Tài liệu thi môn F6 ACCA Việt Nam cho kỳ thi 2011

F6. Vietnam Taxation

Question
s

bank

June 2011 Intake
F6. Vietnam Taxation

2011

2



PART 1

CORPORATE INCOME TAX


Q1. Explain the following terms using your own words

• Permanent Establishment (5m)

PE is a production or business establishment through which a foreign
company perform all or part of its business activities in Vietnam and
having taxable revenue there from. (2m)

For example, a PE may be: branch, operational office, construction
site, workshop, plant, mines etc. (2m)

In addition, a foreign company may also be
viewed/considered/regarded as having a PE in Vietnam if it has agent
or representative in Vietnam with the authority to conclude or sign
contract on its behalf or regularly deliver goods or render services in
Vietnam. (1)

• Taxable income (thu nhap chiu thue) and assessable income (thu
nhap tinh thue) (2m)

Taxable income is determined as revenue from production/trading or
rendering of services less deductible expenses plus other income.

Assessable income equals to taxable income less exempt income less tax
loss carried forward.

Q2. A tax payer said that “The tax period is always based on calendar
years”. Provide a brief explanation if you do not agree with his/her
statement (5m).

The statement of tax payer may be not always correct for the following reasons:

+In the case, the company chooses its tax period to its financial year which is different
with calendar year and it was accepted by the tax department (e.g. it apply the fiscal

year from 1 July to 30 June instead of 1 January to 31 December).

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Q3. A foreign company received income from providing construction
supervision services to your company (established in Vietnam). The general
director of the foreign company told you that the service fees will not be
subject to Vietnam CIT as his company is incorporated outside of Vietnam.
Explain whether you agree or disagree with his view (4 marks).

The general director’s view is not correct. Under/According to/In accordance
with/Pursuant to the prevailing CIT regulations, a foreign company having
income from doing business in Vietnam is subject to
CIT liability.

Notwithstanding the above, if there is a DTA (Double Taxation Agreement) between
Vietnam and foreign country where the foreign company is located, the foreign
company may be not subject to CIT liability should it has no PE in Vietnam.

Nevertheless, if there is no DTA, the foreign company shall be subject to CIT
liability.

Q4. A joint stock company commenced it business on 1 July 2008. Its fiscal year is
from 1 January to 31 December. Details of the company income and expenses are as
follows:

Net profit before tax as per their accounts:

• From 1 July 2008 to 31 December 2008: VND245,500,000
• From 1 January 2009 to 31 December 2009: VND786,900,000

The following expenses may not be allowed for deduction:

2008 2009
Expenses that are not supported with proper
invoices
12,670,000

18,870,000

Depreciation expenditure in excess of the
stipulated level
34,560,000

35,785,000


Non-deductible
unrealized foreign exchange
loss from assets balances
7,600,000

32,650,000



In 2009, the company identified a turnover of VND54,600,000 that the accountant did
not account for in the tax return of 2008. The relevant expenses in respect of this
turnover are VND37,900,000 (assume that these expenses are fully deductible and was
also not accounted last year).
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Calculate assessable income for each relevant period.

Calculation of CIT of XYZ Co.
For year 2008, 2009
Unit: VND


2008

2009
A Net profit before tax per
accounts

245,500


7 86,900






B Less:




1 Expenses of the added back
turnover

-

37,900

37,900



245,500


7 49,000

C Add:




1 Turnover that was not taxed last
year


54,600


2 Expenses not supported with
proper invoices
12,670


18,870


3 Exceed depreciation expenditure 34,560


35,785


4 Non-deductible unrealized foreign
exchange loss
7,600

54,830

32,650

141,905

D Taxable income


300,330


890,905

E
Assessable income
(Assuming no
exempt income, no losses carried
forward, and no science and
technology fund allocation)

300,330


890,905



Q5. For the purposes of determining turnover for CIT, state the point in time when

turnover is derived in respect of:

• goods; and
• services:

For the sales of goods, taxable point of time is when the ownership and risk in
association with the goods is transferred from the buyer to seller.

For the provision of services, taxable point of time shall be upon the completion
of services or issuance of invoice, whichever comes earlier, regardless of the
payment has been made or not.
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The company delivered goods to its customer in the tax period. However, at the
end of tax period the company has not yet received the goods acceptance note
from its customer as agreed in the sale contract so that it can issue the invoice.
Explain the tax treatment on this turnover.

Although it is not clearly as to the ownership and risk associated with the goods
was transferred from the seller to the buyer (given the seller not yet received the
goods acceptance note), considering the company had delivered goods to its
customers in the tax period, it is likely that the ownership and risk had been
transferred and hence, it is qualified to recognize the revenue in the tax period.

In accordance with the CIT regulations, the fact that the invoice is not issued will
not impact to the recognition of revenue.

