Bản dịch văn bản 99/1998/TT-BTC
thong-tu-99-1998-tt-btc
Cơ quan ban hành: Bộ Tài chính
Ngày ban hành: 1998-07-14

CIRCULAR No CIRCULAR No. 99/1998/TT-BTC OF JULY 14, 1998 GUIDING THE IMPLE-MENTATION OF DECREE No. 30/1998/ND-CP OF MAY 13, 1998 OF THE GOVERNMENT THAT DETAILS THE IMPLEMENTATION OF THE LAW ON ENTERPRISE INCOME TAX Pursuant to the Law on Enterprises Income Tax passed by the IX National Assembly on May 10, 1997; Pursuant to Decree No. 30/1998/ND-CP of May 13, 1998 detailing the implementation of the Law on Enterprise Income Tax; The Ministry of Finance hereby provides the following guidances: A. SCOPE OF APPLICATION OF ENTERPRISE INCOME TAX I. ENTERPRISE INCOME TAX PAYERS: According to Article 1 and Article 3 of the Law on Enterprise Income Tax and Article 1 of Decree No. 30/1998/ND-CP of May 13, 1998 of the Government detailing the implementation of the Law on Enterprise Income Tax, the following organizations and individuals engaged in goods production, trading and/or service provision (referred collectively to as business establishments) that have taxable incomes shall all have to pay enterprise income tax: 1. Organizations engaged in goods production and trading and/or service provision: - State enterprises, including State business enterprises and State public utility enterprises; - Limited liability companies, joint stock companies; - Foreign-invested enterprises and foreign parties to business cooperation contracts under the Law on Foreign Investment in Vietnam; - Foreign companies and organizations doing business in Vietnam not under the Law on Foreign Investment in Vietnam; - Political organizations, socio-political organiza-tions, socio-professional organizations, people's armed forces units and administrative, non-business units engaged in goods production and trading and/or service provision; - Cooperatives, cooperation groups; - Private enterprises; - Other organizations engaged in goods production, trading and/or service provision. 2. Domestic individuals engaged in goods production, trading and/or service provision: - Individual business people and groups of business people. - Households - Individual practitioners: medical doctors, lawyers, accountants, auditors, painters, architects, musicians, and others; - Individuals leasing such property as houses, land, means of transport, machinery and equipment or other kinds of property; - Peasant households and/or individuals engaged in cultivation, husbandry and aquaculture that fully meet the two conditions of having a commercial goods value of over 90 million VND/year and an income of over 36 million VND/year, shall have to pay enterprise income tax on income in excess of 36 million VND/year. For example: A peasant family household or individual has a commercial goods value of 150 million VND/year and an income of 60 million VND/year. Such peasant household or individual shall have to pay enterprise income tax with a sum of: (60 million dong - 36 million dong) x 32% = 7.68 million dong 3. Foreign companies conducting business activities through their permanent establishments in Vietnam. Foreign companies are considered as conducting business activities through their permanent establishments in Vietnam in the following cases: a/ Such companies have in Vietnam: executive offices, branches, offices (except for trade representative offices which are not allowed to conduct business activities under Vietnamese laws), factories, workshops, goods reception-delivery warehouses, means of transport, mines, oil or gas fields, natural resource exploration and exploitation sites or equipment and facilities in service of natural resource exploration; b/ Such companies have in Vietnam: construction sites, construction, installation or assembly projects; activities of supervising construction, installation or assembly projects; c/ Such companies are engaged in the provision of services (including consultancy service) in Vietnam through their employees or other subjects authorized by the companies to provide services for one or a number of projects; d/ Such companies have in Vietnam brokerage agents, commission agents or agents of any other type; e/ Such companies authorize subjects in Vietnam to sign contracts in the companies' name or to act as their permanent representatives in delivering goods and/or providing services in Vietnam. In cases where the double taxation avoidance agreements concluded by the Socialist Republic of Vietnam otherwise provide for the permanent establishments, such agreements shall apply. 4. Foreigners conducting business in Vietnam or having incomes generated in Vietnam from such sources as property leasing, capital lending, technology transfer, stock contribution, share and/or bill purchase... II. NON-PAYERS OF ENTERPRISE INCOME TAX SHALL INCLUDE: 1. Cooperatives, cooperation groups and other economic collectives having incomes from cultivation, husbandry and aquaculture. 2. Peasant households and individuals having a commercial agricultural output value of up to 90 million dong/year and an income of up to 36 million dong/year. B. TAX CALCULATION BASES AND TAX RATES Bases for the calculation of enterprise income tax, as prescribed in Article 6 of the Law on Enterprise Income Tax, are taxable incomes and tax rates. I. TAXABLE INCOMES: (calculated according to the calendar year or fiscal year) shall include taxable incomes from production, business and/or service activities, including taxable incomes from production, business and/or service activities abroad and other taxable incomes. According to Article 7 of the Law on Enterprise Income Tax, taxable incomes shall be determined as follows: Taxable incomes in the tax-calculation period = Turnover for calculating taxable incomes in the tax-calculation period - Reasonable costs in the tax- calculation period + Other taxable incomes in the tax-calculation period II. TURNOVER FOR CALCULATING TAXABLE INCOMES According to Article 3 of Decree No.30/1998/ND-CP of May 13, 1998 of the Government detailing the implementation of the Law on Enterprise Income Tax, the turnover for calculating taxable incomes is the total sum earned from the goods sale and/or service provision (without value added tax), including price subsidies, surcharges and surtax enjoyed by business establishment. For example: A sale invoice of enterprise A states: - The selling price: 100,000 dong. - The value added tax (10%): 10,000 dong. - The payment price: 110,000 dong. - So, enterprise A's turnover subject to the calculation of taxable incomes shall be 100,000 dong. The remaining 10,000 dong shall be the tax amount to be paid to the State. If the business establishment pays value added tax directly on the added value, the turnover for calculating taxable incomes shall be the price with value added tax actually paid by the buyer. For example: Enterprise B calculates its tax directly on the added value. It is entitled to use only common invoices. If such an invoice reflects a payment price of 110,000 dong, this shall be at the same time the turnover for calculating taxable incomes. In a number of specific cases, the turnover for calculating taxable incomes shall be determined as follows: 1. For goods sold by installment payment, it shall be the turnover of the sold goods calculated according to the selling price paid in lump sum, excluding interests on deferred payment. 2. For goods and services used for exchange, as gifts or donations, it shall be calculated according to the selling prices of products, goods and services of the same or similar kinds on the market at the time of making such exchange, gift or donation. 3. For products for self-consumption, it shall be the production costs of such products. 4. For goods processing, it shall be the earnings from the processing, including labor wages, costs of fuel, power, auxiliary materials and other costs in service of the goods processing. 5. For property leasing activities, it shall be the rentals collected in each period according to the leasing contracts. In cases where the lessees pay rentals in advance for several years, such turnover shall be the total sum of money collected. 6. For credit activities, it shall be the interests on loans to be collected in the tax calculation period. 7. For insurance and re-insurance business activities, it shall be the sum to be collected from the original premiums, the expertise agent fees, the re-insurance fees, the re-insurance commissions and other revenues. In cases where a production, business or service establishment has turnover in foreign currency(ies), it shall have to convert such turnover into Vietnam dong at the average actual buying/selling rates on the inter-bank foreign exchange market, announced by the State Bank at the time of collecting such foreign currency(ies). III. THE REASONABLE EXPENSES ALLOWED TO BE SUBTRACTED WHEN CALCULATING TAXABLE INCOMES According to Article 9 of the Law on Enterprise Income Tax; and Article 4 of Decree No.30/1998/ND-CP of May 13, 1998 of the Government detailing the implementation of the Law on Enterprise Income Tax, the reasonable expenses related to taxable incomes in the tax calculation period are guided in detail as follows: 1. Depreciation of immovable property used for production, business or service activities according to the regulations on the management, use and depreciation of immovable property issued together with Decision No.1062-TC/QD/CSTC of November 14, 1996 of the Minister of Finance. In cases where a Vietnamese party contributes the value of its land use right to a joint venture's legal capital or to the capital of an economic cooperation with foreign party(ies), the depreciation must ensure the full calculation of the land use right value from the time the foreign-invested enterprise or the joint venture starts production, business and/or service activities till the completion of the project. 2. Costs of raw materials, materials, fuel, energy and goods actually used in production, business and/or service activities related to the turnover and taxable incomes in a given period, which shall be calculated according to the reasonable materials wastage norms and the actual ex-warehouse prices. a/ The reasonable materials wastage levels: - The director of an enterprise shall have to elaborate and approve the reasonable materials wastage levels on the basis of the materials wastage norms issued by the competent level as well as the specific conditions of the enterprise. For an enterprise with the Managing Board, the General Director shall elaborate the materials wastage norms and submit them to the Managing Board for approval. - At the year-end, the enterprise shall have to make final account settlement of materials wastage, ensuring that it shall not exceed the already ratified norms and notify the tax agency thereof. b/ The actual ex warehouse prices shall include: - Prices of materials purchased from outside, including: prices stated in the seller's invoice (without value added tax) plus the purchasing expenses such as the costs of transport, loading and unloading, preservation, insurance premium, loss-related expenses, rents of warehouses, sorting and recycling fees. For import goods, the import tax amount and surcharges (if any) shall be added. - For materials purchased for use in the production of goods which are not subject to value added tax or subject value added tax which is calculated directly on the added value, the actual ex warehouse prices shall cover also the value added tax. - Prices of self-made materials, including: the actual ex warehouse prices plus the actual expenses arising in the material self-making process. - Prices of materials for outside processing, including: the actual exwarehouse prices of materials brought out for processing plus the processing charges, costs of loading, unloading and transportation from the enterprise's warehouse to the place of processing and vice versa. The above-mentioned prices of materials of different kinds and the costs of processing, transportation, loading/unloading, preservation and purchase must be evidenced by vouchers and/or invoices as prescribed by the Ministry of Finance. In cases where the materials and/or goods are agricultural, forest or aquatic products purchased directly from producers, the enterprise shall have to make a list, clearly stating the name(s), address(es) of the producer(s), the goods quantities, unit prices and the total payment; the enterprise's director shall ratify the expenditure and take responsibility before law therefor. 