Circular No. 141/2013/TT-BTC guiding the implementation of Decree No. 92/2013/NĐ-CP dated August 13, 2013 of the Government detailing certain provisions of the Law amending and supplementing some articles of the Law on Corporate Income Tax and the Law amending and supplementing some articles of the Law on Value Added Tax, which took effect from July 1, 2013.

CIRCULAR

Guidelines for Implementing Decree No. 92/2013/NĐ-CP dated August 13, 2013 of the Government

detailing certain provisions that took effect on July 1, 2013

of the Law Amending and Supplementing Certain Provisions of the Enterprise Income Tax Law

and the Law Amending and Supplementing Certain Provisions of the Value Added Tax Law

____________________________________

Pursuant to the Law on Value Added Tax No. 13/2008/QH12 dated June 3, 2008, and the Law Amending and Supplementing Certain Provisions of the Law on Value Added Tax No. 31/2013/QH13 dated June 19, 2013;

Pursuant to the Enterprise Income Tax Law No. 14/2008/QH12 dated June 3, 2008 and the Law Amending and Supplementing Certain Provisions of the Enterprise Income Tax Law No. 32/2013/QH13 dated June 19, 2013;

Pursuant to the Law on Tax Administration No. 78/2006/QH11 dated November 29, 2006 and the Law Amending and Supplementing Some Provisions of the Law on Tax Administration No. 21/2012/QH13 dated November 20, 2012;

Pursuant to Decree No. 92/2013/NĐ-CP dated August 13, 2013 of the Government detailing certain provisions that took effect on July 1, 2013 of the Law Amending and Supplementing Certain Provisions of the Enterprise Income Tax Law and the Law Amending and Supplementing Certain Provisions of the Value Added Tax Law;

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;

At the proposal of the Director General of the State Revenue总局局长的提议；

The Minister of Finance hereby issues guidelines for implementing the provisions of Decree No. 92/2013/NĐ-CP dated August 13, 2013 of the Government detailing certain provisions that took effect on July 1, 2013 of the Law Amending and Supplementing Certain Provisions of the Enterprise Income Tax Law and the Law Amending and Supplementing Certain Provisions of the Value Added Tax Law as follows:

PART I

ENTERPRISE INCOME TAX

Article 1. Application of enterprise income tax rate for enterprises with annual turnover not exceeding VND 20 billion

1. Enterprises established in accordance with Vietnamese laws, including cooperatives and revenue-generating public institutions (hereinafter referred to as enterprises) with annual turnover not exceeding VND 20 billion shall apply an enterprise income tax rate of 20% from July 1, 2013.

The annual turnover serving as the basis for determining whether an enterprise qualifies for the 20% tax rate is the total annual turnover of the preceding year determined based on item code [01] and item code [08] in the Annex on production and business operation results of the preceding year according to Model 03-1A/TNDN attached to the Corporate Income Tax Final Return Form No. 03/TNDN issued together with Circular No. 28/2011/TT-BTC dated February 28, 2011 of the Ministry of Finance and subsequent amendments, supplements, or replacements (if any).

For newly established enterprises during the period from January 1, 2013 to June 30, 2013, the turnover is determined based on item "turnover generated during the period" (excluding other income) code [21] in the Quarterly Corporate Income Tax Provisional Declaration Form for the first quarter and second quarter of 2013 according to Model 01A/TNDN issued together with Circular No. 28/2011/TT-BTC dated February 28, 2011 of the Ministry of Finance and subsequent amendments, supplements, or replacements (if any).

In cases where the total operating time from establishment to the end of the 2012 corporate income tax period is less than 12 months or the first tax period of 2012 exceeds 12 months as stipulated, the turnover serving as the basis for determining the enterprise's qualification for the 20% tax rate under this clause is the average monthly turnover of the 2012 corporate income tax period not exceeding VND 1.67 billion.

