Công văn 4326/TCT-DTNN

OFFICIAL LETTER

REGARDING TAX ON CAPITAL TRANSFER

To: The Tax Department of Yen Bai province

In reply to Official Letter No. 500 CT/CV-QLDN of November 16, 2005, of the Tax Department of Yen Bai province, concerning the procedures for declaration, payment and finalization of tax on capital transfer, the General Department of Taxation gives the following opinions:

Under the provisions of Section V, Part B of the Finance Ministry's Circular No. 128/2003/TT-BTC of December 22, 2003, when "Banpu" Public Company Limited (the foreign party to the Yen Bai-Banpu Limestone Joint Venture) transferred its contributed capital in the joint jenture to another company, its incomes from the capital transfer shall be subject to business income tax (BIT) at the rate of 28%.

The payable BIT amount should be determined as follows:

Payable BIT amount = Taxable income x 28%

Taxable income = Transfer price - Initial value of transferred capital amount - Transfer expenses

Of which:

- The transfer price is the total value actually gained by the transferor under the transfer contract. Where the transfer contract did not state the payment price or the tax authority had grounds to conclude that the payment price was not determined based on the market price, the tax authority may inspect and fix the contract payment value on the basis of reference to the market price or the price saleable to a third party and similar transfer contracts.

- The initial value of the transferred capital amount is determined on the basis of accounting books and documents proving the investor's contributed capital at the time of capital transfer, which are recognized by the Joint Venture Management Board.

- Transfer expenses mean actual expenses directly related to the transfer reflected on the original documents recognized by the tax authority. Where transfer expenses arose in a foreign country, such original documents should be certified by a public notary or independent audit institution of such country. Transfer expenses include the expense for carrying out necessary legal procedures for the transfer; charges and fees paid when carrying out the transfer procedures; expenses for the transactions, negotiations and signing of the transfer contract; and other expenses with documentary evidences.

Within five (05) working days after the competent agency approves the capital transfer, the transferee shall make a capital transfer tax declaration (according to the enclosed form) and submit it to the tax authority of the locality where the transferor makes tax registration, declaration and payment, enclosed with the transfer contract (a copy certified by the transferor and transferee); the competent agency's decision approving the capital transfer (a copy certified by the transferor and transferee); the certification of the contributed capital and original documents on the transfer-related expenses; and, at the same time, fully remit the payable tax amount into the state treasury and send the copy of the tax payment document to the capital transfer-approving agency.

If detecting errors in the declaration or calculation of the payable tax amount, within five (05) working days after receiving the declaration, the tax authority shall notify the transferee of the payable tax amount or request the transferee to supply necessary documents for the accurate calculation of the payable tax amount.

The General Department of Taxation hereby notifies the Tax Department of Yen Bai province thereof for compliance.

APPENDIX

To Official Letter No. 4326/TCT-DTNN

SOCIALIST REPUBLIC OF VIETNAM
Independence - Freedom – Happiness
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DECLARATION ON PAYMENT OF BIT ON PROFITS FROM CAPITAL TRANSFER

Capital transferor:

Name of capital-transferring company or individual:

Nationality: ………………………

Address of head office: ………………..

Tax identification number (if any): …………………

Capital transferee:

Name of company or individual receiving transferred capital:

Nationality: ………………………

Address of head office: ………………..

Tax identification number (if any): …………………

Name of enterprise in which capital is transferred: …………..

Tax identification number:

Transfer contract No.: … dated: …………

We hereby undertake that the above-declared contents are accurate and true. We will take responsibility according to current provisions of Vietnamese law for any untruthful information detected therein by tax authorities.