Nội dung toàn văn Circular No. 09/2010/TT-BTC guiding Value-Added tax and enterprise Income Tax
THE MINISTRY OF FINANCE
SOCIALIST REPUBLIC OF VIET NAM
Hanoi, January 21, 2011
GUIDING VALUE-ADDED TAX AND ENTERPRISE INCOME TAX ON INSURANCE BUSINESS
Pursuant to June 3, 2008 Value-Added Tax Law No. 13/200S/QH12 and guiding documents;
Pursuant to June 3, 2008 Enterprise Income lax Law No. I4/2008/QHI2 and guiding documents;
Pursuant to November 19, 2006 Tax Administration Law No. 78/2006/QH11 and guiding documents;
Pursuant to December 9, 2000 Insurance Business Law No. 24/2000/QHW and guiding documents;
Pursuant to the Government's Decree No. 1I8/2008/ND CP of November 27. 2008, defining the functions, tasks, powers and organizational structure of the Ministry of Finance;
The Ministry of Finance provides guidance on value-added tax I VAT) and enterprise income tax (EIT) on insurance business as follows:
Article 1. Scope of regulation
This Circular provides for guidance on VAT and EIT on insurance business.
Article 2. Subjects of application
1. Insurance enterprises, insurance brokerage enterprises and reinsurance enterprises operating under the Insurance Business Law; organizations operating as insurance agents and other insurance organizations that meet the conditions prescribed in the Insurance Business Law (below collectively referred to as insurance enterprises).
Article 3. VAT-liable objects
Except services not liable to VAT specified in Article 4 of this Circular, insurance services and other goods and services provided by entities specified in Article 2 of this Circular shall be liable to VAT, including:
- Non-life insurance and non-life insurance consultancy and brokerage services:
- Assessment, indemnity examination and third party's refund-claiming agency services;
- Other goods and services liable to VAT under the VAT law which arise during the operation process of companies engaged in insurance activities.
Article 4. Objects not liable to VAT
1. Life insurance, health insurance and human accident insurance within life insurance coverages; student insurance; seafarer and crewmember accident insurance; human accident insurance (covering also accident insurance, life-cum-hospitalization insurance): passenger accident insurance: tourist insurance; insurance for drivers, assistant drivers and people onboard vehicles; sterilization operation insurance; post-operation hospitalization insurance; personal life insurance; electricity user insurance: worker's compensation insurance, health insurance and other insurance services related to humans and human healthcare;
2. Insurance for domestic animals, plants and other agricultural insurance services:
4. Insurance agent training:
5. Insurance for petroleum works and equipment and oil tankers bearing foreign nationalities which are hired by foreign petroleum contractors or sub-contractors for operation in Vietnam's exclusive economic sea areas or contiguous sea areas subject to the common exploitation regime as agreed between Vietnam and foreign countries with adjacent or opposite seashores.
Article 5. VAT payers
VAT payers are insurance enterprises, insurance brokerage enterprises and other insurance organizations that deal in VAT-liable goods or services specified in Article 3 of this Circular.
Article 6. Tax calculation prices
1. For insurance services, the VAT calculation price is the VAT-exclusive original insurance premium, covering also surcharges and additional charges in addition to the service charges which an insurance enterprise is entitled to enjoy, excluding surcharges and compulsory appropriations it has to remit into the slate budget.
- In case the insurance premium is inclusive of VAT, the VAT calculation price is determined as follows:
VAT calculation price
VAT-inclusive insurance premium
1 + VAT rate (10%)
- For insurance policies, applications or certificates which contain an agreement on periodical collection of premiums, the VAT calculation price is the insurance premium amount paid periodically: for those with an agreement on lump-sum payment of insurance premiums, the VAT calculation price is the VAT-exclusive premium amount already paid in lump sum.
- For coinsurance policies, the VAT calculation price is the VAT-exclusive original insurance premium apportioned to each coinsurance enterprise by the coinsurance rate. In case coinsurance enterprises agree to authorize an enterprise to collect insurance premiums, the VAT calculation price applicable to the authorized enterprise is the VAT-exclusive original insurance premium of the whole value of the insurance policy.
2. For assessment, indemnity examination and third party's refund-claiming agents and agents handling goods eligible, for 100% indemnity for remuneration or commission, the
VAT calculation price is the VAT-exclusive remuneration or commission amount (not yet deducted to pay any expenses) collected by the concerned insurance enterprise.
3. For insurance brokerage enterprises, the VAT calculation price is the VAT-exclusive insurance brokerage commission amount minus the reduced amount of insurance brokerage commission (if any).
