When are taxes declared and paid in convertible foreign currencies in Vietnam?

When can taxes be declared and paid in convertible foreign currencies in Vietnam?

Pursuant to Clause 1, Article 4 of Circular 80/2021/TT-BTC stipulates the cases where tax declaration and payment can be made in convertible foreign currencies include:

- Activities involving the search, exploration, and exploitation of oil and gas (except for crude oil, condensate, and natural gas sold in the Vietnamese market or unless otherwise regulated by the Government of Vietnam), including: resource taxes, corporate income taxes; surcharge on the profit-sharing oil portion when crude oil prices fluctuate; profit oil and gas shared with the host country; signature bonuses; discovery bonuses for commercial oil and gas; production bonuses; reading and usage fees for oil and gas documents; compensation for not fulfilling minimum commitments; corporate income tax on incomes from transferring rights to participate in oil and gas contracts; special taxes, surcharges, and corporate income tax on the residual oil portion of Vietsovpetro Joint Venture’s activities in Block 09.1 are to be declared and paid into the state budget using convertible foreign currencies used in payment transactions.

- Fees, charges, and other collections realized by representative agencies of the Socialist Republic of Vietnam abroad:

These fees and charges are declared and paid into the state budget using convertible foreign currencies as stipulated in documents specifying the collection rates for fees, charges, and other collections.

- Fees and charges collected by authorized agencies and organizations in Vietnam in foreign currencies:

These fees and charges are declared and paid into the state budget using convertible foreign currencies as stipulated in documents specifying the collection rates for fees and charges.

- E-commerce business activities, digital platform-based businesses, and other services provided by foreign suppliers without a permanent establishment in Vietnam:

These are declared and paid into the state budget using convertible foreign currencies.

When are taxes declared and paid in convertible foreign currencies in Vietnam? (Image from Internet)

What is the currency for tax declaration and payment in Vietnam?

The currency for tax declaration and payment is stipulated in Article 7 of Law on Tax Administration 2019. Specifically:

(1) The currency for tax declaration and payment is Vietnamese Dong, except in cases where tax declaration and payment are allowed in convertible foreign currencies.

(2) Taxpayers who do accounting in foreign currencies as per Law on Accounting 2015 must convert these into Vietnamese Dong at the actual transaction exchange rate at the time the transaction arises.

(3) For export and import goods, the currency for tax payment is Vietnamese Dong, except in cases where tax declaration and payment are allowed in convertible foreign currencies.

The exchange rate for tax calculation complies with customs laws.

(4) The Minister of Finance prescribes the currency for tax declaration and payment in convertible foreign currencies as stipulated in Clauses 1 and 3, and the actual transaction exchange rate as stipulated in Clause 2 of Article 7 of Law on Tax Administration 2019.

What are the principles for tax declaration and tax calculation in Vietnam?

The principles for tax declaration and tax calculation are stipulated in Article 42 of Law on Tax Administration 2019 as follows:

- Taxpayers must declare accurately, honestly, and fully the contents in the tax declaration forms as specified by the Minister of Finance and submit all required certificates and documents in the tax declaration dossiers to the tax administration agency.

- Taxpayers self-calculate the amount of tax payable, except in cases where tax calculation is done by the tax administration agency as regulated by the Government of Vietnam.

- Taxpayers perform tax declaration and calculation at the local tax authorities where their head offices are located. In cases where taxpayers centralize accounting at the head office and have dependent units in other provincial administrative units, they declare taxes at the head office and calculate and allocate tax obligations payable to each local area entitled to the state budget revenue. The Minister of Finance details Clause 3, Article 42 of Law on Tax Administration 2019.

- For e-commerce business activities, digital platform-based businesses, and other services performed by foreign suppliers without a permanent establishment in Vietnam, such foreign suppliers are obliged to directly or authorize the performance of taxpayer registration, tax declaration, and tax payment in Vietnam as regulated by the Minister of Finance.

- The principles for declaring and determining tax calculation prices for related-party transactions are stipulated as follows:

+ Declare and determine the prices of related-party transactions based on the principle of analyzing and comparing with independent transactions and the principle of the substance over form to determine the tax obligation as in the conditions of transactions between independent parties;

+ Adjust the prices of related-party transactions based on independent transactions to declare and determine the amount of tax payable without reducing taxable income;

+ Small-scale taxpayers with low tax risks are exempted from complying with points a and b, Clause 5, Article 42 of Law on Tax Administration 2019 and are allowed to apply simplified mechanisms in declaring and determining the prices of related-party transactions.

- The principles for tax declaration under the advance pricing agreement mechanism are stipulated as follows:

+ The application of the advance pricing agreement mechanism is based on the taxpayer's proposal and the agreement between the tax authority and the taxpayer under unilateral, bilateral, and multilateral agreements involving the tax authorities, taxpayers, and related foreign tax authorities and territories;

+ The application of the advance pricing agreement mechanism must be based on the taxpayer's information and verifiable commercial databases ensuring legal validity;

+ The application of the advance pricing agreement mechanism must be approved by the Minister of Finance before implementation; for bilateral and multilateral agreements involving foreign tax authorities, it is implemented in accordance with the laws on international treaties and international agreements.