Circular No. 11/2010/TT-BTC guiding the tax obligations of Vietnamese investors investing abroad

Article 1. Scope of Regulation and Applicability

1. These Circulars regulate the tax obligations of Vietnamese investors mentioned in Article 2 of Decree No. 78/2006/NĐ-CP and Article 2 of Decree No. 121/2007/NĐ-CP who are permitted to directly invest abroad according to Decree No. 78/2006/NĐ-CP and Decree No. 121/2007/NĐ-CP.

2. In cases where international treaties signed or joined by the Government of Vietnam have provisions regarding taxes that differ from the guidelines set forth in this Circular, the tax obligations shall be implemented according to those international treaties.

Article 2. Export Duties, Import Duties

1. For exported goods

1.1. Machinery, equipment, spare parts, materials, raw materials, fuel exported by investors to create fixed assets for projects abroad shall be carried out in accordance with the current Law on Export Duties and Import Duties.

In cases where export duties are exempted according to regulations, the documents submitted to customs authorities for exemption of export duties include:

- A request letter from the Vietnamese enterprise investing abroad;

- An export declaration form for goods;

- A list of goods for export to implement overseas investment projects exempted from export duties, self-declared by the enterprise (specifying type, quantity, and value of goods);

- A certified copy of the Overseas Investment Permit issued by the competent authority by the Vietnamese enterprise investing abroad;

- A certified copy of the Power of Attorney for Export Contract (if applicable) by the Vietnamese enterprise investing abroad;

In cases where goods are exported multiple times, the documents listed in points 4 and 5 of the above submission only need to be submitted once at the time of first export.

If goods are exported without paying export duties, based on the list of goods for export to implement overseas projects declared by the enterprise, the customs authority will monitor the export of goods by Vietnamese enterprises investing abroad and clearly record in the export declaration form: type, quantity, and value of goods actually exported.

1.2. Goods exported temporarily and re-imported to implement overseas investment projects, when exporting, shall declare and pay export duties according to the laws on export duties and import duties. If re-imported, no import duties will be paid and the previously paid export duties will be refunded (if applicable) corresponding to the actual amount of goods re-imported.

2. For imported goods

2.1. Machinery, equipment, spare parts exported abroad to create fixed assets for overseas projects, if re-imported to Vietnam upon project liquidation or completion, may be eligible for refund of previously paid export duties (if applicable) corresponding to the actual amount of goods re-imported and no import duties will be paid.

Documents submitted to customs authorities for consideration of refund of previously paid export duties (if applicable) and non-payment of import duties include:

- A request letter from the Vietnamese enterprise investing abroad;

- A list of documents for duty refund application (if applicable).

- Proof of payment of export duties (for cases where export duties were paid);

- A list of exported goods;

- An export declaration form (with confirmation of completed customs procedures and actual exported goods) when exporting goods to create fixed assets for overseas projects - original or certified copy by the Vietnamese enterprise investing abroad.

- An import declaration form indicating that these goods were previously exported under which export dossier and the specific inspection results of the customs authority confirming that the imported goods are the previously exported goods of the enterprise. In cases where the previously exported goods were subject to the exemption of physical inspection, the customs authority will compare the inspection results of the imported goods with the export dossier to confirm that the imported goods are indeed the previously exported goods;

- A certificate of project completion issued by the competent authority of the host country, or a liquidation decision by the Board of Directors or equivalent body according to the host country's regulations - certified copy and translation by the Vietnamese enterprise investing abroad or the competent authority.

- A power of attorney for import (if applicable) - certified copy by the Vietnamese enterprise investing abroad.

In cases where goods are imported multiple times, the documents listed in points 7 and 8 of the above submission only need to be submitted once at the time of first import.

Based on the above documents and the actual imported goods, the customs authority will issue a decision not to collect import duties for each batch of imported goods.

2.2. Goods divided during liquidation or completion of overseas projects funded by capital investment; goods representing profit shares or profits of overseas projects imported into Vietnam are subject to import duties according to the Law on Export Duties and Import Duties.

2. 3. Specimens, technical materials (magnetic tapes, paper tapes, and other documents) imported for the purpose of research and analysis to implement overseas oil and gas investment projects shall be exempt from import tax. The procedures for exemption from import tax shall be carried out according to the guidelines of the Ministry of Finance on customs procedures; customs inspection and supervision; export tax, import tax, and tax management for exported and imported goods.

