Official Dispatch No. 8208/CT-TTHT dated February 27, 2020 on apartment management fee

To: AMALC Company Limited
(Address: 5^th floor, front of area A, Toserco Building, 273 Kim Ma Street, Giang Vo Ward, Ba Dinh District, Hanoi, Vietnam, tax code: 0108663683)

Below is response of Hanoi Tax Department to Official Dispatch No. 02/AMALC – CVHD dated December 27, 2019 and supplementary Official Dispatch No. 02/AMALC – BSCT dated February 14, 2020 on apartment management fee of the AMALC Company Limited:

- Pursuant to Article 4 of Circular No. 96/2015/TT-BTC dated June 22, 2015 of the Ministry of Finance on amendments to Article 6 of Circular No. 78/2014/TT-BTC of the Ministry of Finance on deductible and non-deductible expenses for determination of taxable income

“Article 4. Article 6 of Circular No. 78/2014/TT-BTC (amended in Clause 2 Article 6 of Circular No. 119/2014/TT-BTC and Article 1 of Circular No. 151/2014/TT-BTC) shall be amended as follows:

“Article 6. Deductible and non-deductible expenses for determination of taxable income

1. Except for non-deductible expenses specified in Clause 2 of this Article, enterprises may deduct all expenses that fully satisfy the following conditions:

a) Actual expenses arising in relation to production and business activities of enterprises.

b) Expenses with adequate lawful invoices and documents as required by law

c) Regarding expenses for purchase of goods or services with invoices valued at VND 20 million or more (VAT-inclusive prices) each, there must be non- cash payment documents.

2. Non-deductible expenses for determination of taxable income include:

2.1. Expenses that do not meet all of the conditions in Clause 1 of this Article.

...2.6. Expenses on wages and bonus for employees in one of the following cases:

- If an employment contract between an enterprise and an employee states expense on housing of the employee which is paid by the enterprise, is part of the wages and has sufficient proof according to regulations, such expense shall be included in deductible expenses when determining taxable income.

- If an employment contract between a Vietnamese enterprise and a foreign enterprise states that the Vietnamese enterprise shall incur the cost of accommodation of foreign experts during their working period in Vietnam, the house rent paid for foreign experts working in Vietnam by the Vietnamese enterprise shall be included in deductible expenses when determining taxable income.”

- Pursuant to Clause 1 Article 14 on rules for deducting input VAT of Circular No. 219/2013/TT-BTC dated December 31, 2013 of the Ministry of Finance on guidance on implementation of the Law on Value-Added Tax and the Government's Decree No. 209/2013/ND-CP dated December 18, 2013 on guidance on some Articles of the Law on Value-Added Tax

“Article 14. Rules for deducting input VAT

1. Input VAT on goods and services for production and business of goods/services subject to VAT shall be deducted in full, including non-refundable input VAT on damaged goods.

…

If a business establishment pays foreign experts for working in Vietnam or holding managerial positions in Vietnam under employment contracts, the rent for houses for such foreign experts must not be deducted…”

Pursuant to the above provisions and attached documents, the AMALC Company Limited (hereinafter referred to as “Company”) pays foreign experts to work and hold managerial positions in Vietnam under employment contracts. Tax shall be deducted as follows:

- Regarding VAT: the Company must not deduct VAT on the apartment management fee for such foreign experts as prescribed in Clause 1, Article 14 of Circular No. 219/2013/TT-BTC dated December 31, 2013 of the Ministry of Finance.

- Regarding CIT: If the Company is responsible for paying wages, bonus,…and housing-related expenses in Vietnam for these foreign experts (including apartment management fee) under their employment contracts and the conditions of Article 4 of Circular No. 96/2015/TT-BTC dated June 22, 2015 of the Ministry of Finance are satisfied, the apartment management fee shall be deductible when determining taxable income.

(This Official Dispatch replaces Official Dispatch No. 93847/CT-TTHT dated December 16, 2019 of Hanoi Tax Department)

For your information and compliance./.