Joint Circular No. 05/LB/TC-LDTBXH guiding financial regulations for sending workers to work abroad for a limited period under Government Decree No. 07/CP dated January 20, 1995.

CIRCULAR

OF THE MINISTRY OF FINANCE AND THE MINISTRY OF LABOUR, INVALIDS AND SOCIAL AFFAIRS SOCIAL

Guidelines on financial regulations for sending workers to work abroad for a limited period pursuant to

Decree No. 07/CP dated January 20, 1995 of the Government

_________________

Pursuant to Decree No. 07/CP dated January 20, 1995 of the Government detailing certain provisions of the Labour Code regarding sending Vietnamese workers to work abroad for a limited period, the Ministry of Finance and the Ministry of Labour, Invalids and Social Affairs provide specific guidelines on certain financial regulations as follows:

A- PROVISIONS ON RESPONSIBILITIES AND RIGHTS OF WORKERS AND ECONOMIC ORGANIZATIONS

I. DEPOSIT MONEY:

1. For workers:

Workers must pay a deposit to the economic organization that sends them to work abroad for a limited period to ensure the performance of the contract.

2. For economic organizations:

Collecting and managing the deposit from workers can be done either in one lump sum or deducted gradually from monthly wages, and recorded as a "payable" item to ensure timely repayment.

The amount and method of deposit shall be agreed upon between the economic organization and the worker, but it shall not include the one-way airfare from Vietnam to the place of work abroad, and must be clearly stated in the overseas work contract signed by the worker with the economic organization.

Within one month from the date the worker completes the contract and returns to Vietnam or terminates the contract prematurely without causing economic loss to the economic organization, the economic organization must return the deposit plus interest on demand deposits according to the regulations of the State Bank of Vietnam.

In case the worker violates the contract and causes economic damage to the economic organization, the economic organization has the right to deduct the deposit and interest (if any) from the worker according to the material compensation regime, but must publicly inform the worker of the reasons and amounts to be deducted.

After the completion of the labour contract, if the worker has not returned to Vietnam, they will not receive the deposit back; the economic organization is responsible for continuing to manage the deposit according to the provisions of Part A, Section I, Clause 2, pending resolution under current national laws.

II. SOCIAL INSURANCE

1. During the time working abroad, workers are entitled to social insurance benefits (hereinafter referred to as BHXH) of the country where they work, as specifically stipulated in the contract. This is one of the conditions that the economic organization must achieve when signing contracts with foreign employers to ensure the rights of workers from the time they start exit procedures from Vietnam until they complete their contracts and return home.

2. During the time working abroad, workers must contribute to social insurance in Vietnam to enjoy retirement and death benefits.

The temporary rate of social insurance contributions is 15% of twice the minimum wage set by the Vietnamese Government for each period.

3. Economic organizations are responsible for deducting social insurance contributions when paying monthly salaries to workers and recording these contributions separately for each worker to be entered into their social insurance records according to the regulations of the Vietnamese Social Insurance Authority. If workers do not receive monthly salaries or salary payments are not made through the economic organization, social insurance contributions will be collected through appropriate methods agreed upon between the worker and the economic organization throughout the contract period.

III. SERVICE FEES

1. For economic organizations:

Service fees are revenue for calculating public service taxes of economic organizations and are used to cover operating costs for labor supply systems; recruitment costs; health examinations; skill training and testing; language training; pre-departure education and training; domestic and international labor management; processing of exit and entry documents from district level upwards; returning workers to their base before departure.

Economic organizations sending workers to work abroad for a limited period may collect a maximum service fee of up to 12% of the income received by the worker from the employer, excluding food, accommodation, and local insurance during the time working abroad. In specific contracts, if the income includes food, accommodation, and local insurance during the time working abroad, the maximum service fee that the economic organization may collect is up to 8% of that income.

The ratio of service fees collected by economic organizations is deducted from monthly income after subtracting the following items:

- One-way or round-trip airfare from Vietnam to the country of work as specified in the contract that the worker must bear, priced based on the purchased fare for a reasonable route (excluding baggage fees).

