Thông tư 120/2003/TT-BTC

CIRCULAR

GUIDING THE IMPLEMENTATION OF THE GOVERNMENTS DECREE NO. 158/2003/ND-CP OF DECEMBER 10, 2003 DETAILING THE IMPLEMENTATION OF THE VALUE ADDED TAX LAW AND THE LAW AMENDING AND SUPPLEMENTING A NUMBER OF ARTICLES OF THE VALUE ADDED TAX LAW

Pursuant to Value Added Tax (VAT) Law No. 02/1997/QH9 of May 10, 1997;
Pursuant to Law No. 07/2003/QH11 of June 17, 2003 Amending and Supplementing a Number of Articles of VAT Law;
Pursuant to the Governments Decree No. 158/2003/ND-CP of December 10, 2003 detailing the implementation of the VAT Law and the Law Amending and Supplementing a Number of Articles of the VAT Law;
Pursuant to the Governments Decree No. 77/2003/ND-CP of July 1, 2003 defining the functions, tasks, powers and organizational structure of the Ministry of Finance;
The Ministry of Finance hereby guides the implementation as follows:

A. SCOPE OF APPLICATION OF VAT

OBJECTS SUBJECT TO VAT AND VAT PAYERS

1. Objects subject to VAT:

Objects subject to VAT are goods and services used for production, business and consumption in Vietnam (including goods and services purchased from organizations and individuals abroad), except for those not subject to the tax as mentioned in Section II, Part A of this Circular.

2. VAT payers:

All organizations and individuals engaged in producing and dealing in goods and/or services, which are subject to VAT, in Vietnam, regardless of business lines, forms and organization (called collectively the business establishments) and other organizations and individuals that import goods and/or procure services, which are subject to VAT, from abroad (called collectively the importers) shall have to pay VAT.

Organizations and individuals engaged in producing and dealing in goods and/or services include:

- Business organizations set up and registering business under the Law on Enterprises, the Law on State Enterprises and Law on Cooperatives;

- Economic organizations of political organizations, socio-political organizations, social organizations, socio-professional organizations, peoples armed force units, non-business organizations and other organizations;

- Foreign-invested enterprises and foreign parties to business cooperation contracts under the Law on Foreign Investment in Vietnam; foreign organizations and individuals conducting business activities in Vietnam, which do not belong to the investment forms under the Law on Foreign Investment in Vietnam;

- Individuals, households, independent groups of business people and other business subjects engaged in production, business and/or import activities.

II. OBJECTS NOT SUBJECT TO VAT:

The following goods and services shall not be subject to VAT:

1. Cultivation products (including products from planted forests), husbandry products, cultured and fished aquatic and marine products that have not yet been processed into other products or have just been commonly preliminarily processed then sold by producing or fishing organizations and individuals themselves.

Commonly preliminarily processed products stated at this Point are those which have just been sun-dried, heat-dried, frozen, cleaned or peeled but not yet processed at a higher degree or into other commodity products.

Example: Sun-dried, heat-dried, peeled or seeded agricultural products; iced, salted, sun-dried fishes, shrimps and other cultured or fished aquatic and marine products.

2. Products being animal breeds and plant varieties such as breeding eggs an animals, saplings, seeds, sperms, embryos, genetic materials at the stages of rearing, importation and trading. Products being animal breeds and plant varieties not subject to VAT are those imported and/or traded by the establishments which have been granted the animal breed and/or plant variety business registration certificates by State management bodies. For products being animal breeds and plant varieties subject to quality standards promulgated by the State, they must satisfy the State-prescribed conditions.

3. Salt products, including salt made from seawater, natural rock salt, refined salt, iodized salt.

4. The following imports shall not be subject to VAT:

- Equipment, machinery, special-use transport means forming part of technological chains, and construction supplies of those types which cannot be produced at home and need to be imported for the formation of the fixed assets of enterprises;

- Equipment, machinery, supplies and transport means of those types which cannot be produced at home and need to be imported for direct use in scientific research and technological development activities;

- Aircraft, derricks and ships of types which cannot be produced at home and need to be hired from foreign countries for use in production and business;

- Equipment, machinery, spare parts, special-use transport means and supplies for activities of prospecting and developing oil and gas fields; spare parts and equipment of aircraft, specific equipment used exclusively for aircraft (of those types which cannot be produced at home);

In cases where production and/or business establishments import chains of complete equipment and machinery not subject to VAT, which, however, include equipment and machinery of those types which can be produced at home, the whole chains of complete equipment and machinery shall not be subject to VAT.

Enterprises in this case include enterprises set up under the Law on State Enterprises, the Law on Enterprises or the Law on Cooperatives; foreign-invested enterprises and foreign parties to business cooperation under the Law on Foreign Investment in Vietnam; foreign organizations and individuals conducting business activities in Vietnam, which do not belong to any investment forms under the Law on Foreign Investment in Vietnam.

Example: Textile company A imports some weaving machines of a type which, though not yet being able to be produced at home, have some electric motors in complete units of a type which can be produced at home. These imported motors in complete units shall also not be subject to VAT.

In order to prove that their goods are not subject to VAT at the importation stage as prescribed at this Point, the importing establishments must produce to the customs offices the following documents:

+ Import contracts.

In case of consigned import, import consignment contracts shall be also required.

Where the establishments have succeeded in their bids to supply goods for the subjects for use for the purposes prescribed at this Point, the bid-winning notices and contracts for sale to enterprises in compliance with the bidding results shall be also required.

Where financial leasing companies import goods for financial leasing, the financial leasing contracts shall be also required.

In case of import of goods in service of scientific research and technological development, the competent bodies documents assigning the organizations to carry out scientific research and technological development programs, projects or subjects or the science and technology contracts between the ordering party and the party performing such science and technology contracts shall be required.

+ Certification by the enterprise directors or the heads of the scientific research institutions that the imported goods shall be used as fixed assets; used directly in scientific research and technological development activities, used in activities of exploring and developing oil and gas fields, or that they are of those types used exclusively for aircraft.

Particularly for aircraft, derricks or ships hired from abroad, which are of those types which cannot yet be produced at home and shall be used for production and business, they shall not be subject to VAT; the hiring establishments shall only be required to produce to the customs offices the hiring contracts signed with foreign parties.

The above-said import goods of those types which cannot be produced at home and need to be imported shall be determined on the basis of the list of machinery, equipment, special-use transport means, construction supplies, materials and spare parts of those types which can be produced at home, promulgated by the Ministry of Planning and Investment.

5. State-owned dwelling houses sold by the State to their current tenants under the provisions of the Governments Decree No. 61/CP of July 5, 1994 on dwelling house purchase, sale and dealing.

6. Transfer of land use right.

7. Credit services and investment funds, including activities of lending capital, guaranteeing loans, discounting negotiable instruments and valuable papers such as currencies, selling loan security assets in order to retrieve debts, financial leasing of financial credit institutions in Vietnam; activities of transferring capital in accordance with law, and securities-trading activities.

Securities trading activities mentioned at this Point include such activities as brokerage, dealing, investment portfolio management, issuance underwriting and securities investment counseling.

8. Life insurance; school pupil insurance and such person insurance services as of sailor or crew member accident insurance, person accident insurance (including also insurance for accidents, life in combination with hospitalization), passenger accident insurance, tourist insurance, insurance of accidents for drivers and driver assistants and persons aboard vehicles, insurance for sterilized persons, insurance of allowance for surgical operations, insurance for individuals lives, insurance for electricity users and other kinds of insurance related to persons; insurance for domestic animals, plants, other agricultural insurance, and insurance of non-commercial types such as social insurance, medical insurance and labor insurance.

9. Medical examination, medical treatment and epidemic prevention services, birth control services, health convalescence and rehabilitation services for patients, and veterinary services.

10. Products and services in the following cultural, art, physical training and sport domains:

- Cultural, exhibition as well as physical training and sport activities, organization of exercises and competitions of mass movement nature, whether or not collecting money in the form of sale of admission tickets or exercise charges but not for commercial purposes. Other revenues such as proceeds from goods sale, lease of playgrounds, fair or exhibition stalls shall be liable to VAT.

- Art performance activities such as classical dramas, folk operetta, reformed drama, singing, dancing, music, dramas, circus; other art show activities and art performance-organizing services.

- Production of assorted films (video-recorded) regardless of their themes and genres.

- Import of video-recorded films, distribution and projection of motion pictures and video documentaries:
+ For motion pictures, regardless of their themes and genres.

+ For film recorded in video tapes or discs, they must be documentaries, reportage and science films.

The film genres and themes shall be determined according to the regulations of the Ministry of Culture and Information.

11. Teaching and vocational training, including general education, teaching of foreign languages, informatics, dancing, singing, painting, music, drama, circus, physical training, sports, child nursing, and other jobs in order to train, foster and raise the educational levels and professional knowledge for everyone.

12. Radio and television broadcasting under programs funded with the State budget;

13. Publication, import and distribution of newspapers, journals, specialized bulletins, political books, textbooks (also in the form of audio or video tapes or discs, electronic data), course books, law books (books of legal documents, documents, resolutions and other regulatory documents); scientific-technical books, books printed in ethnic minority languages as well as propaganda drawings, photos and posters; printing of money and money-value certificates (checks, bonds, treasury bills, credit bills); cash remitted from abroad into Vietnam.

Newspapers, journals and specialized bulletins also include the transmission of pages thereof.

Political books are books disseminating the political lines of the Party and the State in service of political tasks, under specific themes or topics, in service of anniversaries, traditional days of organizations, levels, branches and localities; statistical books, books propagating the good people and good deeds movement; books of speeches, research and theoretical papers of Party and State leaders.

Textbooks are books used for teaching and learning at all educational levels from preschool to senior high school (including reference books for use by teachers and pupils, suitable to the contents of education programs).

Course books are books used for teaching and learning in universities, colleges, intermediate professional and job training schools.

Law books are books of legal documents of the State.

Scientific and technical books are books used for introducing and guiding scientific and technical knowledge directly related to production an various scientific and technical branches.

Books printed in ethnic minority languages also include books printed bi-lingually in Vietnamese and an ethnic minority language.

Pictures, photos, posters, leaflets and brochures for the propaganda and mass mobilization purposes, slogans, leaders pictures, the Partys flag, the national flag, the Youth Unions flag, the Young Pioneers Leagues flag.

Audio or video tapes and discs recorded with the contents of the above-said books.

14. Public services, such as sanitation, water drainage, maintenance of zoos, flower gardens, parks, street greenery, public lighting and funeral services, regardless of their payment funding sources.

Public services in street sanitation and water drainage include activities of gathering, cleaning, transporting and treating garbage and waste matters, draining water and treating waste water.

Maintenance of zoos and parks includes activities of managing, planting trees, tending and protecting birds, animals and trees in parks, zoos, public places and national gardens.

Funeral services include activities of leasing houses and cars in service of funerals by funeral service-providing organizations; burial and cremation.

For activities for which charges and fees are collected according to the States charge and fee regime, these revenues shall not be subject to VAT.

15. Maintenance, repair, restoration and construction of cultural, art and public-welfare works, infrastructures and gratitude houses with capital contributed by people and humanitarian aid capital, including cases where the State provides capital supports not exceeding 30% of total actual costs of these works.

16. Mass transit by bus and tramcar or bus and tramcar transport establishments set up and operating under the regulations of the Ministry of Communications and Transport in service of the travel demands of people in inner cities, urban centers, within industrial parks or between urban areas and nearby industrial parks along routes with stops, travel timetables and fares prescribed by competent authorities.

17. The States basic surveys funded with the State budget (including geological, mineral, water resource, metro-hydrological, environmental survey and exploration; surveying and mapping).

18. Irrigation and water drainage in service of agricultural production; clean water exploited by organizations or individuals themselves in rural, mountainous, island, deep-lying and remote areas in service of daily life in such areas.

19. Weaponry and military equipment for exclusive use in service of national defense and security.

- The list of weaponry and military equipment for exclusive use in service of national defense and security is prescribed in Appendix No. 3 promulgated together with this Circular.

These weaponry and military equipment also include finished products made in complete sets or parts, accessories and packages used exclusively for assembling and maintaining finished products.

Activities of repairing weaponry and military equipment used exclusively in service of national defense and security shall be carried out by enterprises of the Ministry of Defense or the Ministry of Public Security.

- Weaponry and military equipment (including supplies, machinery, equipment and spare parts) used exclusively in service of national defense and security shall, when imported, be exempt from import tax in accordance with the provisions of the Export Tax and Import Tax Law, or shall, when imported within annual quotas approved by the Prime Minister, not be subject to VAT.

The establishments which import the above-said VAT-free weaponry and military equipment for exclusive use in service of national defense and security must send to the customs offices the following dossiers:

+ The written certifications by the Ministry of Defense or the Ministry of Public Security that the goods are imported in service of national defense or security.

+ The list of import goods within the import quotas approved by the Prime Minister (granted by the Ministry of Trade or the General Department of Customs).

+ The import consignment contracts (in case of consigned import).

20. Goods imported in the following cases: humanitarian aid or non-refundable aid goods (including imported goods belonging to the source of non-refundable ODA capital); gifts for State agencies, political organizations, socio-political organizations, social organizations, socio-professional organizations and/or peoples armed force units; presents and gifts for individuals in Vietnam; belongings of foreign organizations and individuals within the diplomatic immunity limits; and personal effects in duty-free luggage limits; goods being belongings brought along by overseas Vietnamese upon their returns to the country.

The quantities of import goods falling into the categories not subject to VAT at the importation stage shall be equal to the import duty-free quantities prescribed in the Export Tax and Import Tax Law and documents guiding the implementation thereof.

Imported goods of organizations and individuals eligible for diplomatic immunities under the Ordinance on Diplomatic Immunities shall enjoy VAT privileges and immunities according to current regulations. In cases where such organizations or individuals purchase goods and services in Vietnam and pay VAT thereon, they shall be refunded such paid VAT amounts under the guidance at Point 8, Section I, Part D of this Circular. The subjects, goods and procedural dossiers for enjoying VAT privileges and immunities guided at this Point shall comply with the guidance in the Finance Ministrys Circular No. 08/2003/TT-BTC of January 15, 2003 guiding the refund of VAT to diplomatic missions, consular offices and representative agencies of international organizations in .

For imported goods being humanitarian or non-refundable aid goods, written certifications by the Ministry of Finance shall be required.

The General Department of Customs shall provide specific guidance on the dossiers and procedures for handling imported goods not subject to VAT at the importation stage in these cases.

21. Goods sold to international organizations and foreigners for use as humanitarian aid or non-refundable aid to ;

The procedures for international organizations or foreigners to purchase goods in Vietnam for use as humanitarian aid or non-refundable aid to Vietnam and enjoy VAT exemption: International organizations or foreigners must send to the selling units documents clearly stating the names of the international organizations or foreigners purchasing goods for use as humanitarian aid or non-refundable aid to Vietnam, the quantity or value of purchased goods; and written certification by the Ministry of Finance of such aid.

When selling goods, the establishments must make invoices strictly according to the provisions of Point 5.1, Section IV, Part B of this Circular. They must clearly write on such invoices that the goods are sold to foreign organizations or foreigners for use as non-refundable aid or humanitarian aid and not subject to VAT, and keep the above-said documents of the international organizations or Vietnamese representative agencies as a basis for tax declaration and settlement.

22. Goods transshipped, transited or transported by land through the Vietnamese territory; goods temporarily imported for re-export, goods temporarily exported for re-import, raw materials and materials imported for production or processing of goods for export under export production or processing contracts signed with foreign parties.

Goods not subject to VAT in this case shall be settled by the customs offices. The General Department of Customs shall guide the procedures for VAT determination and non-collection of VAT in these cases.

23. Goods and services supplied to the following subjects and in the following cases:

- Goods and services supplied directly for international transport such as supply of fuel, raw materials and materials, spare parts, water and assorted food and rations for passengers, services for sea-going ship, aircraft and international train sanitation and for loading and unloading of export goods.

- International cargo and passenger transportation.

International transportation includes transportation by foreign countries or domestic transportation business establishments engaged in cargo and passenger transportation from to foreign countries or vice versa, cargo transportation between foreign seaports.

Where the transportation service-providing establishments sign contracts for transportation of cargo and/or passenger abroad, the revenues from transportation services, which are not subject to VAT, shall be the revenues actually collected from customers. Where such transportation services cover also domestic transportation and the revenues from domestic and international transportation are inseparable, the revenues not subject to VAT shall include also those from domestic transportation.

- Re-insurance services to foreign countries.

- Goods on sale at duty-free shops at international airports, sea ports, railway stations and border gates.

- National reserve goods sold by the national reserve agency.

- Goods and services exported by export-processing enterprises; goods and services purchased and sold among export-processing enterprises; goods and services supplied by foreign organizations and individuals to export-processing enterprises.

24. Technology transfer, computer software, excluding software for export.

Technology transfer shall be determined under the provisions in Chapter III Technology Transfer of the Civil Code of the Socialist Republic of Vietnam and documents guiding the implementation thereof. For contracts on technology transfer accompanied by machinery and equipment, tax shall not be imposed on the value of the transferred technology.

Computer software (excluding computer software for export) includes software products and software services as prescribed in the Prime Ministers Decision No. 128/2000/QD-TTg of November 20, 2000 on a number of policies and measures to encourage investment in, and development of, the software industry.

