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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.
97-TC/TCT
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Hanoi,
December 30, 1995
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CIRCULAR
GUIDING THE IMPLEMENTATION OF DECREE No.96-CP OF DECEMBER
27, 1995 OF THE GOVERNMENT PROVIDING DETAILS FOR THE IMPLEMEN- TATION OF THE
LAW ON TURNOVER TAX AND THE LAW ON AMENDMENTS AND SUPPLEMENTS TO A NUMBER OF
ARTICLES OF THE LAW ON TURNOVER TAX
Pursuant to the Law on Turnover
Tax adopted by the VIIIth National Assembly on June 30, 1990; the Law on
Amendments and Supplements to a Number of Articles of the Law on Turnover Tax
adopted by the IXth National Assembly on July 5, 1993 and the Law on Amendments
and Supplements to a Number of Articles of the Law on Turnover Tax adopted by
the IXth National Assembly on October 28, 1995;
Pursuant to Decree No.96-CP of December 27, 1995 of the Government providing
details for the implementation of the Law on Turnover Tax and the Law on
Amendments and Supplements to a Number of Articles of the Law on Turnover Tax;
The Ministry of Finance provides the guidances for implementation as follows:
A. SCOPE OF
APPLICATION OF THE LAW ON TURNOVER TAX
I. SUBJECTS
OF TURNOVER TAX PAYMENT, OBJECTS UNDER TURNOVER TAX
According to the provisions in
Article 1 and Article 8 of the Law on Turnover Tax and Article 1 of Decree
No.96-CP of the Government, business organizations and individuals (commonly
referred to as business establishments) of all branches and trades and all
economic sectors, irrespective of their business forms, which, with or without
business establishments in Vietnam, have their turnover generated in Vietnam
shall be subject to the turnover tax in accordance with the provisions of the Law
on Turnover Tax.
II. OBJECTS
NOT UNDER TURNOVER TAX
According to the provisions in
Article 2 of the Law on Turnover Tax and Article 2 of Decree No.96-CP of the
Government, the following activities are not subject to turnover tax:
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Agricultural products sold by
agricultural production establishments which are not yet processed or only
preliminarily processed (sorted, peeled, sun-dried, heat dried...) are not
subject to turnover tax, such as: preliminarily processed dried tea, unshelled
dried cashew nut, coffee bean, corn, sun-dried sliced manioc and potato...
Such agricultural products,
having gone through processing as dried rubber latex, condensed rubber latex of
various kinds, processed from milky sap through smoke-drying; unshelled cashew
nuts, roasted and soaked cashew nuts; sugarcane juice processed into sugar,
molasses; milled and husked rice, wheat, corn; oil-bearing leaves, stems,
tubers, fruits... processed for oil,etc, shall all be subject to turnover tax
applicable to production and processing activities.
2. The production of goods which
are subject to special consumption tax of which the production establishment
has already declared for payment shall not be subject to the turnover tax for
these items at the production process.
If the production establishment
has shops for selling goods subject to special consumption tax, such shops must
pay turnover tax for their trading activities.
Establishments importing goods
subject to special consumption tax shall have to pay turnover tax for their
trading activities whenever those goods are put on sale.
3. The production of goods for
export (including production or subcontracted production of items for export to
foreign countries, export processing zones or selling to the duty free shops)
in the following cases:
a/ Goods directly exported or
produced by the production establishment under a subcontract signed with a
foreign country (including cases where goods turned out by the establishment
are sent abroad for promotion sales at fairs and exhibitions).
The production establishment
shall have to produce to the tax office:
- The production contract and/or
subcontract signed with the foreign country.
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- Custom declaration with
certification that goods were already exported.
b/ Goods sold by the production
establishment or assigned to import-export establishments for export or sale to
the duty-free shops (items as stipulated by the Government), under economic
contracts in accordance with business license.
The production establishment
shall have to produce to the tax office:
- The sale contract or the
contract on the export assignment.
- The invoice for sale and
delivery of goods assigned for export in accordance with the contract.
- The balance-sheet of the
contract (at the time of balancing the contract) which serves as basis for the
tax balancing.
- The copy of the business
license of the import-export establishment.
c/ Goods produced by the
production establishment under a subcontract with another establishment which
has directly signed a contract with a foreign country.
Example:
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The subcontracted establishment
shall have to produce to the tax agency:
- The contract for the subcontracted
production together with the copy of the contract which the subcontracting
establishment has concluded with the foreign country.
- The invoice for the delivery
of the subcontracted goods in accordance with the subcontract for the
production of export items.
- The balance-sheet of the
subcontract (at the time of completing the contract) which serves as basis for
the tax balancing.
Except cases where production
and subcontracted production of export goods are not subject to turnover tax
payment as mentioned above, all other production and subcontracted production
activities shall be subject to turnover tax, including the following cases:
- Where a production
establishment sells its products to other establishments for producing,
subcontracted-producing or packaging goods for export.
- Where the production and
business establishment supplies materials for other establishment(s) to produce
goods, then the former itself undertakes the export of those goods, the
subcontracted establishment(s) shall have to pay tax for the subcontracting
activities, while the subcontracting establishment shall be subject to the tax
for the export activities.
4. The credit activities of
banking and credit organizations and financial companies. Such professional
service activities as opening bank accounts and payment, trading in foreign
currencies, pawnbrokerage and other business activities of these organizations
(if any) shall be subject to turnover tax applicable to each kind of
activities.
The capital lending activities
conducted by other establishments and permitted by law shall also not be
subject to turnover tax.
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According to provisions in
Article 12 of Decree No.96-CP of the Government, the following activities are
temporarily exempt from turnover tax:
1. Radio and television
broadcastings according to programs and plans and with State Budget
allocations.
2. Geological surveys and
topographic activities in accordance with the State programs and plans and with
State Budget allocations.
3. Publication of specialized
magazines and/or bulletins for internal consumption; if put on sale, such items
must be subject to turnover tax.
4. Activities of the water
works, which are in direct service of agricultural production, shall also be
exempt from turnover tax with regard to the irrigation fees. Activities to
conserve the original breeds of domestic animals and/or poultry shall not be
subject to turnover tax with respect to the revenue earned from the sale of the
offsprings of such original breeds, from the crossbreeding for maintaining the
original breeds, or multiplying the original breeds; except in cases where
there is revenue from the sale of such products as eggs, milk..., turnover tax
must be paid.
5. Activities in repairing and
maintaining roads, dredging canals and ports repairing and maintaining bridges,
culvets, dykes and dams, building houses for families of fallen soldiers;
restoring cutural and art works; preserving environmental hygiene, conserving
zoos, flower gardens, public parks, and trees with non-production funds
allocated from the State Budget or with contributions from people.
If establishments, which are
engaged in repairing, maintaining and dredging... activities and not subject to
turnover tax as mentioned above, earn any revenue from such activities, they
shall have to pay turnover tax.
Example:
An establishment which is
engaged in dredging canals and not subject to turnover tax on its dredging
activities obtains revenue from the sale of the dredged soil, sand and/or
cobble stones, such establishment shall have to pay turnover tax for its
dredging activities with regard to the turnover from the sale of soil, sand
and/or cobble stones.
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7. Sale of the State-owned
houses to the current tenants and cases stipulating that 100% of the proceed from
the sale of houses must be remitted into the State Budget.
8. Medical insurance, social
insurance and labor insurance.
9. Sale of discarded materials
and substandard products on which deduction has been made for so as to reduce
the production cost as well as production and business expenditures; if the
deduction is not made to reduce production cost and circulation fees, the
turnover tax must be paid.
10. Activities to self cater for
the meals in public offices, enterprises, schools or armed force units.
11. Other specific cases shall
be stipulated by the Government.
B. BASES FOR
CALCULATION OF TURNOVER TAX AND TAX TABLES
According to Article 7 of the
Law on Turnover Tax the bases for the calculation of turnover tax shall be the
taxable turnover and tax rates.
I. ON THE
TAXABLE TURNOVER
According to the provisions in
Article 3 and Article 8 of the Law on Turnover Tax and the specific provisions
in Article 3 of Decree 96-CP of the Government, the taxable turnover shall be
the total sale amount, the subcontracting charges, freight, commision, service
charges... (including additional revenues, if any) derived during the tax
payment period, no mater whether these sums have been collected or not.
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1. With regard to production
activities (including production, processing, assembly and exploitation), the
taxable turnover shall be the revenue from the sale of products produced by the
establishment, no matter what these products are: the finished products,
semi-finished products, raw materials or materials, machinery and equipment,
minerals...
In particular:
- With regard to the electricity
production activities, the taxable turnover shall be the revenue earned from
the sale of the commercial electricity.
- With regard to the printing
activities, the taxable turnover shall be the total revenue earned from the
printing of products for customers or for sale. For the printing of books and newspapers,
the taxable turnover shall not include the cost of printing paper.
- With regard to publishing
activities, the taxable turnover shall be the revenue earned from publishing
activities.