Q6. Explain on how turnover is determined where the business establishment is:

• a VAT deduction method tax payer; and
• a VAT direct method tax payer.

Q7. For sales of goods on installment basis, explain the treatment on determining the
turnover and income for CIT purposes in respect of:

• The installment amount excluding interest on installment; and
• Interest on installment.

Q8. Using your own words, explain the CIT treatment in respect of income received
from overseas investment and the associated tax paid in the foreign country.

+

+

Deduct / Credit

Creditable input VAT

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Q9. Details of income of the Brick Co. during tax period 200X as follows:

Turnover from production and trading of goods 500,000,000

Deductible expenses in relation to generating the above
turnover
350,000,000

Interest on bank deposit 45,000,000

Unrealized foreign exchange gain (assets balance) 12,700,000

Fee
on the right to use
the compan
y’s patent 20,000,000

After-tax dividend received from the long-term securities
investment (in a domestic company) (exempt)

46,500,000

Net income received from overseas investment project 300,000,000

Foreign tax paid on the overseas income 75,000,000

Opening balance of the provision for inventory devaluation.
There is no movement of this provision account during the
fiscal year.
57,000,000

Level of the provision for inventory devaluation as
determined in accordance with the Ministry of Finance
guidance at the year-end
38,500,000


Calculate the assessable income. Brick Co’s applicable CIT rate is 25%. Show your
workings where necessary and give explanation on each item that is not included on
your calculation of taxable income.

BrickCo. Ltd
Calculation of CIT FY200x


VND VND
Turnover from production and trading of
goods

500,000,000

Less: deductible expenses

350,000,000

Gross Income

150,000,000

Add: other income


Interest on bank deposit 45,000,000


Unrealized foreign exchange gain (assets
balance – Note 1)
-


Fee on the right to use the company patent 20,000,000


After-tax dividend received from the long-term
securities investment (in a domestic company) –
Note 2
-


Income received from oversea investment

(=300,000,000+75,000,000)
375,000,000


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Reversion of the provision for reduction on
inventory price (57,000,000-38,500,000)
18,500,000

458,500,00

Taxable income

608,500,000

Assessable income
(Assuming no losses
carried forward, and no science and technology
fund allocation)

608,500,000

Tax payable @ 25%

152,125,000

Less: Tax paid overseas (Note 3)

75,000,000

Remaining tax payable

77,125,000


Note:

1. In accordance with Circular 177, unrealized foreign exchange gain from the
revaluation of assets balances denoted in foreign currency is not taxable for CIT
purpose.
2. In accordance with Circular 130, after tax dividend is exempt for CIT purpose.
3. CIT in accordance with Vietnamese regulation = VND375,000,000*25% =
VND93,750,000, higher than the tax paid overseas. Therefore, tax credit is
VND75,000,000 only.

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Q10. Presented below is the draft profit and loss account of Woods Co. Ltd for
financial year ended 31 December 2009. The company principal activity is production
and trading of confectionary. Woods Ltd is a VAT deduction method tax payer.

Note VND million
Net sales 1 3,400

Less Cost of sales 2 2,120

Gross profit 1,280

Add: Financial income 3 120

Less: Financial expenses 4 80

Less:

Selling expenses 5 290

Administrative expenses 6 340

Net profit from operation 690

Add: Other income 7 270

Less: Other expenses 20

Net profit before tax 940

Notes:


(1) Excluding VAT and after deduction of the cash discount of VND75,000,000, which is not
supported by proper invoice/voucher. There is a sale turnover of VND24,000,000
exclusive of VAT that is recognized this year (the associated expenses is VND20,000,000),
but was already included in the taxable income last year.

(2) Including an excess of VND70,000,000 of depreciation expense of an machinery over the
stipulated level.

(3) Including an unrealized foreign exchange gain of VND36,000,000 on the year-end
revaluation of receivables and payables.

(4) Including an interest income on deposit of VND15,000,000 that is wrongly accounted to
financial expenses.

(5) Including:

- The amount advertising/promotion/marketing expenses, totaling VND 37,000,0000 which is
the excess over the stipulated 10% limit.
- A bad debt written-off of VND10,000,000 not in accordance with the prevailing regulations
- Additional provision of doubtful debt of VND38,000,000 not in accordance with the
prevailing regulations

(6) There is a donation to an event raising fund to protect the environment using the company
products. The company accounted this as an administration expense item at the production
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price of VND20,000,000. If these goods are priced at market price the amount will be
VND22,000,000.

(7) Including the after-tax income earning from contribution of capital to a domestic joint
venture company of VND40,000,000.

This also includes a net income from the assignment of the land use rights of
VND200,000,000. Deductible expenses in respect of the assignment of land use right is
VND800 million.

Wood Co. Ltd
Calculation of CIT FY2009

VND VND
Net profit before tax

940

Adjustments


Cash discount of VND75,000,000, which
is not
supported by proper invoice/voucher (Note 1)

75


Taxable revenue already included in the taxable
income last year. (Note 2)
(24)


depreciation expense of an machinery over the
stipulated level.

