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ACCA F6 Taxation Vietnam 2011 Dec Answer

Acca sbr book 2019 (Đại học Kinh tế Quốc dân)

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Answers

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Fundamentals Level – Skills Module, Paper F6 (VNM) December 2011 Answers

Taxation (Vietnam) and Marking Scheme

Marks
1 (a) Fortune-4ever Ltd

(i) Depreciation expense – car

Depreciable Non-depreciable
VND million VND million
Purchase price before VAT (1,540 million/1·1) 1,400 1
Non-deductible input VAT as paid in cash, being deductible
expense for CIT (1,400 * 10% * 50%) 70 1
Registration fee 300 0·5
––––––
Total costs to be capitalised 1,770
––––––
Depreciable amount (capped) 1,600 1
Depreciation expense (1,600 million/5) 320 0·5
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(ii) Depreciation expense – finance leased machine (Article 4.3 Circular 203)
Depreciable Non-depreciable
VND million VND million
Cost (outright purchase price) 400 1
Installation costs 50 1
–––––
Total depreciable costs 450
–––––
Depreciable period (5 years from 1 July 2010 to 30 June 2015) 1
Depreciation expense (450 million/5 years * 6/12) 45 1
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4
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(iii) Distribution expenses
Deductible Subject to Non-deductible
10% cap
Invoice discount 1,500 0·5
Cash discount 100 0·5
Costs of goods for promotion campaign 400 1
Commission for sales force 2,000 0·5
Payment discount 250 1
Market research costs 300 0·5
Overseas tours for distributors (not related to business) 2,500 1
Promoters hiring (a form of support costs for
advertising and promotion) 200 1
Booth rental at festivals 600 0·5
Display fees 1,200 0·5
Support costs to distributors 350 1
Conference organising 650 1
Sample products for customers (60% borne by
Fortune) 240 1
–––––– –––––– –––––– –––
Total 5,600 2,090 2,600 10
–––––– –––––– –––––– –––

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Marks
(b) VCM JSC

Corporate income tax (CIT) payable for the year ended 31 December 2010:
VP project Other projects Transfer of Other income
real property
VND million VND million VND million VND million
Taxable income
VP project – [600,000 –
400,000 + 20,000] 220,000 1
Other projects – [200,000 –
240,000] (40,000) 0·5
Real property transfers – [500,000 –
350,000] 150,000 0·5
Other income (working 1) 36,000 3
Offset between activities 36,000 (36,000) 1
(4,000) 4,000 1
Real property transfers are accounted
for separately – no offset 0 1
Taxable income after offset 216,000 0 150,000 0
Losses carried forward 2009 (40,000) (45,000) (10,000) 0 2
Losses transferred (from other projects
to VP project) (45,000) 45,000 1
Taxable income after losses carried
forward 131,000 0 140,000 0
Tax rate Exempt 25%
Tax payable 0 0 35,000 0 0·5
Remaining losses carried forward 0 0 0 0 0·5
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Working 1 (W1) Other income
Items Taxable/ Non-taxable/
(deductible) non-deductible
Waste disposal loss (10,000) 0·5
Net unrealised foreign exchange gain from payables –
[50,000 – 30,000] 20,000 0·5
Net unrealised foreign exchange gain from translation of receivables
[5,000 – 3,000] 2,000 1
Gain from securities trading 25,000 0·5
Net interest income – [3,000 – 2,000] 1,000 0·5
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Total 36,000 3
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30
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2 Ms Hanh

(a) Family deduction

– Children who satisfy one of the following conditions:
– below 18 years old; or 1
– above 18 years old but handicapped; or 1
– study in university or high school; and having no income or having an average monthly income of
less than VND0·5 million per month. 1
– A spouse who satisfies one the following conditions:
– out of working age without income or having an average monthly income of less than
VND0·5 million per month, or 1
– within working age but handicapped and having an average monthly income of less than
VND0·5 million per month 1

