Thông tư 146/1999/TT-BTC

CIRCULAR

GUIDING THE TAX EXEMPTION AND REDUCTION PRESCRIBED IN THE GOVERNMENT’S DECREE No.51/1999/ND-CP OF JULY 8, 1999 DETAILING THE IMPLEMENTATION OF DOMESTIC INVESTMENT PROMOTION LAW No.03/1998/QH10 (AMENDED)

Pursuant to the current tax laws and tax ordinances;
Pursuant to the Governments Decree No.51/1999/ND-CP of July 8, 1999 detailing the implementation of Domestic Investment Promotion Law No.03/1998/QH10 (amended), the Ministry of Finance hereby guides the tax exemption and reduction prescribed in this Decree as follows:

A. OBJECTS OF APPLICATION

This Circular shall apply to objects defined in Article 2 of the Government’s Decree No.51/1999/ND-CP of July 8, 1999 detailing the implementation of Domestic Investment Promotion Law No.03/1998/QH10 (amended), including:

1. Companies, enterprises (referred collectively to as enterprises), irrespective of their ownership forms and sizes, including limited liability companies; joint-stock companies; partnerships; private enterprises; cooperatives, unions of cooperatives; and State enterprises;

2. Private, people-founded and semi-public educational and training establishments; private and people-founded medical establishments; and national culture establishments set up and operating according to laws;

3. Enterprises of political organizations, socio-political organizations and professional societies, which make business registration according to law provisions.

4. Business individuals and groups set up and operating under Decree No.66-HDBT of March 2, 1992 of the Council of Ministers (now the Government).

5. Vietnamese citizens, overseas Vietnamese and foreigners residing in Vietnam, who purchase stocks of and/or contribute capital to Vietnamese enterprises.

Subjects mentioned in Points 1, 2, 3, 4 and 5, Part A of this Circular shall be entitled to enjoy tax preferences according to Decree No.51/1999/ND-CP and guidances in Part B of this Circular only when:

- Their operations are in line with their registered business lines and trades.

- They have already registered tax payment with the tax agencies.

- They comply with the prescribed accountancy cost-accounting regime.

B. GUIDANCE ON TAX EXEMPTION AND REDUCTION

I. ENTERPRISE INCOME TAX EXEMPTION AND REDUCTION, AND TAX RATE PREFERENCES

1. Objects and dossiers to serve as basis for determination of tax preferences

a/ For investment projects on setting up new business establishments

Decree No. No.51/1999/ND-CP of July 8, 1999 of the Government stipulates: The newly invested and built production/business establishments must have founding decisions issued by the competent level and business registration certificates. The earlier set-up establishments, which are now divided, split, renamed or change their ownership forms shall not be entitled to the tax preferences prescribed herein. The newly built establishments that meet one of the conditions stipulated in Articles 15 and 16 of the Decree shall enjoy the enterprise income tax rate preferences, exemption and/or reduction according to the provisions of Articles 20 and 21 of the said Decree. Within 10 days after getting the investment preference certificates, the production/business establishments shall have to send their dossiers requesting their entitlement to the tax preferences already inscribed in the investment preference certificates to the tax agencies directly collecting taxes from the establishments. Such a dossier includes:

- The application requesting the enjoyment of the tax preference level inscribed in the investment preference certificate, with the signature of the lawful representative and seal of the unit.

- The founding decision and the business registration certificate (the notarized copy or the copy certified with the enterprise’s signature and seal).

- The project settlement report or the minutes on the project hand-over for use (if the project settlement report is not available).

- The investment preference certificate (the notarized copy or the copy certified with the enterprise’s signature and seal), issued by the Ministry of Planning and Investment or the People’s Committee of the province or centrally-run city.

- The tax registration declaration.

b/ For projects on investment in new production chains, business/production expansion or technology renovation.

For production/business establishments having projects on investment in new production chains, business/production expansion or technology renovation in the trades and fields eligible for investment preferences as defined in List A of the Government’s Decree No.51/1999/ND-CP of July 8, 1999, including investment in the establishment of new workshops; installation of new production chains; addition of new machinery and equipment to the existing production chains; installation of new machinery and equipment in replacement of all or part of machinery and equipment of the existing production chains; and application of new technologies to production, they shall enjoy enterprise income tax exemption and/or reduction preference levels defined in Article 23 of Decree No.51/1999/ND-CP.

Business establishments eligible for the said preferences shall have to send their dossiers to the tax agencies directly managing the collection of taxes from the establishments. Such a dossier includes:

- The investment preference certificate (the notarized copy or the copy certified with the enterprise’s signature and seal), issued by the Ministry of Planning and Investment or the People’s Committee of the province or centrally-run city.