70


Unrealized foreign exchange gain (36)


Including an interest income on deposit of
VND15,000,000 that is wrongly accounted to
financial expenses (=15*2=30mil)

30


A&P exceeding cap 37


bad debt written-off of VND10,000,000 not in
accordance with the prevailing regulations

10


Additional provision of doubtful debt of
VND38,000,000 not in accordance with the
prevailing regulations

38


There is a donation to an event raising fund to protect
the environment using the company products
22


Including the after-tax income earning from
contribution of capital to a domestic joint venture
company of VND40,000,000.
(40)

182


Total assessable income

1,122

Total assessable income excluding transfer of
land use right

922

CIT liability (25% *922) (excluding transfer
of land)

230.5

Assessable income from the transfer of land

200

CIT liability from the transfer of land

50

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Total CIT liability

280.5


Notes:
1. Cash discount not properly supported by … is not deductible.

2.



Required:
Compute Woods Ltd tax payable for 2009 tax year. The company applicable tax rate is 25%.

Q11. Describe the principles to determine non-deductible expenses for CIT purposes.

Q12. Explain when expenses are deductible? Provide some examples together with your answer.
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PART 2

VALUE ADDED TAX


Q1. Explain the rule of determining of turnover for VAT purposes.

Q2. Describe the case when goods are deemed to be exports. What is the VAT rate for these cases,
especially when the exported goods are VAT exempted goods.

Q3. Explain the VAT treatment on VAT withheld upon payment to the foreign
organizations/individuals who conducts business in Vietnam without establishing a legal presence

and is a non-VAS user for FCT purposes.

Q4. Explain the tax implication in case of an international transportation service company provides
forwarding services (including transport of goods from the factory to domestic ports and from
domestic ports to the foreign countries and vice versa) to an enterprise located in an Export
Processing Zone (EPZ).

Q5. Bamboo Ltd., a VAT deduction method tax payer, sells both exempted and VAT-able goods.

Explain the tax treatment on the input VAT incurred on goods/services collectively used for both
activities. Give examples where necessary.

Q6. Explain the difference between “zero-rated” sale and “exempt” sale.

Q7. Trees Co. is VAT deduction method trading company with total sales of the month from 1 July
2009 to 31 July 2009 amounting to VND530 million. The total sale figure includes VAT charged to
the purchasers where applicable. Included in the sales was VND200 million of export sales. The
company satisfies all required documents/procedures for the export. Proceeds from disposal of a
fixed asset is VND11 million, inclusive of VAT, and was not included in the total sale figure.

The fixed asset was subject to 10% VAT on purchase. In the same period the company had the
following transactions (inclusive of VAT and purchased from VAT deduction method tax payers
unless otherwise mentioned).

VND
Purchase of goods for trading 247,500,000

Purchase of goods for trading from VAT direct method tax payer 65,000,000

Computers 20,000,000

Office stationery 14,700,000

Electricity 27,500,000

Salary and statutory contribution 70,000,000

Fuel 6,600,000

Gift stuff for sales promotion purposes (these are still in stock at the end of
the month, VAT at 10%)
55,000,000

Goods purchased for donation to locality (fully used for donation purposes).
The marketable value at the time of use (excluding VAT) is VND19,000,000

19,800,000


The cost of good sold this month included cost of destroyed materials of VND25,000,000 (before
VAT). The relevant input VAT has been declared in last 6 months. The Company has been able to
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claim from insurance company for VND27,500,000 for such materials. Company’s goods are subject

to 10% VAT rate.

Required:


a) Calculate the VAT payable to or receivable from the tax authority for July 2009. You are required
to show items for which input VAT cannot be claimed stating clearly the reason. Round off your
calculation to the nearest VND.

b) In case of Trees Co, state the latest date for declaration and payment of VAT to the tax authority in
respect of July 2009 VAT liability.

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Q8. Ampere Ltd. is a VAT deduction method registered entity in Vietnam engaged in the
manufacturing of voltage stabilizers with a capacity of over 50 KVA. In July 2009 the following
transactions were undertaken by the company:

Date of
Invoice
Date of
receipt of
payment
Description Amount

(VND’000)

2 July 2009

15 July 2009

Sale of 5 voltage stabilizers to a local
company.
500,000 (excluding
any
Applicable VAT)
15 July
2009
30 June 2009

Sales of 10 voltage stabilizers to an
overseas company. The stabilizers
were delivered to and used by the
customer’s subsidiary in Vietnam. The
subsidiary engages in hygiene services
for Industrial Zone
1,000,000 (excluding
any applicable VAT)
12 July
2009
31 July 2009

