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THE
MINISTRY OF FINANCE
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SOCIALIST
REPUBLIC OF VIET NAM
Independence - Freedom - Happiness
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No.
89/1999/TT-BTC
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Hanoi,
July 16, 1999
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CIRCULAR
GUIDING THE IMPLEMENTATION OF TAX PROVISIONS APPLICABLE TO
VARIOUS INVESTMENT FORMS UNDER THE LAW ON FOREIGN INVESTMENT IN VIETNAM
Pursuant to the Law on Foreign Investment in
Vietnam passed on November 12, 1996 by the National Assembly of the Socialist
Republic of Vietnam;
Pursuant to the current tax laws and ordinances of the Socialist Republic of
Vietnam and the Governments decrees detailing the implementation of the tax
laws and ordinances;
Pursuant to Decree No.12/CP of February 18, 1997 of the Government detailing
the implementation of the Law on Foreign Investment in Vietnam;
Pursuant to Decree No.36/CP of April 24, 1997 of the Government promulgating
the Regulation on industrial parks, export processing zones and hi-tech parks;
Pursuant to Decree No.10/1998/ND-CP of January 23, 1998 of the Government on a
number of measures to promote foreign direct investment;
Pursuant to Decree No.30/1998/ND-CP of May 13, 1998 of the Government detailing
the implementation of the Law on Enterprise Income Tax;
Pursuant to Decree No.13/1999/ND-CP of March 17, 1999 of the Government on
organization and operation of foreign credit institutions and their offices in
Vietnam;
Pursuant to Decision No.53/1999/QD-TTg of March 26, 1999 of the Prime Minister
on a number of measures to promote foreign direct investment;
The Ministry of Finance hereby guides the implementation of tax provisions
applicable to various investment forms under the Law on Foreign Investment in
Vietnam, as follows:
Part I
GENERAL PROVISIONS
1. This Circular shall apply to:
- Joint-venture enterprises and enterprises with
100% foreign investment capital, which are established under the Law on Foreign
Investment in Vietnam.
- Joint-venture banks between Vietnamese banks
and foreign banks.
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- Foreign parties to business cooperation
contracts (or foreign business cooperation parties for short) under the Law on
Foreign Investment in Vietnam.
Particularly for the parties operating on the
basis of build-operate-transfer (BOT) contracts, build-transfer-operate (BTO)
contracts and build-transfer (BT) contracts, if their operation regulation
promulgated by the Government prescribes tax obligations at variance with this
Circular’s guidance, such operation regulation’s provisions shall apply.
2. A number of definitions:
- "Tax calculation year" is the
calendar year starting on January 1st and ending on December 31 every year. In
cases where foreign-invested enterprises and business cooperation parties are
allowed by the Ministry of Finance to apply a twelve-month fiscal year other
than the calendar year, the tax calculation year shall be the fiscal year
allowed to be applied by such foreign-invested enterprises and business
cooperation parties.
- "The first year with taxable income"
is the first fiscal year when an enterprise generates taxable income, without
offsetting losses carried forward from previous years.
- "A market price-free transaction or
trading contract" is a transaction or trading contract affected by
abnormal commercial relationships such as transactions between associated
enterprises, which are bound together by set or imposed conditions other than
those set among independent enterprises.
Two enterprises shall be considered being
associated in the following cases:
(i) One enterprise directly or indirectly takes
part in the management or control, or contributes to the legal capital or stock
capital of the other enterprise;
(ii) Both enterprises are subject to direct or
indirect management or control by another enterprise, or both enterprises
receive capital contributed by another enterprise.
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GUIDANCE FOR THE
IMPLEMENTATION OF TAX PROVISIONS
I. ENTERPRISE INCOME TAX:
1. Taxable objects:
All income amounts earned from any economic
activity of joint-venture enterprises, enterprises with 100% foreign investment
capital, joint-venture banks (hereafter referred collectively to as the
foreign-invested enterprises); foreign business cooperation parties, shall be
subject to enterprise income tax, including:
- Income from business activities.
- Income from other activities.
2. Tax payers:
Foreign-invested enterprises and foreign
business cooperation parties shall be enterprise income tax payers.
In cases where a foreign company simultaneously
invests in many enterprises or business cooperation contracts, the enterprise
income tax shall be calculated separately for each enterprise or each business
cooperation contract.
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Taxable income
in the tax calculation year
=
Turnover
calculation of taxable income in the tax calculation year
-
Total
reasonable and valid expenses in the tax calculation year
+
Other incomes
When determining their taxable income, the
foreign-invested enterprises may offset the losses of the previous years as
prescribed in Article 37 of the Government’s Decree No.30/1998/ND-CP of May 13,
1998 detailing the implementation of the Law on Enterprise Income Tax.
The loss transfer shall be effected by carrying forward
the full loss amount of any tax calculation year into the year with income
subsequent to the year of loss, and such loss amount may be offset by the
income of subsequent years, or the loss amount of a given year may be evenly
distributed into subsequent years with income expected to be earned by the
enterprise. The enterprise must register with the tax authority its loss
transfer method and follow through such registered loss transfer method and
time.
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a/ The turnover for calculation of taxable
income in the tax year:
The turnover for calculation of taxable income
of a foreign-invested enterprise or a foreign business cooperation party is the
whole proceeds from the sale of goods and the provision of services (without
value added tax) and other incomes of such enterprise or foreign business
cooperation party in the tax calculation year. Particularly for enterprises
that pay value added tax by method of direct calculation on added value, the
turnover for calculation of taxable income shall include the value added tax.
In some specific cases, the turnover for
calculation of taxable income shall be determined as follows:
- For goods sold by mode of installment payment,
it is the turnover of sold goods calculated according to the lump-sum-payment
selling price, and shall not include deferred payment interest.
- For goods or services used for exchange, as
donations or gifts, it is calculated according to the selling price of
products, goods or services of the same or equivalent type on the market at the
time they are exchanged, donated or presented.
- For products for internal use, it is the
production costs of such products.
- For goods processing activities, it is the
money earned from the processing, including remuneration, costs of fuels,
power, auxiliary materials and other expenses in service of such goods
processing.
- For credit activities, it is the loan interest
amounts that must be collected in the tax calculation year.
- For insurance and reinsurance business
activities, the turnover for calculation of taxable income shall be the
collectible insurance premium principals, expertise agency charge, reinsurance
charge, reinsurance commissions and other revenues.
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+ If the shared products are sold on the
Vietnamese market, the turnover shall be determined according to the selling
price of the products on the Vietnamese market.
+ If the shared products are exported to foreign
countries, the turnover shall be determined on the basis of the FOB export
prices at Vietnamese border-gates.
