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August 2023 News Summary

I. Circular 08/2023/TT-NHNN regulations on sonditions for foreign loans not guaranteed by The Government

Issued by: The State Bank of Vietnam

Issued date: June 30th, 2023. Effective date: August 15th, 2023

The State Bank of Vietnam has issued Circular 08/2023/TT-NHNN abolishing Circular 12/2012/TT-NHNN regulating conditions for foreign loans not guaranteed by the government. Accordingly, some notable changes compared to Circular 12/2014/TT-NHNN are as follows:

1. General regulations

  • Supplementing regulations on loans in the form of international bond issuance, in addition to complying with this circular, must also comply with the provisions of law on offering corporate bonds to the international market and other relevant regulations;

  • Supplementing regulations on State-owned enterprises borrowing foreign loans, in addition to meeting the loan conditions according to this circular, must also ensure compliance with regulations on using state capital in production, business and other relevant regulations.

Circular 08/2023/TT-NHNN
  • Supplementing regulations on foreign loans in the form of import of goods with deferred payment: accordingly, loans in the form of import of goods with deferred payment do not have to comply with the foreign loan conditions stated in this Circular;

  • Additional principles for using foreign loans: allowing businesses to use unused loan funds to deposit money (maximum deposit term not exceeding 01 month) at credit institutions applications, foreign bank branches operating in Vietnam;

  • Adding specific concepts and regulations related to: Plans for using foreign loans and plans for restructuring foreign debt.

  • In the case of short-term foreign loans from businesses, it is necessary to pay attention to the preparation of a List of capital needs attached to the Plan for using foreign loans.

2. Additional conditions for credit institutions and foreign bank branches

  • More specific regulations regarding the purposes of the loans

  • The loan purpose is proven through: Plan for using foreign loans (Regulated in Article 7 of this Circular) and Debt restructuring plan (Regulated in Article 8 of this Circular)

  • Short-term loan limit: to standalone equity

+ 30% for commercial banks

+ 150% for foreign bank branches and other credit institutions.

3. Regarding additional conditions for organizations other than credit institutions and foreign bank branches

  • More specific regulations on the purpose of short-term, medium and long-term foreign loans, the use of loan capital and documents proving the purpose of foreign loans. In particular, Circular 08/2023/TT-NHNN abolished regulations on restructuring the borrower's foreign debts without increasing borrowing costs.

  • Specific regulations on foreign loan limits for different purposes and exchange rates used to calculate loan limits.

4. Additional regulations on the responsibilities of the Borrower and the Bank providing account services: Chapter IV of this Circular specifically stipulates the responsibilities of the Borrower and the Bank providing account services:

  • Highlight compliance and self-responsibility, as well as regulations on archiving documents related to the borrower's foreign loans.

  • Simultaneously,, stipulate the bank's responsibilities in terms of verifying and retaining documents to ensure that the foreign exchange services are provided for the intended purposes and in accordance with legal regulations

II. Official letter NO. 58653/CTHN-TTHT guiding on value added tax reduction under decree 44/2023/ND-CP

Issued by: Hanoi Tax Department

Issued date: August 11th, 2023

On August 11th, 2023, Hanoi Tax Department issued Official Letter No. 58653/CTHN-TTHT to provide guidance and answer questions from Construction Technology Transfer and Application Joint Stock Company on VAT reduction.

According to the Official Letter, based on Point c, Clause 4, Article 9 regulating the timing of invoice issuance, as per Decree No. 123/2020/ND-CP of the Government prescribing invoices and record: " Invoices for construction and installation shall be issued at the time of commissioning and acceptance of the finished work, …, whether the payment of the invoiced amount has been made or not.”

In case the Company completed a work in June 2023 but the invoice is issued in July 2023:

  • The company had the act of issuing invoices at the wrong time

  • The company is not eligible to apply the 8% VAT rate according to Decree No. 44/2023/ND-CP.

Thus, the Company is at risk of being fined for the incorrect timing of invoice issuance.

Official letter NO. 58653/CTHN-TTHT

III. Official letter NO. 4099/TCHQ-TXNK guiding on special consumption tax of imported goods.

Issued by: General Department of Customs

Issued date:August 04th, 2023

On August 4, 2023, the General Department of Customs issued Official Dispatch No. 4099/TCHQ-TXNK guiding and answering questions from Mercedes - Benz Vietnam Co., Ltd. on special consumption tax policy for hybrid cars

According to the guidance of the General Department of Customs, based on Article 2 of Law No. 106/2016/QH13, if imports goods are eligible for exemption or reduction of import duty, taxable price shall not include the reduction or exemption. Excise duty on imports that was paid at importation may be deducted when determining the excise duty on goods when they are sold.

In addition, Article 2 of Law No. 106/2016/QH13 also stipulates those cars running on combination of gasoline and electric, or bioenergy, gasoline consumption does not exceed 70% of the energy usage, shall be subject to an excise tax rate equal to 70% of the excise tax rates applied to vehicles of the same type.

Clause 2, Article 5 of Decree No. 108/2015/ND-CP as well as the guidance provided by the Ministry of Finance in Official letter No. 7109/BTC-CST dated June 3, 2010 regarding special consumption tax policy for gasoline - electric hybrid vehicles, states: Vehicles running on combination of gasoline, bioenergy or electric that are designed according to the manufacturer's standards with the gasoline mixture ratio not exceeding 70% of the total fuel used and the ratio of gasoline following the manufacturer's standards not exceeding 70% of total energy consumption compared to the most fuel-efficient gasoline car with the same of seats capacity and the engine displacement available on Vietnamese market.

To determine whether a car is eligible for a special sales tax rate of 70%, businesses need to base on actual goods import records, current regulations on special sales tax laws and specific instructions in official letter no. 7109/BTC-CS dated June 3, 2010.

IV. Officail letter 11680/CTHDU-TTHT on tax policy for export processing enterprises

Issued by: Hai Duong Provincial Tax Department

Issued date:July 12th, 2023

In order to answer questions about implementing procedures related to Export Processing Enterprises (EPE) leasing machinery to domestic enterprises, branches, and subsidiaries, on July 12, 2023, The Hai Duong Provincial Tax Department issued Official Letter No 11680/CTHDU-TTDT providing comprehensive instructions as follows:

Pursuant to the provisions of Clause 6, Article 26 of Decree 35/2022/ND-CP regulating the management of industrial parks and economic zones, if an EPE intends to lease machinery and equipment to other domestic enterprises, the EPE must:

1. Repay any tax incentives previously granted for export activities as stipulated by the law.

2. Establish separate an accounting books for revenue and related cost associated with domestic leasing of machinery and equipment.

3. Complete the tax registration procedures with the tax authorities and fulfill tax obligations for this rental activity.

4. Declare value added tax (VAT) using the deduction method in case businesses use electronic VAT invoices as per Article 8 of Decree 123/2020/ND-CP.

Regarding depreciation costs of machinery and equipment: Enterprises should comply with the provisions of Article 38 of Circular 200/2014/TT-BTC.

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August News Summary
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