4. For other VAT-liable goods and services. their tax calculation prices comply with the VAT Law and current guiding documents.
Article 7. Tax rates
1. The tax rate of 0% applies to insurance services, including insurance services, insurance brokerage services and assessment, indemnity examination, third party's refund-claiming and 100% indemnity-eligible goods handling agency services. provided to enterprises located in non-tariff zones or overseas organizations and individuals.
Overseas organizations arc foreign organizations without permanent establishments in Vietnam which are not VAT' payers in Vietnam.
Overseas individuals are foreigners who do not reside in Vietnam or Vietnamese who reside abroad or slay outside Vietnam during the rime of service provision.
Provisions on permanent establishments and non-residents specified in this Clause comply with the law on enterprise income tax and the law on personal income tax.
2. The tax rate of 10% applies to insurance business activities not specified in Article 4: and Clause 1. Article 7. of this Circular.
3. For business activities other than the above-said insurance business activities. VAT rates prescribed for each specific type of goods or service in the VAT Law and guiding documents apply.
Article 8. Tax calculation methods
1. Insurance enterprises shall pay VAT by the tax credit method as currently prescribed, specifically:
Payable VAT amount
Output VAT amount
To-be-credited input VAT amount
a/ The output VAT amount is equal to (=) the lax calculation price of VAT-liable goods or service sold in the tax period multiplied by (x) the corresponding tax rate.
The time of VAT determination is the time when insurance enterprises' liabilities toward insurance buyers arise under the Insurance Business Law. regardless whether insurance premiums have been paid or not or the time when insurance enterprises issue sale invoices.
b/ The service and goods sale revenues for which VAT has been calculated at the original insurance stage are not subject to VAT under this Circular, including:
- Revenues from reinsurance ceding indemnity and other indemnities (if any).
- Reinsurance ceding commission and other reinsurance ceding turnovers.
- Revenues from refund paid by a third party.
c/ Insurance enterprises may credit input VAT on goods and services purchased for use in VAT-liable insurance business activities which are reflected in purchase VAT invoices under the VAT Law and guiding documents. Some cases are specified as follows:
- For goods and services purchased for payment of indemnities or other expenses related to an insurance policy, each enterprise shall declare and credit input VAT for VAT invoices bearing its name, address and tax identification number and conduct cost accounting under regulations. As for indemnities and other common expenses (inclusive of VAT) paid by the authorized enterprise, input VAT shall be declared and credited by such enterprise. if it is impossible to separate invoices for each coinsurance enterprise.
- For goods and services purchased and used for dealing in both VAT-liable goods and services and VAT-free goods and services. enterprises may only credit input VAT on goods and services used for dealing in VAT-liable ones. In case the to-be-credited input VAT amount cannot be separately accounted, it shall be calculated based on the proportion (%) of the VAT-liable goods and service sale turnover to the total turnover earned in the period, of which:
+ The VAT-liable turnover is the turnover from VAT-liable objects, covering also revenues for which VAT has been calculated at the original insurance stage, such as agent commission, brokerage commission, reinsurance ceding commission and other turnovers not subject to VAT declaration and payment.
+ The total turnover earned in the period is the total turnover earned by the enterprise in the period, excluding revenues accounted as expenditure reduction such as revenues from reinsurance ceding indemnities or refund of a third party.
- Input VAT amounts of fixed assets used for production or trading of both VAT-liable goods and services and VAT-free ones shall be wholly credited, except houses used as working offices and special-use equipment to serve operation of reinsurance enterprises and life insurance enterprises.
- In case an insurance enterprise authorizes insurance buyers to repair their assets and undersign repair service invoices, it may still declare and credit input VAT for these invoices on the condition that:
+ it has issued to each insurance buyer a letter of authorization, clearly stating the name of the authorized person, his/her identity card number or business registration code, address and the serial number of the insurance policy, enclosed with invoices issued by repair establishments.
+ The credited input VAT amount corresponds to the liability of the insurance enterprise and must not be larger than the VAT amount written in the invoice.
+ The insurance, buyer may not make VAT declaration and credit for invoices for which the insurance enterprise has made VAT declaration and credit.
2. Adjustment of input VAT credit: An insurance enterprise must decrease or refund the input VAT amount already credited in case fixed assets, supplies or goods purchased for production or trading of VAT-liable goods and services for which input VAT has been credited arc used for other purposes. The to-be-decreased or -refunded input VAT amount shall be calculated on the remaining value (exclusive of VAT) of fixed assets: for supplies and goods, the to-be-decreased or -refunded VAT amount is the total VAT amount already declared and credited upon their purchase.
