Circular No. 03/2002/TT-BTC guiding the management regime for tax collection on fishing activities

CIRCULAR

Guidelines on the management regime for tax collection from entities engaged in fishing activities

Pursuant to the Law on Value Added Tax No. 02/1997/QH9 dated May 10, 1997 and guiding documents implementing the Law on Value Added Tax;

Pursuant to the Law on Corporate Income Tax No. 03/1997/QH9 dated May 10, 1997 and guiding documents implementing the Law on Corporate Income Tax;

Pursuant to the Resource Tax Decree issued on April 16, 1998 and guiding documents implementing the Resource Tax Decree;

To be consistent with the characteristics of fishing activities, after consulting the Ministry of Fisheries, the Ministry of Finance hereby provides guidelines on the management regime for tax collection from entities engaged in natural fishing activities as follows:

I. SCOPE OF APPLICATION

1. Organizations and individuals (hereinafter referred to collectively as entities) both domestic and foreign that engage in natural fishing activities (hereinafter referred to collectively as fisheries) which are subject to Value Added Tax (VAT), Corporate Income Tax (CIT), Resource Tax, and other revenues (if applicable) under current tax laws and decrees are the subjects to which this circular's tax collection management regime applies.

2. This circular does not apply to the following cases:

a) Fishing of cultivated aquatic products.

b) Production, processing, trading, import and export of aquatic products.

c) Other production, trading, and services, including direct services supporting natural fishing activities.

II. METHODS FOR DETERMINING THE AMOUNT OF TAX TO BE PAID BY EACH FISHING ENTITY

1. According to current tax laws and decrees, fishing activities fall within the scope of application of policies on business license tax, resource tax, VAT, CIT, and other revenues (if applicable) as stipulated:

a) Business license tax is paid once at the beginning of the year based on the scale of operations of each fishing entity.

b) Resource tax, VAT, CIT, and other revenues (if applicable) are paid according to actual amounts generated during the prescribed periods, specifically:

- For fishing entities that fully and correctly implement accounting systems, invoices, and vouchers, accurately determining production volume, revenue, and operational costs, they shall calculate and pay resource tax, VAT, CIT, and other revenues (if applicable) based on the actual amounts reflected in their accounting records in accordance with current tax laws, decrees, and guiding documents.

- For fishing entities that have not fully and correctly implemented accounting systems, invoices, and vouchers, they must pay resource tax, VAT, CIT, and other revenues (if applicable) at rates determined by the tax authority.

2. Method for Determining Prescribed Tax Rates:

To determine the prescribed resource tax, VAT, and CIT rates for each fishing entity, the tax authority must undertake:

2.1/ Determining taxable revenue for each fishing entity:

a) To determine the prescribed fishing production volume (referred to collectively as the prescribed production volume), the tax authority needs to proactively coordinate with the Fisheries Authority and local authorities to carry out the following tasks:

- Conducting a three-year survey and a survey for the tax period regarding the actual fishing capacity of each entity, including: number of vessels, vessel and gear horsepower (HP) for each fishing method, actual fishing productivity, number of fishing laborers, fishing grounds, seasons, etc., to estimate the fishing production volume during the tax period for each type of vessel and each entity.

- Holding meetings with fishermen to explain the state's tax policy and announce the estimated fishing production volume for the tax period so that entities can comment and propose appropriate fishing production volumes, ensuring democracy and fairness. The meeting with the fishing entity must be recorded in a protocol signed by representatives of the tax authority, the Fisheries Authority, local authorities, and the fishing entity.

- Based on the results of the meeting with fishermen and taking into account the prescribed fishing production volume of neighboring provinces' fishing grounds (if available), the Provincial Tax Department will unify with the Provincial Fisheries Department to submit to the People's Committee of the province or centrally-administered city for approval and announcement of the prescribed fishing production volume to remain stable for approximately 3 to 5 years, allowing entities to fish with peace of mind (except in cases where there is a change of 30% or more in the prescribed volume, then a review is necessary).

b) The tax calculation price is the average market selling price of each type of fishery product harvested during the tax period in the local market.

