Circular No. 111/2005/TT-BTC guides value-added tax and corporate income tax for the insurance business sector.

CIRCULAR

Guidelines on Value Added Tax (VAT) and Corporate Income Tax for the Insurance Business Sector

in the field of insurance business

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

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

Pursuant to Law on Insurance Business No. 24/2000/QH10 dated December 9, 2000 and 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;

The Ministry of Finance issues guidelines on Value Added Tax and Corporate Income Tax for the insurance business sector as follows:

I. Scope of Application

Organizations and individuals operating in the insurance business sector fall within the scope of application of the Law on Value Added Tax, the Law on Corporate Income Tax, and the Ordinance on Income Tax for High-Income Individuals, as guided by this Circular, including:

- Insurance companies, insurance brokerage companies, reinsurance companies operating under the Law on Insurance Business (including both domestic companies and foreign-invested companies permitted to operate in Vietnam);

- Organizations and individuals acting as insurance agents satisfying the conditions prescribed by the Law on Insurance Business.

II. Regarding Value Added Tax (VAT)

1. VAT Payable Objects

Insurance services and other goods and services used for production, business, and consumption in Vietnam (excluding services not subject to VAT as specified in Point 2 of this Circular) are objects subject to VAT, including:

- Non-life insurance services (excluding non-life insurance services as specified in Point 2 below);

- Services of agency appraisal, agency claim settlement, and agency third-party compensation request;

- Other goods and services subject to VAT according to the provisions of the law on VAT.

2. VAT Exempt Objects

The following insurance services are not subject to VAT:

- Life insurance; student insurance, and other human insurance services such as seafarer and ship crew accident insurance, personal accident insurance (including combined life and hospitalization insurance), passenger accident insurance, tourist accident insurance, driver-passenger accident insurance and vehicle occupant insurance, insurance for heirs, surgical hospitalization assistance insurance, individual life insurance, and other related human insurance;

- Animal and plant insurance, and other agricultural insurance services;

- Social insurance, health insurance, labor insurance, and unemployment insurance;

- Insurance services provided to international transportation means, such as vessel hull or aircraft hull insurance, or liability insurance for vessel owners or general liability insurance for aircraft;

International transportation means are those with international transportation revenue accounting for more than 50% of total transportation revenue of the means in a year; for international transportation means that are aircraft, the number of hours flown internationally must account for more than 50% of the total flight hours of the aircraft in a year;

- Insurance for oil and gas projects, equipment (including foreign-flagged oil tankers) leased by oil contractors or foreign subcontractors to operate in Vietnam's Exclusive Economic Zone (including overlapping areas where Vietnam and adjacent or opposite coastal states have agreed to place under joint development);

- Insurance for goods transported by road, sea, river, rail, and air for export, crude oil sold to foreign countries;

- Reinsurance abroad;

3. VAT Taxpayers

The VAT taxpayers guided by this Circular are insurance companies, insurance brokerage companies, reinsurance companies, and other insurance organizations (collectively referred to as insurance companies) conducting business activities involving taxable goods and services as specified in Point 1 of Section II of this Circular.

4. Tax Base

The tax base for VAT on insurance services and other services and goods provided by insurance companies shall be determined as follows:

4.1. For insurance services, it is the original insurance premium excluding VAT (including all additional charges and extra fees outside the service price that the insurance company receives, except for charges and fees that the insurance company must pay to the state budget).

In cases where special receipts are used to collect insurance premiums that include VAT, the insurance premium excluding VAT is calculated as follows:

If insurance contracts, insurance applications, or insurance certificates specify payment of premiums in installments, then the tax base is the amount of each installment; if paid in advance in one lump sum, the tax base is the total amount of the advance payment excluding VAT.

In cases where the insurance contract clearly specifies the proportion of co-insurance, the tax base is the original insurance premium excluding VAT allocated according to the co-insurance ratio for each co-insurance company.

In cases where the insurance contract only lists one company responsible for collecting premiums, the tax base is the entire original insurance premium of the contract excluding VAT.