Sale 9 voltage stabilizers to X Ltd, a
local company. The contract clearly
states that the customer will pay no

more than VN900,000,000
900,000

25 July
2009

Issued a voltage stabilizer for use in its
factory as fixed asset.
50,000 (cost,
excluding any
applicable VAT)

Details of purchases (excluding any applicable VAT) are as follows:

Date of
invoice/relevant
documents
Description Purchased
amount

2 July 2009

Import duty and VAT assessment notice from Customs
on imported mechanical parts (5% VAT) use for
production. All relevant liabilities were paid
700,000

6 February 2009

Purchase of local mechanical parts (5% VAT), this was

not included in the VAT declaration of February 2009
100,000

27 July 2009

Production line consultancy advisory fees

20,000

1 August 2009

Installation fee billed by a local company

25,000

27 July 2009

Stationery

32,000

27 July 2009 Restaurant expenses for 10-year anniversary 15,000

1 June 2009 Purchase of ready-to-use electronic cable using for
production. This was not declared in June 2009 pending
a dispute on the quantity of goods. This month the
dispute
was resolved, the company accepted purchased goods in
accordance with the invoice quantity
200,000

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Required:

a) Ascertain the amount(s) of VAT payable to or recoverable from the tax authority for the relevant
prescribed VAT period. You should clearly state the reason for including or excluding any item in
your calculations.

b) How would your answer differ if the stationery is purchased from a VAT direct method taxpayer?

c) With reference to (a) above, state the appropriate deadline(s) for filing the monthly VAT return for
the relevant prescribed period involved. In case of VAT payable, state the latest date for payment to
avoid the imposition of late payment penalties.

Q9. a) Briefly explain the following:

1) Statutory requirement for VAT registration;

2) In general, for a VAT deduction method taxpayer, how is the taxable price determined for VAT
purposes? Particularly in the following cases:
 Goods for the purposes of exchange, gift or donation, or paid in lieu of wages;
 Selling with a price discount to customer.

3) Conditions for an input VAT to be deductible.

b) Good Computers Ltd (a VAT deduction method registered tax payer) sells computer at a 10%
discount off the usual selling price of VND8,000,000 (VAT inclusive). Determine the taxable price
for VAT purposes. What will be the VAT treatment if the Company has a promotion of “buy one
computer get one pair of speakers for free”?

c) A VAT deduction method entity wishes to absorb VAT on a product (subject to 10% VAT rate) it
is currently selling for VND20,000,000 before tax. Calculate the amount of VAT the entity is
required to account for and the taxable price.

Q10. The following 2 companies are VAT deduction method registered taxpayers engaged in varying
business activities (none of them is exemption activities).

INDOCHINA TRAVEL LTD.

a) Conducting 3 days/2 nights tour for Vietnamese and foreigners from Ho Chi Minh City to Phan
Thiet.

b) Conducting 5 days/4 nights tour for foreign tourists of which, 2 days/2 nights sight-seeing in Ho
Chi Minh City, and 3 days/2 nights sightseeing in Cambodia before return Ho Chi Minh City. Tour is
priced on a tour package basis.

c) The company recently disposed a fixed asset.

GOODS MANUFACTURER LTD.


a) Rent a condominium in Ho Chi Minh City for the accommodation of its employee seconded from

overseas, from a VAT credit method tax payer.
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b) Obtain financial advice from a consultancy firm (VAT deduction method tax payer) in connection
with the application of a new computerized management system.

c) Apply for corporate membership with AAA Health Club.

d) Purchase a 7-seat car for its General Director for business travel at VND1,900,000,000.

Required:


Advise the companies on their input/output VAT implications (where relevant) with respect to each
transaction mentioned above, including the possibility of input/output offset.
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PART 3

FOREIGN CONTRACTOR WITHOLDING TAX



Q1. State who is responsible for registering, declaring and paying of tax under a contract signed
between foreign contractors with Vietnamese parties, where:

(a) Foreign contractors adopting Vietnamese Accounting System; or

(b) Foreign contractors not adopting Vietnamese Accounting System. (3marks)

Q2. For foreign contractor and foreign subcontractor who do not adopt Vietnamese Accounting
System, briefly explain how the taxable turnover is determined for Corporate Income Tax and Value
Added Tax purposes. (5 marks).

Q3. For foreign contractor and foreign subcontractor not adopting VAS, discuss how the value of
machineries supplied by foreign contractor and subcontractor is treated for Corporate Income Tax
and Value Added Tax purposes. (2 marks)

Q4. (a) Discuss the Corporate Income Tax and Value Added Tax implications of foreign
organizations supplying goods to Vietnamese parties. (b) Discuss the Personal Income Tax and
Value Added Tax implications of foreign individual supplying goods to Vietnamese parties.