For newly established enterprises in the first half of 2013, the turnover serving as the basis for determining the enterprise's qualification for the 20% tax rate under this clause is the average turnover of the months in the first half of 2013 up to June 30, 2013 not exceeding VND 1.67 billion.

Newly established enterprises from July 1, 2013 must declare provisional quarterly tax at a rate of 25% (except those eligible for tax incentives). At the end of the fiscal year, if the average monthly turnover does not exceed VND 1.67 billion, the enterprise will settle the corporate income tax payable for the fiscal year at a rate of 20% (excluding income specified in Clause 2, Article 1 of this Circular).

2. The 20% tax rate prescribed in Clause 1 of this Article shall not apply to the following incomes:

a) Income from capital transfer, capital contribution rights transfer; income from real estate transfer (excluding income from social housing investment-business activities as defined in Article 2 of this Circular), income from project transfer, project participation rights transfer, exploration and exploitation rights transfer; income received from production and business activities outside Vietnam;

b) Income from oil and gas exploration, exploitation, rare resource exploitation activities, and income from mineral exploitation activities;

c) Income from business services subject to special consumption tax as provided for in the Special Consumption Tax Law.

3. Principles of determination:

a) Enterprises must separately account for income subject to the 20% tax rate and income not subject to the 20% tax rate. If an enterprise cannot separately account for income subject to the 20% tax rate and income not subject to the 20% tax rate, the income subject to the 20% tax rate shall be determined based on the ratio between the turnover from selling goods and providing services subject to the 20% tax rate over the total turnover of the enterprise in the tax period.

b) After separately determining the income, the enterprise may offset profits and losses among different activities. The remaining income after offsetting shall be taxed at the applicable tax rate of the activity still generating income. The offsetting of profits and losses among different activities in each phase shall be implemented as follows:

- From July 1, 2013 to December 31, 2013, it shall be carried out in accordance with Article 16 of the Enterprise Income Tax Law No. 14/2008/QH12 dated June 3, 2008 and the guiding documents.

- Starting from January 1, 2014, it shall be carried out in accordance with Clause 10, Article 1 of the Law Amending and Supplementing Certain Provisions of the Enterprise Income Tax Law No. 32/2013/QH13 dated June 19, 2013 and the guiding documents.

c) Determination of income subject to the 20% tax rate from July 1, 2013:

- In cases where the enterprise can determine turnover, costs, and taxable income of the business operations subject to the 20% tax rate from July 1, 2013, the 20% tax rate shall be applied based on the actual accounting records of the enterprise from July 1, 2013.

- In cases where the enterprise cannot determine the taxable income from business operations subject to a 20% tax rate starting from July 1, 2013, the income subject to a 20% tax rate from July 1, 2013 shall be determined based on the average income subject to a 20% tax rate generated monthly multiplied (×) by the number of months of business operations from July 1, 2013 to the end of that fiscal year, and calculated according to the following formula:

Example 1:

Enterprise A has a fiscal year running from April 1, 2013 to March 31, 2014 (the immediately preceding fiscal year had total revenue not exceeding 20 billion VND), with total taxable income of 1,200,000,000 VND. The determination of income subject to a 20% tax rate from July 1, 2013 to March 31, 2014 (nine months) is as follows:

Article 2. Application of corporate income tax on income from social housing investment and business operations

1. Enterprises established in accordance with Vietnamese law, including cooperatives and public service units with revenue (hereinafter referred to as enterprises) engaged in social housing investment and business operations shall apply a corporate income tax rate of 10% on income from sales, rental, and lease-purchase transactions of social housing arising from July 1, 2013, regardless of the contract signing date for sales, rental, or lease-purchase transactions of social housing.

Social housing as defined in this clause is housing constructed by the State or organizations and individuals belonging to various economic sectors, meeting criteria regarding housing standards, sale prices, rental prices, lease-purchase prices, target groups, and conditions for purchasing, renting, or lease-purchasing social housing as stipulated by laws on housing.

