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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.163/1998/TT-TC
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Hanoi, December 17, 1998
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CIRCULAR
GUIDING THE
IMPLEMENTATION OF THE LAW ON VALUE ADDED TAX REGARDING AIR TRANSPORT AND
SERVICE FLIGHT ACTIVITIES
Pursuant to the Law on Value Added Tax
No.02/1997/QH9 of May 10, 1997;
Pursuant to the Government's Decree No.28/1998/ND-CP of May 11, 1998 detailing
the implementation of the Law on Value Added Tax; and
Pursuant to the Ministry of Finance's Circular No.89/1998/TT-BTC of June 27,
1998 guiding implementation of the Government's Decree No. 28/1998/ND-CP of May
11, 1998 detailing the implementation of the Law on Value Added Tax;
With a view to making the implementation of the Law on Value Added Tax suitable
to the organization, operation, production and business of air transport, the
Ministry of Finance provides specific guidance for calculation, declaration and
payment of VAT on such activities as follows:
I. SUBJECTS LIABLE AND NOT LIABLE TO VAT AND
THE VAT PAYERS
1. Subjects liable to VAT:
Subjects liable to VAT are the following air
transport and services flight activities:
- Air transport activities, which include:
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+ Cargo transport
+ Other air transport activities
- Services flights, which include
+ Flights in service of oil and gas
+ Geological exploration flights;
+ Map photographing flights; and
+ Other services flights.
2. Subjects not liable to VAT:
2.1. International transport operations,
International transports mean transport operations overseas and transports for
journeys from Vietnam to foreign countries and vice versa, including domestic inter-hop
international transports. A domestic inter-hop is a journey to foreign
country(ies) and from foreign countries back home with a domestic flight hop
and a ticket issued for the whole journey.
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Mr. B has an air ticket from Paris to Hanoi; if
he is issued one ticket for Paris - Ho Chi Minh Cty - Ha Noi, the Ho Chi Minh -
Hanoi hop shall be the domestic inter-hop international transport; if he is
issued two tickets; one for Paris - Ho Chi Minh City and one for Ho Chi Minh
City - Hanoi, the Ho Chi Minh City - Hanoi shall be the domestic transport hop.
2.2. Activities involving the import of plane
engines, technical supplies, parts, accessories and specialized equipment in
service of air transport, which cannot be produced at home.
2.3. Activities involving the charter of
airplanes, plane engines, parts and accessories from foreign countries.
2.4. Flight fuel and imported drinks in service
of international flights, which shall be entitled to the system of goods
temporarily imported for re-export.
3. The VAT payers
The VAT payers shall be companies involved in
air transport and service flight business, which include:
- Independent cost - accounting companies; and
- Vietnam Airlines Corporation.
II. METHOD OF VAT CALCULATION
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Payable VAT =
Output VAT (1) - Deductible input VAT (2)
(1) The output VAT shall be determined on the
basic of the VAT calculation prices multiplied (x) by the VAT rates. Prices for
calculating VAT on domestic passenger transport operations are those not yet
charged with VAT.
Example: A passenger transport ticket
from Hanoi to Ho Chi Minh City:
- Prices not yet charged with VAT: VND 910,000
- VAT (10%): VND 91,000
- Price to be paid: VND 1,001,000
Where agents sell tickets at the designated
prices, when giving tickets to passengers, they shall inscribe thereon the item
as shown in the example above. The commissions enjoyed by agents shall not be
liable to VAT and shall be accounted in the expenditures of the air transport
business units.
The prices for calculating tax on luggage and
goods transports and services flights are those not yet charged with VAT. Units
engaged in air transport and service flight business, when collecting transport
freights or service charges, shall issue VAT invoices to serve as the basic for
ascertaining the output VAT.
(2) The deductible input VAT shall be the input
VAT stated in the value added invoices issued when purchasing goods, services
and assets used directly for domestic transport operations liable to VAT and
shall be separately determined and accounted. Where separate accounting of the
input tax on the goods and services used for operations liable to VAT and not
liable to such VAT is impossible, the input VAT shall be allocated according to
the ratio between taxable turnover and the total taxable and non - taxable turnovers.
