Circular No. 107/1998/TT-BTC guides the implementation of Decree No. 24/1998/NĐ-CP dated May 4, 1998 of the Government on amending and supplementing the tax rates for certain products and business sectors, and guiding amendments and supplements to some points in Circular No. 97-TC/TCT dated December 30, 1995 of the Ministry of Finance.

CIRCULAR

OF THE MINISTRY OF FINANCE NUMBER 107/1998/TT-BTC OF JULY 24, 1998 GUIDING THE IMPLEMENTATION OF THE GOVERNMENT DECREE NUMBER 24/1998/NĐ-CP OF MAY 4, 1998 ON AMENDING AND SUPPLEMENTING THE TAX RATES FOR CERTAIN PRODUCTS AND BUSINESS SECTORS AND GUIDING THE AMENDMENT AND SUPPLEMENTATION OF SOME POINTS IN THE CIRCULAR NUMBER 97 TC/TCT OF DECEMBER 30, 1995 OF THE MINISTRY OF FINANCE

Pursuant to the Law on Business Tax which was adopted by the National Assembly of the Socialist Republic of Vietnam at its Eighth Session on June 30, 1990; the Law Amending and Supplementing Certain Articles of the Law on Business Tax which was adopted by the National Assembly of the Socialist Republic of Vietnam at its Ninth Session on July 5, 1993;

Pursuant to Resolution No. 47/1998/NQ-UBTVQH10 of March 25, 1998 of the Standing Committee of the National Assembly on amending and supplementing tax rates for certain products and business sectors;

Pursuant to Decree No. 96/CP of December 27, 1995 of the Government detailing the implementation of the Law on Business Tax and the Law Amending and Supplementing Certain Articles of the Law on Business Tax;

Pursuant to Decree No. 24/1998/NĐ-CP of May 4, 1998 of the Government on amending and supplementing tax rates for certain products and business sectors;

The Ministry of Finance guides the implementation of the amended and supplemented business tax rates and guides the amendment and supplementation of some points in Circular No. 97 TC/TCT of December 30, 1995 of the Ministry of Finance as follows:

A. GUIDANCE ON THE IMPLEMENTATION OF AMENDED AND SUPPLEMENTED BUSINESS TAX RATES

I. AMENDED AND SUPPLEMENTED TAX RATES:

The business tax rates for certain industries in the Business Tax Table have been amended and supplemented as follows:

1. Section I - Manufacturing Industry

2. Section II - Construction Industry

3. Section III - Transportation Industry

4. Section VI - Supplementary Services Add point k to item 16

II. AMENDED AND SUPPLEMENTED BUSINESS TAX RATES APPLY TO THE FOLLOWING SPECIFIC INDUSTRIES AS FOLLOWS:

1. Metal smelting, rolling, drawing and coke production with a tax rate of 2% applicable to all metals regardless of whether they are ferrous or non-ferrous, including precious metals (gold, silver...).

2. Production and assembly of mechanical products with a tax rate of 1% including:

Products such as machinery, equipment, tools, transportation vehicles (excluding cars up to 24 seats), parts, components of machinery, equipment, transportation vehicles; production tools, molds; Iron and steel products such as power poles, traffic bridges, construction scaffolding, complete warehouse frames; measuring devices such as specialized scales over 2000 kg; conveyor belts, conveyors, escalators.

3. Production and assembly of electronic products with a tax rate of 4% regardless of whether they are specialized or consumer electronics, computers.

4. Food production and processing:

a. Refined sugar production with a tax rate of 6%.

+ Refined sugar production from raw sugar, honey, sugar cubes with a tax rate of 4%.

+ Sugar production from raw sugar, honey, sugar cubes with a tax rate of 4%.

Enterprises that produce refined sugar from sugarcane and also purchase raw sugar, honey, sugar cubes for refining must separately account for production volume and revenue for each type to calculate business tax according to different tax rates. If separate accounting is not possible, the revenue share should be determined based on the actual value of sugarcane or raw sugar, honey, sugar cubes used for refined sugar production to calculate the revenue subject to tax rates of 6% and 4% respectively.

Example:

During the production period, Enterprise A purchased 1,800 tons of sugarcane (total purchase cost: 800 million VND) and 70 tons of honey (total purchase cost: 200 million VND) for refined sugar production.