3. Salaries, wages, mid-shift meal allowances and other payments of the salary or wage nature. The enterprise's salary-expense shall include salaries, wages and other allowances of the salary or wage nature to be paid to laborers participating in the enterprise's business activities. The expense for salaries, wages and other allowances of the salary or wage nature paid to laborers is determined for each type of enterprise as follows: a/ For State enterprises: On principle, the salaries must be based on the actual expenses but must not exceed the salary price unit ratified by the competent State agency and the completed work volume. - The salary price unit shall be determined on the basis of the labor norms issued by the competent agency and the salary regime promulgated by the State. - The actual salary-expenses must ensure the principle that the salary increase rate is lower than the labor productivity increase rate. b/ For other enterprises: The salaries, wages and other payments of salary or wage nature paid to the laborers shall be determined by one of the following methods: - If the enterprise has elaborated the salary price unit on the basis of labor norms which have been ratified by the competent State agency, the salaries shall be calculated into the reasonable costs according to the actual expenses but must not exceed the salary price unit and the completed work volume as provided for State enterprises. - If the enterprise applies the labor contract regime or the collective labor agreement regime, the salaries, wages and other payments of salary or wage nature shall be determined according to the labor contracts or the collective labor agreements. - Apart from the above-said cases, salaries and wages paid to the laborers, which are based on the average income of each trade or branch in localities, shall be decided by the provincial/municipal People's Committee. The provincial/municipal Tax Departments shall, in coordination with the provincial/municipal labor agencies and on the basis of the salary regime applicable to State enterprises and the price situation in the localities, determine the average salaries, wages and allowances for each trade or branch in the localities then submit them to the provincial/municipal People's Committees for decision so as to apply them to tax calculation in each period. The following expenses shall not be calculated into the expenses for salaries and wages: - Salaries and wages of private enterprise owners or heads of production, business and/or service households. - Salaries and wages of founding members of companies who do not directly run production, business and/or service activities. c/ Expenses for laborers' mid-shift meals: shall be decided by the enterprise's director in conformity with the production and/or business results but the level of expenses for each laborer must not exceed the minimum wage level set for State employees by the State. 4. Expenses for scientific and technological research, excluding the expenses funded by the State or the higher-level management agencies; expenses for innovations and technical improvements, environmental protection, education, training and health within the enterprise according to the actual amounts of spending but must not be 1.3 times higher than the norms prescribed by the State. Expenses being financial supports for education, outside the enterprise, such as contribution to education promotion fund, assistance to disabled and orphaned school children..., shall be made, depending on the production and/or business situation of the enterprise, but must be evidenced with lawful vouchers and/or invoices. 5. Expenses for services purchased from outside: - Expenses for electricity, water, telephone, stationary, hiring of auditors and property insurance premiums must be evidenced with invoices and/or vouchers as stipulated by the Ministry of Finance. - Expenses for a overhaul of immovable property in order to restore the property's capability shall be accounted in the production and/or business costs in the year. If a repair costs too much, the expenses therefor shall be divided for transfer to the subsequent year. For particular immovable property the repair of which is made periodically, the enterprise shall be entitled to make advance deductions for big repair expenses from the production and/or business costs on the basis of the repair cost estimates made by the enterprise. If the advance deduction is lower than the actual amount of expenses, the enterprise shall be entitled to add the difference to the expenses; if it is higher than the actual expense, the difference shall be accounted as the reduction of the subsequent year's expenses. - Expenses for the purchase and use of technical documents, patents, technology transfer permits, trade marks... which are not regarded as immovable property, shall be gradually accounted in the business/production costs. - Rentals of immovable property shall be accounted into the production and/or business costs according to the actual payment amounts and the renting contract. In cases where the rentals of immovable property is paid in lump-sum for many years, such rentals shall be gradually accounted into the production and/or business costs according to the year of the use of such immovable property. - For contractors, expenses for services purchased from outside shall also include expenses to be paid to sub-contractors (if any). - Expenses for other services hired from outside. For business establishments which pay value-added tax by deduction method, the expenses for services purchased outside shall not include VAT. 6. Payments for women laborers as prescribed by law; labor protection expenses, expenses for the protection of the business establishment(s); deductions for the social insurance, health insurance and the trade union's fund as prescribed. The level of deduction for setting up managerial fund of a corporation shall be ratified and announced by the corporation's managing board after getting written consent from the competent finance agency. 7. Payment of interests on the loans borrowed for production, business and/or service activities from banks and/or credit institutions at the actual interest rates. Payments of interests on loans borrowed from other objects at the actual interest rates which, however, must not exceed the ceiling interest rate of loans of the same type and loan terms shall be set by the State Bank of Vietnam for credit institutions. Expenses for the payment of interests on loans borrowed for contribution to legal capital or statutory capital of foreign-invested enterprises shall not be calculated into the reasonable costs for the determination of taxable incomes. 8. Deductions for setting up the reserves for the price decrease of unsold goods, for bad debts and for the price decrease of securities at the enterprise which shall comply with the guidance of the Ministry of Finance. 9. Severance allowances for laborers as prescribed by the current regulations. 10. Expenses for the sale of goods and/or provision of services, including: expenses for preservation, packaging, transport, portage, renting of warehouses and/or storing yards, product and/or goods warranty. 11. Expenses for advertisements, marketing, sales promotion, reception of guests, ceremonies, transaction, external relations, conferences and other expenses, which must be evidenced with invoices and/or vouchers as prescribed by the Ministry of Finance, related to business results and not exceed the levels prescribed below: - For production, construction and transport establishments which have newly been established and put into operation, such expenses must not exceed 7% of the total above-listed expenses for the first two years, and 5% for the subsequent years. - For newly-established commercial, food catering and service activities, such expenses must not exceed 7% of the total above-listed expenses (excluding the buying prices of the sold goods) for the first two years, then 5% (excluding the buying prices of the sold goods) for the subsequent years. - For a number of branches with less competi-tiveness such as electricity, gas, oil exploitation and refinery, petroleum trading, post and telecommuni-cations, aviation... such expenses must not exceed 5% of the total above-listed expenses (excluding buying prices of the sold goods for commercial activities) then 3% (excluding buying prices of the sold goods for commercial activities) for the subsequent years. In a number of special cases where such expenses need to be restricted at a higher level compared to that prescribed above, a written consent from the Ministry of Finance is required but they must not exceed the maximum level of 7% of the total expenses 12. Payable taxes, fees, charges and land rentals related to the production, business and/or service activities (except for enterprise income tax), including: - Export tax. - Special consumption tax. - Value-added tax (for business establishments which pay value-added tax directly on the added value). - License tax. - Natural resource tax. - Agricultural land use levy. - House and land tax. - Road fees, bridge tolls and ferry tickets, airport charges, title-deed fees... - Land rentals... 13. Business management costs allocated by foreign companies to their permanent establishments in Vietnam according to the proportion of their turnover generated in Vietnam and the total overseas turnover of their respective companies. Hereunder is the general formula of allocation: Business management costs allocated by a foreign company to its permanent establishments in Vietnam in the tax-calculation period = (The total turnover of the permanent establishments in Vietnam in the tax-calculation period: The total turnover of the foreign company in the tax-calculation period) x The total business management costs of the foreign mother company. 