Q5. For foreign contractor and foreign subcontractor not adopting VAS, discuss how the taxable
turnover is determined where part of the value of contract signed by a foreign contractor with
Vietnamese parties is subcontracted to:

(a) Foreign subcontractors;

(b) Vietnamese subcontractors;
(c) Will your discussions in (b) be different if the foreign contractor signed a contract with
Vietnamese supplier to purchases goods in Vietnam to perform the signed foreign
contractor’s contract.

Q6. Discuss how loan interest under a foreign loan contract is taxed under the taxation regime
(regulation/laws) for foreign contractors.

Q7. State the different types of activities that are not subject to the foreign contractor tax (FCT)
regime in Vietnam.

Q8. Faulty Machines Pte Ltd (“FMP”) is a company incorporated in Singapore. FMP enters into a
contract with a Vietnamese company to lease a motorbike assembly line under an operating lease
contract. The contract is for 2 years, leasing fee is US$100,000/month (net of all Vietnam’s taxes).
Under the contract, FMP is responsible for insurance and costs of operating personnel. During
September 2009, FMP received the first payment of US$100,000 and paid the following expenses:

 Insurance premium of US$5,000 to a Singaporean insurer, contract and invoice are available;
 Maintenance costs of US$2,500 to a Vietnamese company. FMP did not obtain VAT invoice
from this company because the company said that it was going to charge addition 10% for
such invoice.

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Required:
Calculate the CIT and VAT FMP has to pay for September 2009 (in USD). Ignore the tax
treaties.


Q9. Quality Construction Limited (QCL), a Singaporean construction and construction consultancy
company, signed contract with JV Limited, a foreign invested enterprise in Vietnam, to construct a
factory and install part of the production line in this factory, that are forming the fixed assets of the
JV.

According to the contract, installation part will be subcontracted to a foreign subcontractor, part of
the construction will be subcontracted to C Ltd. a Vietnamese construction company. QCL will
provide procurement consultancy, construction materials, supervise the installation, will perform
their part of construction works. Details of the contract are as follows:

Amount

(USD)

Construction and installation services:
- Perform by QCL
- Subcontracted to C Ltd.
- Subcontracted to a foreign contractor

1,500,000

500,000

200,000

Construction materials (assuming 10% VAT rate):
- Those cannot be produced in Vietnam
- Other materials

500,000

1,000,000

Procurement consultancy 70,000

Supervising the installation process 200,000


QLC and the foreign subcontractor are not adopting the VAS. The above value is net of any FCT.

QLC arranged for bidding of the supplying of the other materials under the contract. QLC signed
contract to purchase all other materials from a Vietnamese supplier.

Required:


a) State who is responsible for registration, declaration and payment of FCT in respect of the foreign
subcontractor in question.

b) Discuss whether or not the value of the materials that is purchased from Vietnamese suppliers will
be included in the taxable turnover for FCT purposes.

c) Estimate FCT liability of the foreign contractor/foreign subcontractor under this contract. The
exchange rate for conversion purposes is USD=VND16,000.

Ignore the provisions of the tax treaty signed between Vietnam and Singapore at this stage.

d) If the contract signed with the JV Ltd. does not separate value of each activity, explain the tax
implications of this case.


Q10. GB Holdings Plc (GBP), a company incorporated in UK, established a 100% owned
manufacturing subsidiary in Vietnam under the Law on Foreign Investment, GB Vietnam Limited
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(GBV). GBP has obtained a credit facility with a bank in UK, and re-lended this amount to GBV
under a loan contract signed between GBP and GBV on 1 January 2006.

The terms of the loan are as follows:

Loan amount USD5,000,000
Interest Fixed 8% per annum, payable on each 6 months. The
first due date is 30 June 2006
Lending term 10 years
Loan repayment Principal is payable at 31 December every year, at the
amount of USD500,000
Guaranty fee 2% of the balance of the loan at the beginning of each
year. Payable on each 30 June every year. The first
due date is 30 June 2006

Loan arrangement fee USD50,000, one-off payment on 30 June 2006
Tax GBP s responsible for any Vietnam withholding tax
arising from the loan contract

The loan was registered with the State Bank of Vietnam. GBP also granted to GBV the rights to use
the brand name of one of its product. The contract signed between GBP and GBV on this was
registered with the Vietnam relevant authorities in Vietnam. First royalty payment of USD225,000
was made by GBV on July 2006. The royalty paid to GBP is agreed on a net of withholding tax
basis.

Ignore the provisions of the tax treaty between Vietnam and UK at this stage. For your answers of
the below requirement, use exchange rate USD1=VND16,000. GBP does not register to apply VAS.

Required:


a) Discuss the FCT treatment in respect of interest, loan arrangement fee and guaranty fee under this
foreign loan.

b) Calculate FCT liability of the first interest and services fee payment on 30 June 2006.

c) Calculate FCT liability of the first royalty payment on 31 July 2006.

d) If there is an extension or adjustment of the term of the medium/long-term foreign loan that is
signed prior to 1 January 1999, discuss the tax implications of this extension/adjustment.


