In collaboration with Staffordshire University
PERSONAL AND BUSINESS TAXATION 2
MOCK eXAM
1
SECTION A [30
MARKS]
ANSWER ALL TEN QUESTIONS BELOW. EACH QUESTION IS WORTH 3 MARKS.
1. In March 2018, DPN Co, a Vietnamese company, disposed of a machine for
VND2,200 million. The machine was purchased in January 2017 for VND3,600 million
with an estimated useful life of three years. DPN Co’s policy (which is acceptable for
tax depreciation) is to provide for a full month’s depreciation in the month of purchase
and no depreciation in the month of disposal. What is the taxable gain on the disposal
of the machine which DPN Co must declare for corporate income tax (CIT) purposes
for its financial year ended 30 June 2018?
A. VND100 million
B. VND2,200 million
C. VND0 million
D. VND800 million
2. In 2018, ISC Co, a Vietnamese company, received compensation in cash of
VND1,000 million from an insurance company for damage to goods caused by a fire.
According to the insurance policy, the compensation does NOT cover any value added
tax (VAT) on the purchase of the goods. The insured goods were purchased by ISC Co
for VND1,650 million (inclusive of VAT 10%).
What is the amount of output value added tax (VAT) and creditable input VAT (in VND
millions) ISC Co is required to declare in 2018 as a result of the above transactions?
Output VAT Creditable input VAT
A VND100 million VND0 million
B VND0 million VND150 million
C VND0 million VND0 million
D VND100 million VND150 million
3. In 2018, MHT Co, a Japanese company, signed a contract to supply and install
equipment for PCR Co, a Vietnamese company. The contract price was USD2 million
gross of value added tax (VAT) and corporate income tax (CIT). MHT Co purchased
goods relating to this contract, valued at USD0·50 million, from Vietnamese suppliers.
What is the amount (in USD) of the corporate income tax (CIT) portion of foreign
contractor tax (FCT) which PCR Co would be required to withhold on the above
contract with MHT Co, assuming MHT Co applied the deemed method for FCT
declaration?
A. USD29,100
B. USD40,816
C. USD30,612
D. USD38,800
4. On 30 June 2018, STG Co, a Vietnamese company, identified the value added tax
(VAT) declaration it made for April 2018 was under-declared by VND1,000 million. It
should be noted that 21 May 2018 was a Monday, and there had been no tax audit at
STG Co in 2018.
2
What is the late payment interest (in VND) which STG Co is required to settle on 30
June 2018, assuming the under-declared value added tax (VAT) was settled on that
date?
A. VND12,300,000
B. VND15,000,000
C. VND20,000,000
D. VND12,000,000
5. In February 2018, JTF Co, a Japanese investor, sold its capital contribution in TGT
Co, a Vietnamese limited liability company, to a foreign buyer for USD10 million, when
the USD buy–sell exchange rate from the commercial bank was VND23,000–
VND23,200. The original capital contribution in TGT Co was USD10 million which is
reflected in the audited financial statements at an exchange rate of USD1 =
VND20,000. The transfer expenses incurred were immaterial. TGT Co’s functional
currency is VND.
What is the corporate income tax (CIT) liability incurred by JTF Co on the sale of its
capital contribution in TGT Co in the year 2018?
A. VND6,000 million
B. VND0 million
C. VND6,400 million
D. VND230 million
6. PNLT Co, a foreign contractor from Denmark, entered into a contract for
construction of a factory in Vietnam and applied the deemed method for declaring
foreign contractor tax (FCT). The works were completed in 2017, however, there were
some disputes between PNLT Co, its suppliers and the project owner. When the
disputes were settled in 2018, PNLT Co received contractual compensation of
USD500,000 from its suppliers, but had to pay contractual compensation of
USD320,000 to the project owner. Compensation is treated as ‘other business
activities’ for corporate income tax (CIT) purposes.
What is the amount of corporate income tax (CIT) as a portion of the foreign
contractor tax (FCT) liability incurred by PNLT Co in Vietnam in 2018, if the company’s
policy is to minimise tax under current regulations?
A. USD0
B. USD10,000
C. USD36,000
D. USD3,600
7. CCD Co, a company in Vietnam, reimbursed employees’ expenses for overseas
business trips originally paid by the employees using their personal credit cards. The
expenses amounted to VND50 million in total.
Which of the following conditions must be met for CCD Co to treat such reimbursed
expenses as deductible for corporate income tax (CIT) purposes?
