January 14, 2022
December 17, 2021
Kreston firm, Brighture, share their expertise in their latest newsletter covering financial news and updates from China.
December 15, 2021
Kreston Global tax expert, Nam Nguyen from Kreston NNC in Ho Chi Minh City, recently shared his experience of working with foreign investors in Vietnam with STEP Journal and how personal tax planning and understanding tax residence can save clients money.
What is the issue?
Vietnam taxes residents on worldwide income and non-residents on Vietnam-sourced
income, regardless of where they get paid.
What does it mean for me?
Tax rates for tax residents are comparatively high, with a 35 per cent top marginal rate and few tax reliefs.
What can I take away?
Personal tax planning is essential when advising clients considering working or doing business in Vietnam.
December 7, 2021
Kreston Global member Ganesh Ramaswamy of K Rangamani and Associates LLP was invited to share his views with Law360 on BEPS 2 and the impact it would have on SMEs. Ganesh offers excellent advice, discussing options that SMEs who carry out cross-border business should consider, from evaluating their operational structures from a tax perspective to their reporting processes and any costs involved from the new tax initiative.
Read the full article here.
October 28, 2021
McGregor Bailey, a chartered accounting firm based in Auckland, has joined Expatland Global Network as one of the group leaders in the Auckland E-Team.
McGregor Bailey is a member of Kreston Global, a global network of independent accounting firms headquartered in London.
McGregor Bailey will oversee the accounting needs of expat clients moving to Auckland and to other cities in New Zealand. Founded in 1948, McGregor Bailey provides businesses with tax and accounting services from inception through to growth and eventual exit.
The Expatland Global Network consists of E-Teams of multi-disciplinary service providers in popular expat cities around the world. Operating at a city level, they have essential local knowledge and insight and are a great resource for expats on the move.
John Marcarian, Founder of the Expatland Global Network, says, “having McGregor Bailey join the Expatland Global Network strengthens our presence in Auckland We are very pleased to have them join our network.”
For Cameron McGregor, Principal of McGregor Bailey, a partnership with Expatland Global Network is a strategic move for any company expanding its services to capture the expat market. Cameron adds, “joining the Expatland Global Network enables our firm to provide our clients with international connectivity. We’re very excited of the opportunities that the network provides.”
‘Expatland’ origins
Expatland began as a book, written in 2015 by John Marcarian, as a result of his personal expat journey. It later evolved into a global community committed in helping expats plan their move overseas.
E-Teams around the globe
The Expatland Global Network was launched by John in 2018. It is expanding rapidly and has established E-Teams in 32 cities including London, Sydney, Singapore, Amsterdam, Melbourne, Budapest, Hong Kong, and Toronto. With best-in-practice members recognising the importance of this service, many more will follow.
If you are interested in being part of Expatland Global Network or a business interested in being an E-Team member, you can get in touch with Expatland: http://www.expatland.com/contact/
October 4, 2021
By Nam Nguyen, Kreston NNC, Vietnam
This week VN Express International reports that the Asian Development Bank has reduced its forecast of Vietnam’s GDP growth in 2021 to 3.8%. The World Bank has reduced it to 4.8% but forecasted a 6.5% growth next year, while the country targets a growth of 3.5-4%, after a 2.9% growth last year. The government in Vietnam has made announcements to allow resumption of most activities in Covid-hit cities and provinces from 1 October 2021, including Ho Chi Minh City, the commercial hub of Vietnam.
While Covid is still lingering in Vietnam and many other countries, proper cashflow management is important to affected businesses. International investors may be looking at different scenarios. Some may consider funding its Vietnam subsidiary to help it cope with cashflow difficulties. Others may consider scenarios such as mobilising idle working capital or retained earning from their Vietnam subsidiary to help their business elsewhere, suspension of the Vietnam subsidiary’s business, or even an exit option etc. While it is hoped that investors do not have to consider the last two scenarios, this article helps readers to familiarise themselves with the regulatory requirements and tax implications all mentioned scenarios.
Funding a Vietnam subsidiary
A foreign investor may fund its Vietnam subsidiary by increasing the charter capital (i.e. equity), providing a loan capital (i.e. debt), or simply providing a grant, or allowing a debt waiver. Increasing the charter capital requires pre-approval by the licensing authority and it is appropriate if the increased capital will stay in Vietnam indefinitely. There will be no tax implication or benefit.
