Circular No. 100/2004/TT-BTC guiding value-added tax and corporate income tax for the securities sector.

CIRCULAR

Guidelines on Value Added Tax and Corporate Income Tax for the Securities Sector

in the field of securities

Pursuant to the Law on Value Added Tax No. 02/1997/QH9 dated May 10, 1997 and the Law Amending and Supplementing Certain Provisions of the Law on Value Added Tax No. 07/2003/QH11 dated June 17, 2003 and related guiding documents;

Pursuant to the Law on Corporate Income Tax (Amended) No. 09/2003/QH11 dated June 17, 2003 and related guiding documents;

Pursuant to Decree No. 77/2003/NĐ-CP dated July 1, 2003 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

1. Amend and supplement Point 1, Section II, Circular No. 110/2002/TT-BTC as follows: "The level of fee collection for services using securities equipment, infrastructure, and securities activities shall be carried out according to specific levels set forth in Appendix No. 1: Fee Collection Schedule in the Securities Sector."

The Ministry of Finance hereby provides guidance as follows:

I. Scope of Application:

Organizations and individuals operating in the securities sector fall within the scope of application of the Law on Value Added Tax and the Law on Corporate Income Tax as guided by this Circular, including: 

Securities companies, investment fund management companies, central securities depository banks;

Domestic and foreign organizations and individuals investing in securities in Vietnam;

Investment securities funds;

II. Regarding Value Added Tax:

1The following activities in the securities sector are exempt from Value Added Tax, including:

Securities brokerage;

Proprietary trading;

Portfolio management;

Underwriting and agency issuance of securities;

Financial advisory and securities investment advisory services provided by securities companies and fund management companies to clients in the securities investment sector, financial restructuring, mergers, acquisitions, and supporting enterprises in issuing and listing securities;

Management of investment securities funds;

Supervision of investment securities funds;

Securities custody;

Representation of bondholders;

Investment activities of investment securities funds.

2. Organizations and individuals conducting securities business activities exempt from Value Added Tax as specified in Point 1, Section II of this Circular shall not be entitled to deduct and refund input Value Added Tax on goods and services used for non-taxable activities.

In cases where non-taxable activities require a Value Added Tax invoice, only the "selling price" line should be filled with the price excluding Value Added Tax, while the "tax rate" and "Value Added Tax amount" lines should not be filled and should be crossed out. 

III. Regarding Corporate Income Tax:

1. For securities companies and fund management companies (hereinafter referred to collectively as companies):

1.1. Basis for calculating Corporate Income Tax: Corporate Income Tax is determined by multiplying taxable income for the tax period by (x) the tax rate.

1.1.1 Taxable income for the tax period are determined according to the following formula:

1.1.1.1. Revenue for calculating taxable income during the tax period: are fees received from providing services to customers, revenue from proprietary trading activities, including:

a. Brokerage service fees;

b. Portfolio management fees;

c. Guarantee and agency issuance fees;  d. Financial advisory and securities investment advisory fees;

đ. Fund management fees and bonuses paid to fund managers;

e. Fees for issuing fund certificates paid to fund managers;

g. Director's remuneration received for participating in the board of directors of other companies.

h. Price differences from securities trading during the period, interest income from bonds (excluding types of bonds exempted under the law) from proprietary trading activities of securities companies and financial investment activities of fund management companies.

i. Other revenues as prescribed by law.

1.1.1.2 Reasonable expenses deductible when determining

taxable income for the tax period:  expenses incurred to provide services to customers, expenses for proprietary trading activities, including: are Depreciation costs of fixed assets used for business operations.

1. Supplementing Point 6a following Article 6 of Circular No. 02/2019/TT-BVHTTDL dated July 5, 2019 of the Minister of Culture, Sports and Tourism on the procedures for legal expertise regarding copyright and related rights as follows: a1 Fixed assets subject to depreciation that can be included in reasonable expenses must meet the following conditions:

Fixed assets must be used for business operations.

Fixed assets must have complete invoices, receipts

and other legal documents proving ownership of the fixed assets by the company.  Fixed assets must be managed, monitored, and recorded in the company's accounting books according to current management and accounting regulations.

a2 The level of depreciation of fixed assets included in reasonable expenses is calculated according to the Minister of Finance's decision on the management, use, and depreciation of fixed assets.

