Law Amending and Supplementing Certain Provisions of the Value Added Tax Law No. 07/2003/QH11

LAW

AMENDMENTS AND SUPPLEMENTS TO CERTAIN PROVISIONS OF THE LAW ON VALUE ADDED TAX

Pursuant to the Constitution of the Socialist Republic of Vietnam in 1992, amended and supplemented by Resolution No. 51/2001/QH10 dated December 25, 2001 of the National Assembly, tenth session;

This Law amends and supplements certain provisions of the Law on Value Added Tax dated May 10, 1997.

Article 1. Amendments and supplements to certain provisions of the Law on Value Added Tax:

1. Article 4 is amended and supplemented as follows:

"Article 4. Objects not subject to value added tax The following goods and services are not subject to value added tax:
1. Agricultural products, livestock products, aquaculture products, and marine products that have not been processed into other products or only undergone simple processing by organizations and individuals for sale;
2. Animal and plant breeding materials;
3. Salt products;
4. Equipment, machinery, and transportation vehicles specifically used in production lines and construction materials that are not domestically produced and must be imported to become fixed assets of enterprises; equipment, machinery, materials, and transportation vehicles that are not domestically produced and must be imported for direct use in scientific research and technological development; aircraft, drilling platforms, and ships leased from foreign countries that are not domestically produced and used for production and business activities; equipment, machinery, spare parts, transportation vehicles specifically used, and materials that are not domestically produced and must be imported to conduct exploration, development of oil and gas fields;
5. Housing owned by the State sold to tenants by the State;
6. Transfer of land use rights;
7. Credit services, investment funds, and securities trading activities;
8. Life insurance, student insurance, animal insurance, crop insurance, and other types of insurance not for business purposes;
9. Medical services;
10. Cultural, exhibition, and non-commercial sports activities; artistic performances; film production; importation, distribution, and screening of documentary films, video tapes;
11. Education and vocational training;
12. Radio and television broadcasting according to state programs funded by the state budget;
13. Publishing, importing, and distributing newspapers, magazines, specialized newsletters, political books, textbooks, teaching materials, legal texts, science and technology books, books printed in ethnic minority scripts, and propaganda posters; printing money;
14. Public service sanitation, street drainage, and residential area maintenance; maintaining zoos, flower gardens, parks, street trees, public lighting, and funeral services;
15. Maintenance, repair, and construction of cultural, artistic, public service, infrastructure, and charitable housing projects funded by public donations and humanitarian aid;
16. Public passenger transport by bus and electric vehicle;
17. Geological surveying; basic state mapping and measurement;
18. Irrigation and drainage for agricultural production; clean water extracted by organizations and individuals for domestic use in rural, mountainous, island, remote, and border areas;
19. Specialized weapons and equipment for national defense and security;
20. Imported goods in the following cases: humanitarian aid, non-repayable aid; gifts to state agencies, political organizations, social-political organizations, social organizations, occupational associations, and people's armed forces; gifts and presents to individuals in Vietnam within the limits prescribed by the Government; personal items of foreign organizations and individuals exempted under diplomatic standards; goods carried by individuals within the limit of duty-free luggage allowance. Goods sold to international organizations and foreigners for humanitarian aid and non-repayable aid to Vietnam;
21. Transhipment and transit goods through the territory of Vietnam; temporarily imported goods for re-export and temporarily exported goods for re-import;
22. International transportation; goods and services directly supplied for international transportation and reinsurance abroad;
23. Technology transfer; computer software;
24. Postal, telecommunications, and universal internet services according to government programs;
25. Gold imported in bar or ingot form without being crafted into jewelry, ornaments, or other products;
26. Unprocessed mineral resources exported as raw materials, as specified by the Government;
27. Artificial body parts used to replace diseased body parts; crutches, wheelchairs, and other specialized devices for disabled persons;
28. Goods and services of individuals with low income levels. Low income levels are defined by the Government. Goods and services not subject to value added tax as stipulated in this Article shall not be deductible or refunded for input value added tax, except where the zero percent tax rate specified in Clause 1, Article 8 of this Law is applied."

