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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:
08/2001/TT-BTC
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Hanoi, January 18, 2001
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CIRCULAR
ADDITIONALLY GUIDING THE REGULATIONS ON ENTERPRISE
INCOME TAX APPLICABLE TO FOREIGN ORGANIZATIONS’ BRANCHES OPERATING IN VIETNAM STIPULATED IN THE FINANCE MINISTRY’S CIRCULAR No. 99/1998/TT-BTC OF JULY 14, 1998
Pursuant to the Governments Decree
No.30/1998/ND-CP of May 13, 1998 detailing the implementation of the Enterprise
Income Tax Law;
Pursuant to the Governments Decree No.13/1999/ND-CP of March 17, 1999 on
organization and operation of foreign credit institutions and their
representative offices in Vietnam;
Pursuant to the Governments Decree No.92/1998/ND-CP of November 10, 1998 on
the legal consultancy practice by foreign lawyers organizations in Vietnam;
Pursuant to the Governments Decree No.45/2000/ND-CP of September 6, 2000 on
Vietnam-based representative offices and branches of foreign traders and
foreign tourist enterprises in Vietnam;
The Finance Ministry hereby additionally guides the enterprise income tax as
follows:
I.
GENERAL PROVISIONS
1. This Circular applies to foreign
organizations branches operating in Vietnam, including: branches of foreign
lawyers organizations, branches of foreign credit institutions, branches of
foreign cigarette companies and other branches licensed to conduct business
activities in Vietnam according to the provisions of Vietnam laws, hereinafter
collectively referred to as the foreign branches.
2. Foreign branches shall be enterprise income
tax payers under the Enterprise Income Tax Law and the guidance in the Finance Ministrys Circular No. 99/1998/TT-BTC of July 14, 1998.
3. In cases where international treaties,
agreements and/or commitments which the Vietnamese State or Government has
acceded to or signed with international organizations or foreign States and
Governments contain provisions on tax on foreign branches operations different
from the guidance in this Circular, the provisions of such international
treaties, agreements or commitments shall apply.
II.
SPECIFIC CONTENTS ON ENTERPRISE INCOME TAX APPLICABLE TO THE FOREIGN BRANCHES
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The enterprise income tax rate applicable to
foreign branches shall be 32%.
2. When determining income subject to enterprise
income tax, foreign branches in Vietnam shall be entitled to account their
business management expense amounts allocated by their parent foreign
organizations according to the actually arising expenses for their business
operations, provided that such allocated expense amounts must not exceed the
proportion between the turnover generated in Vietnam and the foreign
organizations total turnover. The maximum expense amount to be allocated by a
foreign organization to its branch in Vietnam shall be determined as follows:
Maximum level
of business management expense allocated by the foreign organization to its
branch in a tax calculation year
=
Total turnover
of the foreign branch in a tax
calculation year
x
Total business management
expense of the foreign organization in a tax calculation year
Total turnover
of the foreign organization in a tax calculation year
Within 3 months after submitting its enterprise income
tax settlement report of a tax calculation year, the foreign branches shall
have to produce to the tax authorities their parent foreign organizations
financial reports already certified by independent auditing organization and
clearly showing such indexes as: total turnover, total business management
expense of the foreign organizations and the management expense allocated to
their branches, which shall serve as basis for determining business management
expense amount to be allocated to the foreign branch in Vietnam.
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4. Loan interest payment expenses related to the
legal capital or charter capital of a foreign branch shall not be accounted
into its reasonable and valid expenditure upon determining the taxable income.
5. Transactions conducted between foreign
branches and their headquarters or other branches under the same foreign
organizations ownership or control must be
6. In cases where foreign branches fail to fully
observe the regime of accounting, invoices and vouchers, the tax authorities
shall apply appropriate measures to determine the taxable incomes of such
foreign branches, or may apply the method of distributing profits of foreign organizations
in a tax calculation year to their branches in Vietnam according to the
following formula:
Taxable income
in a period of the Vietnam-based foreign branch
=
Total turnover
in a period of the foreign branch
x
Total income in
a period of the foreign organization
Total turnover
in a period of the foreign organization
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In cases where foreign branches fail to supply
documents to serve as basis for distributing taxable incomes to such foreign branches,
the tax authorities shall base themselves on the already investigated and
gathered documents to set the taxable incomes of the foreign branches.
