Circular No. 128/2011/TT-BTC guiding Value Added Tax (VAT) and Corporate Income Tax for public health facilities

CIRCULAR

Guidelines on Value Added Tax and Corporate Income Tax for Public Health Facilities

for public health facilities

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Pursuant to the Law on Value Added Tax No. 13/2008/QH12 dated June 3, 2008; the Law on Corporate Income Tax No. 14/2008/QH12 dated June 3, 2008; the Law on Tax Administration No. 78/2006/QH11 dated November 29, 2006 and related guiding documents;

Pursuant to the Law on Medical Examination and Treatment No. 40/2009/QH12 dated November 23, 2009;

Pursuant to the Ordinance on Fees and Charges No. 38/2001/PL-UBTVQH10 issued by the Standing Committee of the National Assembly on August 28, 2001;

Pursuant to Decree No. 43/2006/NĐ-CP dated April 25, 2006 of the Government stipulating the rights of self-management and self-responsibility for the implementation of tasks, organizational structure, staffing, and finance for public service units;

Pursuant to Decree No. 51/2010/NĐ-CP dated May 14, 2010 stipulating invoices for goods and services;

Pursuant to the Decree No. 118/2008/NĐ-CP dated November 27, 2008 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

The Ministry of Finance hereby issues guidelines on Value Added Tax (VAT) and Corporate Income Tax (CIT) for public health facilities as follows:

Article 1. Scope of Application

These guidelines provide guidance on VAT and CIT applicable to public health facilities established by competent state authorities with obligations towards the state budget as provided for in Article 10 of Decree No. 43/2006/NĐ-CP dated April 25, 2006 of the Government.

Article 2. Definitions and General Principles

In this Circular, the following terms are understood as follows:

1. Service fee for medical examination and treatment: is the amount payable for each medical examination and treatment service.

2. Fee framework for medical examination and treatment: is the fee framework for a portion of hospital charges issued jointly by the Ministries of Health, Finance, and Labor, Invalids and Social Affairs, or the fee framework for medical examination and treatment services issued by the Ministry of Finance and the Ministry of Health pursuant to the Law on Medical Examination and Treatment.

Public health facilities must separately account for revenue from medical examination and treatment services based on the fee framework for medical examination and treatment services included in the detailed list of fees and charges attached to Decree No. 24/2006/NĐ-CP dated March 6, 2006 of the Government amending and supplementing certain provisions of Decree No. 57/2002/NĐ-CP dated June 3, 2002 of the Government detailing the implementation of the Ordinance on Fees and Charges; revenue from other medical examination and treatment services; and revenue from other production and business activities outside the scope of medical examination and treatment services as prescribed by law.

1. Objects subject to VAT and not subject to VAT:

1.1. Objects subject to VAT are goods and services specified in Point 1, Section I, Part A, Circular No. 129/2008/TT-BTC dated December 26, 2008 of the Ministry of Finance.

1.2. Objects not subject to VAT are medical examination and treatment services and other goods and services specified in Section II, Part A, Circular No. 129/2008/TT-BTC dated December 26, 2008 of the Ministry of Finance.

Medicines for treatment specified in Point 2.11, Section II, Part B, Circular No. 129/2008/TT-BTC are subject to a VAT rate of 5%. In cases where medicines for treatment are part of a package of treatment services (as defined by the Ministry of Health), the entire revenue from treatment activities including the use of medicines falls under the category of objects not subject to VAT.

Services in the field of preventive healthcare, testing, and inspection that charge fees and charges as prescribed by the Ordinance on Fees and Charges fall under the category of objects not subject to VAT.

2. Basis and method of calculation of tax:

2.1. Basis for calculating tax:

The basis for calculating VAT is the taxable value and the VAT rate.

The taxable value and the VAT rate shall be implemented according to the provisions in Section I and Section II, Part B, Circular No. 129/2008/TT-BTC dated December 26, 2008 of the Ministry of Finance.

2.2. Method of calculating tax:

2.2.1. In cases where public health facilities fully comply with accounting records, invoices, and receipts as prescribed and register to pay taxes using the tax deduction method, the VAT payable is determined as follows:

Where:

The output VAT is equal to the total VAT recorded on the VAT invoice for goods and services sold.

Input VAT is equal to the total VAT recorded on the VAT invoice for goods and services purchased for the production and sale of goods and services subject to VAT.

The deductible input VAT is determined according to the provisions in Item 1.2c, Point 1, Section III, Part B, Circular No. 129/2008/TT-BTC dated December 26, 2008 of the Ministry of Finance.

