Joint Circular No. 07/1998/TTLT-BTC-BTS guides the implementation of Decision No. 358/TTg dated May 29, 1997 of the Prime Minister on tax incentives for marine fishing activities in distant sea areas.

CIRCULAR

JOINT CIRCULAR OF THE MINISTRY OF FINANCE AND AQUATIC RESOURCES NO. 07/1998/TTLT-BTC-BTS DATED JANUARY 10, 1998 GUIDING THE IMPLEMENTATION OF THE PRIME MINISTER’S DECISION NO. 358/TTG DATED MAY 29, 1997 ON TAX INCENTIVES FOR SEAFARING FISHERIES ACTIVITIES IN DISTANT WATERS.

Pursuant to current tax laws, investment encouragement laws, and Decision No. 358/TTg dated May 29, 1997 of the Prime Minister on tax incentives for seafaring fisheries activities in distant waters, the Ministry of Finance and the Ministry of Aquatic Resources guide the procedures, processes, and authorities for granting exemptions and reductions in taxes for entities engaged in seafaring fisheries activities in distant waters as follows:

I. SCOPE OF APPLICATION:

1. Scope of application:

Organizations and individuals from all economic sectors, including foreign-invested enterprises and parties participating in joint business contracts under the Law on Foreign Investment in Vietnam, who have fishing vessels actually operating in distant waters for marine resource exploitation, regardless of whether they are newly established or previously established, new investments, expanded investments, or purchased earlier, shall be entitled to tax incentives as stipulated in Article 1 of Decision No. 358/TTg dated May 29, 1997 of the Prime Minister, provided that they meet the following conditions:

- Possess a permit for marine resource exploitation in distant waters or a certificate confirming actual marine resource exploitation in distant waters; a business registration certificate.

- Have fishing vessels with main engines having a power of 90 horsepower (HP) or more.

- Actually engage in marine resource exploitation in distant waters.

2. The following cases do not qualify for tax incentives as guided by this Circular:

- Exploitation of marine resources in other sea areas outside the designated distant waters.

In the case where a marine resource exploitation entity has both vessels operating in distant waters and others operating in other sea areas, separate accounting must be conducted for each location's business results.

- Engaging in other commercial services (construction, transportation, etc.) apart from marine resource exploitation.

3. Some terms mentioned in this Circular are understood as follows:

- Marine resource exploitation refers to the activity of catching marine products such as fish, shrimp, crab, sea cucumber, pearl, and other marine products.

- Distant waters, as defined in Article 2 of the Regulation on Management and Utilization of Credit Funds for New Projects, Renovation of Fishing Vessels, and Marine Resource Exploitation Services in Distant Waters, issued together with Decision No. 393/TTg dated June 9, 1997 of the Prime Minister, are: "sea areas limited by the 30-meter depth contour line from the coast outward for the Gulf of Tonkin, East and West South China Sea, and Gulf of Thailand, and the 50-meter depth contour line from the coast outward for the Central Vietnam coastal area."

The depth contour line is a line connecting points with the same depth measured from the water surface to the seabed.

Therefore, distant waters are sea areas with depths of 30 meters or more from the coast for the Gulf of Tonkin, East and West South China Sea, and Gulf of Thailand; and 50 meters or more from the coast for the Central Vietnam coastal area. Islands within the distant waters area are also considered distant.

Entities mentioned in Point 1, Section above shall enjoy tax incentives as follows: a. They shall be granted a 50% reduction in natural resource tax and business income tax for the first three years from the date of obtaining the permit for marine resource exploitation in distant waters; and exemption from corporate income tax for the first three years from when taxable income begins.

b. Owners of fishing vessels registered for ownership of fishing vessels in distant waters shall pay a stamp duty of 1% (one percent) of the value of the vessel at the time of registration.

If the owner of the vessel does not obtain a permit for marine resource exploitation in distant waters and the main engine power of the fishing vessel is less than 90 HP, then the stamp duty must be paid according to Decree No. 193/CP dated December 29, 1994 of the Government.

c. Entities engaged in marine resource exploitation in distant waters who are also subject to the Domestic Investment Encouragement Law (as stipulated in Article 4 of the Domestic Investment Encouragement Law, Article 1 of Decree No. 29/CP dated May 12, 1995 of the Government detailing the implementation of the Domestic Investment Encouragement Law, and guided in Part I of Circular No. 94 TC/TCT dated December 22, 1995 of the Ministry of Finance) shall simultaneously enjoy tax incentives as specified in Articles 16, 17, 18, 19, 20, and 21 of Decree No. 29/CP dated May 12, 1995 of the Government detailing the implementation of the Domestic Investment Encouragement Law. However, each type of tax can only benefit from the highest rate of exemption or reduction and duration of exemption or reduction prescribed in any document; the rates of exemption or reduction or duration of exemption or reduction prescribed in different documents cannot be combined for application to a single beneficiary.

d. Other types of taxes and fees not mentioned above must be implemented according to current laws.

II. PROCEDURES AND AUTHORITY FOR GRANTING EXEMPTIONS AND REDUCTIONS IN TAXES:

1. Procedures for granting reductions in natural resource tax and business income tax, and exemptions from corporate income tax:

a. Entities eligible for reductions in natural resource tax and business income tax and exemptions from corporate income tax must submit their applications to the local tax authority directly managing them. The application package includes:

- An original application for tax exemption or reduction (original).