2. Clause 8 is added to Article 7 as follows:

"8. The taxable value of goods and services subject to special consumption tax at the production and business stage in the domestic market is the selling price including special consumption tax but excluding value added tax; at the import stage, it is the customs value plus import duties (if applicable) plus special consumption tax."

3. Article 8 is amended and supplemented as follows:

"Article 8. Tax rates The rates of value added tax are set forth as follows:
1. Zero percent rate applies to exported goods and services, including those not subject to value added tax when exported, except for the following cases: international transportation; goods and services directly supplied for international transportation; reinsurance abroad; credit, financial investment, and stock investment services abroad; and unprocessed mineral resource exports as specified by the Government.
2. Five percent rate applies to the following goods and services:
a) Clean water for production and daily use, except as provided in Clause 18, Article 4 of this Law;
b) Fertilizers, ore for fertilizer production; pesticides and growth stimulants for animals and plants;
c) Medical equipment and supplies; medical cotton and sanitary napkins; medicines for treatment and prevention; chemical drugs and medicinal herbs used as raw materials for medicine production for treatment and prevention;
d) Teaching aids for teaching and learning;
đ) Printing various types of products specified in Clause 13, Article 4 of this Law, except printing money;
e) Children's toys; all kinds of books, except books specified in Clause 13, Article 4 of this Law; magnetic tapes, discs that have been recorded or not recorded programs;
g) Agricultural products, livestock products, aquatic products, marine products that have not been processed, except objects specified in Clause 1, Article 4 of this Law;
h) Fresh food; unprocessed forest products, except wood, bamboo shoots and objects specified in Clause 1, Article 4 of this Law;
i) Sugar; by-products in sugar production including sugar sludge, sugarcane residue, mud residue;
k) Products made from rattan, straw, bamboo, reed, leaves;
l) Cotton processed from cotton grown domestically;
m) Animal feed, poultry feed, and other animal feed;
n) Scientific and technical services;
o) Services directly serving agricultural production;
p) Coal, soil, rock, sand, gravel;
q) Basic chemicals; mechanical products used as means of production; various types of molds; explosives; grinding wheels; newspaper printing paper; pesticide sprayer cans; raw rubber; raw rosin; artificial plywood; industrial concrete products including reinforced concrete bridge beams, reinforced concrete beams and house frames, reinforced concrete piles, reinforced concrete power poles, reinforced concrete round pipes, various types of reinforced concrete boxes, prefabricated reinforced concrete panels and non-standard reinforced concrete components, commercial concrete; tires and tire assemblies with sizes from 900-20 and above; neutral glass tubes; nets, fishing ropes and threads for making fishing nets;
r) Products of iron, steel, non-ferrous metals, precious metals smelting, rolling, drawing, except gold imported as specified in Clause 25, Article 4 of this Law;
s) Automatic data processing machines and parts, accessories of such machines;
t) Repairing, restoring historical and cultural relics, museums, except cases specified in Clause 15, Article 4 of this Law;
Transportation, loading and unloading; dredging of channels, rivers, inland ports, sea ports; salvage and rescue operations;
v) Distribution and screening of video films, except distribution and screening of documentary video films as specified in Clause 10, Article 4 of this Law.
3. The tax rate of 10% applies to goods and services:
a) Petroleum, natural gas, ores, and other mining products;
b) Commercial electricity;
c) Electronic products, consumer machinery products, electrical appliances;
d) Chemicals, cosmetics;
đ) Fibers, fabrics, clothing products, embroidery;
e) Paper and paper products, except newspaper printing paper as specified in point q, Clause 2 of this Article;
g) Milk, cakes, candies, soft drinks, and other processed foods;
h) Ceramic, porcelain, glass, rubber, plastic products; wood and wooden products; cement, bricks, tiles, and other construction materials;
i) Postal, telecommunications, and Internet services, except universal postal, telecommunications, and Internet services under the Government's program as specified in Clause 24, Article 4 of this Law;
k) Renting houses, warehouses, docks, factories, machinery, equipment, transportation vehicles;
l) Legal advisory services;
m) Photography, printing photos, enlarging photos; recording tapes, transferring tapes, renting tapes; filming videos; photocopying;
n) Hotels, tourism, catering;
o) Goods and services subject to special consumption tax;
p) Construction, installation;
q) Gold, silver, precious stones, except gold imported as specified in Clause 25, Article 4 of this Law;
r) Ship agency;
s) Brokerage services;

t) Other goods and services not specified in Clause 1 and Clause 2 of this Article.