7. Upon determining the taxable income of a tax
calculation year, foreign branches shall be entitled to clear it against losses
carried forward from previous years according to the provisions of Article 37
of the Governments Decree No. 30/1998/ND-CP of May 3, 1998 detailing the
implementation of the Enterprise Income Tax Law. The loss transfer shall be effected
by carrying forward the whole loss amount of any tax calculation year to the
subsequent profit-making year and the income of the subsequent years shall be
used to make up for such loss amount. The loss transfer duration must not
exceed 5 years counted from the year next to the loss-arising year.
8. When transferring their profits abroad, the
foreign branches shall not have to pay the tax on transfer of income abroad for
the income generated since the 1999 fiscal year.
III.
ENTERPRISE INCOME TAX REGISTRATION, DECLARATION, PAYMENT AND FINAL SETTLEMENT
1. Tax registration:
Foreign branches shall have to make enterprise
income tax registration with local tax authorities (Tax Departments of the
provinces and centrally-run cities) of localities where such branches are
located.
2. Tax declaration:
Foreign branches shall have to make and submit
written declarations of tax to be temporarily paid for the whole year according
to the form prescribed in the Finance Ministrys
Circular No. 99/1998/TT-BTC to the tax authorities directly managing them on
January 25 every year at the latest.
Declaration bases are production, business
and/or service results of the preceding year and business prospects of the
following year.
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If the foreign branches fail to declare or
unclearly declare bases for determining tax amounts to be temporarily paid for
the whole year in their written declarations, the tax authorities may request
such foreign branches to explain bases for determining tax amounts to be
temporarily paid for the whole year. In cases where foreign branches fail to
explain or fail to prove the bases inscribed in their declarations at the tax
authorities requests, the latter may set tax amounts to be temporarily paid for
the whole year.
3. Tax payment:
Foreign branches shall temporarily pay tax for
each quarter in full and on time according to the tax authorities tax notices.
The tax payment deadlines inscribed in tax
payment notices must not be later than the last day of each quarter.
4. Tax final settlement:
Foreign branches shall have to make tax final
settlements with the tax authorities and declare indexes according to the form
prescribed in the Finance Ministrys Circular No.
99/1998/TT-BTC of July 14, 1998.
The year for enterprise income tax final
settlement shall be the solar calendar year starting on January 1 and ending on
December 31 of the same year. In cases where a foreign branch is allowed to
apply a fiscal year different from the above-said solar calendar year, it shall
also be allowed to make tax final settlement according to such fiscal year.
Foreign branches shall have to submit their
production and/or business situation reports, accounting reports already
audited by independent auditing organizations licensed to operate in Vietnam
and enterprise income tax final settlement reports to the tax authorities
directly managing them within 60 days from the end of each fiscal year.
IV.
ORGANIZATION OF IMPLEMENTATION
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In cases where foreign branches had completely
made their enterprise income tax final settlements of the 1999 fiscal year
under the Finance Ministrys previous guidance (enterprise
income tax rate of 25%, not being allowed to apportion management expenses of
foreign headquarters and having to pay tax on transfer of profit abroad) before
the effective date of this Circular, the readjustment thereof shall not be
made, except when foreign branches file written requests to the tax authorities
in order to have their 1999 tax obligations determined under the guidance in
this Circular.
The following Circulars of the Finance Ministry
shall no longer be effective:
+ Circular No. 90-TC/TCT of November 10, 1993
guiding a number of points on tax policies toward joint-venture banks and
foreign banks branches in Vietnam;
+ Circular No. 04-TC/TCT of April 23, 1997
guiding a number of points on tax policies toward branches of foreign lawyers organizations
operating in Vietnam;
+ Circular No.118-TC/TCT of December 26, 1994
providing guidance on tax for branches of foreign cigarette companies in
Vietnam.
FOR THE FINANCE MINISTER
VICE MINISTER
Vu Van Ninh