Công văn 3125/TCT-CS

OFFICIAL LETTER

ON TAX POLICIES TOWARDS NON-PUBLIC ESTABLISHMENTS

To: The Tax Office of Da Nang City

In reply to Official Letters No. 1237/CT-THNVDT of March 12, 2008, and No. 4611/CT-THNVDT of July 31, 2008, of the Tax Office of Da Nang City on tax policies towards non-public establishments operating in the domains of education, healthcare, culture and sports, the General Department of Taxation has its opinions as follows:

1. Subjects of application of Decree No. 53/2006/ND-CP:

According to the provisions in Part I of the Finance Ministry’s Circular No. 91/2006/TT-BTC of October 2, 2006, guiding the implementation of the Government’s Decree No. 53/2006/ND-CP of May 25, 2006, on policies to encourage the development of non-public service establishments, non-public establishments governed by Decree No. 53/2006/ND-CP are those licensed by competent agencies to operate in the domains of education and training, healthcare, culture and information, physical training and sports, science and technology, environment, social affairs, population, family and child protection and care, including:

a/ Non-public establishments set up and operating under Decree No. 53/2006/ND-CP including people-founded and private establishments operating in the domains of education and training, healthcare, culture, sports, science and technology, environment (environmental hygiene, water supply and drainage and other environmental activities), social affairs (nursing establishments for lonely elderly people or disabled people, drug detoxification establishments), population, family and child protection and care establishments.

b/ Non-public establishments set up and operating under the Government’s Decree No. 73/1999/ND-CP of August 19, 1999.

Enterprises operating in the domains of education and training, healthcare, culture, sports, science and technology, environment (environmental hygiene, water supply and drainage and other environmental activities), social affairs (nursing establishments for lonely elderly people or disabled people, drug detoxification establishments), and child protection and care establishments which are set up by organizations or individuals are not governed by Decree No. 53/2006/ND-CP and Circular No. 91/2006/TT-BTC.

The Tax Office should determine non-public establishments eligible for business income tax (BIT) incentives specified in Decree No. 53/2006/ND-CP based on the above-mentioned criteria

2. Preferential BIT rates:

The General Department of Taxation is considering a BIT rate applicable to non-public establishments which fail to comply or improperly comply with regulations on accounting, invoices and vouchers and will issue an official letter guiding this matter in the coming time.

3. BIT and VAT applied to non-public teaching establishments engaged in different business activities:

* VAT:

Clause 11, Article 4 of the VAT Law and the Law Amending and Supplementing a Number of Articles of the VAT Law stipulates: Teaching and job teaching activities are not liable to VAT.

According to this provision, private schools and people-founded schools of all levels set up and operating under Decree No. 53/2006/ND-CP which conduct teaching and job teaching activities are not subject to VAT, therefore, they are not required to calculate and pay output VAT. If they conduct other goods trading or service provision activities which are liable to VAT, they must calculate and pay output VAT.

* BIT:

In Official Letter No. 611/TCT-PCCS of February 2, 2007, sent to provincial-level Tax Departments, the General Department of Taxation has provided guidance on BIT applicable to non-public teaching establishments which, apart from teaching activities, also provide other services.

Non-public teaching establishments are required to separately account incomes from activities entitled to preferential BIT rates. Where impossible, they should comply with the guidance in Point 4, Section II, Part E of the Finance Ministry’s Circular No. 134/2007/TT-BTC of November 23, 2007, guiding BIT.

The General Department of Taxation gives its opinions to the Tax Office of Da Nang City for information and suitable guidance for concerned units.