25. Post, telecommunications and Internet services universalized under the Governments programs.

26. Gold imported in the form of bar or ingot and gold not yet processed into fine-art articles, jewelry or other products.

Gold in the form of bar or ingot and unprocessed gold shall be determined in accordance with international regulations.

27. Export products being exploited mineral resources not yet processed into other products, specifically as follows:

- Crude oil.

- Stone slabs, sand, rare earth.

- Gems.

- Manganese, tin, iron, chromite, emenite and apatite ores.

28. Products being artificial parts used for substitution of diseased peoples organs; crutches, wheelchairs and other tools used exclusively for the disabled.

29. Goods and services of business individuals with average monthly incomes lower than the minimum salary level prescribed by the State for State employees. Incomes shall be determined to be revenues from business activities minus (-) reasonable expenses for such business activities.

Business households with low incomes and not liable to pay VAT shall be examined, determined and listed by the Tax Sub-Departments in coordination with the tax advisory councils. Such business households shall be notified thereof in writing.

In the period when the business households are notified not to be liable to pay VAT, if their business situation changes so that their incomes are higher than the prescribed income level, the Tax Sub-Departments must notify the business households thereof and put them into the category liable to pay VAT as from the month the business households earn incomes higher than the prescribed level.

Business establishments shall not be entitled to deduct, and to be refunded with, input VAT on goods and services used for the production and trading of goods and services not subject to VAT prescribed in this Article but must include them in the original prices of fixed assets, the value of raw materials and materials or business costs.

B. TAX CALCULATION BASES AND TAX CALCULATION METHODS

The bases for calculating VAT are tax calculation prices and tax rates.

I. VAT CALCULATION PRICES:

The VAT calculation prices of goods or services shall be specifically determined as follows;

1. For goods and services sold or supplied by production and/or business establishments to other subjects, their VAT calculation prices are VAT-exclusive sale prices. For goods and services subject to special consumption tax, their VAT calculation prices shall be sale prices inclusive of special consumption tax but not VAT.

The tax calculation prices of goods and services cover also additional levies and surcharges collected in addition to the goods or service prices, which are enjoyed by the business establishments, excluding those which the business establishments must remit into the State budget. In cases where the business establishments apply discounted sale prices, the VAT calculation prices shall be the discounted sale prices inscribed in the invoices.

2. For imported goods, their VAT calculation prices shall be the import prices at the border gates plus (+) import tax (if any), plus (+) special consumption tax (if any). The import prices at the border gates serving as a VAT calculation base shall be determined according to the regulations on tax calculation prices of imported goods.

Example: An establishment imports 4-seat cars in complete units with the import tax calculation price of VND 300,000,000 each.

- The import tax rate is 100%, the special consumption tax rate is 80%, and the VAT rate is 10%.

- The payable import tax:

VND 300,000,000 x 100% = VND 300,000,000

- The payable special consumption tax:

(VND 300,000,000 + VND 300,000,000) x 80% = VND 480,000,000

- The VAT calculation price is:

(VND 300,000,000 + VND 300,000,000 + VND 480,000,000) = VND 1,080,000,000

- The payable VAT is:

VND 1,080,000 x 10% = VND 108,000,000

Where the imported goods are eligible for import tax exemption or reduction, the VAT calculation prices shall be the prices of the imported goods plus (+) import tax to be paid after the exemption or reduction.

3. For products, goods and/or services used for exchange, as presents, gifts or salary substitutes (except for products, goods and services used for sale promotion or advertisement under the provisions of the Governments Decree No. 32/1999/ND-CP of May 5, 1999 on sale promotion, commercial advertisement, trade fairs and exhibitions not subject to VAT), their VAT calculation prices shall be determined as equal to the tax calculation prices of products, goods or services of the same or equivalent types at the time such activities are carried out.

Example: Establishment A manufactures electric fans. It exchanges 50 fans with establishment B for iron, steel at the sale price (exclusive of tax) of VND 400,000/fan. The VAT amount payable for these exchanged fans is:

VND 400,000/fan x 50 fans x 10% = VND 2,000,000

4. For products, goods or services delivered by business establishments for consumption not in service of production and/or business or for the production and trading of goods and services not subject to VAT, their output VAT must be assessed. Their tax calculation prices shall be equal to the sale prices of products, goods or services of the same or equivalent types at the time of consumption.

For goods internally transferred within a production and/or business establishment such as goods delivered into internal warehouses, supplies and semi-finished products delivered in order to continue the production process, they shall not be subject to VAT calculation and payment.

5. For services supplied by foreign parties to consumers in , their VAT calculation prices shall be the service prices payable to the foreign parties.

Example: Company A in hires a foreign company to repair sea-going ships. If the contractual price payable to such foreign company is VND 100 million, Company A must calculate and pay VAT of 10% of VND 100 million.

6. Services of leasing assets such as houses, offices, workshops, warehouses, wharves, yards, transport means, machinery, equipment, etc.

The VAT calculation prices shall be the tax-exclusive rent rates. In case of leasing with rent paid in installments or prepaid for a leasing term, VAT shall be calculated on each installment or the prepaid rent, including also amounts collected in other forms such as those for renovation, repair and upgrading of leased houses at the lessees requests.

The asset rent agreed upon by the involved parties shall be determined according to contracts. Where the rent bracket is prescribed by law, the rent shall be determined within the prescribed bracket.

7. For goods sold by mode of installment payment, their tax calculation prices shall be the lump-sum VAT-exclusive sale prices of such goods (excluding installment payment interests) and must not be calculated according to each installment.

Example: A motorbike trading company sells 100-cc Honda motorbikes. The lump-sum VAT-exclusive sale price is VND 25.5 million (including the installment interest of VND 0.5 million). The VAT calculation price shall be VND 25 million/motorbike.

8. For goods processing, the tax calculation prices shall be VAT-exclusive processing prices consisting of charges, costs of fuel, power, auxiliary materials and other processing expenses incurred by the processing parties.

9. For construction and installation

- For cases of construction and installation including the contracted supply of raw materials and materials, the tax calculation prices shall also include the VAT-exclusive value of raw materials and materials.

Example: Construction company A enters into a contract to build works, including the contracted supply of construction supplies. The total payment value exclusive of VAT is VND 1,500 million, of which the value of construction supplies is VND 1,100 million. The VAT calculation price shall be VND 1,500 million.

- For cases of construction and installation without the contracted supply of raw materials and materials, the tax calculation price shall be the construction and installation value exclusive of VAT and the value of raw materials and materials.

Example: Construction company X is contracted to build works with supplies to be provided by the work owner. If the construction value exclusive of VAT and construction supplies is VND 600 million, then the VAT calculation price in this case shall be VND 600 million.

- For cases of construction and installation with payments to be made on the basis of completed and handed-over construction items or the value of construction and installation volume, the tax calculation price shall be the VAT-exclusive value of the completed and handed-over construction items or work volume.

Example: Textile company X (called Party A) hires construction company Y (called Party B) to perform construction and installation to expand a production workshop.

The total VAT-exclusive value of the work is VND 200 billion, of which:

- The construction and installation value is VND 80 billion

- The value of equipment supplied and installed by Party B is VND 120 billion.

+ Party B shall additionally charge a 10% VAT of VND 20 billion

+ The total amount payable by Party A is VND 220 billion:

+ Party A shall receive the workshop, account it as an increase in the value of its fixed assets for depreciation calculation of VND 200 billion (the VAT-exclusive value)

- The VAT of VND 20 billion already paid shall be deducted into the output tax of the sold goods or refunded at requests according to regulations.

If Party A accepts to make payment to Party B for each construction item (presuming that the workshop construction is completed first and paid for first), when Party A calculates the amount of VND 80 billion to be paid for the workshop construction, it must add the 10% VAT for payment to Party B. The payable amount inclusive of VAT shall be VND 80 billion + VND 8 billion = VND 88 billion.

10. For business establishments which are assigned land by the State for building houses and technical infrastructures for sale, for transfer accompanied with the transfer of the land use right, the VAT calculation prices of sold or transferred houses or infrastructures shall be the sale prices or transfer prices without tax minus land use levies based on land prices prescribed at the time of land assignment.

Example: Housing Investment and Development Company X is assigned 10,000 m2 of land for building houses for sale, of which 3,000 m2 is used for building internal roads in the planned area and not liable to land use levy. Land use levy payable into the State budget is VND 200,000/m2. The company sells one house on a land area of 50 m2 at the sale price and land use right transfer levy without VAT of VND 300 million (of which the sale price is VND 200 million and the land use right transfer levy is VND 100 million).

The VAT calculation price of the above-said house is:

VND 300 million - (50 m2 x VND 200,000/m2) = VND 290 million

The output VAT is: VND 290 million x 10% = VND 29 million

- For business establishments leased land by the State for investment in infrastructures in industrial parks, high-tech parks or other economic zones as prescribed by the Government for sub-lease, the tax calculation prices shall be the VAT-exclusive rents minus the land rents to be remitted into the State budget.

Example: Industrial Park Infrastructure Investment and Dealing Company Y is leased by the State 500,000 m2 of land for a duration of 50 years for building technical infrastructures for lease. The land rent rate is VND 30,000/m2/year. After making investment in infrastructures thereon, company Y leases 5,000 m2 to company Z for 20 years for building a manufacturing plant with the land rent rate exclusive of VAT (not including public-facility charges) of VND 100,000/m2/year. Company Z pays the infrastructure rent once a year.

The VAT calculation price for annual revenues from the lease of infrastructures is:

(5,000 m2 x VND 100,000) - (5,000 m2 x VND 30,000) x 01 year = VND 350,000,000.

The VAT is: VND 350,000,000 x 10% = VND 35,000,000.

11. For real estate dealing activities, the VAT calculation prices for houses or infrastructures affixed to land shall be allowed to exclude the land prices calculated according to the rates prescribed by the provincial/municipal Peoples Committees at the time of sale of real estates.

12. For ocean shipping agency services, brokerage services, export and import consignment as well as other services enjoying remuneration or commissions, their tax calculation prices shall be the enjoyed remuneration or commissions exclusive of VAT.

13. For transportation, loading and unloading, the tax calculation prices shall be the freights or loading and unloading charges exclusive of VAT, regardless of whether the establishments directly undertake the transportation, loading and unloading or hire such services.

14. For goods and services of specific nature for which such vouchers as postal stamps, freight tickets, construction lottery tickets are used and recorded with the payment prices inclusive of VAT, their VAT-exclusive prices shall be determined as follows:

The VAT- The payment price (proceeds from the sale of tickets, stamps)
exclusive = price 1 + the tax rate (%) applicable to such goods or service

Example: A provincial post office sells 10,000 stamps at the price of VND 400 each. The tax-exclusive price and VAT of this quantity of stamps shall be calculated as follows:

+ The price inscribed on stamps (tax-inclusive sale price) = 10,000 x VND 400 = VND 4,000,000

+ The VND 4,000,000
VAT-exclusive =
price 1 + 10%

= VND 3,636,363

+ The payable 10% VAT = VND 3,636,363 x 10% = VND 363,636

- For tourist services in the form of tours under contracts signed with tourists at package prices (inclusive of meal, accommodation, travel), such package prices shall be regarded as tax-inclusive prices for calculating VAT and revenues of the business establishments. Where the package prices cover such items not subject to VAT as air tickets for tourists coming from abroad into Vietnam and from Vietnam abroad, expenses for meals, lodgings and sight-seeing abroad (if accompanied by valid vouchers), such expenses shall be allowed to be excluded from the VAT calculation prices (revenues).

Example 1: Ho Chi Minh City Tourist Company performs a package tour contract with for 50 tourists for 05 days in with the total payment of USD 32,000. The Vietnamese side has to pay all expenses for airfares, meals, accommodation, and sight-seeing tours under the agreed program, of which the airfares from to and vice versa cost USD 10,000. The output VAT under this contract is determined as follows:

+ Turnover subject to VAT is:

USD 32,000 - USD 10,000 = USD 22,000

+ The output VAT is:

USD 22,000
x 10% = USD 2,000
1 + 10%

+ The establishments turnover used for calculation of its business result is:

USD 32,000 - USD 2,000 = USD 30,000

+ The deductible input VAT shall be determined according to regulations for calculating the payable VAT amount.

Example 2: Hanoi Tourist Company performs a contract for taking tourists from to on a five-day tour at the package price of USD 400/person. If it has to pay a Chinese tourist company USD 300/person, its taxable turnover shall be USD 100/person (USD 400 - USD 300).

15. For pawning services, the tax calculation price is the amount to be collected from this service, including interests receivable from pawn loans and differences earned from the sale of pawned articles {(auction turnover minus (-) the amounts (if any) payable to customers minus (-) loans)}.

Revenues from this service shall be determined as the VAT-inclusive prices.

Example:

A pawning company generates in the tax calculation period a pawning turnover of VND 110 million.

+ The output VAT is determined as follows:

VND 110 million
x 10% = VND 10 million
1 + 10%

+ The companys pawning turnover determined for calculation of its business results is:

VND 110 million - VND 10 million = VND 100 million

16. For books, newspapers and journals sold at their distribution prices (cover prices) under the provisions of the Publication Law, such sale prices are determined as VAT-inclusive prices for calculation of VAT and the establishments turnover (for VAT-liable ones). For cases where books, newspapers and journals are not sold at their cover prices, VAT shall be calculated on the basis of sale prices.

Publication is a process of turning out publications from the drafting stage to the stage of distributing such publications to customers.

Example: The Literature Publisher sells literary books to a book-distributing company:

The cover price (VAT-inclusive price) is VND 6,300/book. The distribution charge (25%) is VND 1,575/book

The VAT calculation price is determined as follows:

+ Where the Publisher distributes its publication through the distributing establishments, the tax calculation price of the publication is determined as follows:

The tax The cover price - The distribution charge
calculation price at the =
publishing stage 1 + The tax rate

The VAT calculation price at the publication stage (the Literature Publisher) is:

VND 6,300 - VND 1,575
= VND 4,500/book
1 + 5%

The output VAT at the publishing stage is:

VND 4,500/book x 5% = VND 225/book.

The total payment amount is:

VND 4,500/book + VND 225/book = VND 4,725/book

The tax calculation price at the distributing stage (at the book-distributing company) is:

VND 6,300
= VND 6,000/book
1 + 5%

The output VAT is: VND 6,000/book x 5% = VND 300/book

The VAT payable at the book-distributing stage is:

VND 300/book - VND 225/book = VND 75/book

(Presuming that there is no other input VAT).

+ Where the Publisher directly distributes its publication to users, the VAT calculation price of the publishing activity is determined as follows:

The tax calculation The cover price
price at the =
publishing stage 1 + The tax rate

Where the Publisher consigns the sale of its publication at the fixed (agents) price, the use of invoices and documents, the tax declaration and payment by the Publisher and the consignee shall be the same as in the case where the goods are sold at their fixed prices through commission agents.

The sale prices printed on the book covers minus the distribution expenses must not be lower than the standard-page cost. Where the sale price printed on the book cover minus the distribution expense is lower than the standard-page cost and the publisher has the input VAT larger than the output VAT, it shall not be entitled to tax refund.

17. For printing activities, the tax calculation price shall be the printing cost.

Where a printing establishment performs printing contracts with the payment price covering the printing cost and the paper cost, the tax calculation price shall also include the paper cost.

18. For the services of expertise agency, agency for indemnity consideration, and agency for claim against the third parties, of the insurance business service, the tax calculation price shall be the earned remuneration or commission, including the expenses collected by the insurance business units.

II. VAT RATES:

The VAT rates for goods and services shall apply as follows:

1. The 0% tax rate shall be applicable to export goods and services. Export goods and services include also goods processed for export, export goods and services not subject to VAT (excluding the service of travel tours abroad, the service of reinsurance abroad; the service of credit, financial investment and securities investment abroad, and goods and services prescribed at Point 23, Point 27, Section II, Part A of this Circular).

- Export goods include goods exported abroad, sold to enterprises in export processing zones and other cases regarded as export prescribed by the Government, such as:

+ Intermediate processed goods for export, as prescribed in Article 17 of the Governments Decree No. 57/1998/ND-CP of July 31, 1998 detailing the implementation of the Commercial Law regarding the activities of goods export, import, processing, purchase and sale agency with foreign countries. This case shall apply to goods processed for export directly by the establishments under the processing contracts signed between such establishments and foreign parties (called the consignors), but the processed goods are not yet exported but delivered to other domestic units (called the consignees) designated by the foreign parties for further processing into finished products under the processing contracts already signed with the foreign parties, and the processing remuneration shall be paid directly by the foreign parties.

+ Goods consigned for export processing. In this case an establishment signs a processing contract directly with the foreign party but then sign another contract to assign the processing to another contract. The establishment signing the contract directly with the foreign party shall only enjoy a commission from the processing charge.

+ Goods turned out by enterprises in and sold to foreign countries but delivered to other enterprises in under the foreign parties designation (called goods exported on spot for short) for use as raw materials for production or processing of export goods.

+ Goods exported for sale at overseas fairs and exhibitions.

- Export services are services which have been provided directly to organizations or individuals abroad and consumed outside the Vietnamese territory.

