Công văn 5854/BTC-TCT

In response to Official Dispatch No. 2456/CT-THNVDT dated November 7, 2013 of Tax Department of Dak Nong province, Official Dispatch No. 7568/CT-KTT dated November 26, 2013 of Tax Department of Kon Tum province, Official Dispatch No. 4027/UBND-KTTC dated September 13, 2013 of the People’s Committee of Dak Nong,

1. Regarding value added tax (VAT)

Pursuant to Point c of Clause 3 of Article 5 of Joint Circular No. 62/2012/TTLT-BNNPTNT-BTC dated November 16, 2012 of the Ministry of Agriculture and Rural Development and the Ministry of Finance providing guidance for the management mechanism of money earned from environmental services, Article 4 of Circular No. 06/2012/TT-BTC dated January 11, 2012 of the Ministry of Finance providing guidance for value added tax and regulating entities not liable to value added tax, users of forest environmental services shall pay the suppliers through the Forest Development and Protection Fund (FDPF) of the province. It is allowed to retain an amount of money to cover its operations and uses the rest to pay other units. Therefore, revenues from forest environmental services do not incur/ are not subject to VAT.

2. Regarding personal income tax

In Point 6 of Section III of Part A of Circular No. 84/2008/TT-BTC dated September 30, 2008 providing guidance for certain articles of the Law on Personal Income Tax and Decree No. 100/2008/ND-CP dated September 08, 2008 of the Government regulating in detail certain articles of the Law on Personal Income Tax, in Point E of Clause 1 of Article 3 of Circular No. 111/2013/TT-BTC dated August 18, 2013 of the Ministry of Finance providing guidance for the Law on Personal Income Tax, Amendments to certain articles of the Law on Personal Income Tax, Decree No. 65/2013/ND-CP of the Government regulating in detail certain articles of the Law on Personal Income Tax, and Amendments to certain articles of the Law on Personal Income Tax regulating income qualifying for tax exemption:

“Income of households and individuals who directly get involved in agricultural and forest production, salt making, aquaculture and capture of shellfish which have yet to be processed into other products or have undergone insufficient working or processing”.

Pursuant to the above-mentioned provisions, revenues from forest environmental services to households and individuals who are contracted for forestry or afforestation (hereinafter referred to as “contractors”) are considered their income; therefore, they are exempt from personal income tax.

3. Regarding corporate income tax

Pursuant to Article 7 of Circular No. 123/2012/TT-BTC dated July 27, 2012 providing guidance for certain articles of Law No. 14/2008/QH12 on Corporate Income Tax, Decree No. 124/2008/ND-CP dated December 11, 2008, Decree No. 122/2011/ND-CP dated December 27, 2011 of the Government regulating in detail certain articles of the Law on Corporate Income Tax, Clause 3c of Article 5 of Joint Circular No. 62/2012/TTLT-BNNPTNT-BTC dated November 16, 2012 of the Ministry of Agriculture and Rural Development and the Ministry of Finance providing guidance for the management mechanism of money earned from environmental services, Article 4 and Clause 3 of Article 6 of Decree No. 05/2008/ND-CP dated January 14, 2008 of the Government on FDPFs, the Ministry of Finance has the following comments:

- FDPFs are non-profit state financial organizations according to regulations in Decree No. 05/2008/ND-CP dated January 14, 2008; pursuant to Clause 1 of Article 13 of Decree No. 99/2010/ND-CP dated September 24, 2010 of the Government: "FDPFs are organizations which receive payments for forest environmental services”. After receiving money from the forest environmental service users, a FDPF is allowed to retain not more than 10% to cover the costs of its management, inspection, and supervision (regular costs, irregular costs, and costs for professional operations) and not more than 5% as provision (to provide support for the entities who entered long-term forest protection contracts in cases where natural disasters and droughts happen). The remaining amount of money shall be returned to the forest owners. FDPFs are not forest owners that are assigned responsibility for forest protection; therefore, the amounts retained by FDFPs of provinces are not subject to corporate income tax.

- For forest owners which are organizations (forestry companies and forest management boards):

 + In the cases where a forest owner enters into a contract for provision of environmental services over their entire forest area, the amount that remains after the forest owner retains 10% of the revenues from provision of environmental services and pay the contractors is not subject to corporate income tax.

+ In the cases a forest owner enters into a contract for provision of environmental services over part of their forest area, the income from the area under the forest owner’s management is considered the forest owner’s income and is subject to corporate income tax. The taxable income equals the revenue (from the area under the forest owner’s management) minus valid costs according to regulations.

+ For organizations that are not forest owners to which the state allocates responsibility for forest management (the People’s Committees of communes), the revenue from forest environmental services is considered as a dedicated fund according regulations in Decision No. 94/2005/QD-BTC and is not subject to corporate income tax.

4. Methods of recording revenue, expenses, and management and use of money earned from forest environmental services

a) For forest owners (forestry companies):

Pursuant to regulations in Point c of Clause 3 of Article 5 of Joint Circular No. 62/2012/TTLT-BNNPTNT-BTC dated November 16, 2012 providing guidance for the management mechanism of money earned from environmental services, the revenue from provision of environmental services over the area under the forest owner’s management is considered one of the forest owner’s sources of income. The forest owner shall manage and use it according current state regulations on finance applying to each type of business.

b) For the FDPFs:

In Article 8 of Circular No. 85/2012/TT-BTC dated May 25, 2012 of the Ministry of Finance providing guidance for the financial management regime of the Forest Development and Protection Fund:

1. FDPFs at the central, provincial, and commune levels apply the public-sector administrative accounting regulations (promulgated according Decision No. 19/2006/QD-BTC dated March 30, 2006 of the Minister of Finance) to carry out Fund accounting tasks.

2. FDPFs at the central, provincial, and commune levels shall manage and make use of property according to regulations of the Law on Management and Use of State Property and guiding documents.

Pursuant to the above-mentioned provisions, the FDPFs of provinces apply the public-sector administrative accounting regulations (promulgated according to Decision No. 19/2006/QD-BTC dated March 30, 2006 of the Minister of Finance) to input entries and carry out accounting tasks.

Any issues that arise should be reported to the Ministry of Finance.