Vietnam’s new Law on Tax Administration 38/2019/QH14 will take effect on July 1, 2020. Under the new law, tax authorities have been granted additional enforcement powers. At the same time, the new law has made it a little bit easier for both individuals and entities to file taxes.
The authorities are expected to provide five decrees and eight circulars to guide its implementation. While implementation procedures remain forthcoming, taxpayers can begin to prepare by reviewing the law with their local advisors now.
Seven big changes for taxpayers
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Increased enforcement and enhanced controls on related-party transactions
Under the new law, tax authorities will have additional power to collect tax, particularly in instances where individuals or companies attempt to evade tax.
This will include instances where companies fail to abide by transfer pricing requirements and transactions where entities intentionally attempt to avoid paying tax.
To help ensure compliance, Vietnamese tax authorities will increase cooperation with international jurisdictions through information exchanges.
Further, businesses that engage in transfer pricing will be required to be filed as a separate return, rather than include this information as part of the corporate income tax return.
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Tax registration
Tax registration certificates will be issued in three days. This process currently takes 10 days.
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Filing personal income tax
Personal income tax (PIT) return deadlines have been extended to 120 days from the current 90 days of the calendar year end. This extension is applied for individuals who finalize their annual tax returns directly with the tax authorities.
Individuals will be able to use their citizenship code to file once it has been implemented. At present, individuals are required to have a tax code and an identity card number for filing taxes.
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Legal representatives
Legal representatives of an entity in Vietnam 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 due taxes.
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Audits
Business organizations will be allowed to submit additional tax declaration documents after the tax authorities have announced an audit or inspection decision.
The draft law has also introduced two types of audit: tax inspection and tax examination. A tax inspection is longer and focusses on a specific issue. A tax examination is shorter but covers wider issues or anomalies.
The tax examination period has also been increased from five to 10 days.
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This article is produced by Vietnam Briefing, a premium source of information for investors looking to set up and conduct business in Vietnam. The site is a publishing arm of Dezan Shira & Associates, a leading foreign investment consultancy in Asia with over 27 years of experience assisting businesses with market entry, site selection, legal, tax, accounting, HR and payroll services throughout the region.