Assorted goods and services sold to export- processing enterprises and into export-processing zones: insurance; banking; post and telecommuni-cations; consultancy;audit, accounting; transportation; loading and unloading; lease of houses, offices, storehouses and yards; goods and services provided for consumption demands of individual laborers; petrol and oil sold for transport means shall not be regarded as being exported so as to enjoy the 0% tax rate, but they shall be subject to VAT at the rates prescribed for goods consumed in Vietnam.

2. The tax rate of 5% shall be applicable to the following goods and services:

2.1. Clean water in service of production and daily life, exploited by water production and business establishments from natural water sources and supplied to water users (excluding clean water exploited by establishments themselves in rural and mountainous areas, islands, remote and deep-lying areas in service of production and daily life in such areas, which is not subject to tax, and assorted beverages falling under the 10% tax rate group).

2.2. Fertilizers, ores used for fertilizer production; insecticides, pesticides and growth stimulants for domestic animals and cultivation plants.

- Fertilizers include organic and inorganic fertilizers such as phosphorous fertilizers, nitrogenous fertilizers (urea), NPK fertilizer, mixed nitrogenous fertilizer, phosphorous fertilizer, potassium, micro-biological fertilizer, etc.

- Ores used as raw materials for fertilizer production like apatite ore used for production of phosphorous fertilizer, muddy soil for production of micro-biological fertilizer.

- All kinds of insecticides, cockroach killers, rodenticides, termiticides, pesticides, fungicides, herbicides, growth inhibitors or stimulants for domestic animals and cultivation plants, etc.

2.3. Specialized medical equipment, machinery and instruments, such as scanners, projectors, cameras of various kinds for use in medical examination and treatment, devices and instruments used exclusively in surgery, wound treatment, ambulances, blood-pressure, cardiac and vascular meters, syringes and needles, blood transfusion instruments, contraceptive devices and other specialized medical equipment; medical cotton, bandages, gauzes, medical hygienic bandages, women sanitary napkins.

2.4. Curative and preventive medicines for human and animal use (including vaccines, immuno-biologicals, distilled water for preparation of injections); pharmaco-chemical products, pharmaceutical materials used for production of curative and preventive medicines on the lists of goods included in Appendices 1 and 2 issued together with this Circular.

2.5. Teaching and learning aids, including models, drawings, rulers, writing boards, chalks, compasses used for teaching and learning purposes, and specialized teaching, learning, research and laboratory equipment and instruments.

2.6. Printing of products not subject to VAT prescribed at Point 13, Section II, Part A of this Circular (except printing of money and money-value certificates)

2.7. Childrens toys.

2.8. Assorted books (excluding those not subject to VAT specified at Point 13, Section II, Part A of this Circular).

2.9. Tapes and discs, recorded or not.

2.10. Cultivation and husbandry products, cultured and fished aquatic and marine products that have not yet been processed or have undergone only preliminary processing such as cleaning, freezing, drying at the commercial business stage (except for the objects specified at Point 2, Section II, Part A of this Circular).

2.11. Fresh and raw foodstuffs, foods; forest products (except timber and bamboo shoots), not yet processed at the commercial business stage.

Foods include paddy, rice, maize, potatoes, manioc, wheat; rice, maize, potato, manioc and wheat flour.

Fresh and raw foodstuffs are foodstuffs that have not yet been processed but have undergone only preliminary processing such as cleaning, freezing, drying and remain fresh and raw, such as cattle and poultry meat, shrimps, crabs, fish, and other aquatic and marine products

Unprocessed forestry products are forestry products exploited from natural forests, of the groups of bamboo, rattan of various kinds, mushrooms, Jews ear fungus; roots, leaves, flowers, medicinal plants, plant resins, and other forestry products.

2.12. Sugar, by-products in sugar production, including molasses, bagasse, dregs.

2.13. Products made of jute, rush, bamboo, rattan and/or leaves are those made or processed from jute, rush, bamboo, rattan and/or leaves as main raw materials, such as jute carpets, jute yarns, jute bags, coconut fiber carpets, mats made of jute or rush, ropes and strings made of bamboo, coconut fiber; curtains and blinds made of bamboo of various kinds, bamboo brooms, conical hats, etc.

2.14. Cotton preliminarily processed from home-grown cotton, which is shelled, seeded and classified cotton (imported cotton which has been preliminarily processed or sorted does not fall into this group).

2.15. Feeds for cattle, poultry and for other domestic animals, including those kinds unprocessed or mixed such as bran, groundnut cakes, fish powder, bone powder, etc.

2.16. Scientific and technological services including the following scientific and technical application and guidance activities:

- Data processing, calculation and analysis in service of scientific research and technological development;

- Elaboration of feasibility and pre-feasibility study reports, environmental impact assessment reports;

- Guidance on, and organization of, experiments in order to create new technologies and new products.

2.17. Services in direct service of agricultural production, including activities of plowing and harrowing agricultural land; digging, embanking and dredging canals, ditches, ponds and lakes for agricultural production; farming, cultivating, tending plants, preventing and combating pests and diseases; gathering, harvesting, preliminarily processing and preserving agricultural products.

2.18. Coal, coal dust, coke, peat, briquette, caked coal.

2.19. Earth, rock, sand, gravel (excluding products made of earth, rock, sand or gravel like sawn rocks, tiling stones, granite stones).

2.20. Base chemicals, including chemicals on the list in Appendix 1 issued together with this Circular.

2.21. Mechanical products (excluding those used as consumer goods), including:

- Machinery and equipment such as: generators, mills, lathes, planers, rolling and extruding mills, punchers; equipment in complete sets and equipment in separate units; electricity- measuring devices, stabilizers of over 50 KVA, water-measuring devices, girder structures, warehouse frames and metal structures; assorted automobiles (except for automobiles subject to special consumption tax), ships and boats of various kinds and other kinds of transport means; assorted metal accessories and semi-finished products of the above-named products (including spare parts, semi-finished products of automobiles subject to special consumption tax).

- Production tools of all kinds such as borers, small farm machines, sawing machines of all kinds, planers, rice threshers, water pumps with a capacity of over 10 m³/h; soil preparing and harvesting machinery and tools.

- Products being small production tools such as pincers, hammers, saws, chisels, shovels, hoes, sickles and scythes, kits being mechanical products, nails.

- Fence nets of steel of from B27 to B41, barbed wires, metal roofing sheets, stress metal cables, metal conveyors.

2.22. Molds of all kinds, including those used as tools for production of commodity products shaped by molds, such as molds of machine details, molds for production of assorted tubes.

2.23. Explosive materials, including explosives, delay fuses, detonators and those processed into special-use explosive products without changing the properties of explosive materials.

2.24. Grindstone.

2.25. Newsprint.

2.26. Insecticide sprayers.

2.27. Preliminarily processed rubber latex, such as crepe latex, rubber sheet, crumb rubber and coagulated latex.

2.28. Preliminarily processed pine resin.

2.29. Artificial pressed boards made from raw materials like bamboo, wood pulp, chips and fibers, sawdust, bagasse, rice husk pressed into boards, excluding plywood products.

2.30. Industrial concrete products, including bridge beams, house beams and frames, piles, electric poles, circular sewers and box culverts of all kinds, non-standard prefabricated panels and structures of reinforced concrete (except concrete bricks), commercial concrete (concrete mortar).

2.31. Tires and sets of tires and inner tubes, of a size 900-20 or larger.

2.32. Neutral glass tubes (tubes and ampoule-shaped tubes used to contain injections, test tubes).

2.33. Nets, ropes and fibers for knitting fishing nets, including assorted fishing nets, fibers, ropes of a special kind used for knitting fishing nets, regardless of their production materials.

2.34. Products from metallurgy, rolling or extrusion of ferrous, non-ferrous and precious metals, except imported gold specified at Point 26, Section II, Part A of this Circular.

Products from the metallurgy, rolling or extrusion of ferrous, non-ferrous and precious metals include direct products of the metallurgical, rolling and extrusion industries in the form of raw materials or products, such as metal products in the form of bar, rod, sheet or coil.

For metallurgical, laminated and extruded products which have been manufactured and processed into other products, their tax rates shall be determined according to the goods items.

2.35. Automatic data processors, part and accessories thereof (including assorted computers and their parts and accessories, printers used exclusively for computers), except electricity-storing parts.

2.36. Maintenance, repair and restoration of historical and cultural relics, museums, except activities specified at Point 15, Section II, Part A of this Circular.

2.37. Transportation, loading and unloading, including cargo, luggage and passenger transportation and cargo and luggage loading and unloading, regardless of whether establishments directly perform or hire others to perform such jobs, except for brokerage and agency activities for commissions.

2.38. Dredging of canals, navigation channels, river ports and sea ports; salvage and rescue activities.

2.39. Distribution and projection of video films.

3. The 10% tax rate shall apply to the following goods and services:

3.1. Petroleum oil, gas, ores and other mineral products.

3.2. Commercial electricity sold by electricity generation and trading establishments.

3.3. Electronic products.

3.4. Mechanical products for use as consumer goods.

3.5. Consumer electric articles.

3.6. Chemical products (other than base chemicals as guided at Point 2.20, Section II, Part B of this Circular), cosmetics.

3.7. Electric wires, telephone wires, other conducting wires (except types of wires being products which have just undergone the rolling and drawing stage prescribed at Point 2.34, Section II, Part B of this Circular).

3.8 Welding rods.

3.9. Yarn, fabrics, garments and embroidery articles; baby nappy; sanitary napkins.

3.10. Paper (excluding newsprint guided at Point 2.25, Section II, Part B of this Circular) and paper products.

3.11. Leather and leatherette products.

3.12. Sugar, milk, confectionery, beverage and other processed foodstuffs, except those foodstuffs subject to the tax rate of 5%.

3.13. Ceramic, pottery, glass, rubber and plastic products, wood and wood products; cement, bricks, tiles and other construction materials (except for products in the 5% tax rate group).

3.14. Construction and installation.

3.15. Houses, infrastructures of establishments assigned land by the State for investment therein and construction thereof for sale or transfer.

3.16 Technical infrastructure leasing by establishments assigned land or leased land by the State for investment in technical infrastructures for lease in industrial parks, high-tech parks and other economic zones according to the Governments regulations.

3.17. Postal, mail, telecommunications and Internet services (except postal, mail, telecommunications and Internet services universalized under the Governments program guided at Point 25, Section II, Part A of this Circular).

3.18. Lease of houses, offices, warehouses, ports, storage yards, factories, workshops, machinery, equipment and transport means.

3.19. Legal consultancy and other consultancy services.

3.20. Auditing, accounting, survey and designing services, insurance, including insurance brokerage (except types of insurance not subject to VAT specified at Point 8, Section II, Part A of this Circular.

3.21. Photographing, film printing and development, cassette tapes recording, dubbing and renting; duplicating; videoing.

3.22. Hotel, tourist and food and drink catering services

3.23. Goods and services subject to special consumption tax.

3.24. Gold, silver, gems (except imported gold prescribed at Point 26, Section II, Part A of this Circular).

shipping agency.

3.26. Brokerage services.

3.27. Other kinds of goods and services not specified in Section II, Part B of this Circular.

The VAT rates prescribed above shall apply uniformly to each type of goods or service at the importation, production, processing or commercial business stage. Goods not prescribed in Section II, Part A; Points 1 and 2, Section II, Part B of this Circular shall all be subject to the tax rate of 10%.

Example: If garments are subject to the tax rate of 10%, then this goods item shall all be subject to the tax rate of 10% at the importation, production, processing or commercial operation stage.

Repair and warranty services shall be subject to the 10% VAT rate. Particularly, repair of machinery, equipment or transport means being mechanical products shall be subject to the tax rate of 5%.

Example: Repair of sea-going ships shall be subject to the tax rate of 5%, as applicable to sea-going ships.

Wasted materials and faulty products, which are collected for re-cycling or re-use, shall, when being sold, be subject to the VAT rate applicable to such goods items.

Example: Iron and steel scraps collected by establishments shall, when being sold, be subject to the tax rate of 5%; recovered plastic wastes shall, when being sold, be subject to the VAT rate of 10%, as applicable to plastic products.

III. VALUE-ADDED TAX CALCULATION METHODS

VAT payable by business establishments shall be calculated according to either method: the tax deduction method and the method of direct calculation on added value. Where business establishments subject to tax payment by the tax deduction method also trade in gold, silver, gems and/or foreign currencies, they must separately account this business activity for direct calculation of tax on added value.

The subjects of application and the determination of payable tax amounts according to each method are as follows:

1. The tax deduction method:

1.1. The subjects of application are business establishments and organizations, enterprises established under the State Enterprise Law, the Enterprise Law or the Cooperative Law, foreign-invested enterprises and other business establishments and organizations, except those subjects of application of the method of direct calculation on added value mentioned at Point 2 of this Section.

1.2. Determination of payable VAT amounts:

The payable The output The deducted
VAT = VAT - input VAT
amount amount amount

In which:

a/ The output VAT amount is equal to (=) the tax calculation price of the taxable goods sold or service provided multiplied by (x) the VAT rate of such goods or service.

Business establishments subject to tax calculation by the tax deduction method must, when selling goods or providing services, calculate and collect VAT on the goods sold or services provided. When making invoices for sold goods or provided services, business establishments must explicitly inscribe the tax-exclusive sale price, the VAT amount and the total amount payable by the purchasers. Where in an invoice only the payment amount is inscribed but not the tax-exclusive price and the VAT amount, the amount of VAT on the goods sold or services provided must be calculated on the payment amount inscribed therein.

Example: An enterprise sells iron and steel. The VAT-exclusive sale price of ?6 iron rods is VND 4,600,000/ton; the 5% VAT amount is VND 230,000/ton; but if in some of its sale invoices only the sale price of VND 4,800,000/ton is inscribed, the VAT amount calculated on the sale turnover is determined as: VND 4,800,000/ton x 5% = VND 240,000/ton, instead of being calculated on the sans-tax price of VND 4,600,000/ton and the turnover is thus re-determined as VND 4,560,000 (= VND 4,800,000 - VND 240,000). The enterprises that buy steel shall not be allowed to deduct the input VAT amount with respect to invoices in which the VAT amount is not inscribed.

b/ The input VAT amount is equal to (=) the total VAT amount inscribed in the added value invoices for purchased goods or services (including also fixed assets) used for production of and business in goods and services subject to VAT, the VAT amount inscribed in vouchers on tax payment for imported goods or VAT payment made on behalf of foreign parties under the guidance of the Ministry of Finance for application to foreign organizations and individuals conducting business activities in Vietnam not in the investment forms under the Law on Foreign Investment in Vietnam.

Where purchased goods and services are of the kinds for which special-type invoices inscribed with payment prices being VAT-inclusive ones may be used, the establishments may base themselves on the tax-inclusive prices and the calculation method mentioned at Point 14, Section I, Part B of this Circular to determine the tax-exclusive prices and the input VAT amount to be deducted.

Example: In the period, Company A made payment for input services of special type eligible for tax deduction:

The total payment price is VND 110 million (price inclusive of VAT). This service is subject to the 10% tax rate. The deductible input VAT amount is calculated as follows:

VND 110 million
x 10% = VND 10 million
1 + 10%

As a result, the tax-exclusive price is VND 100 million and the VAT amount is VND 10 million.

c/ Determination of deductible input VAT:

- The deductible input VAT is the VAT on goods and services used for production of, and trading in, goods and services subject to VAT.

- Where purchased goods or services are used for production of, and trading in, both goods and services subject and not subject to VAT, only the amount of input VAT on goods or services used for production of, and trading in, goods and services subject to VAT is deductible; the input VAT amount not allowed to be deducted may be included in the costs of goods and services not subject to VAT.

For fixed assets purchased for exclusive use in the production of, and trading in, goods and services not subject to VAT, the VAT on such fixed assets may be included in the original prices of such fixed assets.

The business establishments must separately account the input taxes on goods and services used for the production of, and trading in, goods and services subject and not subject to VAT. Where goods or services are used for production of and trading in goods and services subject and not subject to VAT but the establishments cannot account separately the deductible input taxes, they may calculate the deductible tax amounts as a percentage (%) between the turnover of goods or services subject to VAT and the total turnover of goods or services sold.

Example 1: A used 5,000 KWh of electricity in the month, of which 4,000 KWh for cement production and 1,000 KWh for the lodging quarter of its workers and employees (the company can separately account the electricity volume used by its workers and employees). It may calculate and deduct the input VAT amount only for the electricity volume used for cement production, specifically as follows:

The deductible input VAT amount for electricity in the month is:

4,000 KWh x VND 700/KWh x 10% = VND 280,000

If the purchased goods and services are not used in service of production and/or business, the input VAT shall be included in the costs of such activities.

Example 2: In the tax calculation period, an enterprise that makes bullets for national defense (not subject to VAT) and fireworks (subject to VAT) purchased several kinds of materials, raw materials and fuel for the production of these two kinds of product and could not account separately how much had been used for the production of each of these two products, the deductible amount of input VAT on these supplies is calculated as follows:

The total value of purchased supplies is VND 2,500 million (VAT-exclusive price).

The input VAT amount summed up according to input added value invoices is VND 250 million, in which the commonly used supplies which could not be separately accounted are worth VND 500 million (exclusive of VAT) and the VAT amount is VND 50 million.