Companies applying the straight-line depreciation method with high economic efficiency may depreciate at a faster rate but not more than twice the straight-line depreciation rate to quickly update technology. Fixed assets participating in business operations that can be depreciated at a faster rate include machinery and equipment; transportation means; management tools. When implementing accelerated depreciation, the company must ensure profitability.

a3 Fixed assets fully depreciated but still used for business operations shall not be further depreciated.

b Material and tool costs;

Labor costs, wages, allowances, and meal allowances during work shifts:

c. c1 Company labor costs include wages, salaries, allowances payable to employees according to the Labor Code and are determined as follows:

For state-owned enterprises: Labor costs payable to employees are determined based on current legal documents guiding wage and salary systems and allowances as stipulated by the Labor Code.

For other companies: Labor costs payable to employees are based on employment contracts or collective labor agreements.

c2 Meal allowances during work shifts are decided by the company director in accordance with business efficiency, but must not exceed the minimum wage set by the State for civil servants.

Each year, the company must register its total wage fund with the tax authority.

d Termination benefits for employees as prescribed by the system;

đ Professional training costs as prescribed by the system;

e External service costs such as postal fees, maintenance and repair of fixed assets; fees for using the stock exchange trading system; fees paid to supervisory and auditing organizations; legal consultation fees, contract drafting fees; fees for hiring experts and other external services;

g Trading attire costs, not exceeding VND 500,000 per person per year;

h Insurance premiums for property and personal accident insurance;

h. Premiums for property insurance and personal accident insurance;

i. Travel expenses, including transportation costs, accommodation rental fees, and lodging fees;

k. Annual membership fees for the Association;

l. Membership fees for the securities trading center (for companies that are members of the securities trading center);

m. Securities deposit fees, securities trading fees at the securities trading center;

n. Listing and registration fees for securities (for issuing companies listed on the securities trading center);

o. Business operation fund expenses;

p. Costs related to managing investment funds and investment portfolios;

q. Capital raising costs for investment funds;

r. Investor care and communication costs;

s. Remuneration costs for the board of directors;

t. Expenses for female employees in accordance with Circular 128/2003/TT-BTC dated December 22, 2003 issued by the Ministry of Finance;

quarantine upon import. Interest payment on loans at the actual interest rate agreed upon in the loan contract, but not exceeding 1.2 times the prevailing lending interest rate of commercial banks transacting with the company at the same time period;

v. Provision for reduction in value of proprietary securities:

The amount of provision is calculated based on the total amount of provisions for each type of securities that have decreased in value according to the following formula:

x. Advertising, marketing, promotional, reception, ceremonial, transaction, external relations, conference, and other expenses up to a maximum of 10% of the total reasonable expenses from items a to v of point 1.1.1.2 herein;

y. Taxes (excluding corporate income tax), fees, and charges required to be paid in accordance with relevant regulations related to business operations during the period;

1.1.1.3.  The following items shall not be included in reasonable expenses::

a. Losses compensated by the Government or reimbursed by the party causing the loss or the insurance agency;

b. Administrative fines, environmental fines, overdue loan penalties, and other violations;

c. Expenses from welfare funds, awards;

d. Regular and extraordinary hardship allowances;

đ. Expenses for supporting organizations, social causes, other agencies, charitable donations;

e. Construction investment expenses;

g. Expenses from other funding sources;

h. Expenses without invoices or legal receipts as prescribed or illegal receipts.

1.1.1.4. Other taxable income:

Other taxable income during the tax period includes: interest income from deposits; income from leasing assets; proceeds from liquidation and sale of assets after deducting the remaining value of the assets and related liquidation and sale expenses; penalty income from breach of economic contracts after deducting penalties for breach of economic contracts; recovered amounts from previously written-off accounts; income from unidentifiable creditors; refunds of provisions previously made but not used or fully utilized, and other taxable income.

1.1.1.5. Tax period and carryforward loss period:

The tax period is determined according to the calendar year. In cases where a company applies a fiscal year different from the calendar year, the tax period is determined according to the applied fiscal year. For newly established companies and companies changing their business form, ownership form, merging, splitting, dissolving, or going bankrupt, the first tax period is determined in accordance with the accounting period as prescribed by the law on accounting.  settlement.

After determining the taxable income according to the above formula, the company may deduct losses carried forward from previous tax periods to determine the corporate income tax payable. The carryforward period does not exceed five years.

