Pricewaterhouse Coopers - Circular 27 PIT Deadline Extension

Pricewaterhouse Coopers - Circular 27 PIT Deadline Extension
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As part of its continuing efforts to stimulate the economy and promote consumer spending, the Ministry of Finance issued Circular 27/2009/TT-BTC on 6 February 2009. In our Newsbrief on 23 January we flagged the prospect of PIT initiatives being announced and this has now become a reality.

Circular 27 allows a temporary deferral of PIT payments for the months of January till May 2009.
However, it will be the decision of the National Assembly, who will meet in May, as to whether this initiative will constitute a deferral only or some form of permanent benefit (e.g. a partial or total exemption from PIT for this period).

Circular 27 applies to various types of income, specifically:
Income from Tax residents Tax nonresidents
Business activities Yes No
Salaries and wages Yes No
Capital investment (e.g. dividends) Yes Yes
Capital assignment (e.g. sale of securities) Yes Yes
Royalties and franchising Yes Yes
Transfer of properties No No
Winning prizes, inheritances and gifts No No

It is important to note that withholding organisations (e.g. employers, etc) are still required to calculate PIT during this period and report it to the tax authorities, in the same manner as usual.
However, no remittance of PIT need be made.

It is not clear whether the monthly PIT due should be withheld from payments to employees, or if they should instead be paid gross. Circular 27 suggests (but does not clearly state) that employees are entitled to the PIT that would otherwise have been withheld.

In the event that employers do not withhold PIT, questions then arise in relation to how such employers would recover the PIT due should the National Assembly not permanently exempt some or all of the PIT. Numerous HR issues would arise e.g. who would be responsible for unpaid PIT if an employee resigns, how to deal with employees on net packages, etc.

Circular 27 is effective 45 days from the date of signing (i.e. 23 March 2009) but applies to income derived from 1 January 2009.

Pricewaterhouse Coopers - delayed remittance of PIT liabilities until May 2009

Pricewaterhouse Coopers - delayed remittance of PIT liabilities until May 2009
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The Ministry of Finance has just issued Official Letter No.1823/BTC-TCT (OL 1823) and Official Letter No.1845/BTC-TCT (OL 1845) guiding the implementation of Circular 27.

Key points as they relate to employment income are as follows.

- All income paid in 2009, irrespective of whether it relates to 2008 or 2009 will be subject to the provisions of the new PIT Law and, to the extent it is paid in the period up till 31 May 2009, will be entitled to the deferral of PIT payments.

- Employers are not allowed to withhold PIT from income paid from 1 January till 31 May 2009.
If PIT has already been withheld but not yet paid to the tax authority, it must be returned to the employee by the last working day of February 2009.

- If 2009 tax receipts have already been issued to employees, these must be retrieved by the employer.

- If an employer has already remitted withheld PIT to the state budget, an application for refund should be made. Payments to employees must be made within 5 working days of receiving the refund.

- Non residents are not entitled to the deferral of PIT with respect to employment income. For this purpose, non-residents will include:
- Individuals not present in Vietnam.
- Individuals that depart Vietnam before 30 June 2009.
- Individuals who come to Vietnam from 1 January 2009 and it is not certain that they will become tax resident.

No further guidance has been provided in relation who will be responsible for paying PIT to the tax authority should the National Assembly not approve a PIT exemption in May.

Pricewaterhouse Coopers - New Circular on Unemployment Insurance

Pricewaterhouse Coopers - New Circular on Unemployment Insurance

On 22 January 2009, the Ministry of Labour, War Invalids and Social Affairs issued Circular 04/2009/TT-BLDTBXH (“Circular 04”), providing guidance for implementing a number of Articles in Decree 127/2008/ND-CP (“Decree 127”), on unemployment insurance, dated 12 December 2008.

Under Circular 04, various provisions in Decree 127 are now clarified, including:

 Circular 04 clarifies the rules for calculating the monthly unemployment allowance – the period prior to job loss need not now be a consecutive 6 month period – interruptions are now taken into account for these calculations.

 Employers with 10 or more employees (including those under indefinite, definite and seasonal labour contracts) are required to participate in the scheme. Employers must participate in the scheme on the 1st day of the following month after this threshold is met.
If/when the number of employees falls below 10, employers who have previously
participated in the scheme must continue to contribute unemployment insurance for their remaining employees until the end of that year. The number of employees for identifying whether an employer will contribute unemployment insurance will be counted as at 1st January of each year.

 Guidelines are also provided on the procedures for registering with, contributing to, and receiving benefits from the unemployment insurance fund.

Despite providing deadlines for employers to register new employees in the scheme, Circular 04 does not provide a deadline for registering existing employees (whose labour contracts were signed before 1 January 2009), nor the procedures for this.

Circular 04 is retroactively effective from 1 January 2009.