Using all these raw materials, the enterprise produced 200 tons of refined sugar and sold it for 1,300 million VND.

In case the enterprise cannot separately account for revenue by type, the business tax will be calculated as follows:

- Proportion of sugarcane value used:

- Proportion of honey value used:

* Revenue subject to 6% tax rate = 1,300 million VND x 80% = 1,040 million VND

- Business tax payable: 1,040 million VND x 6% = 62.4 million VND.

* Revenue subject to 4% tax rate: = 1,300 million VND x 20% = 260 million VND

(or = 1,300 million VND - 1,040 million VND = 260 million VND)

- Business tax payable: 260 million VND x 4% = 10.4 million VND.

Therefore, the total business tax payable during the period is:

62.4 million VND + 10.4 million VND = 72.8 million VND

b. Alcohol production with a tax rate of 6% regardless of the type of alcohol and its purpose.

5. For construction activities; surveying, design and other construction-related activities:

a. Construction activities including materials and raw materials procurement with a tax rate of 4% applied to the total revenue of the project or sub-project undertaken.

Is determined to include materials and supplies if the main raw materials constituting construction products such as iron, steel, cement, bricks, stone, sand, gravel... are supplied by the construction party responsible for building the project.

b. Construction activities not including materials and supplies (materials are arranged by the project owner, the contractor mainly only charges labor costs and other expenses, including auxiliary materials, if any) apply a tax rate of 6%. The taxable turnover for this activity is the revenue from constructing and installing projects, project components, or completed work handed over.

Determining whether construction turnover includes or excludes materials and supplies must be based on the construction contract and the actual settlement of the construction project and termination of the contract.

6. Public passenger transport services by bus companies established and operating according to plans of the Ministry of Transport to serve the travel needs of people within urban areas, industrial zones, or between cities and industrial zones along designated routes, stops, schedules, and fares set by authorized authorities shall apply a tax rate of 0%.

7. Electronic game business applies a tax rate of 10% to establishments using electronic machines and equipment with installed gaming programs for commercial purposes. The taxable turnover for this activity is the revenue from the operation.

B. AMEND AND SUPPLEMENT CERTAIN POINTS IN CIRCULAR NO. 97 TC/TCT OF DECEMBER 30, 1995 ISSUED BY THE MINISTRY OF FINANCE GUIDING VALUE ADDED TAX 

I. ADDITIONAL GUIDANCE ON THE APPLICATION OF VALUE ADDED TAX RATES FOR CERTAIN ACTIVITIES:

1. For production activities:

a. Production of cement bags and paper packaging materials, including plastic-coated paper bags that are waterproof and moisture-proof, apply a tax rate of 2% for the production of paper products.

b. Printing and publishing various types of dictionaries, foreign language learning books (excluding textbooks and teaching materials), apply a tax rate of 1% for printing and publishing book activities.

c. Printing and publishing various types of teaching and learning materials apply a tax rate of 0% for the production of textbook printing and publishing activities.

2. Trade businesses selling the following items apply a tax rate of 1%:

a. Selling fresh flowers.

b. Various types of bricks, tiles (including decorative bricks and tiles), construction glass, roofing sheets, various types of pipes (including water pipes and communication cables).

Machinery, equipment, transportation vehicles (excluding passenger cars with up to 24 seats) including molds, spare parts, and accessories of machinery, equipment, and transportation vehicles (excluding bicycle and motorcycle spare parts and other consumer mechanical products), agricultural tools, fishing gear.

c. Businesses engaging in temporary importation and re-exportation apply a tax rate of 1% on export turnover or 15% on the difference between export price and import price (if conditions for calculating tax on the price difference are met).

d. Businesses dealing in rice purchase, polishing, sieving, and selling rice apply a tax rate of 1% for trade activities; if they purchase paddy, thresh it into rice, and sell it, they apply a tax rate of 2% for rice processing activities; if they charge only labor fees for milling, they apply a tax rate of 6% for processing activities.

