Circular No. 08/2002/TT-BTC of January 23, 2002 guiding the application of import tax calculation prices under foreign trade contracts (Content Attached)

CIRCULAR

Guidelines for Implementing the Application of Import Tax Valuation Prices Based on Foreign Trade Purchase Contracts

pursuant to the foreign trade purchase and sale contract

Pursuant to the authority and valuation principles stipulated in Article of Decree No. 54/CP dated August 28, 1993 of the Government detailing the implementation of the Law on Export Tax and Import Tax and the Law Amending and Supplementing Certain Articles of the Law on Export Tax and Import Tax;

Pursuant to the provisions of Article 59 of Decree No. 24/2000/NĐ-CP dated July 31, 2000 of the Government detailing the implementation of the Law on Foreign Investment in Vietnam;

To facilitate units and enterprises in proactively calculating business efficiency and to gradually prepare for the implementation of international commitments regarding import tax valuation prices, the Ministry of Finance provides guidelines for implementing the application of import tax valuation prices based on foreign trade purchase contracts as follows:

I. SCOPE OF APPLICATION:

1. Scope of application:

The objects subject to the application of import tax valuation prices based on foreign trade purchase contracts are goods of organizations and individuals permitted to import through border gates of Vietnam, excluding those specified in Section 2, Part I of this Circular.

2- Cases not applying import tax valuation prices based on foreign trade purchase contracts:

2.1- Goods imported under the List of items subject to state-managed import tax valuation prices (excluding items managed by the state that have been mentioned in Section 2, Part III of this Circular) with contract prices lower than the minimum price table issued by the Ministry of Finance shall have their import tax valuation prices set at the prices listed in the minimum price table.

2.2- Goods imported not under the List of items subject to state-managed import tax valuation prices but lacking conditions to apply import tax valuation prices based on foreign trade purchase contracts; Goods imported through other methods not via purchase contracts (non-trade imports, imports by border residents,...), not settled through banks (barter, work-for-hire,...) shall have their import tax valuation prices determined according to the prices set by the General Department of Customs in accordance with the import tax valuation pricing principles stipulated in Article 7 of Decree No. 54/CP dated August 28, 1993 of the Government detailing the implementation of the Law on Export Tax and Import Tax.

3- Some terms in this Circular are understood as follows:

Actual payment price: is the total amount of money that the buyer has paid or will have to pay to the seller for imported goods.

Inspection price: is the price level determined based on the actual import price of goods by the General Department of Customs as the basis for inspecting import prices, uniformly applied at all customs gates.

Normal transaction conditions: are conditions through which the price of goods is negotiated in a manner consistent with market pricing practices, where neither the buyer nor the seller grants each other any special benefits.

II. DETERMINATION OF IMPORT TAX VALUATION PRICE:

The import tax valuation price for imported goods is the purchase price at the port of entry including freight charges (F) and insurance costs (I) as stipulated in the purchase contract and consistent with related documents. The purchase price at the port of entry is the total amount of money that the buyer pays or will have to pay to the seller for imported goods (actual payment price).

1- In cases where the purchase price of imported goods does not include freight charges (F) and insurance costs (I), the importing organizations and individuals must present valid documents or invoices regarding these costs to the Customs Authority to determine the import tax valuation price. If the importing organizations and individuals cannot present documents to determine freight charges and insurance costs, the Customs Authority will calculate these costs according to the unified guidance of the General Department of Customs.

2- In cases of deferred payment transactions: the import tax valuation price of imported goods does not include deferred interest if the following conditions are met:

The deferred interest is stated in the sales contract;

The invoice price is consistent with the actual payment price of imported goods without deferred interest.

The deferred interest only relates to the specific consignment being valued, not to other consignments. The deferred interest deducted from the import tax valuation price shall not exceed the maximum ceiling interest rate for foreign currency loans published by the State Bank of Vietnam for domestic loans.

3- In cases where the seller reduces the price for the buyer: the import tax valuation price of imported goods can be reduced by the discount amount if the following conditions are met:

The agreement to reduce the price must be made in writing before the seller completes the shipment procedures to the buyer, clearly stating the reasons for the price reduction.

The invoice price is consistent with the reduced price agreed upon; The actual payment price is consistent with the reduced price;

The price reduction applies only to the specific consignment being imported, not to other consignments.

The discount amount deducted from the import tax valuation price shall not exceed 10% of the total value of that type of goods as recorded in the contract.

For imported goods under the List of items subject to state-managed import tax valuation prices, if the actual payment price, after deducting the discount, is lower than the price listed in the minimum tax valuation price table issued by the Ministry of Finance, then the minimum price table shall be applied.

III. CONDITIONS FOR APPLYING IMPORT TAX VALUATION PRICES BASED ON FOREIGN TRADE PURCHASE CONTRACTS:

1- Imported goods eligible for import tax valuation prices based on foreign trade purchase contracts must meet the following conditions:

- Condition (1): The foreign trade purchase contract must be in writing, containing all essential elements of a contract as stipulated in Article 50 of the Commercial Law adopted by the National Assembly on May 10, 1997, with some essential elements specifically defined as follows:

+ Name of goods: is the common trade name;

+ Quantity;

+ Price;

+ Payment method: In the purchase and sale contract, it must clearly state that the payment of 100% value of the imported consignment shall be made through a commercial bank in a currency agreed upon by both parties according to international payment methods such as: L/C, TTR, T/T, D/A, D/P.

