Circular No. 175/1998/TT-BTC of December 24, 1998 guiding the implementation of Government Decree No. 102/1998/ND-CP of December 21, 1998 which amends and supplements a number of articles of Government Decree No. 28/1998/ND-CP of May 11, 1998 detailing the implementation of the value added tax law đã được thay thế bởi Circular No. 122/2000/TT-BTC of December 29th, 2000, on value added tax providing guidelines for implementation of Decree 79/2000/ND-CP of the Government dated 29 December 2000 making detailed provisions for implementation of Law on Value Added Tax (VAT). và được áp dụng kể từ ngày 01/01/2001.
Nội dung toàn văn Circular No. 175/1998/TT-BTC of December 24, 1998 guiding the implementation of Government Decree No. 102/1998/ND-CP of December 21, 1998 which amends and supplements a number of articles of Government Decree No. 28/1998/ND-CP of May 11, 1998 detailing the implementation of the value added tax law
THE MINISTRY OF FINANCE
SOCIALIST REPUBLIC OF VIET NAM
Hanoi, December 24, 1998
GUIDING THE IMPLEMENTATION OF GOVERNMENT DECREE No. 102/1998/ND-CP OF DECEMBER 21, 1998 WHICH AMENDS AND SUPPLEMENTS A NUMBER OF ARTICLES OF GOVERNMENT DECREE No. 28/1998/ND-CP OF MAY 11, 1998 DETAILING THE IMPLEMENTATION OF THE VALUE ADDED TAX LAW
Pursuant to the Value Added Tax (VAT) Law, and Government
Decree No. 28/1998/ND-CP of May 11, 1998 detailing the implementation of the VAT Law;
Pursuant to Decree No.102/1998/ND-CP of December 21, 1998 of the Government amending and supplementing a number of articles of
Decree No.28/1998/ND-CP of May 11, 1998 of the Government;
The Ministry of Finance hereby provides guidance amending and supplementing a number of points in Circular No.89/1998/ND-CP of June 27, 1998 of the Ministry of Finance guiding the implementation of Government Decree No.28/1998/ND-CP of May 11, 1998 as follows:
I. REGARDING SUBJECTS NOT LIABLE TO VAT MENTIONED IN PART A, ITEM II
1. To add to Point 4: Non-collection of VAT from the chartering of foreign airplanes, drilling platforms and ships, which can not be manufactured at home, for production and/or business activities.
- For the chartering of airplanes, regardless of chartering forms ( with or without pilots).
- For drilling platforms, excluding supplies and raw materials used for drilling activities.
- For the chartering of ships which cannot be built at home, the certification of the Ministry of Communications and Transport or the specialized management body is required.
Establishments chartering foreign equipment without VAT mentioned above shall have to produce the charter contracts signed with foreign parties to the tax authorities of the localities where the establishments have conducted business activities.
2. To add to Point 7: Credit services not liable to VAT shall be the lending activities under the principle of capital reimbursement as prescribed by law
For bank guaranty service activities, if the guarantors perform the obligation of loan payment for customers, when the latter have failed to fulfilled
their committed obligations, the customers shall have to acknowledge the debts and repay the credit institutions the sum the latter paid for them, such service is determined as the credit service not liable to VAT.
II. BASES FOR CALCULATION OF TAXES ON GOODS AND SERVICES MENTIONED IN ITEM I, PART B, AS FOLLOWS
1. To add to Point 3 on prices for calculation of tax on goods and/or services
used for exchange, internal use, donation, gifts, presents:
- For goods given by business establishments to customers as donation, gifts, presents, VAT is calculated like for goods sold. For goods used for sale promotion, marketing and/or advertisement, without the calculation of output VAT, deduction is made only for the input VAT on such volume of goods corresponding to the sale promotion and/or advertisement goods value calculated into other expenses in percentage (%) as compared to the total reasonable expenses in calculating the taxable enterprise income as prescribed for enterprises.