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Marks
– Parents who satisfy one the following conditions:
– out of working age without income or having an average monthly income of less than
VND0·5 million per month, or 1
– within working age but handicapped and having an average monthly income of less than
VND0·5 million per month 1
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(b) Ms Hanh’s family deductions (VND1·6 million per month * 12 months = VND19·2 million per qualified
person per year plus VND4 million per month * 12 months = VND48 million self relief):
Person Amount Explanation
VND million
Self relief 48·0 Per regulations 0·5
Son 19·2 18 years old but studying 1
Daughter 19·2 Studying in high school with an income less than VND6 million
(0·5 million * 12 months) 1
Husband 19·2 Out of working age and has no income (value of assets is not income) 1
Ms Hanh’s mother 19·2 Out of working age and has no income (remittance is to her husband’s
name) 1
Ms Hanh’s father 0·0 Out of working age but has remittance income 0·5
––––––
Total 124·8
–––––– –––
5
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(c) Personal income tax liabilities for the year 2010

Items Amount
VND
Salary (a) 1,300,000,000 0·5
Performance bonus (b) 600,000,000 0·5
Tuition fee for first child (USD20,000 x 21,000) (c) 420,000,000 1
Tuition fee for second child (d) 378,000,000 1
Private car (120 million * (20% + 30%)) (e) 60,000,000 2
Gym membership (567 million/3 years/3 partners) (f) 63,000,000 1
Tax accountant costs (cannot be allocated to
specific person) (g) – 1
Loyalty gift – tour costs paid to travel agent (h) 200,000,000 1
Additional costs in US (not borne by firm) (i) – 1
––––––––––––––
Total gross taxable income before housing (k) 3,021,000,000
Housing benefits
– 15% of gross income (l) = k * 15% 453,150,000
– Actual housing (31·5 million * 12 months) (m) 378,000,000
––––––––––––
Taxable housing (n) = min(l,m) 378,000,000 1·5
––––––––––––––
Total employment income (o) = k + n 3,399,000,000
Insurance [(13 million * 4 months + 14·6 million
* 8 months) * (6% + 1·5% + 1%)] (p) (14,348,000) 1·5
Deduction (from part (b)) (q) (124,800,000)
––––––––––––––
Annual assessable employment income (r) 3,259,852,000
––––––––––––––
Monthly average (s) = r/12 271,654,333
Monthly tax payable
(Income * 35% – 9·85 million) (t) = pit(s) 85,229,017 1
Annual tax payable (u) = t * 12 1,022,748,200
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Marks
3 HNSN

(a) Consequences of having a permanent establishment (P/E) in Vietnam

Even if the project constitutes a P/E of HNSN in Vietnam, it does not mean that HNSN will automatically be
required to declare and pay corporate income tax (CIT) and value added tax (VAT) as a subsidiary/branch of
HNSN in Vietnam. 2
The CIT regulations refer to the concept of a P/E and state that a foreign company having a P/E is subject to
CIT in Vietnam, but is silent on how the foreign company files for tax in Vietnam. 1·5
According to the foreign contractor tax (FCT) regulations, HNSN can select the tax filing method, i.e. it is a
choice, not a requirement, so HNSN can use the deemed method if it wishes to do so. 2
Only if HNSN selects to file tax under the actual method will its tax filing obligations be similar to a company
incorporated in Vietnam. 1
A further potential disadvantage of using the actual method is that if HNSN files tax under this method for the
current project, then it would also have to use the actual method for any subsequent projects it undertakes in
Vietnam. 1·5
According to the double tax treaty (DTA) between Korea and Vietnam, as the project constitutes a P/E of HNSN
in Vietnam, it would not be entitled to a CIT exemption for the business profits attributable to the P/E under
the DTA. 1
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(Note: credit would be given to other appropriate answers)

(b) Foreign contractor tax (FCT) using the deemed method

Items Net contract Corporate Gross contract
amount income amount [Net/ CIT
USD tax (CIT) (1 – CIT rate)] (Gross – net)
tax rate USD USD
Machinery and equipment 80,000,000 1% 80,808,081 808,081 1·5
Construction and installation (10 – 8) 2,000,000 2% 2,040,816 40,816 2
Other services (7 + 4 + 1·2 + 0·5) 12,700,000 5% 13,368,421 668,421 2
Total revised contract price/CIT portion 96,217,318 1,517,318
VAT charged by local sub-contractor
(non-recoverable) (8 * 10%) 800,000 1·5
Total tax costs 2,317,318
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Note: credit is also given to answers with Construction and installation at 5% CIT as highest rate for the
combined activities, for which the values of each activity are not separable.

