According to Clause 3 Article 5 of Circular No. 219/2013/TT-BTC and Clause 1 Article 2 of Circular No. 78/2014/TT-BTC , non-business organizations shall be exempt from payment of value added tax (VAT), enterprise income tax (EIT) when they sell assets. Read more
Accordingly, a foreign representative office that does not perform business activities in Vietnam shall be exempt from declaration and payment of VAT, EIT when it liquidates assets.
Concurrently, the foreign representative office shall not have to buy unbounded invoices to give to the asset buyer (Clause 1 Article 13 of Circular No. 39/2014/TT-BTC).
The obligations to declaration and payment of taxes incurred by the representative office shall be carried out as follows:
+ License fee: To carry out according to the guidelines Article 2 of Circular No. 302/2016/TT-BTC ;
+ Value added tax (VAT): Concentrated tax declaration shall be made at the company’s head office if the representative office neither directly sells goods nor generates revenue (Clause 1, Article 11 of Circular No. 156/2013/TT-BTC);
+ Enterprise income tax (EIT): The company shall declare and pay tax concentratedly at its head office if the representative office is an affiliated unit that keeps accounting records dependently (Article 16 of Circular No. 151/2014/TT-BTC);
+ Personal income tax (PIT): The Company shall be responsible for withholding, declaring and paying PIT if it signs labor contracts and pays salaries to the representative office’s employees (Article 16 of Circular No. 156/2013/TT-BTC).
If the representative office is not required to declare and pay ant tax, it is not required to register digital signature for the tax declaration.
According to Clause 1 Article 7 of Circular No. 16/2014/TT-NHNN , non-resident organizations are only allowed to receive payments transferred into their Vietnam dong accounts with regard to receipts earned from goods and services provision, salary, bonus, etc. and other legal sources in Vietnam dong. Read more
However, according to Article 30 of Decree No. 07/2016/ND-CP, representative offices of foreign traders shall be only entitled to conduct liaison activities, market research, and trade promotion rather than conducting business operation in Vietnam, thereby they do not earn legal sources from business in order to transfer them into their Vietnam dong accounts.
In addition, according to Clause 1 Article 5 of Circular No. 16/2014/TT-NHNN , non-resident organizations are only allowed to receive foreign currency transferred into their foreign currency accounts opened in Vietnam in cases they are entitled to earn foreign currency.
However, according to the regulations on limitation on the use of foreign currencies in the territory of Vietnam, payment transactions between a non-resident and a resident in the territory of Vietnam shall not be performed in foreign currency, except for some special cases).
As the result, a company outside Vietnam is not allowed to designate Vietnamese companies to make payments for goods sale by transferring money into account of its representative office, including Vietnam dong account and foreign currency account.
According to Clause 1 Article 7 of Decree No. 07/2016/ND-CP, foreign traders are allowed to establish representative offices in Vietnam if they are incorporated and register for doing business in accordance with provisions of laws of countries or territories being parties to treaties to which Vietnam is a signatory or are recognized by the aforesaid countries or territories. Read more
On the other hand, according to Clause 1 Article 6 of the Law on Commerce 2005, “traders” include (i) lawfully established economic organizations and (ii) individuals that conduct commercial activities in an independent and regular manner and have business registrations.
Accordingly, a foreign trader that makes business registration or recognized by foreign laws is allowed to establish representative office in Vietnam according to Clause 1 Article 7 of Decree No. 07/2016/ND-CP.
The application for a license for establishment of a foreign representative office shall be carried out according to Article 10 of Decree No. 07/2016/ND-CP.
According to Clause 3 Article 5 of Circular No. 219/2013/TT-BTC and Clause 1 Article 2 of Circular No. 78/2014/TT-BTC , a non-business organization shall be exempt from declaration and payment of value added tax (VAT) and enterprise income tax (EIT) on the sale of their assets. Read more
Accordingly, in case a foreign representative office that does not perform business and production activities carries out liquidation sale of assets which serve the representative office’s operation, it shall be exempt from declaring, paying VAT, EIT.
Tax offices shall not provide unbound invoices for the activity of liquidation sale of assets of the representative office (Clause 1 Article 13 of Circular No. 39/2014/TT-BTC).
According to Clause 6 Article 15 of Decree No. 07/2016/ND-CP, foreign traders have to carry out procedures for adjustments to the license for establishment of representative office upon the change in location of the representative office within a province, centrally - affiliated city (or within a geographical area under the scope of management of an authority). Read more
The application for adjustments to the license for establishment of representative office upon the change in the location of the representative office includes: "agreement on leasing the location to place the office; documents on the expected location of the representative office (point b Clause 1 Article 16 of Decree No. 07/2016/ND-CP.
With regard to the case in which an individual leases location to be used as a representative office, whether such individual has to make business registration or not, its shall be determined according to the Law on housing, the Law on real estate trading and related specialized regulations of laws.
This Decree elaborate estimation, management, use and final statements of funds for recurrent operational costs, special operational costs in the field of trade in overseas missions of Vietnam; management of investment projects of overseas missions and special cases to appoint the Ambassador Extraordinary and Plenipotentiary. Read more
This Decree takes effect from the date of its signing.
According to Article 16 of Circular No. 156/2013/TT-BTC , in case a foreign Representative Office pays salary to its employee but such amount fails to reach the level subject to tax withholding, it is not required to declare PIT in such month/quarter. Read more
However, at the end of the year, the Representative Office shall be responsible for declaring tax accounting, including the tax accounting made on behalf of authorizing persons, whether tax is withheld in such year or not.
With regard to a foreign individual who is designated to act as the Representative Office Chief in Vietnam, even this person in residing and receiving incomes outside Vietnam, he/she shall be still subject to PIT on the income earned from performing the task in Vietnam (Article 18 of Circular No. 111/2013/TT-BTC).
If the Representative Office Chief is entitled to PIT exemption, reduction under an Agreement on double taxation avoidance, it is required to carry out procedures for PIT exemption, reduction according to Clause 13 Article 16 of Circular No. 156/2013/TT-BTC .
According to Article 19 of Circular No. 151/2014/TT-BTC, the obligation to make PIT accounting shall arise only when income is paid. If income is not paid, it is exempt from making PIT accounting. Read more
Accordingly, in case the foreign representative office does not pay income, it shall be exempt from making PIT accounting.
An application for TIN deactivation made by the foreign representative office shall be carried out according to Articles 16 and 17 of Circular No. 95/2016/TT-BTC .
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