Providing loan capital to a Vietnam subsidiary by way of a shareholder’s loan offers flexibility and tax efficiency. A shareholder’s loan may be capitalised to become an addition to the charter capital at any time. A foreign loan does not require the licensing authority’s pre-approval unless the loan will cause the Vietnam subsidiary’s total investment capital (i.e. equity plus debts) to exceed the licensed total investment capital. A foreign loan requires pre-approval by the State Bank of Vietnam (SBV) if the loan period exceeds 12 months. However, a short-term loan (i.e. up to 12 months) does not require SBV’s pre-approval unless the loan period is extended beyond 12 months. A foreign shareholder’s loan may be repaid at any time, and hence, it may be used as a tool for future fund repatriation.
A lending foreign shareholder may charge an interest expense on the loan. The interest rate may be up to 150% of the local prime interest rate (subject to the usual rules on thin capitalisation, related party transactions, and transfer pricing). The interest payable to the lending shareholder by the Vietnam subsidiary will be subject to a 5% interest withholding tax but the interest expense will be tax deductible to the Vietnam subsidiary. For example, assuming that the Vietnam subsidiary is making taxable profits and is paying corporate income tax at the standard tax rate of 20%, then for every dollar of interest that the Vietnam subsidiary pays its oversea lending shareholder, it will pay 5 cents of interest withholding tax and get 15 cents of tax deduction benefit (i.e. 20% – 5%). In fact, this is one of the attractive features of Vietnam’s tax system that international investors may not be aware of.
What if the Vietnam subsidiary is not making any taxable profits to utilise the interest expense tax deduction? Such interest expense may be accounted for as part of the accumulated tax losses, which may be carried forward up to 5 years from the loss-making year.
A grant or debt waiver will trigger corporate income tax liability to the Vietnam subsidiary as they will be considered as the subsidiary’s taxable income. There will be no VAT implication unless the grant or the debt waiver is exchanged for goods or services to be supplied by the Vietnam subsidiary.
Other scenarios
Other scenarios include (i) the sale of the Vietnam business, (ii) the reduction of its charter capital, or (ii) business suspension. Both scenarios (i) and (ii) requires pre-approval by the licensing authority. Scenario (i) may trigger tax on capital gain. Scenarios (ii) and (iii) have no tax implication. The regulatory compliance paperwork process for scenario (i) is simpler and less time-consuming than scenario (ii). Scenario (iii) is simplest and requires only a written notice to the licensing and tax authorities. A company may apply for suspension or early resumption of business at any time. Previously, a company was allowed to apply for business suspension only twice. However, the current regulation no longer limits the number of times that a company may apply for business suspension. If a company has tax incentives (e.g. tax holiday or a 50% tax reduction period), then the unutilised tax incentives may be preserved only if the business is suspended during its pre-operating period.
Employees’ statutory redundancy payment may be another important consideration for companies with a large workforce. The labour law requires that if an employee is made redundant, the employer must pay a redundancy payment at the minimum of 2-month salary or one-month salary for every year of service to employees who have been employed for at least one year.
For a related guide on methods of repatriation of fund from Vietnam, please click here to view. The author can be contacted at nam@kreston-nnc.com
September 27, 2021
Nam Nguyen, Kreston NNC, Vietnam
The recently introduced taxation of e-commerce in Vietnam has triggered a series of issues. Beside those mentioned in the last two articles on this topic, below are others.
The key trigger is permanent establishment (“PE” i.e., taxable presence in Vietnam). As mentioned in the last two articles on this topic, digital presence may be deemed by tax authorities in Vietnam as physical presence for taxation purposes, especially for e-commerce businesses. Otherwise, it would defeat the purpose of e-commerce taxation, as Vietnam has effective tax treaties with around 80 countries, and many companies doing business in Vietnam are from these countries.
If PE is triggered, it means that foreign companies that have transactions in Vietnam may not be able to rely on a tax treaty to protect the business profits derived through a PE in Vietnam from Vietnamese taxation. Where a tax treaty applies, the PE definition of the relevant tax treaty will prevail. However, when a dispute with the tax authority in Vietnam over PE issues arises, it is often like an uphill battle for taxpayers. Where a tax treaty is not available, a foreign company doing business in Vietnam is even more vulnerable to Vietnam’s taxation if a PE arises, as PE is broadly defined under Vietnam’s domestic tax law. It includes (amongst other things) “an agent delivering goods or services in Vietnam on behalf of its overseas principal.”
When PE is triggered, the business profits of a foreign company are not protected from Vietnamese taxation, and there may also be the following potential tax implications.