(c) Foreign contractor tax (FCT) using the hybrid method

Items USD Tax amount
USD
Corporate income tax (CIT) payable
As in part (b) above 1,517,318 1
Value added tax (VAT) payable
Output VAT (7 + 10 + 4 + 1·2 + 0·5) = 22·7 * 10% 2,270,000 1
Input VAT charged by local sub-contractor (non-recoverable) (8 * 10%) (800,000) 0·5
––––––––––
VAT payable 1,470,000
––––––––––
2,987,318
––––––––––
HNSN is correct in thinking that the hybrid method will result in lower tax costs to them (i.e. USD1,517,318
v USD2,317,318 million), because the VAT portion of the FCT will be collected from AHN JSC. 1·5
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Marks
4 (a) (i) Types of invoices to be issued
Case 1: Company A must issue a VAT invoice to Company B. 1
Case 2: Company A must issue an export invoice to Company C. 1
Case 3: Company D should issue a sales invoice to Company A (a foreign exchange trader must use the
direct method for foreign exchange trading). 1
Case 4: Company E should issue a special invoice (international air freight receipt) to Company A. 1
Case 5: The tickets themselves will be invoices, if they have been registered as such with the authorities. 1
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(ii) Allowable forms of invoices
A self-printed invoice, which is printed by the taxpayer from their own computers, cash registers or other
machines upon the sale of goods or provision of services. 1
An electronic invoice, being a collection of electronic data on the sale transaction which is created,
handled, stored and managed under the regulations on Electronic Transactions. 1
A printed invoice which is either:
– an invoice printed by order of the taxpayer in accordance with a format (registered by the taxpayer)
for the sale of goods or provision of services; or 1
– an invoice printed by order of the tax authorities to distribute or sell to the taxpayer. 1
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(b) Situations where settlement is deemed to have been made via a bank
Settlement is deemed as being made via a bank where:
(i) the value of goods and services purchased is offset with the value of goods/services sold to the same
party (or ‘bartering’), if this is provided for in the contract; 1
(ii) the value of goods and services supplied by the seller is offset with a debt that the seller is owing to the
buyer, if this is provided for in the contract; and 1
(iii) the buyer authorises a third party to pay the amount due via a bank to the seller, if this is provided for
in the contract. 1
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(c) Input value added tax (VAT) implications

(i) Input VAT on a fixed asset being a building used as the head office of a life insurance company is not
deductible for VAT purposes, but is added to the cost of the building for corporate income tax (CIT)
purposes. 1
(ii) Input VAT on the villa destroyed by fire is not deductible for VAT, and is not added to deductible expenses
for CIT purposes as in this case the total cost including the VAT is covered by the insurance company
compensation. 1
(iii) Input VAT on the villa sold to the CEO at a significant discount is deductible in full as it is treated as a
normal sales transaction by the company. There are no CIT implications. 1
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3
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15
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Tutorial note: the company must calculate the output VAT based on market value (this was not asked for in
the exam).

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Marks
5 Mai Hoang Co

Corporate income tax (CIT) filing obligations

Types of return and dates of submission Tax authority
Quarterly Annual One-off
Mai Hoang Co 30 April 2010, 31 March 2011 N/A Hanoi 2·5
30 July 2010,
30 October 2010,
30 January 2011
Dependent manufacturing Same as Same as N/A Hanoi and 1
Mai Hoang Co Mai Hoang Co Vinh Phuc
Dependent sales offices N/A N/A N/A N/A 1
(part of central
Mai Hoang Co return)
Ho Chi Minh City subsidiary Same as Same as N/A Ho Chi Minh 1
Mai Hoang Co Mai Hoang Co City
Dong Nai subsidiary 30 July 2010, 30 June 2011 N/A Dong Nai 2·5
30 October 2010, Province
30 December 2010
30 April 2011
Purchase of 49% of N/A N/A 11 December 2010 Quang Ninh 2
Quang Ninh subsidiary
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