Circular No. 118/1999/TT-BTC guides the implementation of value-added tax for state-owned enterprises engaged in public services.

CIRCULAR

CIRCULAR NO. 118/1999/TT-BTC OF SEPTEMBER 30, 1999 GUIDING THE IMPLEMENTATION OF VALUE ADDED TAX FOR STATE ENTERPRISES ENGAGED IN PUBLIC SERVICES

BASED ON THE LAW ON VALUE ADDED TAX, DECREE NO. 28/1998/NĐ-CP OF MAY 11, 1998 OF THE GOVERNMENT; DECREE NO. 102/1998/NĐ-CP OF DECEMBER 21, 1998 OF THE GOVERNMENT; DECREE NO. 78/1999/NĐ-CP OF AUGUST 20, 1999 OF THE GOVERNMENT PROVIDING DETAILED REGULATIONS TO IMPLEMENT THE LAW ON VALUE ADDED TAX; DECREE NO. 04/1999/NĐ-CP OF JANUARY 30, 1999 OF THE GOVERNMENT ON FEES AND CHARGES BELONGING TO THE STATE BUDGET;
BASED ON DECREE NO. 56/CP OF OCTOBER 2, 1996 OF THE GOVERNMENT ON STATE ENTERPRISES ENGAGED IN PUBLIC SERVICES;
THE MINISTRY OF FINANCE GUIDES THE IMPLEMENTATION OF THE LAW ON VALUE ADDED TAX FOR STATE ENTERPRISES ENGAGED IN PUBLIC SERVICES AS FOLLOWS:

I. SCOPE OF APPLICATION:

1. SUBJECTS LIABLE FOR VALUE ADDED TAX: ARE PRODUCTS, GOODS, AND SERVICES PRODUCED AND SUPPLIED BY STATE ENTERPRISES ENGAGED IN PUBLIC SERVICES EXCEPT FOR THE NON-LIABLE SUBJECTS MENTIONED IN POINT 2, PART I OF THIS CIRCULAR.

2. NON-LIABLE SUBJECTS FOR VALUE ADDED TAX: THE FOLLOWING GOODS AND SERVICES OF STATE ENTERPRISES ENGAGED IN PUBLIC SERVICES ARE NOT SUBJECTS TO VALUE ADDED TAX:

- GOODS AND SERVICES UNDER PUBLIC SERVICES: ARE PUBLIC GOODS AND SERVICES PRODUCED BY THE STATE ACCORDING TO PLANS OR ORDERS AT PRICES SET BY THE STATE AND PAID FROM THE STATE BUDGET FUNDS;

- GOODS AND SERVICES AS PROVIDED FOR IN SECTION II, PART A OF CIRCULAR NO. 89/1998/TT-BTC OF JUNE 27, 1998; SECTION I OF CIRCULAR NO. 106/1999/TT-BTC OF AUGUST 30, 1999 OF THE MINISTRY OF FINANCE;

- FEES AND CHARGES BELONGING TO THE STATE BUDGET AS PROVIDED FOR IN SECTION I AND SECTION II OF THE LIST "LIST OF FEES AND CHARGES APPLICABLE" ATTACHED TO DECREE NO. 04/1999/NĐ-CP OF JANUARY 30, 1999 OF THE GOVERNMENT AND GUIDED IN DETAIL IN ATTACHMENT TABLES 1 AND 2 ATTACHED TO CIRCULAR NO. 54/1999/TT-BTC OF MAY 10, 1999 OF THE MINISTRY OF FINANCE.

3. DECLARATION AND PAYMENT OF TAX: STATE ENTERPRISES ENGAGED IN PUBLIC SERVICES THAT PRODUCE AND TRADE GOODS AND SERVICES LIABLE FOR VALUE ADDED TAX SHALL REGISTER AND DECLARE THE PAYMENT OF VALUE ADDED TAX IN ACCORDANCE WITH THE LAW ON VALUE ADDED TAX, DECREE NO. 28/1998/NĐ-CP OF MAY 11, 1998 OF THE GOVERNMENT; DECREE NO. 102/1998/NĐ-CP OF DECEMBER 21, 1998 OF THE GOVERNMENT AMENDING AND COMPLEMENTING CERTAIN ARTICLES OF DECREE NO. 28/1998/NĐ-CP OF MAY 11, 1998 OF THE GOVERNMENT; DECREE NO. 78/1999/NĐ-CP OF AUGUST 20, 1999 OF THE GOVERNMENT AMENDING AND COMPLEMENTING DECREE NO. 102/1998/NĐ-CP OF DECEMBER 21, 1998 OF THE GOVERNMENT AMENDING AND COMPLEMENTING CERTAIN ARTICLES OF DECREE NO. 28/1998/NĐ-CP OF MAY 11, 1998 OF THE GOVERNMENT PROVIDING DETAILED REGULATIONS TO IMPLEMENT THE LAW ON VALUE ADDED TAX; CIRCULAR NO. 89/1998/TT-BTC OF JUNE 27, 1998 OF THE MINISTRY OF FINANCE AND OTHER CIRCULARS OF THE MINISTRY OF FINANCE GUIDING VALUE ADDED TAX.