The VAT-exclusive sale turnover of goods subject to VAT is VND 800 million.

The sale turnover of goods not subject to VAT is VND 3,200 million.

The deductible input VAT amount of the commonly used supplies is calculated as follows:

The percentage between the turnover of goods subject to VAT and the total turnover of goods sold is determined as follows:

VND 800 million/VND 4,000 million = 20%

The deductible input tax amount corresponding to this percentage (%) is:

VND 50 million x 20% = VND 10 million

- For establishments engaged in agricultural production, forestry and/or fishery, if they export products reared, cultivated, caught or exploited by themselves, they may deduct only the input taxes on goods and services directly used for the exploitation stage following the capital construction stage; they shall not be allowed to calculate and deduct the input taxes on goods and services used for the capital construction stage but must include them into the original prices. Where the establishments concurrently sell at home and export their products, they must allocate input taxes according to the above provisions.

- For purchased goods which are damaged due to natural calamities, fires, or lost, and it is determined that compensation therefor must be paid by organizations and individuals, the input VAT on the volume of such goods shall be included in the value of damaged goods to be compensated but not in the deductible input VAT amount when the declaration of payable VAT amount is made.

- The deductible amount of input tax on goods and services arising in a month may be declared for deduction immediately when the tax amount payable in that month is declared, regardless of whether they have been delivered for use or still remain in stock. Where added value invoices or input VAT payment vouchers of purchased goods and services are made but not yet declared in the month, they may be declared for deduction in the subsequent months; the maximum time limit is 3 months, counting from the declaration time of the month when such invoices are made.

For corporation offices that are not directly engaged in business operations and affiliate administrative and non-business units such as hospitals, clinics, sanatoriums, institutes, training schools, etc, not liable to pay VAT, they shall not enjoy input VAT deduction or refund for goods and services purchased in service of their activities.

Where these units also deal in goods and services subject to VAT, they must separately register, declare and pay VAT for these activities.

Example: The office of Corporation A is not directly engaged in production and business activities and operates with the budget contributed by affiliate units. If it leases the unused space of the house (office building), it must separately account, declare and pay tax for the office-leasing operation. The input VAT of goods and services in service of the operation of the Corporations office shall neither be deducted nor refunded. The Corporations office must pay such input VAT with its budget to be remitted to its superior.

d/ To be entitled to input VAT deduction or refund, export goods and services must meet all the following conditions and procedures:

d.1/ Contracts on sale of goods, processing of goods (for cases of goods processing), provision of services for foreign organizations or individuals. For cases of export consignment, export consignment contracts and reports on liquidation of export consignment contracts (for cases where contracts have been terminated) or reports on periodical comparison of debts between the export consignor and the export consignee, clearly stating the quantity and category of products, the value of the goods already exported under consignment; the serial number and date of the export contract signed between the export consignee and the foreign party; the serial number and date of, and amount of money inscribed on, the voucher on the via-bank payment made by the export consignee to the foreign party; the serial number, date of, and amount of money inscribed on, the voucher on the payment made by the export consignor to the export consignee; the serial number and date of the export consignees customs declaration on the export goods.

d.2/ Export goods customs declarations, with the certification by the customs offices that the goods have been exported.

In case of export consignment, the reports on liquidation of export consignment contracts or the reports on periodical comparison of debts between the export consignor and the export consignee as mentioned at Point d.1 above shall be required.

d.3/ Payment for export goods and services shall comply with the following provisions:

- Payment for export goods and services must be made via bank.

Via-bank payment means the transfer of money from the importers bank to the exporters bank in order to pay for goods or services to the exporter in the payment form as agreed upon in the contract and required by the bank. Payment vouchers shall be credit notes of the exporters bank of the amount of money already received from the importers bank accounts. In case of deferred payment, the agreement thereon must be included in the export contracts, and when payment is due, the business establishments must have via-bank payment vouchers. In case of export consignment, the export consignees must make vi-bank payment to the foreign parties.

- The following cases of payment shall also be regarded as via-bank payment:

+ For cases where payment for export goods or services is deducted from foreign loans, business establishments must satisfy all the following conditions, procedures and dossiers:

* Borrowing contracts (for financial loans with a term of under one year); or loan registration certification papers of the State Bank of (for loans with a term of over one year).

* Vouchers on the transfer of money via bank by the foreign party into .

The mode of payment for export goods or services to be deducted from foreign loans must be provided for in the export contracts.

* Written certifications by the foreign parties of the loan deduction.

* For cases where there is any difference between the value of export goods or services and the foreign loans, such difference must be paid via bank. Vouchers on such via-bank payment shall be as guided at this Point.

+ For cases where the goods -or service-exporting establishments make via-bank payment for export goods or services but the foreign parties authorize the third parties being foreign organizations or individuals to make payment, the authorized payment must be provided for in the export contracts (or annexes thereto, if any).

+ For cases where the foreign parties make payment from their current accounts in , they must effect such payment via bank. Payment vouchers shall be credit notes of the exporters bank of the money received from the foreign purchasers current account.

- Other cases of payment prescribed by the Government:

+ For cases of labor export where cash is collected directly from laborers, vouchers of collection of money from laborers shall be required;

+ For cases where business establishments export goods for sale at overseas fairs or exhibitions, if they collect and transfer home in cash the currencies of the countries where such trade fairs or exhibitions are organized, they must produce to the customs offices vouchers declaring the foreign currencies collected from the goods sale and transferred home and vouchers on remittance of such money amounts into banks in Vietnam.

+ For cases of exporting goods or services to repay the Governments foreign loans. the commercial banks certifications that the export goods lots have been accepted by the foreign countries for debt repayment or that the document sets have been forwarded to the foreign countries for debt repayment shall be required; payment vouchers in this case shall comply with a separate guidance of the Ministry of Finance;

+ The case where export goods or services are paid with goods means the one where goods (including the export goods processing) or services are exported to foreign organizations or individuals (called foreign parties for short) but the payment between Vietnamese enterprises and foreign parties is made in the form of clearing between the value of export goods or services or export goods-processing charges and the value of goods or services purchased from foreign parties.

Export goods or services paid with goods must satisfy an additional dossier procedure as follows:

* The mode of payment with goods for export goods must be provided for in the export contract.

* The foreign partys goods or service purchase contract;

* The customs declaration on import goods paid for export goods or services.

* The foreign partys written certification of the clearing payment between the export goods or services and the import goods or services purchased from the foreign party.

* Where there is difference after the clearing between the value of export goods or services and the value of import goods or services, such difference must be made via bank. Vouchers on such via-bank payment shall comply with the guidance at this Point.

+ Other payment forms as prescribed by the Government.

d.4/ Added value invoices on the sale of goods or services or export of processed goods to foreign parties or export-processing enterprises.

e/ Conditions, procedures and dossiers for deduction of input VAT in a number of cases where goods are regarded as being exported:

e.1/ Processed intermediary goods for export as prescribed in Article 17 of the Governments Decree No. 57/1998/ND-CP of July 31, 1998 detailing the implementation of the Commercial Law regarding the activities of goods export, import, processing, and sale and purchase agency with foreign countries:

- Export processing contracts and annexes thereof (if any) signed with foreign parties, clearly stating the goods-receiving establishments in .

- Added value invoices, clearly stating the processing charges and quantities of processed goods returned to the foreign parties (on the basis of the charges provided for in the contracts signed with the foreign parties) and the names of the goods-receiving establishments designated by the foreign parties;

- Bills on delivery of processed intermediary products (called the delivery bills for short), with full certifications by the deliverers and the receivers of processed intermediary products as well as certification by the customs offices managing the processing contracts of the deliverers and receivers.

- Payment for goods processed for foreign countries must be made via bank under the guidance at Point d.3 of this Section.

The procedures for delivery and receipt of processed intermediary goods and delivery bills shall comply with the guidance of the General Department of Customs.

Example: Company A signs with a foreign party a contract to process 200,000 pairs of shoe soles for export. The processing charge is VND 800 million. The contract clearly states that the shoe soles will be delivered to Company B in for production of finished shoes.

In this case, Company A falls into the subject of processing intermediary products for export. In making vouchers to deliver shoe soles to Company B, Company A should write clearly the quantity, category and specifications of products delivered as well as the whole turnover of VND 800 million from the processing of shoe soles so as to enjoy the VAT rate of 0%.

e.2/ Goods consigned for export processing:

- Contracts on processing goods for export, signed with the establishments which have directly signed contracts for processing goods for export with foreign parties. The establishments which directly sign processing contracts with foreign parties shall enjoy only the export processing consignment commissions.

- Reports on liquidation of the export processing consignment contracts (for cases where the contracts have been terminated) or reports on periodical comparison of debts between the establishments which directly sign the processing contracts with foreign parties and the establishments which directly process the goods for export, clearly stating the serial number and date of the processing contract signed with the foreign party; the quantity and category of products processed for export; the processing charge amounts to be paid and already paid; the serial number and date of the customs declarations of the processed goods already exported; the serial number and date of, and amount of money inscribed on, the voucher on the via-bank payment made by the foreign party to the establishment which directly signs the processing contract with the foreign party; the serial number and date of, and amount of money inscribed on, the voucher on the payment by the establishment, which directly signs the processing contract with the foreign party, to the establishment which directly processes goods for export.

- Payment for goods processed for foreign countries must be made via bank under the guidance at Point d.3 of this Section.

- Added value invoices made by the establishments which directly process goods for export for goods processed for export.

Example: Company X performs a contract to process garments for a foreign party, under which it makes 100,000 clothes for a remuneration of VND 200 million. However, Export - Import Company Y has signed this contract directly with the foreign party, enjoying a commission equal to 5% of the said remuneration.

In this case, Company X falls into the subject consigning the processing of goods for export. In making invoices for delivering goods to Company Y, Company X will be allowed to write the tax rate of 0%; the whole turnover of VND 200 million from the processing of goods for export will be subject to the VAT rate of 0%. Company Xs export commission shall be subject to VAT as prescribed.

e.3/ Goods made by enterprises in Vietnam for sale to foreign parties, which have been actually delivered to other enterprises in Vietnam under the designation by the foreign parties (called on-spot export goods for short) for use as raw materials for production or processing of goods for export.

- Contracts on goods sale, signed with foreign parties, clearly stating the goods items, quantities, value, names and addresses of the goods-receiving enterprises in .

- Customs declarations on the on-spot export-import goods, with the certification by the customs offices that the goods have been delivered to the enterprises in under the foreign parties designation.

- Payment for goods sold to foreign traders but delivered in must be made via bank in freely convertible foreign currencies. Via-bank payment vouchers shall comply with the guidance at Point d.3 of this Section.

- Added value invoices of on-spot export goods, clearly stating the names of the foreign purchasers, the goods-receiving enterprises and the goods delivery places in .

- On-spot export goods of foreign-invested enterprises must comply with the provisions of their investment licenses.

For the cases involving export goods or goods regarded as being exported prescribed at this Point, if the customs offices certification is available (for export goods) but the other procedures and dossiers stated above are insufficient, the business establishments shall not have to calculate the output VAT and must not deduct the input VAT but include it in their expenses. For export services, if they fail to satisfy one of the above-said procedures, the business establishments shall not have to calculate the output VAT and must not deduct input VAT. Particularly for the cases prescribed at Points e.1 and e.3, if they fail to satisfy one of the procedures and dossiers prescribed at these points, the establishments must calculate and pay VAT as for domestically consumed goods.

f/ For business households paying VAT by the method of direct calculation on added value which have been permitted to pay the tax by the tax deduction method, they shall be allowed to deduct the VAT on the goods and services purchased from the month they are permitted to pay the tax by the tax deduction method; for goods and services purchased before that month, they shall not be entitled to input VAT deduction.

1.3. The bases for determining the deductible tax amounts prescribed above include the VAT amounts inscribed in the added value invoices of purchased goods or services; vouchers on the VAT payment at the importation stage; vouchers on the VAT payment on behalf of the foreign parties under the guidance of the Ministry of Finance, applicable to foreign organizations and individuals conducting business activities in Vietnam not in the investment forms under the Law on Foreign Investment in Vietnam.

Business establishments must not calculate and deduct the input VAT in the following cases: Added value invoices are used at variance with law provisions, such as they are not inscribed with the VAT (except for special cases where added value invoices may be inscribed with the VAT-inclusive prices); the sellers names, addresses and/or taxation codes are not inscribed or inscribed incorrectly so that the sellers are unidentifiable; VAT payment invoices and vouchers are fake; invoices are erased or deleted, false invoices (goods or services are not actually sold); invoices are inscribed with a value higher than the real value of goods or services.

2. The method of direct calculation of VAT on added value

2.1. Subjects of application of the method of direct calculation on added value include:

- Vietnamese individuals engaged in production and business;

- Foreign organizations and individuals that conduct business in Vietnam not in the investment forms under the Law on Foreign Investment in Vietnam and do not meet all the conditions for accounting, invoices and vouchers serving as a basis for tax calculation by the tax deduction method;

- Establishments trading in gold, silver, gems and foreign currencies.

2.2. Determination of payable VAT amounts:

The payable The added value The VAT rate
VAT = of taxable x for such goods
amount goods or service or service

The added value of goods or service = The turnover of goods sold or service provided - The cost price of the goods sold or service provided

For a number of business lines, the added value is determined as follows:

- For production and business activities, it is the difference between the sale turnover and the turnover of purchased goods and/or services used in production and/or business. Where business establishments cannot account the turnover of purchased supplies, goods and/or services corresponding to the turnover of sold goods, the added value is determined as follows:

The cost of goods sold is equal to (=) The turnover left at the beginning of the period plus (+) the purchase turnover in the period minus (-) the turnover left at the end of the period.

Example: Establishment A makes wood articles. In the month, it sells 150 products and earns a total sale turnover of VND 25 million.

- The value of supplies and materials purchased for production of such 150 products is VND 19 million, of which:

+ Principal raw material (timber): VND 14 million.

+ Other materials and services purchased from outside: VND 5 million.

The VAT rate is 10%. The VAT amount payable by Establishment A is calculated as follows:

+ The added value of the sold products:

VND 25 million - VND 19 million = VND 6 million.

+ The payable VAT amount:

VND 6 million x 10% = VND 0.6 million.

- For construction and installation, it is the difference between the amounts earned from the construction and installation of works or work items minus (-) the cost of materials and supplies, the cost of power, transportation, services purchased from outside and other expenses for the construction and installation of works or work items.

- For transport activities, it is the difference between the collected transport freight, loading and unloading charges minus (-) the cost of petrol and oil, spare parts and other expenses for transportation activities.

- For food and drink catering activities, it is the difference between the amounts earned from the sale of foods and drinks, the service charges and other revenues minus (-) the cost prices of goods and services purchased for the food and drink catering.

- For the trading in gold, silver, gems and foreign currencies, the added value is the difference between the turnover from the sale of gold, silver, gems and/or foreign currencies minus (-) the cost prices of the sold gold, silver, gems and/or foreign currencies.

- For business establishments subject to VAT calculation by the tax deduction method and engaged in the trading in gold, silver, gems and/or foreign currencies subject to application of the method of direct calculation on added value, they must separately account the input VAT amounts for declaration of the VAT payable for goods and services of different business activities and different tax calculation methods.

Where they cannot make separate accounting, the deductible input VAT tax amounts shall be determined corresponding to the percentage between the turnover of goods and services subject to VAT calculated by the tax deduction method and the total turnover of goods sold in the period.

- For other business activities, it is the difference between the amounts earned from business activities minus (-) the cost prices of goods and services purchased for performance of such business activities.

The above-prescribed turnover of goods and services sold includes also surcharges and charges collected outside the sale price and enjoyed by business establishments, regardless of whether or not they have been collected.

The above-prescribed turnover of purchased goods and services includes also various taxes and charges already paid and included in the payment prices of goods and services purchased.

- Business establishments subject to VAT payment by the method of direct calculation on added value must not account the value of purchased assets, invested and constructed fixed assets into the turnover of purchased goods and services for calculation of added value.

2.3. For each business establishment, the method of determination of added value serving as a basis for calculation of payable VAT is as follows:

- For business establishments that have fully effected the sale and purchase of goods and services accompanied with sufficient invoices, vouchers, and book-keeping entries, the added value is determined on the basis of the sale and purchase prices inscribed on vouchers.

- For business establishments that have enough invoices and vouchers for the sale of goods and/or the provision of services, are able to determine the correct turnover from the sale of goods and/or the provision of services according to goods sale and/or service provision invoices but do not have sufficient goods and service purchase invoices, the added value is determined as the turnover multiplied by (x) the percentage (%) of added value calculated on the turnover.

- For business individuals (households) that do not have enough goods sale and/or service provision invoices, the tax offices shall base themselves on the business situation of each household to fix the turnover for tax calculation; the added value is determined as the fixed turnover multiplied by (x) the added value percentage (%) calculated on the turnover.

Invoices used as a basis for VAT calculation by this method are those used in accordance with law provisions. Invoices which are not used in accordance with law provisions as guided at Point 1.3, Section III, Part B of this Circular shall not be used as a basis for VAT calculation.

The General Department of Tax shall guide the provincial/municipal Tax Departments in determining the added value percentage (%) calculated on turnover to serve as a basis for VAT calculation, which is suitable to each business line and reasonable for different localities.