If the foreign party fails to provide the
product selling price or the sale of products is effected not according to the
principle of market price-based transaction and trading, the turnover shall be
determined according to the anti-price change principles prescribed in Section
IV, Part III of this Circular.
b/ Reasonable and valid expenses in the year:
The expenses related to the generation of
taxable income in the tax calculation year of a foreign-invested enterprise or
a foreign business cooperation party, regardless of the accounting regime being
applied, shall be determined to include the following:
b1. Depreciation and expenses for repair of
fixed assets used for the production and business activities and/or the
provision of services. The fixed asset depreciation rate shall be determined on
the basis of such assets’ use duration registered by the enterprise itself with
the tax authority directly managing it in compliance with the provisions of
Decision No.1062-TC/QD/CSTC of November 14, 1996 of the Minister of Finance. In
cases where enterprises wish to register the asset use duration at variance
with the provisions of Decision No.1062-TC/QD/CSTC, they must obtain the
Ministry of Finance’s consent.
The fixed asset depreciation amounts that exceed
the rate prescribed by the Ministry of Finance; depreciation amounts of fixed
assets which have been fully depreciated, depreciation amounts of fixed assets
not used in production and business such as: fixed assets awaiting liquidation
or transfer for setting up of a new joint venture, etc., shall not be accounted
into expenses when determining the taxable income.
b2. Costs of raw materials, materials, fuels,
energy, production tools and goods actually used in the production activities
or the provision of services related to the taxable turnover and income in the
year.
b3. Salaries, wages, remuneration and payments
of salary and wage nature, mid-shift meals and allowances and subsidies paid to
Vietnamese and foreign laborers on the basis of labor contracts or collective
labor agreements in compliance with the labor legislation applicable to
foreign-invested enterprises.
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b5. Expenses on services purchased from outside:
- Expenses on power, water, telephone,
stationary, audit hiring, printing of documents must be evidenced by vouchers
and invoices according to the Ministry of Finance’s regulations.
- Liability or property insurance premiums under
the insurance policies signed with Vietnamese insurance companies or other
insurance companies licensed to lawfully operate in Vietnam (hereafter referred
to as insurance enterprises). With regard to voluntary insurance operations whereby,
according to international practice, an enterprise participating in insurance
may opt for the place to buy the insurance, or if, at the time the insurance
demand arises, the insurance enterprises cannot satisfy it, then the
to-be-insured enterprise may get insured at a foreign insurance company.
Insurance premiums shall be accounted into expenses when determining the
taxable income.
- Expenses for hiring the overhaul of fixed
assets in order to restore their capacity shall be accounted into production
and business costs in the year. If the expense amount for one overhaul in the
year is too large, it shall be distributed into the following year. For
particular fixed assets requiring regular repairs, the enterprise is entitled
to deduct in advance the overhaul expenses into the production and/or business
costs on the basis of its overhaul expense estimates. If the advance deduction
is lower than the actual overhaul expense, the enterprise may additionally
account the difference into its expenses; if the advance deduction is higher
than the actual overhaul expense, the expenses shall be accounted with decrease
in the year.
- Expenses for procurement or payment for use of
technical documents or services; expenses for transfer of technology,
copyright, invention patents or trademarks under technology transfer or license
contracts already approved by the Ministry of Science, Technology and
Environment or other competent agencies.
- The fixed asset rentals shall be accounted
into the production and/or business costs according to the amounts actually
paid under the renting contracts. In cases where the fixed asset rental is paid
in lump-sum for many years, such rental shall be gradually accounted into the
production and business costs according to the number of years during which the
fixed assets are used.
- Expenses for consultations or hiring
management companies paid under the management hiring contracts already
approved by the Ministry of Planning and Investment, and expenses for hiring
other services from outside.
b6. Payments for female laborers as prescribed
by law; expenses for labor safety, safeguarding of business establishments,
remittances to the social and health insurance funds for laborers as the
enterprises� obligation,
or the trade union operation fund according to the prescribed regime.
b7. Banking fees, loan interests paid within the
limit of the ceiling lending interest rate announced by the State Bank of
Vietnam for domestic loans, banking fees and loan interest rate paid under
credit contracts already approved by the State Bank of Vietnam for overseas
loans. If a credit contract has not yet been approved by the State Bank of
Vietnam, the interest rate and banking fee shall be determined according to the
actual payments under the provisions of such credit contract but not in excess
of the ceiling lending interest rate announced by the State Bank of Vietnam.
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All interests paid for loans related to the
legal capital or charter capital (for banking activities) shall not be
accounted into the reasonable and valid expenses when determining the taxable
income.
b8. Reserves for decrease of prices of unsold
goods, bad debts or decrease of securities prices, which are set aside by the
enterprises under the Ministry of Finance’s guidance.
b9. Severance allowances for laborers according
to the current regime.
b10. Expenses directly related to the
circulation and sale of products or the provision of services, such as expenses
for goods preservation and packaging, loading and unloading, transportation,
storehouse and storeyard rent, warranty of products and goods.
b11. Expenses for advertisement, marketing, sale
promotion, guest reception, festive occasions, transactions, external relations
and conferences, and other expenses (including financial aids for humanitarian
and charity activities of Vietnamese organizations and individuals), which must
be evidenced by vouchers prescribed by the Ministry of Finance, associated with
the business results and must not exceed the restricted levels prescribed
below:
- For production, construction or transportation
enterprises which have newly been established and operating, they must not
exceed 7%, for the first two years of operation, then 5%, of the total amount
of the above-listed expenses.
- For trading, food and drink catering and
service business activities, they must not exceed 7%, for the first two years after
the enterprises’ establishment, then 5%, of the total amount of the
above-listed expenses (excluding the cost prices of sold goods).
- For enterprises in such branches as
electricity, petroleum gas, petroleum exploitation and refinement, petrol and
oil trading, post and telecommunications, aviation,...they must not exceed 5%,
for the first two years after such enterprises’ establishment, then 3%, of the
total amount of the above-listed expenses (particularly for trading activities,
excluding the cost prices of sold goods).
In some particular cases where these expenses
must be restricted to levels higher than the above-mentioned restricted levels,
there must be the Ministry of Finance’s written approval. Nevertheless, such
expenses must not exceed 7% of the total expense.
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b13. Payable taxes, tax-like fees and charges,
excluding value added tax, enterprise income tax and tax on transfer of income
abroad. Particularly for enterprises that pay value added tax by direct
calculation method, these payments shall include value added tax.
b14. Expenses for meetings of the managing
boards of joint-venture enterprises in compliance with such joint ventures’
charters and/or resolutions of the managing boards.
All the above-mentioned expenses must be
evidenced by valid vouchers, any expense amount without vouchers or with
invalid vouchers must not be accounted into the allowable expenses when
determining income liable to enterprise income tax. Enterprises must not
account into their expenses the fines, the expenses not related to their turnover
and taxable income such as expenses for capital construction investment, and
expenses covered by other funding sources.
c/ Other incomes:
Other incomes of foreign-invested enterprises
and foreign business cooperation parties include:
c1. Bank deposit and loan interests (excluding
enterprises engaged in credit business); interests from the sale of goods with
deferred payments.
c2. Foreign currency purchase and sale
difference, securities purchase and sale difference, exchange rate difference
(particularly, the exchange rate difference resulting from revaluation of the
balance of cash, deposits, cash in transit, recoverable and payable debts in a
foreign currency other than the currency permitted for accounting purpose shall
not be included in other incomes).
c3. Income earned from the right to own and use
the enterprise’s assets including income from the asset liquidation. In cases
of losses or damage caused to the enterprise’s assets due to subjective
reasons, those losses related to these assets must not be accounted into other
incomes, and the wrongdoer(s) must be identified to make compensations for such
losses according to the prescribed regime.
c4. Incomes earned from the recovery of bad
debts that have been already written off from accounting books; from payable
debts, of which the creditors cannot be identified; incomes discovered from the
production and business activities in the previous years, which had been
omitted.