14. In a number of cases, the reasonable expenses used for the calculation of taxable incomes shall be determined as follows: a/ If the property-renting party makes advance payment of rentals for many years, the expenses shall be temporarily calculated correspondingly to the collected rentals for the calculation of taxable incomes. More concretely: - The depreciation of immovable property shall be calculated correspondingly to the number of years for which the rentals have been paid. If this duration is equal to or longer than the time of using the immovable property, the depreciation costs of such immovable property shall be equal to the original prices of the said property. - Other expenses related to property-leasing activities shall be calculated according to reasonable costs of the first leasing-year and the entire leasing duration. - Besides, 5% shall be added to the above-said total expenses as reserve for unforeseeable expenses which may arise in the subsequent years. Annually, the business establishment shall have to make final account settlement of all actual and reasonable expenses. If the above-mentioned temporarily calculated expense (on the yearly basis) is higher than the reasonable expense, the difference shall be included in the taxable incomes. If the temporarily calculated expense is lower than the reasonable expense, the difference shall be subtracted from the taxable incomes of other activities or calculated into the reasonable expense of the subsequent year for calculating the enterprise income tax in the subsequent year. In cases where a leasing establishment enjoys income tax exemption and/or reduction in the first operation period, the enterprise income tax exemption and/or reduction amount shall be calculated according to the following formula: The enterprise income tax exemption and/or reduction amount = (The enterprise income tax amount calculated on the incomes from rentals collected in advance: The number of years with advance payment) x The tax exemption duration. Every two years of tax reduction shall be equal to one year of tax exemption. For example: Company A invests in the development of infrastructure for lease having a payable income tax amount of 1,200 million dong collected for 30 years in advance. Company A is exempt from enterprise income tax for the first two years after the taxable income is generated and enjoy a 50% enterprise income tax reduction for 3 subsequent years. So, company A is entitled to a tax exemption duration of 3.5 years (3 years of 50% tax reduction is equal to 1.5 years of tax exemption). The tax exemption and reduction amount enjoyed by Company A, therefor, shall be: (1,200 million dong : 30 years) x 3.5 years = 140 million dong b/ For a number of particular business activities such as insurance, lottery..., the Ministry of Finance shall provide separate guidance on the reasonable costs for calculation of enterprise income tax. 15. The following expenses shall not be accounted into the reasonable costs for the determination of taxable incomes: a/ Advance deductions to cover expenses which have actually not been fully spent, such as advance deductions for costs of big fix asset repairs; warranty fees for goods and product, construction projects..., except for cases where written consent from the Minister of Finance is obtained. b/ Expenses without vouchers or with invalid vouchers (except for cases requiring lists as prescribed in Point 2 of this Section). c/ Fines for traffic regulation violations, fines for violations of the business registration regulations, fines for overdue debts, fines for violations of accounting and statistical regulations, fines for tax-related administrative violations and other fines. With regard to the fines for breaches of economic contracts, after balancing the payable and collected fine amounts, the surplus (if any) shall be included in the taxable income. If not, it shall be accounted into the after-tax income. d/ Expenses not related to turnovers and taxable incomes such as spendings on capital construction investment; financial support for mass organizations, social organizations and localities (except for cases where they are accounted into business costs according to the stipulations of the Government); spendings for charity purpose, and other spendings not related to turnovers and taxable incomes; e/ Expenses covered by other funding sources: - Non-business expenses. - Sickness and maternity allowances. - Regular difficulty allowances, unexpected difficulty allowances. - Other expenses covered by other funding sources. f/ Other unreasonable expenses. IV. OTHER TAXABLE INCOMES, INCLUDING: 1. Differences between the purchase and sale of securities. 2. Income from the rights to own or use property: a/ Income from property leasing; b/ Income from the assignment of the use of intellectual property or intellectual property ownership right; c/ Other incomes from the right to own or use property. 3. Income from property assignment, transfer or liquidation: Taxable income from the assignment, transfer or liquidation of property is the remaining net income after subtracting the value (or the remaining value) of the property and expenses related to the assignment, transfer or liquidation. 4. The total interests on deposits, capital loans and goods sale with deferred payment, since the interests on borrowings have been accounted into the reasonable costs for determination of taxable incomes. 5. Differences generated from the sale of foreign currency(ies). 6. The year-end balances of the advance deductions which have been not fully spent; the year-end balances of reserve for the price decrease of unsold goods, the reserve for bad debts and the reserve for the price decrease of securities of the enterprise. 7. Bad debts already offset by the reserves but now recovered; 8. Income from fines for the breach of economic contracts after subtracting the payable fine amount therefor. 9. Income being payable debts with unidentified creditors; 10. Incomes from previous years' production, business and service activities, which were omitted but now discovered; 11. Incomes earned from overseas production, business and service activities without subtracting any income tax already paid abroad. For incomes already taxed abroad, the business establishments shall have to determine the amounts of pre-tax incomes overseas for the calculation of income tax according to the Law on Enterprise Income Tax in Vietnam. After the payable income tax amount for the whole year has been determined, the income tax already paid abroad shall be subtracted, but the subtracted tax amount must not exceed the income tax amount, paid under Vietnam's Law on Enterprise Income Tax for such received incomes. Example 1: Enterprise A receives an income of 800 million dong from abroad. This is the remaining income amount after an income tax amount of 200 million dong has been paid abroad according to foreign laws. The income tax on the income received by enterprise A from abroad shall, therefor, be calculated according to Vietnam's Law on Enterprise Income tax as follows: (800 million dong + 200 million dong) x 32% = 320 million dong. Since enterprise A has already paid income tax abroad with an amount of 200 million dong, it shall have to pay only: 320 million dong - 200 million dong = 120 million dong Example 2: Also the above-said enterprise A receives an income of 800 million dong from abroad. This is the remaining income amount after an income tax amount of 540 million dong has been paid abroad according to foreign laws. The income tax on the income received by enterprise A from abroad shall, therefor, be calculated according to Vietnam's Law on Enterprise Income Tax as follows: (800 million dong + 540 million dong) x 32% = 428.8 million dong Enterprise A shall only be entitled to subtract the tax amount already paid abroad which is equal to the tax amount of 428.8 million dong as calculated according to the Vietnam's Law on Enterprise Tax. In other words, enterprise A shall not have to pay enterprise income tax on the above-said income received from abroad. 12. Incomes related to the sale of goods and provision of services, not yet included in the turnover such as rewards for the quick release of ships, trains, for catering services and hotel services, after subtracting expenses for the generation of such incomes. 13. Other incomes such as income from the sale of discarded materials and faulty products after subtracting expenses for their gathering and sale; gifts, donations in kind or cash from organizations and/or individuals to enterprises... 14. For incomes being after-tax dividends from shares or capital contributions to joint ventures or economic cooperation, the business establishments shall not have to pay enterprise income tax but such incomes must be included into their after-tax incomes for determining the income surtax (if any). For business establishments that use State capital and are allowed by the State to use such capital as contribution to stock companies, joint ventures or economic cooperation with foreign organizations and/or individuals, the incomes earned therefrom shall, be subject to the State budget capital using levy and the remainder shall be included into the after-tax incomes for determining income surtax (if any). V. ENTERPRISE INCOME TAX RATES 1. The enterprise income tax rate applicable to domestic business establishments and foreign organizations and/or individuals doing business in Vietnam not under the Law on Foreign Investment in Vietnam shall be 32%. A number of cases shall be entitled to apply the following tax rates: a/ The following production and/or business establishments shall be entitled to the tax rate of 25% for a period of three years from January 1st, 1999: - Mining enterprises and enterprises engaged in the exploitation of minerals, forest products and aquatic products; - Metallurgical enterprises; - Mechanical-engineering enterprises; - Enterprises manufacturing basic chemicals, fertilizers and insecticides; enterprises processing fresh rubber latex into dried latex; - Enterprises engaged in the production of construction materials (except for cement); - Construction enterprises (except for those engaged in survey, designing, consultancy or supervision activities); - Transport enterprises (except for air transport, taxi transport); b/ For business establishments with high incomes thanks to objective advantages such as their convenient business locations, business lines with little competition.., they shall, beside paying income tax at the tax rate of 32%, have to pay the surtax at the rate of 25% on their remaining incomes, provided that such remaining incomes account for more than 12% of the existing capital owned by such establishments at the time of their year-end final account settlement. For example: - The remaining income after the payment of income tax is 5,200 million dong. - The existing capital owned by the enterprise at the time of its year-end final account settlement is 34,600 million dong. - The payable income surtax amount shall be: [5,200 - (34,600 x 12%)] x 25% = 262 million dong. Income surtax shall temporarily not be collected from the following establishments: - Production and/or business establishments which enjoy the enterprise income tax rate of 25% for a period of three years from January 1st, 1999. - Investment projects in the fields, production/business lines and/or geographic areas where investment is encouraged and which enjoy preferential enterprise income tax rates. - Production establishments which export more than 50% of their products or have an export turnover accounting for more than 50% of their total turnover; c/ For new investment projects in the fields, production/business lines and/or areas eligible for investment preferences, the enterprise income tax rates shall be applied as follows: - For the fields and production/business lines enjoying investment preferences under the Government's stipulations, the preferential tax rate of 25% shall apply. - For projects in the fields and production/business lines enjoying investment preferences and in ethnic