IV. GOODS AND SERVICE PURCHASE/SALE INVOICES AND VOUCHERS

Business establishments, when purchasing or selling goods and/or services, shall have to abide by the regime on invoices and vouchers as prescribed by law.

1. Business establishments liable to pay VAT by method of tax deduction, when selling goods and/or services subject to VAT, must use the added value invoices, including the cases where they sell goods and services subject to special consumption tax (except where they are permitted to use special-type invoices, vouchers which are inscribed with the payment prices being VAT-inclusive prices).

2. Business establishments liable to pay tax by method of direct calculation on added value, when selling goods and/or services, must use goods sale invoices.

3. When making invoices, the business establishments must fully and correctly inscribe all details prescribed on the invoices. For added value invoices, they must be clearly inscribed with the VAT-exclusive sale prices, surcharges and charges calculated outside the sale prices (if any), the VAT, the total payment prices inclusive of tax; if the VAT-exclusive sale prices and the VAT are not inscribed separately and only the payment prices are inscribed, the output VAT must be calculated on such payment prices.

4. Lawful invoices and vouchers are:

- Invoices issued by the Finance Ministry (the General Department of Tax) and provided by tax offices for business establishments.

- Invoices printed according to set forms by business establishments for their own use, which has already been approved by the General Department of Tax.

- Special-type invoices and vouchers of other kinds, permitted for use.

5. Guidance on the use and inscription of invoices in a number of specific cases is as follows:

5.1. Production and/or business establishments liable to pay tax by method of tax deduction, which sell goods and/or services not subject to VAT; sell goods and services to VAT-exempt subjects; sell gold, silver, gems, foreign currencies, shall have to use added value invoices; on such value added invoices only lines for the sale prices are inscribed with the VAT-exclusive prices while the lines for tax rates and VAT amounts are not inscribed and crossed out. In case of selling goods or services not subject to VAT or to VAT-exempt subjects, the invoices must clearly state that the goods are not subject to VAT or goods sold to the VAT-exempt subjects.

5.2. Where exporting and/or importing business establishments liable to pay VAT by method of tax deduction undertake the consigned import of goods for other establishments, when handing over the goods, they shall make the invoices as follows:

If the import consignees, when returning goods imported by consignment, have already paid VAT at the importation stage, they shall make the added value invoices for use by the import consignors as basis for declaration and deduction of input VAT on goods imported by consignment. Where the import consignees have not yet paid VAT at the importation stage, when handing over the imported goods, they shall fill in the delivery-cum-internal transport bills issued by the Finance Ministry (the General Department of Tax) and make the internal transfer orders for use as vouchers for circulation of goods on the market. Only after paying VAT at the importation stage for goods imported by consignment can the establishments make the invoices according to the above regulations.

An added value invoice on delivery and hand-over of goods imported by consignment shall be inscribed with:

a/ The VAT-exclusive sale price covering the value of goods actually imported at CIF price, the import tax, the special consumption tax and other amounts payable according to the regime at the importation stage (if any).

b/ The VAT rate and VAT amount, inscribed according to tax payment notices of the customs offices.

c/ The total payment amount (= a + b).

The import consignees shall make separate added value invoices in order to have the commission paid for the consigned import.

5.3. Production and/or business establishments (including those engaged in processing of export goods) which pay tax by tax deduction method and have export goods subject to VAT, when exporting goods, shall use added value invoices.

When delivering goods for transport to border gates or places where export procedures shall be carried out, if having no grounds yet to make added value invoices, the establishments shall use the delivery-cum-internal transport bills issued by the Finance Ministry (the General Department of Tax) together with the internal transfer orders as vouchers for circulation of goods on the market. After completing the procedures for export goods, the establishments shall make added value invoices for export goods.

In case of consigned export of goods (including consigned export of processed goods for other establishments), when delivering goods to the export consignees, the consignors shall use delivery-cum- internal transport bills issued by the Finance Ministry (the General Department of Tax) together with the internal transfer order. When goods are actually exported, with the certification thereof by the customs offices, basing themselves on the export consignees vouchers for comparing and certifying the quantity and value of actually exported goods, the goods export consignors shall make added value invoices for VAT payment and refund declarations. In this case, the exporting business establishments must keep copies 2. In cases where the exporting business establishments have registered with the tax offices for printing and circulating by themselves invoices to be used for export goods and to be issued to foreign clients, they shall use invoices printed by themselves for tax payment and refund declaration.

5.4. Use of invoices, vouchers for goods consumed internally, donated, presented as gifts, put for sale promotion:

- For products, goods delivered for internal consumption, sale promotion, advertisement, in service of goods production and business, services subject to VAT, the establishments shall use added value invoices, which shall clearly state that the goods are for internal consumption in service of production and business, or sale promotion, advertisement, free of charge. The business establishments shall use invoices as accounting vouchers.

- For products, goods delivered for barter, reward or wage payment to laborers, for internal consumption not in service of production and business or in service of the production of, and/or trading in, goods and/or services not subject to VAT, the establishments shall have to make added value invoices (or sale invoices), which are fully inscribed in all contents and with VAT calculated like invoices on sale of goods to customers.

5.5. For goods and services sold at discount prices inscribed on their invoices, such invoices must clearly state the discount percentage or level, the VAT-exclusive price (discount price), VAT and total payment price inclusive of VAT.

If the price reduction is applied on the basis of the quantity, turnover of actually purchased goods or services, which must reach certain levels, the reduced amounts of already sold goods shall be adjusted on the invoices of the last purchase of goods or services or the next period. Such invoices must contain the invoices serial numbers and reduced amounts.

5.6. Production and/or business establishments which deliver and transfer goods to their dependent cost-accounting establishments such as branches, shops in other localities (provinces, centrally-run cities) for sale or transfer among branches, dependent units; deliver goods back to the business establishments from dependent cost-accounting units; deliver goods to agents for sale at fixed prices and enjoying commissions based on the mode of business organization and cost-accounting, may opt for either of the two following ways of using invoices, vouchers:

- Using added value invoices as a basis for settlement and declaration of VAT payment in each unit and at each independent stage.

- Using delivery-cum-internal transport bills issued by the Finance Ministry (the General Department of Tax), together with the internal transfer orders for goods internally transferred; using the delivery bills for goods for agency sale, issued by the Finance Ministry (the General Department of Tax) for goods delivered to agents, together with the internal transfer orders.

Dependent cost-accounting units and units acting as agents, when selling goods in various forms, shall have to make invoices as prescribed, and at the same time, to make the lists of sold goods (according to Form No. 02/GTGT promulgated together with this Circular, not printed herein), and send them to the establishments which have delivered the goods to them or delivered goods for agency sale so that these establishments make added value invoices for goods actually consumed. Where an establishment has a large sale volume and turnover, such a list may be made every 5 or 10 days. Where the sold goods are subject to different VAT rates, different lists must be made for sold goods according to their tax rates.

Production and business establishments shall apply only either of the two methods of using invoices and vouchers prescribed at this Point and, before applying it, must make registration with their managing tax offices.

5.7. Business establishments acting as goods-gathering and -purchasing agents in various forms, when returning goods to the gathering and purchase- consigning establishments, must make invoices for goods gathered and purchased by agency and enjoyed commissions (if any).

5.8. Where business establishments purchase goods and the sellers have issued the invoices while the purchasers have received the goods which have, however, been partially or fully returned due to their wrong specifications or poor quality, before returning such goods to the sellers, the establishments shall have to make invoices clearly stating the goods returned to the sellers due to wrong specifications, poor quality, and the VAT. These invoices shall serve as a basis for the purchasers and the sellers to adjust the already declared purchase and sale turnovers as well as VAT amounts.

Where the purchasers have no such invoices, upon the return of goods, the purchasers and the sellers shall have to make the written records or written agreements, clearly stating the types, quantity and value of the returned goods according to the VAT-exclusive prices and the VAT inscribed on the sale invoices (serial numbers and dates of the invoices), the reasons for the return, which are sent together with the invoices to the sellers. Such records shall be kept together with the sale invoices for use as a basis to adjust the sellers declared sale turnover and VAT.

Where the sellers have delivered goods and made the invoices while the purchasers have not yet received the goods but detected that goods are of wrong specifications and/or poor quality, hence they must be fully or partially returned, upon the return of goods, the purchasers and the sellers shall have to make written records thereon clearly stating the type, quantity, the VAT-exclusive value and VAT amount of the returned goods and the reasons therefor as inscribed on the sale invoices (serial numbers, codes and dates of the invoices) for returning the goods together with the invoices to the sellers so that the latter can re-make added value invoices for the received goods and use them a basis for adjusting their turnover and output VAT.

5.9. Where business establishments have sold or supplied goods and/or services and made invoices therefor but have to adjust the sale prices (up or down) due to poor quality and/or wrong specifications of such goods and/or services, the sellers and the purchasers shall have to make written records thereon or written agreements clearly stating the quantity and specifications of goods, the level of price increase (decrease) as inscribed in the sale invoices (serial numbers, date of the invoices, time), the reasons for price increase (decrease), and at the same time the sellers shall make invoices according to the adjusted prices. Such invoices clearly state the adjusted prices of the goods and/or services in invoices no, code. Basing themselves on the invoices with the adjusted prices, the sellers and the purchasers shall declare the adjusted purchase or sale turnovers, output and input taxes.

5.10. Business establishments which deliver goods for mobile sale shall use delivery-cum- internal transport bills, issued by the Finance Ministry (the General Department of Tax), together with the internal transfer orders and, when selling goods, make invoices as prescribed.

5.11. Business establishments which directly retail goods and/or provide services of a value below the prescribed levels shall not have to make invoices; if the purchasers request invoices, they shall have to make the invoices as prescribed; where invoices are not made, the retail lists (according to form No. 06/GTGT promulgated together with this Circular, not printed herein) must be made for use as basis for tax calculation.

5.12. For construction establishments having construction and installation projects which take a long time and for which the payment is made according to implementation progress or completed and handed-over work volume, they must make invoices of payment for the completed and handed-over construction volume. Such added value invoices must clearly state the tax-exclusive turnover and the VAT. Where the construction works have been completed and the invoices of payment for the value of the works have been made but then the payable value of the construction volume is adjusted down in the process of approving the settlement of the value of the capital construction works, invoices and vouchers for the adjusted payable value of the works must be made as in the case prescribed at Point 5.9 of this Section.

5.13. For establishments which are assigned or leased land by the State for investment in the construction of houses for sale, infrastructures for lease, for transport services with turnover from international transport; international tour services, invoices shall be made as follows:

- The line for the sale price shall be inscribed with the VAT-exclusive house sale price, infrastructure rental, transport or package tour service turnover.

- The line for VAT calculation shall be inscribed with the house sale price (or infrastructure rental) already minus the land use levy (or land rental) payable to the State budget; tourist turnover already minus expenses arising overseas such as those for meals, accommodation, transport; transport turnover already minus international transport turnover.

- The line for VAT rate and amount shall be inscribed with the payment prices as prescribed.

(See example at Point 10, Section I, Part B of this Circular).

5.14. Financial leasing establishments which lease assets subject to VAT shall make invoices as prescribed,

Establishments engaged in financial leasing activities, when leasing assets subject to VAT, must have added value invoices (for assets purchased at home) or vouchers of VAT payment at the importation stage (for imported assets); the total VAT amounts inscribed on the financial leasing service invoices must match the VAT amounts inscribed on added value invoices (or vouchers of VAT payment at the importation stage).

For cases where assets purchased for lease are not subject to VAT and added value invoices or vouchers of VAT payment at the importation stage are not available, VAT must not be inscribed on the invoices.

When the VAT on financial leasing assets have been fully deducted and the asset ownership right has been transferred to the lessees, the lessors shall transfer to the lessees the added value invoices or the imported goods purchase invoices together with the vouchers of VAT payment for the financial leasing assets.

5.15. For foreign currency-trading establishments conducting foreign currency-purchasing and -selling activities abroad, they shall make the detailed lists of the trading turnover of each kind of foreign currency. The establishments must keep all vouchers on transaction with the purchasers or sellers abroad strictly according to the Ordinance on Accounting and Statistics. For foreign currency- buying and -selling activities arising at home, invoices must be made according to regulations.

5.16. For establishments engaged in buying and/or selling gold, silver, gems, if they buy them from non-business individuals who have no invoices, they shall make the lists of purchased goods according to form No. 04/GTGT promulgated together with this Circular (not printed herein).

5.17. Export-processing enterprises, when selling goods and/or services, shall use sale invoices (or invoices issued by themselves) according to the Finance Ministrys regulations.

In case of using adjusted invoices, business establishments must not inscribe negative (-) figures therein.

6. For individuals as well as administrative and non-business units that are engaged in the irregular production of, and/or trading in, goods and/or services subject to VAT and have the demand to use invoices, they shall be supplied with separate invoices for use for each specific case.

C. TAX REGISTRATION, DECLARATION, PAYMENT AND FINAL SETTLEMENT

I. TAX PAYMENT REGISTRATION:

1. Business establishments, including companies, factories, enterprises, branches and stores attached to principal business establishments, must register tax payment with the provincial/municipal Tax Departments or Sub-Departments for business individuals, regarding the business locations, business lines, labor, capital, tax payment venues and other relevant indexes according to set forms on tax payment registration and guidance of the tax offices.

For newly set-up establishments, the time limit for tax payment registration shall be 10 days as from the date they are granted the investment licenses or business registration certificates and the seals; where the establishments have not yet been granted the business registration certificates but already conducted business activities, they must register for tax payment before conducting business activities.

If establishments which have already made the tax payment registration change their business lines, move their business offices to other places, undergo merger, dissolution, bankruptcy, consolidation, division, separation or establish new companies, factories, enterprises, branches, stores, etc., they shall have to make additional registration with the tax offices at least 5 days before making such changes.

2. For production and/or business establishments which are headquartered in one locality (province or centrally-run city) while having their dependent cost-accounting establishments, including companies, factories, enterprises, branches or stores directly selling goods in another locality, they shall have to register for tax payment with the tax offices of the localities where they are headquartered and their dependent cost-accounting units shall also have to register the VAT payment with the tax offices of the localities where they are based.

Particularly organizations and individuals that provide consultancy, survey, designing services or perform consultancy or service contracts, shall register, declare and pay tax with the tax offices of the localities where they are headquartered.

3. Construction and installation establishments shall have to make tax payment registration with the tax offices of the localities where they are headquartered. Where construction and installation projects are executed in other localities (provinces, centrally-run cities) by their dependent establishments that have no legal person status such as groups, teams, project management boards, the construction establishments shall also have to register, declare and pay tax with the tax offices of localities where the construction is carried out.

4. Where establishments contract business activities to collectives and/or individuals by mode of taking self-responsibility for the business results, such collectives and/or individuals shall have to directly register, declare and pay VAT with the tax offices of the localities where they conduct business activities.

5. For business establishments liable to the application of the method of direct calculation of tax on added value, if properly and fully meeting conditions on goods and/or service purchase and sale with adequate invoices and vouchers, making entries into the accounting books in strict accordance with the regime, declaring and paying VAT strictly according to the prescribed regime and voluntarily registering for the VAT payment by tax deduction method, they may apply the tax calculation by tax deduction method. The establishments shall have to make and send the written tax payment registrations (according to form No. 09/GTGT promulgated together with this Circular, not printed herein) to the tax offices where they have registered for tax payment. Upon receiving the registrations from the establishments, the tax offices shall have to check and promptly inform the establishments of whether or not they are permitted to apply the tax payment by method of VAT deduction (clearly stating the reasons for case of disapproval) within 30 days as from the date of receiving the requests from the establishments. The establishments may pay tax by deduction method only when they are so notified by the tax offices.

For business individuals (or households) liable to pay tax by method of direct calculation on added value, that have been permitted to pay tax by method of tax deduction but failed to strictly observe the prescribed conditions in the course of implementation, the tax offices shall apply the method of fixing the payable tax amounts and issue notices on suspension of the tax payment by method of tax deduction.

6. Regarding the provision of tax codes to tax payers: For business establishments which have made the tax payment registration with the tax offices, the latter shall have to provide them with tax codes and tax registration certificates.

For project owners (or their authorized representatives like the project management units), the foreign principal contractors being the subjects entitled to VAT refund and having not yet been given the tax codes must carry out the procedures with the Tax Departments of the localities where they are based so as to be provided with tax codes.

II. DECLARATION OF VAT PAYABLE TO THE STATE BUDGET

Production and/or business establishments and goods importers shall have to declare the payable VAT according to the following regulations:

1. Establishments dealing in goods and/or services subject to VAT shall have to make and send to the tax offices the monthly VAT calculation declarations together with the lists of goods purchased and sold according to set forms (forms No. 01/GTGT, 02/GTGT, 03/GTGT, 04/GTGT, 05/GTGT, 06/GTGT, 07A/GTGT, 07B/GTGT and 07C/GTGT promulgated together with this Circular, not printed herein). The deadline for submitting the monthly declarations to the tax offices is the 10^th day of the following month.

The establishments must make full and accurate declaration in the tax declaration forms and take responsibility for the accuracy of the declaration. Where the business establishments have sent the declaration forms to the tax offices but then detect errors in the figures declared before the tax payment deadline, they must notify the tax offices thereof and concurrently make new declaration forms in replacement of the incorrect ones. If they detect errors after the tax payment deadline, the establishments must make adjustment in the declaration forms of the subsequent month.