2. With regard to the
subcontracting activities, the taxable turnover shall be the subcontracting
charges, including labor charges, the cost of fuel, motive force, auxiliary
materials and other subcontracting expenditures as defined in the subcontract
(excluding the primary raw materials and semi-finished products delivered for
subcontracting)
In cases where the primary raw
materials are supplied by the subcontracted party (including the assigned
purchase in any form), this shall not be considered subcontracting activity and
shall be subject to turnover tax applicable to production activities.
3. With regard to construction
activities:
a/ For construction and
installation activities (irrespective of the inclusion of materials and raw
materials in the contract or not), the taxable turnover shall be the overall
value of the project or part of the project, excluding the value of machinery
and complete equipment and interior furnishings associated with the project (if
any).
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Machinery and complete equipment
and interior furnishings, of which the values are not included in the taxable
turnover on the construction and installation activities, are the ones which
may be installed or purchased separately from the construction of the project,
such as: production machinery and equipment of various kinds to be installed in
workshops; tables, chairs, beds, wadrobes, television sets...installed in
hotels.
If the building contractor
supplies machinery, equipment and interior furnishings for the project owner,
he/she shall have to pay turnover tax for his/her trading activities.
The value of sanitation wares,
wall tile decoration, buildings, electricity and water supply systems...
included in the construction project, shall not be deducted from the total
value of the project when determining the taxable turnover of the construction
and installation activities.
If the building contractor
supplies to the project owner materials and raw materials of the types included
in the construction project, the value of which is already included in the
taxable turnover from the construction and installation activities, he/she
shall not have to pay the tax for the trading activities.
Example:
The Hanoi construction company
(called Party B) signs a contract to build for an Engineering Factory (called
Party A) a workshop with a total value of 8,100 million VND, of which:
- The value of the workshop,
roads, surrounding walls (including the value of such materials as bricks,
cement, iron..., labor charges and other costs) is: 5,000 million VND.
- The charge for the installation
of machinery and equipment is: 100 million VND.
- The value of machinery and
equipment is : 3,000 million VND (excluding the installation charge)
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The taxable turnover for the
construction and installation activities in this case shall be determined as
follows:
- The value of the project minus
(-) the value of machinery and equipment:
8,100 million VND minus (-)
3,000 million VND = 5,100 million VND
- The amount of turnover tax to
be paid at 4% of the taxable turnover:
5,100 million VND multiplied by
(x) 4% = 204 million VND.
(As it is shown in the above
example, the turmover tax to be paid is not calculated on the sum of 1,600
million VND which Party A has paid Party B)
In cases where the complete
equipment is sold by the Hanoi construction company to the Engineering Company,
the Construction Company shall have to pay the turnover tax on the sale of the
equipment.
The building contractor and the
project owner must supply the tax office in the locality where the project is
being constructed all the construction contracts and other documents relating
to the tax calculation such as payment vouchers, balance-sheets, the settlement
accounts of the contracts.
In cases where the contractor
and the project owner have failed to supply the tax office with the contracts
and documents to be used as basis for determining the value of the construction
project to calculate tax, the tax office shall base itself on the prices of
each period and determine the taxable prices for each project.
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Mr. T's family built a 3-storey
house in Hanoi in 1996. During the construction, Mr. T and the contractor did not
fully supply the tax office with the contracts and documents to be used as
basis for determining the value of the newly constructed house. Therefore, the
tax office shall have the right to determine the taxable prices and the
turnover tax which must be paid as follows:
- The area in square meters of
each floor: supposed to be 70m2, so the total area of the three floors is 210
m2.
- The average construction cost
for such house at the time of the tax calculation is 1.2 million VDN/m2.
Then, the turnover tax to be
paid is determined as follows:
- Taxable turnover:
210 m2 multiplied by (x) 1.2
million VND/m2 = 252 million VND
- Turnover tax to be paid:
252 million VND multiplied by
(x) 4% = 10.08 million VND
In cases where the construction
is completed without determining the basis (or the contractor) for the tax
collection, the project owner shall have to pay the tax for the contractor.
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c/ In cases where many units
take part in the construction of a project or part of a project under a
contract signed directly by the project owner with one or many contractors
(called principal contractors), who later sign subcontracts with other
contractors (called subcontractors), the taxable turnover shall be calculated
only once on the value of the project or part of the project, and shall be
defined as follows:
- With regard to a project being
constructed in one locality with one tax office responsible for tax collection,
the turnover tax paid by the principal contractors shall be calculated on the
value of the contracted project; the subcontractors shall not have to pay
turnover tax for the subcontracted parts of the project. The tax office shall
have the responsibility to inspect and determine the turnover on which the
principal contractors have already paid tax for the subcontractors.
- With regard to a project with
different parts being built in different localities, the subcontractors must
declare and pay turnover tax at the localities where the construction is
underway.
When balancing the turnover tax
for the whole project with the tax office, the principal contractors shall be
entitled to the subtraction of turnover tax which the subcontractors already
paid in the localities for the value of various parts of the project,
subcontracted from the principal contractors (if there's certification of the
tax offices together with the tax payment vouchers or copies of the tax payment
vouchers)
d/ For cases where the
contractors subcontracts the entire project to other establishments, the
contract transferring party must pay turnover tax for its brokerage activities;
the taxable turnover shall be the commision or the difference between the
contracting price and the subcontracting price.
e/ Business establishments
carrying out contracts for the sale of products, materials or equipment to the
project owners or building contractors shall have to make declaration for the
payment of turnover tax on their production activities (if such products are
manufactured by these establishments), or on their trading activities. Such
contracts shall not be regarded as construction contracts for tax calculation
according to the above provisions.
g/ For the construction of
projects for which the payment must be made in different stages, the taxable
turnover shall be calculated on the value of each part of the project or the
work already done.
4. For the transport activities,
the taxable turnover shall be the charges on the transportation of goods,
passengers and baggages and other revenues from transport activities such as
loading and unloading charges, additional revenues, fees..., included in the
transportation fares or turnover.
For air, maritime and railway
transport...activities involving international transport, the taxable turnover
shall be determined as follows:
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- For the foreign transportation
establishments which have no business establishments in Vietnam but conduct
activities involving the transport of passengers, baggages and cargo from
Vietnamese ports to foreign countries, the taxable turnover shall be the
transportation fares from the Vietnamese ports (first port of departure) to the
foreign port of destination where the passengers, their baggages and cargo are
delivered, irrespective of the place where the tickets are bought or forms of
payment of the transport fares. Under this provision foreign transport
establishments as stipulated here are the overseas owners of the transport
means who are not entitled to certificates of transport business registration
in Vietnam but conduct the transport activities from Vietnamese ports to
foreign countries.
Example:
A sea-going vessel of Hong Kong
performs a contract for transporting cargo from Hai Phong port to France, the
taxable turnover for this ship shall be the transportation charge from Hai
Phong port to the destination port in France, excluding other ports of call on
its journey.
Transport activities mean the
use of transport means and/or facilities: trains, vehicles, air-planes,
vessels, tunnels... for the transportation.
The ports as provided for above
include airports, sea ports, river ports, railways terminals, car terminals,
stations, yards or warehouses where the goods and/or passengers are transported
to and from.
5. For the restaurant
activities, the taxable turnover shall be the total revenue from the sale of
food, drinks and cigarettes (whether they are manufactured by the establishment
itself or bought ouside) and other revenues associated with the restaurant
activities, such as dinning room charges, napkin charges and other service
charges collected from the customers.
6. With regard to trading
activities, the taxable turnover shall be defined either in one of these two
forms:
a/ The total revenue from the
sale of goods (including additional revenues if any)
b/ The difference between the
selling and buying prices of the goods.
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- The buying price is the actual
price paid to the seller written on the vouchers or receipts of purchase.
For the imported goods, the
buying price used for calculating the difference includes: The buying price at
the Vietnamese port (CIF) plus (+) the import duties (if any), plus (+) the
special consumption tax (if any). The additional charge (if any) over the
imported goods shall not be included in the buying price when calculating the
price difference.
The buying and selling prices
used as basis for the calculation of the turnover tax levied on each mode of
buying and/or selling goods' shall be determined as follows:
- In case of goods sold through
agents, the taxable turnover shall be determined by the sales mutiplied by (x)
the selling price of the agents. The commission paid to the agents shall be
included in the marketing costs (except in cases where the agents must pay
turnover tax for the goods owner as stipulated in Point 7 below)
- In case of goods sold by
instalments, the taxable turnover shall be the revenue from sale of goods paid
by the purchasers, which is determined by the sales multiplied by (x) the
selling price (the selling price here is the price collected only once at the
time of the sale, excluding the instalment interests).
- In case of a discount of the
selling price for the customers who buy a large quantity of goods with prompt
payment, the taxable turnover shall be determined according to the actual
selling price in such case. In cases where the customers return the goods, the
taxable turnover shall not include the amount paid back to the customers.