To ensure that the tax calculation price closely matches market prices, the Provincial Tax Department must regularly coordinate with relevant local agencies (Department of Finance Prices, Fisheries Department, etc.) to survey market prices, propose appropriate tax calculation prices, and submit them to the People's Committee of the province or centrally-administered city for determination of the tax calculation price for fishery products in the locality and announcement for fishermen to follow.

For provinces and centrally-administered cities sharing the same fishing grounds, before submitting to the provincial People's Committee for determination of the tax calculation price, the Provincial Tax Departments need to exchange views to reach consensus on the tax calculation price, ensuring fair contributions and preventing revenue loss. In cases where market prices fluctuate by 20% or more, adjustments must be submitted to the provincial People's Committee for approval.

2.2/ Determining the percentage of tax payable on revenue (referred to collectively as the tax rate) applicable to each fishing entity:

To simplify the tax calculation and payment process for fishing entities and serve as a basis for state budget accounting according to the state budget classification, it is required to determine the total tax rate (including resource tax, VAT, and CIT) and the individual tax rate on revenue using the following formula:

a) The amount of tax payable for each tax item is calculated as follows:

- Resource tax equals the prescribed fishing production volume multiplied by the tax calculation price determined by the provincial People's Committee, multiplied by the tax rate.

- Value Added Tax (VAT), equal (=) to VAT (according to the percentage rate of VAT on revenue specified by the Provincial Tax Department for each business sector and fixed taxable revenue), multiplied (x) by the VAT rate prescribed for aquatic products.

- Corporate Income Tax (CIT), equal (=) to taxable income (according to the percentage rate of taxable income on revenue specified by the Provincial Tax Department for each business sector and fixed taxable revenue), multiplied (x) by the CIT rate.

b) The revenue serving as the basis for determining the tax rate payable is the fixed taxable revenue at the time of determining the tax rate according to the guidance provided in point 2.1 of this section.

Based on the tax rate (%) payable determined above, the Provincial Tax Department will notify the entity to declare and pay taxes. To enable entities to proactively develop production and business operations and fulfill their tax obligations, the tax rate payable notified to the entity may remain stable for a period of 3 to 5 years; except in cases where there are significant changes in tax policies and operating conditions, adjustments must be made accordingly.

2.3/ Determine the total amount of fixed tax payable (including resource tax, VAT, and CIT) for each entity, detailed by each type of tax, annually and quarterly during the tax year, specifically as follows:

- Annual tax payable, equal (=) to the tax rate (%) payable (as announced by the Tax Department), multiplied (x) by the annual taxable revenue (based on the fixed production volume and the tax price specified by the Provincial People's Committee at the time of taxation).

- Quarterly tax payable within the year is determined based on the annual tax payable, divided (:) by the actual fishing season duration of that year. For example, in Province A, the fishing season lasts nine months, then the monthly tax payable equals (=) the total annual tax payable, divided (:) by nine months.

2.4/ Based on the aforementioned indicators, the tax authority directly managing the entity shall regularly notify the entity and simultaneously send the State Treasury at the location of direct tax collection about the total tax rate payable (with details by each type of tax), taxable revenue, annual tax payable, quarterly tax payable, payment deadlines for each quarter, and the payment locations for state budget revenues. In case of any changes or adjustments to the announced indicators during the year, supplementary notifications must be issued promptly.

III. REGISTRATION, DECLARATION, AND PAYMENT OF TAXES

1. According to the current Tax Law and Tax Ordinance, entities engaged in fishing must register, declare, and pay taxes to the state budget as follows:

a) All fishing entities must register taxes (business license, resource tax, VAT, CIT, and other receivables if applicable) with the local tax authority directly managing the entity where the entity's main office is located or where the head of the household registering for permanent residence operates the fishing business, including the industry, number of vessels, capacity of each vessel, netting equipment capability, number of laborers involved in fishing activities, planned fishing grounds, and expected annual fishery production, etc.