Example: An enterprise manufacturing and trading in electronic appliances has used motorbikes and a number of other products as sale promotion prizes to customers. In 1999, the total production and business cost is VND 120 billion, inducing VND 12 billion as other expenses and VND 0.8 billion as the input VAT on the sale promotion and advertisement goods.
If the percentage of the enterprise's other expenses is controlled at 5% against the total expense, it shall be:
VND 120 billion x 5% = VND 6 billion
So, the enterprise must not deduct VND0.8 billion as the input VAT on advertisement and/or sale promotion but can only deduct a maximum amount corresponding to the advertisement and/or sale promotion goods value calculated in other expenses (VND6 billion).
- For goods transferred from warehouses to warehouses and for materials and semi-finished products taken from warehouses of a production/ business establishment for follow-up production process, VAT shall not be calculated and paid.
2. To add to Point 8 on prices for calculation of VAT on goods sale and/or purchase agency commissions:
- For agents that purchase or sell goods at the prices set by the goods owners, they shall enjoy commissions only, which shall be accounted into the goods owners' expenses and not be subject to VAT. The VAT on goods sold out shall be declared and paid by goods owners.
- Those agents entrusted to purchase or import goods, when delivering such goods to the goods owners, shall have to make VAT invoices and inscribe
thereon the output VAT on the delivered goods in strict accordance with the VAT amount on the imported or purchased goods (if taxed).
- For entrusted export agents: The entrustee shall have to send to the goods owner the copy of the export declaration form with the customs authority's certification of the volume of actually exported goods so that the goods owner declare the output VAT thereon.
For branches, attached stores and agents, which sell goods subject to special consumption tax for production establishments at the prices set by the latter which have already declared and paid the special consumption tax calculated on the selling prices of branches, stores and/or agents, such branches, stores and/or agents shall not have to declare and pay VAT on these goods and the commissions they have enjoyed.
Where agents buy and/or sell goods with immediate lump-sum payment and not at the set prices and in other forms, VAT must be calculated and paid for goods bought in and/or sold out.
3. To add to Point 7:
- For self-help capital construction activities with some construction parts having business results accounted separately, VAT shall be calculated; where business results are not accounted separately, VAT shall not be calculated. The input VAT of self-made construction works shall be deducted into VAT of sold goods and services liable to VAT in accordance with tax deduction regulations.
- With regard to agricultural enterprises having the business results of agriculture-related capital construction accounted separately from the follow-up agricultural production and business processes, the capital-construction process generating agricultural products not liable to VAT shall not be imposed with output VAT and the input VAT shall not be deducted or reimbursed.
4. To supplement the tax calculation prices for a number of goods and services mentioned in Point 10 as follows:
- For tourist services in the form of tours with the package prices stated in the contracts signed with customers, the package prices are determined as the prices already having tax, which shall be used for calculation of VAT and turnover of the business establishments. Where the package prices include non-VAT amounts such as the air fare expense for transporting tourists from foreign countries into Vietnam and/or from Vietnam to foreign countries and expenses for meals, accommodation and visits abroad (if with valid vouchers), such expenses shall be deducted from (turnover) prices used for VAT calculation.
Example 1 :
Ho Chi Minh City Tourist Company, performs a package tourist contract signed with Thailand for 50 tourists to stay in Vietnam for 05 days with the total payment amount of US$32,000. The Vietnamese party shall have to pay all costs of air tickets, meals, accommodation and visits according to the agreed program; of the amount, the air tickets from Thailand to Vietnam and back to Thailand cost US$10,000
The output VAT under this contract is determined as follows:
+ Turnover liable to VAT is: US$32,000 - US$10,000 = US$22,000
+ The output VAT (calculated according to the 50% reduction rate):
1 + 10%
+ The unit's turnover determined for the calculation of business results is:
US$32,000 - US$2,000 = US$30,000
+ The deductible input VAT shall be determined according to the regulation on payable VAT calculation.
