Circular No. 104/2011/TT-BTC amending and supplementing Circular No. 11/2010/TT-BTC dated January 19, 2010, of the Ministry of Finance guiding the implementation of tax obligations for Vietnamese investors investing abroad.

 CIRCULAR

Amending and supplementing Circular No. 11/2010/TT-BTC dated January 19, 2010 of the Ministry of Finance guiding the implementation of tax obligations for Vietnamese investors investing abroad

Implementing the tax obligations of Vietnamese investors investing abroad

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Pursuant to current laws and ordinances on taxes of the Socialist Republic of Vietnam and detailed implementing decrees of the Government regarding such laws and ordinances;

Pursuant to Decree No. 78/2006/NĐ-CP dated August 9, 2006 of the Government on direct investment abroad;

Pursuant to Decree No. 121/2007/NĐ-CP dated July 25, 2007 of the Government on direct investment abroad in oil and gas activities;

Pursuant to Decree No. 17/2009/NĐ-CP dated February 16, 2009 of the Government amending and supplementing certain provisions of Decree No. 121/2007/NĐ-CP dated July 25, 2007 on direct investment abroad in oil and gas activities;

Pursuant to Decree No. 118/2008/NĐ-CP dated November 27, 2008, of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

The Ministry of Finance guides the amendment and supplementation of certain contents of Circular No. 11/2010/TT-BTC dated January 19, 2010 of the Ministry of Finance on the implementation of tax obligations for Vietnamese investors investing abroad as follows:

Article 1. Amending and supplementing certain contents of Circular No. 11/2010/TT-BTC as follows:

1. Amend Point 1.1 Clause 2 Article 2 as follows:

"1.1 Machinery, equipment, spare parts, materials, raw materials, fuel exported abroad to form fixed assets of the investment project in foreign countries shall be implemented in accordance with the current Law on Export Tax and Import Tax.

In cases where export tax exemption is granted according to regulations, the documents submitted to the customs authority for export tax exemption shall be carried out in accordance with the Law on Export Tax and Import Tax and related guiding documents."

2. Amend Point 2.1 Clause 2 Article 2 as follows:

"2.1 Machinery, equipment, spare parts exported abroad to form fixed assets of the investment project in foreign countries, when liquidated or the project ends, if re-imported into Vietnam, shall be eligible for refund of previously paid export tax (if applicable) corresponding to the actual quantity of goods re-imported and shall not be subject to import tax.

Documents submitted to the customs authority for consideration of refund of previously paid export tax (if applicable) and non-payment of import tax shall be carried out in accordance with the Law on Export Tax and Import Tax and related guiding documents."

3. Replace Clause 3 Article 4 with new Clause 3 as follows:

"3.1 Procedures for declaration and payment of tax on income from overseas investment projects

a.1 Documents attached when declaring and paying tax by Vietnamese enterprises investing abroad on income from overseas investment projects include:

- A document from the enterprise regarding the profit distribution of the overseas investment project or confirmation from the enterprise's management regarding the profit distribution of the overseas investment project: present original, submit one certified copy stamped by the enterprise;

- Financial statements of the enterprise confirmed by an independent auditing organization or tax and finance authorities in the country of investment (if the country or territory accepting investment has an independent auditing organization) or confirmation from the competent authority in the country or territory accepting investment: present original, submit one certified copy stamped by the enterprise;

- Corporate income tax return of the enterprise belonging to the overseas investment project confirmed by an authorized representative of the overseas investment project: present original, submit one certified copy stamped by the enterprise;

- Settlement statement of corporate tax of the enterprise (if any): present original, submit one certified copy stamped by the enterprise;

- Confirmation of corporate tax paid, tax refunds, tax exemptions and reductions from the foreign tax authority or proof of tax paid, tax refunds, tax exemptions and reductions in the foreign country: present original, submit one certified copy stamped by the enterprise.

- Annex showing the amount of corporate income tax paid in the foreign country that can be deducted in the tax period according to Form No. 03-4/TNDN (issued together with Circular No. 28/2011/TT-BTC dated February 28, 2011 of the Ministry of Finance guiding the implementation of certain provisions of the Law on Tax Administration, guiding the implementation of Decree No. 85/2007/NĐ-CP dated May 25, 2007 and Decree No. 106/2010/NĐ-CP dated October 28, 2010 of the Government).

