Circular No. 08-TC/TQD explains and provides detailed regulations for the new system of transit trade tax.

CIRCULAR

Explanation and detailed regulations for implementing the new system of itinerant trade tax

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THE MINISTER OF FINANCE

Pursuant to Article 48 of the Business Tax Regulation (Decision No. 200-NQ/TVQH dated January 18, 1966 of the Standing Committee of the National Assembly) and Directive No. 35-TTg/TN dated February 21, 1966 of the Prime Minister, the Ministry of Finance explains and provides detailed regulations for implementing itinerant trade tax as follows:

I. POLICY ON ITINERANT TRADE TAX

Itinerant trade tax aims at:

- Contributing to strengthening market management, combating speculation and hoarding, stabilizing commodity prices, assisting state-owned and cooperative trade enterprises in securing sources of goods and expanding business operations, thereby ensuring production, combat, and people's living needs.

- Limiting the development of private trade, preventing individuals from abandoning production to engage in trading, promoting socialist transformation among itinerant traders, while utilizing the positive aspects of small-scale traders in transporting certain goods that state-owned and cooperative trade enterprises have not yet been able to handle or expand their business with (such as fresh produce, difficult-to-preserve items).

- Regulating the income of itinerant traders, mobilizing them to fulfill their tax obligations to the State budget appropriately.

II. CONTENT OF REGULATIONS ON ITINERANT TRADE TAX

1. Who must pay itinerant trade tax?

a) The following entities must pay itinerant trade tax:

- Individuals engaged in itinerant trading,

- Business establishments subject to corporate tax but selling goods outside the permitted trading area or selling goods not registered for trading.

b) The following cases are exempt from itinerant trade tax:

- Farmers, after fulfilling their obligation to sell products to the State, selling agricultural products they produce, livestock they raise, fish caught, game hunted within the designated area (commonly referred to as self-produced and self-consumed area); if they sell outside this area, they must pay itinerant trade tax.

Currently, cooperative trade has developed relatively strongly in rural areas, basic demands for product consumption by farmers have been met, and the need for intensive farming and increased productivity requires focusing labor on agricultural production, limiting farmers from selling products far away; therefore, it is not advisable to define the self-produced and self-consumed area too broadly. However, at the same time, due consideration should be given to different customs and requirements of each region to suit local conditions. Revenue collection agencies should work together with trade agencies to review the current self-produced and self-consumed areas, study and adjust according to the spirit mentioned above, and after consulting the county administrative committees, propose decisions to the provincial administrative committees. For self-produced and self-consumed areas involving multiple provinces, the relevant provincial administrative committees should make joint decisions.

- Agricultural cooperatives with some agricultural products such as fresh vegetables and fruits, harvested in large quantities but unable to sell all within the self-produced and self-consumed area, and thus must transport these products to distant locations for sale to state-owned trade or cooperative trade enterprises, will be exempt from itinerant trade tax if they have a certificate from the village administrative committee confirming that the agricultural products belong to the agricultural cooperative and were not purchased by the cooperative trade enterprise or the agency commissioned by state-owned trade to purchase goods in the village. In cases where the cooperative trade enterprise or state-owned trade entity where the agricultural cooperative brings its products to sell does not purchase those items, and the agricultural cooperative must sell them on the market, it will also be exempt from itinerant trade tax. Revenue collection agencies should strengthen guidance for village administrative committees to understand the principles of issuing certificates to coordinate well between tax management, business management, and local labor management to serve agricultural production.

- Small-scale industrial cooperatives registered for business and paying corporate and corporate profit taxes at the place of registration, if they have permission from the trade agency to transport their own products for sale in other provinces and carry sales invoices, will not be required to pay itinerant trade tax.

- Private individuals selling personal items without the intention of making a profit will not be required to pay itinerant trade tax. To prevent abuse, for cases of selling many items or items with high value such as bicycles, radios, etc., the seller must have a certificate from the administrative committee of their place of residence or workplace. If there are doubts about the nature of the sale, further investigation should be conducted to determine whether it is a commercial transaction. If the nature cannot be definitively determined, the case should be recorded and monitored over time, and tax should not be levied without sufficient basis.

- Sales of food items subject to a 5% tax rate, where the total value of a single trip is less than 10 dong, will be exempt from itinerant trade tax. If the value of a single trip is 10 dong or more and the seller divides the goods into smaller lots under 10 dong to sell, the amounts should be combined to calculate and collect itinerant trade tax.

For other types of goods, itinerant trade tax must be paid regardless of the value of the trip.

2. Tax Rate, Basis for Calculating Tax

Itinerant trade tax is collected based on the revenue of each trip, which combines two taxes: corporate tax and corporate profit tax, hence the tax rate for itinerant trade tax is higher than the corporate tax rate (collected based on the revenue of stationary traders).