Example 2: Hanoi Tourist Company, performs a contract for sending tourists from Vietnam to China at the package price of US$400 per person for 5 days; the Hanoi Tourist Company has to pay to the Chinese Tourist Company US$300 per person, so the taxable turnover of the Hanoi Tourist Company is US$100 per person (US$400 - US$300).
- For pawning services, the taxable turnover is the amount collected from such activities, including the collectible interests on loans for pawnage and the difference from the sale of pawned goods (the turnover from the auction of goods minus (-) the amount to be paid to pawner (if any), minus (-) the loan amount).
This turnover amount is determined as the turnover already having VAT, which shall serve the calculation of output VAT and turnover of the business establishment.
A pawnage company has, during the taxation period, a pawnage turnover of VND110 million.
+ The output VAT is determined as follows:
VND 110 million
VND 10 million
1 + 10%
+ The unit's pawnage turnover determined for the calculation of business results shall be:
VND 110 million – VND 10 million = VND 100 million
- For books, newspapers and magazines sold at the distribution prices (surface price) according to the Law on Publication, such prices are determined as having already included VAT for the calculation of VAT and turnover of the establishment (for categories liable to VAT). Where they are sold not at the surface prices, VAT shall be calculated on the sale prices.
Example: A literature publisher sells literary books to a book distribution company.
The surface price (already with VAT) is VND 6,300 per book.
The distribution fee (25%) is VND 1,575 per book.
The price for VAT calculation is determined as follows:
- The price for calculation of VAT at the publication stage:
VND 6,300 – VND 1,575
VND 4,500 per book
1 + 5%
+ VAT is VND 4,500 per book x 5% = VND 225 per book.
+ The total payable amount is:
VND 4,500 per book + VND 225 per book = VND 4,725 per book.
- The price for calculation tax at the distribution stage:
VND 6,000 per book
1 + 5%
+ The output VAT: VND6,000 per book x 5% = VND300 per book.
+ The payable VAT is:
VND 300 per book – VND 225 per book = VND 75 per book.
(assuming that there is no other input VAT).
5. The VAT rates applicable to a number of goods and services shall be as follows:
- Auditing, accountancy, surveying or designing services: the tax rate of 10%.
- Labor export services such as compiling dossiers, carrying out procedures, medical examinations with charge, the tax rate of 10% shall apply.
- Liquidated property, discarded materials, faulty products, which are sold out, the VAT rates for such commodities shall apply.
- Internet information provision service, the tax rate of 10%.
- For export goods which are not liable to VAT, the tax rate of 0% (zero per cent) shall not apply
Example: Goods items liable to special consumption tax, which are exported directly by production establishments, unprocessed agricultural products exported directly by production establishments.
III. TO SUPPLEMENT THE SECTION GUIDING VAT-CALCULATING METHODS MENTIONED IN ITEM III, PART B, CIRCULAR No.89/1998/TT-BTC:
1. To add to Point 1 on deductible input VAT the following:
- For production establishments where the VAT calculation by method of tax deduction applies, the input tax shall be deducted at fixed percentage (%) in a number of following cases:
+ Iron and steel manufacturing establishments which gather iron and steel scraps to be used as raw materials for their production shall be entitled to 5% deduction calculated on the value of purchased iron and steel scraps. Where an establishment organizes scrap-purchasing units and places with dependent accounting, the deduction shall be made at the production establishment. The basis for deduction is the invoice of iron and steel scrap purchases. For enterprises that assign their attached units to buy iron and steel scraps at the enterprises' fixed prices for supply to production units of such enterprises, the purchasing units shall be entitled to deduction at the above-said percentage for volume of iron and steel scraps supplied to production units. When selling discarded iron and steel to production establishments, the selling party shall have to issue VAT invoices, the tax calculation prices shall be reduced correspondingly to the fixed amount of tax deduction.
+ Marine products processing establishments that buy marine products from fishermen shall be entitled to 5% deduction calculated on the value of purchased marine products.