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c6. Incomes earned from capital contribution by
enterprises:
Incomes earned from overseas business activities
shall be accounted into other incomes for determination of taxable income.
In cases where the income tax on such income
amounts has been paid overseas, the concerned enterprises shall determine the
pre-overseas taxation income amounts in order to calculate income tax thereon
to be paid in Vietnam according to the Law on Enterprise Income Tax. When
determining payable income tax, the enterprises may subtract the income tax
amount already paid overseas, but the deducted tax amount must not exceed the
income tax amount calculated according to Vietnam’s Law on Enterprise Income
Tax for such income.
All incomes earned after the payment of
enterprise income tax from joint-venture or cooperation activities with
domestic enterprises (including income from transfer of enterprises’
contributed capital) shall not be accounted into other incomes when determining
taxable income.
c7. Other incomes including service bounties in
catering and hotel sectors; proceeds from sale of discarded materials and
faulty products (after deducting sale expenses); donations, gifts...
d/ The method of calculating income subject to
enterprise income tax applicable to enterprises engaged in property leasing
business with rentals collected in advance for many years:
For enterprises engaged in leasing property such
as houses, offices or infrastructure leasing business, with rentals collected
in advance for many years, the income subject to enterprise income tax shall be
determined as follows:
Taxable income
in the year (A)
=
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+
Taxable income
derived from other activities in the year (C)
+
Other incomes
Of which:
Taxable income
derived from turnover of advance rentals (B)
=
Total turnover
of advance rentals
-
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+
Other expenses
deducted in advance from previous years for this year and reserve expenses
this year allocated for this year
Of which expenses related to the generation of taxable
turnover arising in the year (D) shall be determined as follows:
d1. Fixed asset depreciation expenses:
For infrastructure business operation or
dwelling house or office leasing business, they shall be the depreciation rate
of assets directly related to the area for lease with lump-sum rental
collection. Enterprises may register the duration for use of their fixed assets
in compliance with the provisions at Point b.1 above.
In cases where the rental is collected in
advance and the leasing term is shorter than the use duration registered by the
enterprises with the tax authority, the asset depreciation shall be amortized
throughout the actual leasing term.
In cases where there appear in the tax
calculation year certain construction items for which the actual construction
costs have not yet been determined, such construction items’ costs shall be
temporarily determined on the basis of cost estimates according to the
economic-technical explanation report, and divided to the leasing area with
lump-sum rental collection. When the project is completed, the final cost
settlement shall include re-calculated actual construction cost. In cases where
the actual construction cost is smaller than the estimated one, the difference
shall be accounted into the income of the fiscal year when the project final
settlement is made. In cases where the actual cost is larger than the estimated
one, the enterprise shall use its reserve fund to make up for the deficit. If
the reserve fund is not enough to make up for the deficit, the deficit shall be
made up for by the income of that fiscal year.
d2. Other expenses deducted in advance for the
advance turnover, concretely:
Other arising
expenses deducted in advance turnover
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Total amount of
other expenses arising in the tax calculation years
x
Area for lease
with advance rental in the year
x
Number of year
with advance rental collection
Total project’s
area intended for lease
d3. The reserve expenses shall be equal to 5% of
the total of the above-mentioned expenses.
Annually, other expenses and reserve expenses of
the preceding years which are allocated to the current year shall be offset by
the expenses arising in the year when calculating the taxable income.
Particularly for years when losses are made, the enterprise may use the whole
reserve fund to make up therefor.
- For enterprises engaged in infrastructure
business or house and office leasing business, which are in the period of enjoying
tax preferences, the taxable income on their advance turnover (B1) shall be
determined as follows:
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B
x
The number of
years with advance collection
-
The number of
tax-free years
The number of years
with advance rental collection
Of which:
The number of
tax-free years
=
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-
The number of
years from the first year with taxable income
Two years of tax reduction shall be calculated as
a year of tax exemption
* Income from other activities (C):
Income from other
activities (C)
=
Turnover from
other activities
-
Arising
expenses
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Other incomes
Of which:
- Expenses shall not include infrastructure
construction cost.
- Other expenses arising in the tax calculation
year shall be determined as follows:
Other expenses
arising in the tax calculation year
=
Total of other
expenses arising in the tax calculation year
-
Other arising expenses
deducted in advance for advance turnover
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During the period of enterprise income tax
exemption or reduction, income from other activities shall be entitled to
ordinary tax exemption or reduction. If losses are incurred from such
activities, they shall be offset with the income from the advance turnover for
determination of taxable income in the year.
The above-said method of calculating taxable
income shall be used in making final tax settlement for enterprises doing
business with export processing zone or industrial park infrastructure, and
enterprises engaged in office and residential house leasing business (excluding
those engaged in hotel business) as from the fiscal year of 1999. For years
from 1998 backward, the final tax settlement shall comply with the Ministry of
Finance’s Circular No.74-TC/TCT of October 20, 1997.
4. Determination of payable tax amount:
Payable
enterprise income tax amount in the tax calculation year
=
Taxable income
x
Enterprise
income tax rate
Of which:
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- The enterprise income tax rate is specified in
the investment license. For enterprises granted the investment licenses before
January 1st, 1999, which have not yet been readjusted by the investment
licensing agency, the applicable enterprise income tax rate shall be determined
equal to the profit tax rate specified in the investment licenses. In cases
where the investment licenses do not specify the enterprise income tax rate,
the enterprise income tax rate of 25% shall apply.
In the course of operation, if a
foreign-invested enterprise or a foreign business cooperation party fails to
meet the criteria for enjoying preferential enterprise income tax rates and
enterprise income tax exemption or reduction as prescribed in Articles 10 and
32 of Decree No.30/1998/ND-CP of May 13, 1998, Articles 6 and 7 of Decree
No.10/1998/ND-CP of January 23, 1998 of the Government and Article 11 of
Decision No.53/1999/QD-TTg of the Prime Minister, such enterprise or party
shall not be entitled to the preferences. Annually, enterprises shall have to
report to the investment licensing agency and their managing tax agency(ies) on
the fulfillment of norms for enjoying preferences, and declare and pay
enterprise income tax at the tax rate(s) commensurate to the norms fulfilled by
enterprises. The tax agency(ies) directly managing the enterprises shall
inspect and verify the norm fulfillment level for enjoying annual enterprise
income tax preferences by each enterprise, which shall serve as basis for
determining the payable tax amount of each enterprise.
