect taxes from taxpayers. At the same time, the new law has made it a little bit easier for both individuals and entities to file taxes.
The new law will take effect from July 2020. The authorities will provide circulars and decrees with details and guidance for the provisions in the upcoming months. As the new law will change existing procedures, remain tax-complying, taxpayers can begin to prepare by reviewing the law with their local advisors now.
SEVEN BIG CHANGES FOR TAXPAYERS
We highlight seven changes in the new tax law that taxpayers should be aware of:
1. Increased powers for tax authorities
Under the new law, tax authorities will have additional power to collect tax, particularly in instances where individuals and entities have overdue tax liabilities.
This will include instances where companies fail to abide by and transactions where entities intentionally attempt to evade tax or are a high risk of tax evasion.
To help ensure compliance, Vietnamese tax authorities will increase cooperation with international jurisdictions through information exchange.
2. Tax registration
Tax registration certificates will be issued in three days. This process currently takes 10 days.
3. Filing personal income tax
The filing deadline has been extended to 120 days from the current 90 days of the calendar year end.
The tax finalization can also be extended to 150 days from the calendar year end.
The deadline for tax returns to be filed if mistakes are found for up to 10 years. However, this must be done before any audit by the tax authorities.
The tax authorities will also issue an e-tax identification number once it has been implemented. At present, individuals are required to have an ID-card or identity card number for filing taxes.
4. Legal representatives
Legal representatives will need to ensure their companies are tax compliant. Under the new law, authorities may prevent legal representatives from leaving the country if their employer has not paid its taxes.
5. Audits
Business organizations will be allowed to submit additional tax declaration documents after the tax authorities have announced an audit or inspection decision.
The authorities can also extend the time of a tax audit, tax inspection and tax examination. A tax inspection is longer and focuses on a specific issue. A tax examination is shorter but covers wider issues or anomalies.
The timeframe for tax examination has also been increased from five to 10 days.
6. Penalties against entities
Entities that want to appeal a decision are required to pay the full tax amount as well as any penalties and late payment interest. If the decision is in their favor, the appeal court has the discretion to order the payment of 0.03 percent per day on the refunded amount.
7. E-commerce, E-tax, and E-invoices
Most of the provisions in this section will be implemented in July 2022. Regulations on e-commerce activities still require clarification at the present state; however, some notable highlights include:
- Commercial banks will be required to declare and pay taxes on behalf of e-commerce companies that do business abroad and earn income from Vietnam.
- Foreign e-commerce companies that do not have a permanent establishment in Vietnam will be required to register for tax in Vietnam or authorize another entity to do so.
- E-commerce trading floors will be required to declare and pay tax on behalf of individuals that transact through them for tax purposes. This includes tax authorities as well. Further details on e-tax transactions can be found in our article ‘Vietnam’s new rules for E-Tax transactions’.
- E-invoices will be mandatory for all enterprises from November 2020.
The new law will also affect non-resident businesses that sell goods and services into Vietnam via online platforms. Further details on e-invoices and e-commerce activities can be found in Circular No. 68/2019/TT-BTC.