This circular guides the application of a 0% tax rate for construction and installation activities abroad and for export processing enterprises in accordance with the Law on VAT and Decree No. 79/2000/NĐ-CP. The document specifies conditions for applying this tax rate as well as required documents.
Scope of application
Businesses in Vietnam conducting construction and installation activities abroad and for export processing enterprises
Key points
- Enterprises implementing construction or installation contracts abroad or for export processing enterprises are eligible to apply the 0% tax rate (Point 1).
- Contracts including surveying and design will be subject to a 0% tax rate on total revenue received from the project owner (Point 1).
- Enterprises must have construction contracts, VAT invoices, and payment documents to qualify for the 0% tax rate (Point 2).
- Businesses are responsible under the law for declared figures when inspected by tax authorities (Point 2).
- The 0% tax rate is effective from January 1, 2001 (Final Point).
🌐 Social impact of this document
- Reduces financial burden on enterprises exporting construction and installation services.
- Enhances competitiveness of Vietnamese enterprises in the international market.
- Strict requirements for documentation may pose difficulties for some small and medium-sized enterprises.
❓ Frequently asked questions
Which enterprises are eligible to apply the 0% tax rate?
Businesses in Vietnam conducting construction or installation activities abroad or for export processing enterprises.
When does the 0% tax rate take effect?
From January 1, 2001.
Can contracts including surveying and design be subject to a 0% tax rate?
Yes, but only applied to total revenue received from the project owner.
What documents are required for enterprises to apply this tax rate?
Construction contracts, VAT invoices, and payment documents.
What responsibilities do businesses have when inspected by tax authorities?
They must be responsible under the law for declared figures and provide all relevant documentation.
Full text
LETTER
OF THE MINISTRY OF FINANCE NUMBER 11448 TC/TCT DATED NOVEMBER 29, 2001
REGARDING VALUE-ADDED TAX FOR CONSTRUCTION ACTIVITIES,
INSTALLATION OF PROJECTS IN FOREIGN COUNTRIES AND FOR EXPORT PROCESSING ENTERPRISES
Dear: - Ministries, ministerial-level agencies, and government agencies
- People's Committees of provinces and centrally-administered cities
Pursuant to the Law on Value-Added Tax (VAT) and Decree No. 79/2000/NĐ-CP dated December 29, 2000 of the Government detailing the implementation of the Law on VAT, the Prime Minister's opinion regarding VAT for construction activities in foreign countries and export processing enterprises as stated in Document No. 977/CP-KTTH dated October 30, 2001 of the Government, the Ministry of Finance hereby provides guidance on the application of VAT to construction and installation activities in foreign countries and for export processing enterprises as follows:
1- Regarding the rate of VAT:
Business entities operating in Vietnam that engage in construction and installation projects abroad or in export processing zones shall be considered as exporting activities and are subject to a VAT rate of 0% on such revenue.
In cases where business entities enter into turnkey contracts with project owners including both surveying and design, the zero percent VAT rate applies to the total contract value received from the project owner. If business entities sign separate contracts for construction/installation and survey/design with the project owner, then the zero percent VAT rate only applies to revenue from the construction/installation contract; revenue from the survey/design contract is exempt from VAT.
2- Documentation and invoices for activities subject to a 0% VAT rate:
The following documents must be complete for cases applying the 0% VAT rate:
- Contracts for construction and installation projects signed with foreign entities or export processing enterprises;
- VAT invoices issued for contracts for construction and installation with foreign entities or export processing enterprises;
- Payment receipts from foreign entities or export processing enterprises.
These documents must be retained by the business entity at its premises. When filing tax returns or requesting a refund, the business entity is responsible for accurately declaring all procedures and documentation related to construction and installation projects in foreign countries and export processing zones, and bears legal responsibility for the declared figures. During tax inspections, the entity must present all relevant documents pertaining to the taxes declared or requested for refund.
The documentation and invoices specified herein apply to contracts for construction and installation projects for export processing enterprises signed before January 1, 2001 and implemented in 2001 as per Document No. 3410 TC/TCT dated April 3, 2001 of the Ministry of Finance regarding VAT for export processing enterprises.
The zero percent VAT rate for construction and installation activities in foreign countries and for export processing enterprises shall be implemented from January 1, 2001.
Based on the guidance provided herein, business entities subject to tax under the deduction method that undertake construction and installation projects abroad or for export processing enterprises must adjust their input VAT deductions, VAT payable, or VAT refund amounts for completed contracts or parts of contracts or items within construction contracts according to the activities carried out. If a construction entity has issued an invoice without VAT for payment to the project owner, it shall not issue another invoice. Based on these invoices, the entity prepares a summary list detailing the invoices' codes, dates, names of projects, adjusted revenue from non-taxable to taxable income subject to a 0% VAT rate, and sends one copy to the tax authority for confirmation of adjustments in tax declarations as the basis for finalizing taxes.
During implementation, if any issues arise, please report them to the Ministry of Finance (General Department of Taxation) for resolution.
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