2.2.2. In cases where public health facilities engage in business and services with complete invoices for goods and services sold as prescribed or have sufficient conditions to accurately determine sales revenue from goods and services such as contracts and payment receipts but do not have complete invoices for input goods and services, they register to pay VAT using the direct method on VAT. VAT is calculated by multiplying sales revenue by the VAT rate applicable to the goods and services sold.

Public health facilities may apply one method of tax calculation: the tax deduction method or the direct method on VAT. To switch the VAT tax calculation method from the tax deduction method to the direct method on VAT and vice versa, public health facilities submit a written request to the directly managing tax authority for approval to change the VAT tax calculation method. Within ten working days of receiving the request to change the VAT tax calculation method from public health facilities, the tax authority is responsible for reviewing and responding in writing whether to approve or reject the request to change the VAT tax calculation method. The minimum period for the VAT tax calculation method chosen by the facility is one year.

3. Declaration of VAT:

3.1. Declaration forms:

Monthly declaration forms include the forms issued together with Circular No. 28/2011/TT-BTC dated February 28, 2011 of the Ministry of Finance:

3.1.1. For public health facilities registered to pay taxes using the tax deduction method, the declaration forms include:

a) VAT tax declaration form No. 01/GTGT.

b) Invoice and receipt summary for goods and services sold No. 01-1/GTGT.

c) Invoice and receipt summary for goods and services purchased No. 01-2/GTGT.

3.1.2. For public health facilities registered to pay taxes using the direct method, the declaration forms include:

a) For the direct method on VAT, it is the VAT tax declaration form No. 03/GTGT.

b) For the direct method based on revenue, it is the Value Added Tax Declaration Form No. 04/GTGT.

3.2. Deadline for filing tax declaration forms:

Monthly, public health facilities must declare Value Added Tax, with the latest deadline being the 20th day of the following month from when the tax liability arises.

1. Exempt income and taxable income:

1.1. Exempt income:

Income from medical examination and treatment services according to the Service Fee Framework for Medical Examination and Treatment Services under hospital fees issued by the Minister of Health for public health facilities directly under the Ministry of Health, or by the Chairman of the People's Committee of provinces or centrally governed cities for public health facilities managed by localities; Income from clinical nutrition services through feeding tubes or intravenous administration; Income from preventive healthcare services, testing, and certification services with charges and fees as prescribed by the Law on Fees and Charges; and other exempt corporate income tax revenues as stipulated in Section VI Part C Circular No. 130/2008/TT-BTC dated December 26, 2008 of the Ministry of Finance.

1.2. Taxable income:

Income from medical examination and treatment services (excluding income specified in Clause 1.1 of this Article) and other income as prescribed.

2. Method of calculating tax:

2.1. In cases where public health facilities can fully account for revenue and expenses of activities subject to corporate income tax, the amount of corporate income tax payable for the tax period shall be determined as follows:

The determination of taxable income and the corporate income tax rate shall be carried out in accordance with the provisions of Part C Circular No. 130/2008/TT-BTC dated December 26, 2008 of the Ministry of Finance, and Circular No. 18/2011/TT-BTC dated February 10, 2011 of the Ministry of Finance.

Specifically, for labor costs and wages paid to employees in accordance with the Labor Code from activities generating income subject to corporate income tax, these costs may be deducted when determining taxable income.

2.2. In cases where public health facilities can account for revenue but cannot account for and determine expenses and income of each activity subject to corporate income tax, they shall declare and pay corporate income tax at a percentage rate on sales revenue and service revenue. Specifically as follows:

a) For services: 5%;

Including: aesthetic services, renting ATM placement sites; call center placement; parking lots for exclusive taxi companies; renting parking space; renting retail stalls; renting conference halls; accommodation for patients' families, income from parking services, food and beverage services (except clinical nutrition services through feeding tubes or intravenous administration); renting sports training grounds, housing services for students and trainees within public health facilities and training institutions for medical and pharmaceutical staff; entertainment services; and other supporting services.

b) For goods trading: 1%

Including: selling consumer goods and necessities; selling books, newspapers, and magazines; selling medical records; selling preventive and curative medicines, and trading other goods.

c) For other activities: 2%

Including: training services (excluding advanced vocational training for staff within the industry), medical examination and treatment services, vaccination, inoculation, research and production of diagnostic kits, testing of biological samples, production of standards, chemical spraying, pest control, collection of products from experimental animal husbandry, chemical testing, environmental surveys.

3. Corporate Income Tax Incentives

Conditions and principles for applying corporate income tax incentives to public health facilities implementing the provisions set forth in Section I Part H Circular No. 130/2008/TT-BTC and points a, b Clause 7 Article 1 Circular No. 18/2011/TT-BTC. In addition, public health facilities must also meet the following two conditions:

a) Public health facilities contribute capital, raise funds, form joint ventures, or establish associations in accordance with the laws to establish independent accounting units or enterprises operating in socialized fields pursuant to decisions of competent state agencies;

b) They have income from socialized activities within the list of types and meet the scale and standard criteria issued together with Decision No. 1466/QĐ-TTg dated October 10, 2008 of the Prime Minister and register with the tax authority when conducting such activities.