II. METHODS OF CALCULATING TAX:

STATE ENTERPRISES ENGAGED IN PUBLIC SERVICES MUST CALCULATE THE VALUE ADDED TAX TO BE PAID ON GOODS AND SERVICES LIABLE FOR VALUE ADDED TAX ACCORDING TO THE METHOD OF DEDUCTIBLE TAX. THE WAY TO DETERMINE OUTPUT VALUE ADDED TAX, INPUT VALUE ADDED TAX TO BE DEDUCTED, AND OTHER RELATED PROVISIONS ON CALCULATING AND COLLECTING VALUE ADDED TAX ARE IMPLEMENTED ACCORDING TO CURRENT REGULATIONS.

VALUE ADDED TAX TO BE PAID = OUTPUT VALUE ADDED TAX - INPUT VALUE ADDED TAX (DEDUCTIBLE)

1. OUTPUT VALUE ADDED TAX:

OUTPUT VALUE ADDED TAX IS EQUAL TO THE QUANTITY OF GOODS AND SERVICES LIABLE FOR VALUE ADDED TAX SOLD MULTIPLIED (X) BY THE SELLING PRICE MULTIPLIED (X) BY THE RATE OF VALUE ADDED TAX.

a. THE SELLING PRICE IS DETERMINED AS THE PRICE WITHOUT VALUE ADDED TAX. FOR GOODS AND SERVICES WHERE THE STATE SETS THE SELLING PRICE INCLUDING VALUE ADDED TAX (INCLUDING CASES WHERE REVENUE IS BASED ON FEES), WHEN CALCULATING OUTPUT VALUE ADDED TAX, THE PRICE WITHOUT VALUE ADDED TAX MUST BE RECALCULATED AS THE BASIS FOR CALCULATION.

b. RATE OF VALUE ADDED TAX: ACCORDING TO THE LAW AND CURRENT GUIDING DOCUMENTS ON VALUE ADDED TAX.

2. INPUT VALUE ADDED TAX: Clause 4, Article 10 of Decree No. 56/CP dated October 2, 1996 of the Government stipulates: "... separately accounting for business operations." Therefore, public service enterprises must separately account for business operations and fee and charge collection activities belonging to the state budget. For fee and charge collection activities belonging to the state budget, input tax paid when purchasing goods and services for fee and charge collection is included in the cost of organizing fee and charge collection. For production and trading activities, deductible input value added tax is the amount of value added tax on goods and services purchased directly for trading goods and services liable for value added tax. In cases where enterprises cannot separately account for input tax on goods and services used for trading goods liable for value added tax and not liable for value added tax, deductible input tax is allocated according to the ratio between taxable revenue and total taxable and non-taxable revenue.

EXAMPLE: State enterprise engaged in public services (A) has the following figures during the tax period:

- Taxable revenue is: 10 billion VND

- Non-taxable revenue is: 30 billion VND

- Output value added tax on taxable goods and services: 1 billion VND (10%)

- Input value added tax for common use by the enterprise: 1.2 billion VND.

Assuming that the enterprise cannot separately account for input value added tax on taxable and non-taxable goods and services, according to the above regulations, the deductible input value added tax on taxable goods is calculated as follows:

- Determine the ratio between taxable revenue and total revenue.

Deductible input value added tax on taxable goods and services:

1.2 billion VND x 25% = 0.3 billion VND

The value added tax payable on taxable goods and services:

1 billion VND - 0.3 billion VND = 0.7 billion VND

III. IMPLEMENTATION

THIS CIRCULAR TAKES EFFECT FROM JANUARY 1, 1999. STATE ENTERPRISES ENGAGED IN PUBLIC SERVICES ARE RESPONSIBLE FOR SETTLING VALUE ADDED TAX IN ACCORDANCE WITH THIS CIRCULAR. DURING THE IMPLEMENTATION PROCESS, IF THERE ARE ANY DIFFICULTIES, ENTERPRISES AND TAX AUTHORITIES ARE REQUESTED TO REPORT PROMPTLY TO THE MINISTRY OF FINANCE FOR GUIDANCE TO FIT THE SITUATION.