In cases where an enterprise has for 3
consecutive years failed to meet the conditions for enjoying preferential
enterprise income tax rates and enterprise income tax exemption or reduction as
specified in its investment license, it shall have to promptly report to the
investment licensing agency for readjustment of the tax rate and preferences
inscribed in its investment license.
5. The procedures for registration, declaration
and payment of enterprise income tax:
a/ Registration of enterprise income tax:
Enterprises shall have to register enterprise income
tax together with the registration for payment of value added tax with the tax
authorities directly managing them. In cases where an enterprise has branches
or dependent-accounting outlets located in other localities, it shall have to
make tax registration with the tax authorities of the localities where such
branches or outlets are located. Such enterprise shall declare and pay
enterprise income tax at the tax office in the locality where it is
headquartered.
b/ Declaration of enterprise income tax:
By the 25th of the first month of each fiscal
year at the latest, enterprises shall have to declare and submit declarations
of tax amount temporarily paid for the whole year to the tax authorities of the
localities where the enterprises are headquartered. The basis for declaration
shall be the production and/or business results of the preceding fiscal year
and the business prospects for the following year.
After receiving the declarations, the tax
authority shall verify and determine the tax amounts temporarily paid for the
whole year, then notify the enterprises of the tax amount to be temporarily
paid in each quarter. In cases where the enterprises fail to declare or declare
unclear basis for determining the tax amounts to be temporarily paid for the whole
year, the tax agency shall fix such tax amounts.
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c/ Payment of enterprise income tax:
Enterprises shall temporarily pay enterprise
income tax once every 3 months starting from the first day of the tax
calculation year. The temporary tax payment shall be made according to the tax
payment notice of the tax agency and not later than the last day of each
quarter. At the end of the tax calculation year or upon the termination of
business cooperation contract, the settlement shall be made according to actual
figures.
For business cooperation contracts with a term
of under one year, the enterprise income tax shall be paid in two installments,
with the first installment temporarily paid in the middle of the contract term
and the other to be paid upon the termination of the contract, and the
settlement thereof shall be made according to the actual figures.
For business cooperation contracts with the
method of determining business results or a particular method of calculating
enterprise income tax, being specified in the investment licenses by the
investment licensing agency, the tax calculation shall comply with the
provisions in such investment licenses.
d/ Settlement of enterprise income tax:
The final settlement of enterprise income tax
shall be made annually according to the provisions in Part III of this
Circular.
6. Reimbursement of enterprise income tax as the
result of reinvestment:
a/ Foreign investors who have fully made legal
capital contributions under their investment licenses and used their shared
income for reinvestment in projects in fields where investment is encouraged
for 3 years or more shall be refunded by the Ministry of Finance part or whole
of the enterprise income tax amount they have already paid for the income used
for reinvestment reimbursed. The levels of enterprise income tax reimbursement
as the result of reinvestment shall be as follows:
- 100% for reinvestment in projects subject to
the enterprise income tax rate of 10% .
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- 50% for reinvestment in projects subject to
the enterprise income tax rate of 20%.
In cases where foreign investors use their
shared income for reinvestment in projects that were licensed before November
23, 1996, the levels of enterprise income tax reimbursement as the result of
reinvestment shall be as follows:
- 100% for reinvestment in projects subject to
the enterprise income tax rates of up to 14%.
- 75% for reinvestment in projects subject to
the enterprise income tax rates of from 15% to 20% .
- 50% for reinvestment in projects subject to
the enterprise income tax rates of from 21% to under 25%.
In cases where foreign investors use their
shared income of the years before 1996 for reinvestment for three years or
more, to which readjusted investment licenses had been granted, or which had
been approved by the Ministry of Planning and Investment before November 23,
1996, the enterprise income tax reimbursement level shall be 100%.
b/ The enterprise income tax amount to be
reimbursed for the reinvested income shall be determined as follows:
Th =
L
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100% - S
Of which:
Th: is the enterprise income tax amount to be
reimbursed.
L: is the after-enterprise income tax shared income
amount used for reinvestment by the enterprise.
S: is the enterprise income tax rate stated in
the investment license.
T: is the percentage of enterprise income tax to
be reimbursed to the enterprise.
c/ The procedures for reimbursing enterprise income
tax on reinvested income.
In order to get the enterprise income tax
already paid for reinvested income amount reimbursed, foreign investors or
their authorized persons shall have to fully produce the following documents to
the tax authorities of the localities where the enterprises are headquartered:
- A written request or application for the
reimbursement of enterprise income tax as the result of reinvestment. The
application must clearly state the name, address and bank account number of the
unit or individual that receives the reimbursed enterprise income tax for
reinvestment.
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- The investment license (the notarized copy) or
a readjusted investment license granted by the investment licensing agency,
clearly stipulating that the investor is allowed to use his/her/its shared
income for reinvestment.
- A written certification (the original or
notarized copy) by the Managing Board, for joint-venture enterprises, or by an
auditing organization, for enterprises with 100% foreign investment capital or
foreign business cooperation parties, that the foreign party has fully
contributed its share to the legal capital.
- A declaration of reinvested income.
- Vouchers on tax payment by the enterprise (the
notarized copies) and the State Treasury�s
certification of the enterprise income tax amount already paid.
Upon receiving in full the above-mentioned
documents, the local tax authority shall verify such documents, determine the
amount of enterprise income tax already paid by the enterprise and calculate
the amount of enterprise income tax to be reimbursed to the investor, then send
the enterprise income tax reimbursement application dossier to the Ministry of
Finance (the Budget Department) for consideration and decision on tax
reimbursement to the investor.
Within 30 days after receiving the complete
dossier, the Ministry of Finance shall notify the investor of its decision.
Where the investors fail to make reinvestments,
they shall have to return the reimbursed enterprise income tax amount plus the
interests thereon calculated according to the bank deposit interest rate from
the date they receive the reimbursed tax amounts to the time they return such
reimbursed amounts to the State budget and shall be handled according to law.
II. TAX ON TRANSFER OF
INCOME ABROAD
1. Taxable objects:
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All cases where a foreign party uses its shared
income to pay debts of its parent company, or to cover expenditures of the
Vietnam-based representative office(s) of its parent company, shall be
considered the transfer of income abroad, and such foreign party shall have to
pay tax on the transfer of income abroad.
Foreign economic organizations or individuals
having income transferred abroad shall have to declare and pay tax on the
transfer of income abroad.
2. Determination of payable tax:
The payable tax on the transfer of income abroad
shall be determined equal to the income amount transferred abroad or considered
being transferred abroad, or the income amount retained outside the Vietnamese
territory by the investor, multiplied (x) by the income transfer tax rate
stipulated in the investment license. In cases where the granted investment
license does not specify the rate of tax on transfer of income abroad, such tax
rate shall comply with Article 12 of Decree No.30/1998/ND-CP of May 13, 1998 of
the Government and Article 11 of Decision No.53/1999/QD-TTg of March 26, 1999
of the Prime Minister.