2. 4. Specialized equipment and materials for oil and gas activities that are not yet produced domestically when temporarily imported for processing and manufacturing into products which are then re-exported pursuant to contracts signed with authorized representatives of overseas oil and gas investment projects shall be exempt from import tax. When exporting the products, they shall be exempt from export tax.

The specific implementation shall be carried out according to the guidelines of the Ministry of Finance on customs procedures; customs inspection and supervision; export tax, import tax, and tax management for exported and imported goods.

The determination of specialized equipment and materials that belong to the category of items not yet produced domestically shall be based on the List of materials and equipment serving oil and gas activities that have been produced domestically issued by the Ministry of Planning and Investment.

Article 3. Value Added Tax

1. Goods such as machinery, equipment, spare parts, materials, raw materials, and fuel (excluding unprocessed natural resources and minerals) exported abroad to form fixed assets of overseas investment projects shall be subject to value added tax at a rate of 0%, and input value added tax shall be deducted as if they were exported goods under the provisions of the Law on Value Added Tax and guiding documents.

For goods exported under this clause to be eligible for deduction and refund of input value added tax, they must meet the conditions regarding procedures and documents as stipulated in the Law on Value Added Tax and guiding documents. Specifically, the condition of signing sales contracts with foreign countries and payment vouchers for goods shall be replaced by a list of goods exported to implement overseas investment projects declared by the enterprise (specifying types, quantities, and values of goods).

2. Goods exported in the form of temporary export and re-import to implement overseas investment projects; raw materials imported for production and processing of exported goods under export production and processing contracts signed with foreign enterprises shall be subject to temporary export-reimport, temporary import-reexport procedures, and shall not be subject to value added tax upon importation.

The procedures and documents for determining and handling non-collection of value added tax in these cases shall be carried out according to the guidelines of the Ministry of Finance on customs procedures; customs inspection and supervision; export tax, import tax, and tax management for exported and imported goods.

3. Goods such as machinery, equipment, and spare parts exported abroad to form fixed assets of overseas investment projects, when liquidated or terminated and permitted to be re-imported into Vietnam; goods divided during the liquidation or termination of overseas investment projects funded by capital; and goods representing shares of revenue or profits of overseas investment projects imported into Vietnam shall be subject to value added tax according to the current provisions of the Law on Value Added Tax as if they were ordinary imported goods.

Article 4. Corporate Income Tax

1. Vietnamese enterprises investing abroad that generate income from production and business activities outside Vietnam shall declare and pay corporate income tax according to the provisions of the Double Taxation Avoidance Agreement between Vietnam and the country where the investment project is located (if applicable), the Law on Corporate Income Tax of Vietnam, and guiding documents, including cases where the enterprise is currently enjoying tax exemption or reduction benefits under the laws of the recipient country.

The corporate income tax rate for calculating and declaring taxes on foreign-source income is 25%, without applying any preferential tax rates (if any) that Vietnamese enterprises investing abroad are currently enjoying under the current Corporate Income Tax Law.

2. In cases where income from overseas investment projects has already been subject to corporate income tax (or a similar tax) in the foreign country, when calculating the corporate income tax payable in Vietnam, Vietnamese enterprises investing abroad may deduct the tax paid in the foreign country or paid on their behalf by the receiving country's partner (including taxes on dividends), but the amount deducted cannot exceed the corporate income tax calculated according to Vietnam’s Corporate Income Tax Law. Any corporate income tax exemptions or reductions granted to Vietnamese enterprises investing abroad for profits earned from overseas investment projects under the laws of the investing country shall also be deducted when determining the corporate income tax payable in Vietnam (no need to pay tax).

Example 1: In the 2009 fiscal year, Enterprise A of Vietnam had a source of income from an overseas investment project amounting to 1,000 million VND. The corporate income tax payable according to the Corporate Income Tax Law of the investing country, in the absence of tax incentives, would be 200 million VND. Since the enterprise is currently entitled to a 50% reduction in corporate income tax payable under the Corporate Income Tax Law of the recipient country, the actual tax paid in the investing country is 100 million VND.