1.1.2. Tax rate:

Securities companies and securities investment fund management companies are subject to a corporate income tax rate of 20% for a period of ten years from the commencement of business operations. Upon expiration of the 20% tax rate period, the company must switch to paying corporate income tax at a rate of 28%.

In cases where a company has commenced business operations and has declared and paid corporate income tax at a rate of 32% (for businesses operating under the Law on Domestic Investment Promotion) or at a rate of 25% (for businesses operating under the Law on Foreign Investment in Vietnam), starting from the 2004 fiscal year, they can switch to applying a tax rate of 20% for the remaining period. The remaining period equals the time the 20% tax rate was applied minus the time already operated. 

Example: In 2000, Securities Company X commenced operations and established its headquarters in downtown Hanoi. Before 2004, the company had declared and paid corporate income tax at a rate of 32%. Starting from the 2004 fiscal year, the company switched to applying a corporate income tax rate of 20% until the end of the 2009 fiscal year. From the 2010 fiscal year onwards, the company must switch to applying a tax rate of 28%.

1.2. Periods of tax exemption and reduction:

1.2.1. Newly established securities companies and securities investment fund management companies are exempt from corporate income tax for two years from the date they generate taxable income and are granted a 50% reduction in the tax payable for the next three years.

The tax exemption and reduction period is determined in accordance with the tax period. The tax exemption and reduction period is calculated continuously from the tax period when the company begins to generate taxable income (before deducting losses carried forward from previous tax periods). If in the first tax period, the company generates taxable income but the business operation period has not reached twelve months, the company has the right to register with the tax authority to calculate the tax exemption and reduction period within the first tax period or from the subsequent tax period.

1.2.2. Companies established before January 1, 2004, which have enjoyed tax exemptions and reductions, will continue to enjoy the full period of tax exemptions and reductions as stipulated in item 1.2.1 of this point.

Corporate income tax benefits apply only to independent accounting entities that comply with accounting systems, invoices, and receipts; have registered taxes and declare and pay taxes accordingly.

2. For securities investment organizations (regardless of whether the securities are listed or not listed):

2.1. Independent accounting economic organizations include all types of enterprises operating in all fields (except for securities companies and fund management companies) that conduct independent accounting, such as state-owned enterprises, limited liability companies, joint stock companies, partnerships, foreign-invested enterprises operating under the Law on Foreign Investment in Vietnam, and economic organizations of political, political-social, and occupational organizations participating in securities investment: these activities are financial operations, therefore, income from securities investment during the tax period must be combined with the enterprise's business income to calculate corporate income tax according to general regulations.

Taxable income from securities investment during the tax period is determined by the total value of securities sold during the period minus (-) the total purchase price of the securities sold during the period minus (-) the cost of buying and selling securities plus (+) interest from bonds obtained from holding bonds.. This taxable income does not include the portion of distributed profits already taxed at the corporate income tax stage and interest from bonds obtained from exempt bond types according to the provisions of the law.

2.2. Other organizations (excluding those mentioned in paragraph 2.1 of this point, securities companies, fund management companies, and investment funds) including foreign investment funds that only open accounts in Vietnam without having a presence in Vietnam participating in securities investment: they implement the payment of corporate income tax through the quota method. The amount of tax payable is determined by 0.1% of the total value of shares sold in each transfer transaction (investment fund certificates are treated like shares, various types of bonds when transferred are not subject to corporate income tax). The portion of distributed profits already taxed at the corporate income tax stage and interest from bonds obtained from exempt bond types according to the provisions of the law of these organizations are not subject to corporate income tax.

The collection and payment of quota taxes are as follows:

For listed shares: securities companies are responsible for withholding corporate income tax and filing declarations on behalf of the investing organization (according to Form No. 1 issued together with this Circular), paying taxes and settling taxes with the tax authority according to the guidance provided in Point 1, Section IV of this Circular.

For unlisted shares:

In the case where a joint-stock company authorizes a securities company to manage the entire shareholder list and carry out share transfer procedures between investors and between the company and investment organizations, the withholding of tax and the declaration, payment, and settlement of taxes with the tax authority will also be carried out similarly to the case of listed shares.

In the case where a joint-stock company does not authorize a securities company to manage the shareholder list or register share transfers, or only authorizes the management of part of the shareholder list for registration of share transfers and dividend payments (for example, in cases where the shareholder list is managed outside or far from the company), these joint-stock companies are responsible for withholding tax and filing declarations on behalf of the investing organization (according to Form No. 1 issued together with this Circular), paying taxes, and settling taxes with the tax authority according to the guidance provided in Point 1, Section IV of this Circular.