The time for determining the arising turnover subject to VAT is the time when the business establishments have transferred the right to own, the right to use (in case of sale by mode of installment payment) goods or have provided services to the purchasers, regardless whether or not the purchasers have made payment therefor.

2. The declaration of payable tax in a number of specific cases where establishments pay tax by tax deduction method is as follows:

- For cases where business establishments produce and/or deal in both goods and services subject to VAT and not subject to VAT but cannot separately account the deductible input VAT, the deductible input VAT shall be calculated according to the percentage between the turnover from the sale of goods and services subject to VAT and total turnover from the sale of goods and services in the period. Monthly, the business establishments shall temporarily calculate the deductible input VAT according to the percentage arising in the declaration month; when making annual settlement, they shall readjust the deductible input VAT according to the actual percentage of the sale turnover of the settlement year.

- For cases where construction and installation establishments organize dependent units, which have no legal person status such as construction groups, teams, project management units, for carrying out the construction and installation in localities (provinces, centrally-run cities) other than the places where they are headquartered, the construction and installation units or their parent establishments shall have to declare the turnover and VAT payable at the localities where the projects or project items are being constructed at the rate of 3 % of the VAT-exclusive payment prices of the projects or project items. The construction and installation establishments shall have to declare and settle VAT according to the prescribed regime with the tax offices of the localities where they are headquartered. The VAT amounts already paid in the localities where projects are constructed shall be included in the VAT amounts already paid when the construction establishments made VAT payment declaration at their headquarters. Dependent cost-accounting units which build projects or project items in other localities shall use tax codes and invoices of their superior units; use VAT declaration forms (according to form No. 07C/GTGT promulgated together with this Circular, not printed herein). If construction and installation establishments sign construction and installation contracts (principal contractors) but then assign parts of the work or projects to other establishments (sub-contractors) for performance, the former must register and declare with the tax offices of the localities where the construction and installation projects exist, the construction and installation contracts and the subcontracts signed with other establishments, so that such establishments can declare and pay VAT in the localities for the project values they have performed. If the construction and installation establishments (subcontractors) fail to register, declare and pay tax, the construction and installation establishments (principal contractors) shall have to declare and pay VAT on the whole value of the projects under the contracts.

- In cases where construction and installation establishments carry out the construction and installation of such projects and/or project items which relate many localities as traffic roads, power transmission lines, water, petrol or gas pipe lines and cannot determine the arising turnover and expenditures of the projects in each locality, they shall register, declare and pay VAT in the localities where they are headquartered.

- Insurance business services are not subject to VAT imposed on the following amounts collected from provided services or sold goods:

Re-insurance compensation or other compensation amounts (if any); commission for re-insurance transfer and other revenues from re-insurance transfer; re-insurance charges and other revenues from re-insurance (including charges for taking re-insurance from insurance enterprises operating inside and outside the Vietnamese territory); revenues claimed from the third party.

Insurance business establishments shall only be allowed to deduct the input tax on insurance compensation expenses for expenditures accompanied by added value invoices.

- Establishments having their goods sold through agents (at the prices set by goods owners for commission) shall base themselves on the invoices made for goods sold through agents as prescribed at Point 5.6, Section IV, Part B of this Circular, to make annual tax payment declarations for such goods as provided for in this Circular.

Establishments being dependent cost-accounting units based in localities other than the places of the head-offices of their parent establishments, such as branches, shops directly selling goods or providing services, shall base themselves on input and output invoices of goods transferred and goods directly purchased by themselves to declare and pay VAT in the localities where they are based.

- Establishments being sale agents in various forms must declare, calculate and pay VAT on the goods sold through agency and commissions earned from agency activities.

Establishments being agents which sell goods at prices set by the goods owners for commission shall have to declare and pay tax on the basis of the sale prices set by goods owners if they sell goods at prices lower than the ones set by goods owners.

Establishments acting as gathering and purchasing agents in various forms must declare and pay VAT on the goods gathered and purchased through agency and their earned commissions (if any).

- For fixed assets, supplies or goods, which are purchased for use for the production of, and/or trading in, goods and/or services subject to VAT and the input tax thereon has already been deducted, but are now used for the production of, and/or trading in, goods and/or services not subject to VAT, or for other purposes (including the cases where fixed assets, supplies or goods have been mortgaged but then are sold to retrieve debts for financial or credit institutions), the establishments shall have to refund the deducted VAT on such fixed assets. The refunded VAT amounts shall be calculated on the value of the residual value (exclusive of VAT) of the fixed assets. For supplies and goods, the establishments shall have to refund wholly the deducted VAT amounts.

- For establishments which have used goods and/or services intended for internal consumption not in service of production and business, like transport, aviation, railways or post, not subject to output VAT calculation, they shall have to clearly specify the internally consumed goods and/or services and their control limits, which shall be approved in writing by competent bodies.

- Agents selling construction lotteries for commission shall not have to declare and pay VAT, which must be declared and paid by the construction lottery companies at their offices.

- For corporations and companies with attached establishments, the declaration of payable VAT shall be effected as follows:

+ Independent cost-accounting establishments and dependent cost- accounting establishments such as companies, enterprises, factories, branches or shops with incomplete legal person status, own seals and bank accounts and directly selling goods or services, must declare and pay VAT by deduction method in the localities where the business establishments are headquartered.

+ Where dependent cost-accounting establishments are based in localities other than the localities where the companies or corporations are headquartered, have no legal person status, own seals nor bank accounts, but directly sell goods or services and earn turnover therefrom, they must declare and pay VAT in the localities where their turnovers are generated at the rate of 2% of VAT-exclusive turnover for goods and services subject to the tax rate of 5% and at the rate of 3% of VAT-exclusive turnover for goods and services subject to the tax rate of 10%. The corporations or companies shall have to declare and settle VAT according to the prescribed regime with the tax offices in the localities where they are headquartered. The VAT amounts already paid by their dependent cost-accounting establishments in the localities shall be included in the paid VAT amounts when the companies or corporations declare and pay VAT at their head offices. The companies or corporations shall have to register for the grant of tax codes to their dependent cost-accounting establishments while the latter shall use invoices of their superior establishments and use VAT declaration forms (form No. 07C/GTGT promulgated together with this Circular, not printed herein).

+ Dependent cost-accounting establishments based in the same localities (provinces or centrally-run cities) where are based the head-offices of their superior establishments such as companies or corporations, the companies or corporations shall declare and pay tax for their dependent cost-accountings. If dependent cost-accounting have incomplete legal person status, own seals and bank accounts, directly sell goods or services, and declare fully input and output VAT, wish to declare and pay tax on their own, they must make registration for tax payment, the grant of dependent tax codes and use of separate invoices.

+ For dependent cost-accounting establishments based in localities other than the localities where the companies are headquartered, if they do not directly sell goods, thus generating no turnover and they cannot fully account the input tax, they shall have to declare and pay tax at the head-offices of the companies.

Corporations and companies shall base themselves on the situation of their own business organization and operation to determine and register specific subjects which must declare and pay tax at the tax offices of the localities where they conduct business activities. In case of necessity to apply VAT declaration and payment different from the above guidance, corporations and companies shall have to report such to the Finance Ministry for separate guidance.

- Financial leasing service business establishments shall not have to declare and pay VAT for financial leasing services. They shall have to declare and calculate tax for assets financially leased/purchased by other units, which are subject to VAT, according to the invoices prescribed at Point 5.14, Section IV, Part B of this Circular.

The establishments shall only declare VAT for the financial leasing services as provided for in this Circular according to forms No. 02/GTGT and No. 03/GTGT (not printed herein) set for leased assets subject to VAT, of which form No. 03/GTGT is only inscribed in the VAT index column 9- VAT with the VAT of the leased assets allocated in accordance with the added value invoices made for the turnover of the financial leasing service in the declaration period.

Where the lessees fail to perform the contracts, thus forcing the lessors to recover the assets, the lessors shall have to notify the lessees thereof and determine clearly the VAT amounts already paid and not yet paid. When the lessors continue to lease such assets to other units, they shall calculate the VAT amounts not fully collected for continued collection under the new contracts.

Where the assets are leased for a period of time before the lessors sell them to the lessees or other establishments, the lessors shall have to calculate VAT for the sold assets, make added value invoices and be only allowed to deduct the uncollected input VAT of the assets.

Where the lessor and the lessee jointly pool capital for the purchase of the assets and the lessor only collects the rent (principal and interest) corresponding to his/her/its contributed capital amount, the invoice on the purchase of assets for lease shall be managed by the lessor till the asset ownership right is transferred to the lessee. The VAT corresponding to the capital amount contributed by the lessor shall be included in the first-time receipt.

Where a financial leasing contract has been completed, the VAT amount has been paid fully by the lessee and the two parties agree to continue the lease, the invoice made for the subsequent turnover shall not include VAT.

- Business establishments which pay tax by tax deduction method and are engaged in gold, silver, gem, foreign-currency business activities subject to tax payment by method of direct calculation on added value, shall declare and pay VAT as follows:

+ For goods and/or services subject to tax calculation by deduction method, the establishments shall make detailed declarations (according to form No. 01/GTGT promulgated together with this Circular, not printed herein), on which index 18 shall be left blank.

+ The establishments make detailed declarations separately for gold, silver, gems trading activities and foreign-currency trading activities (according to form No. 07A/GTGT promulgated together with this Circular, not printed herein), inscribing relevant indexes of goods or foreign currencies.

On the basis of the above-said detailed declarations, the establishments shall sum them up and fill in the VAT declaration forms (according to form No. 01/GTGT promulgated together with this Circular, not printed herein). Such declaration forms shall only be inscribed in indexes 18, 38, 39, 40 and 41.

Monthly, the business establishments shall have to submit to the tax offices the general VAT declarations and the detailed VAT declarations enclosed with the list of vouchers on goods and/or services purchased and/or sold according to forms No. 02/GTGT, 03/GTGT and 04/GTGT (for gold, silver and foreign currencies purchased from sellers without invoices).

For such business establishments as banks with dependent cost-accounting units based in the same locality, such dependent units shall have to make the lists of goods and/or services purchased or sold for archival at the principal establishments. In synthesizing and making the list of goods and/or services purchased or sold, the principal establishments shall only sum up the general figures on the lists made by their dependent units.

- Air transport companies shall declare and pay VAT for air transport activities in the localities where they are headquartered.

- For business establishments which sell goods subject to VAT to the subjects at prices set by the State and enjoy the price and freight subsidies by the State, when selling such goods, they shall have to calculate the output VAT so as to declare and pay VAT for goods at the State-prescribed prices. The price and freight subsidies provided from the State budget shall be free from VAT and included by the establishments in their incomes for the calculation of enterprise income tax.

- For the offices of the corporations which are not directly engaged in business and not liable to pay VAT, when selling assets, even those subject to VAT, they shall not have to calculate, declare and pay VAT for the sold assets. When selling assets, the units shall have to make invoices according to form HD/TS/TL-3L set in Decision No. 55/2000/QD-BTC of April 19, 2000 of the Finance Minister promulgating the Regulation on management of the handling of State assets in administrative and non-business agencies (the invoices issued by the provincial/municipal Finance and Pricing Services). The production and business establishments which buy liquidated assets must not deduct the input VAT.

- Business establishments, upon their merger, dissolution, bankruptcy, ownership transformation, which sell assets being goods subject to VAT, shall have to calculate, declare and pay VAT. When selling goods, they must make invoices as prescribed, declare and pay VAT thereon.

In case of selling goods of enterprises under the provisions of Decree No. 103/1999/ND-CP of September 10, 1999 of the Government on assignment, sale, business contracting and lease of State enterprises, selling assets of bankrupt enterprises under the provisions of the Law on Enterprise Bankruptcy, VAT shall not have to be calculated, declared and paid for these assets.

3. Business establishments and importers that import goods subject to VAT shall have to make and submit VAT declarations upon each importation together with the import tax declaration with the import tax-collecting customs offices.

4. Import and export business establishments which undertake the consigned import of goods subject to VAT shall have to make VAT declaration as follows:

Establishments undertaking the consigned import of goods shall not have to declare and pay VAT for such goods but have to declare added value invoices made for the consigned import goods already returned to the import-consigning establishments with the tax offices on the list No. 02/GTGT together with invoices and vouchers of other goods and services sold. Invoices for consigned import goods are listed separately in the List.

5. The business establishments engaged in shipment trading shall have to declare and pay tax upon each goods shipment with the Tax Sub-Departments of the localities where they purchase such goods before transporting the goods away (except for the cases of VAT exemption under the Governments regulations). The payable tax amount for shipment goods shall be calculated by the method of direct calculation on the added value.

6. Business establishments dealing in assorted goods and/or services with different VAT rates shall have to declare VAT according to each tax rate prescribed for each kind of goods or service; if they cannot determine tax according to each tax rate, they must calculate and pay tax at the highest tax rate of the goods and/or services which the establishments deal in.

7. Where the goods/service sale turnovers, input tax and output tax do not arise, the business establishments shall still have to make and submit the declarations to the tax offices.

8. Business establishments trading in gold, silver, foreign currencies and/or gems and business establishments paying tax by the method of direct tax calculation on added value, which have effected the goods/service purchase and sale with adequate invoices, vouchers and book-entries, shall not have to pay VAT if the negative added value (-) arises when declaring the payable tax of the month; the negative added value shall be carried forward for clearing against the arising added value of the following month to calculate payable VAT and make the final settlement of tax for the whole year, but the negative added value of the tax settlement year must not be carried forward to the subsequent year.

9. For non-business units and other organizations, which are engaged in the production and/or trading of goods and/or services subject to VAT, they shall have to register, declare and pay VAT and the enterprise income tax as provided for by law. Where units cannot account and determine separately the costs and input VAT of the taxable goods and/or services, the payable VAT and enterprise income tax shall be determined on the basis of the turnover and added value percentage (%) and the percentage (%) of enterprise income calculated on turnover and determined by the tax offices for tax declaration and payment.

10. Foreign organizations and individuals engaged in production and/or business activities in Vietnam not in any form of investment under the Law on Foreign Investment in Vietnam (collectively referred to as foreign contractors) shall declare and pay VAT according to separate regulations of the Finance Ministry.

Where organizations or individuals in Vietnam act as goods or service sale agents for foreign organizations or individuals, such organizations or individuals in Vietnam must declare and pay VAT for goods and/or services for the foreign parties.

11. For goods imported directly by bid-winning establishments (including the form of entrusted import) and prescribed at Point 4, Section II, Part A of this Circular for sale to enterprises for used as fixed assets for the approved investment projects, the VAT must not be calculated and paid.

Upon delivery for sale or return of entrusted-import goods, establishments shall make invoices as provided for at Point 5.1, Section IV, Part B of this Circular.

12. The making of lists of goods and/or services purchased or sold for submission together with the monthly tax declarations to the tax offices in a number of cases shall be as follows:

- For goods and services which are retailed directly to consumers, such as electricity, water, petrol and oil, postal services, hotel services, food and drink catering, passenger transportation services and retail of other consumer goods and services, their retail turnovers may be summed up in general declarations; declaration in each separate invoice shall not be required.

- For goods and services which are purchased from retailers, the general list shall be made for each group of goods or services subject to the same tax rate; detailed listing in each separate invoice shall not be required.

III. VAT PAYMENT

VAT payers shall have to pay VAT in full and on time into the State budget.

The order and procedures for tax payment shall be effected as follows:

1. For business establishments which pay tax by tax deduction method shall, after submitting VAT declarations to the tax offices, have to pay VAT into the State budget. The deadline for paying tax in a month shall be the 25^th of the subsequent month.

For business establishments which have opened deposit accounts at banks, they shall carry out tax payment procedures by making papers on remittance of money into the State budget. The time of paying tax into the State budget shall be the date the banks receive and carry out the procedures to deduct and remit money from the establishments accounts into the State budget and record such in the papers on remittance of money into the State budget. For business establishments paying tax in cash, the time of paying tax into the State budget shall be the date the treasury or tax office receives the tax monies.

For business establishments with large and stable payable tax amounts of VND 200 million/ month or more, they shall pay the tax amounts arising in the month once every 5 or 10 days. When declaring the tax amounts payable for the whole month, if the temporarily paid tax amounts are not enough, the establishments shall pay the outstanding tax amounts into the State budget. The deadline for paying outstanding tax amounts is the 25^th of the subsequent month. The tax payment periods shall be determined by the tax offices and notified to the establishments for implementation.

Business establishments shall have to pay outstanding VAT amounts into the State budget within 10 days after the date of submitting the tax settlement reports; any overpaid amounts, if any, shall be deducted from the tax amounts payable in the subsequent period or shall be refunded if the establishments fall into the cases and subjects entitled to tax refund.

2. For business organizations and individuals (households) that pay VAT by direct calculation method and make tax declaration and payment according to the tax notices of the tax offices, the deadline for tax payment is the 25^th of the subsequent month. For business individuals (households) that pay tax in fixed amounts, the deadline for tax payment is the last day of the month when the tax must be paid.