4.2. For agency appraisal, agency claim settlement, agency third-party compensation request, and agency full-replacement processing services where the insurance company receives a fee or commission, the tax base for VAT is the fee or commission received (without deducting any expenses) by the insurance company, excluding VAT.

4.3. For other goods and services subject to VAT, the tax base is implemented according to Circular No. 120/2003/TT-BTC dated December 12, 2003 of the Ministry of Finance guiding the implementation of Decree No. 158/2003/NĐ-CP of the Government detailing the enforcement of the Law on VAT.

5. Tax Rate

5.1. A zero percent tax rate shall be applied to insurance services, inspection agency services, claim settlement agency services, third-party compensation request agency services, and full compensation goods processing services provided to export processing enterprises.

5.2. A ten percent tax rate shall be applied to insurance business activities (including insurance brokerage) including: insurance services, agency services comprising loss assessment, claim examination, third-party compensation request, and other services related to insurance business operations (excluding insurance services not subject to VAT as specified in Point 2, Section II, this Circular and insurance services subject to a zero percent tax rate as specified in Subsection 5.1, Point 5, Section II, this Circular).

5.3. For other business activities outside the aforementioned insurance business activities, the applicable tax rates for specific goods and services shall be applied as stipulated in Section II, Part B, Circular No. 120/2003/TT-BTC dated December 12, 2003, issued by the Ministry of Finance.

6. Tax Calculation Method

6.1. Insurance companies shall pay VAT according to the tax deduction method as guided in Point 1, Section III, Part B, Circular No. 120/2003/TT-BTC, specifically:

Where:

Revenue from taxable goods and services sold includes: revenue from insurance business operations and revenue from other service and goods business operations (outside insurance business operations) subject to taxation. Among which, revenue from insurance business operations includes:

- Original insurance premium fees of insurance services subject to VAT;

- Revenue from inspection agency services (excluding inspection fees between internal units within the same holding company or company), claim settlement agency services, third-party compensation request agency services, full compensation goods processing agency services, and other revenues from insurance business operations.

The time point for determining revenue for VAT calculation is when the insurance contract has been concluded between the insurance company and the policyholder or there is evidence that the insurance company has accepted the insurance and the policyholder has paid the insurance premium, including cases where the insurance company agrees to allow the policyholder to owe the insurance premium; or the time point when the insurance company issues a sales invoice.

b) Revenues from goods and services sold that have already been taxed at the original insurance level shall not be subject to VAT as prescribed in this Circular, including:

- Reimbursement income from reinsurance cessions and other reimbursement incomes (if any).

- Commissions from reinsurance cessions and other incomes from reinsurance cessions.

- Premiums for accepting reinsurance and other incomes from accepting reinsurance (including premiums for accepting reinsurance from insurance companies operating within Vietnam and outside Vietnam).

- Third-party recovery income.

c) Insurance companies may deduct VAT input on goods and services purchased for VAT-liable insurance business operations as shown on the VAT purchase invoices according to the guidance in Point 1, Section III, Part B, Circular No. 120/2003/TT-BTC.

d) Deduction of input tax for certain specific cases shall be carried out as follows:

- In the case of an insurance contract where only one company is named in the contract and is responsible for collecting premiums, settling claims, and paying related expenses associated with the insurance contract, the named company may declare the deduction of VAT input recorded on the VAT invoice for claim payments, insurance commissions, and other related expenses paid on behalf of co-insurers as agreed in the contract.

- For goods and services purchased simultaneously for both taxable and non-taxable business operations, only the VAT input on goods and services used for taxable business operations can be deducted. If it is not possible to separately account for deductible input tax, the deductible input tax shall be calculated based on the percentage of revenue from taxable goods and services compared to total revenue realized during the period; wherein: revenue from taxable goods and services and total revenue realized during the period include all revenues already taxed at the original insurance level as specified in Subsection b, Item 6.1, Point 6, Section II, this Circular.

- Insurance companies are not allowed to deduct input tax on goods and services purchased for insurance business operations without a VAT invoice.