In cases where enterprises engage in social housing investment and business operations sign contracts for the transfer of housing with advance payments from customers according to progress before July 1, 2013, continue to collect payments from July 1, 2013 (enterprises have not been able to determine corresponding costs for revenue, enterprises have declared provisional corporate income tax payments based on revenue received), and the handover date is from July 1, 2013, then the income from these housing transfer activities shall be subject to a 10% tax rate.

Income from social housing investment and business operations subject to a 10% tax rate under this clause is income from sales, rentals, and lease-purchases arising from July 1, 2013. In cases where enterprises cannot separately account for income from sales, rentals, and lease-purchases of social housing arising from July 1, 2013, the income subject to a 10% tax rate shall be determined based on the ratio between revenue from sales, rentals, and lease-purchases of social housing and total revenue during the corresponding period of the enterprise.

2. Determination of income subject to a 10% tax rate from July 1, 2013:

a) In cases where enterprises can determine revenue, expenses, and taxable income from July 1, 2013, the 10% tax rate shall be applied based on actual accounting records from July 1, 2013.

b) In cases where enterprises have a fiscal year coinciding with the calendar year or a different fiscal year not starting from July 1, 2013, and cannot determine taxable income from July 1, 2013, income subject to a 10% tax rate from July 1, 2013 to the end of that fiscal year shall be determined according to the following formula:

Example 2:

Enterprise B has a fiscal year running from April 1, 2013 to March 31, 2014, with the following business activity indicators:

- Total revenue for the fiscal year: 100 billion VND.

Of which: Revenue from production and business operations involving sales, rentals, and lease-purchases of social housing: 24 billion VND.

- Total taxable income for the fiscal year: 12 billion VND, of which other income (including financial activity revenue) is 2 billion VND.

The determination of income subject to a 10% tax rate from July 1, 2013 to March 31, 2014 (nine months) is as follows:

Chapter II

VALUE ADDED TAX

Article 3. Apply a tax rate of 5% for social housing

1. Apply a tax rate of 5% from July 1, 2013 for the sale, rental, or lease-purchase of social housing.

2. Social housing referred to in this Article is housing as defined in Clause 1 of Article 2 of this Circular.

3. In cases of selling or lease-purchasing social housing, the 5% tax rate shall be applied according to the sales or lease-purchase contracts signed from July 1, 2013, and shall apply to payments made from July 1, 2013, for contracts signed before July 1, 2013.

In cases of renting social housing, the 5% tax rate shall be applied based on the time of receiving rent payments according to the contract (including cases where rent is collected in advance for multiple periods) from July 1, 2013. If the enterprise has not received rent payments from July 1, 2013, it shall apply the tax rate according to the issuance date of the invoice.

Example 3:

Company Y is the developer constructing the X social housing area. In December 2012, Company Y and Mr. B signed a purchase contract for an apartment in the X social housing area. Mr. B is eligible to purchase social housing, and the transaction between Company Y and Mr. B complies with the legal regulations governing the sale of social housing. The purchase contract between both parties stipulates that Mr. B's payment to Company Y will be made in several installments as follows:

First installment: Payment of 20% of the apartment value immediately upon signing the contract - December 2012.

Second installment: Payment of 30% of the apartment value in May 2013.

Third installment: Payment of 25% of the apartment value in December 2013.

Fourth installment: Payment of 25% of the apartment value in April 2014.

In fact, Mr. B made payments at the times specified in the contract. Based on the above provisions, Company Y applies a VAT rate of 5% to the amounts paid by Mr. B in the third installment (in December 2013) and the fourth installment (in April 2014).

4. In cases where developers of commercial housing projects convert commercial housing to social housing, if such conversion complies with the legal regulations governing housing, then from the date of the competent authority's decision allowing adjustment and change of project purpose, the 5% VAT rate shall be applied from July 1, 2013, for the sale, lease-purchase, or rental of social housing as defined in this Article.