3. The procedures for tax payment:
- Tax on the transfer of income abroad shall be
collected upon each transfer of income abroad. Particularly for cases where
investors retain their income outside Vietnam, pay debts for their parent
companies or cover expenses of the latter’s offices in Vietnam, the tax
declaration, payment and collection shall be made on a monthly basis.
- Before transferring income abroad or no later
than the 5th of the following month in cases where the income is used for
purposes deemed to be the transfer of income abroad or the retention of income
outside the Vietnamese territory, a foreign economic organization or individual
shall make and submit a tax declaration to the tax authority directly managing
the enterprise in which such foreign economic organization or individual has
invested capital and, at the same time, pay the declared tax amount into the
State Treasury.
Within 5 days after receiving the tax
declaration, the tax authority shall examine the declaration and, in cases
where it discovers any errors in such tax declaration, issue a notice of
payable tax amount to the foreign investor. The foreign investor shall have to
pay the outstanding tax amount into the State Treasury according to the tax
authority’s notice. In cases where the investor fails to submit the tax
declaration within the prescribed time limit, the tax authority may set the tax
amount to be temporarily paid, issue a tax notice and impose a fine for delayed
tax declaration.
The State Treasury shall hand over to the
taxpayer a receipt of income transfer tax payment so that the latter can carry
out the procedure for the transfer of income abroad.
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- An application for reimbursement of the paid
tax amount. The application must clearly state the reason(s) of application for
tax reimbursement, the name, address and bank account number of the applicant.
- A list of the paid tax amounts accompanied by
vouchers (copies) of the payments to the State Treasury and the State
Treasury’s certification of the paid tax amounts (clearly stating the chapter,
category, clause and item of the budget content index where the tax amounts
have been paid to).
- The tax authority’s certification of the paid
tax amounts.
The tax reimbursement application dossier shall
be filed to the Ministry of Finance (the Budget Department) for verification
and decision on the reimbursement of the paid tax amount.
III. EXPORT TAX AND IMPORT
TAX
All goods which foreign-invested enterprises and
business cooperation parties are permitted to export or import across the Vietnamese
border, including goods from the Vietnamese market sold to enterprises in
export processing zones and goods from enterprises in export processing zones
sold into the Vietnamese market, shall be subject to export tax and/or import
tax according to the Law on Export Tax and Import Tax.
1. Export and/or import tax exemption or
reduction:
a/ Export tax:
Goods sold by domestic enterprises and
individuals (including foreign-invested enterprises) to export processing
enterprises shall be exempt from export tax according to Article 8 of Decision
No.53/1999/QD-TTg of March 26, 1999 of the Prime Minister.
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b/ Import tax:
In addition to the cases of tax exemption and
reduction specified in the Law on Export Tax and Import Tax, foreign-invested
enterprises and business cooperation parties shall be entitled to tax exemption
or reduction according to Article 63 of Decree No.12-CP of February 18, 1997
and Articles 10 and 13 of Decree No.10/1998/ND-CP of January 23, 1998 of the
Government, and Article 11 of Decision No.53/1999/QD-TTg of March 26, 1999 of
the Prime Minister.
- The competence to consider tax exemption for
eligible cases specified in Article 63 of Decree No.12-CP of February 18, 1997
shall be as follows:
Based on the investment license and the
economic-technical explanation for each project, the Ministry of Trade or the
authorized agency shall consider and approve the list of duty-free import goods
items for each enterprise.
Based on the approved list of duty-free import
goods items, the Customs Departments of the provinces and centrally-run cities
shall monitor the import activities of enterprises. Quarterly, the Customs
Department shall submit a sum-up report to the Ministry of Finance and the
General Department of Customs on the export and import turnovers and the
volumes of the major export and import goods items of foreign-invested
enterprises.
- The procedures for import tax exemption or
reduction for eligible cases specified in Articles 10 and 13 of Decree
No.10/1998/ND-CP of January 23, 1998 of the Government shall comply with the
guidance of Circular No.63/1998/TT-BTC of May 13, 1998 of the Ministry of
Finance.
- The procedures for import tax exemption for
raw materials of projects for manufacture of mechanical, electric and
electronic components and spare parts shall comply with the provisions in
Article 11 of Decision No.53/1999/QD-TTg of March 26, 1999 of the Prime
Minister;
The projects for manufacture of mechanical,
electric and electronic components and spare parts shall be exempt from import
tax on production raw materials for 3 years from the date the manufacture is
commenced. In cases where an enterprise is concurrently eligible for
preferences provided for in Article 11 of Decision No.53/1999/QD-TTg and those
provided for at Point 3, Article 10 of Decree No.10/1998/ND-CP of the
Government, it may choose to enjoy preferences provided for in either of the
two said documents. Operating enterprises shall be exempt from import tax for
lots of imported raw materials according to their customs declarations opened
as from April 10, 1999 and for a period of 3 years (calendar year) from the
year they commence their production. The procedures for import tax exemption
shall be as follows:
+ The investment license (copy) granted by the
competent agency, clearly stating that the enterprise has the function of
manufacturing components and spare parts.
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+ The production plan of the year and the volume
of raw materials planned to be imported in service of the production.
Basing itself on the enterprise’s annual
production plan, the Ministry of Trade or the authorized agency shall give the
list of tax-free import raw materials to the enterprise. For the operating
enterprises, the 1999 list of tax-free imports shall not include the volume of
raw materials they have already imported according to the customs declarations
made before April 10, 1999.
Basing themselves on the list of tax-free import
raw materials, the provincial/municipal Customs Departments shall monitor the
import by the enterprises.
2. Declaration and retrospective collection of
export tax and import tax arrears:
- In cases where export processing enterprises
purchase goods, materials and raw materials from the domestic market and export
them to foreign countries instead of putting them into production and/or
processing, they shall have to pay export tax according to the current export
tariff.
- If the imported goods of foreign-invested
enterprises and foreign business cooperation parties, which have been exempt
from import tax as specified in the above cases, are used for purposes other
than those approved for import tax exemption, or sold on the Vietnamese market,
they must be permitted by the Ministry of Trade and the tax amounts already
exempted shall be retrospectively collected.
For goods imported at the time the Law on
Special Consumption Tax was yet effective, which were already exempt from
import tax, but used for purposes other than the original purpose or sold on
the Vietnamese market after the Law on Special Consumption Tax takes effect,
the concerned foreign-invested enterprises or foreign business cooperation parties
shall, besides having to pay the import tax arrears (at the tax rate applicable
at the time of retrospective payment), have to pay special consumption tax for
those goods subject thereto.
- Within 2 days from the date the imported goods
are used for purposes other than the purposes for which they are exempt from
import tax, or for sale, the concerned foreign-invested enterprises or business
cooperation parties shall have to submit declarations thereof to the customs
departments of the provinces and cities where the enterprises’ executive head
offices are located, or the customs authorities of the localities where such
goods were sold, or the customs authorities of the localities where the
enterprises register the import goods declarations. Past that time limit, if
the enterprises or business cooperation parties fail to submit such
declarations, they shall be sanctioned for tax evasion according to the
provisions of the Law on Export Tax and Import Tax and the Law on Special
Consumption Tax.