1. Potential VAT implication
For example, a foreign company makes consumer products such as mobile phones or fashion apparel in Vietnam through an export-manufacturing arrangement with a manufacturer in Vietnam, and the company also sells its products online directly to Vietnamese consumers through its website or other e-commerce platforms. Normally, the export-manufacturing fees charged by the local manufacturer enjoy 0% VAT for export-manufacturing services, so the foreign company does not suffer a 10% VAT which would otherwise be charged by a service provider in Vietnam.
However, according to Vietnam’s current VAT regulation, if the services are rendered under a contract between a Vietnamese service provider and PE in Vietnam of a foreign company, then the 0% VAT rate will only apply if the services are performed outside of Vietnam. In export-manufacturing, the services are obviously performed in Vietnam, so the manufacturing fees will be taxable at 10% VAT, if the foreign company is found to have a PE in Vietnam.
2. Potential foreign contractor tax implication
Another example is where a service is provided by a foreign contractor, to a Vietnamese customer, and it is performed outside Vietnam (known as offshore service). Such service may be exempt from the foreign contractor withholding tax (including 5% VAT and 5% corporate income tax), if it is “consumed” outside Vietnam, and if the foreign contractor does not have a PE in Vietnam. As an illustration, a foreign company provides conventional (i.e., offline rather than online) advertising or marketing services to a Vietnamese customer, to promote made-in-Vietnam products (whether they are made by a foreign owned company or a local company) in international markets, and the services are performed outside Vietnam. These services are exempt from the foreign contractor withholding tax. However, if they are provided as online services then they will be taxable, and so will it be the case if the foreign contractor has a PE in Vietnam.
3. Potential personal income tax implication
For business visitors to Vietnam who spend less than the aggregate of 183 days in Vietnam in a tax year, they are considered as non-residents, and they may apply for tax protection under a tax treaty. Most tax treaties with Vietnam provide that if the person’s remuneration is not borne by a PE in Vietnam then the person’s employment income will not be taxable in Vietnam.
However, in the case scenario (1) above, if the foreign company has a Representative Office in Vietnam which employs (just pays for the cost of) a non-resident expatriate executive (e.g., a regional procurement manager) who frequently visits Vietnam to conclude contracts with the company’s contract manufacturers. The Representative Office itself does not constitute a PE in Vietnam under Vietnam’s current tax regulation. However, if the company is found to have a PE, either under the case scenario (1) above because of its e-commerce activities in Vietnam, or because of certain activities undertaken by the Representative Office or by the non-resident executive, then the person may not be protected by the relevant tax treaty.
A foreign company may be found to have a PE in Vietnam in different ways and it may have more than one PEs in Vietnam. Vietnam’s current tax legislation is silent as to whether if a business is found to have a PE in Vietnam, then above tax treatments will only apply to the transactions associated with such a PE, or they will apply to all transactions. So, the risk of the latter exists, even if a transaction is not associated with the PE.
4. Potentially higher tax implication to PEs
Normally, if a PE is found then only the business profits derived from such a PE (if any) is taxable in Vietnam. However, under the current tax administration rules, Vietnam taxes the business profits of a foreign company that are derived through a PE in Vietnam primarily through the withholding tax regime, whereby a PE’s tax liability is based the contract value (i.e., revenue), instead of profits. For example, a PE is taxed at 1% corporate income tax and 1% VAT on of its trading revenue, or 5% corporate come tax and 5% VAT on its service revenue etc.
However, the foreign contractor tax regulation allows a foreign contractor to select the option of paying corporate income tax at 20% of profits (i.e., revenue – expenses), subject to successful tax registration as if the PE were an ordinary registered business in Vietnam. It means that the tax office may attempt to tax a PE at 20% corporate income tax on profits, instead of at a lower rate (1% or 5%) on the revenue. In this case, the tax on the business profits derived through the PE may be higher than 20% of the real business profits, because chances are that the foreign company may not be able to substantiate all its overseas expenditures (e.g., administration or management expenses) allocated to the PE for tax deductions. Vietnam has very strict rules on expense substantiation for tax deductions, and the tax regulation limits a foreign company’s allocation of management expenses to its PE in Vietnam by prorating the total global management expenses of the foreign company at the ratio of the revenue of the PE in Vietnam over the global revenue (including revenue of all PEs in all countries).