5. In cases where enterprises have issued invoices with a 10% VAT rate for the sale, rental, or lease-purchase of social housing subject to a 5% VAT rate as provided in this Article from July 1, 2013, they must issue adjusted invoices and declare adjusted supplementary information according to the regulations. If adjusting the VAT rate changes the content recorded in the sales, rental, or lease-purchase contract, the enterprise must supplement the contract with an appendix clearly stating the adjustment.

Article 4. Reduce the VAT rate by 50% for commercial housing

1. Reduce the VAT rate by 50% from July 1, 2013, to June 30, 2014, for the sale, rental, or lease-purchase of completed commercial housing units with a floor area under 70 square meters and a selling price under 15 million VND per square meter.

2. Commercial housing units referred to in this Article are completed condominiums that have been completed and accepted according to the developer's design and can be used immediately upon handover and meet the conditions set out in Clause 3 or Clause 4 of this Article.

3. The application of a reduced 50% VAT rate for the sale or lease-purchase of commercial housing must meet the following conditions:

a) The commercial housing sold or leased for purchase must be a completed condominium unit with a floor area recorded in the contract under 70 square meters and a selling or leasing price under 15 million VND per square meter.

b) The selling or leasing price of commercial housing must be clearly stated in the contract.

The selling or leasing price of commercial housing under 15 million VND per square meter as provided in this Clause includes the 10% VAT and maintenance fees as prescribed.

In cases where commercial housing is sold through installment or deferred payment, the lump sum selling price includes the 10% VAT and maintenance fees as prescribed but does not include installment interest, deferred payment interest, or other interest.

Example 4:

In October 2013, Mr. C purchased a condominium unit with an area of 54 square meters from Company E at a selling price excluding VAT and maintenance fees of 14 million VND per square meter.

The selling price including 10% VAT and maintenance fees is 15.68 million VND per square meter (= 14 million + 1.4 million (VAT 10%) + 280 thousand (maintenance fee 2%)). Therefore, this case does not qualify for the reduction of 50% of the VAT rate.

c) The reduction of 50% of the VAT rate for contracts for the sale or lease-purchase of commercial housing signed before July 1, 2013, and contracts signed during the period from July 1, 2013, to June 30, 2014, shall apply to payments made during the period from July 1, 2013, to June 30, 2014.

Example 5:

In April 2013, Company X and Mr. A signed a purchase contract for a condominium unit with an area of 60 square meters at a selling price excluding VAT and maintenance fees of 11 million VND per square meter. The purchase contract between both parties stipulates that Mr. A's payment to Company X will be made in several installments as follows:

First installment: Payment of 20% of the apartment value immediately upon signing the contract - April 2013.

Second installment: Payment of 60% of the apartment value in August 2013.

Third installment: Payment of 20% of the apartment value in August 2014.

In fact, Mr. A made payments at the times specified in the contract. Based on the above provisions, Company X applies a 50% reduction in the VAT rate to the amount paid by Mr. A in the second installment (in August 2013).

4. The application of a reduced 50% VAT rate for rented commercial housing must meet the following conditions:

a) The rented housing must meet the condition of having a floor area under 70 square meters and a value equivalent to a similar sold unit under 15 million VND per square meter.

Similar units are units within the same area with the same size, characteristics, and location as the rented unit at the time of signing the rental contract.

b) The selling price of the apartment used as the basis for determining the reduction in the VAT rate for rented apartments under this Clause includes VAT at 10% and maintenance fees for the building as prescribed.

c) The reduction of 50% of the VAT rate applicable to the rental of commercial housing shall be calculated based on the rental amount stipulated in the lease contract (regardless of the date of signing the contract) from July 1, 2013 to June 30, 2014 (including cases where rent is prepaid for multiple years).

In cases where a business rents out housing from July 1, 2013 to June 30, 2014 but has not yet received the rental payment, the reduction of 50% of the VAT rate shall be calculated based on the rental amount from July 1, 2013 to June 30, 2014.