- The written request of the business establishment, clearly stating the reasons for tax exemption and/or reduction:

+ For State enterprises, it shall be the investment study report already ratified by the competent level; the project settlement report or the minutes on the project hand-over for use (if the settlement report is not available).

+ For limited liability companies and joint-stock companies, it shall be the investment study report ratified by the members’ council or the company owner; the project settlement report or the minutes on the project hand-over for use.

+ For private enterprises, it shall be the contract and the final settlement of the contract on construction and equipment and machinery installation; where a project is built by the enterprise itself, it must produce vouchers and invoices on the procurement of materials, machinery and equipment as well as the actually used and installed machinery and equipment.

- The final account settlement report and the enterprise income tax settlement report for the pre-investment year and the post-investment year of the business establishment requesting the tax exemption and/or reduction.

Business establishments shall base themselves on the tax exemption and reduction levels to calculate and make separate cost-accounting of their increased incomes brought about by the new investment, the tax and/or reduction amount and the tax amount payable for each period as well as for the whole year, and make the final tax settlement with the tax agencies according to regulations. Where a business establishment fails to make separate cost-accounting of the taxable incomes increased by the investment in the production chains, production/business expansion or technology renovation, the increased taxable incomes shall be determined on the basis of the increased investment value over the total value of the existing fixed assets of the business establishment. Annually, when settling enterprise income tax, the tax agency shall officially determine the enterprise income tax exemption and/or reduction amount enjoyed by the enterprise.

c/ For BOT and BTO projects

Business establishments implementing BOT and BTO projects shall enjoy enterprise income tax exemption and reduction according to the provisions of Article 22 of the Government’s Decree No.51/1999/ND-CP of July 8, 1999. Such a business establishment shall have to send its dossier to the tax agency directly managing the tax collection, including:

- The written request of the business establishment.

- The investment preference certificate (the notarized copy or the copy certified with the enterprise’s signature and seal), issued by the Ministry of Planning and Investment or the People’s Committee of the province or centrally-run city.

- The BOT or BTO investment project approved by the competent level.

2. Order and competence to consider and decide enterprise income tax exemption and reduction

The tax agencies managing the collection of taxes from business establishments shall, after receiving the tax exemption and/or reduction dossiers from the business establishments entitled to the enterprise income tax preferences mentioned at Points 1a, 1b and 1c above, have to examine such dossiers.

Within 30 days after receiving the dossiers, the tax agencies directly managing the units shall have to issue decisions on the tax exemption and/or reduction as well as the tax exemption and/or reduction duration as inscribed in the investment preference certificates.

Where the dossier of a unit is detected invalid or the unit is none of the subjects stipulated in this Circular, the tax agency shall, within 15 days after receiving the dossier, have to reply the unit in writing.

Basing themselves on the tax exemption and reduction levels, the business establishments shall themselves determine the tax exemption and/or reduction amounts as well as the payable amounts, and make the declaration on tax payment for each period as well as the annual tax settlement with the tax agencies as prescribed. Annually, when settling the enterprise income tax, the tax agencies shall have to issue official notices on the payable tax amounts as well as the tax exemption and reduction amounts according to the investment preference certificates. If the tax amount temporarily paid by an establishment in the year is smaller than the amount stated in the official tax notice, the establishment shall have to fully pay the deficit tax amount according to the time-limit mentioned in the tax notice; where the establishment has paid tax in excess of the amount stated in the tax notice, the excessive amount shall be subtracted from the amount payable in the subsequent period. In the course of examining the tax settlement, if the tax agency detects that a business establishment has falsely declared or evaded tax, such establishment shall not only have to pay the tax arrears but also be sanctioned according to law; the tax arrears paid by the establishment shall not be entitled to exemption or reduction according to the investment preference certificate. Where the business establishments fail to strictly comply with the provisions of Point 6, Part A of this Circular, the tax agencies shall notify them of their disqualification for investment preferences.

II. ADDITIONAL ENTERPRISE INCOME TAX EXEMPTION

According to the provisions of Article 24 of Decree No.51/1999/ND-CP investors having investment projects stipulated in Article 15 or 16 shall not have to pay the additional enterprise income tax as prescribed in Clause 1, Article 10 of the Law on Enterprise Income Tax, which shall be effected by the tax agencies directly managing the units when settling the enterprise income tax.

III. EXEMPTION AND REDUCTION OF LAND-USE LEVY

Investors allotted land by the State having to pay the land-use levy for their production and business activities and entitled to the land-use levy exemption and/or reduction as stipulated in Article 17 of Decree No.51/1999/ND-CP shall have to send dossiers of application for land-use levy exemption and/or reduction to the tax agencies directly managing the collection of land-use levy for implementation. To enjoy land-use levy exemption and/or reduction, business establishments shall have to send their dossiers to the tax agencies directly managing the tax collection; such a dossier shall include:

- The business establishment’s written request.