(1) The credit card is guaranteed by the company
(2) The expenses are supported by proper documents/invoices
(3) The trip is authorised by a decision issued by the company’s directors
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(4) The company policy allows employees to advance expenses for business trips by
personal credit cards
A. 1, 2, 3 and 4
B. 1 and 4 only
C. 2 and 3 only
D. 2, 3 and 4 only
8. VidX Co imported the original video player, the import price according to the
contract and invoice is VND1 million/unit, the import taxable price is VND1.25
million/unit. The import tax rate is 30% and the VAT rate is 10%.
What is the payable VAT of VidX Co?
A. VND130,000
B. VND162,500
C. VND137,500
D. VND155,000
9. A producer sells car in domestic market. Before VAT price of a car is VND450
million. Excise duty rate: 50%, VAT rate: 10%. The base price for excise duty for car is:
A. VND450 million
B. VND410 million
C. VND300 million
D. VND272.7 million
10. Which of the goods below is excisable?
A. 16-Seat passenger automobiles
B. 24-Seat passenger automobiles
C. Lorry
D. Truck
SECTION B [30
MARKS]
ANSWER ALL QUESTIONS BELOW.
QUESTION 1 (15
MARKS)
State whether each of the statements below are true or false and explain
1. The base price for excise duty for imported goods at the importation stage is the
import tax base price plus (+) import tax
2. The base price for excise duty for domestic goods is the selling price exclusive of
VAT, but inclusive environmental tax (if any) and excise duty
3. A trading company bought beer from a beer producer. When the trade company
sales beer in the domestic market, he has to pay only excise duty
4. When enterprises in export processing zones import and export goods from
abroad, they will pay import tax.
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5. Goods imported from export processing zones to internal market are subjected to
import and export tax.
QUESTION 2 (15
MARKS)
Explain the treatment of ‘realised’ foreign exchange differences arising from the
formation of fixed assets in the following periods:
– the construction period (where a company has no business operations); and
– the period from when a company starts its business operations.
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SECTION C [40
MARKS]
THERE ARE THREE INDEPENDENT QUESTIONS. ANSWER ALL QUESTIONS
BELOW.
QUESTION 1 (15
MARKS)
FXVN Ltd is a Vietnamese company established in 2014, whose functional currency is
the Vietnam Dong. From 2014 to June 2016, the company was in the construction
period (construction of its factory and purchase of machinery and equipment) with no
operations and no revenues. During this period, FXVN Ltd had the following
transactions in US dollars (USD):
Transactions Amount Date of USD/VND Note regarding
USD transactio exchange accounting
n rate records of
monetary items
Purchase of machinery on 4 million 1 February 21,450 Recorded as
credit 2015 ‘Payables for
fixed assets’
Receipt of first invoice from 3 million 1 22,470 Recorded as
the construction contractor December ‘Payables for fixed
2015 assets’
Settlement of amounts (7 31 22,410 Recorded as a
owed for machinery and million) December reduction in
construction (as above) 2015 ‘Payables for fixed
assets’
Receipt of final invoice from 3 million 15 22,290 Recorded as
the construction contractor February ‘Payables for fixed
2016 assets’
Settlement of the final (3 28 June 22,370 Recorded as a
invoice from the million) 2016 reduction in
construction contractor ‘Payables for fixed
assets’
Factory and machinery 1 July 2016 22,340
completed at a total cost of
USD10 million and put into
use
FXVN Ltd commenced business operations and started generating revenue from 1 July
2016. The company expects to amortise the foreign exchange differences incurred
during the construction period over the maximum period available as allowed under
the prevailing regulations in 2016.
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Required: Calculate (in VND millions) the amount of the foreign exchange differences
which FXVN Ltd can capitalise during the construction period, and the deductible
expense from the amortisation of the capitalised exchange differences allowable for
corporate income tax (CIT) purposes, if any, in the fiscal year ended 31 December
2016.
QUESTION 2 (15
MARKS)
MCNR Co is a European company specialising in machinery for the pulp and paper
industry. In 2016, MCNR Co received a request for proposal (RFP) from SGPP JSC, a
company in Vietnam, for the construction of a paper factory in Dong Nai, Vietnam.
The RFP requires that bidders quote a price which is gross of the corporate income tax
(CIT) portion and net of the value added tax (VAT) portion of the foreign contractor tax
(FCT) payable in Vietnam.
