Official dispatch No. 17848/BTC-TCT dated December 29 2011, VAT deduction according to Circular No. 28/2011/TT-BTC

• Official number: 17848/BTC-TCT
• Legislation Type: Official Dispatch
• Organization: The Ministry of Finance
• Signer: Do Hoang Anh Tuan
• Issued Date: 29/12/2011

MINISTRY OF FINANCE -------	SOCIALIST REPUBLIC OF VIETNAM Independence - Freedom - Happiness ---------------
No. 17848/BTC-TCT Re: VAT deduction according to Circular No. 28/2011/TT-BTC	Hanoi, December 29, 2011

To:

- Provincial State Treasuries
- Provincial Departments of Taxation

For uniform implementation of Clause 3 Article 24 of the Circular No. 28/2011/TT-BTC dated February 28, 2011 of the Ministry of Finance (hereinafter referred to as Circular No. 28/2011/TT-BTC) on deduction of VAT on infrastructure works, the Ministry of Finance hereby provides guidance as follows:

1. Scope of VAT deduction:

- The State Treasury where the investor opens the transaction account shall deduct VAT on payments for infrastructural works, work items funded by state budget; payments from state budget for infrastructural works of projects funded by ODA (counterpart fund paid at State Treasuries for infrastructural works of ODA projects).

- State Treasuries shall not deduct VAT on:

+ Payments for infrastructural construction without business contracts specified in Clause 3 Article 24 of Circular No. 28/2011/TT-BTC, such as: payments for project management works directly carried out by the investor; expenditures of the project management board, expenditures on land clearance, expenditures on projects executed by the people, etc.

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2. Rules:

2.1. Time for VAT deduction: The State Treasury where the investor opens the transaction account shall deduct VAT when the investor follows procedures for disbursement; the State Treasury shall not deduct VAT when the investor follows procedures for advancing capital. The amount of VAT deducted is 2% of the value of the finished work, or work item accepted by the State Treasury for each time the investor requests the disbursement using Form C3-01/NS (Request for disbursement) enclosed herewith (including reimbursement for advance payment).

2.2. On principle, the State Treasury shall record deducted VAT as budget revenue of the administrative division in which the infrastructural work is located. Regarding a work that involves more than one provinces (or districts), if the revenue generated in each province (or district) can be determined, deducted VAT shall be recorded as budget revenue of the province (or district) proportional to the revenue generated. Regarding a work that involves more than one province (or districts), if the revenue generated in each province (or district) cannot be accurately determined, the investor shall determine the proportion of revenue generated in each province (or district) and notify the State Treasury.

3. Responsibility for deducting VAT:

3.1. Local tax authorities (Departments of Taxation or Sub-departments of taxation) earning revenues from VAT have the responsibilities to:

- Instruct constructors whose infrastructural works are subject to VAT deduction to follow procedures for declaring VAT as prescribed in Article 10 of Circular No. 28/2011/TT-BTC.

- Transmit adequate and timely information and data about tax payers (names of building contractors, taxpayer ID numbers, supervisory tax authorities) for State Treasuries as the basis for circulation of documents and record state budget revenues correctly.

- Provide information about taxpayers whose infrastructural works are subject to VAT deduction (using the form enclosed herewith) for investors and State Treasuries where their accounts are opened in order to record the collection and deduction of VAT on infrastructural works funded by state budget and projects funded by ODA in a timely and conformable manner.

3.2. Responsibilities of State Treasuries:

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+ Cooperate with tax authorities in instructing investors to complete form No. C3-01/NS enclosed herewith according to contractors’ information (name, address, taxpayer ID number, supervisory tax authority, etc.) provided by tax authorities in order to follow procedures for VAT deduction. Form C3-01/NS enclosed herewith replaces form C3-01/NS enclosed with Decision No. 120/2008/QĐ-BTC dated December 22, 2008 of the Minister of Finance on state budget accounting practice and operation of State Treasuries).

+ VAT shall be deducted and transferred to state budget according to prescribed tax rates; a receipt for payment to state budget (the form of which is provided by the Ministry of Finance) shall be given to the investor for the investor to present it to contractors.

+ Record state budget revenues according to prescribed rates (if deducted VAT is immediately recorded as budget revenue of the administrative division of the deducting State Treasury) or send a credit note to the State Treasury of the administrative division that is entitled to the revenue from deducted VAT (the State Treasury at the same level as the collecting authority where the contractor declares tax, hereinafter referred to as “receiving State Treasury”).

+ Cooperate with tax authorities in deducting VAT to ensure that VAT deduction is convenient and conformable.

- The receiving State Treasury shall record state budget revenues as prescribed rates according to the documents sent by the deducting State Treasury.

4. Procedures for deducting VAT

4.1. If VAT deducted is recorded as budget revenue of the administrative division of the deducting State Treasury:

- The investor shall prepare and send documents about payment for the infrastructural works, work items to the State Treasury for deducting VAT.

- The State Treasury shall determine the amount of VAT to be deducted in accordance with the provisions of Article 2 of this document. According to the amount of VAT to be deducted and information provided by the investor on form C3-01/NS and information provided by the tax authority, State Treasury shall issue a receipt for payment to state budget as the basis for deducting VAT and record a state budget revenue as prescribed; carry out payment procedures and transfer money to the recipient.

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4.2. If VAT deducted is recorded as budget revenue of an administrative division different from that the deducting State Treasury:

- The deducting State Treasury shall follow the instructions in (4.1). However, a credit not shall be sent by the deducting State Treasury to the receiving State Treasury (the State Treasury at the same level with the collecting authority where the contractor declares tax) via the internal payment channel.

- The receiving State Treasury shall record a state budget revenue at prescribed rates according to the credit note sent by the deducting State Treasury and send data about the revenue to the tax authority as prescribed (in areas where the Project for Modernization of State Budget Collection is not executed, 01 copy of the document shall be sent to the tax authority at the same level to monitor the taxpayer).

4.3. The taxpayer (building contractor) may deduct the paid VAT (deducted by the State Treasury) when declaring VAT. If the amount paid to the investor is just enough to cover the advance paid earlier, the State Treasury shall not deduct VAT. The taxpayer shall declare and pay VAT as prescribed.

Directors of State Treasuries and Provincial Departments of Taxation are responsible for organizing the implementation of this document. Difficulties that arise during the implementation of this document should be reported to the Ministry of Finance for consideration.

PP MINISTER
DEPUTY MINISTER




Do Hoang Anh Tuan