- For activities in trading in
lots with the turnover tax paid on each lot of goods, the taxable turnover
shall be determined according to the market selling price in the locality
wherefrom the goods are delivered.
7. For the activities of sale
and purchase agents and/or assignees, the taxable turnover shall be the
commision and other revenues derived from these activities. In cases where the
agent or assignee undertakes both the purchase and the sale of goods for the
goods owner, he/she shall have to pay on behalf of the goods owner the turnover
tax on the trading activities in addition to the turnover tax on his/her agent
or assignee activities. The taxable turnover of the goods sold through the
agent is the revenue from the sales minus (-) the commission.
For the activities of sale
agents for overseas establishments, besides paying the turnover tax on their
agent activities, such sale agents shall have to pay the turnover tax and
profit tax on the trading activities on behalf of the goods' owner; The taxable
turnover of the agents here is the revenue from the sales minus (-) the
commission.
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The calculation of turnover tax
based on the price difference shall not be applied to the goods sold through
agents,entrustees or assignees.
Only those establishments which
meet the following conditions shall be recognized as agents, entrustees or
assignees and subject to the turnover tax payment on the commission:
- Having license for trading
activities.
- Having contract between the
goods owner and the agent, entrustee or assignee. The amount of goods, kinds of
goods, prices and commission must be clearly stated therein.
The establishment undertaking
the task of sale and/or purchase agent, entrustee or assignee must send a copy
of the contract to the local tax office which directly manages the
establishment.
- Selling the goods strictly in
accordance with the prices written in the contract.
- Strictly observing the
accounting regime, regime on vouchers and receipts; explicit and exact
accounting of actual revenue, commission earned from the agent's, entrustree's
or assignee's activities and relevant expenditures. In case of the sale of
goods entrusted for sale by non-business people without receipts, the entrustee
must write down in the book the name and address of such people, the quantity,
type and prices of the goods entrusted for sale.
If the agents, entrustees or
assignees fail to meet the above conditions, they shall have to pay turnover
tax on the trading activities and the taxable turnover shall be the total
revenue from the sale. In case of the sale of goods entrusted by business
establishments which have not registered and made declaration of the tax
payment, the establishments selling such goods have also to pay the tax on
behalf of the goods owner.
8. For the service activities,
the taxable turnover is the total revenue from the service activities:
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b/ For activities in lodging
business, the taxable turnover shall include the room rents and the service
charges (if any).
c/ For the tourist business
activities, the taxable turnover shall be the total revenue from such
activities, except payments made on behalf of the customers, as prescribed in
the contract. The travel fares and accomodation charges (if with legitimate
vouchers) shall not be included in the taxable turnover for these activities.
d/ For activities in the Post
and Telecommunications Service, the taxable turnover shall include postal
charges, the earning from the sale of postal stamps, the charges from the
installtion and renting of telephones, pagers, faxes..., revenues from the
transmission on the telecommunication system including the additional charges
(if any) and other revenues from the postal services.
For activities in international
telecommunications, the taxable turnover shall be the sum the Vietnamese tax
payer in Vietnam is entitled to receive according to international practice.
For the establishments ouside
the Post and Telecommunications Service which conduct postal service activities
such as telephone, fax..., the taxable turnover shall be the commission they
receive or the amount they receive in excess of the charge they have to pay to
the Post Service.
e/ For insurance and
re-insurance activities, the taxable turnover shall be the revenue from the
insurance business (fees on original insurance, fees on re-insurance, fees on
evaluation and other revenues from these activities).
In particular, for re-insurance
fees collected by the insurance and re-insurance business establishments
operating on Vietam's territory, which have already paid the turnover tax on
the fees for the re-insurance transfer, the re-insurance establishment shall
not have to pay the turnover tax on such re-insurance fees (in accordance with
the stipulations in Section I, Circular No.43 TC/TCT of June 5, 1995 of the
Ministry of Finance providing guidance on turnover tax for insurance and
reinsurance activities).
f/ For pawnbrokerage activities,
the taxable turnover shall be the difference between the revenue and the
advance payment to the pawner.
Example: A person brings a
motorbike to pawn at a pawnshop and is paid in advance (loaned) a sum of 14
million VDN. One month later, when the pawner comes back to return the money
and receive back his/her motorbike, he/she shall have to repay the pawnbroker
15 million VND, so the taxable turnover in this case is 1 million VND (15
million VND minus (-) 14 million VND) . In cases where the pawnbroker must sell
the pawned property to recover his/her capital, the taxable turnover for such
activity shall be the total earning he/she gets from the sale of the property
(the total revenue from the sale of the property minus (-) the sum to be paid
to the pawner in accordance with the contract or as stipulated by law). Also in
the above example, according to the agreement between the pawner and the
pawnbroker written in the contract, when the debt falls due, the pawnshop shall
be entitled to sell the motorbike to recover both the capital and interests.
For example, the motorkike is sold for 19 million VND, the pawnbroker must pay
the pawner 4 million VND and the taxable turnover shall be 15 million VDN (19
millionVND - 4 million VND). If the contract fails to specify the amount of
money that the pawnbroker must pay the pawner, the taxable turnover shall be
the whole revenue from the sale of the motorbike (19 million VND).
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In cases where a lease is made
with rent paid in advance for several months or several years (in any form),
the taxable turnover shall be the total revenue that the lessor has already
received.
For establishments which render
services by leasing things for other establishments or by leasing then
sub-leasing them to earn commission from this service, the taxable turnover
shall be calculated as for the brokerage activities.
h/ For the "national
construction" lottery and other lotteries, the taxable turnover shall be
the actual revenue from the sale of tickets and cards (the revenue on prices of
tickets and cards minus (-) the commission paid to the sale agents, if any).
i/ For the golf course business,
the taxable turnover shall be the revenue from the sale of membership cards,
the admission tickets, the coaching charges, the rent of implements and
utensils for golf playing and other revenues. For other service activities
associated with golf course business such as hotel, restaurant,
tourism...businesses, the taxable turnover shall be determined according to
each kind of activity.
The turnover from the sale of
the membership cards shall be determined by the actual sales (including cards
sold in Vietnam and abroad) multiplied by (x) the price written on the cards.
j/ The turnover from the
activities in ship chartering shall be the whole revenue from these activities,
minus (-) the expenditures spent on behalf of the means' owners under the
contract, such as: port fee, loading charges, fees on goods quarantining... (if
with regular vouchers).
k/ For advertizing activities,
the taxable turnover shall be the whole revenue from these activities: over
radio, on television, books, newspapers, billboards, advertizing logos,
advertizing displays and other forms of advertisement.
For establishments engaged in
advertisement service, which sign contracts with other establishments such as
radio stations, television stations, books' or newspapers' offices...for
carrying out part(s) of the advertisement services, the part of turnover
transferred to other establishments for performing the advertisement
(determined according to the contract and the actual payment), shall be
deducted from the taxable turnover for advertizing activities. For such
activities as billboard painting, electronic billboard making, patterning the
advertisement, programming the advertisement... conducted by the establishments
themselves or by the outside establishments, the taxable turnover shall be the
advertisement costs, which shall not be deducted from the advertisement
turnover.
If an advertisement service
establishment signs a contract for advertisement services then later transfer
the contract to another establishment for the full performance of the
advertisement service and only enjoy commission from this service, the turnover
tax shall be collected as for the brokerage activities.
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a/ Business establishments using
their goods, materials, machinery and equipment... for exchanges, debt payment,
internal consumption, or donation as gifts to other peoples, including
customers under any form of marketing or advertisement, shall be all subject to
the turnover tax. The taxable turnover shall be determined according to the
sale prices of goods of the same types and at the same moment.
b/ Activities in self-performing
the capital construction shall be subject to turnover tax and the taxable
turnover shall be the value of the project or part of the project.
Activities in planting trees,
tending perennial trees during the capital construction before they are turned
into business shall not be subject to turnover tax.
10. Business establishments with
revenues in foreign currency(ies) are entitled to pay turnove tax in foreign
currency(ies) or in Vienam Dong. In cases where the payment is made in Vietnam
Dong, it must be based on the exchange rates announced by the State bank of
Vietnam at the time of the tax calculation. If the payment is made in foreign
currency(ies), foreign currency(ies) must be convertible.
II.
TURNOVER TAX RATES
Based on the amended and
supplemented turnover tax tables issued together with the Law on Amendments and
Supplements to a Number of Articles of the Law on Turnover Tax and the
provisions in Article 4 of Decree No.96-CP of the Government providing for the
application of the turnover tax rates, the Ministry of Finance provides the
following guidances for the application of turnover tax rates with regard to
each branch, trade or each business activity:
1. If a business establishment
operates in different branches and trades and is subject to different turnover
tax rates, it shall have to pay the turnover tax at the rate specified for each
branch or service. If it is impossible to determine the separate turnover for
each branch or trade, highest tax rate for the branch or trade in business
shall apply.
2. If an establishment producing
commodities which are subject to both the tax rate for branch or trade and tax
rate for the utility of the commodities, it shall be entitled to the utility
tax rate when such tax rate is lower than that for branch or trade.