minority districts of mountainous areas, islands and other areas with difficulties as prescribed by the Government, the tax rate of 20% shall apply. - For projects in the fields and production/business lines enjoying investment preferences and in ethnic minority districts of high-mountainous areas as prescribed by the Government, the tax rate of 15% shall apply. Investment projects enjoying preferential enterprise income tax as stipulated in this Point shall have to fully meet the following conditions: - Having business registration certificates and operating in strict compliance with the registered business lines. - Having certificates of investment preferences issued by the competent agency(ies) that clearly state the conditions of preferences. - Strictly abiding by the accounting regime and regulations on vouchers, invoices, tax payment registration and declaration. When conditions for preferences no longer exit due to changes of its business lines and/or its business location at any time in the first 6 months of a year, a business establishment shall not be entitled to the preferential tax rate for the whole year. If the conditions for preferences terminate at any time in the last 6 months of the year, the business establishment shall, from the beginning of the subsequent year, not be entitled to the preferential tax rate. Business establishments that fail to strictly comply with the accounting regime and the regulations on vouchers and invoices and/or fail to declare or falsely declare tax calculation bases shall not be entitled to the preferential tax rates and have to pay tax every month according to the designated incomes and taxable income percentages. Additionally, they shall also be subject to fines for tax-related administrative violations. 2. Enterprise income tax rates applicable to foreign-invested enterprises and foreign parties to business cooperation contracts under the Law on Foreign Investment in Vietnam shall be 25%. A number of cases shall be entitled to apply the following tax rates: a/ The tax rate of 20% shall apply for a period of 10 years from the commencement of production and/or business activities to investment projects which satisfy one of the following criteria: - Exporting at least 50% of their products. - Employing 500 laborers or more. - Raising or cultivating and processing agricultural products, forest products or aquatic products. - Using advanced technologies, investing in research and development. - Using raw materials and materials available in Vietnam; efficiently processing and exploiting natural resources in Vietnam; manufacturing products with localized contents of 40% or higher. b/ The tax rate of 15% shall apply for a period of 12 years from the commencement of production and/or business activities to investment projects which satisfy one of the following criteria: - Exporting at least 80% of their products. - Investing in the fields of metallurgy, basic chemicals, mechanical engineering, petrochemicals, fertilizer production and the manufacture of electronic components, automobile and motorcycle components. - Building and commercially operating infrastructure projects (bridges, roads, water supply and drainage, electricity supply, ports). - Growing perennial industrial plants. - Investing in other difficult areas as defined by the Government (including hotel projects). - Transferring property to the State of Vietnam without indemnity at the end of the operation duration (including hotel projects). - Projects that satisfy two criteria mentioned in Point a above. c/ The tax rate of 10% shall apply for a period of 15 years from the commencement of production and/or business activities to the projects for: - Building infrastructure in difficult areas. - Investing in mountainous, island, remote or deep-lying areas. - Afforestation. - Other projects on the list of projects where investment is specially encouraged. d/ For investment projects under BOT, BTO and BT contracts; projects for building infrastructure of industrial parks or export processing zones, the preferential tax rates of 20%, 15% and 10% shall apply throughout the whole project implementation period. e/ The tax rates mentioned in Points a, b, c and d of this Clause shall not apply to hotel projects (except for cases of investment in difficult, mountainous or island areas, or transfer of property to the State of Vietnam without indemnity); financial, banking, insurance, service provision and commercial projects. f/ All incomes earned by foreign investors from their investment under the Law on Foreign Investment in Vietnam (including reimbursed income tax amounts and incomes from the capital transfers) which are remitted abroad (or kept outside Vietnam) or kept in Vietnam but used to pay debts for the mother companies or to cover expenditures of Vietnam-based representative offices of the mother companies... shall be liable to tax on the transfer of incomes abroad. The tax rates for the transfer of incomes abroad shall apply as follows: - The tax rate of 5% shall apply to foreign investors who make legal capital contributions or business cooperation capital contributions of USD 10 million or more and to overseas Vietnamese who invest in the country; - The tax rate of 7% shall apply to foreign investors who make legal capital contributions or business cooperation capital contributions of from USD 5 million to under 10 million; - The tax rate of 10% shall apply to foreign investors who make legal capital contributions or business cooperation capital contributions of less than USD 5 million. g/ The enterprise income tax rates and the abroad-income transfer tax rates shall be noted down in the enterprises' investment licenses by the competent agencies, after obtaining written consent from the Ministry of Finance. With regard to foreign-invested enterprises and foreign parties to business cooperation contracts, which have been established and operating under the Law on Foreign Investment in Vietnam before the effective date of the Law on Enterprise Income Tax, the tax rates written in their investment licenses granted before the effective date of the Law on Enterprise Income Tax shall apply. 3. Vietnamese and foreign individuals and organizations conducting oil and gas prospection, exploration and exploitation shall apply the enterprise income tax rate of 50%. For the exploitation of other rare and precious natural resources, the rates of from 32% to 50% on taxable incomes may be decided by the Ministry of Finance for projects of domestic production and/or business establishment; and by the competent agencies for foreign-invested projects, but with written consents from the Ministry of Finance. C. TAX REGISTRATION, DECLARATION, PAYMENT AND SETTLEMENT I. REGISTRATION OF ENTERPRISE INCOME TAX 1. Business establishments shall have to register enterprise income tax at the same time with the registration of value-added tax payment. 2. Corporations and companies, when registering tax, shall have to declare clearly their attached units with independent business cost-accounting as well as units subject to accounting-book cost accounting. Units attached to corporations or companies with independent cost accounting or accounting-book cost accounting shall all have to register tax with the tax agencies in the localities where they are located. 3. Independent cost-accounting units attached to corporations or companies shall have to declare, pay and settle tax separately. Units with accounting-book cost accounting, attached to corporations or companies shall only have to register tax in the respective localities, but not declare and pay tax therein. Corporations and companies shall have to declare, pay and settle tax on both their business incomes and the incomes of their dependent units subject to accounting-book cost accounting. II- DECLARATION OF ENTERPRISE INCOME TAX 1. Business establishments shall have to declare and submit the declarations on the tax amounts to be temporarily paid for the whole year according to set form to the directly managing tax agency not later than January 25 every year. Bases for tax declaration shall be the results of production, business and/or service activities of the preceding year as well as the business capability of the subsequent year. 2. After receiving a tax declaration, the tax agency shall examine and determine the tax amount to be temporarily paid for the whole year, divide it for quarterly payment and notify the related business establishment thereof. 3. If in their tax declarations, the business establishments fail to point out or to clearly point out bases for determination of the tax amounts to be temporarily paid for the whole year, the tax agency shall have the right to request the business establish-ments to explain the bases in order to determine the tax amounts to be paid temporarily for the whole year. In cases where the business establishments fail to explain or prove the bases for tax calculation at the request of the tax agency, the tax agency shall be entitled to determine the tax amounts to be temporarily paid by the concerned establishments for the whole year. 4. Any adjustments of the enterprise income tax amounts to be temporarily paid for each quarter and the whole year shall be effected only when there are big changes in the taxable incomes through the actual production and business situation in the first 6 months of the year. The business establishments shall have to make a complete dossier requesting the readjustment of the tax amounts to be temporarily paid for each quarter and the whole year, which shall include the following: - An official dispatch proposing the adjustment of the tax amounts to be paid for the whole year clearly stating: the reason therefor; the tax amount temporarily paid for the first 6 months and the tax amount to be temporarily paid for the last 6 months of the year according to the adjustment. - The financial statement of the first six months of the year, including: the account balance, the business results; the monetary flow and the explanation of the financial statement. After considering the request of the production and/or business establishment, the directly tax managing agency shall have to notify the latter of the tax amount temporarily paid for the whole year (already adjusted) and the tax amount to be paid for the two last quarters. 5. For business establishments that fail to fully and properly comply with the accounting regime and the regulations on vouchers and invoices, the declaration for tax calculation shall be based on the taxable incomes calculated on the turnovers and according to the set tax rates as follows: a/ Business establishments that fail to fully and properly comply with accounting regime but have sold their goods and/or provided services with vouchers and/or invoices, shall have to declare their turnover and calculate monthly payable tax amounts according to the following formula: Turnover x Percentage (%) of taxable incomes x Enterprise income tax rate The tax declaration must be submitted to the tax agency before the 5th of the subsequent month. b/ For business households that fail to apply the accounting regime and the regulations on vouchers and/or invoices for the purchase and/or sale of goods and provisions of services, the tax agency shall base itself on the business situation of each household to determine the turnover for the calculation of taxable income and calculate tax according to the following formula: Turnover x Percentage (%) of taxable income x Enterprise income tax rate The determination of turnover for the calculation of taxable income must be made in accordance with the regulations, in an open and democratic manner. The General Department of Taxation shall guide the provincial/municipal tax departments in determining the taxable income percentages (%) on the turnover, which shall serve as basis for income tax calculation suited to each business line and harmonious among localities nationwide. 