Circular No. 115/2005/TT-BTC guiding the implementation of Decree No. 156/2005/NĐ-CP dated December 15, 2005 of the Government amending and supplementing decrees detailing the implementation of the Special Consumption Tax Law and the Value Added Tax Law.

CIRCULAR

Guidelines for implementing Decree No. 156/2005/NĐ-CP dated December 15, 2005 of the Government

Amending and supplementing Decrees detailing the implementation of

Special Consumption Tax Law and Value Added Tax Law

Pursuant to the Special Consumption Tax Law (SCTL) and the Value Added Tax Law (VATL);

Pursuant to the Law amending and supplementing certain provisions of the SCTL and VATL No. 57/2005/QH11 dated November 29, 2005;

Pursuant to Decree No. 156/2005/NĐ-CP dated December 16, 2005 of the Government amending and supplementing Decrees detailing the implementation of the SCTL and VATL;

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 hereby provides guidance as follows:

Part A: REGARDING SPECIAL CONSUMPTION TAX

I. Replace Section B of Circular No. 119/2003/TT-BTC dated December 12, 2003 and Points 2 and 3 of Circular No. 18/2005/TT-BTC dated March 8, 2005 of the Ministry of Finance on the basis of taxation and tax rates of special consumption tax with a new Section B as follows:

"B. Basis for taxation and tax rates:

The basis for taxation of special consumption tax is the taxable value of goods and services subject to special consumption tax and the tax rate of special consumption tax.

I. Taxable value for special consumption tax:

The taxable value for special consumption tax of goods and services is determined specifically as follows:

1. For domestically produced goods: The taxable value for special consumption tax is the selling price of the production unit without value added tax and without special consumption tax, which is determined specifically as follows:

The selling price without value added tax is determined according to the provisions of the VATL.

In cases where the production unit selling goods subject to special consumption tax sells through branches, shops, or dependent units, the basis for calculating the special consumption tax is the selling price of these branches, shops, or dependent units without value added tax. If the production unit sells through agents at the price set by the unit and receives commission, the basis for determining the taxable value for special consumption tax is the selling price without value added tax set by the production unit before deducting the commission.

- For canned beer (beer cans), the taxable value for special consumption tax is determined as follows:

In which: The value of the can is fixed at VND 3,800 per liter of beer can.

Example: For canned beer: The selling price of 1 liter of beer can without value added tax is VND 16,000, the value of the can for 1 liter of beer that can be deducted is VND 3,800, the tax rate of special consumption tax for beer cans is 75%, then:

 - For goods subject to special consumption tax sold through commercial trading establishments, the basis for calculating the special consumption tax is the selling price without value added tax of the production unit but not lower than 10% compared to the average selling price of the commercial trading establishment.

In case the selling price of the production unit is lower than 10% compared to the selling price of the commercial trading establishment, the taxable value for special consumption tax is the price determined by the tax authority according to Point 8d of Section D of Circular No. 119/2003/TT-BTC dated December 12, 2003 of the Ministry of Finance.

2. For imported goods: The taxable value for special consumption tax for imported goods subject to special consumption tax is determined as follows:

Taxable value for special consumption tax = Taxable value for import tax + Import tax.

The taxable value for import tax is determined according to the provisions of the Export Tax Law and Import Tax Law. In cases where imported goods are exempted or reduced from import tax, the import tax included in the taxable value for special consumption tax is the remaining import tax to be paid.

For imported beer cans: The taxable value for special consumption tax is deducted by the value of the can at VND 3,800 per liter of beer can.

The taxable value for special consumption tax of 1 liter of imported beer can is calculated as follows:

3. For bottled wine and bottled beer when calculating special consumption tax, the value of the bottle cannot be deducted.

4. For processed goods: The taxable value for special consumption tax is the selling price without value added tax and without special consumption tax of the unit sending for processing, which is determined specifically as follows:

5. For goods sold on installment payment terms: The taxable value for special consumption tax is the selling price without value added tax and without special consumption tax of the goods sold in a lump sum payment, excluding the installment interest.