+ Establishments engaged in insurance business activities shall be entitled to 5% deduction of input tax, calculated on the amount of indemnities actually paid to clients without VAT invoices for insurance operations liable to VAT (indemnities incurred by non VAT insurance services and indemnities paid according to vouchers of goods purchases and service charge payment of indemnity-receiving organizations and individuals, shall not be deducted according to the above percentage (%).
+ Trade organizations and enterprises that buy goods liable to special consumption tax from production establishments for sale shall be entitled to 3% deduction calculated on the prices of purchased goods.
The deduction of input tax according to the above stipulations shall not apply to the following cases:
+ Where production establishments buy this kind of goods as raw materials for export goods production or processing;
+ Where business establishments buy goods liable to special consumption tax from production establishments for export or catering business establishments; Where goods liable to special consumption tax are bought from trade establishments.
+ Where insurance services do not apply the insurance indemnities of non-VAT insurance services.
Example 1: An iron and steel manufacturing company has, in the taxation period, a sale turnover of VND100 million, the output VAT: VND 10 million.
The value of materials and goods bought in the period for iron and steel production is VND 60 million, including VND 30 million being accompanied with VAT invoices with the input tax amount being VND 03 million; and VND 30 million for the purchase by accumulated gathering of iron and steel scraps.
The payable VAT is determined as follows:
- The input VAT deductible for iron and steel scraps bought through accumulated gathering is:
VND 30 million x 5% = VND 1.5 million.
- The payable VAT is:
VND 10 million - (VND 03 million + VND 1.5 million) = VND 5.5 million.
The value of iron and steel scraps bought in, which is accounted into expenses for the determination of business results, is:
VND 30 million – VND 1.5 million = VND 28.5 million.
Example 2: Insurance Company A has, in the taxation period, the insurance turnover as follows:
- The premiums liable to VAT: VND 100 million; the output VAT VND 10 million.
- The premiums not liable to VAT: VND 150 million.
- The value of purchased goods and services: VND100 million the input VAT: VND 10 million (unable to account the taxable and non-taxable insurance services separately).
- Insurance indemnities: VND 60 million (in which the payment amount corresponding to non-VAT insurance services is VND 40 million).
The payable VAT is determined as follows:
- The input VAT deductible for the amount of indemnities paid to customers who have participated in insurance services liable to VAT:
VND 40 million x 5% = VND 2 million.
- The deductible input VAT on purchased goods and services corresponding to the ratio between the taxable turnover and the total turnover is:
VND 100 million
VND 10 million
VND 4 million.
VND 100 million + VND 150 million
- The payable VAT:
VND 10 million - (VND 2 million + VND 4 million) = VND 4 million
Establishments buying goods items eligible for input tax deduction according to the above rates shall have to make a list of purchased goods as prescribed; regarding expenses for insurance indemnities, a list thereof shall have to be made according to vouchers on actual expenses.
2. To add to the end of Item III the following:
For business establishments subject to VAT calculation by method of tax deduction which trade in gold, silver, precious stones and/or foreign currencies and apply the method of direct calculation on added value, the establishments shall have to account separately the VAT payable for goods and/or services according to each business activity and to separate tax calculating method.
Where separate accounting is unable, the input goods and/or services are determined according to allocation and the deductible input VAT corresponding to the turnover from each activity. On the basis of determining payable VAT according to each tax calculation method, the establishment shall make the declaration on tax payment for the entire establishment according to the set form.
Business establishments paying VAT by the method of direct calculation on added value must not account the value of the property bought, investment and constructions as fixed assets into the turnover of purchased goods and/or services for the calculation of added value.
3. To add to Point 5, Item III, on invoices and vouchers for the purchase and/or sale of goods and services:
Where business establishments buy goods from non-business people and/or organizations without prescribed invoices and vouchers, they shall have to
make lists of purchased goods according to form 04/GTGT issued together with Circular No.89/1998/TT-BTC of the Ministry of Finance (with the names of such lists and norms therein being amended in line with the category of purchased goods).
