VCN – Based on the Law on Tax Administration, the Ministry of Finance has drafted a circular guiding currency for tax declaration and payment in foreign currencies and the exchange rate.
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Tax payment in a freely convertible foreign currency
According to the Ministry of Finance, there are no specific regulations on tax declaration and payment in foreign currencies, they are only described in some circulars (including: Circular No. 56/2008 / TT -BTC dated June 23, 2008, Circular No. 176/2014 / TT-BTC dated November 17, 2014, Circular No. 36/2016 / TT-BTC dated February 16, 2016 guiding the currency of tax declaration and payment for oil and gas activities; Circular No. 38/2015 / TT-BTC dated March 25, 2015 providing guidance on the currency for tax payment for import and export duties).
Regarding implementation method, the circular defines two specific cases for tax declaration and payment in a freely convertible foreign currency. If ataxpayer does the accounting and makes financial statements in VND, the tax shall be finalised in VND and the exchange rate is the buying price of the bank where the tax payment transaction is made. In addition, if the taxpayer does the accounting and makes financial statements in a foreign currency approved by the Ministry of Finance, the exchange rate from the freely convertible foreign currency will be converted into the foreign currency in accounting.
According to Le ThiDuyen Hai, Director of Tax Declaration and Accounting Department, the General Department of Taxation, the currency for tax declaration and payment in a freely convertible foreign currency will include a number of cases. The cases of tax declaration and payment for the search, exploration and extraction of oil and gas; declaration and payment of fees, charges and other revenues collected by the representative agencies of Vietnam in foreign countries; declaration and payment of fees and charges for agencies and organisations permitted to collect fees and charges in foreign currencies; tax declaration and tax payment for e-commerce business, digital-based business of overseas suppliers; tax declaration and payment for imports and exports in foreign currencies in accordance with regulations in the Ministry of Finance’s Circular No. 38/2015 / TT-BTC dated March 25, 2015 and its amendments and supplements.
She said according to current regulations on the collection of fees and charges, some fees and charges are collected in foreign currencies stipulated in Circular 138/2016 / TT-BTC, Circular 219/2016 / TT-BTC, Circular 264/2016 / TT-BTC.
However, currency for tax declaration and payment is VND, leading to inconsistency between currency for determining the rates of fees and charges and the currency for determining the remittance to the State budget; collecting agencies must convert foreign currencies into VND for declaration and remittance to the State budget.
To simplify procedures for agencies allowed to collect fees and charges in foreign currencies, the draft proposesprovidingadditional regulations for declaration and payment of fees and charges in freely convertible foreign currencies.
Save time and costs
Economic experts said the tax loss from e-commerce is significant, so specific regulations on tax administration for e-commerce and allowing tax payments in freely convertible foreign currency will contribute to increasing State budget revenues from cross-border trade.
According to Nguyen Thi Cuc, Chairwoman of the Vietnam Tax Consulting Association, in the past, tax payment was stipulated in VND or US$. According to the provisions of the Law on Tax Administration, tax can be paid in a freely convertible foreign currency and the exchange rate is determined by banks. This is a great transformation and makes it convenient for firmsespecially those that do business with foreign partners without making transactions in VND or US$. This will help businesses reduce costs and time spent oncurrency conversion.
However, this is controversial. Arepresentative of the Ernst & Young Vietnam Consulting Company said the draft only provides guidance on applying the exchange rate for a certain case (tax payment in a freely convertible foreign currency), but doesn’t provide specific guidance on taxable rates in other cases (as specified in the previous Circular 26/2015 / TT-BTC).
The actual exchange rate for revenue accounting is the buying rate of the commercial bank where the taxpayer’s account is opened andthe actual exchange rate for the cost accounting is the selling rate of the commercial bank where the taxpayer’s account is opened at the time of payment transaction in a foreign currency.
In addition, he emphasisedthe new circular does not clarify the exchange rate for the contractor tax declaration. This is a controversial issue currently guided in various documents, making it toughfor enterprises in determining exchange rate in their transaction.
For foreign contractor tax, this is the liability of the foreign contractor andthe Vietnamese party is only the payment intermediary that withholds and pays tax.
The tax base is still the contractor’s revenue by each payment. Therefore, Ernst & Young proposed it is necessary to apply the principle of the buying rate of commercial banks. If the contractor does not open a bank account in Vietnam, the Vietnamese party’s account willbe used to declare and pay tax on behalf of the foreign contractor.
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“Such regulations will ensure the consistency, equality, regardless of the form of tax registration and declaration by foreign contractors, and ensure the strict and unified tax administration from the tax departments,”Ernst & Young said.
By Thuy Linh/ Huyen Trang