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Vietnam Labour Law Update (August 2016)

Publication date

I. New decree on voluntary supplemental retirement scheme:
On 1 July 2016, the government promulgated Decree No 88/2016/ND-CP (“Decree 88”) on the voluntary supplemental retirement program. This program’s purpose is to provide supplemental financial support for those who meet the plan’s defined retirement: through their individual retirement account, the fund contributions are then invested and accumulated in accordance with the prevailing regulations. In this,

i.    Employers (“ERs”) voluntarily contribute on behalf of their employees (“EEs”), or
ii.    Employers and employees both contribute on the basis of mutual agreement, or
iii.    Employees voluntarily contribute.
The individual retirement accounts are opened for the fund participants and are managed by retirement fund-management enterprises.

The individual retirement accounts are used to collect contributions, receive investment returns, make payments of regulated obligations to the state treasury, pay out benefit entitlements to the fund participants and return money to employers.

Employers’ contributions shall be accounted as deductible expenses for corporate income tax purposes and employees’ contributions shall be tax-deductible.

Employers have options in deciding on contribution levels and contribution timing, adjustments of increases/decreases, suspension or cessation of contributions subject to written agreement between the employers and the employees.

In cases where employees fail to meet their obligations under the agreement between employers and employees, the employers are returned their contributions made on behalf of employees and the investment return from these contributions.

Employees have rights of access to their individual retirement account: in cases of changes in their employers, they can transfer their individual retirement account to retirement fund-management enterprises linked to their new employers.

Fund participants shall register with retirement fund-management enterprises for their payout plan. 
Fund participants have alternative options to receive monthly benefits or one-off ones. Those who meet the plan’s defined retirement shall receive a monthly benefit of not more than the total accumulated amount of their individual retirement account at their plan’s defined retirement date divided by 120 months. The time-frame of the monthly benefit scheme is set at a minimum of 10 years. After 10 years, the participants shall be able to receive a one-off benefit.

In addition, Decree 88 also regulates conditions for the establishment and operation of retirement funds, and inspection and responsibility of state authorities over retirement funds. For more details, please refer to the Decree 88 here.

Decree 88 took effect from 1 July 2016.

II. Guidance on penalty level of late payment of tax for cases of under-declared tax:
On 25 July 2016, the Ministry of Finance issued Official letter No 10315/BTC-TCT (“OL 10315”) implementing several new matters regarding Law No 106/QH13 amending and supplementing a number of articles of the Law on Value-added Tax, Law on Special Sales Tax and Law on Tax Administration.  

For tax liability incurred before 1 July 2016 which had yet been paid to the state treasury by 1 July 2016, from 1 July 2016 interest on these late payments of tax changed to a new flat rate of 0.03% per day. In cases where taxpayers’ under-declared tax liability incurred during periods before 1 July 2016 and then after 1 July 2016 was detected by a competent body of the state via inspections or reviews or identified by the tax-payers themselves, interest shall be imposed at the flat rate of 0.05% per day (or at the rate imposed by the prevailing regulations of the respective periods) from the  payment deadlines regulated by the law to the end of 30 June 2016 and at the flat rate of 0.03% per day on the under-declared tax liability incurred from 1 July 2016 till the date of payment made to the state treasury.

III. Regulations on documentary evidence for dependents over 15 years old.
Under Official letter No 3420/TCT-TNCN issued by the General Department of Tax on 1 August 2016 in responding to the Tax Department of Phu Yen Province, in cases of dependents who are over 15 years old, documentary evidence for them should include a copy of their identification card (“ID”) and when registering for their tax code via tax administration application the ID number is required to avoid duplicate declarations (except for cases where dependents’ IDs have yet been issued in accordance with the police regulation).