Công văn 4574/TCT-CS

To: Department of Taxation of Danang.

The General Department of Taxation has received the Official Dispatch No. 2163/CT-KTNB dated June 07, 2018 of the Department of Taxation of Danang requesting guidance on corporate tax policies applied to Vietnam Tokai Limited Liability Company. Regarding this issue, the General Department of Taxation has responded to the Department of Taxation of Danang with Official Dispatch No. 231/TCT-CS dated January 15, 2018.   Below are opinions of the General Department of Taxation:

Pursuant to Article 8, Article 17 of Law No. 80/2006/QH11 on technology transfer dated November 29, 2006 by the National Assembly

“Article 8. Rights to make technology transfer

1. A technology owner shall have the right to transfer the ownership or the right to use such technology.

2. Any entity which is permitted by the technology owner to transfer the right to use such technology shall have the right to transfer the right to use such technology.

3. Any entity with technology being an industrial property object for which the term of protection has expired or which is not protected in Vietnam shall have the right to transfer the right to use such technology.

Article 17. Transfer of right to use technology

1. Transfer of the right to use a technology means an entity as stipulated in Article 8 of this Law permits another entity to use the technology in accordance with clause 2 of this Article and Article 18 of this Law.

2. The scope of transfer of the right to use a technology shall be as agreed by the parties, comprising:

a) Exclusive or non-exclusive right to use the technology;

b) Permission to re-transfer the right to use the technology to a third party or a prohibition from doing so;

(c) Fields of use of the technology;

(d) The right to improve the technology, and the right to receive information about improvements to the technology;

(dd) The exclusive or non-exclusive right to distribute and sell products created from the transferred technology;

(e) Geographical area in which it is permitted to sell products created from the transferred technology;

(g) Other rights related to the transferred technology.

3. If a technology is a protected industrial property rights object, then transfer of the right to use such technology must be implemented together with transfer of ownership of industrial property rights in accordance with the law on intellectual property.”

Pursuant to clause 4 Article 4 of Law No. 50/2005/QH11 on intellectual property dated November 29, 2005 by the National Assembly

“4. Industrial property rights means rights of an organization or individual to inventions, industrial designs, designs of semi-conducting closed circuits, trade secrets, marks, trade names and geographical indications which such organization or individual created or owns, and the right to prevent unfair competition.”

Pursuant to Article 53 of Law No. 56/2010/QH12 on inspection dated November 15, 2010 by the National Assembly which regulates the tasks and powers of heads of specialized inspection teams; Article 54 thereof which regulates the tasks and powers of members of inspection teams, inspectors and persons assigned to perform the specialized inspection task while conducting independent inspection and Article 58 thereof which regulates the obligations of inspected subjects.

Pursuant to clause 1 Article 6 of Circular No. 78/2014/TT-BTC ; Article 4 of Circular No. 96/2015/TT-BTC dated June 22, 2015 which amends Article 6 of Circular No.78/2014/TT-BTC (amended in clause 2 Article 6 of Circular No .119/2014/TT-BTC and Article 1 of Circular No. 151/2014/TT-BTC) specifying deductible expenses when calculating taxable income.

Pursuant to the aforementioned regulations, the transfer of “technical information” from Tokai Togyo JSC to Vietnam Tokai Co. Ltd. specified in clause 3 Article 1 of Contract VT 1000-1 is a technology transfer and  regulated by Law No. 80/2006/QH11 on technology transfer mentioned above. Pursuant to clause 1 Article 17 of Law No. 80/2006/QH11 on technology transfer,  the transferor of technology must be one of the entities stipulated in Article 8 of such Law, specifically: the technology owner or any entity which is permitted by the technology owner to transfer the technology.  For this reason, if Tokai Togyo JSC  is not required to register the ownership of the technology according to regulations of Japanese law, Vietnam Tokai shall provide supporting documents or make a commitment to prove that Tokai Togyo JSC is the owner of the technology.

During the inspection visit by the Department of Taxation of Danang, if Vietnam Tokai does not provide or fully provide documents which can prove the technology ownership of Tokai Togyo JSC, the inspectorate will be entitled to draw a conclusion based on the documents provided by Vietnam Tokai during the inspection. Moreover, the Official Dispatches of the Ministry of Science and Technology in response to Vietnam Tokai (Official Dispatch No. 1439/BKHCN-DTG dated May 15, 2018 and Official Dispatch No. 1439/BKHCN-DTG dated July 02, 2018) only confirmed that the technologies on the contract of technology transfer is not on the list of technologies banned or restricted from transfer but did not confirm that the contract is a technology transfer contract between the Parties.

For this reason, the General Department of Taxation requests that the Department of Taxation of Danang handle the case of the Vietnam Tokai in accordance with regulations of law on tax and other related laws and relevant documents.

In addition to the matter mentioned above, Tokai Togyo JSC has stake in Vietnam Tokai. General Department of Taxation requests that the Department of Taxation of Danang inspect the transactions between such companies to clarify whether the technology transfer between them is a transaction between related parties for the purpose of transfer pricing.

For your information./.