6. The taxable value for services subject to special consumption tax is the service revenue of the business without value added tax and without special consumption tax, which is determined as follows:

Example: Revenue from operating nightclubs of the business in the period is VND 30,000,000.

The service revenue without value added tax serving as the basis for determining the taxable value for special consumption tax for certain services is specified as follows:

- For nightclub operations, it is the revenue without value added tax from all activities in the nightclub.

- For massage services, it includes the revenue from massage without value added tax including bathing and steam baths.

- For golf operations, it is the actual revenue without value added tax from selling membership cards, golf tickets, including fees paid by members and deposits (if any). In case the deposit is refunded to the depositor, the business will be entitled to a refund of the tax already paid by offsetting against the amount due in the next period, if not offsettable, the business will be entitled to a tax refund according to regulations. Golf businesses that operate other goods and services not listed under the special consumption tax shall not be subject to special consumption tax.

Example: Golf businesses that organize hotel, catering, retail, or game operations shall not be subject to special consumption tax.

- For casino services and slot machine games, it is the revenue without value added tax from sales minus prizes paid out, i.e., the amount received (without value added tax) from exchanging money at the counter or table before playing, minus the amount exchanged back to the customer.

- For betting entertainment, it is the revenue from lottery ticket sales minus the prize money paid to winning customers (without value added tax), excluding revenue from viewing entertainment events with betting.

- For lottery services, it is the price of lottery tickets without value added tax.

- The taxable value for goods and services subject to special consumption tax used for promotional activities, exchange, internal consumption, gifts, or donations is the taxable value of similar goods or services at the time these activities occur.

The taxable value for domestically produced goods and services subject to special consumption tax includes additional amounts received outside the selling price of the goods or services (if any) that the entity receives.

In cases where the taxpayer's revenue from selling goods or services is in foreign currency, such foreign currency must be converted into Vietnamese Dong using the average inter-bank exchange rate published by the State Bank of Vietnam at the time the revenue is generated to determine the taxable value.

II. Special Consumption Tax Rate.

According to Clause 2, Article 1 of the Law Amending and Supplementing Certain Provisions of the Special Consumption Tax Law and Value Added Tax Law No. 57/2005/QH11 dated November 29, 2005, the specific special consumption tax rates are applied as follows:

TABLE OF SPECIAL CONSUMPTION TAX RATES

For goods subject to special consumption tax, the special consumption tax rate does not differentiate between imported goods and domestically produced goods.

The application of the special consumption tax rate for certain goods and services in the Table is specified as follows:

1. Medicinal spirits are liquid medicines intended for human use to prevent, treat diseases, or alleviate symptoms; they must be registered for circulation by authorized health authorities.

Manufacturers of medicinal spirits must have a production permit for medicinal spirits and a certificate of registration for the name, label, and quality of medicinal spirit products issued by health authorities or competent authorities. Imported medicinal spirits must be identified as medicinal spirits by health authorities or competent authorities and obtain an import permit.

If the above conditions are not met, the manufacturer or importer must pay the special consumption tax according to the rate applicable to spirits with the corresponding alcohol content.

2. Paper goods subject to special consumption tax do not include children's toys and decorative paper goods.

II. Repeal certain points in Circulars No. 119/2003/TT-BTC dated December 12, 2003; Circular No. 82/2005/TT-BTC dated September 21, 2005 of the Ministry of Finance as follows:

1. Repeal the last part of Point 1b Section I Part C of Circular No. 119/2003/TT-BTC dated December 12, 2003 as follows:

"For cigarette manufacturers, in addition to registering trademarks as mentioned above, they must also register with the tax authority regarding the raw material consumption quota for each type of cigarette produced, specifying the weight of tobacco strands per unit product and the ratio of imported tobacco strands (if any) to the total weight of tobacco strands used for production as the basis for determining the special consumption tax rate."

2. Repeal Point 1b Section D of Circular No. 119/2003/TT-BTC dated December 12, 2003 of the Ministry of Finance concerning reduced special consumption tax for automobile assembly and manufacturing enterprises.

