On 22 March 2018, CEEC 8th Share & Learn happened with the topic relating to Tax and optimization. At the beginning, Mrs. Magdalena Krakowiak, CEEC Vice-Chairwoman warmly welcomed guests. She thanked to Mazars Vietnam, CEEC member and a partner at this event, as well as CPA Australia for being so kind and offering their conference room for the event. Then she invited representative of CPA Australia to give a short introduction of their company. Detail information about CPA Australia can be found here.
Afterwards, Mr. Nguyen Hai Minh, Tax & Legal Partner of Mazars Vietnam, started a very practical presentation focused on corporate taxation and transfer pricing issues when business involves foreign invested companies or cross-border dealings. How to organize the transitions to be tax optimized? There are three main organizational structures utilized by foreign companies to operate in Vietnam:
- Representative Office: limited scope (e.g. no revenue allowed) and minimal tax implications
- Service Company: provides services to parent company (e.g. marketing activities) and generates revenue for services rendered: transfer pricing rules must be followed and might be subject to withholding taxes and VAT
- Trading Company: full scope of activities with revenue rendered from sales in domestic market with a range of implications: transfer pricing, withholding taxes and VAT
Selecting proper structure is important to minimize tax impact for the whole organization. Many factors have to be taken into account: proper transfer pricing, withholding tax, specific local regulations and even double taxation treaties between each involved country.
After a short coffee break, Ms. Do Thanh Tam, Tax and Business Advisory Director of Mazars Vietnam, gave an update on social security insurance for foreign workers. The newest decree, which applies social security contributions to foreign employees having labour contract in Vietnam with term of 1 month or more (having a work permit, having a practice certificate or licence in Vietnam) is already in force. Yet, as there are no guidelines on specific implementation, this regulation is not enforced. This compulsory social insurance will cost burden employers by 17.5% and employees – 8% (the monthly contribution of employee should not be higher than 210usd as maximum contribution is capped). The same benefits as for Vietnamese will apply for foreigners: short term- sickness, maternity, work accident, long term – pension. Effectively these benefits would be difficult to realize by foreigners, and again it is unclear how process would look like.
As the result of discussion and request from participants, Mazars will work on the guidance giving more specific information: after what time foreigners are eligible to benefits (e.g. pension), and how to claim them (process).