Article 9. Goods and service sale and purchase invoices and vouchers
1. insurance enterprises shall abide by relevant laws' regulations on invoices and vouchers.
2. Specific cases are prescribed as follows:
a/ VAT-free services in Item b. Clause 1, Article 8 of this Circular:
- Insurance enterprises do not issue VAT invoices for every transaction.
- For reinsurance activities, it is required to comply with regulations on payment vouchers for reinsurance undertaking and ceding prescribed in the current accounting regime applicable to insurance enterprises. Directors of insurance enterprises and reinsurance enterprises shall take responsibility before law for the accuracy and truthfulness of these vouchers, which shall serve as a basis for insurance buyers to account their expenses.
b/ For cases of coinsurance:
- When collecting insurance premiums, each coinsurance enterprise shall issue VAT invoices to customers based on its received premium amount and declare and pay VAT according to regulations. Incase a coinsurance enterprise is authorized to collect insurance premiums on behalf of others or there is only one enterprise undersigning the contract, regulations applicable to cases of authorized collection and payment guided in Item d. Clause 2. Article 9 of this Circular apply.
- When buying goods or services for indemnification or paying other expenses related to coinsurance policies, insurance enterprises shall declare and credit input VAT for VAT invoices bearing their names, addresses and tax identification numbers and conduct cost accounting under regulations. In case coinsurance enterprises authorize the enterprise that has undersigned the policy to pay these expenses, they shall comply with regulations applicable to cases of authorized collection guided in Clause d. Clause 2. Article 9 of this Circular.
For indemnities and other arising expenses which cannot be separately apportioned to each coinsurance enterprise, the authorized enterprise shall declare and credit input VAT on these expenses. When apportioning expenses to coinsurance enterprises, the authorized enterprise shall issue a VAT invoice to each enterprise. Invoices must clearly slate expenses for payment of indemnities and other expenses related to the coinsurance contract (its serial number and dale), performed by the contract-undersigning enterprise; the VAT line will be left blank and crossed out. Such invoices shall serve as a basis for coinsurance enterprises to account their expenses and the contract-undersigning enterprise to account a decrease in its collectibles (without accounting them as turnover).
c/ For authorized collection and payment for other insurance enterprises:
- When collecting insurance premiums under authorization, enterprises or agents acting as authorized collectors shall issue VAT invoices to customers, clearly writing in such invoices that they collect the premiums for insurance companies (names, addresses, lax identification numbers of the companies) under insurance policies (numbers and dates of policies). The authorized collectors shall not account the collected premiums as their turnovers but account them as amounts collected under authorization, and declare and pay VAT thereon. When receiving money from authorized collectors, authorizing enterprises shall issue VAT invoices, clearly stating that they have received insurance premiums collected by companies or agents (names, addresses, tax identification numbers of the companies) under insurance policies (numbers and dates of policies,): the VAT amounts written in such invoices must be equal to those already collected by the authorized collectors from customers. These invoices shall serve as a basis for authorized collectors to credit input VAT when calculating the payable VAT amounts, and also for the authorizing enterprises to account their turnovers and declare and pay VAT according to regulations.
- When making authorized payment for goods and services for making indemnities to customers, the authorized enterprises or agents shall request goods or .service providers to issue sale invoices under the names, addresses and tax identification numbers of the authorizing enterprises. Such invoices shall be handed over to the authorizing enterprises for them to declare and credit input VAT (if any) and conduct cost accounting according to regulations.
d/ For cases of authorized collection or payment among attached enterprises of an insurance enterprise or between its dependent cost-accounting enterprises and its headquarters:
-When collecting insurance premiums under authorization, authorized enterprises shall issue VAT invoices to customers, declare and pay VAT on collected amounts and. at the same time, send authorized collection notices to the authorizing enterprises. Based on authorized collection notices, the authorizing enterprises shall account their turnovers (exclusive of VAT) without having 10 issue invoices, declare and pay VAT on the turnover collected under authorization.
In case authorizing enterprises do not request authorized enterprises to issue VAT invoices to customers, when collecting insurance premiums, authorized enterprises shall only account collected amounts but neither declare nor pay VAT on such amounts. Based on authorized collection notices, the authorizing enterprises shall issue VAT invoices to customers and declare and pay tax on the turnovers collected under authorization.