5. Issuing invoices for the sale, rental, and lease-purchase of commercial housing subject to reduced VAT rates:

When issuing invoices for the sale, rental, and lease-purchase of commercial housing subject to reduced VAT rates as guided in this Article, the VAT rate column shall state “10% x 50%”; the VAT amount column shall state the reduced VAT amount; the total payment amount column shall state the amount the buyer must pay.

Example 6:

Following Example 5, when collecting the second installment payment, Company X issues an invoice to Mr. A as follows:

In the "Name of Goods and Services" column, it states "Second Installment Payment - Reduced 50% VAT".

"Unit Price" is recorded as: 11,000,000 x 60 (sqm) x 60% = 396,000,000 VND.

"Quantity": 01 (installment).

"VAT Rate" is recorded as: 10% x 50%.

"VAT Amount" is recorded as: 19,800,000 VND.

"Total Payment Amount" is recorded as: 415,800,000 VND.

Example 7:

In October 2013, Construction Company A signed a contract to sell a fully-finished residential apartment with an area of 50 sqm at a selling price excluding VAT and maintenance fees for the construction project at 12,000,000 VND/sqm to Mr. B. According to the contract, Mr. B paid the entire purchase price to Company A immediately upon signing the contract, and the apartment was handed over in November 2013.

The sale of the apartment by Company A falls within the category eligible for a 50% reduction in the VAT rate (as the price after including VAT at 10% and maintenance fees at 2% is 12,000,000 + 1,200,000 (VAT) + 240,000 (maintenance fee) = 13,440,000 VND/sqm).

At the time of receiving payment, Company A issued an invoice to Mr. B as follows:

In the "Name of Goods and Services" column, it states "Sale of Apartment Eligible for 50% VAT Reduction".

"Unit Price" is recorded as: 12,000,000 x 50 (sqm) = 600,000,000 VND.

"Quantity" is recorded as: 01 (apartment).

"VAT Rate" is recorded as: 10% x 50%.

"VAT Amount" is recorded as: 30,000,000 VND.

"Total Payment Amount" is recorded as: 630,000,000 VND.

6. Declaration of VAT Subject to Reduction

a) The procedures for declaring VAT are carried out according to the provisions of the Law on Tax Administration, the Law Amending and Supplementing Certain Provisions of the Law on Tax Administration, and the guiding documents for implementation.

b) Invoices for the sale, rental, and lease-purchase of commercial housing subject to reduced VAT are declared under the group "Goods and Services Subject to a 10% VAT Rate" on the Invoice and Supporting Documents Schedule accompanying the VAT Declaration Form for taxpayers using the deduction method. The note column shall state "50% Reduced Commercial Housing".

7. In cases where, from July 1, 2013, businesses have issued invoices without applying the 50% reduction in the VAT rate for the sale, rental, and lease-purchase of commercial housing eligible for a 50% reduction in the VAT rate as prescribed in this Article, they shall issue adjusted invoices and declare adjusted and supplementary information as required. If adjusting the VAT rate changes the content already recorded in the sales, rental, or lease-purchase contracts for commercial housing, the business shall supplement the contract appendices clearly stating the adjustment content.

Chapter III

IMPLEMENTATION

Article 5. Effective Date

This Circular takes effect from November 30, 2013 and applies to tax periods for corporate income tax and VAT starting from July 1, 2013.

Article 6. Responsibility for Implementation

1. Provincial People's Committees directly under the Central Government shall direct competent agencies to implement in accordance with the Government's regulations and the guidance of the Ministry of Finance.

2. Tax authorities at all levels shall be responsible for disseminating and guiding organizations and individuals to implement the contents of this Circular.

3. Organizations falling within the scope of regulation of this Circular shall implement in accordance with the guidance provided in this Circular.

During the implementation process, if there are difficulties, organizations and individuals are requested to promptly reflect to the Ministry of Finance for research and resolution./.