Circular No. 07 TC/TCT supplements Circular No. 20 TC/TCT dated March 12, 1994 on reducing business income tax for businesses operating in mountainous areas.

CIRCULAR

DIRECTIVE NUMBER 30/TC/TCT OF THE MINISTRY OF FINANCE ON APRIL 12, 1995 GUIDING THE REDUCTION OF BUSINESS INCOME TAX FOR BUSINESSES OPERATING IN MOUNTAINOUS REGIONS IN 1995 

BASED ON Article 18 of the Business Tax Law and the Law Amending and Supplementing Certain Provisions of the Business Tax Law adopted at the third session of the Ninth National Assembly on July 5, 1993; Directive No. 525/TTg dated November 2, 1993 on some policies and measures to continue developing the economy and society in mountainous regions; and the opinion of the Prime Minister in Official Letter No. 287/KTTH dated January 21, 1994 from the Government Office, the Ministry of Finance guides certain points regarding the continued reduction of business tax for businesses operating in mountainous areas to be implemented in 1995 as follows:

Article 1. Scope of Application:

a) The subjects eligible for reduced business tax under this Circular include organizations and individuals (referred to collectively as entities) belonging to all economic sectors (including entities established and operating under the Law on Foreign Investment in Vietnam), actually engaged in production and business activities and generating revenue within the highland and mountainous region (excluding those mentioned in point 1b below) including:

- Entities with fixed business locations in mountainous areas and operating there or in other mountainous areas.

- Entities without fixed business locations in mountainous areas but actually operating in mountainous areas (construction, artistic performances, film screenings, etc.).

- Trading trips from mountainous areas to other places.

b) The following entities shall not be considered for tax reduction under this Circular:

- Households subject to business income tax under the quota method.

- New entities that have been exempted or granted reductions in business tax in 1995 according to Clause 3 of Article 18 of the Business Tax Law; or have received reductions in business tax under Article 10 of the Law Encouraging Domestic Investment.

- Entities belonging to units with full-sector accounting.

c) The mountainous area basis for reducing taxes as stipulated in this Circular shall be determined based on the administrative boundaries of districts, towns, and cities (hereinafter referred to collectively as districts) recognized as mountainous districts by the Committee for Ethnic Minorities and Mountainous Areas.

Some examples: County X is recognized as a mountainous county.

Enterprise A has a fixed production location in District X and a sales location in District Y (also a mountainous district) and Nam Dinh City (not a mountainous area).

According to Point 4 of Decree No. 55/CP dated August 28, 1993 of the Government, Enterprise A will pay business tax on production activities at the place of production and business tax on trading activities at the place of consumption. Therefore, Enterprise A will be granted a reduction in business tax on production activities in District X and a reduction in business tax on sales activities in District Y; but must fully pay business tax on sales activities in Nam Dinh City.

b. Enterprise B, which operates construction and has a fixed business location in Nam Dinh City, undertakes a construction project in District X. Enterprise B will be granted a reduction in business tax on the construction of that project in District X.

c. Enterprise C has a fixed production location in Nam Dinh City and a fixed sales location in District X. Enterprise C must pay business tax on production activities in Nam Dinh City; and will be granted a reduction in business tax on sales activities in District X.

2. Level and duration of tax reduction:

- The rate of reduction: For manufacturing, construction, and transportation industries, it is 50%; for other industries, it is 25% of the business income tax payable to the State budget.

- The period for tax reduction is one year, from January 1, 1995 to December 31, 1995. After the end of the year, the Ministry of Finance will review the actual situation and opinions of localities to determine appropriate solutions for the following year.

3. Implementation:

To ensure that the tax reduction targets the correct entities and truly encourages and creates conditions for entities to serve the production and living needs of the mountainous people in accordance with Directive No. 525/TTg of the Prime Minister, the Ministry of Finance requests the Tax Departments:

- To disseminate the government's policy on tax reduction to businesses and guide them on necessary procedures to implement the policy.

- To review and closely monitor both regular and irregular business activities within their jurisdiction, promptly bringing them under tax management in accordance with the prescribed policy.

- Adjust revenues accurately to reflect the actual business operations of households paying taxes through the quota method at the specified time. At the same time, regularly guide and inspect accounting work of entities to ensure comprehensive, timely, and accurate reflection of all activities, ensuring the accuracy and correctness of tax reduction, preventing abuse to evade taxes.

b) Establishments engaged in business in mountainous areas that are eligible for tax reduction on business revenue under this Circular shall be responsible for:

- To present the establishment permit and business registration with the tax authority in accordance with the regulations.

- Declaring and registering business income tax payments with the tax authority in accordance with regulations.

- Fully declare generated revenues according to the deadlines set by the tax authority. The calculation of tax reduction will be directly calculated by the relevant authority and approved by the head of the tax department in the tax declaration form of the entity in the tax ledger.

Entities violating the declaration system, registration payment system, bookkeeping records, and accounting vouchers as prescribed shall not be entitled to the business tax reduction under this Circular; and depending on the specific level of violation, they may be subject to penalties under current regulations.

The tax reduction under this Circular shall be calculated after deducting all other tax reduction amounts regarding business revenue (if any).

c) The tax authority must clearly reflect the amount of business tax payable, the amount of business tax reduced, the remaining business tax payable, and other indicators as prescribed on tax collection receipts, monthly tax declarations, tax ledgers, and accounting books.

At the end of the year, the tax authority must jointly with the Department of Finance compile comprehensively and clearly the amounts of business tax payable, reduced, and still payable for each enterprise in the locality (accompanied by tax payment receipts) and submit them to the General Department of Taxation and the Ministry of Finance for consideration of the aforementioned exemptions and reductions.

This Circular takes effect from January 1, 1995, replacing Circulars No. 20 TC/TCT dated March 12, 1994 and No. 07 TC/TCT of the Ministry of Finance. During implementation, if any difficulties arise, localities are requested to report to the Ministry of Finance for prompt resolution.