For business individuals (households) (excluding subjects that pay tax according to declarations) that stay in areas far from the State treasury or conduct mobile and/or irregular business operations, the tax offices shall organize the tax collection and payment into the State budget. The time limit for the tax offices to pay the collected tax amounts into the State budget shall be three days (from the date the tax is collected); particularly for mountainous, island and difficult-to-access areas, such time limit shall be six days.

3. Business establishments and persons that import goods shall have to pay VAT on import goods upon each importation. The time limit for notice and payment of VAT on import goods shall coincide with the time limit for import tax notice and payment.

For goods not subject to import tax or subject to the import tax rate of 0%, the time limit for VAT declaration and payment shall comply with the provisions applicable to goods subject to import tax.

For non-commercial import goods, non-quota cross-border import goods, the form of tax payment notice shall not apply, VAT must be declared and paid immediately upon the importation thereof.

For import goods for which VAT is not required to be paid upon their importation such as raw materials imported for production and/or processing of export goods, gifts, donations, humanitarian aid, non-refundable aid goods, etc., if they are then delivered for sale or for use for other purposes, VAT declaration and payment must be made with the tax offices directly managing the establishments as applicable to goods traded in by the establishments.

4. Business establishments with fixed locations, when purchasing, buying or transporting import goods, must strictly comply with the regime on invoices and vouchers. If failing to produce fully invoices and vouchers as prescribed, they shall be handled for violations of regulations on invoices and vouchers, for tax-related administrative violations or have their goods (for goods imported without lawful invoices, vouchers) confiscated according to law provisions.

When paying tax, the business establishments shall be given by the tax offices or the State treasuries tax receipts or vouchers certifying the tax collection. Such receipts and vouchers are uniformly issued by the Finance Ministry. The tax offices shall have to guide and inspect business establishments in observing the regime of book keeping and making clear book entries of the VAT amounts inscribed on invoices and vouchers for use as basis for calculation of payable and deductible VAT amounts.

5. In a tax calculation period, if business establish-ments have the overpaid tax amounts of the previous period, such tax amounts shall be cleared against the payable tax amounts of the subsequent period; if the previous periods tax amounts are underpaid, the outstanding tax amounts must be fully paid.

Business establishments which move to other localities (urban districts, rural districts for tax payers directly managed by the Tax Sub-Departments; provinces, centrally-run cities for tax payers directly managed by the provincial/municipal Tax Departments) shall have to fully pay the outstanding VAT amounts and obtain certification thereof by the direct managing tax offices before their relocation.

For establishments which pay tax by tax deduction method, when relocating their offices, if having the input VAT amounts not yet fully deducted or overpaid, they shall be entitled to deduction or clearing against when making tax declaration and payment with their direct managing tax offices in the localities where they move to. Business establishments shall have to make general lists of the arising tax amounts, the already paid tax amount and the overpaid tax amounts and send them to the provincial/municipal Tax Departments for certification, serving as a basis for tax calculation and payment with the tax offices of the localities where they move to.

Business establishments entitled to VAT calculation by deduction method, if in the tax calculation period they have the deductible input tax amounts larger than the payable output tax amounts, may carry forward the input tax amounts not yet fully deducted into the subsequent tax calculation period. Where business establishments have made investment in new fixed assets and enjoy large deductible input tax amounts, they shall be entitled to gradual tax deduction or refund under to the provisions in Part D of this Circular.

6. VAT shall be paid into the State budget in Vietnam dong. Where business establishments have the turnover of goods and/or service purchase or sale in foreign currency(ies), such foreign currency(ies) must be converted into Vietnam dong at the average inter-bank exchange rates announced by Vietnam State Bank at the time of arising the goods and/or service purchase or sale amounts in foreign currency(ies) in order to determine the payable VAT amount.

IV. SETTLEMENT OF VAT

All business establishments (excluding medium- and small-sized business households which pay tax in fixed amounts) shall have to make and send their annual VAT settlements to the tax offices. They must make full and accurate declaration according to the indexes and date in the tax settlement form; send the tax settlements made according to forms No. 11/GTGT, 12A/GTGT and 12B/GTGT promulgated together with this Circular (not printed herein) to the tax offices in the localities where they have made tax payment registration.

The tax settlement year is calculated according to the calendar year. Where a business establishment is allowed to apply a financial settlement year other than the calendar year, it must still make VAT settlement according to the calendar year. The time limit for business establishments to submit their tax settlement to the tax offices shall be 60 days as from December 31 of the tax settlement year.

Where business establishments are merged, consolidated, divided, separated, dissolved, bankrupt, have their ownership transformed; assigned, sold, contracted or leased, for State enterprises, they shall still have to submit the tax settlements to the tax offices within 45 days as from the dates the decisions on the merger, consolidation, division, separation, dissolution, bankruptcy, ownership transformation, or assignment, sale, contracting or lease, for State enterprises, are issued.

Business establishments shall have to bear responsibility for the truthfulness of the tax settlement data; if business establishments make wrong reports in order to evade tax, they shall be sanctioned according to law provisions.

D. REFUND OF VAT

I. SUBJECTS ENTITLED TO AND CASES OF VAT REIMBURSEMENT

1. Business establishments which pay tax by tax deduction method shall be considered for tax refund in the following cases:

a/ They have input tax amounts left undeducted for three or more consecutive months (regardless of the accounting year).

The refundable tax amount is the input tax amount not yet fully deducted by the time of applying for tax refund. This case shall apply also to business enterprises making new or in-depth investments.

Example: Enterprise A declares VAT, having the input and output VAT as follows:

(Calculation unit: VND million)

According to the above example, Enterprise A has the accumulative input tax amount for three consecutive months larger than the output tax amount. Enterprise A is entitled to be refunded with the VAT amount of VND 150 million.

b/ If business establishments export goods and/or services in the month and have the input VAT amount thereon not yet deducted reaching VND 200 million or more, they shall be considered for tax refund every month. Where in a month the input VAT amounts not yet fully deducted cover also the input tax on goods and/or services sold at home, such input tax shall be also allowed to be included in the tax amounts refundable in the month.

For goods consigned for export, intermediate processing for export, the subjects entitled to tax refund shall be the establishments having goods consigned for export or conducting intermediate processing of goods for export. For consigned processing, the subjects entitled to tax refund shall be the establishments directly processing goods for export.

2. For newly invested business establishments which have made business registration and tax payment by tax deduction method but are still at the investment stage, have not yet started operating and thus their output tax has not yet arisen, if the investment duration has reached one year or more, they shall be considered for annual tax refund. If the refundable input VAT amount of their invested assets is valued at VND 200 million or more, the establishments shall be considered for quarterly tax refund.

Example 1: A business establishment was newly set up in 2003; during 2003, it invested VND 6 billion in the construction and installation and VND 2 billion in machinery and equipment.

- The input VAT on supplies used in the construction and installation is VND 400 million.

- The VAT on machinery and equipment is VND 200 million.

At the end of 2003, the project was not put into production and business operation, yielding no turnover, hence no payable VAT emerged yet. After making the 2003 VAT settlement report with the input tax amount determined to be VND 600 million, the establishment shall compile a dossier requesting the tax office to refund the VAT amount of VND 600 million to the establishment.

Where the establishments have the quarterly accumulated input tax amount larger than VND 200 million, they may request the quarterly tax refund.

3. For business establishments subject to pay tax by tax deduction method, if they have investment projects to build production establishments, which are at the investment stage, have not yet been put into operation, have not yet made business and tax payment registration, and the VAT on the goods and/or services used for such investment projects reaches VND 200 million or more, they shall be considered for the quarterly tax refund. They shall have to make separate declaration and compile tax refund dossiers for each investment project.

4. Business establishments shall settle tax upon their merger, consolidation, division, separation, dissolution, bankruptcy; or assignment, sale, contracting or lease, for State enterprises, and have any overpaid tax amounts or input VAT amounts not yet fully deducted.

5. Business establishments shall be refunded tax under decisions of competent bodies as prescribed by law.

6. The refund of paid VAT amounts for ODA-funded projects shall be as follows:

- Owners of projects funded with non-refundable ODA capital, projects funded with ODA loans or mixed ODA capital, which fall into the categories enjoying full or partial non-refundable investments from the State budget, shall be refunded the VAT on goods and services purchased and used for these projects. The refundable VAT amounts are those inscribed on added value invoices of the purchased goods and services.

- Where the above-said project owners are not allocated reciprocal capital from the State budget for payment of the VAT on goods and services purchased and used for their project; the project owners have signed contracts with the principal contractors being VAT payers by tax deduction method to supply goods and/or services at the VAT-exclusive prices, such principal contractors shall be allowed to calculate for deduction or refund the input VAT on the goods and/or services purchased and used for the projects.

Example 1: Construction Company A builds a construction work of Project B funded with non-refundable aid capital at the price determined in the contract signed with the project owner, with the VAT-exclusive construction and installation value of VND 4 billion. The Project B owner is not allocated reciprocal capital from the State budget for payment at the VAT-inclusive prices. The Project B owner directly buys home-made equipment and hands them over to Company A for installation; the VAT-exclusive purchase price of such equipment is VND 1 billion, VAT is VND 100 million.

If Company A receives the payment at the VAT-exclusive contracting price of VND 4 billion, it shall be entitled to deduct the input VAT of the purchased goods and supplies in service of the construction of Project B.

The Project B owner shall be refunded the input VAT of the purchased home-made equipment, which is VND 100 million.

Example 2: Construction Company M carries out the construction and installation of works of Project C funded with ODA loans and the project is entitled to non-refundable State budget investment, with the VAT-exclusive construction and installation value of VND 5 billion, 10% VAT of VND 500 million. Project B owner imports equipment and delivers them to Company M for installation, which have the VAT-exclusive import price of VND 2 billion and VAT of VND 200 million. The Project B owner shall be refunded the input VAT of VND 700 million.

The owners of ODA-funded projects that are entitled to tax refund must record the refunded VAT amounts as an increase in the budget capital allocated to the projects. When making the annual reciprocal capital plans for the projects, they shall not have to calculate the reciprocal capital plans for VAT payment.

Where project owners are allocated reciprocal capital from the State budget for payment to contractors at VAT-inclusive prices, such contractors shall, when selling goods and services to the projects, have to calculate, declare and pay VAT according to regulations.

7. Vietnamese organizations which use humanitarian aid and/or non-refundable aid money of foreign organizations and/or individuals for the purchase of goods in Vietnam for use as aid shall be refunded the already paid VAT inscribed on the added value invoices upon the goods purchase.

Example: The Red Cross Society is provided with VND 200 million as aid from international organizations for the purchase of humanitarian aid goods for people in the provinces hit by natural calamities. The tax-exclusive value of purchased goods is VND 200 million and the VAT is VND 10 million. The Red Cross Society shall be, as prescribed, refunded VND 10 million of tax.

Business establishments and organizations which are entitled to VAT refund under the provisions in this Section I must be the subjects that have been granted business registration certificates (investment licenses), have own seals, keep accounting books and vouchers according to the prescribed regime, and have deposit accounts at banks.

Where business establishments have already compiled dossiers requesting the tax refund, they must not transfer the input tax amounts requested to be refunded into the deductible tax amounts of the month following the time the tax refund dossiers are compiled.

Where in the month preceding the tax refund-requesting time, the establishments have some overpaid VAT amounts, they shall be allowed to add the overpaid VAT amounts into the VAT amounts requested to be refunded in the period; where the establishments have some underpaid tax amounts, they shall have to pay them fully into the State budget before being refunded tax.

8. For the subjects entitled to diplomatic privileges and immunities under the Ordinance on Diplomatic Privileges and Immunities, if purchasing goods or services in Vietnam, they shall be refunded the VAT inscribed on valued added invoices. For business establishments in Vietnam, which sell goods or services to these subjects, when making added value invoices, they must still calculate VAT. The subjects, goods, services, procedures and dossiers for tax refund in this case shall be as guided in Circular No. 08/2003/TT-BTC of January 15, 2003.

II. VAT REFUND DOSSIERS

1. The VAT refund dossiers for cases mentioned at Points 1a, 2 and 3, Section I, Part D of this Circular shall each comprise:

- The official dispatch requesting VAT refund, clearly stating the reasons therefor, the tax amount requested to be refunded, the refund time (made according to form No. 10/GTGT promulgated together with this Circular, not printed herein).

- The general declaration of the arising output tax amount, the deductible input tax amount, the already paid tax amount (if any), the input tax amount larger than the output tax amount requested to be refunded.

- The list of goods and services purchased and sold in the period, which relate to the determination of input and output VAT (forms No. 02/GTGT and 03/GTGT promulgated together with this Circular, not printed herein). Particularly for purchased goods and services for which special-type invoices inscribed with VAT-inclusive prices are used, form No. 05/GTGT promulgated together with this Circular (not printed herein) shall be used.

Where the monthly tax declarations have been made fully and accurately, which is compatible with the general declarations, the establishments shall not have to submit the list of purchased and sold goods and services of the months for which the tax refund is requested. In case of adjustment of the deductible input VAT and output VAT of the months during the tax refund period, the establishments shall have to declare the deductible input VAT, the arising output VAT for each month in the tax refund period; for the adjusted tax amounts, they must clearly explain the reasons therefor.

2. Tax refund dossiers for the cases prescribed at Point 1.b, Section I, Part D of this Circular:

- The documents specified at Point 1 of this Section.

- The report on liquidation of the contract on consignment of export or consignment of processing of goods for export (for cases where the contracts have been terminated) or the report on periodical comparison of debts between the export consignor and the export consignee (for cases of export or export processing consignment).

- The list of dossiers, signed and stamped by the establishment, clearly stating:

+ The serial number and date of the export declaration of export goods (for cases of export consignment, the serial number and date of the export declaration of the consignment consignee must be clearly stated).

+ The serial number and date of the export contract or the serial number and date of the export consignment or processing consignment contract for cases of export or export processing consignment).

+ The form of payment, serial number, date and amount of the voucher on payment for export goods or services.

b/ Tax refund dossiers for the cases where export goods or services are paid with goods shall each comprise:

- The documents specified at Point 1 of this Section.

- The list of documents, signed and stamped by the establishment:

+ The serial number and date of the goods or service export contract signed with the foreign party.

+ The serial number and date of the contract on purchase of import goods or services of the foreign party (called the import contract for short) for clearing against the export goods or services.

+ The serial number and date of the export declaration of the export goods.

+ The serial number and date of the import declaration of the import goods purchased from the foreign party for clearing against the export goods or services.

+ The serial number and date of the written certification with the foreign party of the money amount of clearing payment between the export goods or services and the import goods or services purchased from the foreign party.

Where there remains some difference after the clearing has been made between the value of the export goods or services and that of the imported goods or services, such difference must be paid via bank and the business establishments must also declare in the enclosed list the serial number and date of the via-bank payment voucher, and the paid amount.

Goods and service export contracts, contracts on import and purchase of goods or services from foreign parties must strictly comply with the provisions of the Commercial Law, clearly stating the quantities, categories and value of goods or services, the sale (purchase) prices, the processing charges (for cases of goods processing), the form of clearing between the value of export goods or services and that of import goods or services purchased from foreign parties.

Where business establishments produce or process goods for export and make clearing against import goods under long-term contracts with foreign parties, they must register with the tax offices their export contracts, import contracts and plans on payment with foreign parties. Periodically, the establishments must produce written certifications of the quantities and value of goods used for clearing with foreign parties.

c/ Tax refund dossiers for cases of on-spot export goods shall each comprise:

- The documents stated at Point 1 of this Section.

- The list of these documents, signed and stamped by the establishment.

+ The serial number and date of the on-spot export contract signed with the foreign party.

+ The serial number and date of the on-spot export and import declaration.

+ The serial number, date and amount of the voucher on via-bank payment for on-spot export goods.

3. Tax refund dossiers for business establishments with overpaid VAT amounts upon their merger, division, separation, dissolution, bankruptcy; ownership transformation; assignment, sale, contracting or lease, for State enterprises, shall each comprise:

- The official dispatch requesting the refund of VAT amounts already overpaid into the State budget.

- The decision on the merger, consolidation, division, separation, dissolution, bankruptcy, ownership transformation; assignment, sale, contracting or lease, for State enterprises, by the competent authorities.

- VAT settlement by the time of merger, consolidation, division, separation, dissolution, bankruptcy, ownership transformation; assignment, sale, contracting or lease, for State enterprises.

4. The tax refund dossiers for cases mentioned at Point 6, Section I of this Part shall each comprise:

- The documents stated at Point 1 of this Section [(particularly for investment-project owners eligible for tax refund, they shall only sum up in the general declarations the refundable input tax amounts and the list of purchased goods, services according to form No. 03/GTGT and form No. 05/GTGT (for purchased goods and services for which special-type invoices inscribed with VAT-inclusive prices are used)] and additionally send them to the tax offices (the first submission):

- The investment decision of the competent body (the copy certified by the establishment).

- The written certification by the competent agency that the project funded with non-refundable ODA (or funded with ODA loans and enjoying non-refundable investment from the State budget) are entitled to VAT refund (the copy certified by the establishment).

In case of refunding tax to principal contractors, the principal contractors shall have to additionally send (for the first time) the project owners documents confirming that the projects are not allocated reciprocal capital from the State budget for payment to the contracts at VAT-inclusive prices; or the payment prices according to the bidding results are exclusive of VAT, and proposing the VAT refund to the principal contractors.