Q11. Foods Vietnam Limited (FVL), a foreign invested enterprise in Vietnam, signed a contract with
Best Design Limited, a US incorporation on 1 April 2005. According to the signed contract Best
Design will provide architecture design for FVL’s office and factory and also provide project

management service during the construction phase. The construction project will last 2 years. Best
Design performed their obligations under the contract both in Vietnam and outside of Vietnam.
Details of its billing at 30 August 2006 to FVL for the period from 1 April 2005 to 30 August 2006
as follows:



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Amount
(USD)
Geological survey performed in Vietnam 85,000

Designing works performed entirely outside of Vietnam 300,000

Project management services for the period from 1 March 2006 to 30 August
2006
200,000

Recharge of accommodation and traveling expenses of Best Design’s specialists 30,000



The billed value of the geological survey service does not include part of this service that was

subcontracted to a Vietnamese subcontractor as agreed in the contract with FVL. The subcontracted
value is USD25,000.

With respect to the designing works, Best Design paid USD10,000 to a consulting firm in US for
designing consulting services.

All Vietnam taxes arising from the contract is to be borne by FVL. There is no tax treaty between
Vietnam and US. Best Design does not apply to use VAS.

Required:


a) With respect of this signed contract, briefly discuss the FCT treatment on:

• The value subcontracted to the Vietnamese subcontractor.
• The accommodation and traveling recharges.
• Value of the service performed entirely outside of Vietnam.
• Value paid to the US consulting firm.
(4 marks)

b) Calculate the FCT liability of the first billing by Best Design.
(6 marks)

c) Will the FCT be different if the value of each business activity under the contract cannot be
calculated separately, and Best Design bills FVL on a lump sum amount basis.
(4 marks)

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PART 4

PERSONAL INCOME TAX



Q1. Discuss how the residency status is determined for Vietnam PIT purposes and how the residency
status affects the tax treatments of individuals.

Q2. Give 3 examples of benefits that are provided to employees, which are exempted from PIT.

Q3. Briefly describe how to determine the assessable income of individuals arising from employment
and from doing business, assuming that the taxable income has been identified.

Q4. Briefly describe how to determine the taxable income of individuals doing business.

Q5. Explain the various deductions that an individual may claim. Are deduction available to all
income categories and both residents as well as non-residents?

Q6. Explain the tax treatments of income from doing business and employment of nonresidents.
State the major differences with the tax treatments of the same income for residents.

Q7. Kim Yu Na first arrived in Vietnam on 2 January 2009 and subsequently visited Vietnam many
times, in total she stayed in Vietnam for 105 days for the period from 2 January 2009 to 1 January
2010. Determine Kim’s first tax period and her tax residency status.

Q8. Mr George Soros is a masterpiece investor specializing in trading listed stocks and bonds with
investment amount of VND2,000 billion. He anticipates that 2009 is a very difficult year for the
stock exchange and only expects to make 11% gain on his original investment, which includes 1% of
relevant expenses (such as brokerage commission, legal and investment consultancy fees, etc.). The
gain shall be made from various transactions during the year with a total turnover of VND3,000
billion. Soros is considering what method would result in lower tax liability.

Q9. Briefly explain the tax treatment of income from transfer of capital for residents and
nonresidents.

Q10. Briefly explain the tax treatment of income from capital investment for residents and non-
residents.

Q11. Briefly explain the tax treatment of income from transfer of real estate for individuals. Is there
any difference between non-residents and residents for PIT purpose in respect of this income
category?






F6. Vietnam Taxation

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21

PART 5

PAST YEAR QUESTIONS


1. JUNE 2007


Exchange rate:


Euro 1 = VND20,000
USD1 = VND16,000
AUD1 = VND11,000

Section A – BOTH questions are compulsory and MUST be attempted

1 (a) Identify THREE types of business establishment or activities carried on in Vietnam which are not liable
to pay corporate income tax (CIT) in Vietnam. (3 marks)

(b) Gios Vietnam Limited was established in 2004 and manufactures bicycle frames for export to Italy. 90% of
the bicycle frames manufactured are sold to its parent company Gios Italy Spa Limited. During the 2006 tax
year, Gios Vietnam Limited made an accounting profit (before tax) of 10,000,000 Euro. The following
transactions (all in Euro), were recorded in its books of account:

Items

Amount

(EUR)
Sales revenue

50,000,000

Cost of goods sold

20,000,000

Salary and wages

5,000,000

Advertising and marketing

2,000,000

Rent

750,000

Charitable contributions to the Lance Armstrong Cancer Foundation

100,000

Increase in prepaid insurance recorded on the balance sheet

250,000

Royalties paid

2,000,000

Provision for parent loan interest

1,000,000

Uninvoiced allocation of
parent company expenses

1,000,000

Dividends paid in the year

1,000,000

Provision for dividends

2,000,000

Additional legal capital contribution

10,000,000

Provisional corporate income tax payments

1,500,000


Required: Calculate the corporate income tax (CIT) payable by Gios Vietnam Limited on 2006 taxable

income. You should commence your computation with the accounting profit figure and list all the
individual items specifically referred to in the question, indicating with ‘0’ those for which no
adjustment is required (i.e. they do not affect the calculation). (15 marks)

