February 2025 will see many tax changes affecting both businesses and individuals. This article will provide an overview of the latest changes in VAT, PIT, CIT, foreign contractor tax and other related policies, based on the latest official letters and circulars. Keeping up to date with these changes is key to ensuring legal compliance and optimizing your financial operations.
Below is a summary of notable tax changes taking effect in February 2025, based on information from the latest official dispatches and circulars.
Tax changes in February 2025
1. Value Added Tax (VAT)
Input VAT deduction missed:
Companies can additional declaration and deduction input VAT on invoices arising from the end of 2022, provided that this is done before the tax authority announces the decision to conduct a tax audit or inspection at the company's headquarters. This is in accordance with the provisions of Clause 6, Article 1 of Law No. 31/2013/QH13, Article 47 of the Tax Administration Law No. 38/2019/QH14 and Point b, Clause 4, Article 7 of Decree No. 126/2020/ND-CP.
Factory transfer to manufacturing enterprises:
The VAT rate applicable to the transfer of factories from domestic enterprises to export processing enterprises depends on the satisfaction of the following conditions:
- If the transfer complies with land laws.
- The transferee meets the conditions for customs inspection and supervision of the duty-free zone.
- Transferred assets are not subject to customs procedures.
- The company's project implementation location is stated on the Investment Registration Certificate.
- At the same time, it must comply with the provisions of Clause 2, Article 9 of Circular No. 219/2013/TT-BTC.
- If all of the above conditions are met, the VAT rate is 0%. On the contrary, apply tax rates according to regulations in Article 11 of Circular No. 219/2013/TT-BTC.
Additional declaration of VAT for investment projects:
In this case, Song Vu Dak Nong Company Limited is not allowed to declare an additional increase in the VAT amount requested for refund on the declaration form 02/GTGT for the first quarter of 2022 if it has submitted the declaration form 01/GTGT for the second quarter of 2022 and has transferred the remaining deductible input tax from the declaration form 02/GTGT for the first quarter of 2022 to the declaration form 01/GTGT for the second quarter of 2023 for further deduction.
VAT refund for businesses with related transactions:
The Tax Department will process VAT refunds for enterprises exporting goods abroad to related parties if the enterprise meets the conditions for input tax deduction, refund and required documents and procedures.
Recovering VAT refunds:
The Tax Department will recover the refunded VAT on exported goods and services if there is no non-cash payment document.
VAT rate for overseas advertising business cooperation contracts:
Revenue sharing from business cooperation contracts with foreign companies and foreign advertising partners is subject to tax rates 10%.
Determine input VAT refund period:
For companies that have both exported goods and services and domestically sold goods and services but cannot account for them separately, the input VAT amount of exported goods and services is determined based on the ratio of export revenue to total revenue from the tax declaration period following the previous tax refund period to the current tax refund period.
Handling when exported goods with VAT refund are returned:
Enterprises need to make additional declarations according to Article 47 of the Law on Tax Administration and Article 7 of Decree 126/2020/ND-CP, and at the same time pay back the refunded tax amount and corresponding late payment fees according to Clause 3, Article 21 of Circular 80/2021/TT-BTC.
2. Personal Income Tax (PIT)
Personal income tax on agency, cooperation and service provision contracts:
- Individuals not registered for business: Income is calculated as salary, wages and the company is responsible for declaring and deducting tax.
- Individuals who are traders: Income is considered business income if the individual conducts commercial activities independently, regularly and has a business registration in the same industry.
Income from inheritance of capital contribution in LLC:
Income for personal income tax calculation is determined based on the accounting book value on the company's Balance Sheet at the time of preparing the most recent Balance Sheet. This value is calculated by total assets minus liabilities (Code 100 + Code 200 - Code 300).
Confirmation of tax obligations for individuals:
The Tax Authority will base on the data on the system and the documents provided by the taxpayer to confirm or not confirm the fulfillment of tax obligations.
3. Corporate Income Tax (CIT)
- Corporate income tax incentives for supporting industries: The Certificate of Incentive for Production of Priority Supporting Industrial Products is the basis for applying CIT incentives. The time of application of incentives is based on the time the product is granted the Certificate of Incentive by the Ministry of Industry and Trade.
- Income from capital transfer: In case the transfer contract does not specify the payment price or the tax authority has grounds to determine that the payment price is inappropriate, the tax authority has the right to inspect and determine the transfer price at the time of transfer.
4. Foreign Contractor Tax
- Corporate income tax rate for imported goods under DDU, DAP terms: If the contract for the supply of goods under the terms of DDU and DAP delivery does not include any services in Vietnam, the contract is only subject to VAT at the import stage and the CIT rate of 1% on taxable revenue is applied.
5. Other Related Policies
Administrative penalties for violations of tax and invoices:
- If a taxpayer is penalized for multiple violations at the same time, only one penalty decision will be issued. The penalty amount is the total penalty amount for each violation and is not limited by the maximum penalty amount.
- The aggravating circumstance of “large-scale administrative violation” shall not be applied if the taxpayer commits multiple violations regarding invoices in the same penalty. This circumstance shall only be applied when the number of violating invoices is 10 or more.
- From the second violation onwards for the same acts, it will be considered an aggravating circumstance of "repeated administrative violation".
These changes require close updating and compliance from businesses and individuals to ensure compliance with current tax laws.
Tax changes in February 2025 require constant attention and updates from taxpayers. To ensure compliance and avoid legal risks, businesses and individuals should proactively study the new regulations thoroughly, especially those related to VAT deduction, factory transfer, VAT refund, and corporate income tax incentives. Proper application of these regulations not only helps to comply with the law but can also bring significant financial benefits.
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