In cases where the enterprises manufacturing
mechanical, electric or electronic components and spare parts, and enjoying
import tax exemption for production raw materials for 3 years from the year
they commence their production as prescribed in Point 2, Article 11 of Decision
No.53/1999/QD-TTg of March 26, 1999 of the Prime Minister have not used up such
raw materials within the grace period or used them for wrong purposes, the
import tax thereon shall be retrospectively collected. Within 2 days after they
use the raw materials for the wrong purposes, the enterprises shall have to
declare and retrospectively pay import tax as prescribed.
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The provincial/municipal tax departments shall
have to make final settlement of accounts on the import and use of raw
materials volumes already exempt from import tax by the enterprises.
- The import tax and special consumption tax
arrears to be retrospectively collected shall be deter-mined according to the
tax calculation bases, including the tax rates, exchange rates, the tax
calculation prices at the time of sale under the provisions of the Law on
Export Tax and Import Tax and the Law on Special Consumption Tax currently in
force.
- In the course of managing the collection of
taxes from foreign-invested enterprises and business cooperation parties, the
authorities managing the tax collection from foreign-invested enterprises and
business cooperation parties shall have to supervise the use of tax-free export
and import goods and, upon discovery of any sale of such tax-free goods, the
directors of the provincial/municipal tax departments shall, besides collecting
value added tax according to the Law on Value Added Tax, have the power to
issue decisions on the retrospective collection of import tax arrears and
impose fines according to the Law on Export Tax and Import Tax.
IV. TAX ON INCOME FROM
CAPITAL TRANSFER
Foreign investors that transfer their contributed
capital shares in joint-venture enterprises, enterprises with 100% foreign
investment capital or business cooperation contracts according to Article 34 of
the Law on Foreign Investment in Vietnam shall pay tax on income from the
capital transfer according to the provisions of this Circular.
Taxes on income from capital transfer shall
include enterprise income tax and tax on transfer of income abroad. Concretely:
1. Enterprise income tax:
Income earned from capital transfer activities
shall be subject to enterprise income tax under the Law on Foreign Investment
in Vietnam.
Payable
enterprise income tax
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Taxable income
x
Enterprise
income tax rate applicable to income from capital transfer
1.1 Taxable income:
Taxable income
=
Transfer value
-
Initial value
of the transferred capital amount
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Transfer
expenses
Of which:
+ The transfer value shall be determined as the
total actual value that the transferor receives under the transfer contract. In
cases where the transfer contract does not specify the payment price or the
payment price cannot be determined according to the principle of market
price-based transactions between the transferor and the transferee, the tax
authority may examine and determine the contract’s payment value on the basis
of reference to the market prices and similar transfer contracts.
+ The initial value of the transferred capital
amount shall be determined on the basis of accounting books and vouchers on the
investor’s contributed capital at the time of capital transfer, which is
recognized by the joint venture enterprise managing board, for joint-venture
enterprises, or the auditing results from the auditing organization, for
enterprises with 100% foreign investment capital, or by business cooperation
parties in compliance with the Vietnamese laws currently in force.
In cases where the subsequent investors further
transfer their contributed capital shares, the initial value of the transferred
capital amount in each subsequent transfer shall be determined equal to the
value of the preceding transfer contract plus the actual value of any
additionally contributed capital (if any) determined on the principle stated in
this Clause.
+ Transfer expenses mean the actual expenses
directly related to the transfer, based on the original vouchers recognized by
the tax authorities. In cases where transfer expenses arise overseas, such
original vouchers must be certified by a public notary or an independent
auditing agency of the country where the expenses arise.
Transfer expenses include expenses for the
completion of legal procedures necessary for the transfer; charges and fees
which must be paid when the transfer procedures are carried out; expenses for
transactions, negotiations and signing of transfer contracts... evidenced by
valid vouchers.
1.2. Enterprise income tax rate:
- The rate of enterprise income tax on income
from capital transfer shall be 25%.
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- In cases where a foreign investor transfers
capital to a Vietnamese enterprise other than those mentioned above, such
investor shall be entitled to 50% reduction of payable enterprise income tax
amount.
1.3. Procedures for tax declaration and payment:
Within 5 working days after the competent agency
approves the capital transfer, the capital transferor or his/her mandatory
(including cases where the transferor is exempt from enterprise income tax on
income from capital transfer) shall have to make and submit a declaration of
enterprise income tax on income from capital transfer to the local tax
authority managing the enterprise in which the transferor invests capital,
enclosed with the transfer contract, the competent agency’s decision to approve
the capital transfer, a copy of the decision on the establishment of the
enterprise receiving the transferred capital (in cases of Vietnamese
enterprises), certification of contributed capital and original vouchers on
expenses, and, at the same time, pay in full the payable tax amount to the
State Treasury and send a copy of the tax payment voucher to the agency which
has approved the capital transfer.
Where inaccuracy is found in the declaration or
calculation of payable tax amount, the tax authority shall, within 5 working
days after receiving the declaration, notify the tax-payer of the payable tax
amount or request the tax-payer to provide the necessary documents for an
accurate calculation of the payable tax amount.
2. Tax on transfer of income abroad:
Foreign investors with income from capital
transfer, after paying tax on income from capital transfer under the guidance
at Point 1 above and transferring or retaining their income abroad, shall have
to pay tax on transfer of income abroad under the guidance in Clause e, Point
2, Section V, Part B and Section V, Part C of Circular No.99/1998/TT-BTC of
July 14, 1998 of the Ministry of Finance.
V. OTHER TAXES AND
FINANCIAL OBLIGATIONS
Other taxes and financial obligations such as
value added tax, special consumption tax, excise tax, natural resources tax,
and land, water and sea surface rents... applicable to foreign-invested
enterprises and foreign business cooperation parties shall comply with the
regulations in current legal documents of the Socialist Republic of Vietnam.
Part III
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I. ANNUAL TAX SETTLEMENT
At the end of each fiscal year, foreign-invested
enterprises or foreign business cooperation parties shall make and submit
reports on tax settlement to the tax authorities. The annual tax settlement
shall be carried out in accordance with the following regulations:
1. Within 60 days after the end of the fiscal
year, the foreign-invested enterprises and foreign business cooperation parties
shall submit their reports on production and business activities, accounting
reports audited by independent auditing organizations licensed to operate in
Vietnam, reports on enterprise income tax settlement and reports on settlement
of taxes payable in the year to the tax authorities of localities where their
executive head offices are located.
Within 10 working days after the above-said tax
settlement reports are submitted as prescribed, the foreign-invested
enterprises or business cooperation parties shall have to pay the outstanding
tax amounts according to their settlement reports to the State budget. If past
that 10 day-time limit, the enterprises still fail to pay the outstanding tax
amounts, they shall also have to pay fines for late payment as prescribed.
The foreign-invested enterprises or business
cooperation parties shall not be permitted to clear an overpayment of one tax
against a underpayment of another tax when making their annual tax settlements.