- Amounts payable to the country of work according to its laws (if applicable).

The amounts deducted from monthly income to calculate the above service fees are determined by dividing the total value of deductions equally over the number of months specified in the contract.

Besides the aforementioned service fee, economic organizations are not allowed to collect any additional fees from workers.

To enhance the responsibility of workers, when registering to work abroad, economic organizations may temporarily collect sufficient funds for the following tasks (the collection amount does not exceed 1 million Vietnamese dong):

- Health examination according to the prescribed standards of the Ministry of Health.

- Language and skill testing (including training and retraining costs required by the labor contract) at the prescribed levels by the Ministry of Education.

- Costs related to exit procedures from the district level upwards for workers.

- Costs related to pre-departure training and education.

The advance collected expenses from the aforementioned workers shall be refunded by the economic organization when signing the formal contract with the worker before they go abroad (as stipulated in Section II, Point 2, Subsection c of the Circular guiding number 20/LDTBXH dated August 3, 1995 of the Ministry of Labor - Invalids and Social Affairs). In case the overseas work contract cannot be implemented, if it is due to the worker (no longer having the need or not meeting the conditions specified in the contract), the worker must bear the costs according to each specific task that the economic organization has carried out; if the contract cannot be implemented due to the economic organization, then the economic organization must bear the costs and immediately refund the temporarily collected amount to the worker.

2. For workers:

- Have the obligation to pay service fees monthly along with each salary period to the economic organization at the level prescribed in Section 1 above.

- In cases where the worker does not collect monthly salaries or the economic organization does not have the conditions to collect service fees because the worker receives salaries directly from the employer abroad, the worker is responsible for paying the service fees according to the agreed method between the worker and the economic organization.

IV. HIGH INCOME TAX:

Workers are responsible for paying personal income tax according to the Ordinance on Income Tax for High-Income Individuals dated May 19, 1994, Decree No. 05/CP dated January 20, 1995 of the Government, and Circular guiding No. 27TC/TCT dated March 30, 1995 of the Ministry of Finance.

For individuals working in countries that have signed Double Taxation Avoidance Agreements with Vietnam, implementation shall be carried out according to the contents of the Agreement signed with each country specifically and the guidance document on implementing the Double Taxation Avoidance Agreement No. 1664TCT/HTQT dated October 11, 1994 of the General Department of Taxation-Ministry of Finance.

1. Taxable Income: Due to the special nature of high-income taxpayers who are workers going to work abroad for a limited time under specific contracts, taxable income for high-income tax is determined as follows:

a. Taxable income includes income clearly stated in the contract that the foreign employer pays the entire monthly salary to the worker to cover all living expenses, travel, insurance, and other expenses during the contract period. If the foreign employer only covers part of the living, accommodation, travel, and social insurance expenses, the remaining portion will be deducted from the income stated in the contract to calculate the net income as stipulated in point b below.

b. If the contract states that the foreign employer pays a portion of the gross salary (net income) excluding living, accommodation, and insurance expenses during the work period abroad, these expenses will be calculated as half of the net income (or approximately 50% of total income) to determine the total taxable income.

c. Deductible amounts to determine taxable income include those deducted from monthly income when calculating service fees as stipulated in Section III, Point 1 of this Circular (excluding high-income tax already paid in the destination country, if applicable).

d. In labor contracts with foreign entities, the monthly income of the worker is fixed throughout the contract period, so the monthly income is the average taxable income per month in a year.

2. Calculation of High-Income Tax:

According to Article 10, Section 2 of the Ordinance on Income Tax for High-Income Individuals dated May 19, 1994, Vietnamese workers going to work abroad for a limited time shall implement the progressive tax rate and the calculation of income tax shall be based on the following table:

Where TNCT: Taxable Income

(x): Multiplication sign (-): Subtraction sign

3. Example of Calculating Taxable Income and High-Income Tax:

a. Example 1:

Medical expert Nguyen Van A went to work in Angola for three years. The labor contract he signed clearly states a total monthly income of 1,000 USD. Vietnamese experts must cover their own round-trip airfare of 1,600 USD and bear all living, accommodation, travel, insurance, etc., expenses during the contract period. The taxable income and high-income tax for Mr. Nguyen Van A are calculated as follows:

