[ingodirectors] Update from PACCOM on PIT and 2 new decrees: Social Insurance and Administrative Violations - 28 August 2017

[Marko Lovrekovic]

Dear INGO directors,

Last Thursday I met with the Deputy Director General Ms. Pham Anh Dao
at the People’s Aid Coordinating Committee (PACCOM) to discuss three
important issues affecting INGO operations in Vietnam. The date for a
wider meeting with INGO representatives in Hanoi, which was planned
for late August, has not yet been decided. PACCOM will inform us when
their senior management set the exact date. Here is an update and a
summary of my discussion with Ms Dao:

1. LETTERS FROM HANOI TAX DEPARTMENT REQUESTING PAYMENTS OF PERSONAL INCOME TAX

Starting in early 2017, many of you have received letters from the
Hanoi Tax Department (HTD), requesting INGOs to deduct, declare and
pay —retroactively— the Personal Income Tax (PIT) for your foreign
staff, including for a number of staff who have already left Vietnam.
In these letters HTD was challenging Article 1.4 of INGOs' framework
agreements (FAs) between VUFO and INGOs. Following our request, PACCOM
held a series of consultations with the Committee for Foreign NGO
Affairs (COMINGO), General Tax Department (GTD) and HTD. They also
requested an official opinion from the Ministry of Justice (MOJ) on
the legality of FAs between INGOs and VUFO. MOJ responded and stated
that FAs between INGOs and VUFO are not international treaties. As for
the question regarding legality of HTD’s actual requests for PIT
payment — MOJ has not responded yet. In the meantime PACCOM is
suggesting two options for consideration by relevant bodies:

a) reverting FAs to previous arrangement when they were signed between
INGOs and COMINGO; or
b) introducing new arrangement where FAs will be signed between INGOs and MOFA

In both above-mentioned cases new FAs would be considered equivalents
to international treaties; and consequently eliminate the need for
payment of PIT. However, these proposals have to be discussed; agreed
upon; and approved by all members of COMINGO: Ministry of Foreign
Affairs (MOFA), Ministry of Finance (MoF), Ministry of Public Security
(MPS), Ministry of Planning and Investment (MPI), Government’s
Commission for Religious Affairs, Government’s Office, Commission for
External Relations of the Party’s Central Committee and VUFO. In
addition, PACCOM is still waiting for the official opinion from MOJ on
legality of HTD's payment requests.

2. DRAFT DECREE ON COMPULSORY SOCIAL INSURANCE FOR FOREIGN WORKERS

The Ministry of Labour Invalids and Social Affairs (MOLISA) drafted a
new decree on compulsory social insurance required from foreign
workers in Vietnam, which should come into force in January 2018. The
decree is only available in Vietnamese at MOLISA's website. I asked
from PACCOM to obtain an English version of the decree and I will
circulate it as soon as I receive it. This decree requires payment of
8% of the salary (by employee) plus 18% of the salary (by employer)
for compulsory social insurance. The decree is in line with the Law on
Social Insurance from 2014. This recent enforcement of the law has
been triggered by strong movements of the labour workforce between
Vietnam and other countries; and the fact that Vietnam joined
international agreements regulating social safety net. It applies to
Vietnamese and foreign NGOs; and it stipulates compulsory payment of
social insurance for those who sign labour contracts locally and/or
obtain Vietnamese work permits. PACCOM met with the Department of
Social Insurance at MOLISA, which was in charge of drafting the
decree. They were told that if foreign employees’ work contracts were
signed outside Vietnam (e.g. at INGOs’ headquarters) — foreign
employees are not obliged to pay social insurance, even if they had to
obtain Vietnamese work permits. Also, if foreigners are employed on
projects which are fully funded under bilateral treaties between
Vietnam and a foreign country — they are not obliged to pay social
insurance. PACCOM will help resolve individual requests on the
case-by-case basis.

3. DECREE ON SANCTIONS FOR INGO ADMINISTRATIVE VIOLATIONS

The Ministry of Foreign Affairs (MOFA) drafted a new decree on
administrative violations in organising conferences and workshops in
Vietnam; operations of INGOs; and consular certifications /
legalisation activities. Please see the attached draft in Vietnamese
and (informal) English translation. INGOs may be facing fines between
20 and 60 million VND if they organise international activities
without permission. This decree will affect not only INGOs — but also
their VNGO partners and other international Development Agencies
(DPs). There are ongoing consultations within COMINGO and the decree
is under review by all its members. The decree is a follow-up on Law
on Administrative Violations. MOFA will organise a consulting team and
PACCOM already drafted its feedback — mostly objecting a number of
points in the decree, which they will submit to MOFA (pending VUFO
Vice-President’s approval). PACCOM team agrees with INGOs who pointed
out that applying penalties to INGOs in cases where administrative
violations were committed due to the Government’s delays would be
unfair and should not be enforced. I shared all comments that I
received so far from several INGO directors and development partners.
PACCOM would appreciate it if we provided more feedback to be shared
with COMINGO (including MOFA). They will organise a meeting with INGOs
to discuss the new decree, but the date is not set yet. Kindly note
that the draft is being discussed by a number of different
governmental bodies; there are many divided opinions among them; and
MOJ has not yet shared their official opinion.

The VUFO-NGO Resource Centre will conduct a quick survey to gather
your collective feedback on the latest decree, later this week. In the
meantime feel free to share your thoughts directly with me. If you
have any specific question that you may want to ask — I apologise in
advance if my answers get delayed. I will have to deal with a minor
health emergency for the next couple of days.

Warm regards,

Marko
---------
Marko Lovrekovic, Managing Co-Director
VUFO-NGO Resource Centre
Trung Tu Diplomatic Compound
6 Dang Van Ngu, Dong Da, Hanoi
Building E3, Room 201, 2nd floor
Mobile: +84 904 191 871
Phone: +84 24 3832 8570
Email: director at ngocentre.org.vn
Web: http://www.ngocentre.org.vn
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