6.2. Adjustment of deductible VAT input: Insurance companies must adjust downward or refund the VAT input already deducted for fixed assets, materials, and goods purchased for production and business operations subject to VAT that have now been transferred for use in non-VAT liable production and business operations or for other purposes (including cases where fixed assets, materials, and goods are used as collateral but are sold to recover debts for financial and credit organizations). The adjusted or refunded VAT amount is calculated based on the remaining value (excluding VAT) of the fixed asset; for materials and goods, the VAT adjustment or refund is the entire amount declared for deduction when purchased.

7. Sales Invoices and Purchase Documents

7.1. Insurance companies shall implement the invoice and document system in accordance with relevant laws and the guidance in Section IV, Part B, Circular No. 120/2003/TT-BTC.

7.2. Specific cases shall be implemented as follows:

7.2. Certain specific cases shall be implemented as follows:

7.2.1. For the types of services not subject to VAT as specified in paragraph b, Clause 6.1, Point 6, Section II of this Circular, insurance enterprises shall not issue VAT invoices for each reinsurance transaction but must implement the payment receipt and reinsurance transfer document system as prescribed in Decision No. 1296/TC-QĐ-CĐKT dated December 31, 1996 of the Ministry of Finance. The General Director of the insurance enterprise and the reinsurance enterprise shall be responsible under the law for the accuracy and truthfulness of these documents. These payment receipt and reinsurance transfer documents serve as the basis for the buyer to record expenses.

7.2.2. In the case of an insurance contract where the proportion of co-insurance for each insurance enterprise is clearly defined in the contract:

- When collecting insurance premiums, each co-insurer issues a VAT invoice to the customer based on the portion of the premium with VAT corresponding to their co-insurance ratio and complies with the regulations for declaring and paying VAT.

- When purchasing goods or services for compensation or other payments related to the insurance contract, the VAT invoice bearing the name, address, and tax code of which entity shall that entity declare the input VAT deduction and record the expense according to the regulations.

7.2.3. In the case of an insurance contract where only one enterprise named in the contract is responsible for collecting premiums and handling claims and other payments related to the insurance contract:

- When collecting insurance premiums, the named enterprise issues a VAT invoice to the customer, declares and pays VAT on the entire contract value according to the regulations. When the named enterprise allocates the premium (excluding VAT) among co-insurers based on the co-insurance ratio, those co-insurers issue VAT invoices to the named enterprise; the invoice clearly states it is a co-insurance invoice according to the contract number, date, month, year, and the VAT line is not filled out and crossed out. This invoice serves as the basis for co-insurers to record revenue according to the regulations.

- When paying on behalf of various expenses incurred under the co-insurance contract such as compensation, insurance commissions, and other related payments, the named enterprise declares the input VAT deduction for these payments. When allocating costs to co-insurers based on the co-insurance ratio, the named enterprise issues VAT invoices to these entities; the invoice clearly states the compensation and other related payments made by the named enterprise according to the contract number, date, month, year, and the VAT line is not filled out and crossed out. This invoice serves as the basis for co-insurers to record expenses according to the regulations.

7.2.4. In the case of collecting premiums or paying expenses on behalf of another insurance enterprise:

- When collecting premiums on behalf of another enterprise, the collecting enterprise is responsible for issuing a VAT invoice to the customer, clearly stating it is collecting on behalf of the Insurance Company (name, address, tax code of the company) according to the Insurance Contract (number, date, month, year of the contract). The collecting enterprise does not record its own revenue but records agency revenue and declares and pays VAT on this revenue. For the enterprise requesting collection, when receiving money from the collecting enterprise, it issues a VAT invoice to the collecting enterprise, clearly stating it has received the insurance premium collected on behalf of the Insurance Company (name, address, tax code of the company) according to the insurance contract (number, date, month, year of the contract); the VAT amount on the invoice is equal to the VAT amount collected by the collecting enterprise from the customer. This invoice serves as the basis for the collecting enterprise to deduct input VAT when calculating VAT payable, and also serves as the basis for the enterprise requesting collection to record revenue, declare, and pay VAT according to the regulations.