5. The tax refund dossiers for the cases mentioned at Point 7, Section I of this Part shall each comprise:

- The documents stated at Point 1 of this Section (particularly for the general declarations, it shall only sum up the refundable input tax amounts and the list of purchased goods, services according to form No. 03/GTGT and form No. 05/GTGT (for purchased goods and services for which special-type invoices inscribed with VAT-inclusive prices are used) promulgated together with this Circular (not printed herein).

- The copy of the decision approving the aid amounts, issued by competent authorities (the Prime Minister, ministers, Peoples Committee presidents, heads of the ministerial-level agencies or Government-attached agencies, heads of mass organizations) as provided for in Article 5 of Decision No. 28/1999/QD-TTg of the Prime Minister (the copy certified by the establishment).

- The written certification by the Aid Reception Management Committee of the Finance Ministry of the aid amounts given by non-governmental organizations, clearly stating the names of the donors, the value of the aid amounts, the bodies receiving and managing aid money (the copy certified by the establishment).

III. RESPONSIBILITIES OF VAT REFUNDEES

1. To make the tax refund dossiers as provided for in Section II of this Part and send them to the tax offices. To make accurate and truthful declaration in tax refund dossiers and to take responsibility before law for the declared data.

2. Where their dossiers are unclear or incomplete. to supply supplementary documents or give explanation as requested by the tax offices.

3. To send tax refund dossiers as provided for in Section II of this Part to the tax offices; to fully keep at the establishments other documents related to tax refund and tax deduction; to fully supply invoices, vouchers and related documents used as a basis for determination of the refunded VAT amounts when the tax offices carry out the tax reimbursement examination and inspection at the establishments.

IV. COMPETENCE AND ORDER FOR SETTLEMENT OF VAT REFUND:

1. Competence to settle tax refund:

a/ The directors of the provincial/municipal Tax Departments shall consider and issue decisions on tax refund for VAT refundees prescribed in Section I of this Part.

b/ The Finance Minister or the General Director of Tax, as authorized by the Finance Minister, shall issue decisions on tax refund for other subjects and special cases.

2. The tax offices responsibilities in tax refund:

- To receive tax refund dossiers of tax payers.

- To examine the tax refund dossiers at the tax offices, classify the subjects eligible for tax refund so as to apply appropriate tax refund procedures and ensure the close management of tax refund.

- To notify in writing and send back the dossiers to the business establishments not eligible for tax refund; where a business establishment is eligible for tax refund but its dossier has not yet been compiled completely and properly, within 7 days (after receiving the dossier) to request in writing the business establishment to supplement or re-compile its dossier.

- To check the data and determine the refundable tax amounts of the subjects eligible for tax refund:

- To issue decisions to refund tax to the subjects eligible for tax refund according to form No. 13/GTGT promul-gated together with this Circular (not printed herein).

- To examine and inspect the tax refund at the establishments in cases of detecting doubtful signs in the dossiers or tax refundees violations of the tax legislation

3. Time limit for settlement of tax refund:

- The time limit for settlement of tax refund for the subjects liable to tax refund prior to examination shall be 15 days (three days for the tax refund cases prescribed at Point 6, Section I, Part D of this Circular) after the complete dossiers as prescribed are received.

- The time limit for settlement of tax refund for the subjects liable to examination and inspection prior to tax refund shall be 60 days after the complete dossiers as prescribed are received.

4. Responsibilities of the State Treasuries:

The State Treasuries of the provinces and centrally-run cities shall refund VAT to various subjects within the time limit of three days after receiving the tax refund decisions of the tax offices; in case of tax refund under the provisions at Point 1.b, Section IV of this Part, basing itself on the tax refund decisions of the Finance Minister, the spending proxies of the General Director of Tax, the Central State Treasury shall effect the tax refund.

5. VAT refund money shall come from the VAT Refund Fund. The management and use of the VAT Refund Fund shall comply with separate regulations of the Finance Ministry.

6. The number of days for considering and settling tax refund in the above cases is counted in working days.

E. TASKS, POWERS AND RESPONSIBILITY OF TAX OFFICES

1. To guide business establishments which have made the business registration to observe the regime of VAT registration, declaration and payment in accordance with the VAT Law.

To issue notices to remind business establishments which fail to comply with the regulations on tax registration, declaration and payment; to impose sanctions on tax-related administrative violations in cases where the establishments, though have been reminded, fail to comply with such regulations.

2. To issue notices to business establishments to explain, adjust, supplement or make re-declaration in cases their VAT declarations fail to state fully and correctly the payable tax amounts. Such notices of the tax offices must be sent to the tax payers 3 days before the tax payment deadlines.

Tax payment notices sent to organizations and business individuals (households) that pay tax by direct method on the payable tax amounts and the tax payment deadlines shall be made according to form No. 08A/GTGT or 08B/GTGT promulgated together with this Circular. Tax payment notices must be sent to the tax payers 3 days before the tax payment deadlines inscribed therein.

3. To issue late tax payment notices on the tax amounts and fine amounts of late payment under the provisions of Clause 2, Article 19 of the VAT Law to business establishments which fail to pay tax on schedule.

The time for computing fines on late monthly tax payment shall be as follows:

- From the 26^th of the subsequent month for tax payers that pay tax by tax deduction method and tax payers that pay tax by direct calculation method with declarations.

- From the 1st of the subsequent month for tax payers that pay tax in fixed amounts.

- From the date following the tax payment date as provided for by the Export Tax and Import Tax Law for import goods.

4. To apply measures to handle tax-related administrative violations or propose competent bodies to apply measures specified in Clause 4, Article 19 of the VAT Law, for cases of failing to pay taxes and fines according to the tax offices notices.

If the business establishments still refuse to pay taxes and fines despite the application of the said measures, the tax offices shall transfer the dossiers to the competent bodies for handling according to law.

5. To examine and inspect the tax declaration, payment and settlement by business establishments in accordance with the provisions of law.

6. To settle tax-related complaints in accordance the provisions of law.

7. To request tax payers to supply accounting books, invoices, vouchers and other dossiers as well as documents related to tax calculation and payment; to request credit organizations, banks and other concerned organizations and individuals to supply documents related to the tax calculation and payment.

8. To keep and use data and materials supplied by business establishments and other subjects according to the prescribed regime.

9. The tax offices may set the payable VAT for tax payers in the following cases:

a/ The business establishments fail to observe or improperly observe the accounting, invoice and voucher regimes.

For business households being VAT payers by method of direct calculation on added value and consignment business establishments which have not yet implemented or have not fully implemented the purchase and sale of goods and services with invoices or vouchers, the tax offices shall base themselves on their business situation to determine the added value and payable tax amounts by method of direct tax calculation on added value mentioned at Point 2.3, Section III, Part B of this Circular.

For business individuals and medium- and small-sized business households (called collectively the business households), with the fixed tax amounts payable every month being suitable to the business households, these tax levels shall be determined as a basis for stable tax collection for 6 or 12 months. The tax offices shall have to publicly announce the turnovers and tax amounts set for these subjects.

For medium- and small-sized business households which pay tax at fixed levels for each period, if having any changes in their business lines or scope during that period, they must declare these changes to the tax offices for consideration and adjustment of the fixed tax levels. Where business households fail to declare or declare untruthfully such changes, the tax offices shall be entitled to set the payable tax amounts suitable to the business situation. Households which cease to do business for 15 days or more in a month shall be considered for the 50% reduction of the payable tax amount of the month; if they cease to do business for the whole month, they shall be exempt from tax payment for that month.

For medium- and small-sized business households which pay tax at fixed levels, if they do not open business in a number of days eligible for tax reduction or exemption, they shall have to make written requests (according to a form set and guided by the tax offices), specifying the number of days when they did not open business, the reasons therefor and send them to the tax offices or the urban or rural districts. The tax offices shall examine whether it is true, if true, they shall settle the tax exemption or reduction according to regulations.

Medium- and small-sized business households shall be determined by the Tax Departments according to business lines or trades in a way suitable to the practical situation of each locality, and for the application of tax management and collection methods according to regulations

b/ The business establishments fail to make declaration or past the deadline for submission of declarations and though having been reminded thereof they still fail to do it, or they have submitted the tax declarations which, however, contain incorrect bases for determination of VAT amounts.

Where business establishments fail to submit the tax declarations or have declared incomplete and incorrect bases for determination of the payable VAT amounts such as output VAT (sale prices, tax rates) or deductible input VAT, the tax offices shall be entitled to base themselves on the business situation of the establishments and investigation data to set the sale prices, turnovers and payable VAT amounts, and notify the establishments thereof for implementation. If the business establishments disagree with the tax amounts set by the tax offices, they may lodge complaints with the superior tax offices or competent bodies but pending the settlement still have to pay the tax amounts set by the tax offices.

c/ They refuse to produce accounting books, invoices, vouchers and necessary documents related to VAT calculation;

d/ They are detected through examinations to have conducted business activities without business registration or without tax registration, declaration and payment.

The tax offices shall base themselves on documents on the investigation of the situation on business activities of the establishments or on the payable tax amounts of establishments engaged in the same business lines with equivalent business scopes to fix the payable tax amount for each business establishment in the cases mentioned above.

F. HANDLING OF VIOLATIONS

I. HANDLING OF TAX-RELATED VIOLATIONS

Tax payers that violate the VAT Law shall be handled as follows:

1. If failing to strictly comply with the provisions on business registration procedures, tax registration, declaration, payment and settlement, declaration and compilation of accounting books and preservation of vouchers and invoices related to tax calculation and payment, they shall be cautioned or fined, depending on the seriousness of their violations.

2. If they delay the payment of tax or fines inscribed in the tax notices, tax collection orders or sanctioning decisions, they shall, apart from fully paying the tax or fine amounts as prescribed by law, have to pay a fine equal to 0.1% (one thousandth) of the late paid amount per late day.

3. If they falsely declare or evade tax or commit frauds in tax refund, apart from fully paying the tax amounts as prescribed by the VAT Law, they shall, depending on the nature and seriousness of their violations, be subject to a fine from one to five times the falsely declared tax amounts; if they evade tax or commit tax frauds involving large amounts or have been sanctioned for tax-related administrative violations but continue to commit serious violations, they shall be examined for penal liability according to the provisions of law.

Business establishments which have committed fraudulent acts in making declarations for tax deduction or tax refund shall not be allowed to deduct the falsely declared tax amounts nor have them refunded; where the tax offices have refunded tax to them, the tax offices must retrieve the falsely declared tax amounts which have been refunded; for the VAT amounts stated in the tax refund dossiers, the business establishments must, after deducting the falsely declared tax amounts therefrom, carry them forward to the subsequent tax declaration and payment period to clear against the payable VAT amounts.

4. Failing to pay tax and/or fines, tax payers shall be handled as follows:

a/ Deducting the tax payers money deposited at banks, treasuries or credit institutions for payment of tax and/or fines.

Banks, treasuries and credit institutions shall have the responsibility to deduct the money from the deposit accounts of the tax payers to pay tax and/or fines into the State budget according to tax-related handling decisions of the tax offices or competent bodies before recovering debts;

b/ Keeping goods, evidences to ensure the full collection of tax and/or fines;

c/ Inventorying property according to the provisions of law in order to ensure the full collection of the outstanding tax and fine amounts.

The handling of the above-said VAT-related violations shall comply with the procedures and order prescribed in legal documents on handling of tax-related violations.

II. COMPETENCE TO HANDLE TAX-RELATED VIOLATIONS

Tax offices at all levels, upon detecting the violations of the VAT Law committed by business establishments, shall have to examine and clearly determine the acts of violation, the seriousness, the causes of the violations; responsibilities of organizations and individuals for such acts of violation, and compile dossiers as prescribed. Basing themselves on the provisions and levels of sanctioning administrative violations in the field of tax, the tax offices shall, within the scope of their respective sanctioning powers, issue sanctioning decisions or propose the superior tax offices or law bodies to handle the violations according to the provisions of law:

1. Heads of the tax offices directly managing the tax collection shall have the right to handle violations committed by tax payers prescribed at Point 1, Point 2, and sanction tax-related administrative violations prescribed at Point 3, Section I, Part F of this Circular.

2. Directors of the Tax Departments, heads of the Tax Sub-Departments which directly manage the tax collection may apply the handling measures defined at Point 4, Section I, Part F of this Circular according to the provisions of law and transfer the dossiers to the competent bodies for handling according to the provisions of law for cases of violation prescribed at Point 3, Section I, Part F of this Circular.

G. COMPLAINTS AND STATUTE OF LIMITATIONS FOR IMPLEMENTATION

1. Tax payers rights and responsibilities in making tax-related complaints:

Under the provisions of Article 23 of the VAT Law, organizations and individuals have the right to lodge complaints about wrong application of the VAT Law by tax officers or tax offices to their establishments. Their written complaints must be addressed to the tax offices that have issued the tax notices, tax collection orders or the handling decisions within 30 days from the date of receiving the tax collection orders or the handling decisions. Pending the settlement, the complaining organizations and individuals shall still have to pay the notified tax and/or fine amounts fully and on time. If they disagree with the decisions of the tax offices on the settlement of their complaints, or past the time limit of 30 days from the date of sending their complaints they still receive no settling opinions, the complaining organizations and individuals may further lodge their complaints to the superior tax offices or initiate lawsuits at court according to the provisions of law. Where business establishments lodge their complaints with the superior tax bodies, the complaint-handling decisions of the Finance Minister shall be the final ones.

The procedures and order for lodging complaints or initiate lawsuits and the consideration and settlement thereof shall comply current law provisions.

2. Responsibilities and powers of the tax offices in settling tax-related complaints

Under the provisions in Article 24 of the VAT Law, the tax offices of all levels, upon receiving written tax-related complaints from tax payers, shall have to consider and settle them within 15 days after receiving the complaints. For complicated cases which take time for inspection and verification, they should inform the involved parties thereof but the time limit for settlement must not exceed 30 days after the receipt of the written complaints; if the cases fall beyond their settling competence, they shall have to transfer the case dossiers or report them to the competent bodies for settlement and notify the involved parties thereof within 10 days from the date of receipt of the complaints. Tax offices that inspect, detect and conclude on tax frauds, tax evasions or tax-related mistakes and impose fines shall have to retrospectively collect or refund the tax amounts and/or fine amounts wrongly calculated within the last five years from the date of inspection and detection of tax frauds, tax evasions or tax-related mistakes. Where business establishments fail to make tax registration, declaration and payment, the time limit for collection of tax and fine arrears shall be counted from the date the business establishments commence their operation.

H. ORGANIZATION OF IMPLEMENTATION

I. ORGANIZATION OF VAT COLLECTION

1. The tax offices shall have to organize the VAT collection and refund for business establishments.

2. The customs offices shall have to organize the collection of VAT on import goods.

II. IMPLEMENTATION EFFECT

This Circular takes effect as from January 1, 2004 and replaces the Finance Ministrys Circular No. 122/2000/TT-BTC of December 29, 2000 guiding the implementation of the Governments Decree No. 79/2000/ND-CP of December 29, 2000 detailing the implementation of the VAT Law; the Finance Ministrys Circular No. 82/2002/TT-BTC of September 18, 2002 guiding the amendments and supplements to a number of contents of Circular No. 122/2000/TT-BTC of December 29, 2000 (above); the Finance Ministrys Circular No. 116/2002/TT-BTC of December 25, 2002 guiding the implementation of the Governments Decree No. 108/2002/ND-CP of December 25, 2002 on canceling the regulation on the input VAT deduction in percentage (%) for a number of goods and services; the Finance Ministrys Circular No. 84/2003/TT-BTC of August 28, 2003 guiding the application of VAT rates according to the List of import goods; the Finance Ministrys Circular No. 164/1998/TT-BTC of December 17, 1998 guiding VAT applicable to postal and telecommunication services. All regulations contrary to this Circular are hereby annulled.

- The application of VAT rates to a number of specific cases shall be as follows:

+ For construction and installation establishments having construction and installation contracts which are signed before January 1, 2004 at the VAT-inclusive prices and 5% VAT rate, if, by December 31, 2003, still having unfinished construction or installation works, they shall continue to enjoy the tax rate of 5% for the volumes or items of the construction and installation works which are still to be performed under the contracts.

+ For business establishments which have investment projects on building houses for sale, if they have signed house sale contracts at the VAT-inclusive prices and the VAT rate of 5%, have collected from the purchasers at least 30% of the contractual value before January 1, 2004, they shall be entitled to apply the tax rate of 5% to these contracts.

In January 2004, the construction and installation establishments engaged in building houses for sale must declare to the tax offices that directly manage them the lists of house construction, installation, sale or purchase contracts in order to apply the tax rate of 5% according to the above guidance.

- From January 1, 2004, the establishments producing and/or dealing in goods and/or services subject to special consumption tax shall be allowed to deduct the input VAT inscribed on added value invoices of raw materials and materials used for the production of, and/or dealing in, the goods and/or services subject to special consumption tax, which have been purchased before January 1, 2004. The time limit for VAT declaration and deduction for these invoices shall not exceed three months after the month such invoices arise.

Should any difficulties or problems arise in the course of implementation, the units and business establishments are requested to report them promptly to the Finance Ministry for study and additional guidance.