Công văn 1732/BTC-TCT

To: Provincial/municipal Tax Departments

The Ministry of Finance has received proposals of some provincial/municipal Tax Departments and enterprises concerning the refund of value-added tax (VAT) to enterprises mortgaging goods (raw materials), together with their purchase invoices and documents, at banks. Concerning this matter, the Ministry of Finance gives the following opinions:

Pursuant to Section I, Part G of the Finance Ministry’s Circular No. 60/2007/TT-BTC of June 14, 2007, guiding the implementation of a number of articles of the Tax Administration Law and guiding the implementation of the Government’s Decree No. 85/2007/ND-CP of May 25, 2007, detailing the implementation of a number of articles of the Tax Administration Law regarding tax refund dossiers;

Pursuant to Point 3, Section III, Part D of the Finance Ministry’s Circular No. 120/2003/TT-BTC of December 12, 2003, guiding the implementation of the Government’s Decree No. 158/2003/ND-CP of December 10, 2003, and the Finance Ministry’s Circular No. 32/2007/TT-BTC of April 9, 2007, guiding the implementation of the Government’s Decree No. 158/2003/ND-CP of December 10, 2003, Decree No. 148/2004/ND-CP of July 23, 2004, and Decree No. 156/2005/ND-CP of December 15, 2005, detailing the implementation of the VAT Law and the Law Amending and Supplementing a number of Articles of the VAT Law, responsibilities of entities eligible for VAT refund include: “3. … adequately supply invoices and documents and relevant dossiers for use as a basis for determining the to-be-refunded VAT amounts when tax agencies request tax refund inspection on the field.”

However, currently some cash-strapped business establishments have to get bank loans to meet their production and business requirements by mortgaging their purchased goods (raw materials), together with their original purchase invoices and documents at banks to secure guarantee for the payment of loans.

In order to remove difficulties for business establishments, the Ministry of Finance agrees to allow enterprises temporarily not to supply original invoices and documents of purchased goods (raw materials) upon tax agencies’ pre-tax refund examination and inspection at the head offices of taxpayers in case credit (loan) contracts or bank mortgage contracts indicate that they mortgage goods (raw materials) together with their original purchase invoices and documents at banks.

In order to be eligible for tax refund in this case, the business establishment shall enclose the tax refund dossier with the following documents:

- Copies of the credit (loan) contract and mortgage contract, certified by the business establishment;

- A list of invoices and documents of purchased goods (raw materials) being mortgaged at the bank, certified by that bank;

- The business establishment’s written commitment on the deadline it will submit the original invoices and documents of purchased goods (raw materials) being mortgaged at the bank right after the bank returns those invoices and documents.

Past the committed deadline, if the business establishment fails to submit the original invoices and documents of purchased goods (raw materials) mortgaged at the bank to the tax agency for examination and comparison, the tax agency shall recover the refunded VAT amount and make sanction acts of violation of the tax law according to current regulations.

The Ministry of Finance notifies the above opinions to provincial/municipal Tax Departments for information and guidance to business establishments for compliance.