However, the tax regulation also states that no tax deduction is permissible where a PE in Vietnam does not maintain adequate bookkeeping according to Vietnamese accounting standards, which may be the case for a foreign company that is found to have a PE in Vietnam by accident.
Therefore, international businesses that intend to further penetrate Vietnam’s market through e-commerce should be mindful of the higher PE risk, and the above potential additional tax implications.
If you have missed the last two articles on this topic and would like to read them, you may click here to view the first article and click here to view the second article. The author can be contacted at nam@kreston-nnc.com.
September 17, 2021
Many audits went ‘virtual’ in 2020, either partially or wholly, accelerating a process that’s been underway for a decade or more. What are the rules, and what is best practice, as they currently stand? And where might they be going in years to come?
Traditionally, audits have relied on the evidence of the auditor’s own senses and have valued physical evidence wherever possible. That has meant auditors on site with clients, reviewing paper records, and getting close enough to touch high-value assets.
With business increasingly being done online, and intangible assets such as software or development costs becoming more common, that has begun to feel, to some, a little anachronistic.
With the rise of secure document transfer protocols, and the drive for end-to-end digital record-keeping through programmes such as Making Tax Digital, digitalisation was already underway.
In 2019, even before the COVID-19 pandemic, there was much excitement around the idea of using drones to conduct stock audits in hard-to-reach locations, such as coal fields.
With climate change on the agenda, too, the idea of sending audit teams out on planes, trains and automobiles by default came under scrutiny. Could this be a way for the audit industry to play its part in reducing carbon emissions?
Then came lockdown, affecting different territories to different degrees at different times. The audit industry was forced to embrace new ways of working overnight – and find ways to ensure the quality and robustness of virtual audits.
As happened across many sectors, auditors and their clients pedalled a little harder to make it work, but there were clear downsides.
In practical terms, the challenges are around obtaining sufficient evidence, and appropriate evidence, as the basis of an audit opinion. Auditors have developed new ways of obtaining audit evidence such as attending stock observations virtually through the use of video facilities. Assessing the reliability of audit evidence is important as limitations in the availability of audit evidence may need to be stated in the audit report.
Less tangibly, and anecdotally, auditors value opportunities for informal, ad-hoc conversation at client premises. Entirely remote audits deny them opportunities to see those client businesses or organisations in operation and to ask questions as and when they arise. This is not only important in reducing audit risk but also because it allows auditors to deliver a better service.
Finally, there are concerns around the reliability of evidence presented digitally. It may sound like science fiction but we already see deepfake technology being used to spoof voices and likenesses in audio and video, in close to real time. Less sophisticated deception might involve relatively simple digital manipulation of documents by, for example, copying signatures from one to another.
In 2020, the International Auditing and Assurance Standards Board (IAASB), which oversees audit standards worldwide, issued a series of policy statements in response to COVID-19.
Those touched on remote audit only in passing, and only then to underline the importance of adhering to existing principles. And, indeed, on the need to double down on professional scrutiny and scepticism.
Audit standards tend to evolve slowly, over the course of years – and rightly so. Nonetheless, that means we are not likely to see any sweeping policy judgements further encouraging remote audit anytime soon.
As staff return to offices and workplaces, what we’re likely to see is a return to in-person auditing, with some remote audit practices retained as part of the mix.
Where auditors feel confident in providing an opinion based on digital-only evidence, or evidence received by correspondence, they may continue to use it.
That will reduce travel time, reduce the potential burden on clients, while retaining the physical presence of auditors for instances where it can really add the most value.
Contact your local Kreston firm for more information or to talk about how modern audit procedures might work for you. Or contact us at Kreston Global via kreston.com
A global minimum tax rate of 15% was one of the central topics of the June 2021 G7 meeting in Cornwall. It aims to reduce tax competition and profit shifting in all economic sectors. The ultimate goal is to ensure that the global profits of multinational enterprises would be taxed at an effective tax rate. This move would be disadvantageous for some developing countries, while for some others it would be beneficial.
Taxation magazine’s latest piece discusses the potential impact of the proposed G7 minimum tax deal on developing countries.
Below are the key points from the article:
Read the full article here.
By Nam Nguyen, Kreston NNC, Vietnam
Vietnam’s recent introduction of the taxation of e-commerce may be a game-changer and worthy of a rethink of market entry strategies for foreign trading companies. Below is why.