- When paying on behalf of the purchase of goods or services for compensation to customers, the paying enterprise requires organizations or individuals providing goods or services to issue a sales invoice in the name, address, and tax code of the enterprise requesting payment; this invoice is transferred to the enterprise requesting payment for it to declare the input VAT deduction (if applicable) and record expenses according to the regulations.

7.2.5. In the case of collecting premiums or paying expenses between affiliated units or between a dependent unit and the main office of an insurance enterprise:

- When collecting premiums on behalf of another unit, the collecting unit issues a VAT invoice to the customer and declares and pays VAT on the agency revenue, while simultaneously notifying the unit requesting collection. Based on the notification of collection, the unit requesting collection records revenue (without VAT), does not need to issue an invoice, and does not declare or pay VAT on the agency revenue.

If the unit requesting collection does not require the collecting unit to issue a VAT invoice to the customer, then when collecting, the collecting unit only records the collection and does not declare or pay VAT on the agency revenue. Based on the notification of collection, the unit requesting collection issues a VAT invoice to the customer, declares and pays VAT on the agency revenue.

- When paying on behalf of others, the entity whose name and tax code appear on the VAT invoice shall declare and deduct input VAT, and simultaneously notify the unit requesting payment so that the latter can record expenses.

7.2.6. In the case of refunding or reducing insurance premiums:

When the policyholder participating in insurance is a business organization, upon refunding part or all of the insurance premium, the insurance enterprise requests the participating organization to issue a VAT invoice, clearly stating the refunded premium amount, VAT amount, and reason for the refund. This invoice serves as the basis for the insurance enterprise and the participating organization to adjust their purchase and sale revenues and the VAT already declared or deducted.

In the case where the insurance customer is an entity without a VAT invoice, when refunding the insurance premium fee, the insurance company and the insurance customer must prepare a record or agree in writing to clearly state the amount of the refunded insurance premium fee (excluding VAT), the amount of VAT according to the invoice for the insurance premium fee that the insurance company issued when collecting the insurance premium fee (invoice number, date, month of the invoice), the reason for refunding the insurance premium fee. This record must be kept together with the invoice for the insurance premium fee to serve as the basis for adjusting revenue declaration and VAT of the insurance company. If the insurance customer cannot provide the invoice for the insurance premium fee, then the amount of the refunded insurance premium fee recorded in the record or written agreement for the refund shall be the amount of the insurance premium fee excluding VAT.

8. Registration, Declaration, Payment of Tax

Insurance companies shall implement registration, declaration, payment of tax, refund of tax, and settlement of VAT in accordance with the guidelines set out in Part C of Circular No. 120/2003/TT-BTC and Circular No. 84/2004/TT-BTC dated August 18, 2004, amending and supplementing Circular No. 120/2003/TT-BTC.

Insurance agents who receive commissions are not required to declare and pay VAT on the commission amounts they receive.

III. Regarding Corporate Income Tax (CIT)

1. For insurance companies:

1.1. Basis for calculating CIT

Corporate income tax is determined by multiplying the taxable income during the tax period by the applicable tax rate.

1.1.1. Taxable income during the tax period:

Taxable income during the tax period includes: taxable income from insurance business activities, income from financial investment activities (including income from foreign investments), and other taxable income.

Taxable income during the tax period is determined by the following formula:

1.1.1.1. Revenue for calculating taxable income during the tax period: is the total amount of money received from providing insurance services and other goods and services, including surcharges and additional fees that the insurance company receives before VAT, including:

a) Revenue from insurance business activities: is the amount receivable for the original insurance premium; service fees for agency (loss assessment, claim settlement review, third-party compensation request, full compensation processing); reinsurance acceptance fees; commission income from reinsurance and other income related to insurance business after deducting the amounts payable to reduce revenue such as: refunding insurance premiums, reducing insurance premiums; refunding reinsurance acceptance fees, reducing reinsurance acceptance fees; refunding reinsurance ceding commissions, reducing reinsurance ceding commissions.

In the case of an insurance contract, the revenue for calculating taxable income is the original insurance premium amount allocated according to the proportion of the insurance contract, excluding VAT.