6. For foreign organizations and/or individuals conducting business activities without permanent establishments in Vietnam but with incomes generated in Vietnam, the organizations and/or individuals that pay such incomes to the foreign organizations and/or individuals shall have to make tax declarations and deductions according to the formula: The payable amount x The taxable income percentage (5%) x The tax rate. III. PAYMENT OF ENTERPRISE INCOME TAX 1. Production and/or business establishments shall have to temporarily pay the tax amounts for each quarter in full and on time according to the tax agency's tax payment notices. The tax payment deadline stated in such a notice shall not be later than the last day of each quarter. 2. Business establishments which have not fully and properly observed the regulations on accounting, invoices and vouchers shall have to pay a tax calculated according to the taxable income percentage on the turnover according to the following deadlines: a/ Business establishments that sell goods and/or provide services with vouchers and invoices shall declare and fully pay tax every month according to tax agency's notice. The deadline for monthly tax payment stated in the notice shall not be later than the 25th day of the subsequent month. b/ Business households that fail to comply with the regulations on accounting, vouchers and invoices for their purchase and/or sale of goods or provision of services shall calculate tax based on the set turnover levels and pay tax according to the deadline stated in the notices simultaneously with the payment of the value added tax. 3. Organizations and/or individuals in Vietnam paying incomes to foreign business organizations and/or individuals that have no permanent establishments in Vietnam, shall have to deduct tax amounts and pay them to the State budget simultaneously with the transfer of payments to the foreign organizations and/or individuals. Vietnamese organizations and/or individuals that fail to deduct such tax amounts shall have to pay them instead of the foreign parties in addition to a fine against tax-related administrative violations according to the current regulations. 4. Business establishments engaged in consignment trading shall have to declare and pay tax for each goods consignment to the tax agency in the locality where they buy goods before transporting the goods, simultaneously with the declaration and payment of value-added tax. IV. SETTLEMENT OF ENTERPRISE INCOME TAX 1. Business establishments shall have to settle enterprise income tax with the tax agency (except for cases where the tax is paid on the monthly basis on the taxable income-over-turnover ratio and tax rates). The tax settlement must reflect all indices: the taxable turnovers; the reasonable costs; the taxable incomes; the payable income tax amounts; the income tax amount already paid temporarily in the year; the income tax amount already paid abroad for incomes received from abroad; the income tax amount underpaid or overpaid...according to the set form. The tax-settlement year shall coincide with the calendar year, commencing from January 1st and ending on December 31 of the same year. In cases where business establishments are permitted to apply a tax calculation year other than the above-said fiscal year, they shall be permitted to settle their tax according to such fiscal year. For merged, consolidated, divided, split, dissolved or bankrupt business establishments, they shall still have to make tax settlements with the tax agency up to the time the decisions on their merger, consolidation, division, splitting, dissolution or bankruptcy are issued by competent agencies. 2. Business establishments shall base themselves on the yearly financial statements which have been made public to make tax-settlement reports in an accurate and honest manner. If the tax agency detects any false data in the tax-settlement reports, to the effect of a lower payable tax amount, the concerned business establishments shall, apart from paying in full the tax amount, have to pay fines for false tax declaration and tax evasion. In cases where the tax-settlement report of a merged, consolidated, divided, split, dissolved or bankrupt business establishment is untruthful, the new business establishment enjoying the former's property shall have to fully pay the deficit tax amount and fine to the State budget. 3. Business establishments shall have to submit their financial statements and tax settlement reports directly to the tax agency within 60 days from the end of the fiscal year. In the case of a merger, consolidation, division, splitting, dissolution or bankruptcy, the dealine for submitting tax-settlement report shall be 45 days from the date of issue of the decisions on the merger, consolidation, division, splitting, dissolution or bankruptcy by the competent agency. 4. Business establishments shall have to pay the deficit tax amounts according to their tax-settlement reports within 10 days from the date of submission of the tax-settlement reports. Past this time limit, if they fail to pay tax, they shall, apart from paying in full the deficit tax amount, have to pay fines for their delayed payment. 5. The examination of the tax-settlement reports shall be decided by the head(s) of the tax agency(ies) directly managing the establishments or the head(s) of the higher-level tax agency(ies). In the course of tax settlement examination, if any selling or purchasing prices or business expenses of a business establishment are detected untrue, the tax agency shall be entitled to re-determine them according to the prices at the time of goods purchase and/or sale so as to ensure the full and accurate collection of enterprise income tax. At the end of the examination, the tax agency shall have to make a report thereon and propose handling measures. Business establishments shall have to abide by the tax agency's examination reports. V. PROCEDURES FOR THE DECLARATION, PAYMENT AND REIMBURSEMENT OF TAX ON INCOME REMITTANCE ABROAD 1. The abroad-income remittance tax shall be declared and paid for each transfer abroad. In cases where enterprises keep their incomes abroad; pay debts for their mother companies and cover expenditures for Vietnam-based representative offices of the mother companies in Vietnam, they shall make tax declaration and payment on the monthly basis. 2. Before transferring incomes abroad or on the fifth day of the subsequent month at the latest (for cases of monthly tax declaration and payment), foreign investors shall have to make tax declarations and submit them to the tax agency directly managing the enetrprises and at the same time pay the already declared tax amounts to the State Treasury. Only after obtaining a tax payment receipt (from the treasury), can the foreign investors proceed with the procedures for the transfer of their incomes abroad. 3. In cases where the tax has been paid but the incomes have not been transferred abroad or the tax is overpaid, the State budget shall refund the tax amounts already overpaid. A dossier on tax reimbursement sent to the Ministry of Finance shall include: - An official written request for the reimbursement of the overpaid tax amount, clearly stating the reasons of the overpayment; the name, address and account number of the investor who requests the tax reimbursement. - A list of the tax amount already paid to the treasury attached with vouchers and/or receipts (copies) and certification by the treasury of the payable tax amount (clearly stating the chapter, category, clause and item to which the tax is paid according to the budget contents). - The certification by the tax agency directly managing the enterprise of the overpaid tax amount and handling proposal. 4. Annually, within 90 days from the end of the fiscal year, foreign investors shall have to report to the tax agency(ies) directly managing enterprises on the use of their divided incomes and pay tax on the transfer of income abroad for that fiscal year. D. TASKS, POWERS AND RESPONSIBILITIES OF THE TAX AGENCY The tax agency shall have the following tasks and responsibilities: 1. Guiding business establishments to register, declare and pay tax in accordance with the regulations. The registration of enterprise income tax shall be made simultaneously with the registration of value-added tax. Business establishments that fail to comply with the regulations on tax registration, declaration and payment shall be warned of in writing by the tax agency; if after being warned of they still fail to comply with the regulations, the tax agency shall have the right to sanction their tax-related administrative violations. 2. Notifying business establishments of the payable tax amounts and the tax payment deadlines as prescribed. Tax-payment notices must be sent to the tax payers at least 3 days before the date set for tax payment (which must be stated in the notices). Past the tax payment deadlines stated in the notices if any business establishments fail to pay tax, the tax agency shall continue to issue notices for the second time. The second tax notices shall state the payable tax amounts as well as the fines on the late payment as prescribed in Clause 2 of Article 24 of the Law on Enterprise Income Tax. If such business establishments still fail to fully pay the tax amounts and fines according to the second notices, the tax agency shall be entitled to apply handling measures provided for in Clause 4, Article 24 of the Law on Enterprise Income Tax. If even after the above-mentioned handling measures have been applied the concerned business establishments still fail to fully pay the tax amounts and fines, the tax agency shall transfer the dossiers to the competent State agency for handling according to law. 3. Supervising and inspecting the business establishments' tax declarations, payments and settlements, ensuring the compliance with the provisions of law. 4. Handling tax-related administrative violations and settling tax-related complaints. 5. Requesting business establishments to supply accounting books, invoices, vouchers and other documents related to tax calculation and tax payment; requesting credit institutions, banks and other organizations and/or individuals to supply documents related to tax calculation and payment. 6. Keeping and using data and documents supplied by business establishments and other subjects according to the prescribed regime. 