Based on its experiences from prior projects in Vietnam, MCNR Co estimated that the
value net of all withholding taxes which it would expect to receive from the project
would be as follows:
Item Value net- Notes
of-tax USD
Machinery and 45 million This amount can be broken down into:
equipment machinery and equipment with a value of USD42
million, and a one-year guarantee with a value of
USD3 million.
MCNR Co estimated that it would purchase spare
parts for the machinery and equipment with a
value of USD2 million from MCEQVN, an affiliate
of MCNR Co in Vietnam.
Design and 8 million
engineering
services
Construction and 15 million MCNR Co will sign a contract to subcontract the
installation installation works valued at USD4 million to
MCSIVN, a subsidiary of MCNR Co in Vietnam.
Supervision 4 million
Commissioning 1 million
Technical training 2 million To be performed in Vietnam by personnel
dispatched from Europe by MCNR Co.
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Total 75 million
Required:
(a) State whether the cost of the spare parts to be purchased from MCEQVN and the
value of the services to be subcontracted to MCSIVN will be deductible from taxable
revenue when determining the foreign contractor tax (FCT) liability of MCNR Co.
(b) Calculate (in USD millions, rounded to two decimals) the contract price to be
quoted by MCNR Co as required in the request for proposal (RFP) and the potential
FCT which will be withheld from the payments made to MCNR Co if the parties agree
to break down the value of each item in the contract.
(c) Calculate (in USD millions, rounded to two decimals) the contract price to be
quoted by MCNR Co as required in the RFP and the potential FCT which will be
withheld from the payments made to MCNR Co if the parties agree to state a lump
sum price in the contract.
QUESTION 3 (10
MARKS)
(a) CSN Co operates a golf course in Ha Long, Quang Ninh province. The company’s
information regarding golf course income for the period ended 30 June 2018 is as
follows:
– Membership fees from players: VND16,000 million
– Sales of tickets for golf training ground: VND6,000 million
Note: The collections are inclusive of value added tax (VAT) at 10% and special sales
tax at 20%.
Required: Calculate the taxable revenue for value added tax (VAT) purposes and the
output VAT which CSN Co should declare for the period ended 30 June 2018.
(b) THD Co is the manufacturer of pharmaceutical products. The company’s
manufacturing facility and headquarters are located in Ho Chi Minh City. The company
has dependent branches in various provinces in Vietnam, including Vinh Phuc. The
whole group adopts the deduction method for VAT declaration purposes.
Required: Briefly describe the invoicing requirements for both THD Co and the
dependent branch in Vinh Phuc province (i) when THD Co issues goods to the branch;
and (ii) when goods are sold by the branch.
- END OF EXAM -
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APPENDIX: TAX RATE AND ALLOWANCES
By Vietnamese Tax Law, the following tax rates and allowances are to be used in
answering the questions.
Value Added Tax (VAT)
The following rate of VAT are to be used in answering all questions in this exam
(unless otherwise stated):
Standard rate 10%
Reduced rate 5%
Corporate Income Tax (CIT)
Standard rate for enterprises 20%
Foreign contractor Tax (FCT)
VAT rates as a percentage (%) of taxable turnover
1. Services, leasing of machinery and equipment, and insurance 5%
2. (a) Construction, assembly and installation where the tender includes the 3%
supply of materials, machinery and equipment in the construction work;
lumpsum turnkey contracts.
(b) Construction, assembly and installation where the tender does not include 5%
the supply of materials, machinery and equipment in the construction work.
3. Other business and production 2%
CIT rates as a percentage (%) of taxable turnover
1. Trading: distribution and supply of goods, raw materials, supplies, machinery 1%
and equipment associated with services in Vietnam (including the supply of
goods in the form of on-the-spot export, (except processing goods for foreign
organisations and individuals); and the supply of goods under the terms of
Incoterms).
2. Services, leasing of machinery and equipment, insurance, leasing of oil rigs 5%
3. Management services of restaurants, hotels and casinos 10
%
4. Leasing of aircraft, aircraft engines, aircraft spare parts and sea going vessels 2%
5. Construction and installation regardless of whether the tender includes or 2%
does not include the supply of materials, machinery and equipment in the
construction work; lumpsum turnkey contracts
6. Other production or business activities and transportation (including sea and 2%
air transportation)
7. Assignments [transfers] of securities, reinsurance and commissions from 0.1
reinsurance %
8. Derivatives 2%
9. Loan interest 5%
10. Income from royalties 10
%
Rates of exchange
The following rate of exchange rate are to be used in answering all questions in this
exam (unless otherwise stated): 1 USD = VND 23,500
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