3.1. Tax rate incentives:

Public health facilities contributing capital, raising funds, forming joint ventures, or establishing associations in accordance with the laws to establish enterprises operating in socialized fields pursuant to decisions of competent state agencies; having income from socialized activities within the list of types and meeting the scale and standard criteria issued together with Decision No. 1466/QĐ-TTg dated October 10, 2008 of the Prime Minister shall be subject to a corporate income tax rate of 10% on income from these socialized activities. In cases where, before January 1, 2009, they were applying a higher tax rate than 10%, they shall switch to applying a 10% tax rate for this portion of income from such activities starting from January 1, 2009.

3.2. Incentives for tax exemption and reduction periods:

Public health facilities contributing capital, raising funds, forming joint ventures, or establishing associations in accordance with the laws to establish enterprises operating in socialized fields pursuant to decisions of competent state agencies; having income from socialized activities within the list of types and meeting the scale and standard criteria issued together with Decision No. 1466/QĐ-TTg dated October 10, 2008 of the Prime Minister:

a) If implemented in areas with difficult economic and social conditions or extremely difficult conditions as specified in the Appendix issued together with Decree No. 124/2008/NĐ-CP dated December 11, 2008 of the Government, they shall be exempted from tax for four years and granted a 50% reduction in the amount of tax payable for the next nine years.

b) If implemented in areas not included in the list of areas with difficult economic and social conditions or extremely difficult conditions as specified in the Appendix issued together with Decree No. 124/2008/NĐ-CP dated December 11, 2008 of the Government, they shall be exempted from tax for four years and granted a 50% reduction in the amount of tax payable for the next five years.

The specific determination of corporate income tax incentives shall be carried out in accordance with the guidance provided in Part H; Part I Circular No. 130/2008/TT-BTC, Clause 7 Article 1 Circular No. 18/2011/TT-BTC.

4. Corporate Income Tax Declaration:

4.1. The declaration forms are implemented in accordance with the guidance provided in Circular No. 28/2011/TT-BTC dated February 28, 2011 of the Ministry of Finance:

a) Form 01A/TNDN for provisional corporate income tax declaration applicable to cases where public health facilities can account for revenue, expenses, and actual income generated.

b) Form 01B/TNDN for provisional corporate income tax declaration applicable to cases where medical examination and treatment facilities declare based on a percentage of revenue.

4.2. The final tax declaration forms for corporate income tax include Form 03/TNDN for final tax declaration and the accompanying annexes issued together with Circular No. 28/2011/TT-BTC dated February 28, 2011 of the Ministry of Finance (if applicable).

In cases where public health facilities can account for revenue but cannot account for and determine expenses, the declaration form for corporate income tax is Form 04/TNDN for declaring corporate income tax based on a percentage of revenue for public institutions.

4.3. Deadline for submitting tax declaration forms:

The deadline for submitting provisional corporate income tax declaration forms quarterly is the thirtieth day of the quarter following the quarter in which the tax liability arises.

The deadline for submitting final tax declaration forms for corporate income tax is the ninetieth day after the end of the fiscal year.

Article 5. Invoices and Receipts

1. For revenue from medical examination and treatment services and other revenues from preventive healthcare, testing, and certification services that charge fees and charges as prescribed by the Ordinance on Fees and Charges, public health facilities shall use receipts for fees printed and issued by the Ministry of Finance (or self-printed receipts in accordance with regulations).

2. For other revenues (excluding those specified in Clause 1 of this Article), public health facilities shall use invoices as prescribed in Decree No. 51/2010/NĐ-CP dated May 14, 2010 of the Government and related guiding documents.

Specifically, for revenue from medical examination and treatment services, public health facilities may choose to use either receipts or invoices suitable for the characteristics of the public health facility.

In cases where patients do not request an invoice, at the end of the day, the public health facility must issue a single invoice for the total revenue generated from patients who did not request an invoice during the day based on an itemized list. The invoice shall record the amount of service provision for the day shown on the summary line of the itemized list, signed, and given to the patient at the stub, while the other copies are circulated according to regulations. The name of the patient on this invoice shall be recorded as "retail without issuing an invoice."

Article 6. Implementation Organization

1. This Circular takes effect from January 1, 2012.

2. In case of any difficulties during implementation, organizations and individuals are requested to promptly report to the Ministry of Finance for further study and supplementary guidance.