7. The tax agency shall be entitled to set the taxable incomes for calculating enterprise income tax to be paid by business establishments in the following cases: a/ Business establishments fail to observe or falsely observe the regulations on accounting, invoices and vouchers. b/ Business establishments fail to declare or improperly declare the tax calculation bases or fail to prove the bases stated in the declarations at the request of the tax agency. c/ Business establishments refuse to produce accounting books, invoices, vouchers and necessary documents related to the enterprise income tax calculation. d/ Business establishments are detected having conduct business activities without business registration. The tax agency shall base itself on the survey documents on the situation of the business establishments' production and business activities and on the taxable incomes of business establishments of the same business category and scope to set the turnover for the calculation of taxable incomes. Beside the above-said method, the tax agency may also use the following method to determine taxable incomes of permanent establishments of foreign companies based on their turnovers: Taxable incomes of a permanent establishment in Vietnam in the period = (The total turnover of the permanent establishment in Vietnam in the period : The total turnover of the foreign company in the period) x The total income of the foreign company in the period. For the implementation of the method of fixing taxable incomes for permanent establishments, foreign companies shall have to produce to the tax agency their accounting books and reports that have been certified by independent auditing organizations and will serve as basis for the allocation of taxable incomes to their permanent establishments in Vietnam. In cases where business establishments disagree with the set taxable amounts, they shall be entitled to complain with the immediate higher-level tax agency. Pending a solution, the complaining business establishments shall still have to pay the tax amounts as already set. E. ENTERPRISE INCOME TAX EXEMPTION, REDUCTION AND REIMBURSEMENT I. CASES ENTITLED TO ENTERPRISE INCOME TAX EXEMPTION AND REDUCTION 1. Tax exemption and reduction for newly-established domestic production establishments a/ Newly-established production establishments shall be exempt from enterprise income tax for the first two years from the time the taxable income is generated, then enjoy a 50% reduction of the payable enterprise income tax for two subsequent years. For newly-established production establishments in districts of mountainous, island or difficult areas, they shall enjoy such tax reduction for two more years. b/ Newly-established production establishments in the fields and business lines eligible for investment preferences shall enjoy enterprise tax exemption for the first two years from the time the taxable income is generated and a 50% reduction of the payable income tax amount for three subsequent years. c/ Newly-established production establishments in the fields and business lines eligible for investment preferences in districts of ethnic minority people or high mountainous areas shall enjoy income tax exemption for the first four years from the time the taxable income is generated and a 50% reduction of the payable income tax amount for nine subsequent years. d/ Newly-established production establishments in the fields and business lines eligible for investment preferences in districts of ethnic minority people or mountainous and island areas shall enjoy income tax exemption for the first four years from the time the taxable income is generated and a 50% reduction of the payable income tax amount for seven subsequent years. e/ Newly-established production establishments in the fields and business lines eligible for investment preferences in other difficult areas shall enjoy income tax exemption for the first three years from the time the taxable income is generated and a 50% reduction of the payable income tax amount for five subsequent years. 2. Tax exemption and reduction for newly-established business or service establishments in the fields and business lines eligible for investment preferences a/ Newly-established business or service establishments in the business lines eligible for investment preferences shall enjoy a 50% reduction of the payable income tax amount for the first two years from the time the taxable income is generated. b/ Newly-established business or service establishments in the business lines eligible for investment preferences in districts of ethnic minority people on high mountains shall enjoy income tax exemption for the first two years from the time the taxable income is generated and a 50% reduction of the payable income tax amount for five subsequent years. c/ Newly-established business or service establishments in the business lines eligible for investment preferences in districts of ethnic minority people or mountainous and island areas shall enjoy income tax exemption for the first two years from the time the taxable income is generated and a 50% reduction of the payable income tax amount for four subsequent years. d/ Newly-established business or service establishments in the business lines eligible for investment preferences in other difficult areas shall enjoy income tax exemption for the first year from the time the taxable income is generated and a 50% reduction of the payable income tax amount for three subsequent years. Newly-established business or service establishments eligible for enterprise income tax exemption and/or reduction as guided in Points 1 and 2, Item I above are the establishments which have been newly set up and granted business licenses since the Law on Enterprise Income Tax took effect. The establishments which were set up previously and are now divided, split, merged, consolidated, renamed or transformed or investing in the building of new production lines, expansion of production scale, technological renovation, ecological improvement, raising of production capability, addition of new commodities and/or business lines to their business licenses shall not be entitled to tax exemption and/or reduction as the newly-set up production, business and/or service establishments. 3. Domestic production establishments which invest in building new production lines, expanding the production scale, renewing technologies, improving the ecological environment or raising the production capacity, shall be exempt from the enterprise income tax on the increased income for the first year and enjoy a 50% reduction of the payable income tax amount on the income brought about by the new investment for two subsequent years. The increased income brought about by the new investment shall be determined by the difference between the taxable income of the year when the investment project is completed and the taxable income of the year just before the investment is made. For example: - In 1998, taxable income of Company A is 500 million dong - At the beginning of 1999, Company A completes the project on the expansion of its production scale and put such project into operation. For 1999, 2000 and 2001, the company shall have a taxable income of 800 million dong/year. Company A shall enjoy tax exemption and reduction as follows: - In 1999, company A shall enjoy tax exemption for the following taxable income: 800 million dong - 500 million dong = 300 million dong - In each year of 2000 and 2001, company A shall enjoy enterprise income tax reduction with an amount equal to: 50% x (800 million dong - 500 million dong) x 32% = 48 million dong. 4. Domestic business establishments which move to mountainous, island or difficult areas shall be exempt from enterprise income tax for the first three years from the time the taxable income is generated. 5. The following incomes of domestic business establishments shall be exempt from enterprise income tax: a/ Income from the performance of scientific research contracts. b/ Income from the performance of technical service contracts in direct service of agriculture. c/ Income from production, business or service activities of business establishments exclusively reserved for disabled laborers. For business establishments defined as exclusively reserved for disabled laborers, they must fully meet the following conditions: - To be recognized by the People's Committees of the provinces or centrally-run cities as business establishments exclusively reserved for disabled laborers (including war invalids and war diseased). - To strictly abide by the regulations on the opening of accounting books, use of vouchers and invoices for the purchase and/or sale of goods or provision of services in accordance with the current regulations. - To have business permits issued by the competent State agency. - To employ at least 10 laborers or more, 51% of whom are disabled as certified by the competent medical agency. The remaining laborers are mainly relatives of the disabled, the capital contributors and people with managerial, professional, scientific and technological skills and knowledge. - To have operation regulation or statute suited to the disabled laborers. d/ Income from vocational training activities exclusively reserved for the disabled, ethnic minority people, children in specially difficult circumstances and victims of social vices. Vocational training activities which are defined as exclusively reserved for the disabled, ethnic minority people, children in especially difficult circumstances and victims of social vices, shall have to fully meet the following conditions: - To be conducted by enterprises, employment service centers, organizations and/or individuals stipulated in Article 17 of Decree No.72-CP of October 31, 1995; Articles 10 and 13 of Decree No.81-CP of November 23, 1995; and Article 10 of Decree No.90/CP of December 15, 1995 of the Government. - To operate in strict compliance with the business lines which are stated in their business licenses or which have been registered with the competent labor, war invalids and social affairs service. - To register the tax payment in accordance with the provisions of law. - To strictly comply with the regulations on the opening of accounting books and use of vouchers and invoices as prescribed by the current regulations. 6. Production, business and/or service households shall be considered for tax exemption and/or reduction in the following cases: a/ Production, business and/or service households of medium and small sizes that have not applied the regulations on vouchers and invoices for the purchase and/or sale of goods and/or services as well as for tax calculation and tax payment on the fixed incomes, if ceasing their business operations for 15 consecutive days or more in a month, shall be considered for a 50% reduction of the payable tax amount; if ceasing business operations for one month, shall be considered for the tax exemption for that month. b/ Production, business and/or service households that have monthly average incomes in a year lower than the minimum salary level prescribed by the State for State employees shall enjoy tax exemption for the whole year. 7. The enterprise income tax exemption and/or reduction for foreign-invested enterprises and foreign parties to business cooperation contracts shall be effected as follows: a/ Projects allowed to apply the tax rate of 20% for 10 years after the commencement of their production and/or business activities shall enjoy income tax exemption for the first year from the time the taxable income is generated and a 50% reduction of the payable income tax amount for two subsequent years. b/ Projects allowed to apply the tax rate of 15% for 12 years after the commencement of their production and/or business activities shall enjoy income tax exemption for the first two years from the time the taxable income is generated and a 50% reduction of the payable income tax amount for three subsequent years. c/ Projects allowed to apply the tax rate of 10% for 15 years after the commencement of their production and/or business activities shall enjoy income tax exemption for the first four year from the time the taxable income is generated and a 50% reduction of the payable income tax amount for four subsequent years. d/ Afforestation projects and infrastructure development projects in mountainous or island areas, and other projects where investment is specially encouraged shall be exempt from income tax for eight years from the time the taxable income is generated. The tax exemption and reduction mentioned in Points a, b, c and d above shall not apply to hotel projects (except for those in mountainous, island and difficult areas or where property is transferred to the State of Vietnam without indemnity at the end of the operation duration) and investment projects in financial, banking, insurance, service provision and trade fields. 