- The investment preference certificate (the notarized copy or the copy certified with the enterprise�s signature and seal).

- The land allotment decision of the competent State agency.

The tax agencies directly managing the land-use levy collection shall, within 30 days after receiving the land-use levy exemption and/or reduction dossiers, have to issue decisions on the land-use levy exemption and/or reduction.

IV. LAND RENT REDUCTION AND EXEMPTION

Investors (having investment projects that meet one of the conditions stipulated in Article 15 of Decree No.51/1999/ND-CP of July 8, 1999) shall be entitled to land rent exemption and/or reduction according to Article 18 of Decree No.51/1999/ND-CP The investors shall have to send their dossiers to the tax agencies directly managing the land rent collection for implementation. Such a dossier includes:

- The business establishment’s written request, clearly stating the reasons for exemption and/or reduction.

- The investment preference certificate (the notarized copy or the copy with the enterprise’s signature and seal).

- The land rent contract.

The tax agencies directly managing the land rent collection shall, within 30 days after receiving the land rent reduction and/or exemption dossiers, issue decisions on the land rent exemption and/or reduction levels and durations.

V. AGRICULTURAL LAND USE TAX EXEMPTION AND REDUCTION

Investors entitled to the agricultural land use tax exemption and/or reduction stipulated in Article 19 of the Government’s Decree No.51/1999/ND-CP of July 8, 1999 shall have to send their dossiers to the tax sub-departments directly managing the collection of agricultural land use tax. Such a dossier includes:

- The business establishment’s written request

- The investment preference certificate (the notarized copy or the copy certified with the enterprise’s signature and seal).

- The land allotment decision of the competent agency.

Within 10 days after receiving a dossier on the exemption and/or reduction of agricultural land use tax, if deeming that such dossier meets the prescribed conditions, the tax sub-department directly managing the collection of agricultural land use tax shall have to send it together with a written proposal to the provincial/municipal Tax Department. The provincial/municipal Tax Department shall, within 20 days, have to submit the dossier to the People’s Committee of the province or centrally-run city so that the latter may issue a decision on agricultural land use tax exemption and/or reduction for each specific case.

VI. IMPORT TAX EXEMPTION FOR EQUIPMENT AND MACHINERY TO CREATE FIXED ASSETS

Under the provisions of Article 26 of Decree No.51/1999/ND-CP: investors having investment projects defined in List A (branches and trades eligible for investment preferences) or projects implemented in the regions defined in List B (regions meeting with socio-economic difficulties) or List C (regions meeting with special socio-economic difficulties) shall be exempt from import tax on the following goods which cannot be produced in the country or may be produced in the country but fail to meet the quality requirements:

1. The specialized equipment, machinery and transport means (included in the technological lines) which are imported to create fixed assets of enterprises or to expand their investment scales or renew technologies;

2. The specialized transport means for carrying workers.

The units entitled to investment preferences shall submit their applications and techno-economic explanations clearly stating the lists of machinery, equipment, specialized transport means (included in the technological lines) and specialized transport means for carrying workers to the agencies that have issued the investment preference certificates for certification.

Basing themselves on the investment preference certificates, and lists of machinery, equipment, specialized transport means (included in the technological lines) and specialized transport means for carrying workers, which have been certified by the investment preference certificate-issuing agencies, investors shall have to register with the customs offices of the border-gates where such machinery and equipment are to be imported so that the latter shall effect the import tax exemption for the establishments upon their actual importation (in case of the entrusted importation, the establishment that undertakes the entrusted importation shall produce the above-mentioned dossier together with the entrusted import contract to the customs office).

VII. ADDITIONAL TAX PREFERENCES FOR INVESTORS IN EXPORT GOODS PRODUCTION AND TRADING

In addition to the enterprise income tax preferences stipulated in Articles 21, 22 and 23, investors in export goods production and trading shall also be entitled to enjoy enterprise income tax preferences under the provisions of Article 27 of Decree No.51/1999/ND-CP To enjoy enterprise income tax reduction under the provisions of Article 27, business establishments shall have to send their dossiers to the tax agencies directly managing the tax collection; such a dossier shall include:

- The business establishment’s written request, which clearly states the reasons for enterprise income tax exemption and/or reduction as well as the exemption and/or reduction level.

- The investment preference certificate issued by the Ministry of Planning and Investment or the People’s Committee of the province or centrally-run city (the notarized copy or the copy certified with the enterprise’s seal).