In the past, the key considerations for foreign trading companies in deciding how to sell their products in Vietnam’s market, beside the need to test the market first, included the administrative challenges in setting up a trading company, due to Vietnam’s restrictions on wholly foreign-owned trading, distribution, and retail businesses. Obtaining the licenses to conduct direct import, trading, distribution, and retail involved a lengthy and costly process. Setting up a company in Vietnam required physical presence including a proper business premise, the exorbitant rental of an office space, and of course the consideration of whether the business was ready yet to establish a taxable presence in Vietnam.
Those considerations often lead foreign trading companies to the choice of selling their products to Vietnam under a distributorship agreement with a local distributor or through direct online sales, rather than setting up a subsidiary in Vietnam. These business models do not require any business license, save operating costs, have limited risk, and avoid taxable presence in Vietnam. In most cases, sales of products to Vietnam through a distributor or direct online sales were regarded as purely commercial transactions (or trading-WITH-Vietnam) and foreign suppliers were often not subject to the foreign contractor withholding tax. In the worst-case scenario, if a sale was regarded as a taxable transaction (or trading-in-Vietnam) the gross sales would be taxable at the deemed flat rates of 1% VAT and 1% CIT (corporate income tax). However, a foreign supplier could effectively pay no Vietnamese tax if it passed the VAT to its distributors or business customers (as they would be able to recover the VAT as their input VAT), and it could rely on a tax treaty with Vietnam (if applicable) to claim an exemption of the 1% CIT under the tax treaty. The risk of taxable presence (i.e. permanent establishment or PE) in Vietnam existed, but it was relatively lower than it is today.
The recent introduction of new rules on taxation of e-commerce potentially leads to increased PE risk in Vietnam for foreign suppliers. Although the issue has not yet been specifically addressed by the new rules, if digital business presence means physical business presence in Vietnam, then it would follow that foreign e-commerce suppliers could no longer benefit the trading-WITH-Vietnam exemption or tax treaty exemption. So, PE risk may no longer be relevant.
For trading sector, the profit margin is often low in comparison to other sectors, and volume is very important. As sales volume grows, paying CIT at 20% of profit (for trading companies) could be more tax efficient than paying a total withholding tax at 2% of the gross revenue. As an example, assuming the average gross margin for trading of popular consumer products in Vietnam ranges from 15% to 22% (or net profit margin from 4% to 8%, according to a private bench-marking exercise), then paying Vietnam’s withholding tax at a total of 2% on the gross sale revenue could be higher than paying the CIT at 20% of the net profit. If that is the case, then doing business in Vietnam as a foreign contractor may no longer necessarily be the most effective option for foreign trading companies.
It is needless to say that there are lots of advantages in trading in Vietnam through a local subsidiary than as a foreign contractor, which can give trading businesses a competitive edge. The advantages include greater market access, visibility and product marketability, efficiency, volume growth potential, and less dependency on local distributors etc. Besides that, setting up a trading company in Vietnam is much easier, faster, and less costly nowadays than it used to be. Therefore, it may be worthwhile of a revisit to this option.
Beside the company option, there is another option of setting up a Representative Office in Vietnam which can help a foreign trading company to achieve greater market access and visibility and drive volume growth in Vietnam. It is a hybrid option between the company model and the foreign contractor model. A detailed comparison of these three business models can be viewed here. If you missed our last article on this topic, please click here to view.
Kreston NNC’s team in Vietnam has extensive hands-on experience in helping clients reviewing and evaluating their Vietnam business models and market entry strategies. If you need professional support in this area, please contact the author at nam@kreston-nnc.com.
August 27, 2021
One of our key firms in China, Brighture, has published its August update on recent alterations to Chinese tax and finance policy.
August 16, 2021
By Ganesh Ramaswamy, Partner at K Rangamani and Associates LLP
(Published in the International Accountant)
“In recent years, the world has seen several major events which have caused huge global shifts in trade power. One such event is Brexit. While this development is likely to slow down trade and disrupt supply chain activities between the UK and the EU, it could also lead to hugely beneficial opportunities for countries and businesses in other regions, especially Asia. Brexit, in particular, has made the UK and the EU look to increase trade with other countries.”
Ganesh Ramaswamy’s latest piece discusses the varying impact of Brexit expected to be felt across the Asian continent and how one should make note of the UK’s novel negotiating position in reference to any new or upcoming FTAs with the region.
Read the article in the International Accountant magazine.
August 6, 2021
We are thrilled to announce that Edmond Chan, of Kreston CAC in Hong Kong, has been honoured once more by The Ministry of Finance of The People’s Republic of China in his reappointment as one of Hong Kong’s accounting and consulting specialists. This is the third time he has been granted this position.
