Circular No. 112/1999/TT-BTC guides the Value Added Tax (VAT) applicable to goods sold by foreign-invested enterprises to overseas buyers but delivered in Vietnam.

CIRCULAR

CIRCULAR NO. 112/1999/TT-BTC OF SEPTEMBER 21, 1999 GUIDING VALUE ADDED TAX APPLICABLE TO GOODS SOLD BY FOREIGN-INVESTED ENTERPRISES TO FOREIGN BUYERS BUT DELIVERED IN VIETNAM

BASED ON THE LAW ON VALUE ADDED TAX NO. 02/1997/QH9 ISSUED BY THE NATIONAL ASSEMBLY OF THE SOCIALIST REPUBLIC OF VIETNAM ON MAY 10, 1997;
BASED ON THE DECREE NO. 28/1998/NĐ-CP OF MAY 11, 1998 ISSUED BY THE GOVERNMENT PROVIDING GUIDELINES FOR THE IMPLEMENTATION OF THE LAW ON VALUE ADDED TAX AND THE DECREE NO. 102/1998/NĐ-CP OF DECEMBER 21, 1998 ISSUED BY THE GOVERNMENT AMENDING AND COMPLEMENTING CERTAIN PROVISIONS OF THE DECREE NO. 28/1998/NĐ-CP OF MAY 11, 1998 ISSUED BY THE GOVERNMENT PROVIDING GUIDELINES FOR THE IMPLEMENTATION OF THE LAW ON VALUE ADDED TAX;
TO IMPLEMENT POLICIES ENCOURAGING EXPORT PRODUCTION AND PRODUCTION REPLACING IMPORTS WHILE IMPLEMENTING SOME MEASURES TO ENCOURAGE FOREIGN DIRECT INVESTMENT;
THE MINISTRY OF FINANCE GUIDES THE IMPLEMENTATION OF VALUE ADDED TAX ON GOODS PRODUCED BY FOREIGN-INVESTED ENTERPRISES IN VIETNAM AND SOLD TO FOREIGN CUSTOMERS BUT DELIVERED TO DOMESTIC ENTITIES AT THE REQUEST OF FOREIGN BUYERS AS FOLLOWS:

I. APPLICABLE OBJECTS:

GOODS PRODUCED BY JOINT-VENTURE ENTERPRISES, WHOLLY FOREIGN-OWNED ENTERPRISES, AND FOREIGN PARTIES PARTICIPATING IN BUSINESS COOPERATION CONTRACTS UNDER THE LAW ON FOREIGN INVESTMENT IN VIETNAM (HEREINAFTER REFERRED TO AS FOREIGN-INVESTED ENTERPRISES) THAT ARE SOLD TO FOREIGN CUSTOMERS ACCORDING TO CONTRACTS BUT NOT EXPORTED OUT OF VIETNAM BUT DELIVERED TO DOMESTIC ENTITIES AT THE REQUEST OF FOREIGN BUYERS MUST SATISFY THE FOLLOWING CONDITIONS:

- THE GOODS PRODUCED BY FOREIGN-INVESTED ENTERPRISES MUST BE IN ACCORDANCE WITH THE PROVISIONS OF THE INVESTMENT LICENSE.

- THE GOODS MUST NOT BELONG TO THE LIST OF GOODS EXEMPT FROM VALUE ADDED TAX AS PROVIDED FOR IN ARTICLE 4 OF THE LAW ON VALUE ADDED TAX AND CURRENT GUIDING DOCUMENTS.
- DOMESTIC ENTERPRISES RECEIVING GOODS AT THE REQUEST OF FOREIGN BUYERS MUST SATISFY THE REQUIREMENTS SET OUT IN POINT 7 OF JOINT CIRCULAR NO. 23/1998/TTLT-BTM-TCHQ OF DECEMBER 31, 1998 ISSUED BY THE MINISTRY OF TRADE AND THE GENERAL DEPARTMENT OF CUSTOMS.

II. SPECIFIC GUIDELINES ON VALUE ADDED TAX

1. FOR EXPORTING ENTERPRISES:

GOODS PRODUCED BY FOREIGN-INVESTED ENTERPRISES AND SOLD TO FOREIGN CUSTOMERS BUT DELIVERED IN VIETNAM AT THE REQUEST OF FOREIGN BUYERS SHALL BE SUBJECT TO A ZERO PERCENT VALUE ADDED TAX RATE.

WHEN DELIVERING GOODS TO IMPORTING ENTERPRISES AT THE REQUEST OF FOREIGN BUYERS, FOREIGN-INVESTED ENTERPRISES MUST ISSUE A VALUE ADDED TAX INVOICE (INDICATING A ZERO PERCENT VALUE ADDED TAX RATE) CLEARLY STATING THE NAME OF THE FOREIGN BUYER, THE RECEIVER, AND THE LOCATION OF RECEIPT SIMULTANEOUSLY OPENING AN EXPORT DECLARATION IN ACCORDANCE WITH THE GUIDELINES SET OUT IN LETTER NO. 655/TCHQ-GSQL OF JANUARY 30, 1999 ISSUED BY THE GENERAL DEPARTMENT OF CUSTOMS.