- As for authorized payments, enterprises shall declare and credit input VAT for VAT invoices bearing their names and lax identification numbers. The authorized enterprises shall notify authorizing enterprises of authorized payments for cost accounting.
e/ For cases of refund of insurance premiums and reduction of insurance brokerage commissions:
In case the insurance buyer is a business organization, when refunding insurance premiums (partially or wholly), the insurance enterprise shall request such insurance buyer to issue a VAT invoice, clearly stating the insurance premiums refunded by the insurance company, the VAT amount and reasons for the refund. Such invoices shall serve as a basis for the insurance enterprise to adjust its sale turnover and output VAT and for the insurance buyer to adjust its insurance purchase expenses and the VAT amount already declared or credited.
In case the insurance buyer has no VAT invoices, when refunding insurance premiums, the insurance enterprise and the insurance buyer shall make a written record or agreement, clearly stating the refunded insurance premium amount (exclusive of VAT), the VAT amount as stated in the insurance premium receipt (serial number and date) which the insurance enterprise has issued upon premium collection and reasons for the refund. Such record or agreement shall be kept together with premium receipts and serve as a basis for the insurance enterprise to adjust its turnover declaration and VAT amount. If the insurance buyer cannot supply insurance premium receipts, the insurance enterprise shall base itself on receipts kept by itself and the record or agreement to refund insurance premiums, exclusive of VAT.
Cases of reduction of insurance brokerage commission comply with relevant legal documents.
f/ For cases of reduction of insurance premiums:
In case insurance enterprises or insurance brokerage enterprises have collected insurance premiums and issued invoices lo customers, but they are required to reduce premiums for force majeure reasons or as agreed, upon the expiration of the insurance term, if no loss is incurred or the incurred loss is below the ratio specified in the insurance application, insurance premiums will be partially reduced, insurance enterprises shall reduce insurance premiums. Insurance enterprises and insurance buyers shall make a written record or agreement, clearly stating the amount of insurance premiums to be reduced under sale invoices (serial numbers and dates of invoices). Insurance enterprises shall issue a VAT invoice for such reduced amount. Such invoice must clearly slate the reduction of insurance premiums (it is not allowed lo write a negative number (-)) and the VAT amount for insurance services under invoice No... coded... Based on adjustment invoices, the two parties shall declare adjustments of their turnovers, expenses and input and output tax.
g/ For goods and services purchased by life insurance enterprises for sales promotion, advertising or donation lo serve life insurance business activities, insurance enterprises shall issue VAT invoices, clearly stating that these goods are for sales promotion, advertising or donation without collection of money as well as the appellations and quantity of these goods; the VAT rate and VAT amount lines will be left blank and crossed out. In case insurance agents or customers do not ask for invoices, insurance enterprises shall issue a single invoice for all sales promotion, advertising or donation goods arising in a day by the end of the day.
h/ For goods and services purchased by non-life insurance enterprises for sales promotion, advertising or donation to serve non-life insurance and business activities, insurance enterprises shall issue. VAT invoices, clearly stating that these goods are for sales promotion, advertising or donation without collection of money as well as the appellations and quantity of these goods; the VAT rate and VAT amount lines will be left blank and crossed out. In case insurance agents or customers do not ask for invoices, insurance enterprises shall issue a single invoice for all sales promotion, advertising or donation goods arising in a day by the end of the day.
i/ For enterprises which provide brokerage services for VAT-free insurance services and institutional insurance agents that receive insurance commission, it is required to issue VAT invoices, clearly staling the amount of brokerage money or commission amount; the VAT rate and VAT amount lines will be left blank and crossed out.
j/ Insurance enterprises and insurance agents which receive support money from other business establishments shall make collection vouchers and account the received amounts as other incomes for declaration and payment of EIT according to regulations. Cases in which insurance enterprises provide financial supports to their agents comply with regulations on insurance activities.
When providing financial supports, insurance enterprises shall based themselves on the support purposes slated in support contracts to make payment vouchers. The VAT amounts on goods and services purchased with support money may not be declared and credited.
Article 10. Tax registration, declaration and payment
Insurance enterprises shall register, declare, pay. refund and settle VAT under the tax administration law. Some specific cases are guided as follows:
1. Insurance agents enjoying commissions are not required to declare and pay VAT on commissions they are entitled to,
2. Insurance brokerage enterprises are not required to declare and pay VAT on reinsurance brokerage commissions and insurance brokerage commissions for VAT-free insurance services.
3. Life insurance enterprises are not required to declare and pay VAT on amounts received from liquidation of special-use assets used for life insurance business.
