Circular No. 35/2011/TT-BTC of March 15, 2011 guiding some contents on value-added tax on telecommunications services

• Official number: 35/2011/TT-BTC
• Legislation Type: Circular
• Organization: The Ministry of Finance
• Signer: Do Hoang Anh Tuan
• Issued Date: 15/03/2011

THE MINISTRY OF FINANCE -------	SOCIALIST REPUBLIC OF VIET NAM Independence - Freedom Happiness ---------
No. 35/2011/TT-BTC	Hanoi, March 15, 2011

CIRCULAR

GUIDING SOME CONTENTS ON VALUE-ADDED TAX ON TELECOMMUNICATIONS SERVICES

Pursuant to June 3, 2008 Law No. 13/2008/ QH12 on Value-Added Tax;
Pursuant to November 29. 2006 I .aw No. 78/ 2006/QH11 on Tax Administration;
Pursuant to November 23. 2009 Law No. -41/ 2009/QH12 on Telecommunications;
Pursuant to the Government's Decree No. 123/2008/ND-CP of December 8. 2008. detailing and guiding a number of articles of the Law on Value-Added Tax:
Pursuant lo the Government s Decree No. 85/ 2007/ND-CP of Max 25. 2007. detailing a number of articles of the Law on Tax Administration;
Pursuant to the Government's Decree No. 106/20W/ND-CP of October 28. 2010, (unending and supplementing a number of articles of the Government's Decree No. 85/ 2007/ND-CP of May 25. 2007. detailing a number of articles of the Law on lax Administration, and Decree No. 100/2008/ND-CP of September 8. 2008, detailing a number of articles of the Law on Personal IncomeTax;
Pursuant to the Government's Decree No. 118/2008/ND-CP of November 27. 2008, defining the functions, tasks, powers and organizational structure of the Ministry of Finance;
The Ministry of Finance guides some contents on value added tax on telecommunications services as follows:

Article 1. Scope and subjects of application

This Circular guides some contents on value-added tax (VAT) on telecommunications services of telecommunication service businesses.

Article 2. Telecommunications services not subject to VAT

The following telecommunications services are not subject to VAT:

1. Public telecommunications services as defined by the Law on Telecommunications.

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2. Telecommunications services from overseas into Vietnam (incoming direction).

Article 3. Interpretation of terms

1. The terms and phrases referred to this Circular are construed under the Law on Telecommunications, specifically

Telecommunications services arc services of sending, transmitting, receiving and processing information between two or among a group of service users, including basic services and value-added services.

Telecommunications connection is the physical and logic connection of telecommunications networks through which users of telecommunications services of one network can access users or services of another and vice versa.

2. The terms and phrases below shall be construed under the guidance in this Circular:

Telecommunications service businesses include enterprises established under Vietnamese law. licensed to provide telecommunications services for commercial purposes under the Law on Telecommunications, and units attached to these businesses.

Telecommunications service businesses include those providing services with network infrastructure and those providing services without network infrastructure.

Telecommunications connection service charge means an amount collected by telecommunications service businesses when providing the service of telecommunications connection with the telecommunication network of another telecommunications service business.

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Postpaid telecommunications services arc telecommunications services provided by telecommunications service businesses for which customers pay charges after using such services.

Article 4. VAT on telecommunications connection service charges

1. Monthly, after completing the comparison of figures on telecommunications connection service charges, telecommunications service businesses shall make out value-added invoices and declare and pay VAT according to current regulations. The time limit for completing the comparison complies with economic contracts between telecommunications service businesses but must not exceed 2 months counting from the month in which telecommunications connection service charges arise.

2. In case a telecommunications service business completes the comparison late, resulting in the making out of value-added invoices for the provision of telecommunications connection service after the above time limit, it shall be sanctioned for such tax-related violation undercurrent regulations. The time for calculating fines on late VAT payment is the date following the deadline for submission of tax declaration dossiers for telecommunications connection service charges of which the comparison is completed late.

Example:

The deadline for completing the comparison and making out of invoices on mobile telecommunications connection service charges arising in April 201 1 of telecommunications service business A is June 30. 2011.

- In case business A completes the comparison and makes out value-added invoices on June 5. 2011. it shall declare and pay VAT for the tax period of June 2011. and submit a VAT declaration dossier not later than July 20. 2011.

- In case only on July 25. 2011. can it complete the comparison and make out value-added invoices on mobile telecommunications connection service provision in April 2011. and declare and pay VAT. it shall be fined for such tax-related violation under current regulations.

Article 5. Input VAT on goods and services purchased by telecommunications service businesses for investment in their entire telecommunications infrastructure systems

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They shall allocate VAT amounts on purchased goods and services to dependent cost-accounting units that provide commercial telecommunications services and pay VAT by the credit method, for VAT declaration, credit and refund at local tax offices that directly manage such units.