2. Basing themselves on the reports on business
and production activities and financial statements of enterprises, the tax
departments of the provinces and centrally-run cities shall re-calculate payable
amounts of each tax in the fiscal year and, at the same time, compare these
amounts with those in the tax declarations periodically submitted during the
year in order to verify the accuracy of these declarations and tax settlement
reports. Where tax settlement reports have been made inaccurately, the tax
authorities shall organize the inspection of tax payment by enterprises.
II. INSPECTION OF TAX
PAYMENT BY ENTERPRISES
In the course of tax management of
foreign-invested enterprises and foreign business cooperation parties, the
provincial/municipal tax departments shall have to organize regular or
irregular tax inspections at enterprises when necessary. They shall, at least
once a year, inspect the tax payment by the following subjects:
- Enterprises which, according to their
financial settlement reports, make no profits in the period of tax exemption or
reduction.
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- Enterprises which make inaccurate or unclear
tax settlement reports, or their tax settlement reports do not fully specify
the indices for tax calculation.
- Enterprises which fail to submit their tax
settlement reports or fail to submit them within the prescribed time limit.
- Enterprises which see major changes in their
financial situation during the tax calculation year as compared to the previous
years.
For the other enterprises, the
provincial/municipal tax departments shall have to organize the inspection at
least once every 3 years.
Before inspecting foreign-invested enterprises
or foreign business cooperation parties, the tax authorities shall have to
issue inspection decisions clearly stating the contents and duration of the
inspection. The inspection decisions shall be sent to the foreign-invested
enterprises or the representatives of the foreign business cooperation parties
3 days before the inspection begins. Where it is necessary to inspect contents
other than those stated in the inspection decisions or to prolong the
inspection time, the tax authorities shall have to issue additional inspection
decisions.
The inspection results shall be recorded in
minutes signed by the authorized representatives of the enterprises or foreign
business cooperation parties and the representative of the tax authorities
conducting the inspections. The tax authorities shall have to submit such
inspection minutes to the Ministry of Finance (the General Tax Department)
together with the enterprises’ financial statements (copies).
If a foreign-invested enterprise or foreign
business cooperation party disagrees with the tax authority�s conclusions in the
inspection minutes, it may lodge complaints to the General Tax Department and
the Ministry of Finance. Pending the settlement of the complaints, the
enterprise or the foreign business cooperation party shall have to strictly
abide by the tax authority’s conclusions.
III. TAX SETTLEMENT UPON
THE EXPIRY OF OPERATING DURATION OR DISSOLUTION OF FOREIGN-INVESTED ENTERPRISES
OR FOREIGN BUSINESS COOPERATION PARTIES
Upon the termination of a business cooperation
contract by the parties thereto, or the expiry of the operating duration or the
dissolution of a foreign-invested enterprise under the Law on Foreign
Investment in Vietnam, the concerned foreign-invested enterprise shall, within
45 days after the investment licensing agency issues the dissolution decision,
have to make and submit its tax settlement report to the tax authority. The tax
authority shall have to proceed immediately with the followings:
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2. Determination of the rights and obligations
of each party to the foreign-invested enterprise or the business cooperation
contract, with the following principal contents:
- Determination of the invested capital amounts
of the investors currently on the enterprise’s account(s), including capital in
cash, fixed assets, materials and goods... Confirmation of the invested capital
amounts which the foreign investors may transfer abroad.
- Determination of profits or losses, and the
rights and responsibilities of the investors related to such profits or losses.
Confirmation of the income amounts which the foreign investors are entitled to
and may transfer abroad. The amount of tax on transfer of such income abroad
shall be immediately collected for the State budget except where the foreign
investors can produce documents proving that such income amounts will not be
transferred abroad for one of the following reasons:
+ It is used for reinvestment in Vietnam by
decisions of the investment licensing agency.
+ It is used for personal spending needs in
Vietnam, in addition to other incomes already declared.
+ It is used for other purposes in Vietnam.
IV. MEASURES AGAINST THE
PRICE CHANGE
To ensure the correct determination of tax
payment obligations of enterprises, during the regular inspection or the
examination of tax settlement reports of enterprises, if any price or income
ratio irrationality is detected in the transactions among associated
enterprises, the tax authorities shall apply the following anti-price change
measures in order to accurately determine the taxable incomes of enterprises:
1. Method of comparing market prices:
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(i) There is no difference between the two
compared business operations, which affect the transaction prices, such as
goods quality, trademarks, delivery conditions, mode of payment.
(ii) In cases of difference between the two
compared business operations, calculation methods may be applied to preclude
the factors affecting the transaction prices.
For example: A British lubricant company
sells to Vietnam-based joint-venture enterprise A (a joint-venture between such
British company and a company in Vietnam), 1,200 liters of lubricant for 1,500
USD, to be paid after 6 months. At the same time, the British company sells to
enterprise B, an independent enterprise in Vietnam, 1,000 liters of lubricant
for 1,000 USD, to be paid immediately. Supposing that the 6-month commercial
credit interest rate on the market is 10%. When determining income of
joint-venture enterprise A, the Vietnamese tax authority may re-determine the
contractual lubricant price on the basis of the comparative price according to
the contract with company B, as follows:
Unit price of 1 liter of lubricant, with payment
made after 6 months:
1,000 USD +
1,000 USD x 10%
= 1.1
USD/liter
1,000 liters of
lubricant
The price determined for the contract between
the joint-venture company and the British company shall be:
1,200 liters
x 1.1 USD/liter = 1,320 USD
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In cases where a trade unit purchases goods
supplied by an overseas associated enterprise and it is impossible to determine
the actual purchase prices on the free market, the tax authority may use the
selling price of the trade unit to determine the purchase price according to the
following formula:
Purchase price
=
Selling price
independent enterprises (excluding import tax, if any)
-
Selling price
to independent enterprises (excluding import tax, if any
x
The average
aggregate profit margin of the trade service
The average aggregate profit margin of the trade
service may be determined on the basis of the aggregate profit margin of other
goods purchased by such unit from independent enterprises and sold to
independent enterprises, or the aggregate profit margin of other independent
trade units. The aggregate profit margin shall be determined according to the
following formula:
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=
Net turnover
-
Cost price of
sold goods
x
100%
Net turnover
(The data shall be based on the enterprises’
reports on business results).
The method of using the selling price to
determine the purchase price shall not apply to the following cases where:
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- The goods and products, before being sold,
were affixed with trademarks, trade names of high value on the market.
- The period between the goods purchase and the
goods sale lasts for more than one year and, during that period the market
witnessed a great price fluctuation.