For insurance contracts agreed to pay in installments, the revenue for calculating taxable income is the amount receivable generated in each installment period.

In cases where collection transactions are carried out between affiliated units or between dependent units and the main office of the insurance company, the revenue for calculating taxable income does not include the portion collected on behalf of others.

b) Revenue from financial activities: includes income from financial investment activities as stipulated in Section 3, Chapter II of Decree No. 43/2001/NĐ-CP dated August 1, 2001, of the Government; income from securities trading; interest on pledged funds; rental income; reversal of provisions for impairment of securities; and other income as prescribed by law.

1.1.1.2. Time of determining revenue for calculating taxable income:

a) Time of determining revenue from insurance business activities: is the time when the insurance company assumes liability under the insurance contract, which has been concluded between the insurance company and the policyholder, the insurance company has accepted the insurance, and the policyholder has paid the insurance premium or the issuance of the invoice; for other receipts, it is the time when the economic transaction occurs and there is evidence of approval for payment by both parties, regardless of whether the money has been received or not, or the issuance of the invoice.

b) Time of determining revenue from financial activities: is the time when the receivable amount is generated within the fiscal year.

1.1.1.3. Reasonable expenses deductible for calculating taxable income during the period:

Reasonable expenses deductible for calculating taxable income for insurance companies are determined as follows:

a) Expenses for insurance business activities, including:

(1) Claims payments under insurance contracts (original insurance claims payments for non-life insurance, insurance benefit payments for life insurance), reinsurance contracts after deducting amounts receivable to reduce expenses such as: reinsurance ceded claims payments, third-party compensation payments, processed full compensation items.

(2) Reinsurance ceding fees;

(3) Loss reserve expenses as prescribed by the Ministry of Finance;

(4) Insurance commissions, reinsurance acceptance commissions as stipulated in Point 5, Section II and Point 2, Section IV of Circular No. 98/2004/TT-BTC dated October 19, 2004, of the Ministry of Finance guiding the implementation of Decree No. 42/2001/NĐ-CP dated August 1, 2001, of the Government detailing the implementation of certain provisions of the Law on Insurance Business;

(5) Loss assessment expenses as stipulated in Article 26 of Decree No. 42/2001/NĐ-CP dated August 1, 2001, of the Government detailing the implementation of certain provisions of the Law on Insurance Business;

(6) Agency service expenses including loss assessment, claim settlement review, third-party compensation requests;

(7) Expenses for processing fully compensated losses;

(8) Insurance agent management expenses such as training, recruitment of agents; agent incentive expenses and other expenses as agreed in the agency contract.

(9) Expenditure for prevention and limitation of losses shall not exceed 2% of the actual premium income in the fiscal year for measures to prevent and limit losses as prescribed in Clause 2, Article 25 of Decree No. 42/2001/NĐ-CP dated August 1, 2001 of the Government detailing certain provisions of the Law on Insurance Business.

(10) Expenditure for risk assessment of insured objects includes expenditure for collecting information, investigation, and evaluation of insured objects.

(11) Depreciation expenses of fixed assets used for business operations.

The level of depreciation of fixed assets to be included in reasonable expenses shall be determined according to the decision of the Minister of Finance regarding the management, use, and depreciation of fixed assets.

(12) Material and tool expenses.

(13) Wages, salaries, allowances, and meal expenses during work shifts:

The company's wage expenses include wages, salaries, allowances payable to employees in accordance with the Labor Code and are determined as follows:

- For state-owned insurance companies: Wage expenses payable to employees are determined based on current legal documents guiding wage and salary systems and allowances as stipulated in the Labor Code.

- For other companies: Wage expenses payable to employees are based on labor contracts or collective labor agreements.

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

Meal expenses during work shifts are decided by the company director in accordance with business efficiency but must ensure that the monthly expenditure per employee does not exceed the minimum wage set by the State for civil servants.

(14) Severance pay expenses for employees in accordance with the prescribed system.

(15) Research and development expenses (excluding funds supported by the State or superior management agencies); rewards for innovative ideas that contribute to business efficiency; training expenses for employees in accordance with the prescribed system; health care expenses within the enterprise; support expenses for schools permitted by the State.