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- Turnover from international air
transport (non - taxable): VND400 billion
- Turnovers from domestic air transport
and other services liable to tax: VND 600 billion
- Output VAT for operation liable to tax (10%):
VND 60 billion
- Input VAT applied to both taxable
and non - taxable operations: VND 20 billion
Supposing that the Joint-Stock Corporation does not
make separate accounting of the input VAT on taxable and non - taxable
operations, then, according to the stipulations mentioned above, the deductible
input VAT on taxable operations shall be reckoned as follows:
- Determination of the ratio between the
turnover from taxable operations to the total turnover:
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x 100 = 60%
VND 600billion + VND
400billion
- Deductible input VAT:
VND 20billion x
60% = VND 12billion
- Payable VAT for taxable operations:
VND 60billion - VND
12billion = VND 48billion
Where the input VAT levied on goods, services
and fixed assets purchased in the period is accounted separately with a part
for taxable operations and a part for non - taxable operations, and the
remaining input VAT is applied jointly to both taxable and non-taxable
operations, the amount of input VAT for taxable operations shall be determined
by the amount of the input tax applied directly to operations liable to tax
plus (+) the amount of the jointly applied input tax allocated as in the case
referred above.
Example 4: Continued from example 3,
supposing that for the total input VAT of VND20 billion on the purchased goods
and services, the Airlines Joint-Stock Corporation can make separate accounting
as follows:
- Applied to taxable operations VND4 billion.
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- Applied jointly to both operations VND15
billion.
According to the above-mentioned stipulations,
the deductible input VAT and the tax to be paid for the taxable operations
shall be determined as follows:
+ The VAT accounted separately for taxable
operations: VND 4 billion.
+ The part of the jointly accounted VAT
allocated to taxable operations:
VND
15 billion x 60% = VND 9 billion.
+ The deductible input VAT on taxable operations:
VND
4 billion + VND 9 billion = VND 13 billion.
+ The VAT to be paid for taxable operations
shall be:
VND
60 billion - VND 13 billion = VND 47 billion.
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The companies shall make VAT registration and
payment in localities where their head offices are located. Where a company has
its dependent branches and regional offices based in other provinces, every
month, these offices and dependent cost - accounting units shall base
themselves on the purchase invoices and vouchers to make a list of invoices and
vouchers of the purchase in goods and services used for air transport
operations. The list shall be made in duplicate, one copy shall be forwarded to
the company's headquarters and on shall be kept at the units.
The company shall have to synthesize the input
VAT declarations from regional offices and dependent cost - accounting units
and the input tax incurred at the company to draw up a general list of the
input VAT of the air transport operations of the whole Company. The Company
shall base itself on the turnover liable to VAT and turnovers not liable to VAT
to reckon and allocate the deducted input VAT for taxable operations.
The companies that make the monthly VAT
declarations shall make a detailed list of invoices and vouchers of goods and
services bought in and sold out, the output VAT and the input VAT and the
deducted amount pursuant to other list forms as stipulated in the Ministry of
Finance's Circular No. 89/1998/TT/BTC of June 27, 1998 and shall send the tax declarations
on the Tax Departments in localities where their headquarters are located and
shall pay VAT according to the stipulated regime.
IV. ORGANIZATION OF IMPLEMENTATION
1. The Vietnam Airlines Corporation, the Air
Transportation Company and the Air Service Company shall have to guide their
attached units to make VAT declaration, calculation and payment according to
the guidance provided herein.
2. Regarding invoices and vouchers, the units
shall comply strictly with the system of invoices and vouches. Where the use of
invoices printed by the units is necessary, registration of the same must be
made with the tax offices in accordance with the stipulations.
3. This Circular shall take effect as of January
1, 1999. Other matters, if not be guided herein, shall comply with the
stipulations in the Ministry of Finance's Circular No. 89/1999/TT/BTC of June
27, 1998.
The units shall report any difficulties that may
arise in the course of implementation to Ministry of Finance for consideration
and resolution.
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FOR THE MINISTER OF
FINANCE
VICE MINISTER
Pham Van Trong