- A copy of the business registration certificate issued by the competent authority (certified copy).

- A certified copy of the confirmation of actual marine resource exploitation time in distant waters issued by the aquatic resource protection agency.

- Confirmation of tax registration and declaration according to current laws from the local tax authority where the entity is headquartered and where it actually operates (copy).

- For entities paying corporate income tax through declaration, when applying for corporate income tax exemption, they must also submit the financial settlement statement accompanied by the audit report of the tax settlement of the year being considered for reduction or exemption (copy).

b. The procedures for granting reductions and exemptions in taxes for entities benefiting from tax incentives under the Law on Domestic Investment Encouragement shall be carried out according to Circular No. 94 TC/TCT dated December 22, 1995 of the Ministry of Finance guiding the procedures, processes, and authorities for granting exemptions and reductions in taxes under the Law on Domestic Investment Encouragement and Decree No. 29/CP dated May 12, 1995 of the Government detailing the implementation of the Law on Domestic Investment Encouragement.

2. Process and authority for granting reductions in natural resource tax and business income tax, and exemptions from corporate income tax:

The direct tax authority receiving the application for tax exemption or reduction from the entity must conduct a review; if the application is incomplete or inaccurate, it shall request the entity to supplement and correct the application before making a decision on tax exemption or reduction within its jurisdiction. In cases exceeding its jurisdiction, it must submit a report along with the entity's application to the higher-level tax authority for resolution. Within a maximum period of thirty days from the date of receipt of the application, the competent authority must decide on tax exemption or reduction, or notify the entity of the reasons for not resolving the application.

Authority to examine and reduce resource taxes, business income taxes, and exempt profit taxes:

a. The Director of the Tax Department has the authority to examine and decide on tax exemptions and reductions for individual, household, cooperative, joint venture entities, companies, enterprises, and exploitation facilities managed by local authorities (except as provided in point c below).

b. The Director General of the State Tax Administration examines and decides on tax exemptions and reductions for exploitation facilities managed centrally, foreign-invested enterprises, or joint ventures with foreign partners operating under the Law on Foreign Investment in Vietnam (except as provided in point c below).

c. The Minister of Finance examines and decides on cases where the average reduction in business income tax exceeds fifty million VND per month, or the exemption of profit tax exceeds one hundred million VND per year.

The competent authority examining and deciding on business income tax reductions and profit tax exemptions also examines and decides on resource tax reductions.

Exemption and reduction of resource taxes, business income taxes, and profit taxes are conducted annually following the end of the fiscal year. During the period of tax exemption or reduction, the head of the direct tax authority shall inspect the exploitation permit, business registration certificate, and compare them with the conditions for tax exemption or reduction as stipulated in this Circular to temporarily refrain from collecting profit tax, defer payment of no more than fifty percent of the monthly business income tax and resource tax due to the exploitation facility.

3. Procedures and authority for collecting stamp duty at a rate of 1%:

The ship owner or operator subject to stamp duty at a rate of 1% must submit an application to the provincial or municipal Tax Department where the exploitation facility is located, including:

- A declaration form for stamp duty on ships and boats according to the current stamp duty regulations; the declaration must clearly state the main engine power of the ship or boat.

- An operating permit for marine product exploitation in distant waters.

- A business registration certificate.

The Director of the provincial or municipal Tax Department shall review the application and procedures and collect the stamp duty as prescribed before the ship owner or operator registers ownership or use rights of the asset.

Any ship or boat that has paid stamp duty at the rate of 2% as stipulated in Article 4 of Decree No. 193/CP dated December 29, 1994 of the Government, and subsequently obtained a permit for marine product exploitation in distant waters, shall not be entitled to a refund of the stamp duty paid or deduction from other payable amounts.

If an exploitation facility engages in false declarations to obtain tax reductions or stamp duty exemptions, it will be subject to back payment of all taxes and stamp duties declared falsely and administrative penalties under the law on administrative sanctions in the field of taxation.

III. IMPLEMENTATION:

1. This Circular takes effect fifteen days from the date of signature, replacing Circular No. 109 TT/LB dated December 31, 1993 issued by the Ministry of Finance and Fisheries guiding the implementation of Decision No. 400/TTg dated August 7, 1993 of the Prime Minister.

Exploitation facilities currently enjoying tax benefits under Decision No. 400/TTg dated August 7, 1993 of the Prime Minister shall continue to enjoy such benefits for the full duration and time specified in Decision No. 400/TTg. After the expiration of the benefit period under Decision No. 400/TTg, if the entity qualifies for continued benefits under Decision No. 358/TTg dated May 29, 1997, it may continue to enjoy such benefits under Decision No. 358/TTg.

2. Tax authorities, provincial or municipal aquatic resource protection agencies, and border guard units at ports shall cooperate closely to monitor fishing vessels operating in distant waters, ensuring that tax benefits are granted to eligible entities and that permits are issued within their jurisdiction. They shall organize quick and efficient registration, declaration, and confirmation processes to avoid inconvenience to beneficiaries.

During implementation, any issues should be promptly reported to the Ministry of Finance and the Ministry of Fisheries for study and resolution.