Highlights in Tax Management Law No. 38 taking effect from July 1, 2020

Tax Management Law No. 38/2019/QH14 will officially take effect from July 1, 2020

Expanding taxpayers' rights

In Article 16 of the Law on Tax Management No. 38, besides the rights as prescribed in the Law on Tax Management No. 78/2006/QH11, many new rights of taxpayers have been added in order to ensure the rights of taxpayers.

Specifically, receiving documents related to tax obligations of competent authorities when conducting inspections and audits.

It is known the time limit for processing tax refunds, the non-refundable tax amount and the legal basis for the non-refundable tax amount.

Allowing for searching, viewing and printing all electronic documents that taxpayers have sent to the web portal of tax authorities in accordance with the Law on Tax Management and regulations on electronic transactions.

Allowing to use electronic documents in transactions with tax authorities and related agencies and organizations.

Not subjected to be sanctioned for administrative violations of tax, not charging late payment interest for cases in which taxpayers complied with the guidance documents and handling decisions of tax authorities and competent state authorities relating to determine taxpayer's obligations.

Extending the time limit for lodging tax finalization of personal income

According to the provisions at Point b, Clause 2, Article 44 of the Law on Tax Management No. 38, allowing individuals who directly made tax finalization of personal income (PIT) to submit dossiers at the latest day of the fourth month since the ending date of the calendar year (lasts one month compared to the regulation as prescribed in the Law on Tax Management 78/2006/QH11, the 90th day since the end of the calendar year).

With this provision, individuals will have more time to complete the procedures and dossiers of tax finalization of PIT, and help the organizations promptly issue documents of tax deduction of personal income tax for individuals who must directly make tax finalization. Besides that, this provision also helps the tax authorities to have more databases to handle dossiers of requesting for personal income tax refunds of individuals.

Adding functions of providing accounting services for tax agents

Point c, Clause 1, Article 104 of the Tax Management Law No. 38 added the function of providing accounting services for micro-enterprises for tax agents. This is a provision that allows tax agents to provide accounting services besides providing ongoing tax agency services. This function is in line with the Law on Supporting Small and Medium Enterprises, which helps small businesses save costs instead of hiring two units to perform two services (tax and accounting consultancy). Now they only need one unit to perform the above two tasks.

Tighten management of transfer pricing activities

Currently, the acts of tax evasion through transfer pricing is increasingly common. To prevent the above situation, Tax Management Law No. 38 prohibits the acts of colluding, linking and covering between taxpayers, tax officials and tax authorities for transfer pricing and tax evasion (Clause 1, Article 6).

In addition, to strictly control acts of tax evasion, Clause 5, Article 42 of the Law on Tax Management No. 38 also stipulates the principles of declaration and determination of calculating prices for associated transactions as follows: declaration, determination of transaction price is based on the principle of analysis, compared with independent transactions and the principle of nature of the operation, the transaction of determining the tax obligations needs to be paid as in the condition of transactions between independent parties.

Besides that, the prices of linking transactions is adjusted in accordance with the independent transactions to declare and determine the amount of payable tax in accordance with the principle of not reducing taxable income.

Taxpayers should also note that, for small-sized taxpayers, the low risk on tax is exempted from complying with the declaration and determination of taxable prices as mentioned in the above contents and applied the simplified mechanism in the declaration to determine the associated transaction price.

Regulations of tax management for e-commerce activities are implemented by overseas suppliers without permanent establishments in Vietnam

Clause 4, Article 42 of the Tax Management Law No. 38 on tax declaration stipulates that for the operation of e-commerce, digital-based business and other services performed by foreign suppliers without permanent establishments in Vietnam, the overseas supplier is obliged to directly or authorize to implement tax registration, tax declaration and payment in Vietnam in accordance with the regulations of the Minister of Finance. Although this content is oriented, it plays an important role in tax management for e-commerce business.

The provisions of the Tax Management Law No. 38 will provide a basis for modern tax management, approach international standards and practices, and facilitate taxpayers and tax authorities to strictly fulfill the rights and obligations of taxpayers; duties of tax management authorities as stipulated in law provisions; actively prevent corruption and negative effects.