The corporate income tax that Enterprise A of Vietnam must pay according to Vietnam’s Corporate Income Tax Law is as follows:

1,000 million VND x 25% = 250 million VND

The remaining corporate income tax payable (after deducting the tax paid in the investing country) is:

250 million VND - 200 million VND = 50 million VND

Example 2: In the 2009 fiscal year, Enterprise A of Vietnam had income of 660 million VND from an overseas investment project. This income was the remainder after paying corporate income tax in the investing country. The corporate income tax payable and paid according to the laws of the investing country is 340 million VND.

The portion of income from the overseas investment project that the enterprise must declare and pay corporate income tax according to Vietnam’s Corporate Income Tax Law is as follows:

[(660 million VND + 340 million VND) x 25%] = 250 million VND

In this case, since the corporate income tax required to be declared and paid according to Vietnam’s Corporate Income Tax Law (250 million VND) is lower than the corporate income tax paid according to the laws of the investing country (340 million VND), Enterprise A of Vietnam does not have to pay corporate income tax on the income derived from implementing the overseas investment project when declaring and paying corporate income tax in Vietnam. However, Enterprise A of Vietnam cannot offset the excess tax paid in the investing country against the tax payable in Vietnam, which amounts to 90 million VND (340 - 250 = 90).

3. The attached documents 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 owner regarding the profit distribution of the overseas investment project.

- Financial statements of the enterprise confirmed by an independent auditing organization. - The corporate income tax declaration form of the enterprise belonging to the overseas investment project (a certified copy by an authorized representative of the overseas investment project);

- Settlement records of corporate income tax for the enterprise (if available);

- Confirmation of the tax paid, tax paid on behalf, and tax exemptions or reductions from the tax authority in the foreign country or proof of tax paid, tax paid on behalf, and tax exemptions or reductions in the foreign country.

In cases where the overseas investment project has not yet generated taxable income (or is generating losses), when declaring annual corporate income tax settlement, Vietnamese enterprises investing abroad only need to submit audited financial statements by an independent auditing organization or by an authorized body of the investing country and the corporate income tax declaration form of the overseas investment project (a certified copy by an authorized representative of the overseas investment project). Losses arising from overseas investment projects cannot be deducted from domestic income when calculating corporate income tax.

4. Income from overseas investment projects shall be declared in the corporate income tax settlement of the following fiscal year after the income is generated abroad or declared in the corporate income tax settlement of the same fiscal year if the enterprise has sufficient basis and supporting documents to determine the income and corporate income tax paid from the overseas investment project.

Example 3: Enterprise A of Vietnam had income from an overseas investment project in the 2009 fiscal year. Enterprise A of Vietnam must declare the aforementioned income in the corporate income tax declaration for the 2009 fiscal year or the 2010 fiscal year according to Vietnam’s Corporate Income Tax Law.

5. The tax authority has the right to determine taxable income from overseas business operations of Vietnamese enterprises investing abroad in cases of violation of regulations on declaration and payment of taxes as stipulated in the Law on Tax Administration.

Article 5. Personal Income Tax

Vietnamese investors who are individual businesses or individuals implementing investment projects abroad or working for investment projects abroad shall pay personal income tax in accordance with the provisions of the Double Taxation Avoidance Agreement between Vietnam and the country where the investor implements the project (if any), the Law on Personal Income Tax of Vietnam, and guiding documents.

Article 6. Other Types of Taxes, Fees, and Charges

In addition to fulfilling tax obligations for the production and business activities of overseas investment projects as guided in this Circular, Vietnamese enterprises investing abroad must also fulfill tax, fee, and charge obligations according to current laws on taxes, fees, and charges applicable to production and business activities in Vietnam through the supply of goods, services, and other economic transactions with overseas investment projects.

Article 7. Organization of Implementation and Effectiveness

1. This Circular takes effect 45 days from the date of signature. This Circular replaces Circular No. 97/2002/TT-BTC dated October 24, 2002, issued by the Ministry of Finance, guiding the fulfillment of tax obligations by Vietnamese enterprises investing abroad.

2. During implementation, if there are any difficulties, organizations and individuals are advised to report to the Ministry of Finance for timely guidance and resolution./.