On September 28th, 2020 Bac Ninh Tax Department issued Official Letter No. 3079/CT-TTHT. Whereby:
If the Companies purchase the apartment for foreign employees accommodation during their working period in Vietnam and this real estate is attached to a long-term ownership, the use of land right shall be determined separately and recognized as an intangible fixed asset which will not be depreciated and amortized into deductible expenses when determining CIT payable.
The input VAT of the apartment and VAT of the accompanying equipment, furniture, services will not be deductible. The non-deductible VAT shall be accounted into expenses for CIT calculation or be included in the apartment price for depreciation as regulated by the law.
The depreciation expenses on the apartment, water, electricity bills and other accompanied services shall be calculated into the taxable personal income of the employees but ít will not exceed 15% of the total taxable income (not including the above expenses).
If the contract includes a term that the Company must pay for the common property maintenance (2% of the apartment selling value) as regulated by the Law on housing, the expenses for the apartment building maintenance will be deductible when calculating the CIT payable. Thus, the Company will carry out adding the maintenance expenses to the apartment price for depreciation.
In the event that, during the apartment using process, the Company arises labor changes which include the case that foreigner comes to Vietnam for employment. This case results in incurring a period of having no residence in the apartment, the depreciation expenses for the apartment in the aforementioned period (in the less than 9 months period) will be deductible when determining the CIT payable if the Company have sufficient dossiers, the reason for the temporary suspension of the apartment accommodating. Hence, the Company must reserve and provide the dossier in full when being requested by the tax agency.