Additionally, for entities that move fishing grounds outside the local area where their main office is located or where the head of the household has registered for permanent residence, they must register taxes with the local tax authority at the new location within ten days from the start of fishing operations at the new ground.

b) Implement declarations and payments of taxes locally as follows:

- Resource tax is paid at the location where the actual fishing takes place.

- Business license tax, VAT, CIT, and other receivables (if applicable) are paid at the location where the entity's main office is located or where the head of the household has registered for permanent residence.

2. Based on the tax payment notification sent by the tax authority, the fishing entity must deposit money into the State Treasury according to the deadline and address indicated on the notification.

In cases where the State Treasury does not have a convenient tax collection point in the locality, the entity may not directly deposit money into the State Treasury. In such cases, the tax authority collects the tax or may delegate the Village People's Committee to collect the tax directly and deposit it into the state budget. When collecting tax from each entity, the collector must issue a tax receipt specifying the total tax paid and clearly indicating the resource tax, VAT, and CIT according to the state budget classification. The tax authority or Village People's Committee must promptly deposit the collected tax into the state budget in accordance with current regulations, strictly prohibiting the retention of tax funds for unauthorized expenditures.

If the tax authority delegates the Village People's Committee to collect taxes directly, before delegating, the tax authority must determine the tax payable and establish a tax ledger for each entity. During implementation, the tax authority must provide guidance and oversight; if there are any changes in tax policies (such as policy modifications, tax exemptions...), the tax ledger must be adjusted promptly and the Village People's Committee delegated to collect taxes must be informed to implement the changes.

3. For entities that move to different fishing grounds (outside the registered local fishing grounds), during the period of moving fishing grounds, they can temporarily postpone paying the resource tax at the registered location to complete registration and declaration of tax payment with the local tax authority at the new location, specifically as follows:

a) For entities that pay fixed taxes according to each fishing season, if the entity has completed the fishing season, they must pay all taxes at the registered location before moving to a new fishing ground (no deferral allowed); upon arrival at the new fishing ground, they must register and declare the payment of resource tax at the new location.

b) For those exploitation bases implementing annual tax installment payments divided equally by month or quarter, before moving, they must settle all outstanding taxes to the state budget up to the day of relocation and be temporarily exempted from paying the resource tax that has been recorded in the tax ledger during the time of moving fishing grounds for registration and declaration of tax payment at the relocated location.

The temporary exemption from paying the resource tax during the time of moving fishing grounds shall be decided by the Tax Administration directly managing (where the exploitation base registers tax), based on the application for temporary exemption from tax due to relocation submitted by the exploitation base, clearly stating: the period of relocating fishing grounds, the amount of tax payable, the amount of tax already paid, the amount of tax still payable before relocation, and the amount of resource tax proposed to be deferred. The village/township tax team (or room) directly managing the tax collection from the exploitation base, upon receiving the application from the exploitation base, shall have the responsibility to study and compare with the tax ledger to determine whether the exploitation base still owes taxes, requiring them to pay off all outstanding taxes, while preparing a list for approval by the District Tax Branch leader (or Bureau leader for rooms under the Bureau) and notifying the exploitation base in writing about the temporary exemption from paying the resource tax as a basis for deducting from the tax payable during the time of relocating fishing grounds for the exploitation base. At the latest within 15 days from the date of the decision on temporary exemption, the District Tax Branch must report to the Provincial Tax Bureau about the amount of resource tax temporarily exempted for the exploitation base on its territory due to relocation.

Upon completion of the relocation period for fishing grounds within 30 days, the exploitation base must present to the village/township tax team (or room) where it registered tax, original tax payment receipts for resource tax at the exploitation location consistent with the actual relocation period of fishing grounds (as stated in the application).

Based on the tax payment receipts of the exploitation base, comparing with the file and the decision on temporary exemption from tax, the village/township tax team (or room) confirms the amount of tax deducted for the exploitation base and sends the file to the District Tax Branch (or Provincial Tax Bureau) for verification and processing of tax reduction at the registration location, and notify the exploitation base within 15 days from the date of receipt of the complete file reported by the village/township tax team (or room). The amount of resource tax reduced at the registration location is the actual amount of tax paid by the exploitation base recorded on the tax payment receipt at the exploitation location, but the maximum amount of tax reduction at the registration location cannot exceed the amount of resource tax payable according to the tax rate calculated on revenue recorded at the registration location.

