TAX POLICY ON EDUCATION EXPENSE FOR CHILDREN OF FOREIGN WORKERS WORKING IN VIETNAM

In Clause 13, Article 4 of Circular No. 219/2013/TT-BTC dated December 31, 2013 of the Ministry of Finance stipulates subjects not subject to value added tax (VAT) including: Education and vocational training as prescribed by law, including foreign language training, artistic training, sports training, nursing, children’s nursing, and training of other professions in order to raise extend education, improve professional knowledge and skills. The revenues from meal, student transport collected by educational institutions from preschool to high school are not subject to tax.

Revenues from boarding school services; revenues from training (including the examinations and issuance of qualifications are part of the training course) are not subject to VAT. If the training institution only organizes the examinations and issues qualifications that are part of the training course without running the course, the examinations and issuance of qualifications are also not subject to tax. The examinations and issuance of qualifications beyond the training course are subject to VAT…

In addition, Article 4 of Circular No. 96/2015/TT-BTC dated June 22, 2015 of the Ministry of Finance has regulations on deductible and non-deductible expenses when calculating taxable income, Except for the non-deductible expenses prescribed in Clause 2 of this Article, every expense is deductible if all of these following conditions are satisfied: The actual expense incurred is related to the enterprise’s business operation; There are sufficient and valid invoices and proof for the expense under the regulations of the law; There is proof of non-cash payment for each invoice for purchase of goods/ services of VND 20 million or over (including VAT). The proof of non-cash payment must comply with regulations of law on VAT.

The expenses not deductible when calculating taxable income include expenditures on wages and bonus for employees in one of the following cases: If an employment contract between an enterprise and a foreign employee has an education expense of his/her children in Vietnam from preschool to high school which is covered by the enterprise as part of the wages, does not contravene regulations of law on salaries and wages, and has sufficient proof, such education expense will be deductible expenses when calculating taxable income.

Furthermore, according to Point g, Clause 2, Article 2 of Circular No. 111/2013/TT-BTC dated August 25, 2013 of the Ministry of Finance regulating incomes not included in taxable incomes: The tuition fees for children of foreign employees in Vietnam to study in Vietnam, for children of Vietnamese employees overseas to study overseas from preschool to high school, which is paid by the employer on their behalf.

Pursuant to the above regulations, in case the Company signs a labor contract with an individual who is a foreigner coming to Vietnam to work, the contract has an agreement on education expense for the foreigner’s children to study at private schools in Vietnam from preschool to high school which is covered by the enterprise for the foreigner, and has sufficient proof documenting the Company’s name, address, and tax code, such education expense will be deductible expenses when calculating income subject to corporate income tax. These expenses are not subject to personal income tax from employees’ wages and remunerations when calculating personal income tax.