THE DOCUMENTS AND RECORDS USED AS BASIS FOR SETTLEMENT OF VALUE ADDED TAX INCLUDE:

- SALES CONTRACTS AND ATTACHMENTS (IF ANY) SIGNED WITH FOREIGN BUYERS, SPECIFYING THE NAME OF THE RECEIVER AND THE LOCATION OF DELIVERY.
- VALUE ADDED TAX INVOICES (INDICATING A ZERO PERCENT VALUE ADDED TAX RATE) CLEARLY STATING THE NAME OF THE FOREIGN BUYER, THE RECEIVER, AND THE LOCATION OF RECEIPT.

- CUSTOMS DECLARATION FOR EXPORT GOODS CONFIRMED BY THE GENERAL DEPARTMENT OF CUSTOMS AS ACTUALLY EXPORTED.

2. FOR RECEIVING ENTERPRISES:

RECEIVING ENTERPRISES MUST OPEN AN IMPORT DECLARATION IN ACCORDANCE WITH THE CURRENT IMPORT AND EXPORT POLICY. SPECIFICALLY:

- IN CASES WHERE ENTERPRISES RECEIVE GOODS FOR PROCESSING FOR FOREIGN PARTIES ACCORDING TO SUBCONTRACTING CONTRACTS, ENTERPRISES MUST REGISTER THE DECLARATION AND PROCEDURE AT THE CUSTOMS AUTHORITY MANAGING THE SUBCONTRACTING CONTRACT. GOODS RECEIVED FROM THE EXPORTING ENTERPRISE TO BE USED AS RAW MATERIALS FOR EXPORT PRODUCTS ACCORDING TO THE SUBCONTRACTING CONTRACT SIGNED WITH FOREIGN PARTIES ARE EXEMPT FROM VALUE ADDED TAX.

- IN CASES WHERE ENTERPRISES RECEIVE GOODS FOR PRODUCING EXPORT PRODUCTS ACCORDING TO EXPORT CONTRACTS SIGNED WITH FOREIGN PARTIES, ENTERPRISES MUST REGISTER THE DECLARATION AND PROCEDURE AT THE CUSTOMS AUTHORITY MANAGING THE EXPORT PRODUCT PRODUCTION CONTRACT. GOODS RECEIVED FROM THE EXPORTING ENTERPRISE TO BE USED FOR PRODUCING EXPORT PRODUCTS ACCORDING TO THE EXPORT CONTRACT SIGNED WITH FOREIGN PARTIES ARE EXEMPT FROM VALUE ADDED TAX.

WHEN RECEIVING GOODS FOR PRODUCING OR PROCESSING EXPORT PRODUCTS, THE RECEIVING ENTERPRISE MUST PRESENT THE FOLLOWING DOCUMENTS TO THE CUSTOMS AUTHORITY:

+ IMPORT CUSTOMS DECLARATION.

+ EXPORT PRODUCTION OR PROCESSING CONTRACT SIGNED WITH FOREIGN PARTIES (COPIES WITH THE ENTERPRISE'S SEAL OF APPROVAL).

+ VALUE ADDED TAX INVOICE FROM THE SUPPLYING ENTERPRISE CLEARLY STATING THE NAME OF THE BUYER, THE NAME AND ADDRESS OF THE RECEIVER (COPIES WITH THE ENTERPRISE'S SEAL OF APPROVAL).

THE CUSTOMS AUTHORITY WILL MONITOR, MANAGE, AND SETTLE TAXES FOR CASES OF RECEIVING GOODS FOR PRODUCING OR PROCESSING EXPORT PRODUCTS IN ACCORDANCE WITH CURRENT REGULATIONS. IF ENTERPRISES USE THE GOODS AS DOMESTIC RAW MATERIALS OR FINISHED PRODUCTS, THEY MUST PAY VALUE ADDED TAX AND MAKE UP FOR IMPORT DUTIES ACCORDING TO CURRENT REGULATIONS.

- IN CASES WHERE ENTERPRISES RECEIVE GOODS ACCORDING TO PURCHASE CONTRACTS SIGNED WITH FOREIGN CUSTOMERS (WITHOUT SUBCONTRACTING OR EXPORT CONTRACTS), ENTERPRISES MUST PAY VALUE ADDED TAX ACCORDING TO REGULATIONS. THE DEADLINE FOR PAYING VALUE ADDED TAX IS THE SAME AS THE DEADLINE FOR PAYING IMPORT DUTIES ACCORDING TO THE CURRENT LAWS ON EXPORT AND IMPORT TAXES.

III. IMPLEMENTATION PROVISIONS

THIS CIRCULAR SHALL TAKE EFFECT 15 DAYS AFTER ITS DATE OF ISSUANCE. FOR CASES WHERE EXPORTING ENTERPRISES HAVE ALREADY ISSUED VALUE ADDED TAX INVOICES AND CALCULATED VALUE ADDED TAX FOR RECEIVING ENTERPRISES PRIOR TO THIS CIRCULAR, THE EXPORTING ENTERPRISES SHALL CONTINUE TO DECLARE AND PAY TAXES TO THE TAX AUTHORITIES. WHEN EXPORTING GOODS ACCORDING TO SUBCONTRACTING CONTRACTS OR EXPORT CONTRACTS SIGNED WITH FOREIGN PARTIES, RECEIVING ENTERPRISES WILL BE REIMBURSED FOR INPUT VALUE ADDED TAX ACCORDING TO REGULATIONS.

DURING THE IMPLEMENTATION, IF THERE ARE ANY DIFFICULTIES, UNITS ARE ADVISED TO REPORT TO THE MINISTRY OF FINANCE FOR REVIEW AND RESOLUTION.