The additional enterprise income tax preference levels stipulated in Article 27 shall be effected upon the annual final settlement of enterprise income tax; the tax agencies directly managing the collection of taxes from the business establishments shall have to decide the official enterprise income tax exemption amounts for business establishments after completing the final tax settlement. Where the business establishments make separate cost-accounting of their incomes eligible for tax exemption or reduction according to cases mentioned in Article 27, the tax agencies shall allow the temporary calculation of the exemption and/or reduction amounts when determining the amount payable in each period of the year.

VIII. TAX ON THE TRANSFER OF PROFITS ABROAD

Overseas Vietnamese, foreigners residing in Vietnam, foreigners making capital contribution or buying stocks under the provisions of Clause 4, Article 1 of Decree No.51/1999/ND-CP when transferring their earned profits abroad, shall have to pay only a tax amount equal to 5% of the money transferred abroad.

The way of determining the payable tax amount and the tax payment procedures shall comply with Section V, Part C (procedures for declaration, payment and reimbursement of tax on the transfer of profits abroad) of the Finance Ministry’s Circular No.99/1998/TT-BTC of July 14, 1998.

C. ORGANIZATION OF IMPLEMENTATION

1. Investment projects enjoying preferences under the Law on Domestic Investment Promotion before June 22, 1994 or the Government’s Decree No.07/1998/ND-CP of January 15, 1998 detailing the implementation of the Law on Domestic Investment Promotion shall continue enjoying the investment preferences for the remaining grace period according to their investment preference certificates. The profit tax preferences inscribed in the investment preference certificates shall be converted into the enterprise income tax preferences as from January 1, 1999. The turnover tax preferences inscribed in the investment preference certificates shall be effected till the end of December 31, 1998.

2. For projects having investment preference certificates under the Law on Domestic Investment Promotion before June 22, 1994 or the Government’s Decree No.07/1998/ND-CP of January 15, 1998 detailing the implementation of the Law on Domestic Investment Promotion, which are entitled to the additional preferences on exemption and/or reduction of the land-use tax, the land-use levy and land rent as well as the enterprise income tax and import tax preferences stipulated in Decree No.51/1999/ND-CP the investment preference certificate-issuing agencies shall, according to their competence, adjust or supplement preferences for the remaining grace period as from the date Decree No.51/1999/ND-CP takes effect.

3. After enjoying the tax preferences according to the provisions of Decree No.51/1999/ND-CP and guidances in this Circular, if there’s a change of investors, the new investors shall continue enjoying the tax exemption and/or reduction levels already stated in their investment preference certificates for the remaining period and have to fulfill all the old investors’ obligations in order to enjoy the tax exemption and/or reduction preferences.

In case of having enjoyed the tax preferences under the registered conditions of the invested project, if, during the course of implementation, an investor changes the registered conditions, thus leading to the change in the tax preference level under Decree No.51/1999/ND-CP he/she must, within 5 days, declare with the competent agency which shall readjust the investment preference certificate.

Any investor who commits deception in order to enjoy tax preferences or deliberately fails to declare the change of investment conditions so as to enjoy higher level of tax preferences shall, apart from having to repay all preferential tax amount, be administratively sanctioned or examined for penal liability according to law, depending on the seriousness of his/her violation.

Any tax and customs officials or other individuals who abuse their positions and powers to deliberately act against the provisions of Decree No.51/1999/ND-CP and the guidances in this Circular, thus causing damage to the State budget shall, depending on the seriousness of their violations, be disciplined, administratively sanctioned or examined for penal liability according to law.

The tax agencies at all levels shall have to strictly manage the investment projects under the Law on Domestic Investment Promotion, as well as the conditions investors have registered for each project in their respective localities, which are related to the tax exemption and reduction regime. They shall, on the one hand, create favorable conditions for the investors in the course of implementing the projects and, on the other hand, detect and prevent in time abusive acts to evade tax. The tax agencies shall have to open books to monitor and keep all documents related to the tax exemption and reduction consideration for each investment project and annually report to the Finance Ministry (General Department of Tax) on the temporary exemption and reduction tax amounts as well as the amount of actual tax exemption and reduction for subjects eligible for investment preferences under the Law on Domestic Investment Promotion.

4. This Circular takes effect as from July 23, 1999, which is the effective date of Decree No.51/1999/ND-CP and replaces Circular No.43/1998/TT-BTC of April 4, 1998 of the Finance Ministry guiding the tax exemption and reduction under the Governments Decree No.07/1998/ND-CP which details the implementation of the Law on Domestic Investment Promotion (amended).

The business establishments, branches and localities shall promptly report to the Ministry of Finance any problems arising in the course of implementation for consideration and additional guidance.