Vietnam Tax: Guidance issued on mandate of New Large Enterprise Unit of General Department of Taxation

The Vietnamese General Department of Taxation (GDT) issued Official Document 1620/TCT-DNL on the Implementation of Decision 856/QD-BTC on 14 May 2010, prescribing how the newly established Department for Administration of Large Enterprises (Large Enterprises Unit) will implement its responsibilities.

The Minister of Finance prescribed the duties, powers and organizational structure of Large Enterprises Unit in Decision No. 106/QD-BTC (issued on 14 January 2010). The responsibilities of the new department are to:

- Provide guidance to the General Department of Taxation on specific tax policies and the tax administration mechanism for large enterprises;
- Submit proposals and amendments to the text of tax legislation that affects large enterprises;
- Organize, guide and direct the tax inspection offices at all levels to implement tax policy, regulations, processes and tax administration for large enterprises;
- Collect, compare and synthesize information on the production and business activities of large enterprises;
- Build a database for the tax administration for large enterprises by economic activity; and
- Coordinate with other General Department of Taxation units to estimate, supervise, inspect and test the collection of tax on large enterprises.

However, large enterprises were not defined in this Decision so it was not clear which taxpayers might be under the supervision of the new Department.

On 19 April 2010, the Ministry of Finance announced in Decision No. 856/QD-BTC the list of large enterprises under the mandate of the Large Enterprise Unit, noting that the General Department of Taxation would prescribe how it will implement the tax administration duties and powers of the unit on the listed enterprises in subsequent announcements. The list of companies that are subject to the unit includes many state-owned enterprises, banks, automobile companies and other selected companies. However, the Decision does not indicate what selection factors were used in developing the list of companies, nor is it clear whether all taxes are within the mandate of the unit or only corporate income tax. The Decision also does not address exactly how the unit will be involved in tax audits of the listed companies or whether ruling requests would be handled by the unit. The Decision became effective immediately.

With the release of Official Document 1620/TCT-DNL, the General Department of Taxation announced that the listed enterprises will continue to make their tax registrations, tax declarations, tax settlements and tax payments with tax departments of the provinces and cities, as is currently the case. General Department of Taxation will issue specific guidance or regulations on the institutional coordination between the Large Enterprises Unit with the tax departments of the provinces and cities.

Affected companies should consider a review of all open tax years' corporate income tax filings for uncertain tax positions. In addition, a review of all tax documentation, including transfer pricing documentation, would be recommended. Once clarification is provided on the scope of taxes under the mandate of the unit, listed taxpayers may need to expand their reviews to include indirect tax, Foreign Contractor Withholding Tax and other taxes.