II. AMEND AND SUPPLEMENT THE TAXABLE TURNOVER FOR CERTAIN PRODUCTION AND BUSINESS ACTIVITIES LISTED IN PART B, SECTION I OF CIRCULAR NO. 97 TC/TCT AS FOLLOWS:

1. For trade businesses: Trade businesses meeting the conditions to calculate tax on the difference between selling price and purchasing price: the selling price and purchasing price used to determine the difference are the actual prices recorded on sales invoices (except for agricultural and aquatic products purchased from farmers and aquaculture producers and goods purchased from non-business entities without invoices, where the purchase price is determined based on the actual payment made and the business must prepare a detailed list of purchased goods according to tax authority guidelines). Specific purchase and sale prices are determined according to Point 6, Section I, Part B of Circular No. 97 TC/TCT dated December 31, 1995, now providing further guidance on certain cases as follows:

a. Trade businesses purchasing goods and then buying packaging materials, strings, straps, etc., to package the goods for sale, the cost of purchasing packaging materials, strings, straps, etc., shall not be included in the purchase price to calculate tax on the difference between selling price and purchase price.

b. Trade businesses selling goods through agents, consignment sellers, or commission-based sales, if the trade business meets the conditions to calculate tax on the difference, they can still apply the calculation method based on the difference. The selling price of goods sold through agents or consignment sellers is the price at which the agent or consignment seller sells the goods before deducting commissions. Commissions paid to the agent or consignment seller are included in business expenses according to regulations.

2. Goods used internally, given as gifts, for advertising, or promotional purposes, businesses must record revenue and pay value added tax as if they were sold to other parties, except for the following cases which do not require payment of value added tax:

- Internal circulating materials and semi-finished products (which do not generate revenue) used by the business to continue producing products and goods circulated between internal warehouses.

- Goods purchased externally used for promotions, gifts, or giveaways to customers without charging money or already included in the selling price of goods sold, or used as prizes in promotional lotteries, do not require payment of value added tax.

Example:

A manufacturer of electric fans, to increase fan sales, purchases some products such as ballpoint pens, electric pens to give to customers who buy fans or buys some televisions as prizes in promotional lotteries for fan buyers. The ballpoint pens, electric pens, and televisions given to customers do not require payment of value added tax; however, if the business uses some electric fans for office, kindergarten use, or as rewards for employees, these fans must be recorded as revenue and subject to value added tax.

III. AMEND AND SUPPLEMENT POINT 1.C OF PART C - REGISTRATION, DECLARATION, PAYMENT, AND SETTLEMENT OF VALUE ADDED TAX:

For production establishments that organize branches and retail stores selling products produced by such establishments, the production establishment must declare and pay turnover tax at the production location according to the production industry tax rate and declare and pay turnover tax at the branch and retail store locations according to the commerce industry tax rate.

To have a basis for determining turnover and taxes payable at each location, when units deliver goods to retail stores, they must use sales invoices clearly stating: quantity, type of item, unit price, and total value of goods dispatched from the warehouse. Retail stores must use sales invoices purchased from the tax authority where the branch or retail store is located when selling goods. If branches and retail stores meet the conditions to pay turnover tax on the difference, the tax authority will inspect and notify the production establishment to apply payment of turnover tax on the difference; in cases where the unit implements a unified pricing mechanism (same price at the production location and branch or retail store location) without generating a price difference, the branch or retail store does not need to pay turnover tax on this type of goods.

Specifically, Cement Companies under the Vietnam Cement Corporation still apply the calculation of turnover tax and declaration, payment of turnover tax according to current regulations.

For production establishments that organize warehouses in other localities (warehouses not directly engaged in selling goods), when dispatching goods from the production establishment to affiliated warehouses, as well as adjusting goods between warehouses, the establishment may use Internal Dispatch and Transportation Forms; when selling goods, sales invoices must be established according to regulations.

This Circular takes effect from August 1, 1998. Specifically, the amended and supplemented turnover tax rates mentioned in Part A of this Circular guiding the implementation of Decree No. 24/1998/NĐ-CP dated May 4, 1998 of the Government shall be implemented from April 1, 1998.

Other provisions that have not been amended or supplemented shall continue to be implemented according to Circular No. 97 TC/TCT dated December 30, 1995 of the Ministry of Finance guiding the implementation of Decree No. 96/CP dated December 27, 1995 of the Government detailing the implementation of the Law on Turnover Tax and the Law Amending and Supplementing Certain Articles of the Law on Turnover Tax.

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