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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: 49/1999/TT-BTC
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Hanoi, May 06, 1999
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CIRCULAR
GUIDING THE IMPLEMENTATION OF THE VALUE ADDED
TAX LAW FOR FINANCIAL LEASING ACTIVITIES
Pursuant
to the Value Added Tax (VAT) Law 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 VAT Law;
Pursuant to the current law provisions on financial leasing and the particulars
of the financial-leasing property, the Ministry of Finance hereby guides the
implementation of the VAT Law with regard to the leasing of such property as
follows:
I.
GENERAL PROVISIONS
1. Subject to this Circular shall be financial
leasing companies and financial leasing enterprises established according to
laws (hereafter referred collectively to as the financial lessor) and financial
renting enterprises as prescribed by current law provisions on financial
leasing, which pay VAT by tax deduction method.
2. The financial leasing property is the
property used by the financial lessor for the financial leasing services. This
property is imported or procured domestically. For the imported property, the
financial lessor shall be the payer of VAT thereon. For the property procured
in the country, the financial lessor shall pay VAT indirectly through the
payment for the purchase of the property. The financial leasing services
prescribed by law are the medium- and long-term credit services on the basis of
financial leasing contracts between the financial lessor and the financial
lessee. Financial leasing revenue not liable to VAT shall include proceeds from
the financial leasing, fee of commitment to use capital, the repurchase value
(in cases where the lessee repurchases the rented property at the end of the
leasing term at the nominal price).
3. The VAT on the financial leasing property
already paid by the financial lessor shall be gradually repaid by the lessee on
the basis of the financial leasing contracts.
4. This Circular shall not apply to common
property leasing services.
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1. For the lessor:
a/ The financial lessor shall be the non-payer
of VAT for the financial leasing services, and the VAT on the purchased or
imported leasing property already paid by the lessor shall be gradually repaid
by the lessee and the lessor shall have to fully observe the following
regulations:
- The property bought by the financial lessor
for lease must have the added value invoice or vouchers on the VAT payment for
the imported goods according to the provisions of law.
- The financial leasing contract shall have to
clearly prescribe the rent, VAT, the total payment, the leasing term and the
payment cycle.
For property imported by the lessor for
financial leasing, which is on the list of commodities not liable to VAT, the
lessor shall not have to pay VAT on such import goods.
b/ The financial lessor, when providing
financial leasing services, may use the following vouchers:
- The financial lessor shall issue the financial
service invoice which must include all the prescribed contents and be
registered for use after the General Department of Tax issues the written
approval. The invoice shall be issued according to payment time prescribed in
the contract (possibly monthly or quarterly); but to simplify the
invoice-writing procedures, the lessor may gather invoices for writing twice a
fiscal year (in June and December every year or at the time the ownership is
transferred).
- When filling the financial leasing invoice,
the lessor shall have to fully inscribe all elements stipulated on the invoice.
Particularly the VAT column (the current period) is determined according to the
principle of equal distribution of the VAT amount already paid on the leasing
property for the whole leasing term.
Example: Financial leasing company A leases its
property to enterprise X with the tax amount of 360 million VN dong written on
the added value invoice. Presumably:
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+ The payment cycle: On the first day of every
month.
So, the VAT calculated every month is
360,000,000 VN dong : 36 months = 10,000,000 VN dong. The financial leasing
company A shall write in invoice issued for enterprise X the VAT amounts as
follows:
Period 1: In June of the first year, the
to-be-deducted tax amount for 5 months (from February to June) is:
10,000,000 VN dong x 5 = 50,000,000 VN dong.
Period 2: In December of the first year (1999):
10,000,000 VN dong x 6 = 60,000,000 VN dong.
Period 3: In June of the second year:
10,000,000 VN dong x 6 = 60,000,000 VN dong.
Period 4: December of the second year (2000):
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Period 5: June, the third year:
10,000,000 VN dong x 6 = 60,000,000 VN dong.
Period 6: December, the third year (2001):
10,000,000 VN dong x 6 = 60,000,000 VN dong.
