To the extent of this article, we would like to keep you updated of several notable points of the Law No. 38/2019/QH14 on Tax Administration passed by the National Assembly on 13 June 2019 (“LTA 2019”), which shall take effect on 01 July 2020, except its provisions on invoices and electronic source accounting documents which shall take effect on 01 July 2022.
- Tax management authority
According to Article 2.2.a of the LTA 2019, Regional Tax Sub-departments are introduced to tax offices to reflect the fact that at the moment, a number of Tax Sub-departments have been merged or are currently merging into Regional Tax Sub-departments.
- Tax administration subject
The following subjects have been newly added to the tax administration under the LTA 2019:
- Administration of invoices and evidencing documents (Article 4.5);
- Tax-related international cooperation (Article 4.10);
- Communication to and support for taxpayers (Article 4.11).
- Tax-related international cooperation
Tax-related international cooperation has been added with tax management authorities’ new responsibility according to Article 12 of the LTA 2019 for “taking measures to support tax collection pursuant to international treaties of which Vietnam is a member, comprising:
- Proposing that foreign tax management authorities and other competent agencies support tax collection in foreign countries where there are tax debts in Vietnam of taxpayers with tax payment obligations who are no longer in Vietnam (Article 12.4.a);
- Supporting tax collection when requested by foreign tax management authorities regarding tax debts payable in foreign countries by taxpayers in Vietnam by measures for activating collection of such tax debts in accordance with the provisions of this Law and in conformity with the reality of tax management practices of Vietnam (Article 12.4.b).
- Taxpayer right
In comparison with Law on Tax Administration No. 78/2006/QH11 passed by the National Assembly on 29 November 2006, as amended from time to time (“LTA 2006”), the LTA 2019 has added a number of new rights to taxpayers, which include:
- To receive official documents relating to their tax obligations from functional agencies conducting any check, inspection or audit (Article 16.2);
- To be informed of the time-limits for resolution of a tax refund, or the amount of tax not refunded and the legal bases for same (Article 16.5);
- To receive decisions dealing with tax and minutes of tax checks or inspections, and to request explanations of the contents of decisions dealing with tax issues (Article 16.7);
- Not to be dealt with for a tax breach and not to be subject to a late payment charge in a case where the taxpayer complied with the written guidelines and decision dealing with a tax issue by the tax office or other competent State agency regarding determination of the tax obligations of such taxpayer (Điều 16.11).
- To be permitted to consult and fully print out e-documents which the taxpayer has sent to the electronic portal of a tax management authority in accordance with the provisions of this Law and the laws on e-transactions (Article 16.13).
- To use e-vouchers during the conduct of transactions with tax management authorities and other related entities (Article 16.14).
- Tax registration time-limits
Article 22 of the LTA 2006 specifically requires tax registrants to make tax registrations within 10 working days after:
- obtaining Business Registration Certificates or Licences for Establishment and Operation or Investment Certificates;
- starting business with respect to organizations not bound to apply for business registrations or family households or natural persons subject to the business registration requirement, and yet to obtain Business Registration Certificates; etc.
In the meantime, Article 30 of the LTA 2019 generally provides that taxpayers must conduct tax registration and be issued by the tax office with a tax code prior to their commencing production and business activities or prior to obligations to pay tax to the State Budget.
- Time limits for grant of Tax Registration Certificates
Article 26 of the LTA 2006 specifically stipulate that tax offices will issue Tax Registration Certificates to taxpayers within 10 working days from receipt of valid tax registration files. In case where such certificates are lost or damaged, they will be reissued by tax offices within 5 working days from receipt of taxpayers’ requests.
In the meantime, Article 34 of the LTA 2019, Tax Registration Certificates are granted within 3 working days from the date of receipt of a complete tax registration file from taxpayers. In case where such certificates are lost, badly damaged, torn or burnt, they will be reissued by tax offices within 2 working days from the date of receipt of a complete file from the taxpayers.
- Time limits for submission of Personal Income Tax (“PIT”) finalization documents
According to Article 32.2 of the LTA 2006, annual PIT finalization files must be submitted not later than the 90th day after end of a calendar year or a fiscal year. In the meantime, according to Article 44.2.b of the LTA 2019, PIT finalization files of persons directly conducting tax finalization must be submitted no later than the last day of the 4th month after the end of a calendar year. It is clear that as from 1 July 2020, the time limit for submission of PIT finalization files by individuals who directly conduct tax finalization shall be prolonged.
- Cases in which tax debts, late payment charges and fines will be cancelled
According to Article 85 of the LTA 2019, as from 01 July 2020, there will be 04 cases in which tax debts, late payment charges and fines may be cancelled. Specifically:
- An enterprise or cooperative has been declared bankrupt and has made payments in accordance with the laws on bankruptcy but does not have any residual assets to pay tax monies, late payment charges or fines. (It is seen that cooperatives are added in the LTA 2019 in comparison with the LTA 2006).
- An individual taxpayer has died or has been declared by a Court to be deceased or to lack capacity for civil acts and does not have assets including inherited assets to pay outstanding tax, late payment charges or fines.
