However, the tax authority has suggested that Ms. Halena Van should file an additional declaration for the transfer contract with a tax rate of 20% because she has stayed in Vietnam for more than 183 days. Ms. Halena Van explained that her prolonged stay in Vietnam was due to an exceptional circumstance.

Ms. Halena Van asked whether her exceptional circumstance would allow her to deduct the period spent in Vietnam for resolving the matter. She also inquired if she qualifies for any tax exemptions under any double taxation avoidance agreements in this case.

The Ho Chi Minh City Tax Department provided the following response:

Based on the Tax Management Law dated June 13, 2019:

 - Article 47 stipulates the filing of supplementary tax returns:

"Article 47. Supplementary tax return filing

Taxpayers who discover errors or omissions in tax returns submitted to the tax authorities may file supplementary tax returns within ten years from the deadline for filing the tax return for the tax assessment period with errors or omissions, provided that the tax authority or competent authority has not issued a decision on tax inspection or examination.

... 3. After the tax authority or competent authority has issued conclusions and decisions on tax matters following tax inspection or examination at the taxpayer's premises, the filing of supplementary tax returns is regulated as follows:

a) Taxpayers may file supplementary tax returns in cases where they increase the amount of tax payable, reduce the amount of tax deductible, or reduce the amount of tax exempted, reduced, or refunded, and are subject to administrative fines for violations of tax management as stipulated in Article 142 and Article 143 of this Law; b) In cases where taxpayers discover errors or omissions in their tax returns and filing supplementary tax returns would reduce the amount of tax payable or increase the amount of tax deductible, or increase the amount of tax exempted, reduced, or refunded, the procedures for settling tax complaints shall apply."

Regarding Article 59, which deals with the handling of late tax payments:

"Article 59. Handling of Late Tax Payments

Cases that must make late tax payments include:

... b) Taxpayers who file supplementary tax returns that increase the amount of tax payable or where the tax authority or the competent state authority for tax inspection and examination discovers a tax deficiency in the tax return must make late tax payments for the additional tax amount from the day following the last day of the tax filing deadline for the tax assessment period with errors or omissions, or from the day after the tax filing deadline for the initial customs declaration;

c) Taxpayers who file supplementary tax returns that reduce the amount of tax already refunded or where the tax authority or the competent state authority for tax inspection and examination discovers that the refunded tax amount is less than the tax amount to be refunded must make late tax payments for the amount of refunded tax to be recovered from the day they receive the refund from the state budget;

... 2. The late tax payment rate and calculation period are as follows:

a) The late tax payment rate is 0.03% per day calculated on the amount of tax payable that is paid late;...".

Regarding Article 142, which concerns incorrect declarations leading to a deficiency in tax payment or an increase in tax exemptions, reductions, or refunds:

Based on Decree No. 126/2020/ND-CP dated October 19, 2020, issued by the Government, detailing certain provisions of the Tax Management Law:

In Article 7, specifically, Section 4, which pertains to tax return filings:

"Article 7. Tax Return Filing

... 4. Taxpayers shall file supplementary tax returns for each tax return with errors or omissions according to the provisions in Article 47 of the Tax Management Law and the form specified by the Minister of Finance. Taxpayers shall file supplementary tax returns as follows:

a) In cases where the supplementary filing does not change the tax obligations, the taxpayer must submit an Explanation for the Supplementary Filing and related documents, without having to submit a Supplementary Tax Return.

In cases where the annual tax settlement has not been filed, the taxpayer shall file supplementary tax returns for months or quarters with errors or omissions, while also consolidating the supplementary data into the annual tax settlement.

In cases where the annual tax settlement has been filed, only the annual tax settlement needs to be supplemented; specifically, in the case of supplementary filing of the personal income tax return for organizations and individuals receiving income from wages and salaries, the corresponding monthly or quarterly returns with errors or omissions must be supplemented.

b) Taxpayers filing supplementary returns resulting in an increase in tax payable or a decrease in the tax refunded by the state budget must pay the additional tax amount or the tax amount that has been refunded in excess, as well as any late tax payments (if applicable) to the state budget…".