August 5, 2021
By Nam Nguyen – Kreston NNC, Vietnam
According to Vietnam E-commerce Association (VECOM)’s 2021 report, the average annual growth of Vietnam’s e-commerce sector is 30%, with USD13.2 billion revenue in 2020 and it is expected to reach USD52 billion in 2025. Last year, online retail sales increased by 46%, ride-hailing and food deliveries increased by 34%, online marketing & entertainment increased by 18%, and parcel deliveries increased by 47%. On average, there are 3.5 million online transactions per day, 80% of which are cash-on-delivery transactions.
Understandably, tax authorities in Vietnam are stepping up measures to claim their shares of tax collection in this fast-growing sector. They have been introducing rules targeting various stakeholders including local and international e-commerce suppliers, digital service providers and e-platform operators. The new rules require local banks, payment intermediaries, and consumers to assist the tax authorities by withholding taxes, filing tax returns, and paying taxes on behalf of targeted taxpayers, or identifying and reporting delinquent taxpayers.
So, whether you are a supplier, intermediary service provider, or consumer, it is important to know the new rules and be prepared before the tax authorities might come after you or your business.
This article looks at what may be required of you, or your business, whether as a seller, a buyer, or an intermediary.
The rules
Prior to 1 July 2020 (ie before the introduction of the rules on taxation of e-commerce), the key taxation rules already existed, but they were not expressly directed to e-commerce transactions. In essence, unless a business had already been registered for taxation (which is often the case of most local businesses) foreign suppliers or service providers (commonly known as “foreign contractors”) who had transactions with customers in Vietnam were required to pay a tax, foreign contractor tax, through withholding by their customers in Vietnam.
However, there was no obligation imposed on intermediary service providers such as banks, payment service providers, logistics providers, and customers who acquired goods or services for personal use. In practice, there were requirements that when acquiring goods or services from a foreign supplier, a business (rather than individual) customer in Vietnam was required to withhold the foreign contractor tax, file a tax return, and remit the taxes withheld to the tax office on behalf of the foreign supplier. Individuals doing business by supplying goods or services were also required to register for taxation and pay the applicable taxes, including VAT and personal income tax (PIT), on their business income. The rules are as follows:
In both cases, the tax rates are flat rates which are applied directly to the turnover. In the second case, if the goods title passes outside Vietnam, then it is regarded as a “trading-WITH-Vietnam” transaction which is exempt from foreign contractor tax, as opposed to a “trading-IN-Vietnam” transaction which is taxable. Cash-on-delivery transactions and the supply of goods that includes services (other than warranty) are obviously trading-In-Vietnam. For some services, if they are performed and consumed outside of Vietnam, they may be exempt from the foreign contractor tax. However, it is currently unclear whether these exemptions will continue to apply to e-commerce transactions.
Also, technically a foreign supplier may apply for tax treaty exemption of the 1% CIT where a tax treaty applies and if the supplier does not have a permanent establishment (or taxable presence) in Vietnam. It is also unclear whether the same rule will apply to foreign e-commerce suppliers, given that there are many uncertainties surrounding permanent establishment issues. For example, whether digital business presence is equal to physical business presence in Vietnam etc. As for VAT, if import VAT is already paid when the goods are imported, then the 1% VAT is technically exempt.
Effective 1 July 2020, the rules are summarised as below:
So far, this new e-commerce tax administration mechanism appears not to target logistics providers. However, given that 80% of e-commerce transactions in Vietnam are currently on cash-on-delivery terms, it would not be a surprise if the tax authorities introduce further rules that may require logistics providers (and other intermediaries, if any) to do the same.
Practical tax planning tips for foreign suppliers:
Tax planning tips for local buyers:
For local buyers, the following questions should be checked and cleared:
As the rules are new, it is likely there will be different interpretations that could lead to practical issues. Kreston NNC’s tax professionals are at the forefront of this new area of taxation in Vietnam. Our team has extensive hand-on experience in helping clients, ranging from start-up businesses to large corporations in Vietnam. If your business needs professional support in this area, please contact us at + 84938464763 or nam@namnguyenconsulting.com.
Right now, the world is changing at a dizzying pace.
Even within the past couple of years, we’ve significantly changed the way we socialise… shop… work… and even use money. (I haven’t seen a chequebook in quite a while, and many people no longer carry cash.)
But all this pales in comparison to the changes we’ve been through over the past 50 years.