IV. ADDITIONAL GUIDANCE ON A NUMBER OF POINTS REGARDING THE VAT REGISTRATION, DECLARATION AND PAYMENT AS STATED IN PART C, CIRCULAR No.89/1998/TT-BTC OF THE MINISTRY OF FINANCE AS FOLLOWS
1. Business establishments shall have to register, declare and pay VAT in localities where they carry out business activities (namely provinces and centrally-run cities).
2. Organizations and individuals providing consultancy, survey or designing services shall register, declare and pay tax with the tax offices of the localities where they are headquartered.
3. Construction enterprises and units which contract to build projects in localities other than the localities where they are headquartered shall have to
declare and pay VAT at localities where the projects are being built. The units undertaking the construction shall have to declare and pay VAT. Where construction units of enterprises fail to meet the registration condition, such enterprises shall have to declare and pay tax for them according to tax notices of the tax offices. The amount of already paid tax may be settled all together at such enterprises. In cases where it is unable to determine the input VAT and the output VAT at the construction sites or the registration is improperly made, the tax office may fix the payable VAT amount and notify the unit thereof.
4. For non-business units and other organizations such as television and radio stations, schools, hospitals, armed forces units..., engaged in the production or trading of goods and services liable to VAT, they shall have to register, declare and pay VAT and enterprise income tax according to law. Where units fail to separately account and determine the costs and input VAT of taxable goods and services, the payable VAT and enterprise income tax shall be determined on the basis of turnover and the percentage (%) of added value and the percentage (%) of enterprise income calculated on the turnover determined by the tax offices for tax declaration and payment. When writing the invoices of goods sales or service payment, units shall have to write clearly the non-VAT prices and VAT as prescribed.
V. REGARDING VAT REIMBURSEMENT PROVIDED FOR IN PART C, ITEM I
To amend, supplement Point 1:
Business establishments paying to tax by tax deduction method shall be considered for tax reimbursement if the amount of deductible input tax for three consecutive months is larger than the output tax amount. Business establishments that export goods in large quantities according to seasons or each period shall be entitled to be considered for VAT reimbursement for each period if the arising input VAT amount is larger than the output VAT amount.
The dossiers and procedures requesting tax reimbursement shall comply with guidance in Circular No.89/1998/TT-BTC.
VI. REGARDING VAT REDUCTION PROVIDED FOR IN PART H, ITEM II
1. To supplement, amend Point 1 and Point 2 on VAT reduction subjects and levels as follows:
- For production, construction, transport, trade, tourist, service and catering enterprises which have, during the first years of application of VAT, suffered from losses due to the fact that the payable VAT amount is larger than the amount of turnover tax as previously calculated, they shall be considered for reduction of payable VAT amounts.
- The amount of VAT reduction for each business establishment shall correspond to the loss amount due to the above-said cause but the maximum shall not exceed the VAT amount to be paid by such business establishment for the year when tax reduction is considered.
Example: Trade establishment A has the value of VND5 billion for goods lying in stocks in 1998 and carried forward to 1999 goods purchased during the year achieving VND53 billion, the input VAT is VND4 billion. The volume of goods sold out during the year is valued at VND62 billion; the output VAT is VND6.2 billion the original prices of sold goods and the business costs accounted in the year to calculate business results amount to VND63 billion.
The payable VAT is determined as follows:
- The payable VAT is:
VND 6.2 billion – VND 4 billion = VND 2.2 billion.
- The business loss
VND 62 billion – VND 63 billion = - VND 1 billion.
- Determining tax change as the cause of loss:
+ The turnover tax paid according to the previous turnover tax rate (assuming that the sold goods are subject to the 2% turnover tax rate calculated on selling prices with tax) is:
(VND 62 billion + VND 6.2 billion) x 2% = VND 1.364 billion
+ The payable VAT is larger than the turnover tax.
VND 2.2 billion – VND 1.364 billion = VND 0.836 billion.