Previously, the itinerant trade tax schedule only distinguished between two categories of goods: agricultural and forest products (5%) and manufactured goods (7%). Now, the newly implemented tax system categorizes goods as follows, to differentiate treatment in line with tax policy requirements:

- Lighter tax rates apply to supplementary foods (clams, oysters, snails, mussels...) and agricultural tools (baskets, sieves, pots, trays...),

- Lighter tax rates apply to perishable goods (fruits, vegetables, pickles...) compared to dry goods (garlic, ginger, wood ear fungus, dried mushrooms...),

- Lighter tax rates apply to the aforementioned dry goods compared to decorative items (bonsai, aquarium fish...).

- For goods types that state trade and cooperative purchasing and selling businesses are striving to secure supplies for, it is necessary to limit speculative trading, thus such goods must be subject to higher tax rates compared to those goods that state trade and cooperative purchasing and selling businesses have not yet engaged in or only partially engaged in, where private speculative trading is still needed to promote commodity circulation.

To reflect the aforementioned principles, the tariff schedule specifies different tax rates for each group of goods: 5%, 7%, 10%, 12% (see the tariff schedule attached to these regulations).

In order to serve market management requirements and the development of state trade and cooperative purchasing and selling businesses closely aligned with local conditions, the tax regulations stipulate that the Ministry of Finance may decide to allow provincial administrative committees to increase or decrease the tax rate by one level for their respective localities.

For example, for speculative trading goods taxed at 10%, if cooperatives have not yet developed sufficient trading capacity, thus requiring continued use of speculative trading, the tax rate can be reduced by one level to 7%. Conversely, if speculative trading needs to be restricted to allow cooperatives to develop their trading capacity, the tax rate can be increased by one level to 12%.

The increase or decrease in tax levels mentioned above must be proposed by the provincial administrative committee and decided upon by the Ministry of Finance. The highest tax rate cannot exceed 12%, and the lowest tax rate cannot be less than 5%, which are the maximum and minimum rates set forth in the tariff schedule established by these regulations.

To ensure differentiated policies for various goods, if a single trip includes multiple types of goods, the speculative trading tax shall be calculated based on the revenue from each type of good according to the tax rates specified in the speculative trading tariff schedule attached to these regulations and guided by the "table for applying tax rates for speculative trading tax" appended to this circular. To apply this guidance accurately to local conditions, it is important to avoid rigid application; for certain goods listed in the table but which should not be allowed speculative trading due to organized procurement in the locality, the provincial administrative committee will organize public announcements, dissemination, and explanations, and guide tax collection agencies not to collect speculative trading tax on such goods. If such goods are found being traded speculatively, the tax collection agency will not collect tax but will refer the matter to the procurement agency for handling.

3. Procedures for declaration, record-keeping, and payment of speculative trading tax

- Speculative traders who have registered their business with the trade authority must declare to the tax collection agency to obtain a speculative trading ledger, according to the model attached to this circular[1].

After completing a purchase trip, the speculative trader must record in the speculative trading ledger: the name of the goods, quantity, unit price purchased, and total purchase price; before transporting the goods to the selling location, they must present the ledger and goods to the tax collection agency at the purchase location and temporarily pay the speculative trading tax. Upon arrival at the selling location, the speculative trader must present the ledger and goods to the local tax collection agency to purchase a speculative trading invoice, and immediately after selling the goods, they must go to the agency to settle the tax.

- The tax collection agency at the location where the speculative trader purchases goods is responsible for inspecting the goods requested for transportation, comparing them with the speculative trading ledger, calculating and temporarily collecting tax based on the purchase value of the goods at the local area. The calculation method is as follows: Based on the purchase value of each type of goods, calculate the tax according to the tax rate specified in the tariff schedule, for example, a speculative trader purchases goods in Bac Giang city and requests transportation to sell in Hanoi, including:

20 kg snails at a purchase price of 1 dong/kg

10 kg soybean sprouts at a purchase price of 0.80 dong/kg

10 kg ginger at a purchase price of 0.80 dong/kg

The temporary tax collection would be calculated as follows:

Snails: 1 dong x 20 x 5% = 1 dong

Soybean sprouts: 0.80 dong x 10 x 7% = 0.56 dong

Ginger: 0.80 dong x 10 x 7% = 0.56 dong

Temporary speculative trading tax... 2.12 dong

On the provisional tax collection receipt for speculative trading, the tax collector must note the applied tax rate to ensure accurate recording in the designated column, so that when the speculative trader comes to settle the tax at the selling location's tax collection agency after selling the goods, the agency has the basis to verify and settle the tax correctly according to policy.

After temporarily collecting the speculative trading tax, the tax collection agency must record in the speculative trading ledger the amount of temporarily collected tax, the number and date of the receipt, and the name of the tax station.

It is particularly important to note that for trips where speculative trading tax has already been temporarily paid, tax collection agencies along the transportation route from the purchase location to the selling location must absolutely not collect additional tax, except in cases where inspection reveals that the quantity, weight, and type of goods transported exceed those recorded in the speculative trading ledger. In such cases, the speculative trader must record the excess in the ledger, and the agency will temporarily collect tax on the difference, based on the purchase price of the goods at the point of origin. Depending on the degree of false declaration, appropriate action may be taken according to Point 2, Article 44 of the Tax Regulations.