Back when I started work – not 50 years ago! – there were 10 people in my team and only one computer.
It’s hard to imagine today!
It’s something I’ve been thinking about a lot, thanks to Kreston’s 50th anniversary. What are the biggest changes we’ve seen in our working lives – and in our industry?
And intriguingly – what are the biggest changes we might expect over the next 50 years, by the time Kreston turns 100?
I’ve jotted down some of my best guesses below. And I’ve also included a condensed version of the thoughts of some of our ‘Purpose Champions’, who have been helping us articulate Kreston Global’s purpose and the difference we make in the world.
I hope you enjoy reading them!
Now for a look at the past 50 years… and a bit of futurology:
>> LIZA ROBBINS:
What is the most significant change to the accounting profession during your work-life?
First, internationalisation. When networks like Kreston were established many people were probably cynical, and dismissed their goals to serve international clients as a pipe dream and/or an unrealistic hobby-horse of the founders.
Most clients did not need international services and if they did that was the domain of the Big 4 (or Big 8 back then!).
Now the world is a global village and most organisations have some aspect of international in their work.
Then, there’s people. The hierarchies (not just in professional services) are breaking down and the old pyramid “command and control” systems are becoming obsolete.
There is a fight for talent – 50 years ago people paid to do articles with a firm in some countries. Now firms are fighting for talent, and fighting against a greater pool of competing employers. The balance of power is changing.
What do you think the most significant change is likely to be over the next 50 years?
We will see new client sectors – perhaps clients operating in the value chain of space travel?
If the global balance of power continues to move toward individuals, will might need representatives in organisations (e.g. The Elon Musk organisation) as opposed to just looking at countries. The implications of individuals becoming more powerful than countries is interesting! Would organisations like Kreston need to pay to have a representative in a business to ensure we stay in that organisation’s value chain radar?
>> SUDHIR KUMAR, Senior Partner, Kreston Menon (UAE)
What is the most significant change to the accounting profession during your work-life?
The move towards outsourcing accounting-related jobs. We’ve seen some large organisations in the UAE reduce the number of accountants in their Finance Department by as much as 90% as a result. The cost saving is phenomenal. The redundant accountants, when this first happened, had to survive by pivoting towards new businesses in the SME industry and start-ups.
What do you think the most significant change is likely to be over the next 50 years?
Cloud Accounting will become the norm. To draw a parallel in the Food & Beverage industry, Dark Kitchens or Cloud kitchens (which specialise only in deliveries – they have no storefront) are predicted to be the future. It’s predicted that leading F&B brands operating virtually out of Cloud stores/Dark stores will outnumber physical stores in 5 years…
Accountants will need to do a 100% transformation and reskilling to be part of the future – like any other professionals.
>> CHARITA CHAVLEISHVILI, HR Manager, Kreston Georgia
What is the most significant change to the accounting profession during your work-life?
There are many more young people coming into this profession.
What do you think the most significant change is likely to be over the next 50 years?
Accounting software programs will replace entry-level employees.
And analytical skills or the ability to see the big picture will be more valuable than knowing the tax code.
>> MEERA RAJAH, Partner, James Cowper Kreston (UK):
What is the most significant change to the accounting profession during your work-life?
A lot has changed during my work-life… The modern accountant is highly skilled in business management. Accounting is much more about driving commercial improvement, commercial finance and the world of targets.
Another big change is the dress code. For decades, a business suit has been required attire for professionals in finance. Indeed, some say that the thin stripes on a pinstripe suit were originally meant to represent the lines on an accounting ledger. The suit reflected seriousness and practicality. It then changed to business casual and now the policy is mostly for staff to wear what is appropriate for the job that day.
Finally, the accounting profession has been traditionally male-dominated but now the presence of women in the accounting profession is overwhelming.
What do you think the most significant change is likely to be over the next 50 years?
Perhaps new forms of regulation and continued globalisation of reporting or disclosure standards. Social and environment considerations are increasing in importance alongside economic concerns in organisations.
>> EDUARDO SOLANA, Project Manager, Transfer Pricing, Kreston BSG (Mexico):
What is the most significant change to the accounting profession during your work-life?
The ability to use technology to build closer relationships and to work more efficiently with clients and colleagues. The pandemic accelerated this process, and it has allowed us to have productive conversations with people on the other side of the world, and to produce better quality work.
What do you think the most significant change is likely to be over the next 50 years?