- Airfare evenly distributed monthly over the contract period is:

1,600 USD : 36 months = 44.44 USD/month

- Taxable income is:

1,000 USD - 44.44 USD = 955.56 USD/month

Converted to Vietnamese Dong at the exchange rate of 11,000 VND/USD: 10,511,160 VND/month

- Monthly high-income tax is:

10,511,160 VND x 10% - 500,000 VND = 551,116 VND equivalent to 50.10 USD (551,116 : 11,000)

For Angola, which has not signed a Double Taxation Avoidance Agreement, if the worker can present proof of monthly tax payment in that country assumed to be 30 USD (converted to Vietnamese Dong at the exchange rate of 11,000 VND/USD is 330,000 VND), then the tax still payable in Vietnam is 221,116 VND (551,116 - 330,000 VND). If the assumed tax paid abroad exceeds the tax payable in Vietnam (50.10 USD), the worker is exempted from high-income tax in Vietnam.

b. Example 2:

Mr. Tran Van B signed a labor contract to work in Country X for one year. The contract clearly states that the worker receives a net monthly income of 350 USD and the employer guarantees living, accommodation, and insurance expenses during the work period.

The taxable income and high-income tax for Mr. B are calculated as follows:

- The taxable income mentioned in point 1, subsection b of this section is: 350 USD + 350 USD = 700 USD/month

- Mr. B must cover his own round-trip airfare from Vietnam to Country X based on a reasonable route at 360 USD, evenly distributed over the 12-month contract period is 30 USD/month

- According to the contract provisions, management costs for workers abroad are deducted from the monthly income of the worker before the net income is paid, which is 20 USD/month

The actual income remaining for tax calculation is: 700 USD - (30 USD + 20 USD) = 650 USD/month

Convert Vietnamese dong according to the exchange rate of 11,000 VND/USD: 7,150,000 VND/month

- The income tax that Mr. B must pay for one month is: 7,150,000 VND x 10% - 500,000 VND = 215,000 VND equivalent to 19.5 USD (215,000 ÷ 11,000).

For country X, which has signed a Double Taxation Avoidance Agreement with Vietnam, according to Article 15, Article 23 of the Agreement and Circular 1664 TCT/HTQT dated October 11, 1994 of the State Revenue总局-财政部，则劳动者必须在两国缴纳所得税。假设他们在国家X已经缴纳了10美元（按11,000越南盾/美元的汇率计算为110,000越南盾）的较高所得税，并且有合法凭证，那么他们还需向越南缴纳105,000越南盾的税款；如果假设他们在国家X已缴纳的税款高于在本国应缴纳的税款（19.5美元），则该劳动者可免缴越南的较高所得税。

In the case where Mr. Tran Van B receives the salary stipulated in the aforementioned contract, but he himself bears the cost of two meals (breakfast and dinner) and purchases health insurance, and these expenses amount to 110 USD in country X, then Mr. B's taxable income is calculated as follows:

- Mr. B's net income is: 240 USD (350 USD - 110 USD)

- The taxable income is: (240 USD + 240 USD) - (30 USD + 20 USD) = 430 USD

Convert Vietnamese dong according to the exchange rate of 11,000 VND/USD: 4,730,000 VND, based on the above tax rate, Mr. B does not fall within the category required to pay high-income tax.

V. LICENSE FEES:

1. Collection levels

The Ministry of Labor - Invalids and Social Affairs is authorized to collect and manage two types of fees: license fees for business operations and license fees for contract implementation.

Economic organizations must pay a license fee in Vietnamese dong equivalent to 2,000 USD upon receiving a business operation permit, and a license fee in Vietnamese dong equivalent to 5 USD per person as recorded in the contract for the Ministry of Labor - Invalids and Social Affairs (Foreign Labor Management Department) upon receiving a contract implementation permit.