In the case where investment organizations mentioned in paragraphs 2.1 and 2.2 of this point invest in securities through investment funds, they shall pay corporate income tax according to the guidance provided in Point 3, Section III of this Circular.

3. For investment funds:

Investment funds are not subject to corporate income tax. When an investment fund distributes profits to investors, the distributed profit portion of the investing organization (regardless of whether it is a domestic or foreign investing organization) must be subject to corporate income tax at a rate of 20% (excluding the portion of distributed profits already taxed at the corporate income tax stage and interest from bonds obtained from exempt bond types according to the provisions of the law).

The fund management company is responsible for withholding the corporate income tax payable by the investing organization at a rate of 20%, filing declarations (according to Form No. 1 issued together with this Circular), paying taxes, and settling taxes according to the guidance provided in Point 1, Section IV of this Circular. However, the investing organization mentioned in paragraph 2.1, Point 2, Section III of this Circular may choose the self-payment method by combining the income from securities investment with the organization's business income to calculate and pay taxes according to the current Corporate Income Tax Law; the investing organization is responsible for notifying the Fund Management Company about choosing the self-payment method so as not to be withheld the corresponding tax.

Example: In March 2004, Hoang Tien Cement Company invested VND 200 million in an investment fund. In December 2005, the investment fund distributed profits. Hoang Tien Company received VND 10 million, of which VND 2 million was dividends already taxed at the corporate income tax stage in the enterprises in which the fund participated in investment. Therefore, out of the VND 10 million profit distributed to Hoang Tien Company, VND 8 million must be subject to corporate income tax. The fund management company will withhold 20% tax of VND 8 million, equivalent to VND 1.6 million, and pay it to the state budget on behalf of Hoang Tien Company. If Hoang Tien Company is an independent accounting economic entity, it can choose the self-payment method by receiving the full VND 10 million and combining VND 8 million with its business income to declare and pay corporate income tax according to the current regulations. Hoang Tien Company must notify the Fund Management Company of its choice of the self-payment method to avoid being withheld the corresponding tax.

4. For individual securities investors:

Domestic and foreign individuals investing in securities in Vietnam temporarily do not have to pay income tax on income from dividends, bond interest, differences in buying and selling securities, and other income from securities investment according to current regulations.

IV - Implementation Organization

1The registration, declaration, payment of taxes, settlement of taxes, and handling of tax violations for organizations and individuals operating in the securities sector shall be carried out in accordance with the current regulations of the laws on value-added tax and corporate income tax.

For Securities Companies, Fund Management Companies, and Joint Stock Companies that withhold corporate income tax and pay taxes on behalf of investment organizations, they shall declare and settle taxes with the direct tax authority managing the Company (using Form No. 01 attached to this Circular) and deposit the taxes into the State Treasury. The declaration, payment, and settlement of taxes must be completed within thirty days from the date of occurrence of taxable income of the investment organization.

2. Securities Companies, Fund Management Companies, and Joint Stock Companies that withhold tax from investment organizations and declare and pay taxes on behalf of investors who benefit from a fee of 0.8% of the actual tax collected, not exceeding fifty million dong per declaration and payment of tax, shall deduct this fee from the tax revenue before it is deposited into the state budget and use it to cover expenses related to tax collection and payment, and to reward individuals involved in the process of collecting and paying taxes.

3This Circular takes effect fifteen days after its publication in the Official Gazette.

In the course of implementation, if there are any difficulties, units are requested to promptly report them to the Ministry of Finance for study and resolution.

CORPORATE INCOME TAX DECLARATION FORM

(For Securities Companies, Fund Management Companies, and Joint Stock Companies that withhold corporate income tax and pay taxes on behalf of investment organizations with income from securities investments)

Name of the company withholding tax:...

Address: …

Telephone:...Fax:...Email:...

Tax code:...

Bank account number...opened at bank...

Total amount of corporate income tax paid on behalf:...

.....................................................................................................................................

(details in the attached declaration form below)

                                                              Day...Month...Year...

Place of submission of declaration:

- Tax Authority:

- Address:

Tax authority receiving the declaration:

- Date received:

- Receiver (signature, full name, position)

This form is made in duplicate: one copy sent to the tax authority, one copy retained by the company withholding corporate income tax and paying taxes on behalf of investment organizations with income from securities investments.