Monthly, they shall draw up tables of allocation of the value of purchased goods and services (exclusive of VAT), input VAT amounts allocated to their dependent cost-accounting units and head offices. Based on the value of purchased goods and services (exclusive of VAT) and allocated VAT amounts, these units and head offices shall declare them in statements of invoices and documents on purchased goods and services for declaring input VAT under current regulations.

Input VAT on goods and services purchased by a telecommunications service business for investment in its entire telecommunications infrastructure system, which is allocated to its dependent cost-accounting units and head office shall be determined according to the following formula:

Input VAT allocated to a dependent cost accounting unit or head office

=

Revenues arising at a dependent cost- accounting unit or head office

x

Total input VAT amount allocated

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In which:

- Revenues arising at a dependent cost-accounting unit or head office arc VAT-exclusive revenues at a dependent cost-accounting unit or head office of the month preceding the month in which input VAT is allocated.

- Total revenues at dependent cost-accounting units and head office are total VAT-exclusive revenues at dependent cost-accounting units and head office (excluding internal revenues) of the month preceding the month in which input VAT is allocated.

- Total input VAT amount allocated is the VAT amount on goods and services purchased by a telecommunications service business for investment in its entire telecommunications infrastructure system as evidenced in value-added invoices and documents on VAT payment for imports, and documents on VAT payment for foreign parties, which, as guided by the Ministry of Finance, are applicable to foreign organizations and individuals doing business or earning incomes in Vietnam.

Input VAT amounts allocated to dependent cost-accounting units based in the same locality with the head office shall be declared by the head office If such a dependent cost-accounting unit has registered to declare and pay VAT independently from the head office, the input VAT amount allocated lo such unit shall be declared by the unit itself.

The head office and dependent cost-accounting units of a telecommunications service business may have their allocated input VAT amounts credited and refunded under current regulations.

Telecommunications service businesses shall draw up tables of allocation of input VAT to dependent cost-accounting units and head office (form No. 01 enclosed with this Circular - not primed herein) and send them to the General Department of Taxation, provincial-level Tax Departments (of localities with which dependent cost-accounting units have registered to pay lax) and dependent cost-accounting units, and at the same time send statements of invoices and documents on purchased goods and services (clearly indicating the VAT-exclusive value of purchased goods and services and input VAT amounts.) for investment in their entire telecommunications infrastructure systems, to lax offices managing their head offices before the 20th of the month following the month of allocation of input VAT.

Telecommunications service businesses shall take responsibility for the lawfulness of value-added invoices of purchased goods and services, documents on VAT payment for imports, and documents on VAT payment for foreign parties, which, as guided by the Ministry of Finance. are applicable to foreign organizations and individuals doing business or earning incomes in Vietnam, as the basis for allocating input VAT to their dependent cost-accounting units and head offices.

If detecting, through inspection, that input VAT amounts allocated to their dependent cost-accounting units and head offices for credit are different from those already allocated, telecommunications service businesses shall declare adjusted input VAT amounts to tax offices directly managing their head offices.

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Input VAT on goods and services purchased by dependent cost accounting units of telecommunications service businesses for investment in their own units shall be declared, credited and refunded undercurrent regulations.

Article 6. Declaration and payment of VAT for postpaid telecommunications services

In case a telecommunications service business commercially provides postpaid telecommunications services in provinces and/or centrally run cities Other than that in which its head off ice is based and establishes dependent cost-accounting branches that pay VAT by the credit method and join in providing these telecommunications services in such localities, it shall declare and pay VAT for these postpaid telecommunications services as follows:

- It shall declare VAT on revenues from postpaid telecommunications services of the entire business to the tax office directly managing its head office.

- It shall pay VAT in the locality in which its head office is based and in the localities in which its dependent cost-accounting branches are based.

VAT amounts payable in the localities in which its dependent cost-accounting branches are based shall be determined to be 2% (for postpaid telecommunications services subject to the VAT rate of 10% ) of revenues (exclusive of VAT) from postpaid telecommunications services in these localities.

In case the total VAT amount (2%) payable in the localities in which dependent cost-accounting branches are based is bigger than the VAT amount payable by the telecommunications ser\ ice business at its head office, such business shall itself allocate the VAT amounts paid in the localities in which its dependent cost-accounting branches are based as follows: The VAT amount payable in the locality in which a dependent cost-accounting branch is based shall be determined to be (=) the VAT amount payable by the telecommunications service business at its head office multiplied (\) by the percentage ('}'() between (he revenue based on VAT exclusive prices of postpaid telecommunications services provided in the locality in which the dependent cost-accounting branch is based and total revenue based on VAT-exclusive prices of these services of the entire business.

The VAT amount payable in the locality in which the head office is based shall be determined to be the VAT amount payable by the telecommunications service business at its head office less(-) the total VAT amount payable in the localities in which its dependent cost-accounting units are based.