4- Clause 1 and Clause 2 of Article 10 are amended and supplemented as follows:
"1. Businesses paying value-added tax under the deduction method shall deduct input value-added tax (hereinafter referred to as input tax) as follows:
a) Input tax on goods and services used for producing and trading taxable goods and services shall be fully deducted;
b) Input tax on goods and services used simultaneously for producing and trading taxable goods and services and non-taxable goods and services shall only be deducted for the portion of input tax on goods and services used for producing and trading taxable goods and services;
c) Input tax arising in a month shall be declared and deducted when determining the tax payable for that month; the maximum declaration period is three months from the date of tax declaration for the month in which the tax arose; for fixed assets, if there is a large amount of deductible input tax, it can be deducted gradually or refunded according to the regulations of the Government;
d) Exported goods eligible for input tax deduction must be confirmed by customs authorities as having been actually exported for exported goods; must have a sales contract for goods, a processing contract for goods, or a service provision contract for foreign parties; must have a sales invoice for goods or services issued to foreign parties; must be settled through banks, except in cases of offsetting between exported goods and imported goods, repaying debts on behalf of the State, and some special payment cases. The Government will specify the specific procedures and conditions for payment of exported goods eligible for input tax deduction;

đ) The deduction of input tax for certain special cases shall be regulated by the Government. 2. The basis for determining the amount of input tax deductible is the value-added tax amount stated on the value-added tax invoice when purchasing goods or services or the tax payment certificate for imported goods; in cases where purchased goods or services do not have a value-added tax invoice or have a value-added tax invoice but do not comply with the provisions of the law, the business shall not be entitled to deduct tax."

5- Clause 4 is added to Article 11 as follows:

"4. Businesses involved in printing, distributing, using invoices improperly to evade taxes or defraud tax deductions or refunds shall, in addition to being required to pay back taxes and refunds, be subject to administrative penalties for tax violations or criminal prosecution according to the law."

6- Clause 1 of Article 14 is amended and supplemented as follows:

"1. Businesses are responsible for paying value-added tax to the state budget in full and in accordance with regulations. The latest deadline for monthly tax payment is the 25th of the following month;"

7- Clause 5 is added to Article 14 as follows:

Article 16, Clause 3 shall be amended and supplemented as follows:

"3. The decision on tax refund by the competent authority in accordance with the provisions of the law and cases of tax refund under international treaties to which the Socialist Republic of Vietnam is a party or has acceded."

Article 17, Clause 2 shall be amended and supplemented as follows:

"2. To notify the business entity of the amount of tax due as prescribed by the Government, urge the business entity to pay the tax within the stipulated time; if the business entity fails to pay the tax within the prescribed period, issue a notice of the amount of tax due and the late payment fine as provided for in Clause 2, Article 19 of this Law; if the business entity still fails to pay the full amount of tax and the late payment fine as notified, have the right to apply the measures for handling as provided for in Clause 4, Article 19 of this Law to ensure the collection of the full amount of tax and the late payment fine; if such measures have been implemented but the business entity still fails to pay the full amount of tax and the late payment fine, transfer the file to the competent state agency for handling in accordance with the provisions of the law;"

Article 2:

This Law shall take effect from January 1, 2004.

Article 3:

The Government shall promulgate detailed regulations and provide guidance on the implementation of this Law.

This Law was adopted by the National Assembly of the Socialist Republic of Vietnam, the eleventh session, third meeting, on June 17, 2003./.