2. MANAGEMENT REGIME:

The collection and management of license fees shall be carried out in accordance with the current state regulations on fees and charges. The Ministry of Labor - Invalids and Social Affairs (Foreign Labor Management Department) prepares a budget plan for expenditures according to specific categories, submits it to the Ministry of Finance for approval, and it is announced in the annual revenue and expenditure plan of the Ministry in the form of a fixed percentage of the total license fees collected, this ratio remains stable for one to two years. Specific expenditure items from this source include:

- Expenses for organizing the qualification review of legal entities as well as necessary conditions for enterprises sending workers abroad for a limited period, to provide a basis for issuing business operation permits.

- Expenses for reviewing contracts and the feasibility of contracts for sending workers abroad, to provide a basis for issuing contract implementation permits.

- Costs for opening new markets, marketing activities, and establishing networks of cooperating agents in areas with demand for Vietnamese labor.

- Other necessary costs arising in the field of state administration for a special foreign economic sector that the current state financial policies have not fully quantified.

VI. ON THE ORGANIZATION OF SOCIAL INSURANCE CONTRIBUTIONS, HIGH-INCOME TAXES, AND SERVICE FEES COLLECTION:

1. Economic organizations acting as commissioned collectors must proactively register and declare with the local tax authority where they registered for business tax (or registered office) to receive guidance on procedures and practices to ensure tax payment according to the law. Monthly when disbursing salaries to workers, economic organizations have the responsibility to collect social insurance contributions, high-income taxes, and service fees. If the overseas employer directly pays monthly salaries to workers, the organization can implement the collection through one of the following methods:

- Agree with overseas employers to deduct three items: social insurance contributions, high-income taxes, and service fees before paying salaries to workers (based on pre-calculated amounts by Vietnamese economic organizations) and transfer them into a designated account according to the organization's regulations to remit back to the country.

- Through representative offices (or authorized representatives), organize monthly collections in appropriate forms suitable for the situation and characteristics of each country and specific contract.

2. Due to the nature of the sector of sending Vietnamese workers abroad for a limited period, all revenues arise overseas. Therefore, the commissioned collector, which is the direct managing economic organization of workers, serves as the central point for collecting revenues for the state, ensuring timely and full collection according to the law, and receives a commission of 0.5% of the actual collected amounts for social insurance contributions and high-income taxes.

Regularly, no later than the 10th day of the following month, economic organizations must submit the collected amounts for social insurance contributions and high-income taxes according to the instructions of the social insurance agency and the tax authority at the same level, with 0.5% deducted simultaneously each time the submission process is carried out.

VII. REPORTING SYSTEM:

1. System for setting up tracking sheets and accounting vouchers:

In addition to the general accounting system for state-owned enterprises as guided by the finance department, social insurance agency, and local tax authority, economic organizations, as commissioned collectors for the state and direct managers of workers, must carry out the following procedures:

- Set up tracking sheets (or ledgers) to monitor the monthly income and collection status of each worker (according to Form No. 01) to serve as a basis for verification after the contract ends and to handle various benefits and policies for workers.

- Tracking sheets are made in duplicate: one copy retained by the economic organization for file storage along with the worker's records as a basis for preparing financial reports, and one copy kept by the worker (or authorized representative) to present and sign whenever there is contact with the organization.

2. Periodic Reporting System:

- Quarterly, economic organizations must submit reports on the implementation of revenue payments (according to Form No. 02) to the Ministry of Finance (Department of Foreign Financial Affairs), the Ministry of Labor - Invalids and Social Affairs (Foreign Labor Management Department), local tax authorities, and the Vietnam Social Security.

- Annually, economic organizations must prepare the following reports:

+ A report on the next year's plan based on the situation of the first nine months of the year, which includes an analysis of the number of workers (male and female), occupations, countries where they will work, contract duration, expected salary levels, expected departure times for each contract, etc. The report also includes proposals and recommendations to relevant authorities regarding labor cooperation.

+ A report on the implementation of the annual plan according to two indicators: labor and revenue payments (Form No. 04 issued under Circular No. 20/LDTBXH and Form No. 02 of this circular). These annual reports must be sent to the Ministry of Labor - Invalids and Social Affairs (Foreign Labor Management Department), the Ministry of Finance (Department of Foreign Financial Affairs), the Vietnam Social Security, and local tax authorities. The submission deadlines for these reports shall follow current state regulations.