Example:
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3. An establishment engaged in
the exploitation or production activities which directly uses its products for
the production of other products shall pay turnover tax at the tax rate for the
branch or the manufactured products, and the taxable turnover shall be the
turnover from the sale of the final products.
Example:
- An establishment extracting
iron ores which are used for refining into steel shall be subject to the tax
rate applied to metallurgical activities with respect to steel products.
- An establishment which
produces yarn and fabrics and uses the produced yarn as material for the
production of fabrics shall not have to pay the turnover tax on the yarn used
for the production of fabrics and the turnover tax shall be calculated on the
turnover from the sale of fabrics at the rate specified for textile industry.
Quarrying activities shall be
subject to the turnover tax for the exploitation activities on the turnover
from the sale of such products as ashlars and stones of various sizes that the
establishment has directly crushed or ground. If the establishment produces
marbles for walling or flooring, or granites, it shall be subject to the tax
rate applied for the production of such construction materials.
4. The production and assembly
of electronic goods shall be subject to a tax rate of 8%.
Particularly:
- A tax rate of 4% shall apply
to the production and assembly of special-purpose electronic equipment and
machinery, computers, including:
+ Production and assembly of
electronic machinery and equipment (telephone exchange, receivers and
transmitters and equipment for radio and television relay stations) for special
use in telephone, wireless communications, radio and television.
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+ Production and assembly of
special-purpose electronic equipment for the control traffic lights system,
traffic siren, burglar alarms, fire alarm system.
+ Production and assembly of
electronic control equipment for installation at production establishments or
in machines and equipment and means of transport.
+ Production and assembly of
special-purpose electronic apparatuses and equipment to be used in researches,
experimentations and medical service.
+ Production and assembly of
computers and accompanying printers.
In case of the production of
special-purpose electronic equipment in complete sets accompanied by common
electronic products such as receivers and transmitters accompanying with
amplifiers and microphones...the same tax rate of 4% shall apply to the
accompanied equipment.
Beside the above-mentioned
special-purpose electronic products, or the production of and assembly of such
products as television sets, video recorders, radios, casette recorders,
amplifiers, speakers, microphones, telephones, pagers... the tax rate of 8%
shall apply.
5. For the production of
electrical products and communication cables including metal and optical
cables, and electric wires of all kinds, a tax rate of 4% shall apply.
6. Production of electrical
products, including electric fans, washing machines, air conditioners with an
electronic controller shall be subject to turnover tax at the rate applied to
engineering products.
- For the production and
assembly of such products as locks, scales (except electronic scales), safes,
motorbikes, sewing machines, alunminium and enamelled utensils, tin or zinc-coated
iron roofing sheets, iron barrels or tanks a tax rate of 2% (group 5, Section
I, Turnover Tax Table) shall apply.
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For the production of rat,
cokroache, fly and mosquito killers of different kinds (including mosquito
joss-sticks), a tax rate of 0.5% shall aplly.
8. For the production of building
materials, a tax rate of 4% shall apply:
- Concrete mortar, including
different kinds of mortar with cement and other agglutinative substances like
asphalt..., used for building workshops, roads, bridges... or for the
production of pre-frabricated concrete structures.
- For the production of cement,
a single tax rate shall apply based on the Vietnamese grades of the cement,
including the cement produced from clinke imported from overseas or bought from
other establishments.
9. A tax rate of 6% for the production
of alcohol (group 13, Section I) shall be applied to alcohol used exclusively
for medical service and industry (based on the products' properties or economic
contract or sale invoice). Alcohol used for the production of liquors, spirits
shall be subject to the special consumption tax; in cases where it is
impossible to define the kind of alcohol, the special consumption tax shall
apply.
10. A tax rate of 2% shall apply
to the production of ice used in fisheries, based on the economic contract and
sale invoice for the fishery establishments to use in freezing and preserving
aquaproducts. In cases where the ice producing establishment sells ice to
consumers of various kinds that makes the identification of the ice used for
fisheries impossible, a tax rate of 6% shall be applied on the total turnover
of the establishment.
11. Production of yarn, textiles
and cotton:
Synthetic yarn subject to a tax
rate of 4% includes those produced from synthetic fibers or synthetic fibres
mixed with cotton and natural fibres.
12. For the production of audio
and video tapes, recorded laser discs, a tax rate of 1% shall apply to products
directly made by the establishment through its own programs, and its own
audio-visual recording in audio and video tapes and laser discs for publication
under the publication permit granted by the cultural service.
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13. A tax rate of 1% shall apply
to the production of medical and sanitary cotton, bandages, including gauzes of
various kinds, medical cotton, bandages and women's sanitary towels with
sanitary standards certified by the quality control agency or medical agency.
14. Agricultural production
establishments engaged in the processing of agricultural products shall have to
pay turnover tax at the tax rate specified for each branch or each kind of the
processed products: processing liquid rubber latex into dry or condense latex:
4%; processing coffee, cashew: 6%; processing tea: 4%...
Agricutural production
establishments which are not subject to the agricultural land use tax and earn
revenue from the sale of agricultural products (of cultivation and husbandry),
including the fish cage-rearing or fry catching shall be subject to a tax rate
of 2%. A tax rate of 1% shall be applied exclusively to the production of plant
and animal breeds..
Activities such as ploughing,
harrowing and prepairing soil for agricultural production shall be subject to a
tax rate of 2%.
15. For subcontracting
activities a tax rate of 6% shall apply, irrespective of branches, trade or
goods to be subcontracted for production.
In cases where the business
establishment supplies materials for other establishments to process into commercial
products, the formers shall have to pay turnover tax at the tax rate applied to
the production branch and on the turnover; if the establishment sells these
products to a foreign country (export), it shall have to pay turnover tax on
its export activities at a tax rate of 1% on the export turnover.
16. A tax rate of 1% for the
intramunicipal transportation of passengers by buses shall also apply to the
transportation of passengers from the downtown to adjacent areas.
Example:
Transportation of passengers
from Hanoi to Ha Dong provincial town or from Ho Chi Minh City to Bien Hoa by
buses shall apply the same fares for intramunicipal transportation as defined
by the State.
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17. Tax rates applied for
trading activities:
a/ The sale of the following
goods shall be subject to a tax rate of 1% (as stipulated in Point 1, Section
IV, Turnover Tax Table):
- Foodstuff: rice, corn, potato,
manioc and processed foodstuff such as noodle, instant noodle...
- Fresh food and vegetables.
- Production materials and raw
materials, including: fuel of various kinds (except petrol), oils, lubricants,
grease, coal of various kinds (including coal made in the forms of cakes and
perforated blocks), thin cloth, canvas, yarn, cotton fluff.
- Transport means: ships, boats,
motorboats, trucks, passenger cars, small diesel lorries, improved carts,
forklifts, cranes (excluding bicycles, motorcycles and cars of 24 seats or less).
- Machinery and euqipment used
as means of production: machine tools, motors, equipment in complete sets and
equipment not in complete sets... electric cables, communications cables and
other production tools, fishing gears.
- Sale of spare parts and assessories
of machinery and equipment, transport means (excluding spare parts of such
consumer goods as bicycles, motorcycles, clocks, cameras...).
- Sale (distribution) of books
and newspapers, movie films (ready for screenings).
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Example:
The sale of the following goods
shall be subject to a tax rate of 2%:
- Plywood or pressed wood, furnitures
made of wood and other materials, glass, looking-glass, paints, color dyes,
wood doors and windows, plastic doors and windows, glass doors and windows with
aluminium frames and other interior fixtures including air conditioners, water
heaters, bathtubs and sanitation wares,etc...
- Electric, electronic and
mechanical appliances and instruments, including telephones, pagers,
hand-drills, sewing machines, water pumps of under 10 m3/hour, transformers,
voltage stabilizers of under 15A, electric wire , swiches, plugs and other
common electric utensils, knives, scissors, pliers, hammers and tool kits for
common mechanical and electric repair.
c/ In-lots trading activities
shall be subject to the tax rates applied for each group of the traded
commodities. If it is impossible to identify which group the commodities belong
to, a tax rate of 2% shall be applied on the whole revenue from the lot.
d/ Hotels or rastaurants having
souvernir shops, if their turnovers can be separately defined, shall be
entitled to the turnover tax rate applicable to trading activities.
18. Trading in golds, silver,
gems, the following tax rates shall apply:
a/ For purely buying and selling
activities, the tax rate on trading activities shall apply. In cases where the
establisment carries out by itself such activities as flowing, polishing,
cutting or making gold into common rings, cutting gold into pieces for sale at
the same price as for gold, such activities are considered trading activities.
19. For restaurant business, the
tax rate is 6%.
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- Well-furnished restaurants.
- Restaurants which prepare and
sell dishes which are rare and/or precious or by menu.
