Circular No. 14/2003/TT-BTC guiding the implementation of Decision No. 128/2002/QÐ-TTg dated September 30, 2002 of the Prime Minister on certain preferential policies for Vietnam Construction Import-Export Corporation (Ministry of Construction) to produce building components and materials for housing for households in flood-prone areas in the Mekong Delta and ethnic minority households residing in the Central Highlands provinces.

CIRCULAR

Regarding certain preferential policies for the Vietnam Import-Export Construction Corporation (Ministry of Construction) to produce building components and materials for housing thiết lập

for households in

flood-prone areas in the Mekong Delta and ethnic minority households in place in the Central Highlands provinces

Pursuant to current laws and ordinances on taxes;

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Pursuant to Decision No. 128/2002/QD-TTg dated September 30, 2002 of the Prime Minister regarding certain preferential policies for the Vietnam Import-Export Construction Corporation (Ministry of Construction) to produce building components and materials for housing for households in flood-prone areas in the Mekong Delta and ethnic minority households in place in the Central Highlands provinces.

The Ministry of Finance guides the implementation of certain preferential policies as follows:

I. APPLICABLE SUBJECTS:

Production facilities under the Vietnam Import-Export Construction Corporation (Ministry of Construction) producing building components and materials for housing sold to households in flood-prone areas in the Mekong Delta on deferred payment terms (as per Decision No. 105/2002/QD-TTg dated August 2, 2002) and to ethnic minority households in place in the Central Highlands provinces on deferred payment terms (as per Announcement No. 144/TB-VPCP dated September 12, 2002 of the Government Office).

II. PREFERENTIAL POLICIES:

1) Exemption from land rental fees for the construction of factories producing building components and materials for housing sold to households in flood-prone areas in the Mekong Delta and to ethnic minority households in place in the Central Highlands provinces.

2) Value-added tax: No value-added tax shall be levied on building components and materials for housing sold to households in flood-prone areas in the Mekong Delta and to ethnic minority households in place in the Central Highlands provinces. When issuing VAT invoices, production facilities producing building components and materials for housing shall only record the selling price without VAT; the tax rate and amount of VAT shall not be recorded and shall be crossed out. The VAT on raw materials and inputs purchased for the production of building components and materials for housing shall not be deductible but shall be included in the cost of the products, building components, and materials for housing.

3) Corporate income tax: Exemption from corporate income tax on income derived from the production of building components and materials for housing during the entire period of implementing projects to sell houses to households in flood-prone areas in the Mekong Delta and to ethnic minority households in place in the Central Highlands provinces.

In cases where production and business establishments have other production and business activities, such establishments must separately track and account for the taxable income from these other activities and declare and pay corporate income tax according to the provisions of the Law on Corporate Income Tax.

4) Import duties and VAT at the import stage:

Exemption from import duties, VAT at the import stage, and additional charges (if applicable) for machinery and equipment within the production technology chain that cannot be produced domestically and need to be imported to form fixed assets of enterprises and essential materials that cannot be produced domestically and need to be imported for the production of building components and materials for housing. Customs authorities at border gates shall base their exemption on the quantity of items as decided by the Vietnam Import-Export Construction Corporation and the list of machinery, equipment, and essential materials that cannot be produced domestically and need to be imported attached to this Circular to exempt taxes for enterprises when importing machinery, equipment, and essential materials to serve the production of building components and materials for housing for households in flood-prone areas in the Mekong Delta and ethnic minority households in place in the Central Highlands provinces.