Forms: Telegraph, telex, fax, email, and other forms of electronic information printed on paper are considered written form.

Quotations and acceptance of quotations in written form have the effect of a commercial contract if they contain all the essential elements as prescribed above and are also considered as foreign trade purchase contracts.

In cases where there are changes or additions to the terms of a signed foreign trade contract, they must be carried out according to the procedures and formalities appropriate to each type of contract. Any amendments or supplements to the contract must be completed before the seller finishes the shipment procedures for the buyer.

- Condition (2): Carry out the payment of 100% value of the imported consignment through a commercial bank in a currency agreed upon by both parties according to international payment methods such as L/C, TTR, T/T, D/A, D/P.

In cases where the payment has been made through the bank for the value of the imported consignment before receiving the goods, the payment documents must be presented to the Customs Authority when handling import procedures. If the payment is made after receiving the goods, the payment deadline must be clearly stated in the purchase and sale contract.

- Condition (3): The importing enterprise implements the payment of VAT according to the deduction method. When handling import procedures, the importing enterprise must submit (once) to the Customs Authority (where the import procedures are handled) a copy of the Registration for Applying VAT Deduction Method with the approval of the tax authority where the enterprise registers for tax payment (a copy stamped with a true copy seal of the enterprise).

2- Special cases:

2. 1- For imported goods of enterprises with foreign investment capital (subject to the Law on Foreign Investment in Vietnam), the import tax is calculated based on the price recorded on the invoice of the imported goods if the price recorded on the invoice is the actual purchase price to be paid, including transportation fees (F) and insurance fees (I).

2. 2 - For goods imported by enterprises as raw materials and components directly used in production, the import tax is calculated based on the price recorded on the foreign trade purchase contract, provided that the following conditions are met:

a- Meeting all the conditions stipulated in Section 1, Part III of this Circular;

b- The importing enterprise (or entrusted to import) does not have overdue tax arrears subject to compulsory enforcement at the import stage;

c- Imported raw materials and components comply with the list of raw materials and components for production registered with the Customs Authority where the enterprise handles import procedures.

Cases of supplying imported raw materials and components between independent accounting enterprises (including units within the same Group or Joint Venture) are not considered as being directly used in production.

2. 3- For other cases (other than those specified in Points 2.1 and 2.2 of Section 2, Part III of this Circular), although meeting all the conditions stipulated in Section 1, Part III of this Circular, if the price recorded on the purchase contract is lower than 80% of the verified price by the Customs Authority, the import tax will be calculated based on the verified price.

Within thirty days from the date the Customs Authority issues the tax notice, the importer has the right to prove the truthfulness and objectivity of the price recorded on the contract based on invoices, payment documents, and other relevant information about the imported goods by demonstrating: The price recorded on the contract is the actual import payment price formed under normal transaction conditions.

Within thirty days from the date the importer presents the documents to prove the truthfulness and objectivity of the price recorded on the contract, the Customs Authority must respond in writing to the importer. If the importer proves the truthfulness and objectivity of the price recorded on the contract, the Customs Authority will recalculate the import tax based on the price recorded on the contract. In case the Customs Authority disagrees with the results of the proof by the importer, it must provide reasons for non-acceptance and maintain the price applied for tax calculation.

If the importer disagrees with the decision of the Customs Authority, they have the right to appeal according to the guidelines in Part IV of this Circular. The importer bears legal responsibility for the accuracy of the price recorded on the contract as well as the documents and information declared to the Customs Authority.

During the period of appealing the tax calculation price, the enterprise must pay taxes according to the deadlines and rates specified in the Tax Notice issued by the Customs Authority. When there is a decision to adjust the amount of tax payable, the enterprise will be refunded the excess tax paid if the tax already paid exceeds the tax due.

IV. INSPECTION, VIOLATION HANDLING AND APPEAL RESOLUTION:

1- Inspection:

The Ministry of Finance coordinates with the General Department of Customs to direct the Tax Administration and local Customs Departments to cooperate in inspecting the tax calculation prices for imported goods after the release of imported goods, in cases suspected of false declaration to evade taxes through the tax calculation price. The inspection of these cases is based on the entire documentation of the imported consignment and the accounting books, invoices, and documents of the enterprises in accordance with the regulations of the Ministry of Finance and the General Department of Customs.

2- Violation Handling:

In cases where the Customs Authority and the Tax Authority discover fraud in the declaration of invoices and documents related to the tax calculation price of imported goods, or violation of any provisions of this Circular, in addition to paying the full import tax, special consumption tax, and VAT on imported goods, the importing enterprise or entrusted importing enterprise will be penalized for tax evasion according to the law.

3- Appeal Resolution:

Rights and responsibilities of the taxpayer in lodging complaints regarding the customs value for import tax, duties and powers of agencies in handling such complaints in accordance with current laws and regulations.

V. IMPLEMENTATION: 

This Circular takes effect from February 20, 2002, and replaces Circular No. 82/1997/TT-BTC dated November 11, 1997, and Circular No. 92/1999/TT-BTC dated July 23, 1999, issued by the Ministry of Finance. Any previous provisions that conflict with this Circular are hereby abolished.

The General Department of Customs shall guide local Customs Bureaus to implement and monitor compliance with this Circular. 

In case of difficulties during implementation, organizations and individuals are requested to promptly report to the Ministry of Finance for timely guidance and resolution./.