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tax law

Significant changes of the law on tax administration

10/11/2019
tax law

On 13 June 2019, the National Assembly approved a new Law on Tax Administration No. 38/2019/QH14 (“LTA”). This law will take effect on 01 July 2020 (except for its provision on invoices and e-documents, which will come into force on 01 July 2022) and replace the current Law on Tax administrative No. 78/2006/QH11. LTA 2019 provides the number of significant changes to the current Law on related- party transactions, e-commerce business, the deadline for submission of tax declaration dossiers, etc. 

1. In recent years, the transfer pricing issue has been very much concerned by the Tax Authority. Therefore, at Clause 5, Article 42, the LTA 2019 guides the detail of the principles for declaration, determination the taxable prices of related-party transactions as follows:

  • Declaration and determination of the price of related- party transactions shall be applied according to the comparability analysis principles with that of independent transactions and the operation substance principles for the determination of tax obligation to determine tax payables as in the condition of transactions with independent parties (substance over form principle).
  • The related-party transactions will be adjusted based on the independent transactions to declare and determine the tax payable amount but do not cause any reduction in taxable income.
  • A small-sized taxpayer with low tax risks shall be exempted from the implementation of the provisions of section a and b of this clause and applied simplified mechanisms in declaration and determination of related-party transaction prices.

2. Currently, e-commerce business has been growing with rapid speed, therefore, declaration and calculation principles are added in the LTA 2019. However, the guidelines are only general guidelines in the LTA 2019, these points shall be more detailed guided in following sub-law documents in future.

  • According to the Clause 4, Article 42, the LTA 2019, for e-commerce business, digital- based business and other services performed by overseas suppliers without a permanent establishment in Vietnam, the overseas suppliers are obligated to directly or authorize tax registration, tax declaration and payment in Vietnam according to the regulations of the Minister of Finance.

3. The LTA 2019 has also changed deadline for submission of tax declaration dossiers for quarterly and annual basis, this can make it easier for taxpayers to not need to calculate the number of specific days as before. Accordingly,

  • At the Section b, Clause 1, Article 44, the LTA 2019, for quarterly declaration dossiers,  the submission deadline is the last day of the first month of the next quarter in which the tax obligation arises (the current regulation is the 30th day of the first month of the next quarter).
  • At the Section b, Clause 2, Article 44, the LTA 2019, for annual tax finalization dossiers, the submission deadline is the last day of the 3rd month from the end of the calendar year or the fiscal year (the current regulation is the 90th day from the end of the fiscal year or calendar year); for the annual tax declaration dossiers, the submission deadline is the last day of the first month of the calendar year or the fiscal year ( the current regulation is the 30th day of the first month of the calendar year or the fiscal year).