20. For a number of services,
the applicable tax rates shall be as follows:
a/ For overseas remittances
service with commission, the tax rate is 6%, the same as that applied to other
professional services of banking and credit organizations or financial companies.
b/ For such activities as
watching cars, motorcycles, bicycles, conducting business in video games and
other games like leasing table-tennis tables, billiard tables or football game tables,
selling tickets for admission into entertainment centers, a tax rate of 4%
shall apply (other services).
c/ For such transportation
service activities as: recommending or renting transport means for the goods
owner, recommending goods sources to the owner of the transport means,
including services for procedural paper work, the inspection and supervision of
the transportation, the preservation of goods... for goods owner; in cases
where organizations or individuals providing such services only enjoy the
commission while expenditures on renting transport means, on loading and
unloading services are all paid by the goods owner or are paid by such
organization or individual on behalf of the good owner as defined in the
economic contract, the unit providing such services shall have to pay turnover
tax at a tax rate of 15% on the revenue or the commission earned from such
services (as specified in group 15h, Section VI, Turnover Tax Table), no matter
what the unit is called in the contract as agent, broker or transport service
provider.
In cases where the unit signs
with the goods owner a package contract for the transportation of goods, which,
however, fails to specify expenditures and commission, the turnover tax shall
be calculated at the rate of 2%, as applicable to transport activites; the
taxable turnover shall be the total revenue from the package contract
(irrespective of the transport provider, whether the unit itself or a hired
outsider)
d/ For postal service
activities, the applicable tax rate is 6%.
A unit of the Post Service
conducting other activities shall be subject to the turnover tax levied on each
kind of its activities (in case it's an independent accounting unit) as
follows:
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- Business activities such as
selling machinery and equipment, telephones, pagers... shall be subject to the
tax rate applicable to trading activities.
- Activities such as
transmitting newspaper pages shall be subject to the tax rate applicable to
newspaper printing and publishing activities.
Other units ouside the Post
Service, which provide the telephone, fax...services shall be subject to a tax
rate of 15% on their revenue, that is the commission or the excess charges as
compared to the charges paid to the Post Service (the same as in agent
activities). If the parts of revenues they are entitled to receive can not be
determined separately, the turnover tax must be paid at the tax rate applicable
to the Post Service, that is 6% calculated on the total charges, collected from
customers.
e/ Activities in horse race
business shall be subject to a tax rate of 20% applicable to the turnover from
the sale of tickets in horse betting (the turnover still includes reward
payments and other expenditures), and a tax rate of 4% for the turnover from
the sale of tickets to the spectators.
f/ Activities in renting wedding
dresses and other appliances shall be subject to a tax rate of 10%.
g/ The activities in ship
salvage service (survey, refloating and towing the wreck ashore) shall be
subject to a tax rate of 2%.
h/ A tax rate of 30% shall apply
to the activities in pilotting and towing sea ships.
The General Taxation Department
is responsible for controlling, guiding and inspecting the application of the
tax rates to business establishments based on the Turnover Tax Table and the
above provisions. In cases where it is not clear which tax rate shall be
applied, the General Taxation Department shall report to the Ministry of
Finance for guidance.
C.
REGISTRATION, DECLARATION AND PAYMENT OF TURNOVER TAX
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1. Make registration and
declaration of turnover tax:
a/ Business establishments must
submit their tax declarations and registrations (in accordance with the
standard form) to the local tax offices where they are granted business
licenses or investment licenses. In case where the establishments have not been
granted licenses yet, but have actually conducted business activities, they
must register and make tax declaration when starting their busineses. If
establishments, which have already registered and made tax declaration, have
some changes in business lines or branches, merging, dissolving or organizing
branch shops... they must make an additional registration of such changes with
the tax offices.
Branch establishments, shops...
of the Corporations or companies must register and declare the tax payment with
the local tax offices where they are located.
Construction establishments must
register and make tax declaration with the tax offices of localities where
their head offices are located and at the same time must register and declare
for tax payment with the tax offices of localities where the projects are being
constructed.
Establishments which conduct
their production activites in a locality (province or city directly under the
Central Government) but their head offices and transaction offices are located
in other localities shall have to register and declare the payment of turnover
tax for their production activities at the localities where their production
establishments are located.
Example:
Dong Nai Milk Factory
(conducting its production activities in Dong Nai province), which has a
transaction office in Ho Chi Minh City, must register and declare the milk
production tax payment in Dong Nai province; in cases where the Factory has set
up subsidiaries and shops which directly sell its products in other localities
(provinces or cities), such subsidiaries and shops must register and declare
the turnover tax payment for their trading activities in such localities.
b/ Trade establishments wishing
to pay turnover tax on the difference between the selling and buying prices,
must submit their requests to the local tax offices for consideration and
decision.
Trade establishments which meet
the following conditions shall be entitled to the calculation and payment of
turnover tax on the difference between the selling and buying prices:
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- Keeping records strictly in
accordance with the accounting regime, determining the difference between the
selling and buying prices of goods.
- Having already registered the
payment of the turnover tax on the price difference with the tax office which,
after its examination, certifies that the establishment has met all the
conditions.
After receiving the request from
the turnover tax-paying establishment, the tax office has the responsibility to
conduct the examination and inform in time the establishment whether it is
entitled to pay the turnover tax on the differnce or not (if not, the reasons
must be clearly stated).
The establishment can start the
payment of the turnover tax on the price difference only when the tax office has
already examined and certified that it has met the conditions and inform it of
the permission for the application.
c/ With regard to the
establishments applying contractual regime for business collectives and
individuals (irrespective of the business branches, services or contractual
forms), the collective or individual that will perform the contract must
diretly register and declare the tax payment with the managing tax office; in
case of a package contract with self-responsibility for all expenditures and
revenues, the collective or individual package-contractors must additionally
pay other taxes and fees as stipulated by law. The contracting establishments
must pay tax on the revenues paid to them by the contractors. The tax office
shall have to concretely determine the taxable turnover in conformity with each
contractual form.
With regard to the tax
registration and declaration form and application for tax payment on the price
difference, the establishment shall have to submit two copies to the tax office
for examination and certification (one copy shall be returned to the business
establishment, the other shall be kept at the tax office for record).
2. Declaration for the payment
of turnover tax: According to provisions in Article 5 of Decree No.96-CP,
production or business establishments shall have to declare and pay the
turnover tax at the tax offices of the localities where they conduct the
production or business activities.
The business establishment shall
have to make monthly declaration of turnover tax calculation in accordance with
the stipulated form and send it to the tax office. The time-limit for sending
the monthly declaration is the 5th day of the following month at the latest.
The construction establishments, no mater what they are the principal
contractors or the subcontractors, must make the declarations at the tax office
of the locality where the construction is underway, on the revenues from the
projects or parts of the projects (even if they are not subject to the turnover
tax payment, their declarations must still be submitted).
The tax office has the
responsibility to examine and calculate the tax and annouce the amount of tax
to be paid for the previous month by the tax payer before the 10th day of the
following month.
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For construction establishments
which are subcontractors and not subject to the turnover tax on the
construction and installation activities (for the tax has been already paid by
the principal contractors), the tax office shall have to examine and certify
concretely the turnover not subject to turnover tax so that the establishment
shall have basis for its tax balancing.
With regard to the small
business households, the tax payment shall be based on the package revenue, and
the tax office shall base itself on the package tax rates to inform the amount
of tax that each business household shall have to pay.
The tax payment declaration for
a number of cases are stipulated as follows:
a/ Business establishments of
the Trade Service which have fixed locations but take their goods to sell
outside the areas covered by their business registration, shall have to declare
the tax payment before delivering their goods as applied to trade-in-lots
activities and the portion of turnover for which the trade-in-lots tax has been
already paid shall not be subject to the turnover tax on the sales of goods.
b/ Trading establishments which
take goods from their stocks to their shops for sale, or transport goods from
one shop to another shop of their own shall not have to pay the turnover tax on
the intra-establishment transported goods, if with regular vouchers envidencing
that those are intra-establishment transported goods.
Each trading establishment shall
only have its turnover tax calculated and paid for its trading activities in
one of the two following forms: the tax is calculated either on the turnover or
on the difference between the selling and buying prices of the goods. This
provision is applicable to establishments which have registered and declared
their tax payment and settled the turnover tax with the local tax office.
Business establishments paying tax on the difference shall be entitled to a
compensation for the taxable difference between different categories of goods
but with the same tax rates and also to the compensation for the difference
between the months in a quarter.
If an establishment, which pays
turnover tax on the price difference, violates the stipulated conditions, the
tax office shall, depending on the seriousness of the violation, impose a
penalty for the tax violation and at the same time decide or annouce the
suspension of the tax payment on the difference by the establishment as from
the month when it has discovered that the establishment failed to observe the
stipulated conditions. Any fines on the false tax statement or evasion by the
violating establishment must be calculated on the turnover of such
establishment.
b/ If an import-export
establishment which buys goods from a production establishment and undertakes
the export under assignment sells the goods inside the country, it shall,
besides paying the turnover tax at the tax rates applied to trading activities,
have to pay the turnover tax or special consumption tax at the tax rates
applied to the production branch or manufactured goods items (which should have
been paid by the production establishment).