3. Repeal Form 06A/TTĐB for reporting wine consumed during the period; Form 06B/TTĐB for reporting bottled beer consumed during the period (sold with bottles); Form 01B/TTĐB for adjusting the taxable value and special consumption tax on bottled wine and beer, all issued along with Circular No. 119/2003/TT-BTC dated December 12, 2003 of the Ministry of Finance, and the last part of Point 2b Section II of Circular No. 82/2005/TT-BTC as follows:

"At the end of the calendar year, the entity must prepare Form 01B/TTĐB for adjusting the taxable value of bottled wine and beer (in cases sold with bottles). This form must be prepared and adjusted in the tax declaration for January or February of the following year."

PART B: REGARDING VALUE ADDED TAX ON GOODS AND SERVICES

I. REPLACE POINT 1 OF SUBSECTION II OF PART A OF CIRCULAR NO. 120/2003/TT-BTC DATED DECEMBER 12, 2003 ISSUED BY THE MINISTRY OF FINANCE WITH THE FOLLOWING NEW POINT 1:

"1. AGRICULTURAL PRODUCTS (INCLUDING PLANTED FOREST PRODUCTS), LIVESTOCK PRODUCTS; AQUATIC AND MARINE PRODUCTS FROM FARMING AND HARVESTING THAT HAVE NOT BEEN PROCESSED INTO OTHER PRODUCTS OR HAVE ONLY UNDERGONE SIMPLE PREPARATION BY INDIVIDUALS OR ORGANIZATIONS FOR SALE AND AT THE IMPORT STAGE.

PRODUCTS THAT HAVE ONLY UNDERGONE SIMPLE PREPARATION WITHOUT BEING PROCESSED TO A GREATER EXTENT OR CONVERTED INTO OTHER PRODUCTS ARE DEFINED AS FOLLOWS:

- FOR AGRICULTURAL PRODUCTS, THEY INCLUDE PRODUCTS THAT HAVE BEEN DRIED, ROASTED, CLEANED, AND PEELLED.

- FOR LIVESTOCK PRODUCTS; AQUATIC AND MARINE PRODUCTS FROM FARMING AND HARVESTING, THEY INCLUDE PRODUCTS THAT HAVE BEEN DRIED, ROASTED, CLEANED, AND FROZEN."

IIMODIFY POINT 2.14 OF SUBSECTION II OF PART B OF CIRCULAR NO. 120/2003/TT-BTC DATED DECEMBER 12, 2003 ISSUED BY THE MINISTRY OF FINANCE AS FOLLOWS:

"SIMPLY PROCESSED COTTON IS COTTON THAT HAS HAD ITS SEED CASES REMOVED, SEEDS REMOVED, AND SORTED."

PART C: IMPLEMENTATION

THIS CIRCULAR SHALL TAKE EFFECT 15 DAYS AFTER ITS PUBLICATION IN THE OFFICIAL GAZETTE. ABOLISH ANY PROVISIONS CONTRARY TO THE GUIDELINES SET OUT IN THIS CIRCULAR. PROVISIONS IN CIRCULARS NO. 119/2003/TT-BTC DATED DECEMBER 12, 2003; CIRCULAR NO. 18/2005/TT-BTC DATED MARCH 8, 2005; CIRCULAR NO. 82/2005/TT-BTC DATED SEPTEMBER 21, 2005 AND CIRCULAR NO. 120/2003/TT-BTC DATED DECEMBER 12, 2003 ISSUED BY THE MINISTRY OF FINANCE THAT ARE NOT AMENDED, SUPPLEMENTED OR ABOLISHED BY THIS CIRCULAR SHALL CONTINUE TO BE ENFORCED. DURING THE IMPLEMENTATION PROCESS, IF THERE ARE ANY DIFFICULTIES OR OBSTACLES, WE URGE THE UNITS, AUTHORITIES, AND BUSINESS ESTABLISHMENTS TO REPORT PROMPTLY TO THE MINISTRY OF FINANCE FOR FURTHER GUIDANCE AND COMPLEMENTARY REGULATIONS./.