Period 7: January 2002:
10,000,000 VN dong x 1 = 10,000,000 VN dong.
Accumulated total (36 months) 360,000,000 VN
dong.
- When the financial leasing service invoice is
issued, the following principles must be followed:
+ The purchased leasing property must have added
value invoice or voucher on the VAT payment, which must be equally distributed
according to the above-mentioned regulation.
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+ In cases where the property is purchased
without VAT, added value invoice or VAT payment voucher as prescribed by law,
the VAT must not be written in the financial leasing service invoice.
2. For the lessee:
Apart from the payment of rent, the lessee shall
also have to pay VAT which has already been paid to the property supplier by
the lessor. On the basis of the invoice issued by the lessor, the lessee shall
account the VAT amount paid to the lessor into the tax deduction account.
3. The provisions on management of invoices and
receipts:
a/ The lessor shall have to manage the added
value invoices when purchasing the property which is used for lease. In cases
where the lessor directly imports goods, it shall have to manage the receipts
on the payment of VAT for the import goods (if any). These vouchers shall be
transferred to the financial renting enterprises after the VAT amount is fully
deducted and the ownership is transferred to the lessee at the end of the
financial leasing contract.
b/ Where the lessee fails to perform the
contract thus leading to the property recovery by the lessor : The lessor shall
have to send a notice to the lessee, clearly stating the VAT amount already
paid and the VAT amount not yet paid. Such notice is made in 03 copies: 1 sent
to the lessee and 2 kept by the lessor. Where the financial leasing of this
property is continued, the lessor shall keep one copy while the other sent to
the lessee. Under the new leasing contract, the VAT amount not yet paid by the
former lessee shall be paid by the subsequent lessee and accounted into the tax
deduction account. The method of issuing invoices is similar to that prescribed
at Point b, Item II.1 of this Circular.
Where the financial lessor refuses to lease the
property to the third party in the form of financial leasing but sells it, it
must pay VAT and issue the added value invoice according to the provisions of
law.
c/ Where the financial leasing contract
stipulates that the lessee only rents part of the property value then
repurchases such property, the lessor shall manage the leasing property
purchase receipts till the procedures for selling the property are carried out.
The remaining VAT amount (the tax amount on the invoice minus (-) the paid tax
amount) shall be further deducted like in the cases where the fixed asset is
directly purchased with the input VAT.
The vouchers required from the lessee enterprise
for VAT deduction when repurchasing the property include: The added value
invoice when the property is purchased (domestically) or the VAT payment
document (imported) transferred from the lessor, the financial leasing service
invoice by the time the lessee repurchases the property. The VAT amount to be
further deducted when the lessee repurchases the property by mode of financial
leasing is equal (=) to the VAT amount written on the invoice transferred by
the lessor minus (-) the paid VAT written on the financial leasing service
invoice (Item 3, Column: Accumulated).
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e/ Where the financial leasing contract has been
fulfilled and the VAT amount has been fully paid by the lessee and the two
sides agree to continue the leasing, the issuance of financial leasing service
invoice shall not reflect VAT.
4. Handling of violations:
To strictly prohibit the taking advantage of the
form of financial leasing to cause losses to the State budget. All acts of
violating the provisions of this Circular shall be handled according to the Law
on Value Added Tax as well as the current legal documents.
III.
ORGANIZATION OF IMPLEMENTATION
This Circular takes effect 15 days after its
signing but is applicable to contracts signed from January 1, 1999. Other
issues not guided in this Circular shall comply with Circular No.
89/1998/TT/BTC of June 27, 1998 of the Ministry of Finance guiding the
implementation of the Government’s
Decree No. 28/1998/ND-CP of May 11, 1998 detailing the implementation of the
VAT Law and other legal documents guiding the amendments and supplements to the
current VAT Law.
If any problems arise in the course of
implementation, organizations and individuals are requested to promptly report
them to the Ministry of Finance for study and settlement.
THE MINISTRY OF
FINANCE
Pham Van Trong
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