8. The enterprise income tax shall be exempt and/or reduced for foreign investors in the following cases: a/ Overseas Vietnamese who invest in the country under the Law on Foreign Investment in Vietnam shall enjoy the 20% reduction of the payable income tax amount, except for cases where they enjoy the income tax rate of 10%. b/ The value of patents, technical know-how, technological processes and/or technical services defined as legal capital contributions of foreign investors shall be exempt from enterprise income tax. c/ Foreign investors shall be exempt from enterprise income tax in cases where they transfer their contributed capital to State enterprises or enterprises where the State holds predominant shares. d/ The 50% reduction of enterprise income tax shall be given to foreign investors who transfer their contributed capital to other Vietnamese enterprises such as limited liability companies, joint stock companies, private enterprises or cooperatives, etc. 9. Domestic enterprises and foreign-invested enterprises engaged in production, construction and transport activities involving a large number of female laborers shall be entitled to enterprise income tax reduction. The level of tax reduction shall correspond the following actual expenses for such female laborers: a/ Additional expenses for the re-training of female laborers, if their previous trainings are no longer suited to the new job according to the development planning of the enterprises. These expenses include: tuition (if any) + wage differences due to the change of positions and/or ranks (the trainees shall still enjoy 100% of their wages). b/ Wages and wage allowances (if any) for female teachers of kindergartens and pre-school classes which are organized and run by the enterprises themselves. The number of such female teachers shall be determined according to the norms set in the education and training system. c/ Expenses for an extra health examination in a year (in addition to the examinations already prescribed), mainly the examination of occupational, chronic or gynecological diseases which are often infected by women. d/ Lump-sum additional expenses as post-natal allowances for female laborers after their first or second childbirth. The level of such an expense must not exceed 300,000 dong for enterprises located in cities, provincial towns and townships and 500,000 dong for enterprise in deep-lying, remote and island areas, thus, to some extent helping the mothers overcome the difficulties after their childbirth. e/ During the period of nursing her child, if due to some objective reasons, such laborer cannot go home to breastfeed the child and stay to work at the enterprise, she shall be entitled to the extra-time allowance according to the current regulations. The above-said expenses for female laborers shall be exempt from enterprise income tax, provided that they are evidenced by vouchers on actual expenses with signatures of the money receivers. A production, construction and/or transport enterprise shall be considered having employed a large number of female laborers if it meets one of the following conditions: a/ It regularly employs from 10 to 100 female laborers, who account for at least 50% of the total number of laborers regularly working at the enterprise. b/ It regularly employs more than 100 female laborers, who account for more than 30% of the total number of laborers regularly working at the enterprise. Non-business units and offices of State corporations that fully meet the above-said conditions but not directly engaged in business shall not be entitled to tax reduction as mentioned in this Point. 10. Reimbursement of enterprise income tax to foreign investors who use their dividends for reinvestment a/ Conditions for the tax reimbursement: - Reinvesting in projects in the fields where investment is encouraged. - The reinvestment capital is used for three years or more; - Having made full contribution to the legal capital as stated in the investment licenses. b/ The percentages of income tax reimbursement as the result of reinvestment are prescribed as follows: - 100% of the already paid tax amount, for cases of reinvestment in projects enjoying the enterprise income tax rate of 10% for 15 years. - 75% of the already paid tax amount, for cases of reinvestment in projects enjoying the enterprise income tax rate of 15% for 12 years. - 50%, for cases of reinvestment in projects enjoyinging the enterprise income tax rate of 20% for 10 years. c/ The enterprise income tax amount reimbursed for the reinvested incomes shall be determined as follows: Th = L : (100% - S) x S x T of which: - Th: is the reimbursed tax amount - L: is the dividend left after the payment of income tax, and used for reinvestment. - S: is the enterprise income tax rate stated in the investment license. - T: is the income tax reimbursement percentage. 11. Domestic business establishments and foreign-invested enterprises, which suffer from losses after making settlement with the tax agency shall be entitled to carry forward such losses to subsequent years for deduction from the taxable incomes. The loss carry-forward period shall not exceed five years. II. PROCEDURES FOR CONSIDERATION OF TAX EXEMPTION AND REDUCTION Business establishments entitled to tax exemption and/or reduction shall have to send dossiers to the competent tax agency for consideration as follows: 1. For cases entitled to tax exemption and/or reduction mentioned in Points 1, 2 and 4, Item I, Part E, the business establishments shall only have to send official dispatches to the tax agency directly in charge of tax collection, requesting the tax exemption and/or reduction (clearly slating the reasons therefor). After examining the conditions for tax exemption and/or reduction, the tax agency directly in charge of tax collection shall notify such business establishments of whether they are entitled to the annual tax exemption and/or reduction or not. 2. For cases entitled to consideration for tax exemption and/or reduction according to Point 3, Item I, Part E, a dossier shall include: - An official written request from the concerned business establishment to the tax agency directly in charge of tax collection, which must clearly state the reasons for tax exemption and/or reduction, which is attached with the following papers: + For State enterprises: The investment study report already ratified by the competent level; the final account settlement of the project and capital sources for construction and procurement. + For limited liability companies and joint stock companies: The investment study report already ratified by the managing board; the final account settlement of the project and capital sources for construction and procurement. + For private enterprises: The construction contract and the report on the liquidation of the contract on construction, equipment installation and/or machine assembly; in case of construction, vouchers and/or invoices on the procurement of materials and supplies which have been used, installed and/or assembled, are required. - The business establishment's financial statement and report on final settlement of enterprise income tax of the pre-investment year as well as the post-investment year subject to consideration for tax exemption and/or reduction. 3. For cases considered for tax exemption according to Point 5a, Item I, Part E, a dossier shall include: - An official written request from the business establishment to the tax agency directly in charge of tax collection, clearly stating the reasons for tax exemption. - The establishment decision issued by the competent agency. For collectives and individuals, the registration certificate of scientific research activities issued by the provincial/municipal scientific management agency is required. - The business permit. - The scientific research contract with certification by the proper competent State agency in charge of scientific affairs. - The report on the liquidation of the contract. - The business establishment's financial statement and report on final settlement of enterprise income tax that reflect in detail the results of scientific research. 4. For cases considered for tax exemption according to Point 5b, Item I, part E, a dossier shall include: - An official written request from the business establishment to the tax agency directly in charge of tax collection, clearly stating the reasons for tax exemption. - The technical service contracts in direct service of agriculture and the report on the liquidation of the contracts. - The business establishment's financial statement and report on final settlement of enterprise income tax that reflect in detail the results of the performance of technical service contracts in direct service of agriculture. 5. For cases considered for tax exemption for business establishments exclusively reserved for disabled laborers (Point 5c, Item I, part E), a dossier shall include: - An official written request from the business establishment to the tax agency directly in charge of tax collection, clearly stating out the reasons for tax exemption. - The decision of the People's Committee of the province or centrally-run city certifying that the concerned business establishment is exclusively reserved for disabled laborers. - The business establishment's financial statement and report on the final settlement of enterprise income tax. 6. For cases considered for tax exemption according to Point 5d, Item I, part E, a dossier shall include: - An official written request from the business establishment to the tax agency directly in charge of tax collection, clearly stating the reasons for tax exemption. - The business permit with registration of vocational training activities, granted by the labor, war invalids and social affairs service. - The paper issued by the labor, war invalids and social affairs service certifying that the business establishment is exclusively reserved for disabled people, people of ethnic minority, children in special difficult circumstances and victims of social vices. - The list of trainees being disabled people, ethnic minority people, children in special difficult circumstances and victims of social vices. - The financial statement and the report on the final settlement of enterprise income tax of the vocational training establishment. 7. For cases of tax exemption and/or reduction according to Point 6, Item I, Part E, the dossier shall include only a written request from the production, business and/or service household, clearly stating the reasons for tax exemption with certification by the commune/ward authorities. The direct managing tax agency shall, after obtaining approval from the tax consultancy council of the same level, issue a notice on tax exemption and/or reduction to the concerned production, business and/or service household. 