- The tax debts, outstanding late payment charges and fines of the taxpayer are not within the two cases prescribed above, and the tax management authority has applied coercive measures of revoking the Enterprise Registration Certificate, Business Registration Certificate, Cooperative Registration Certificate, Investment Registration Certificate, Licence for Establishment and Operation or practising license and such tax arrears have been outstanding for more than 10 years as from the deadline for payment of same and are unable to be recovered. (This is new under the LTA 2019 in comparison with the LTA 2006).
- The tax debts, late payment charges and fines of the taxpayer in the case where the taxpayer has been considered for exemption from late payment charges due to the impacts of a natural disaster, tragedy or epidemic on a large scope and has been granted an extension of the time-limit for tax payment but still suffers loss and damage, is unable to recover production and business nor to pay the tax debts, late payment charges and fines. (This is new under the LTA 2019 in comparison with the existing provisions of the LTA 2006).
- Declaration and determination of taxable prices of affiliated transactions
Compared to the LTA 2006, the LTA 2019 has supplemented in Articles 42.5.a and 42.5.b the provisions on the principles of declaration and determination of taxable prices for affiliated transactions as follows:
- The declaration and determination of the price of an affiliated transaction is made by analysing such transaction in comparison with an independent transaction on the principle of the substance or nature of the activity or the transaction decisive for the tax obligation in order to determine tax payable the same as for transaction conditions as between independent parties.
- The price of an affiliated transaction is adjusted in accordance with an independent transaction in order to declare and determine the amount of tax payable on the principle of not reducing taxable income.
It is noted that small-scale and low-risk taxpayers are exempt from implementing the above-mentioned provisions and shall apply a simplified mechanism in declaring and determining the price of an affiliated transaction.
- Accounting services rendered by tax agents to small and medium-sized enterprises
Article 104.1.c of the LTA 2019 regulates that tax agents may provide accounting services to micro enterprises. Accordingly, as from 1 July 2020, business organizations providing tax procedures may provide accounting services for micro enterprises when at least one person has an accountant certificate.
It is noted that micro enterprises are determined in accordance with the laws on supporting small and medium-sized enterprises.
- Legitimization of regulations on electronic invoices (“e-invoices”)
Previously, e-invoices were prescribed in sub-law instruments, typically including Decree No.
Legitimization of regulations on electronic invoices is an important point of the LTA 2019, though it will take effect on 01 July 2022. However, the LTA 2019 encourages agencies, organizations and individuals to apply the provisions on e-invoices and evidencing documents before 01 July 2022. Accordingly, upon selling goods or providing services, the seller must formulate and provide an e-invoice on the standard data format to the purchaser, and must record all items in accordance with the laws on tax and the laws on accounting regardless of the value of the goods sold or the services provided on each occasion (Article 90.1).
Enterprises and economic organizations shall use e-invoices with a code of the tax office on the sale of goods or provision of services regardless of the value of the goods sold or the services provided on each occasion, except for certain cases prescribed by the LTA 2019 (Article 91.1).
Business households and business individuals with an amount of turnover and number of employees satisfying the highest criteria for micro-enterprises as specified in the laws on support for small and medium sized enterprises that must implement the accounting regime and pay tax in accordance with the declaration method as well as those whose turnover from sale of goods or provision of services is determinable shall use e-invoices with a code of the tax office on sale of goods or provision of services (Article 91.3).
It is noted that business households and business individuals who fail to satisfy the conditions for use of e-invoices with a code of the tax office but wish to have invoices to provide to customers or enterprises, economic organizations and other organizations for which the tax office approves issuance of e-invoices to customers shall be issued with e-invoices with a code by the tax offices upon each occasion of transaction arising, provided that they must declare and pay tax before the tax office issues an e-invoice on each occasion of a transaction arising (Article 91.4).
- Tax administration regarding e-commerce business activities
This is a completely new content and is first regulated in tax administration laws. Specifically, according to Article 42.4 of the LTA 2019, the tax declaration and calculation for e-commerce business activities are as follows:
“In the case of e-commercial business, digital based business and other services provided by overseas suppliers without a permanent establishment in Vietnam, such overseas supplier is obliged to directly or to authorize another to conduct tax registration, tax declaration and tax payment in Vietnam or to authorize such tax registration, tax declaration and tax payment in Vietnam in accordance with guidelines provided by the Minister of Finance.”
- Prohibited acts in tax administration
In addition to the prohibited acts currently provided by the LTA 2006, the LTA 2019 has newly added a number of other prohibited acts in tax administration activities, specifically:
- Collusion, contact or covering up as between a taxpayer and a tax management official or tax management authority in order to conduct price transferring (Article 6.1);
- Deliberately failing to declare the amount of tax payable, or making a declaration about same which is incomplete, out of time or inaccurate (Article 6.4);
- Obstructing tax management officials from performing their duty (Article 6.5);
- Selling goods or providing services without providing an invoice as required by law, or using an illegal invoice or illegally using an invoice (Article 6.7).