A telecommunications service business shall draw up a table of allocation of VAT amounts for postpaid telecommunications services in the locality in which its head office is based and in localities in which its dependent cost-accounting branches are based according to form No. 02 (enclosed with this Circular - not printed herein ) and send it together with its tax declaration dossier to its managing tax office, and concurrently send copies of this table lo lax offices directly managing its dependent cost-accounting branches.

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A telecommunications service business which has no VAT amount to be paid at its head office does not have to pay VAT for postpaid telecommunications services in the localities in which its dependent cost-accounting branches are based.

Example 1: Telecommunications service business A bases its head office in Da Nang city, It commercially provides postpaid telecommunications services and sets up 2 dependent cost-accounting branches that pay VAT by the credit method in Quang Tri and Thua Thien Hue provinces for jointly providing these services.

In the tax period of June 2011. it can determine its revenues (exclusive of VAT) from postpaid telecommunications services in Quang Tri and Thua Thien Hue provinces as follows: VND 10 billion (at the VAT rale of 109; ) and VND 30 billion (at the VAT rate of 10%). respectively. The VAT amount payable at its head office (according to form No. 01/GTGT) is VND 1 billion in this period.

The VAT amount to be paid in Quang Tri province is: VND 10 billion x 2% = VND 0.2 billion.

The VAT amount lo be paid in Thua Thien Hue pro\ ince is: VND 30 billion X 2% = VND 0.6 billion.

The VAT amount lo be paid in Da Nang city is: VND 1 billion-VND 0.2 billion-VND 0.6 billion = VND 0.2 billion.

F.xample 2: Telecommunications service business A bases its head office in Da Nang city. It commercially provides postpaid telecommunications services and sets up 3 dependent cost-accounting branches that pay VAT by the credit method in Da Nang city and Quang Tri and Thua Thien Hue provinces for jointly providing these services.

- In the lax period of July 2011. it can determine its revenues (exclusive of VAT) from postpaid telecommunications services in Da Nang city and Quang Tri and Thua Thien Hue provinces as follows: VND 60 billion (at the VAT rate of 10':; ). VND 10 billion (at the VAT rate of 10%). and VND 30 billion fat the VAT rate of 10%). respectively. The VAT amount payable al its head office (according to form No. 01/GTGT) is VND 0.5 billion in this period.

According to the principle of payment of VAT at 2% of revenues in localities as guided in this Circular for postpaid telecommunications services subject lo VAT al the rate of 10%, business A shall determine the payable tax amounts for Quang Tri and Thua Thicn Hue provinces as follows:

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So, it shall allocate by itself the VAT amounts to be paid in the localities as follows:

The VAT amount to be paid in Quang Tri province is: VND 0.5 billion x VND 10 billion/ (VND 60 billion + 10 billion + 30 billion) = VND 0.05 billion.

The VAT amount to be paid in Thua Thien Hue province is: VND 0.5 billion x VND 30 billion/(VND 60 billion + 10 billion + 30 billion) = VND 0.15 billion.

The VAT amount to be paid in Da Nang city is: VND 0.5 billion - VND 0.05 billion - VND 0.15 billion = VND 0.3 billion.

Example 3: Telecommunications service business Abases its head office in Da Nang city. It commercially provides postpaid telecommunications services and sets up 2 dependent cost-accounting branches that pay VAT by the credit method in Quang Tri and Thua Thien Hue provinces for jointly providing these services.

In the tax period of August 2011, it can determine its revenues (exclusive of VAT) from postpaid telecommunications services in Quang Tri and Thua Thien Hue provinces as follows: VND 10 billion (at the VAT rate of 10%) and VND 30 billion (at the VAT rate of 10%), respectively. No VAT amount arises at its head office (according to form No. 01/GTGT) in this period.

In this case, business A does not have to pay VAT in Quang Tri and Thua Thien Hue provinces.

Article 7. VAT on revenues from the provision of telecommunications services internally divided within telecommunications service businesses

In case telecommunications services are jointly provided by a telecommunications service business and its dependent cost-accounting units and all of their production and business results and enterprise income tax are accounted solely at the business, the business or its dependent cost-accounting units shall make out value-added invoices, collect money from customers and declare and pay VAT on such revenues according to value-added invoices; the division of revenues between the business and its dependent cost-accounting units and among these units only aims to serve internal management and business administration upon division of internal telecommunications service revenues; the business does not need to make out value-added invoices and declare and pay VAT.

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1. This Circular takes effect on May 1, 2011.

2. Contents not guided in this Circular and others not contrary to this Circular comply with current regulations on value-added tax and tax administration.

Any difficulties and problems arising in the course of implementation should be reported to the Ministry of Finance for settlement.-

FOR THE MINISTER OF FINANCE
DEPUTY MINISTER




Do Hoang Anh Tuan