(c) CAC Limited, which is registered with the tax authorities for value added tax (VAT), incurred the
following expenditure on fixed assets in the year ended 31 December 2006:

(1) On 1 April 2006, a new machine with a purchase price of 7·7 million VND (including VAT). In addition to
the purchase price CAC Limited incurred 800,000 VND transporting the machine to its factory premises and
300,000 VND on installing it. The anticipated useful life of the machine is eight (8) years.

(2) On 1 June 2006, machine tools with a total cost of 4·5 million VND. The anticipated useful life of the
machine tools is three (3) years.
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(3) On 1 August 2006, the right to use a patent in respect of the manufacture of specialist K widgets for a
period of five (5) years, for 8 million VND. CAC Limited will also be required to pay an annual fee of 1,000
VND for every 50 K widgets produced in each of the five years. CAC Limited produced a total of 50,000 K
widgets in the year ended 31 December 2006 and expects to produce 150,000 K widgets in the year ending 31
December 2007.

All amounts are stated exclusive of VAT except where stated otherwise.

Required:

Calculate the expenses deductible by CAC Limited for corporate income tax (CIT) purposes as a result
of the above, in the years ended 31 December 2006 and 2007 respectively, giving brief explanations of
your treatment in each case. (10 marks)

2 Ms Chau Tran, born in Vietnam, is a citizen of the United States and holds only a US passport. Ms Tran is a
consultant for Transition, Inc, located in Los Angeles, California. During 2007, Ms Tran travelled to Vietnam
to work for Transition, Inc’s affiliated company, Transition-Vietnam Ltd, a company licensed under the Law
on Foreign Investment in Vietnam. The secondment was effective from 15 January 2007–15 April 2007 and
this was the first year that Ms Tran was in Vietnam for business purposes.

During the three months secondment, Ms Tran’s salary continued to be paid by Transition, Inc. While in
Vietnam, Ms Tran received a per diem allowance for daily expenses such as meals. The per diem allowances
were paid by Transition-Vietnam Ltd. In addition, Transition-Vietnam Ltd provided Ms Tran with an
apartment during her stay in Vietnam and also paid for the utility expenses for this apartment.

After the end of her secondment, Ms Tran spent the month travelling through Vietnam, on holiday. After her
travels, she returned to the USA.

Ms Tran had the following income in 2007:
– Salary – USD60,000 (net of tax while she is outside the USA)
– Interest deposited into a USA bank account – USD1,200, earned evenly over the 12 months
– Dividends from stock investments deposited into a US bank account – USD600 earned evenly over
the 12 months
– Bonus – USD10,000 received in November 2007 and deposited into a US bank account.

Ms Tran had the following expenses deducted from her salary during 2007:
– Non compulsory contributions to an individual retirement account – USD12,000 for the year,
deducted bi-weekly from her after tax pay.
– Voluntary contribution to United Way, a non-profit charitable organisation – USD200 in February
2007.

This amount was directly deducted from her payroll.

From 15 January 2007 through 15 April 2007, Transition-Vietnam Ltd paid for the following in respect of Ms
Chau Tran:
– Rent – USD1,000 per month
– Laundry services – USD45 per month
– Utilities – USD200 per month
– Per diem allowance – USD15 per day
Prior to arriving in Vietnam, Ms Tran incurred the following expenses relating to her secondment; these were
all subsequently reimbursed by Transition, Inc on presentation of valid invoices. All the reimbursements were
deposited into her bank account in the USA.
– Round trip airfare – USD1,600
– Visa application fee – USD280
– Excess luggage – USD50
– Immunisations/vaccinations – USD600
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While present in Vietnam, Ms Tran noticed that a lot of people were making a lot of money on the stock
market in Vietnam. On 20 January 2007 she transferred her life savings of USD250,000 into a Vietnam bank’s
custodial account and invested heavily in the stock market. She was extremely successful and just before Tet
(listening to rumours of an imminent share market crash) she sold out of all her positions and made a
USD125,000 gain. She kept the gain in Vietnam (for future trading) but transferred the original USD250,000

(less any taxes, bank charges etc) back to the USA.