This excerpt provides details on how late tax payments are handled and the procedures for filing supplementary tax returns in the context of tax adjustments and deficiencies.

Based on the calculation of personal income tax on capital transfer income

In accordance with Circular No. 111/2013/TT-BTC dated August 15, 2013, issued by the Ministry of Finance providing guidance on the implementation of the Personal Income Tax Law, the Law amending and supplementing certain provisions of the Personal Income Tax Law, and Decree No. 65/2013/NĐ-CP issued by the Government detailing certain provisions of the Personal Income Tax Law and amending and supplementing certain provisions of the Personal Income Tax Law:

In Article 11, which specifies the basis for calculating tax on income from the transfer of capital:

"Article 11. Basis for Calculating Tax on Income from the Transfer of Capital

Regarding income from the transfer of capital contributions:

The basis for calculating tax on income from the transfer of capital contributions consists of taxable income and the tax rate.

a) Taxable Income: Taxable income from the transfer of capital contributions is determined by subtracting the selling price from the purchase price of the transferred capital contribution and reasonable expenses related to generating income from the transfer of capital.

b) Tax Rate:

The personal income tax rate for income from the transfer of capital contributions is based on the progressive tax rate with a rate of 20%.

c) Determination of Taxable Income Timing:

The timing for determining taxable income is the effective date of the capital contribution transfer contract. In the case of contributing capital through capital contributions, the timing for determining taxable income from the transfer of capital is the moment when the individual transfers the capital or withdraws the capital.

d) Tax Calculation Method:

Personal income tax to be paid = Taxable income x Tax rate of 20%."

File for tax exemption and reduction under tax treaties

Based on Circular No. 205/2013/TT-BTC dated December 24, 2013, issued by the Ministry of Finance providing guidance on the implementation of double taxation avoidance agreements and preventing tax evasion for various types of income and assets between Vietnam and countries and territories that are effective in Vietnam.

In accordance with Circular No. 80/2021/TT-BTC dated September 29, 2021, issued by the Ministry of Finance, providing guidance on the implementation of certain provisions of the Tax Management Law and Decree No. 126/2020/ND-CP dated October 19, 2020, issued by the Government, which details certain provisions of the Tax Management Law.

In Section 2 of Article 62, which specifies the procedures for tax exemption and reduction under double taxation avoidance agreements (tax treaties):

"2. For foreign individuals:

a) For foreign individuals who are residents of foreign countries with income from wages, salaries, business income, capital investment, royalties, real estate transfer, capital transfer, securities transfer, income from independent professional services, and other income subject to taxation through a Vietnamese entity by contract or income disbursement.

a.1) Within 15 days before entering into contracts with Vietnamese entities or individuals: Foreign individuals shall submit a request for tax exemption or reduction under the tax treaty to the tax authority directly managing the Vietnamese entity along with the initial tax return for the first tax filing. The submission includes:

a.1.1) A request document using Form No. 01/HTQT issued as an attachment in this Circular;

a.1.2) The original (or a certified copy) of the residence certificate issued by the residence country's tax authority immediately before the year in which the request for tax exemption or reduction under the tax treaty is legally authenticated by consular legalization;

a.1.3) A copy of the labor contract with the foreign employer and a personal commitment signed by the individual (if applicable);

a.1.4) A copy of the labor contract with the Vietnamese employer (for income from wages, salaries, and business income) or a copy of legal documents proving the source of the income (for other types of income) and a personal commitment signed by the individual;

a.1.5) A copy of the passport used for immigration in Vietnam and a personal commitment signed by the individual."

In the case of Ms. Halena Van, who is a foreign national and has been doing business in Vietnam since 2006, and transferred her capital contributions to another person in 2018, in principle, for the tax year 2018, if she was a resident individual at the time of capital transfer, she should have followed the tax declaration and payment regulations as stipulated in Article 11 of Circular No. 111/2013/TT-BTC.

If she is required to file a supplementary tax return, she should follow the provisions of Section 4 of Article 7 in Decree No. 126/2020/ND-CP.