We’ll see an economy based on cryptocurrencies and the use of the cloud will give us a large database that will give companies better business insights. We’ll see tax authorities taking advantage of these technologies to be able to carry out better planned audits that will help combat, in real time, risky tax strategies.
And how about you? What are your thoughts on the biggest changes we’ve seen – and the ones yet to come?
August 2, 2021
The International Accounting Bulletin’s (IAB) latest piece delves into our network’s perceptions of technology and its role in the future of accounting.
Read the full article here.
July 29, 2021
Below is the International Accounting Bulletin’s latest piece on the G7 initiative that discusses the post-pandemic options for developing countries in relation to tax, and how they may oppose it.
July 22nd 2021
Ganesh Ramaswamy, Kreston Global Tax Group, Asia Pacific Regional Director
Economists and tax experts in developing countries are of the considered opinion that a global minimum tax rate would take away a tool that developing countries use to push policies that suit them.
Particularly against the backdrop of the pandemic, IMF and World Bank data suggest that developing countries with less ability to offer mega stimulus packages may experience a longer economic hangover than developed nations. Developing countries have been implementing tax cuts since the 1960s as a way of attracting overseas investments and generating more economic activities and employment opportunities. This advantage would no longer be there for developing countries with the advent of minimum floor rate tax.
However, developing countries know very well that tax competition brings more harm than the perceived benefits. Tax cuts come at the cost of public spending on infrastructure, education and health. Serious overseas investors keen to expand business in developing countries would primarily look at infrastructure, lower cost, justice delivery and quality of workforce rather than the tax code of the investee country. To provide these requirements to investors, tax revenues are a must for developing countries. In this context, it’s likely that most developing countries will get behind the G7 deal in due course.
July 27, 2021
HMRC recently published its long-awaited ‘Cryptoassets manual’ signalling that the wait-and-see era might be over when it comes to accounting for Bitcoin and other such cryptocurrencies.
When cryptocurrencies such as Bitcoin emerged more than a decade ago, they presented a challenge to global tax authorities – how could this new form of intangible asset be taxed, and investor liability established?
In fact, the challenge seemed so great that many, including the UK tax authority, HMRC, almost seemed to be ignoring the issue. In March 2021, however, it updated the official documentation on this subject.
It refers to cryptoassets, of which cryptocurrencies are a subset. HMRC is clear that it does not regard cryptoassets as currency, or as a form of money, but rather ‘similar in nature to a trade in shares [or] securities’.
The revisions to the manual underline that the important question in deciding on a tax treatment is whether cryptoasset activities amount to a trade. In other words, is investing in and trading cryptoassets a substantial business in its own right?
If an individual is deemed to be trading, HMRC says, receipts and expenses will feed into the calculation of trading profit. Income tax will apply rather than capital gains tax. In the case of companies, cryptoasset profits will be treated as part of trading profits rather than as a chargeable gain.
The changes to the guidance are not yet backed by law in the UK, and there is still no international accounting standard covering cryptoassets.
The IFRS Interpretations Committee last considered cryptoassets and cryptocurrencies in 2019 when it concluded that:
“IAS 2 Inventories applies to cryptocurrencies when they are held for sale in the ordinary course of business. If IAS 2 is not applicable, an entity applies IAS 38 to holdings of cryptocurrencies.”
IAS 2 defines ‘inventories’ as assets held for sale in the ordinary course of business, in the process of production for sale or as materials or supplies to be consumed in the production or delivery of services. IAS 38 refers to ‘intangible assets’ which it defines as any “identifiable non-monetary asset without physical substance”.
Because cryptoassets and currencies are not treated as legal tender in any territory, and certainly not by the United Nations or other global bodies, they do not meet the strict IFRS definition of cash, as set out in IAS 32:
Regardless of references such as the above that might apply to cryptocurrencies, the fact remains that, to date, there is no specific accounting standard covering cryptoassets.
As the status of this new type of asset becomes clearer in coming months and years, and as more tax authorities follow HMRC’s lead in determining local policy, we can surely expect to see more concrete global reporting standards emerge.
Contact us for more information or to talk about how your business accounts for cryptoassets.
July 16, 2021
Liza Robbins, our CEO, is featured in this latest piece published by Financial Management. Based around the challenging times in which businesses currently operate, the article talks of the need for finance leaders to tune into what their team members are going through in order to cultivate a productive workplace environment.
“The global crisis has presented leaders with an opportunity to relaunch themselves and learn new skills to motivate teams and drive business performance.” – Liza Robbins