So, Establishment A is entitled to VAT reduction consideration and the amount to be considered for VAT reduction in this example is VND0.836 billion (corresponding to the amount of loss caused by the fact that the payable VAT is higher than the amount of payable tax calculated according to the previous tax rate).
2. Establishments trading in the following goods and services, when calculating the output VAT, is entitled to 50% reduction of the prescribed tax rates.
- Pit coal.
- Mechanical ploughs, tractors, mechanical pumps, machine tools, force engines.
- Caustic soda (NaOH); Sodium hypochloxide (Na(OCI)); Calcium hypochloxide (Ca(OCI)2): Aluminum hydroxide (Al(OH)3); Hydrogen chloride (HCI); Liquid and gaseous chlorine Clo (Cl2); Sodium silicate (Na2SiO3);
- Trade establishments' goods liable to special consumption tax paid by method of purchase and sale tax deduction.
Hotels, tourism, food catering.
- Software services and software production (the tax rate of 10% now cut by 50%).
Business establishments, when selling goods and services, shall have to write VAT of such goods and services on VAT invoices according to the reduced tax rates.
Example 1: Engineering Company A sells a tractor at VND20 million; the VAT is calculated and written on VAT invoices as follows:
- VAT determined according to the reduced rate as follows:
VND20,000,000 x 10% = VND2,000,000, reduced by 5%; to be collected: VND1,000,000.
- The VAT is inscribed:
+ Sale price. VND 20,000,000.
+ VAT: VND 1,000,000.
+ Payment price: VND 21,000,000.
For tourist service, hotel and catering services, the 50% reduction is determined on the basis of goods and services at the tax rate of 20%; other goods and services of business establishments, which are in the 10% tax-rate group shall not be entitled to the 50% reduction according to this stipulation.
Example 2: Hanoi Hotel deals in hotel bed rooms and souvenir sale, the tax rate of 20% for hotel room business is now reduced by 50% (to only 10%). For souvenir sale, the tax is still calculated according to the prescribed rate for each category of goods.
Example 3: A trade company buys cigarettes in packs with special consumption tax on credit from a production establishment for sale. When calculating payable VAT of this goods category, the output tax is calculated at the reduced tax rate which is reduced by 50% as compared to the prescribed rate and the input tax shall be entitled to 3% deduction calculated on the purchase prices of the production establishment (besides the input VAT amount stated in the VAT invoice of transport and services bought for business activities)
- The purchase price of the cigarette manufacturing company (calculated on 1,000 packs) is VND 5,800,000.
- Its selling price: VND 6,000,000.
- VAT calculated at the 10% rate on the selling price, reduced by 50%, is:
VND 6,000,000 x 5% = VND 300,000.
- The selling price with VAT is:
VND 6,000,000 + VND 300,000 = VND 6,300,000.
- The input tax with 3% deducted:
VND 5,800,000 x 3% = VND 174,000
- The remaining VAT to be paid:
VND 300,000 – VND 174,000 = VND 126,000
(If the input VAT on goods and services bought from outside for business activities is deducted, the payable VAT amount shall be smaller than VND126,000)
The establishment may readjust the selling prices, based on the market prices, the market situation and the payable tax amount.
VII. GUIDING THE VAT DECLARATION AND PAYMENT STIPULATED IN POINT 1, ITEM II, PART C, CIRCULAR No.89/1998/TT-BTC AS FOLLOWS
Business establishments when making lists of goods and services bought in and sold out, together with the annual tax declarations, may, in some cases, declare as follows:
- For sold goods and services which are retailed directly to users such as electricity, water, postal services, hotel and catering services, they may declare the retail turnover in total, not according to each invoice
- For purchased goods and services, which are directly purchased from and for which the payment is made to, retailers of such goods and services, they may make a general declaration on such purchased goods and services, and shall not have to declare in detail according to each invoices.