(16) External service fees such as postal fees, maintenance, repair, or rental repair costs for fixed assets; fees paid to supervisory and auditing organizations; legal advisory fees, contract drafting fees; fees for hired experts as designated and other external purchase expenses directly serving business activities; insurance premiums for property and personal accident insurance.

(17) Uniform expenses, with an expenditure limit of VND 500,000 per person per year.

(18) Travel expenses, including travel costs, accommodation rental fees, lodging expenses; leave transportation allowances as prescribed by the Labor Code.

(19) Contributions to social insurance, health insurance, trade union funds; support expenses for Party and mass organization activities at enterprises; contributions to association funds in accordance with the prescribed system.

(20) Provision for bad debts, establishment of a reserve fund for unemployment benefits in accordance with the guidance of the Ministry of Finance.

(21) Expenses for protecting business premises; expenses for female workers as prescribed in Circular No. 128/2003/TT-BTC dated December 22, 2003 of the Ministry of Finance.

(22) Advertising, marketing, promotional, reception, ceremonial, transaction, foreign affairs expenses, brokerage commissions (excluding insurance brokerage commissions), conference expenses, and other expenses actually incurred but not exceeding 10% of the total reasonable expenses from items (1) to (21) of this sub-section.

(23) Tax payments (excluding corporate income tax), fees, and rent payments required by relevant regulations related to business operations during the period, including: export taxes; VAT input on goods and services exported without conditions for deduction and refund as prescribed, VAT input beyond the deductible period as prescribed; business license tax; agricultural land use tax; real estate tax; land rent; fees and charges paid by enterprises into the State budget as prescribed by law.

b) Financial activity expenses:

(1) Investment activity expenses as prescribed in Section 3, Chapter II of Decree No. 43/2001/NĐ-CP dated August 1, 2001 of the Government detailing financial systems for insurance businesses and insurance brokerage businesses.

(2) Interest paid to life insurance policyholders.

(3) Rental expenses for assets.

(4) Bank processing fees, interest on loans.

(5) Provision for securities write-downs.

(6) Other investment activity expenses as prescribed by law.

1.1.1.4. The following items shall not be recorded as reasonable expenses:

(1) Losses compensated by the Government or by the party causing the loss or the insurance agency.

(2) Penalties for administrative violations, environmental violations, overdue loan penalties, and other violations.

(3) Expenses from welfare and reward funds.

(4) Regular and emergency hardship allowances.

(5) Support expenses for social organizations, other agencies, charitable donations, except for support expenses for schools permitted by the State.

(6) Construction investment expenses.

(7) Expenses from other funding sources.

(8) Expenses without invoices or legal receipts as prescribed.

1.1.1.5. Other taxable income, including:

(1) Income from the transfer of land use rights or lease rights.

(2) Income from the transfer or liquidation of assets. This income is determined by subtracting the remaining value of the transferred or liquidated asset and related transfer or liquidation expenses from the revenue received from the transfer or liquidation of the asset.

(3) Recovery of previously written-off bad debts.

(4) Receipts from unidentifiable creditors.

(5) Revenue from economic contract breach penalties after deducting penalties for breach of economic contracts.

(6) Recoveries of previously established reserves that were not used or fully utilized (excluding recoveries of securities write-down reserves).

(7) Income from business or investment activities abroad.

The determination of taxable income from business activities or investments abroad shall be based on international agreements to avoid double taxation that the Socialist Republic of Vietnam has signed.

For income received from business activities or investments abroad where the Socialist Republic of Vietnam has not signed an international agreement to avoid double taxation, the taxable income is the amount of income before paying corporate income tax in the foreign country. After determining the corporate income tax payable according to the Law on Corporate Income Tax, the amount of corporate income tax paid in the foreign country shall be deducted for payment into the State budget. The amount of tax paid in the foreign country shall not exceed the corporate income tax payable according to the Law on Corporate Income Tax.