In case the overseas investment project has not yet generated taxable income (or is currently generating losses), when declaring annual corporate income tax settlement, Vietnamese enterprises investing abroad only need to submit audited financial statements or statements confirmed by the competent authority of the country of investment and the corporate income tax return of the overseas investment project confirmed by an authorized representative of the overseas investment project (present original and submit one certified copy stamped by the enterprise). Losses arising from the overseas investment project cannot be deducted from the domestic enterprise's taxable income when calculating corporate income tax.

a.2 Responsibilities of the tax authority:

The tax authority is responsible for receiving, checking, and processing the following:

If the documents are incomplete, within three working days from the date of receipt, issue a written response (specifying the reasons);

If the documents are complete, within ten working days from the date of receipt, conduct verification and comparison of the documents and evidence in the file with the provisions of this Circular to determine the tax payable, ensure the consistency and accuracy of the file, and guide the enterprise to declare and pay tax in accordance with Circular No. 11/2010/TT-BTC and the guidance provided in this Circular.

3.2 In cases where the overseas investment project must cease operations and generate unrecovered losses that the Vietnamese enterprise must bear, the Vietnamese enterprise may declare and offset these losses against the taxable income of the Vietnamese enterprise from the next tax period in accordance with the provisions of the Law on Corporate Income Tax. The carryforward period for losses is continuously up to five years, starting from the year the Vietnamese enterprise receives the unrecovered losses as stipulated in this clause.

The amount of loss transferred shall be equal to the amount of foreign direct investment actually disbursed, not exceeding the amount of foreign direct investment for business operations as certified/licensed by the Ministry of Planning and Investment under the Certificate of Foreign Investment/Certificate of Foreign Investment Operation (or the latest adjusted Certificate of Foreign Investment/Certificate of Foreign Investment Operation in case the project has adjusted such certificates).

a.1 The accompanying documents when declaring and settling tax for Vietnamese enterprises investing abroad for losses from overseas projects include:

- A request letter from the Vietnamese enterprise investing abroad: submit one original copy;

- Certificate of Foreign Investment/Certificate of Foreign Investment Operation (or the latest adjusted Certificate of Foreign Investment/Certificate of Foreign Investment Operation in case the project has adjusted such certificates) issued by the Ministry of Planning and Investment for the enterprise according to regulations: present the original, submit one copy;

- Documents confirming the cessation of activities of the economic organization abroad: present the original, submit one copy;

- Financial statements of the last three years from the fiscal year of liquidation of the overseas project, audited and confirmed by an independent auditing organization/tax authority in the country of investment, or financial statements (if the receiving country/territory has an independent auditing organization) or confirmation by the competent authority in the receiving country/territory. In cases where the overseas investment project has not been conducted for at least three years, the enterprise must submit all financial statements from the start of operation until the end of the overseas investment project: present the original, submit one copy;

- Liquidation contract of the overseas investment project and supporting documents proving the liquidation transactions carried out abroad: present the original, submit one copy;

- Tax return of the enterprise belonging to the overseas investment project, confirmed by the authorized representative of the overseas investment project: present the original, submit one copy;

- Settlement report on tax for the enterprise (if any): present the original, submit one copy;

- Confirmation of taxes paid, taxes refunded, taxes exempted/reduced by the foreign tax authority or proof of taxes paid, taxes refunded, taxes exempted/reduced abroad, transferred losses, untransferred losses of previous fiscal years' business operations.

a.2 Responsibilities of the tax authority: The tax authority is responsible for receiving, examining the documents, and processing them as follows:

a.2.1 If the documents are incomplete, within three working days from the date of receipt, issue a written response specifying the reasons;

a.2.2 If the documents are complete, within ten working days from the date of receipt, conduct a verification and comparison of the documents and evidence in the file with the contents specified in this Circular to determine the amount of loss that can be transferred, the consistency and accuracy of the file, and guide the enterprise to handle the loss according to the guidance provided in this Circular.

Article 2. Implementation Organization and Effectiveness

This Circular takes effect from August 26, 2011.

During implementation, if there are difficulties or obstacles, units are requested to report to the Ministry of Finance for timely guidance and resolution.