To: Netafim Vietnam Co., Ltd.
Address: A1, No. 672 Street, No. 1 Quarter, Phuoc Long B Ward, District 9, HCMC
TIN: 0313950257

In reply to the Company’s Letter of Transmittal No. 01/2019/NTF dated December 25, 2019 regarding tax policies, HCMC Tax Department gives the following opinions hereunder:

Pursuant to clause 2 of Article 2 in the Circular No. 111/2013/TT-BTC dated August 15, 2013 of the Ministry of Finance, providing instructions about value-added tax (VAT), which prescribes income from wages and salaries:

“Income from wages and salaries refers to income that an employee receives from an employer, including:

a) Wages, salaries, and other cash or non-cash equivalents.

b) Benefits and allowances, except the followings:

…

b.6) Employee emergency allowance; occupational accident allowance; one-time allowance for childbirth or child adoption; paternity pay; postpartum convalescence and rehabilitation benefit; benefit for employee incapacity for work; lump-sum retirement allowance; monthly survivorship allowance; severance pay; layoff or job loss allowance; other benefit as provided in the Labor Code and Social Insurance Law.

…”

dd) Non-wage compensation package, including benefits in cash or in kind, that an employer pays and a taxpayer receives in any form:

…”

Pursuant to Article 4 in the Circular No. 96/2015/TT-BTC dated June 22, 2015 of the Ministry of Finance, providing instructions about corporate income tax (CIT) (in force as from January 1, 2015) that amends and supplements Article 6 in the Circular No. 78/2014/TT-BTC (previously amended and supplemented by clause 2 of Article 6 in the Circular No. 119/2014/TT-BTC and Article 1 in the Circular No. 151/2014/TT-BTC):

“Article 6. Tax deductible expenses and non-deductible expenses determined as a basis for calculation of taxable income

1. Except the non-deductibles specified in clause 2 of this Article, enterprises may claim deductions for all of their expenses if the following conditions are satisfied:   

a) They incur actual expenses pertaining to their business and production activities.

b) They incur fully-invoiced or legally-documented expenses.

c) They incur expenses for goods and services, the invoice value for each of which is at least 20 million (inclusive of VAT) and submit documents evidencing their non-cash payments on these expenses.

Documents evidencing non-cash payments shall be subject to regulations of legal normative documents on value-added tax.

…

2. The non-deductibles serving as a basis for calculation of taxable income, including:

2.1. The expenses that fail to meet conditions specified in claue 1 of this Article.

…”

As stated above, the Company must pay the expenses hereunder to foreign employees who leave for their countries upon termination of their employment contracts:

- Employee severance pay prescribed in the Labor Code and the Social Insurance Law that is not subject to PIT and is categorized as the deductible from taxable income of the CIT. 

- Expenses paid for flight tickets or luggage transportation to foreign employees as agreed upon in employment contracts that are charged into taxable income of VAT for which these employees are liable, and are categorized as the CIT deductibles if these expenses meet the conditions specified in Article 4 in the Circular No. 96/2015/TT-BTC.    

- Expenses paid for flight tickets or luggage transportation to families of foreign employees that are charged into taxable income of VAT for which these employees are liable, and are categorized as the CIT deductibles.   

HCMC Tax Department is requesting the Company to comply with regulations of legal normative documents cited herein.

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