8. Tax exemption and/or reduction for foreign-invested enterprises, foreign parties to business cooperation contracts and foreign investors under the provisions of Points 7 and 8, Item I, Part E shall be stated in the investment licenses issued by the competent agency after getting consent from the Ministry of Finance. 9. For cases considered for tax reduction according to Point 9, Item I, Part E, the dossier shall include: - An official written request from the business establishment, clearly stating the reasons for tax reduction. - The list of laborers, including female laborers regularly working in the enterprise. Such list must be certified by the competent labor management agency. - The list of extra expenses for female laborers already certified and examined by the direct managing tax agency. - The business establishment's financial statement and report on the final settlement of enterprise income tax. 10. A dossier of application for enterprise income tax reimbursement to foreign investors who use their dividends for reinvestment projects in the fields where investment is encouraged, according to Point 10, Item I, Part E shall include: - An official request or application for enterprise income tax reimbursement due to reinvestment by foreign investors or their authorized persons. The application must state clearly the name, address and account number of the investor or his/her authorized person. - The investor's commitment to use incomes for reinvestment for 3 years or more. - The investment license (the notarized copy) or the adjusted license issued by the investment licensing agency, which clearly states that the investor is allowed to use his/her dividends for reinvestment and if meeting the prescribed conditions, shall have the tax amount on reinvestment refunded. - The document certifying the full contribution to the legal capital issued by the managing board for a joint venture enterprise or certification by the auditing agency for enterprise with 100% foreign-invested capital or foreign parties to a business cooperation contract (the original or notarized copy). - A declaration on the reinvested incomes made according to the prescribed form. - Vouchers and invoices on the enterprise's tax payment (copies) with certification by the State treasury regarding the enterprise income tax amount already paid. After receiving a complete dossier, the direct managing tax agency shall conduct examination of the already paid tax amount and calculate the tax amount to be refunded to the investor, then send the dossier to the Ministry of Finance (the State Budget Department) for consideration and issue of a decision on tax reimbursement to him/her. Within 30 days after receiving a complete dossier, the Ministry of Finance shall notify the investor of its decision. In cases where the tax amount has been refunded to the investor but he/she actually does not use it for reinvestment, he/she shall not only have to pay back the reimbursed tax amount but also pay interests arising therefrom according to the bank deposit interest rate and shall be deal with in accordance with the provisions of Vietnamese laws. III. ORDER AND COMPETENCE FOR CONSIDERATION OF TAX EXEMPTION AND REDUCTION 1. The tax exemption and reduction shall be considered annually after the business establishment has completed its financial statement as well as report on final settlement of enterprise income tax. To reduce difficulties for business establishments, in the year they are considered for tax exemption and/or reduction, the tax agency may grant them temporary tax exemption and/or reduction. 2. Within 30 days after receiving a dossier requesting tax exemption and/or reduction, the competent tax agency shall have to issue a decision on temporary or official tax exemption and/or reduction for the concerned business establishment or notify such business establishment of the reasons for the late settlement or non-settlement of its request. 3. Competence to decide tax exemption and reduction: a/ The directors of the tax sub-departments shall decide enterprise tax exemption and/or reduction for production, business and service households under their respective management, which have the average monthly income lower than the minimum wage level prescribed by the State for State employees or have to cease their monthly business activities. b/ The directors of the provincial/municipal tax departments shall decide tax exemption and/or reduction for productions, business and service establishments in their respective localities, except for cases falling within the competence of the directors of the sub-departments mentioned above. Decisions on tax exemption and/or reduction issued by the directors of the tax sub-departments or tax departments shall not only be sent to the business establishments but also to the General Department of Taxation. Every year, the tax departments shall have to sum up the tax exemption and reduction amounts in their respective localities (provinces, districts) and report them to the General Department of Taxation. F- HANDLING OF VIOLATIONS I. HANDLING OF TAX VIOLATIONS Tax payers that violate the Law on Enterprise Income Tax shall be handled as follows: 1. A failure to abide by the regulations on accounting, invoices, vouchers, declaration, payment and settlement of tax shall, depending on the nature and seriousness of the violation, be subject to warning or fine. 2. If they fail to pay tax or fine, according to the deadline stated in the tax notices, tax collection orders or sanction decisions, they shall have to pay, in addition to the full amount of tax or fine, a 0.1% of the amount of deferred payment for each day of the delay. 3. If they falsely declare or evade tax, they shall, besides having to fully pay the tax amount as prescribed by the Law on Enterprise Income Tax, be subject to a fine of from one to five times the falsely declared or evaded amount, depending on the nature and seriousness of the violation; if they evade tax in big amount, repeat their already administratively sanctioned violations or commit other serious violations, they shall be examined for penal liability as prescribed by law. 4. A failure to pay tax or fine under a tax notice or a tax-handling decision shall be handled as follows: a/ Making deductions from money deposited by the business establishment at a bank, treasury or credit institution for the payment of such tax or fine. The concerned bank, treasury or credit institution shall have to make deductions from the deposit account of the business establishment to pay the tax or fine to the State budget under a tax-handling decision issued by the tax agency or the competent agency before collecting debts. b/ Retaining goods, material evidences to ensure the full collection of the tax or fine. c/ Making inventory of assets as prescribed by law to ensure the full collection of the tax or fine arrears. The procedures and order for handling of cases mentioned in Points a, b and c shall comply with the current provisions of law. II. COMPETENCE FOR HANDLING TAX-RELATED VIOLATIONS Tax agencies, when detecting any violations of the Law on Enterprise Income Tax committed by business establishments shall have to examine and clearly determine the acts of violations and compile dossiers as prescribed. Basing themselves on the regulations and levels of administrative sanctions in the field of taxation, the tax agencies shall, within the sanctioning competence of each level, have to issue sanctioning decisions or propose the higher-level tax agencies or other judicial bodies to handle according to their respective competence specified as follows: 1. The heads of the tax agencies directly managing the tax collection shall have the right to handle violations by tax payers as prescribed in Points 1 and 2 and sanction tax-related administrative violations as prescribed in Point 3, Item I, Part F of this Circular. 2. The directors of the tax departments and sub-departments which directly manage the tax collection shall be entitled to apply measures prescribed in Point 4, Item I, Part F of this Circular and submit the dossiers to the competent agencies for handling cases of violation prescribed in Point 3, Item I, Part F of this Circular, in accordance with the provisions of law. G. COMPLAINTS AND STATUTE OF LIMITATIONS 1. Rights and responsibilities of tax payers in making tax complaints: According to the provisions of Article 28 of the Law on Enterprise Income Tax, tax payers shall have the right to complain about tax officers and tax agencies that fail to comply with the Law on Enterprise Income Tax. A complaint must be sent to the tax agency directly issuing tax notice, tax collection order or handling decision within 30 days after receiving the tax collection order or the handling decision. Pending a solution, the tax payer shall still have to pay the tax and/or fine in full and on time as notified. If the tax payer disagrees with the decision of the tax agency settling his/her complaint or past 30 days after submitting the complaint, his/her complaint has not been settled, such tax payer shall have the right to lodge the complaint to the immediate higher-level tax agency or initiate a lawsuit in a court as prescribed by law. Tax payers shall have to comply with the procedures and order on complaint or litigation in accordance with the current provisions of law. 2. Responsibilities and powers of tax agencies in settling tax complaints : According to the provisions of Article 29 of the Law on Enterprise Income Tax, tax agencies of different levels shall have to consider and settle tax complaints from tax payers within 15 days after receiving such a complaint. For complicated cases that require time for investigation and verification, they must notify such to the complainants and must settle the complaints within no more than 30 days after receiving them; if a case does not fall under its competence, the concerned tax agency shall have to forward the tax dossier or report it to the competent agency for settlement and notify the complainant thereof within 10 days after receiving the complaint. Upon the detection of or conclusion on false tax declaration, tax evasion or tax-related errors, the tax agency shall have to collect the tax or fine arrears or reimburse the tax money paid in excess within the five latest years from the date of detection of the false tax declaration, evasion or errors. In cases where the business establishment fails to make tax registration, declaration and payment, the duration for the collection of the tax or fine arrears shall be counted from the date when the business establishment starts its operation. H. ORGANIZATION OF IMPLEMENTATION 1. This Circular takes effect from January 1st, 1999. 2. The settlement of the remaining tax-related problems, tax settlement, tax exemption and/or reduction as well as the handling of profit-tax related violations before January 1st, 1999 shall comply with the corresponding provisions of the Law on Profit Tax, the Law on the Amendments and Supplements to a Number of the Law on Profit Tax and other legal documents on profit tax. In the course of implementation of this Circular, any problems arise, should be promptly reported by business establishments, branches and localities to the Ministry of Finance for consideration and further guidance. For the Minister of Finance Vice Minister PHAM VAN TRONG