The establishment shall have to
make a detailed list of purchases for export but which have been sold in the
country instead, and the selling and buying prices which serve as basis for the
tax calculation; if the buying price cannot be determined for the calculation
of tax on the production activities, the tax must be calculated according to
the selling price.
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- The buying price at the
establishment: 60,000 VND/set
- The selling price of goods
inside the country: 80, 000 VND/set.
- The turnover tax to paid by
the establishment: 4,000 VND/set, including:
+ The tax paid at the tax rate
of 4% as applied for the apparel industry:
60,000 VND multiplied by (x) 4%
= 2,400VND
+ The tax paid at the tax rate
of 2% as applied for the trading activities: 80,000 VND multiplied by (x) 2% =
1,600 VND.
If the buying price is not
determined, the turnover tax to be paid shall be calculated totally on the
selling price, concretely: 80, 000 VND multiplied by (x) (4% + 2%) = 4, 800
VND.
c/ A production establishment
with dependent accounting shops and subsidiaries which directly sell products
turned out by the establishment itself, when calculating and balancing the
turnover tax to be paid for the goods sold at such shops and subsidiaries, must
calculate the turnover tax to be paid at the rate set for the production branch
on the actual revenue from the sale of goods at the shops and subsidiaries.
However, the establishment is entitled to deduct the amount of the turnover tax
already paid at the localities by the shops and subsidiaries for their trading
activities. In cases where the shops and subsidiaries sell other kinds of
goods, the establishment must make a separate tax declaration and shall not be
entitled to deduct this from the amount of tax to be paid by the establishment.
The establishment must produce
to the tax office the vouchers on tax payment together with a list of goods
produced by itself and sold at its subsidiaries.
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Seasonings Company A in Bien Hoa
has a network of shops selling its products in some provinces:
- In 1995, the Company delivered
from its stock 1000 tons of seasonings for sale, of which:
+ 600 tons were sold at Bien Hoa
production establishment at a price of 10 million VND/ton and the revenue earned
therefrom was 6,000 million VND.
+ 400 tons were delivered to its
shops, which actually sold 360 tons during the year at a price of 11 million
VND/ton and the revenue was 3,960 million VND on which the turnover tax was
already paid for the shops' business activities in the localities.
3,960 million VND multiplied by
(x) 2% = 79.2 million VND.
The turnover tax that the
Company had to pay in 1995 is determined as follows:
- Taxable turnover: 6,000
million VND plus (+) 3,960 million VND = 9,960 million VND.
- Turnover tax to be paid: 9,960
million VND multiplied by (x) 6% (tax rate for production activities) = 597,6
million VND.
After deducting the amount
already paid by its shops in localities where goods were sold, the amount of
tax to be paid in Bien Hoa in 1995 was:
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The production establishment,
when delivering its products from the place of production to its attached shops
and subsidiaries, must write an invoice of sale which clearly states the sale
price. Every month, when making the turnover tax payment daclaration, if the
production establishment does not have lists of goods and vouchers to serve as
basis for calculating the turnover and the amount of tax already paid for the
goods sold at the attached shops and subsidiaries has not been determined, such
establishment shall have to pay turnover tax for the total volume of goods
delivered to its shops and subsidiaries at the selling price at the place of
production.
The shops and subsidiaries of
the establishment must register, declare and pay the turnover tax at the tax
offices of the localities where the goods are sold and must use the receipts
bought at these tax offices.
The above provisions on tax
declaration and calculation with regard to the goods produced by the
establishment and delivered for sale at its dependent shops and subsidiaries,
shall not apply to: shops with cost accounting independent from the
establishment; shops applying the regime of package business contracts and shops
selling goods subject to the special consumption tax.
e/ The lottery companies shall
have the responsibility to declare and pay the turnover tax on behalf of their
selling agents before paying commission to them.
f/ The Vietnamese tax paying
units which sell goods for foreign parties as sale agents; which hire foreign
machinery, equipment and means of transport; which provide services for foreign
parties, which do not directly register the tax payment in Vietnam, shall have
to register, declare and pay their turnover tax and profit tax on behalf of the
foreign parties before paying to the foreign parties revenues from the sales,
and settling the rents and service charges. The amount of turnover tax to be
paid by the Vietnamese units shall be determined according to the tax rate set
for each branch, service or business activity, except for the profit tax which
shall be determined concretely by the Ministry of Finance based on the turnover
of each branch or service.
For the performance of the
contracts mentioned above, the units selling goods or hiring means of
transport... must send a copy of the contract to the tax office; if the units
fail to deduct the amount of taxes they have to pay on behalf of the foreign
parties from the revenue to be paid to the foreign parties, they shall have to
pay taxes on behalf of the foreign parties.
f/ With regard to foreign
airlines having represen- tative offices or branches to sell tickets in
Vietnam, such offices or branches shall have to register, declare and pay turnover
tax on behalf of their agency.
3. Time limit for tax payment:
The tax office which directly
manages the tax paying unit shall base itself on the business situation and the
average monthly amount of tax paid by the unit to fix the date in the month for
tax payment. With regard to the units which have to pay a large amount of tax,
the monthly tax payment may be fixed periodically once every 5, 10 or 15 days.
Based on the periodic revenue, the units shall pay the turnover tax at the
State Treasury.
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- Establishments trading in lots
shall have to declare and pay the turnover tax and profit tax on each lot at
the local tax office before transporting the goods away.
To ensure the uniform tax
calculation in each locality and to prevent the loss of tax on prices, the tax
office at the district or equivalent level should conduct survey of all the
fluctuations of the market prices of goods items which the in-lots traders have
often traded in the locality, then inform this to the tax stations or tax teams
so that they can use this as basis for determining the taxable prices for
trading-in-lots activities.
- A fixed business
establishment, which send its people out to buy materials and goods and
transport its goods for sale or exchange with other establishment(s) or
transport the goods within itself, must have all the vouchers and receipts
required for the goods transported on road. If the establishment does not have
such receipts and vouchers as stipulated, it shall have to pay the turnover tax
as for the trading-in-lots activities, if they are the import goods, the
establishment shall have to pay import tax in arrears.
4. For all tax collections, the
tax collecting office must issue receipts on tax collection or vouchers
certifying that tax has been collected from the tax payer, with receipts or
vouchers uniformly issued by the Ministry of Finance.
The tax office shall have the
responsibility to guide and inspect the business establishments in their
implementation of the regulations in keeping records in books and in using
vouchers or receipts in accordance with the regulations; as well as organize
the management of the tax collection in conformity with the professional
process and regulations.
5. Pursuant to Article 10 of
Decree No.96-CP of the Government providing guidance for the implementation of
Article 14 of the Law on Turnover Tax thereby, the small business households
are eligible for the regime of tax payment according to quota set for each
period.
A small business household which
is eligible for the regime of turnover tax payment according to set quotas is
the one which has the average monthly revenue provided for each branch or trade
as follows:
- Production branch with revenue
under 8 million VND
- Construction branch with
revenue under 8 million VND
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- Trading branch with revenue
under 8 million VND
- Restaurant business with
revenue under 6 million VND
- Services business with revenue
under 4 million VND
The small business households, which
have strictly observed the regulations on vouchers and receipts regarding sales
and purchases and accountancy regime, shall be entitled to the tax calculation
and payment according to their declarations.
If establishments entitled to
the tax payment according to their declarations have failed to fully observe
the regulations on vouchers and receipts regarding sales and purchases and
accounting regimes, the tax office shall base itself on their business
situation to determine the turnover and the amount of tax to be paid.
D. TAX
REDUCTION AND EXEMPTION
Pursuant to Article 18 of the
Law on Turnover Tax and stipulations in Article 11 of Decree No.96-CP of the
Government, the Ministry of Finance stipulates the procedures and competence
for considering tax reduction and exemption as follows:
I. CASES
ELEGIBLE FOR TAX REDUCTION OR EXEMPTION
1. Turnover tax is exempt for
the elderly, disabled and small producers and traders engaging in small and
petty businesses, sidelines and auxilary crafts in the family with monthly
incomes equivalent to the current minimum salary of 120,000 VND (such incomes
are determined by the revenue minussing (-) the expenditures from the revenue).
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The Taxation Sub-Department
shall have the responsibility to coordinate with the Consultancy Coucils of the
commune or district in examining and determining the production and business
households with low incomes, which are eligible for the tax exemption, and the
small business households which are entitled to the regime of turnover tax
payment according to set quotas as well as the actual duration of business
cessation entitled to tax reduction or exemption in accordance with the
provisions in this Clause.
The General Taxation Department
shall provide guidance in the procedures for the declaration and examination of
tax reduction and exemption with regard to households ceasing business in
accordance with this provision.