The tax collection agency at the selling location is responsible for inspecting the goods and comparing them with the speculative trading ledger and the provisional tax receipt for speculative trading tax.

If the quantity exceeds the recorded amount, the speculative trader must record the additional quantity and value of the goods in the ledger. Subsequently, the tax collection agency will issue a certain number of speculative trading invoices (according to the current model), stamped with a cross-reference seal, so that when selling the goods, they can provide invoices to buyers.

Immediately after selling the goods, the speculative trader must bring the second copy and stub of the speculative trading invoice to the tax collection agency to settle the speculative trading tax, while returning any surplus purchase invoices to the procurement agency.

The tax collection agency settles the speculative trading tax as follows:

- For goods with provisional tax receipts for speculative trading, the actual selling price of each type of goods is applied according to the tax rate specified in the tariff schedule for that type of goods, and the differential tax is collected. For example, a speculative trader transports 20 kg of snails, 10 kg of soybean sprouts, and 10 kg of ginger from Bac Giang to Hanoi and has provisionally paid speculative trading tax as stated above, now selling snails at 1.30 dong/kg, soybean sprouts at 1 dong/kg, and ginger at 1.20 dong/kg, the tax settlement would be as follows:

Snails: 1.30 dong x 20 x 5% = 1.30 dong

Soybean sprouts: 1 dong x 10 x 7% = 0.70 dong

Ginger: 1.20 dong x 10 x 7% = 0.84 dong

Speculative trading tax payable: 2.84 dong

Less provisional tax paid in Bac Giang: 2.12 dong

Amount due: 0đ72

If there are goods not recorded in the trading ledger in the shipment, taxes shall be collected simultaneously, and depending on the severity of the insufficient record-keeping, penalties shall be imposed according to Point 2 or 4 of Article 44 of the Tax Regulations for Commerce and Industry.

After the trader has fully paid the tax, the tax collection agency at the place of sale must record in the trading ledger the additional tax amount collected, the number and date of the receipt, and the name of the tax station.

In cases where a trader has temporarily paid trading tax but the goods were damaged during transportation due to natural disasters or epidemics, if the trader has a certificate from the local authority or police station regarding the extent of the damage, it shall be handled as follows:

- If the entire shipment is lost, the tax collection agency that temporarily collected the trading tax shall examine and refund the tax already temporarily collected to the taxpayer.

- If only part of the shipment is damaged, the tax collection agency at the place of sale must calculate the tax on the remaining goods. If this tax amount exceeds the temporarily collected tax at the point of departure, the difference shall be collected; if it equals or is less than the temporarily collected tax, no additional tax shall be collected. In all cases, detailed calculations must be clearly recorded so that the tax collection agency at the point of departure has sufficient documentation to check and refund any excess amount.

The above is the method of collecting trading tax for traders who have obtained a business registration certificate from the commerce agency. Traders without such registration shall be treated as engaging in illegal business activities and shall be handled as follows:

- If they trade in goods freely circulating and exchanged on the market, they must pay taxes according to the market tax rate listed in the tax schedule, plus an additional 2%. For example:

Trading goods subject to the following tax rates:

- 5% then pay 5% + 2% = 7%

- 7% then pay 7% + 2% = 9%

- 10% " " 10% + 2% = 12%

- 12% " " 12% + 2% = 14%

- If they trade in goods under unified state management or wholly purchased by local authorities, not allowed for private purchase or sale (the list of such goods is determined and published by the administrative committee of cities or provinces), the tax collection agency shall not collect taxes but must prepare a report transferring the goods to the responsible agency for handling (commerce, foodstuffs, etc.).

Weekly, the tax collection agency must compile a list detailing the names and addresses of unregistered traders and send it to the commerce agency for appropriate measures.

Some special cases listed below, because they are not engaged in trading as a profession, although they do not have a trading business registration permit, sellers can still pay taxes according to the tax rates listed in the schedule (without adding 2%):

- Farmers selling agricultural products they produce themselves, livestock they raise, or fishermen, hunters selling products they catch or hunt, outside the self-consumption area as defined by local authorities;

- People temporarily selling a large quantity or high-value old items without a certificate from the local authority or workplace.

Trading tax is a type of tax prone to loss due to the ease with which trading can evade taxes. Therefore, in managing the collection of trading tax, tax agencies need to pay particular attention to the following matters:

1. Thoroughly disseminate the new tax policy and regulations for trading tax;

2. Appropriately arrange the tax collection network;

3. Must investigate and understand the prices (purchase and sale prices) of goods frequently traded in the local market, each tax station must weekly prepare a price list (purchase and sale prices) as a basis for calculating taxes for tax officers. There must be close cooperation between tax agencies, especially with the tax agency at the location where goods are usually brought for sale (exchanging weekly price lists, information on traders, etc.).

4. Must enhance supervision work, overcome time constraints, reluctance to face difficulties, bureaucratic style, superficial supervision, and strictly manage trading invoices.

The above is the Ministry's guidance on some principles for implementing the Tax Regulations for Commerce and Industry concerning trading tax. During implementation, if encountering difficulties, please report to the Administrative Committee for comments and solutions.