Required:

(a) Explain whether or not Ms Tran will or will not be a Vietnam tax resident for the year 2007 and
state the basis on which she would pay tax in Vietnam. (3 marks)

(b) (i) Calculate Ms Tran’s Vietnam personal income tax (PIT) liability for the year ended 31 December
2007. (18 marks)

(ii) Give brief explanations of your treatment of:
– the contributions to United Way;
– the rent paid by Transition-Vietnam Ltd; and
– the Vietnamese share gains. (3 marks)

(c) Explain how the calculation of Ms Tran’s tax liability would differ if she had spent a further 90 days
in Vietnam in the second half of year ended 31 December 2006 working on an unrelated project.

Note: you are not required to calculate her revised tax liability. (3 marks)

Section B – THREE questions ONLY to be attempted

3 (a) An establishment imports four Seat cars in complete units with an import tax calculation price of
USD30,000 each.
– The import tax rate is 100%, the special sales tax rate is 80%
– The import tax payable is USD30,000
– The special sales tax payable is USD48,000

Required: Calculate the VAT payable on the importation of each car and the total landed cost per car
in Vietnam (excluding freight insurance etc) in USD. (3 marks)

(b) A literary publisher sells books to a book distribution company. The VAT inclusive cover price per book is
VND12,600. The distribution charge is VND3,150 per book.

Required: Calculate the VAT payable per book at the book distribution stage. (7 marks)
(c) A motorbike company sells 200 Honda motorbikes for VND30,000,000 per bike, exclusive of VAT. The
price per motorbike includes instalment interest of VND750,000.

Required: Calculate the value added tax (VAT) calculation price per bike, clearly stating the basis used.
(3 marks)

(d) State the circumstances when value added tax (VAT) will be calculated using the direct added value
basis. (2 marks)

4 (a) State the dates and explain the basis on which a business establishment that has properly observed
the regulations on accounting will pay corporate income tax (CIT). Your answer should refer to the
position both during the year and following the enterprise’s financial year-end. (8 marks)

F6. Vietnam Taxation

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(b) Explain the procedure by which a taxpayer can appeal a decision of the tax authority, stating any
time limits that apply. (7 marks)

5 (a) In late 2006, foreign contractor MMM signed a contract with a Vietnamese party to construct a hydro

power plant valued at USD140 million (net of taxes). The value of the contract comprises:
 Value of machinery and equipment supplied to the project: USD100 million
 Value of technological design and other designs: USD10 million
 Value of buildings, constructed and installed: USD21 million
 Value of services of supervising and instructing the installation: USD6 million
 Value of services of technical training and commissioning: USD3 million

MMM has not adopted the Vietnamese accounting system (VAS).

Required:
State, giving reasons, the corporate income tax (CIT) rate/s that will be applied to the contract. (5
marks)

(b) Contractor Abbott is a foreign contractor that has not adopted the Vietnamese accounting system (VAS).
Contractor Abbott provides a Vietnamese party, Benjamin, with the service of supervising the construction
volume of a hospital. Abbott’s contract price is USD600,000 (excluding tax). In addition, Benjamin will
arrange accommodation and a working place for the managers of the foreign contractor (Abbott) valued at
USD46,000.Under the contract, the Vietnamese party Benjamin is responsible for paying both corporate
income tax (CIT) and value added tax (VAT) on behalf of Abbott.

Required:
Calculate the total amount of corporate income tax (CIT) and value added tax (VAT) payable in USD
under the contract between Abbott and Benjamin. (10 marks)

6. (a) State two circumstances when companies will be ‘associated’ (affiliated parties) for the purposes
of the transfer pricing regulations. (2 marks)

(b) Identify the four acceptable transfer pricing methods and briefly state the circumstances in which
each may be utilised. (8 marks)

(c) Enterprise AIN (AIN) is a subsidiary company of Company HBH and acts as a forwarding service agent
for HBH. Enterprise THT (THT) is an independent enterprise specialising in the provision of forwarding
services to numerous independent clients. The turnover and costs of AIN and THT are as follows:


AIN

THT

Total costs

1,500

2,000

Total turnover

1,650

2,500


Enterprise AIN is considering its transfer pricing obligations. Enterprise THT satisfies all the conditions for
being selected for comparison with AIN in terms of the ratio of before tax income to total costs.

Required:

Using the ratio of before tax income to the total costs for production or business activities calculate the
taxable profit that AIN must declare for transfer pricing purposes. (5 marks)

7 (a) List four situations when the assignment of a land use right or land lease right is NOT subject to
corporate income tax (CIT). (4 marks)

(b) Define the term ‘residual income’ for the purposes of calculating corporate income tax (CIT) on the
assignment of a land use right or land lease right and state how this value will be taxed. (3 marks)
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(c) Describe the two methods that a business establishment, entitled to different exemptions and tax
reductions for different parts of its multiple business operations, can use in declaring its taxable income.
(4 marks)

(d) Explain what a business establishment is entitled to do when it is entitled to multiple corporate
income tax (CIT) incentives and state the procedures that it must follow. (2 marks)

(e) Explain the relief available for losses incurred by a domestic business enterprise. (2 marks)