2. A business establishment
which meets with difficulties due to the natural calamities, enemy sabotage or
unexpected accidents, is eligible for reduction of turnover tax. The reduction
shall correspond with the percentage of the damaged property but shall not
exceed 50% of the turnover tax to be paid and the amount of reduced tax money
shall not exceed 30% of the value of the damaged property. The duration for the
tax reduction shall not exceed 12 months from the month when the establishment
begins to generate income following the month when the damage occurs.
Example:
An establishment suffered from a
fire in January 1996 with the damage valued at a total of 150 million VND,
equivalent to 60% of the total value of its property. From March 1996 the
establishment restored its production and earned revenue, so it was eligible
for a reduction of turnover tax from March 1996 to the end of February 1997 (12
months); the maximum rate of the reduction in this case is 50% (not according
to the damage value of 60%); if the amount of the 12-month 50% tax reduction
money exceeds 30% of the value of the damaged property, the maximum rate of
reduction shall be only 30% of the damage; in this case, the maximum reduction
amount is: 150 million VND multiplied by (x) 30% = 45 million VND.
3. Cases eligible for tax
reduction in accordance with Clause 3, Article 18 of the Law on Turnover Tax
shall be as follows:
a/ A business establishment
operating in a mountainous region or an offshore island, exploiting sea
products far offshore, conducting scientific research or application of new
technology, making a trial run on a new technology, when meeting with
difficulties and suffering from losses, shall be considered for turnover tax
reduction in the initial stage. The tax reduction for each year (solar
calendar) shall correspond with the losses, but shall not exceed 50% of the
amount of tax to be paid and the duration of the reduction shall not exceed 2
years (24 months).
An establishment exploiting sea
products far offshore is the one which has been granted the license for
offshore maritime exploitation activities by the maritime sources protection
agency in accordance with Inter-ministerial Circular No.199-TT/LB of December
31, 1993 of the Ministry of Finance and the Ministry of Aquaculture providing
guidances for Decision No.400-TTg of August 7, 1993 of the Prime Minister on
the tax exemption for the offshore maritime exploitation.
In order to provide a basis for
the consideration of tax reduction, the establishment requesting tax reduction
shall have to clearly define the loss in each case, for example: Production
establishment A in 1995 installed and made a trial run on a new technology.
When balancing the 1995 taxes, the establishment had to pay 500 million VND of
the turnover tax and suffered from a loss of 700 million VND, which, after
settling by other measures, was reduced to 600 million VND, of which 300
million VND resulted from the trial run on the new technology; the
establishment was entitled to a reduction of its turnover tax in 1995,that is
250 million VND, which is equivalent to 50% of the to be-paid turnover tax. In
cases where the loss from the trial run is defined as 100 million VND (instead
of 300 million VND), the establishment shall be considered for a reduction of
100 million VND. If in 1996, the establishment continues to suffer from losses
due to this difficulty, it shall be considered for further reduction of the
1996 turnover tax.
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Example:
Enterprise A has produced
arc-light electric bulbs since 1995. On January 1st, 1996, the Ministry of
Planning and Investment announced that this item had been listed as one of the
substitutes for imports the production of which is encouraged by the State.
Through the test of the product's quality, the agency in charge of the
management and measurement of the quality of products certified that from April
1st, 1996 the bulbs produced by the enterprise have reached the Vietamese
quality standards; therefore the establishment shall be considered for a 50%
reduction of the turnover tax for 12 months from April 1st, 1996. If on
February 1st, 1997 the Ministry of Planning and Investment shall announce a new
list of substitutes for imports, which does not include this item, the tax
reduction shall be implemented only till the end of January 1997.
c/ A production establishment
(in the group of branches and trades listed in Item I, Turnover Tax Table) which
has been newly founded since 1993 and meeting with difficulties in the
production, marketting of its products, or in the payment of the loans, shall
be entitled to a 50% reduction of the turnover tax for a duration of one year
(12 months) from the month when it begins to generate revenue; establishments
which meet with many difficulties and continue suffering from losses in the
year following the year of tax reduction, shall be considered for tax reduction
for that year; the tax reduction shall correspond with the loss remaining after
a settlement by other measures, but shall not exceed 50% of the obligatory tax
and the total duration for the tax reduction shall not exceed two years (24
months). For the production establishments in mountainous regions or islands,
the total duration shall not exceed 3 years (36 months) from the first month of
the tax reduction.
In cases where a new production
establishment conducts other business activities, when being considered for the
reduction of the turnover tax, it shall be entitled only to the consideration
for the turnover tax on the production activities.
A newly founded production
establishment is the one which has newly received investment in construction,
been granted a production license and which has directly registered and
declared for the turnover tax payment with the local tax office.
Establishments, which were set up previously and are now devided, splitted up,
merged or renamed or invested to improve and expand their production or which
are added with new production lines or new trades; or have changed to new
production lines, and establishments founded through the purchase of other
production establishments, which contributed or have contributed capital to the
newly founded establishments with their properties, machinery and equipment or
workshops, shall not be entitled to be considered for reduction of the tunover
tax in accordance with this provision.
4. If a production and/or
business establishment which has been simulantly entitled to various turnover
tax reductions under the Law on Turnover Tax, the Law on the Promotion of
Domestic Investment and other regulations, shall be entitled to only one tax
reduction.
Example:
Textile Company A has been
founded since January 1996 and is one of the establishments where new
production technologies have been applied. If the Company is qualified for a
tax reduction as stipulated for newly founded production establishments, it
shall not be considered for other turnover tax reductions.
II.
PROCEDURES AND DOSSIERS OF APPLICATION FOR TURNOVER TAX REDUCTION
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1. For establishments meeting
with difficulties caused by natural calamities, enemy sabotage or unexpected accidents
as stipulated in Clause 2, Article 11 of Decree No.96-CP of the Government, the
dossier shall include:
- An application (official
dispatch) for tax reduction of the unit suffering from damages which clearly
states the situation in which the damage has occured, the duration and amount
of tax reduction.
- A report on the cause and
extent of damages with the certification by responsible agencies ( police, a
damage evaluation council or the financial agency managing capital of the
establishment).
- A report on the balance-sheet
or related documents, which serve as basis for the evaluation of assets and
capital of the establishment before the damages occurred.
- An examination report of the
tax office managing the establishment, which clearly determines bases for the
consideration of tax reduction.
If the case is not under the
competence of the local tax office, such tax office must consider the case,
make written comments and send it together with the dossier of the
establishment to the higher tax office for consideration and settlement.
2. For the establishments which
meet with difficulties and apply for the tax reduction in accordance with the
stipulations in Item 3a, Article 11 of Decree No.96-CP of the Government, the
dossier shall include:
- The establishment's
application or official dispatch for tax reduction, clearly stating the case
and the proposed amount of tax reduction
- The financial balance-sheet of
the year for which the tax reduction is requested, together with the
examination record of the tax office certifying the losses and the causes of
losses.
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If the case is not under the
competence of the tax office that manages the establishment, the tax office
must consider the case, make written comments and send it together with the
dossier of the establishment to the higher tax office for consideration and
settlement.
3. For establishments producing
substitutes for imports as stipulated in Item 3b, Article 11 of Decree No.96-CP
of the Government, the dossier shall include:
- The establishment's
application for tax reduction which clearly states the item has been listed as
one of the items whose production is encouraged so as to substitute for
imports, the duration and amount of tax reduction.
- The certification of the State
managerial agency that the products turned out have met the Vietnamese quality
standards or can be used as the substitute for imports; the date of the
certification must be written down clearly. The tax office which manages the
establishment shall have to conduct examination and make comparision with the
list of items produced with encouragement for the substitution for imports so
as to settle the case within its competence or propose to the higher tax agency
for consideration and settlement.
4. For newly founded
establishments which apply for the tax reduction as stipulated in Item 3c,
Article 11 of Decree No.96-CP of the Government, the dossier shall include:
- The establishment's
application for tax reduction, stating the reasons, duration and amount of tax
reduction.
- The decision on the founding of
the production establishment, the business registration certificate which
clearly defines its production lines and the item to be produced. For newly
set-up production households, they have to obtain only business licenses which
define their production lines and items to be produced.
- Related dossiers evidencing
that the establishment has just invested in the purchase of machinery and
equipment, the construction (or renting) of workshops (in form of a list
summarizing the value of investment assets in groups and categories), the
contract on renting workshops (if any) with the certification by the tax office
managing the establishment.
For State enterprises,
companies, factories (except for small business households), they must have
investment projects, balance-sheets or reports on the commissioning of the
newly built projects.
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- The certificate of the tax
payment registration and declaration with the tax office.
The tax office which manages the
unit has the responsibility to examine the dossier and define the actual time
when the unit commences its production which generates turnover. If the unit is
a newly founded production establishment eligible for turnover tax reduction as
stipulated by law, the tax office shall within its competence make a decision
on the tax reduction for the unit within its competence or send a written
proposal together with the dossier of the unit to the higher tax agency for
consideration and settlement.