VIII. ADDING TO THE END OF ITEM II, PART H, CIRCULAR No.89/1998/TT-BTC AS FOLLOWS
State enterprises, which produce or deal in such goods or services as lottery, electricity, cement, post and telecommunications and a number of other kinds of goods and services, and which have high income due to the lower VAT payment than the previous turnover tax payment, shall have to pay enterprise income tax and additional income tax according to the Law on Enterprise Income Tax; if such income is still large, additional remittance to the State budget must be made according to percentage (%) calculated on the remaining income as follows:
- Lottery companies: 90%.
- Cement and post and telecommunications companies, and sea-shipping agents: 80%.
- Other companies: 70%.
Example. The H.T. Cement Company in 1999 earns VND40 billion as its income liable to enterprise income tax, of which VND10 billion is earned due to the lower VAT payment than the previous turnover tax payment(about 25% of the total taxable income).
The capital of the Company's owners is VND120 billion
- The income tax to be paid by the enterprise according to the said Law:
VND 40 billion x 32% = VND 12.8 billion
- The remaining income after the payment of enterprise income tax:
VND 40 billion – VND 12.8 billion = VND 27.2 billion
The amount of income subject to additional income tax corresponding to the income amount higher than 12% of the owners' capital is determined as follows:
- The income corresponding to 12% of the owners' capital is:
VND 120 billion x 12% = VND 14.4 billion
- The additional income tax to be paid is:
(VND 27.2 billion – VND 14.4 billion) x 25% = VND 3.2 billion
- The remaining income after the payment of income tax and additional income tax:
VND 40 billion - (VND 12.8 billion +VND 3.2 billion) = VND 24 billion,
of which the amount earned due to tax change is:
VND 24 billion x 25% = VND 6 billion.
The additional amount to be paid: VND6 billion x 80% = VND4.8 billion
The total payable tax amount, including the enterprise income tax, the additional income tax and the additional amount remitted to the State Budget, is:
VND 12.8 billion + VND 3.2 billion + VND 4.8 billion = VND 20.8 billion
The determination and collection of additional income is based on the tax settlement for the whole year, in order to have grounds for temporary collection, the tax agency shall base itself on the enterprise's estimated income in the year to set the quarterly temporary payment level together with the payment of enterprise income tax.
Pursuant to Clause 6, Article 1, Decree No.102/1998/ND-CP of the Government, if establishments producing or trading in fertilizers, insecticides and a number of other goods categories have made the reserves thereof at the Government's request and such reserves still left in stock by December 31, 1998 and carried forward to 1999 affect their business results, they shall be entitled to the reduction of payable VAT on the sold reserve goods corresponding to the increased payable VAT amount over the turnover tax amount.
Business establishments shall have to send the reports on the reserve goods left in stock by December 31, 1998 in terms of categories, volumes, stock values, including the amount of reserves made at the Government's request, the volume actually sold out, the payable VAT amount for the sold reserve goods and the proposed reduction amount, to the tax agencies as grounds for tax reduction consideration. The provincial/municipal Tax Departments shall have to examine and determine and report specific cases to the Ministry of Finance for consideration and settlement.
For business establishments having large quantities of goods left in stock in 1998 (including materials, raw materials, semi-finished products, goods, unfinished constructions) which have been put into production, business or sold out since January 1, 1999, if the payable VAT amount is larger than the previously calculated income tax amount, thus causing losses, they shall be considered for tax reduction according to Article 28 of the Law on Value Added Tax, as guided in Item VI of this Circular.
IX. IMPLEMENTATION EFFECT
This Circular takes effect from January 1, 1999, replacing or supplementing corresponding provisions in Circular No.89/1998/TT-BTC of June 27, 1998 of the Ministry of Finance guiding the implementation of
Decree No.28/1998/ND-CP of May 11, 1998 of the Government detailing the implementation of the VAT Law.
Any difficulties or problems arising in the course of implementation should be promptly reported to the Ministry of Finance for study and additional guidance.
FOR THE MINISTER OF FINANCE