5) Borrowing funds with a preferential interest rate of 3% per annum from the Development Support Fund to invest in constructing production facilities for building components and materials for housing for households in flood-prone areas in the Mekong Delta and ethnic minority households in place in the Central Highlands provinces shall be implemented as follows:

a) Conditions for borrowing funds:

- Investment projects to construct production facilities for building components and materials for housing eligible for borrowing are those investment projects decided by the Vietnam Import-Export Construction Corporation to commence from October 15, 2002, which have completed investment procedures in accordance with Decree No. 52/1999/ND-CP dated July 8, 1999 of the Government promulgating the Investment Management and Construction Regulations and Decree No. 12/2000/ND-CP dated May 5, 2000 amending and supplementing certain articles of the Investment Management and Construction Regulations attached to Decree No. 52/1999/ND-CP dated July 8, 1999 of the Government. These investment projects must be financially appraised and approved for borrowing by the Development Support Fund before being approved by competent authorities.

- Investors must comply with the provisions of Clause 2, Article 9 of Decree No. 43/1999/ND-CP dated June 29, 1999 of the Government on state investment credit and development.

b) Amount of loan and source of loan funds:

- The amount of loan is determined based on the proportion of products supplied and sold on deferred payment terms to households in flood-prone areas in the Mekong Delta and ethnic minority households in place in the Central Highlands provinces facing difficulties in housing, but not exceeding 70% of the total project investment capital.

- Annual disbursement shall be carried out according to the approved plan and in accordance with current regulations.

- The Development Support Fund uses self-raised funds to provide loans.

c) Interest rate on loans:

- The interest rate on loans is 3% per annum. Investors are responsible for mobilizing funds to repay debts in accordance with the provisions of the credit agreement. If investors fail to repay debts on time and are not granted an extension by the Development Support Fund, the Fund will transfer the debt to overdue status and apply the current overdue interest rate.

- For the interest rate on loans: The central government budget shall subsidize the difference in interest rates and fees for the Development Support Fund.

d) Loan term for each project:

The maximum loan term is five years, and the determination of the starting point for debt repayment (principal and interest) shall be carried out in accordance with current regulations on state investment credit and development.

The maximum term for borrowing is five years. The determination of the commencement date for collecting the loan principal and interest shall be carried out in accordance with the current regulations on state investment credit development.

6) The enterprise shall be responsible for fully accounting production and business costs and product cost prices based on actual reasonable incurred expenses and in accordance with current State regulations.

To ensure the stability of deferred payment housing sale prices for the public, each year, the enterprise may include in the product cost price a reserve fund for material and raw material price fluctuations amounting to 3% of the total cost of materials and raw materials (main materials and auxiliary materials) in the product cost price to establish a reserve fund to offset increases in material and raw material prices.

The establishment, use, and settlement of the reserve fund to offset increases in material and raw material prices shall be carried out as follows:

- The establishment of the reserve fund for material and raw material price fluctuations shall be calculated on the last day of the fiscal year (December 31) according to the following formula:

- The reserve fund shall be used to offset the price difference of materials and raw materials increased during the year to stabilize the deferred payment housing sale prices for the public.

- The enterprise shall be responsible for maintaining separate ledgers to account for the establishment and use of the reserve fund for material and raw material price fluctuations and the increased costs of materials and raw materials offset by the reserve fund.

- Each year, the enterprise must report on the establishment and use of this reserve fund for material and raw material price fluctuations to the tax authority at the location where the enterprise's main office is situated.

- Upon completion of the deferred payment housing sale project for the public, the enterprise shall be responsible for settling all amounts contributed to and used from the aforementioned reserve fund with the Ministry of Finance. Based on the settlement situation, the Ministry of Finance will consider and propose specific handling measures for the reserve fund surplus or deficit to offset increases in material and raw material prices.

III- IMPLEMENTATION:

This Circular takes effect from October 15, 2002, the date on which Decision No. 128/2002/QĐ-TTg dated September 30, 2002, of the Prime Minister comes into force. Enterprises falling within the scope of tax incentives under Part II of this Circular that have already paid taxes before the issuance of this Circular shall be allowed to offset against other types of taxes payable by the enterprise from other business activities. In cases where the enterprise does not engage in other business activities, the paid taxes shall be refunded.

During implementation, if there are any difficulties, units are requested to promptly reflect them to the Ministry of Finance for supplementary guidance and study./.