IV. TAX EXEMPTIONS AND REDUCTIONS

The exemptions and reductions of tax for exploitation bases operating in fisheries shall be carried out in accordance with Article 10 of the Resource Tax Ordinance; Article 28 and Clause 26 of Article 4 of the Value Added Tax Law; Articles 17, 18, 19, 20, 21 of the Corporate Income Tax Law; Articles 20, 21, 22, 23, 24, 25, 26 of the Domestic Investment Incentive Law (amended) No. 3/1998/QH10 dated May 20, 1998.

To implement the preferential policies correctly for exploitation bases engaged in fisheries activities, the Tax Administration directly managing these exploitation bases shall have the responsibility to:

1. Publicly announce to the exploitation bases operating in fisheries the provisions of the laws regarding the objects not subject to taxation and the objects eligible for tax reduction and exemption.

2. Guide the exploitation bases to complete the necessary files and procedures for requesting tax reduction and exemption in accordance with the current tax laws.

For exploitation bases actually operating in fisheries in distant sea areas eligible for preferential treatment under the Resource Tax Ordinance, the Corporate Income Tax Law, and the Domestic Investment Incentive Law (including exploitation bases that have implemented accounting systems or have not implemented accounting systems as prescribed), in addition to the current files and procedures, they must also supplement:

- Business registration certificate issued by the competent authority, clearly indicating the operation in distant sea areas.

- Vessel inspection certificate, clearly indicating the following criteria: vessel gross tonnage and power, fishing industry (fishing, trawling, dragging, netting, etc.)

- Vessels operating in distant sea areas must have a main engine power (marine or other replacement engines installed on vessels) of 90 HP or more and minimum vessel tonnage as follows:

3. The examination and decision on tax reduction and exemption for each exploitation base must be conducted annually.

In cases where, during the year or during the stable production period and the tax rate (%) on revenue as mentioned above (including cases where the tax ledger has been established), it is found that the exploitation base falls under the category eligible for tax reduction and exemption according to the tax laws and the Domestic Investment Incentive Law (or does not fall under the taxable category stipulated in Clause 26 of Article 4 of the Value Added Tax Law), and actual natural disasters such as typhoons and floods, unexpected accidents causing property damage (vessels, fishing gear, etc.), leading to cessation or reduction in fishing production, difficulties in product sales, price drops affecting revenue and income of fishermen, then the Tax Administration must promptly examine and decide not to collect tax or issue a decision to reduce or exempt tax for each specific case in accordance with the regulations.

4. The authority to examine and decide on tax reduction and exemption (resource tax, VAT, CIT) shall be carried out as follows:

- The Director of the Provincial Tax Bureau shall examine and decide on tax exemption and reduction for exploitation bases managed by the Provincial Tax Bureau.

- The Director of the District Tax Branch shall examine and decide on tax exemption and reduction for exploitation bases managed by the District Tax Branch.

V. IMPLEMENTATION

1. Organizations and individuals exploiting fisheries must comply with the Laws and Ordinances on Taxation as detailed in this Circular. Any violations of tax policy will be punished according to the current tax laws.

2. To organize tax collection management for aquatic product exploitation establishments accurately, the Tax authority needs to closely coordinate with the Aquatic Products authority and take advantage of the leadership of the People's Committees at all levels to ensure centralized and unified guidance, organizing aquatic product exploitation establishments to comply with the laws and guidelines stipulated in this Circular. In necessary cases, in complex areas far from the Tax authority, the collection of taxes on aquatic product exploitation activities may be delegated to other agencies according to the decision of the Director of the General Tax Department, the agency receiving the tax collection delegation is entitled to retain 5% (five percent) of the actual tax collected before remitting it to the State budget to cover the costs of collecting taxes on aquatic product exploitation activities.

3. This Circular takes effect from February 1, 2002; all previous regulations that conflict with this Circular are hereby abolished.