5. The establishment's dossier
of application for tax reduction as stipulated above must be the original one,
for which the administrative procedures have been already completed. In cases
where the dossier includes the copies: if they are the copies of documents or
vouchers issued by other agencies or units such as the Decision on the
establishment of enterprise, business licenses... they must be notarized the
Notary Public Office; if they are the copies of documents issued by the
establishment such as the balance-sheets, or the related vouchers, they must be
fixed with the seal of the establishment.
III.
COMPETENCE AND PROCEDURES FOR CONSIDERATION OF TAX REDUCTION
1. The competence for the
consideration of turnover tax reduction is stipulated as follows:
a/ The Head of the Taxation
Sub-department is authorized to consider tax reduction or exemption for small
business households having low incomes and business households which are package
tax payers and have suspended their business activities which are eligible for
tax reduction or exemption as provided for in Point 1, Section I.
b/ The Head of the Taxation
Department is authorized to consider and decide the tax reduction for business
establishments entitled thereto by law with the amount of turnover tax
reduction for each establishment is less than 50 million VND and the duration
of tax reduction shall not exceed one year (12 months).
c/ The General Director of the
General Taxation Dapartment is authorized to consider and decide the tax
reduction for production and/or business establishments entitled thereto by law
with the amount of turnover tax reduction for each establishment is less than
200 million VND and the duration of tax reduction shall not exceed one year (12
months).
d/ The Minister of Finance is
authorized to consider and decide the tax reduction as provided for by law and
for cases which are not under the competence of the tax offices of different
levels.
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If an establishment entitled to
be considered for tax reduction as stipulated by law has already submitted
dossier of application for tax reduction to the tax office and has suffered
from losses while waiting for a decision from the competent agency, the local
tax office is authorized to consider and allow such establishment to delay the
tax payment which is equivalent to 70 % of the losses but shall not exceed the
proposed amount of tax reduction.
2. The procedures for the tax
reduction.
In all circumstances, a request
for tax reduction by an establishment must be made with proper dossier which
shall be submitted to the tax office that manages the establishment. Upon
receiving the establishment's dossier for tax reduction, the tax office shall
have to examine and determine whether the case is elegible for tax reduction as
provided for by law or not, whether the dossier has been filed rightly and properly
or not, then must compare such dossier with the reality, determined data and
facts related to the tax reduction.
If the establishment's dossier
is incomplete or made with mistakes, the tax office must request the
establishment to supplement or readjust it promptly.
In cases where the establishment
is not eligible for tax reduction by law, the tax office shall have reply the
establishment in writting, explaining the reason why its request was rejected.
- In cases where the
consideration of tax reduction is beyond the competence of the local tax office
that manages the establishment, such tax office shall, after examining the
dossier and the actual situation of the unit, make a written comment and send
it to the higher tax office for consideration and settlement. Such written
comment must be sent together with the already examined dossier of the unit,
and at the same time the tax office shall inform in writting the unit of the
place where the dossier has been sent to. The dossier to be sent to the higher
tax office must be named and numberd.
- In case of the approval for
tax reduction, the agency that has decided the reduction must issue the
decision on tax reduction then send it to the unit and other concerned agencies
for the implementation.
Based on the decision on the tax
exemption or reduction, the tax office shall together with the establishment
balance the turnover tax to be paid and redetermine the amount of losses and
profits as well as other revenues to be remitted into the Budget.
- The agency that considers and
decides the tax reduction has the responsibility to keep and preserve the
dossiers on tax reduction in accordance with the stipulated regime.
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According to Article 19 of the
Law on Turnover Tax, breaches of the Law on Turnover Tax shall be dealt with as
follows:
1. The administrative sanctions
shall be imposed on the following breaches of turnover tax:
a/ Organizations and individuals
that fail to strictly observe the regulations on procedures for the tax
registration and declaration, the establishment of books, the use and keeping
of vouchers and receipts in accordance with the stipulations in Artciles 10 and
11of the Law on Turnover Tax, shall, depending on the seriousness of the
breach, be subject to warning or fines.
b/ Organizations or individuals
that make false tax declarations or evade tax payment, shall, beside paying the
full amount of turnover tax as stipulated by law, be subject to a fine of from
one to three times the amount of tax evaded:
- For the first breach: once
- For the second breach: twice
- For the third breach or more:
three times
In cases where the breach is
added with aggrevating factors, the first breach may be subject to a fine twice
or three times the amount of tax evaded;
c/ Organizations and individuals
that make late payment of tax or fines written in the tax notice, tax
collection order or penalty decision shall, besides paying fully the tax or
fines as provided for by law, be subject to a fine of 0.2% of the tax in late
payment for each day of the late payment.
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- With regard to the turnover
tax, it is the time beyond the 15th day of the following month, when the
establishment still fails to pay fully the tax of the previous month to the
State Treasury.
- With regard to fines, it is
the time determined by the tax office in the fine notice or in the tax or fine
collection order.
d/ Organizations and individuals
that intentionally delay the tax payment shall be dealt with as follows:
- Subject to the deduction from
their bank accounts for the payment of tax or fines. The bank concerned shall
have to base itself on the tax notice, tax collection order or order on the
collection of fines from the tax office so as to make the deduction from the
accounts of the concerned business etablishments and remit the tax or fines to
the State Budget.
- Subject to temporary seizure
of their goods or other objects as the security for the full payment of tax
and/or fines.
- Subject to the asset inventory
as provided for by law to ensure the payment of the tax or fine.
The tax offices of different
levels shall, when discovering breaches of the Law on Turnover Tax by business
establishments, have to examine and clearly define the acts of violations, the
seriousness and causes of such violations; the responsibilities of
organizations and individuals for each act of violations; and file dossiers as
stipulated by law. Based on the stipulations on the regime of the
administrative sanctions in the field of taxation, the tax office shall decide
the case by itself or report it to a higher tax office for consideration and
decision according to the stipulated competence.
2. Individuals who evade a large
amount of tax or who have been subject to administrative sanctions as
stipulated in Point 1 above, and again commit tax evasions in large amount or
commit other serious crimes, shall be subject to penal liability in accordance
with Article 169 of the Penal Code.
F.
COMPLAINTS AND STATUTE OF LIMITATIONS
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According to Articles 24 and 25
of the Law on Turnover Tax, organizations and individuals shall have the right
to lodge complaints in respect of incorrect application of the Law on Turnover
Tax towards them.
The complaint must be sent to
the tax office, which has issued the tax collection order or decision on
handling the violations within 30 days from the date when the organization or
individual receives such order or decision. Pending the resolution, the complainants
shall still have to pay in full and on time tax amount of tax or fines as
announced.
If the complaining organization
or individual disagrees with the decision of the tax office; or upon the expiry
of the time limit of 30 days from the date the complaint was sent, it still has
not received the reply, such organization or individual shall be entitled to
send the complaint to the higher tax office.
2. Responsibilities and
competence of the tax office:
Tax offices of different levels
shall, within 15 days from the date of receiving complaints from the tax paying
units, have to consider and settle the complaints. With regard to complicated
cases which take time to conduct investigation and examination, the tax office
must inform the units invovled thereof, but the time limit for the settlement
shall be not later than 30 days from the date of receiving the complaints.
As stipulated in Articles 26 and
27 of the Law on Turnover Tax, the tax office which receives a tax complaint
must issue decison on either:
- Retaining the previous
decision; or
- Changing forms, extents and
measues of handling breaches; or
- Rescinding the previous
decision and suspending its enforcement.
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In cases where it has discovered
and concluded that there was a false tax declaration or tax evasion or a
mistake in the tax calculation or in penalty imposition, the tax office shall
have to collect tax or fines in arrears or reimburse the amount of tax or fines
wrongly calculated within 3 years prior to the time when such false declaration
or evasion of tax, or such mistakes were discovered.
G. ORGANIZATION
OF IMPLEMENTATION
1. This Circular takes effect
from January 1st, 1996 and replaces Circular No.73A-TC/TCT of August 30, 1993,
Circular No.114-TC/TCT of December 16, 1994 and Circular No.40-TC/TCT of May
25, 1995 of the Ministry of Finance providing guidances on turnover tax.
All guidances on turnover tax in
other legal documents which are contrary to this Circular are now annuled.
Cases eligible for the tax
reduction in 1995 or earlier shall be considered for settlement in accordance
with the then provisions and the decisions on the turnover tax reduction made
in accordance with the regulations of that period shall continue to be
implemented with the rate and duration of the tax reduction already determined.
2. The General Director of the
General Taxation Department shall have to organize and direct the taxation
service in inspecting, guiding the units to correctly implement the Law on
Turnover Tax, Decree No.96-CP of December 27, 1995 of the Government providing
details for the implementation of the Law on Turnover Tax and the Law on
Amendments and Supplements to a Number of Articles of the Law on Turnover Tax,
and this Circular.
In the process of the
implementation if there is any difficulty or obstacle, the units and agencies
are requested to promtply report it to the Ministry of Finance for
consideration and guidance.
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