The taxable income of insurance enterprises for the tax period does not include the portion of profits distributed that have already been taxed at the corporate income tax rate prior to distribution and interest from bonds exempted from tax under the provisions of the law.

(8) Other types of income.

1.1.1.6. Tax period and loss carryforward period:

The tax period is determined according to the Gregorian calendar year. In cases where insurance enterprises are permitted to apply a fiscal year different from the Gregorian calendar year, the tax period is determined according to the fiscal year applied. The first tax period for newly established enterprises and the last tax period for enterprises changing their business form, ownership form, merging, splitting, dissolving, or going bankrupt shall be determined in accordance with the accounting period as prescribed by the law on accounting.

Insurance enterprises, after finalizing their accounts and suffering losses, may carry forward such losses to offset against taxable income in subsequent years. The loss carryforward period shall not exceed five years from the year following the year in which the loss occurred. Insurance enterprises must register their loss carryforward plan with the tax authority when losses occur.

1.1.2. Tax rate:

The corporate income tax rate applicable to insurance enterprises is 28%.

Insurance enterprises with foreign investment capital licensed before January 1, 2004, currently paying corporate income tax at a rate of 25%, shall continue to apply the 25% tax rate until the expiration date of their Investment License. Domestic insurance enterprises currently applying a tax rate of 32% shall switch to applying the 28% tax rate starting from January 1, 2004.

Insurance enterprises with income from transferring land use rights or land lease rights shall pay corporate income tax on this income in accordance with the provisions of Part C of Circular No. 128/2003/TT-BTC dated December 22, 2003, issued by the Ministry of Finance guiding the implementation of Decree No. 164/2003/NĐ-CP dated December 22, 2003, of the Government detailing the implementation of the Law on Corporate Income Tax.

1.2. Exemption and reduction of tax:

Insurance enterprises meeting the preferential tax conditions stipulated in Article 33 and Article 34 of Decree No. 164/2003/NĐ-CP shall implement exemption and reduction of corporate income tax in accordance with the provisions of Part E of Circular No. 128/2003/TT-BTC and Points 5, 6, and 7 of Circular No. 88/2004/TT-BTC dated September 1, 2004, issued by the Ministry of Finance amending and supplementing Circular No. 128/2003/TT-BTC.

1.3. Registration, declaration, payment of tax, and settlement of tax:

Insurance enterprises shall implement registration, declaration, payment of tax, and settlement of corporate income tax in accordance with the provisions of Part D of Circular No. 128/2003/TT-BTC.

2. For insurance brokerage enterprises:

Insurance brokerage enterprises shall pay corporate income tax in accordance with the guidance provided in Circular No. 128/2003/TT-BTC and Circular No. 88/2004/TT-BTC dated September 1, 2004, issued by the Ministry of Finance amending and supplementing Circular No. 128/2003/TT-BTC.

3. For insurance agency enterprises:

- Insurance agencies are organizations established and operating under the Enterprise Law: shall pay corporate income tax in accordance with the guidance provided in Circular No. 128/2003/TT-BTC and Circular No. 88/2004/TT-BTC dated September 1, 2004, issued by the Ministry of Finance amending and supplementing Circular No. 128/2003/TT-BTC.

- Insurance agencies are other organizations (excluding organizations established and operating under the Enterprise Law) and individuals: shall pay income tax at a fixed rate of 5% on the commission received from insurance agency activities (including all cash support payments from the party assigning the agency). The party assigning the agency is responsible for withholding the corporate income tax before paying the commission to the organization or individual receiving the agency and remitting it to the State budget.

IV. Implementation Organization

Where there are provisions in the Double Taxation Avoidance Agreement signed between Vietnam and another country that differ from the guidance provided in this Circular, such provisions shall be implemented in accordance with the Agreement.

Matters not specifically addressed in this Circular shall be implemented in accordance with the corresponding guidance in current laws and regulations on value-added tax, corporate income tax, and high-income earners' income tax.

This Circular takes effect fifteen days after its publication in the Official Gazette. Provisions contrary to this Circular are abolished.

Any difficulties encountered during implementation should be reported to the Ministry of Finance for consideration and resolution./.