ENTERPRISE INCOME TAX
EIT complies with the EIT Law and guiding documents. Turnover, time for determining turnover and some deductible expenses arc specified as follows:
Article 11. Turnover
Turnover for calculation of taxable income means the whole amount of money earned from the provision of insurance services, goods and other services, including VAT-excIusive surcharges and additional charges which insurance enterprises are entitled to, including:
1. Turnover from insurance business:
For insurance and reinsurance business activities, it is the collectible amount of original insurance premiums, reinsurance charges; reinsurance ceding commissions and insurance application management charges; and agency service charges, including damage assessment, indemnity claim settlement, claim for refund by the third party and handling of goods eligible for 100% indemnity (excluding cases of authorized assessment among internal cost-accounting member enterprises of an independent cost-accounting insurance enterprise), after subtracting payables which are accounted for revenue reduction such as refund or reduction of insurance premiums, refund or reduction of reinsurance charges; refund or reduction of reinsurance ceding commissions.
In case of coinsurance, the turnover for calculation of taxable income of each coinsurance party is the collected amount of original insurance premiums apportioned according to coinsurance rates, exclusive of VAT.
With regard to insurance policies containing agreement on periodical payment of premiums. the turnover for calculation of taxable income is the money amount to be collected in each period.
In case of authorized collection among attached enterprises of an insurance enterprises or between its dependent cost-accounting enterprises and its headquarters, the turnover for calculation of taxable incomes is exclusive of 1 the amounts collected under authorization.
2. For insurance brokerage activities. turnover for calculation of taxable income is revenues from insurance brokerage commissions, after subtracting insurance brokerage commissions and refund and reduction of insurance brokerage commissions-
Article 12. Time for determining turnover
- The time for determining turnover from insurance business activities is the lime when liabilities of an insurance enterprise towards an insurance buyer arise under the Insurance Business Law. regardless of whether insurance premiums have been collected or not.
- The time for determining turnover from insurance brokerage activities is the time when insurance liabilities arise under an insurance policy, regardless of whether insurance premiums have been collected or not.
- The time for determining turnover from reinsurance activities, reinsurance ceding commission and other amounts collected from insurance ceding activities is the time of certifying reinsurance payment sheets. The time of determining turnover from reinsurance activities coincides with the time of determining costs of ceding enterprises.
Article 13. Deductible expenses
Some expenses of insurance enterprises which are allowed lo be deducted are specified as follows:
- Expenses for payment of indemnities under original insurance, policies (original insurance indemnities, for non-life insurance, or payment of insurance money, for life insurance), or reinsurance policies, alter subtracting revenues which are accounted as expenditure reduction such as revenues from indemnities for reinsurance ceding, from refund by a third party and from goods already handled and wholly indemnified
Expenses for original insurance indemnities of life insurance enterprises must be paid in conformity with insurance scope and insurance conditions prescribed in insurance policies as agreed upon by involved parties, with proofs evidencing damage.
- Reinsurance ceding charges;
- Appropriations for setting up professional provisions under the insurance business law;
- Expenses for payment of insurance and insurance brokerage commissions according lo the insurance business law;
- Expenses for risk assessment according lo law;
- Expenses for agency services, including damage assessment, indemnity examination and settlement and claim for refund by third party;
- Expenses for the handling of damaged goods eligible for 100% indemnity:
- Expenses for management of insurance agents according to the insurance business law;
- Expenses for damage prevention and limitation according to regulations.
Expenses for damage prevention and limitation must be paid for proper purposes as prescribed by law. with lawful invoices and documents or proofs.
- Expenses for assessment, of risks of the insured, including those on collection of information on. investigation and appraisal of the insured.
- Expenses for compulsory appropriations according to the insurance business law;
- Bonuses paid based on enterprises' business results to laborers on the conditions that reward criteria are clearly written in labor contracts or collective labor accords, decisions of the Board of Directors or executive board;
- Others expenses and deductions according to the insurance business law.
ORGANIZATION OF IMPLEMENTATION
Article 14. Effect
1. This Circular takes effect 45 days from the date of its signing.
2. To annul the Finance Ministry's Circular No. 111/2005/TT-BTC of December 13, 2005, guiding value-added tax and enterprise income tax for insurance business, and the Ministry of Finance's previous guidance on VAT and EIT on insurance business which is contrary to this Circular.
Any problems arising in the process of implementation should be reported to the Ministry of Finance for consideration and settlement.
FOR THE MINISTER OF FINANCE