3. Implementing the reporting system as prescribed above is the obligation and responsibility of economic organizations to comply with Point 10, Section 9 of Government Decree No. 07/CP dated January 20, 1995, and is considered one of the conditions for issuing further permits for economic organizations to send workers abroad for temporary employment.

B. SOME OTHER PROVISIONS

1. To ensure the rights of the State, economic organizations, and workers, and to maintain consistency in implementing financial policies and wage systems stipulated in contracts, the wages of workers must be denominated in US dollars (USD) or other freely convertible foreign currencies. Depending on specific circumstances, payment and disbursement may be carried out as follows:

- The currency for monthly wages shall be agreed upon by both parties but must be converted into US dollars (USD) at the exchange rate published by the central bank of the host country at the time of payment.

- If wages are paid in local currency, the contract should include a commitment that workers have the right to request the host country's bank or the employer to convert the entire or a certain proportion of the amount into US dollars (USD) suitable for living expenses in the destination country.

2. Types of revenue and payments:

- Deposit payments from workers can be made in Vietnamese dong or US dollars (USD) as agreed between the economic organization and the worker.

- Revenue and payment of social insurance contributions (as stipulated in Section II) and fees for issuance (as stipulated in Section V) shall be made in Vietnamese dong.

- Service fees (as stipulated in Section III) and high-income tax payments (as stipulated in Section IV) shall be made in US dollars, specifically:

Convert the amount of high-income tax payable in Vietnamese dong to US dollars (based on the exchange rate from US dollars to Vietnamese dong used to calculate the tax payable) for workers to pay in US dollars.

When collecting high-income taxes and service fees in foreign currencies, economic organizations must base their collection on the actual wages received: if the wages are fully paid in US dollars (USD), then collect in US dollars; if part of the wages is paid in local currency, collect in both types of currency (US dollars and local currency corresponding to the proportion of foreign currency in the monthly wage). Economic organizations shall remit the portion collected in US dollars to domestic tax authorities, while the portion collected in local currency shall be deposited into a temporary holding fund for the State Budget at the Vietnamese Embassy in the host country. The commission earned by economic organizations for collecting high-income taxes shall be based on the type of currency actually collected.

3. Economic organizations sending Vietnamese workers abroad under the form of tendering, subcontracting projects, or production sharing, etc., shall implement the financial system as follows:

- If workers receive wages in foreign currency during their stay abroad, similar to other labor contracts sent abroad by economic organizations (labor export), then they shall follow the provisions of this circular.

- If during their stay abroad, workers only receive living allowances (food, accommodation, etc., sufficient to work) and part of their wages and other financial benefits are provided according to Vietnamese business laws within the country, then workers and economic organizations shall follow Vietnamese state-owned enterprise laws.

C - IMPLEMENTATION

1. This circular takes effect from January 1, 1996, except for high-income tax, which is implemented from June 1, 1994. Circular No. 05 LB - TC - LDTBXH dated March 7, 1992, guiding Decision No. 370/HĐBT, Circular No. 2599/LDTBXH dated July 25, 1995, of the Ministry of Labor - Invalids and Social Affairs guiding workers going to South Korea, and other conflicting documents are abolished.

For financial policies concerning workers going abroad for temporary employment implemented before January 1, 1996, if economic organizations cannot handle them when implementing this circular, they must promptly report to the relevant ministries for guidance on handling each specific case.

2. Inspecting and auditing the implementation of financial systems for sending workers abroad as stipulated in this circular is one of the important tasks under the management of related ministries and sectors. During implementation, if violations are discovered, they shall be handled according to the current financial accounting system of the Vietnamese State, or administrative disciplinary measures may be taken depending on the severity of the violation, requiring termination of contracts prematurely, suspension, or revocation of permits for specific cases.

3. In the course of implementation, if there are difficulties, please reflect them to the Ministry of Finance - Ministry of Labor - Invalids and Social Affairs for coordination and resolution.