2021 Amendment of the Tax Laws – Key Changes and Impacts

The amendment of the tax laws No. 01/NA dated 7 August 2021 (“Tax Law Amendment 2021”) was adopted by Presidential Decree No. 231/P dated 21 December 2021 and became effective from 1 January 2022.

We provide below a brief summary of the key changes to the existing tax laws (including the Taxation Administration Law No. 66/NA dated 17 June 2019, the Income Tax Law No. 67/NA dated 18 June 2019, the Excise Tax Law No. 68/NA dated 19 June 2019, and the Value Added Tax (“VAT”) Law No. 48/NA dated 20 June 2018) that could impact your business.

VAT Law

• The VAT rate has been reduced from 10% to 7%.
• Any input VAT paid at 10% that was not fully deducted or refunded during the last quarter of 2021 must be reversed and booked as an expense and deducted for profit tax (“PT”) purposes for the period ended 31 December 2021.
• Some additional requirements were added in order to be allowed to deduct input VAT:
  • VAT must be declared via TaxRis and paid through the banking system.
  • Sales and purchases must be done through the banking system, no more cash transactions are allowed.
  • The supporting documents required are VAT invoices, payment receipts, and AVIS (bank transfer) slips.
  • Input VAT must be declared in the monthly VAT declaration corresponding to the date of the VAT invoice.
• Some additional conditions were added regarding what is considered as non-deductible input VAT:
  • Any input VAT that has already been booked as an expense will not be deductible against output VAT (stated in the VAT Law but further clarified in the Tax Law Amendment 2021).
  • Any input VAT from mining and electricity must be booked as an expense or a fixed asset.
• Electricity supplied to any electricity enterprises within the country or exported to special zones or overseas is now exempt from VAT (not zero rated), while electricity distributed to domestic users is VATable.
• Minerals exported to special zones or overseas are exempt from VAT.
• VAT in relation to importation can be paid either at the border together with the import duty and excise tax through bank transfer to the national budget account or at the time that the imported goods are supplied on the domestic market (upon conditions determined by the government).

Excise Tax Law

Most excise tax rates applicable to goods and services have increased; please note that the list below is not exhaustive.

Item	Tax Rate
Beer	From 50% to two rates: – 60% for beer having 0.5% alcohol and more – 20% for beer having <0.5% alcohol
Alcohol and beverages with alcohol	Previous rates were 50% -70% Current rates are 62% to 80%
Tobacco	Previous rates were 35% and 50% Current rates are 42% and 57%
Lottery	From 25% to 30%
Premium gasoline	From 35% to 40%
Ordinary gasoline	From 30% to 31%
Diesel	From 20% to 21%
Motorcycles with combustible engines from 150cc and over	Previous rates were 25% to 100% Current rates are 28% to 110%
Small vehicles with engine capacity from 1000cc and over	Previous rates were 25% to 90% Current rates are 26% to 102%

Fortunately, the excise tax rate for internet services was reduced from 3% to 2% for 2022 and will be zero rated from 2023 towards.

Excise tax on importations can be paid either at the border together with the import duty and VAT through bank transfer to the national budget account or at the time that the imported goods are supplied on the domestic market (upon conditions determined by the government).

Income Tax Law

• The higher PT rate of 35% for mining businesses has been removed.
• New lower PT rates have been added:
  • 0.1% for microenterprises that are registered for VAT
  • 3% for three years for small-scale enterprises that are registered for VAT (after that they must use the standard PT rate)
  • 5% for three years for medium-scale enterprises that are registered for VAT (after that they must use the standard PT rate)
• A new profit deeming rate of 30% has been added for mining and hydropower activities.
  • Expenses with VAT invoices that are not reported in the monthly VAT declaration will not be deductible in the PT calculation.

Disciplinary Measure for Outstanding Taxes

In the event that a taxpayer does not pay their outstanding taxes by the due date after the tax authority has issued a tax payment demand notice, the tax authority has the right to seize the taxpayer’s bank account and request that the relevant commercial bank deduct funds from it to pay the outstanding taxes.

If you have any questions about this alert, please contact the undersigned or your usual VDB Loi adviser.