For example: Enterprise A in Vietnam is
an enterprise with 100% foreign capital invested by company B which produces
liquor in France. Enterprise A is the sole outlet for company B’s products on
the Vietnamese market. In 1999, enterprise A imported from company B 10,000
liters of liquor, paid 75,000 USD for import tax and special consumption tax
set by the customs office, and sold the whole liquor volume for 185,000 USD as
converted turnover within the year. By the end of 1999, the tax authority shall
determine the purchase price of the liquor of enterprise A as follows:
Net turnover
= Sale turnover - Import tax
= 185,000USD - 75,000USD
= 110,000 USD
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Selling price (excluding
import tax)
=
110,000 USD
= 11
USD/liter
10,000 liters
Assuming that the average aggregate profit
margin of liquor trading is 10%,
Purchase
price = 11USD/liter - (11USD/liter x 10%)
= 9.9USD/liter
3. Method of using total production cost to
determine the taxable income
In cases where an unit produces and/or processes
semi-products and delivers all to an associated enterprise, without products
being sold on the market, to determine the comparative price, the tax authority
may base itself on the accounting books and records of the units’ expenses to
determine the income of that unit according to the following formula:
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=
Total
production cost of all products
x
Average net income
rate of the production branch
Totalproduction
cost of all products delivered in the period
=
Cost price of
goods delivered in the period
+
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+
General
management expenses in the period
The average net income rate of the production
branch may be determined on the basis of data on the net income rates of other
independent production enterprises.
The net income rate shall be determined
according to the following formula:
Net income rate
=
Before-enterprise
income tax net income
Cost price of
sold goods
+
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+
General
management expenses
(The data shall be based on the
enterprises’ reports on business results)
For example: Garment enterprise A in
Vietnam is a joint venture between company B from the Republic of Korea and a
Vietnamese company. Garment enterprise A produces under processing contracts
apparel articles and delivers them all to company B in the Republic of Korea.
Assuming that in 1999 enterprise A delivered to company B 10,000 suits at a set
price of 10 USD/suit. The accounting books and records of enterprise A in 1999
contain the following data:
Cost price of sold goods 80,000 USD
Delivery expenses 6,000 USD
General management expenses 12,000 USD
Total production cost 98,000 USD
Enterprise A and company B in Vietnam are two
associated enterprises, the tax authority may determine the taxable income as
follows:
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The determined income = 98,000 USD x 10%
In cases where price irrationalities are
discovered but there exist no conditions for the application of the above
methods, the tax authority shall request the enterprise to produce the relevant
vouchers and attest in writing the legality of the vouchers produced. Copies of
the relevant vouchers shall be sent to the General Tax Department for the
exchange of information with the tax authorities of other countries.
Part IV
TAX PAYMENT CURRENCY AND
OTHER GUIDANCES
I. TAX PAYMENT CURRENCY
Foreign-invested enterprises and foreign
business cooperation parties shall pay tax(es) in Vietnam dong.
Enterprises which are permitted by the Ministry
of Finance to use foreign currency(ies) in their cost-accounting and
book-keeping activities, when making tax declaration, shall have to convert
such foreign currency(ies) into Vietnam dong at the time of declaration.
The conversion of a foreign currency into
Vietnam dong or vice versa shall be effected at the average actual purchasing
and selling rates on the inter-bank foreign currency market announced by the
State Bank of Vietnam on the Nhan Dan (People) daily. For certain days on which
the Nhan Dan daily is not published or published without announcement of
exchange rate, the exchange rate applicable to the conversion shall be the
preceding day’s exchange rate.
All budget revenues from the foreign-invested
enterprises shall be accounted into the budget index according to the current
regulations.
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1. Foreign-invested enterprises shall have to
strictly observe the procedures for tax code-granting registration and tax
registration with the tax authorities directly managing them according to the
current regulations.
2. Within 5 days at the latest from the change
of their goods lines for business or change of the locations of their executive
head offices, the enterprises, their business affiliates or foreign business
cooperation parties shall have to complete the tax registration procedures at
the tax authorities of the provinces and centrally-run cities where their
executive head offices are located (according to the form issued together with
Circular No.79/1998/TT-BTC of June 12, 1998 of the Ministry of Finance).
3. To strictly comply with all the regulations
on tax declaration in the course of business and production activities.
4. To present all accounting books and records
and necessary documents related to the tax calculation and settlement at the
request of the tax authority.
5. To pay in full taxes within the prescribed
time limit.
6. To notify the tax authority of the decision
on its dissolution or expiry of the project’s operation duration, and submit
its final settlement report on time.
III. RESPONSIBILITIES AND
POWERS OF THE TAX AUTHORITY
1. To guide the tax-payers to make tax
registration and declaration according to the prescribed regime.
2. To examine tax declaration forms, accounting
books and records as well as necessary documents for tax calculation. To be
entitled to request the tax-payers to clarify unclear matters related to tax
calculation.
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4. To record in writing and handle tax
violations within its competence as prescribed by law.
5. To strictly enforce the tax legislation, thus
ensuring its truthfulness, accuracy and objectiveness.
6. To inspect the registration of accounting
regimes by enterprises and inspect the implementation of the registered
accounting regimes.
7. To certify the tax amounts already paid by
foreign investors at the request of such foreign investors.
IV. HANDLING OF VIOLATIONS
AND SETTLEMENT OF COMPLAINTS
1. All violations of the tax legislation shall
be sanctioned as follows:
- Failures to strictly comply with the
regulations on tax registration at Point 1, Section II, Part IV of this
Circular shall be sanctioned as prescribed in Decree No.22/CP of April 17, 1996
of the Government on sanctions against administrative violations in the field
of tax.
- Failures to observe the regulations on tax
declaration and payment shall be subject to pecuniary fines as prescribed in
the Ordinance on Administrative Sanctions, the Government’s Decree No.22/CP and
guiding documents currently in force.
- False declaration and evasion of taxes shall
be fined up to 5 times the falsely declared or evaded tax amount.
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2. Competence to handle violations and
complaints:
- Violations of tax regulations shall be handled
by the tax authority directly managing the tax collection.
- Complaints of tax-payers about taxes shall be
examined and settled by the tax authority directly collecting taxes. In cases
where a tax-payer disagrees with the settlement, he/she shall be entitled to
lodge a complaint to the higher-level tax authority or the Ministry of Finance
or initiate a lawsuit according to provisions of law.
In cases where the complaints are lodged to the
higher-level tax authority and the Ministry of Finance, the settlement
decisions of the Minister of Finance shall be the final. Pending the
settlement, the complainant shall have to strictly comply with the conclusion
by the tax authority.
V. ORGANIZATION OF
IMPLEMENTATION
The provincial/municipal tax departments shall
have to guide foreign-invested enterprises and foreign business cooperation
parties to strictly observe the provisions of this Circular.
They shall assign a contingent of full-time
officials to manage the collection of taxes from foreign-invested enterprises
and foreign business cooperation parties. These officials shall have to submit
monthly, quarterly and year-end reports to the Ministry of Finance (the General
Tax Department) on the situation of tax collection and other reports in service
of the general management of foreign-invested enterprises and foreign business
cooperation parties operating in their respective localities.
This Circular takes effect after its signing, replaces
Circular No. 74-TC/TCT of October 20, 1997 of the Ministry of Finance, and
shall be effective for the determination of enterprise income tax obligation in
the fiscal year of 1999.
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FOR THE MINISTER OF FINANCE
VICE MINISTER
Pham Van Trong