Circular No. 146/1998/TT-BTC guides the calculation of value-added tax (VAT) and the declaration and payment of VAT for the electricity sector.

CIRCULAR

MINISTRY OF FINANCE DECREE NO. 146/1998/TT-BTC OF NOVEMBER 12, 1998
GUIDELINES FOR CALCULATING VALUE ADDED TAX AND REPORTING, PAYING VALUE ADDED TAX ON ELECTRICITY
FOR THE ELECTRICITY SECTOR

Pursuant to the Law on Value Added Tax (VAT) No. 02/1997/QH9 dated May 10, 1997; Government Decree No. 28/1998/NĐ-CP dated May 11, 1998 detailing the implementation of the Law on VAT; the Ministry of Finance has issued Circular No. 89/1998/TT-BTC dated June 27, 1998 guiding the implementation of the aforementioned Decree;

To ensure that the calculation of VAT, reporting, and payment of VAT on electricity align with the organizational structure and business operations of Vietnam Electricity Corporation;

After reaching consensus with Vietnam Electricity Corporation, the Ministry of Finance provides specific guidelines for calculating VAT, reporting, and paying VAT on electricity products of Vietnam Electricity Corporation as follows:

I - SUBJECTS REPORTING AND PAYING VAT:

The subjects required to report and pay VAT on electricity products are:

1. Vietnam Electricity Corporation; reports and pays VAT on electricity products sold by the Corporation to its affiliated Electricity Companies and other entities, and settles the VAT payable with the Hanoi City Tax Department.

2. Hanoi Electricity Company, Ho Chi Minh City Electricity Company, and Electricity Units under Electricity Companies I, II, and III: report and pay VAT, settle VAT on electricity products sold by the Company to local electricity consumers (in the province or city where the company is headquartered).

II - DETERMINATION OF VAT PAYABLE FOR ELECTRICITY PRODUCTS:

VAT payable for electricity products is determined as follows for each unit:

1. For Vietnam Electricity Corporation:

The Corporation is responsible for reporting and paying VAT on electricity products it sells.

a) VAT output tax on electricity products is determined as follows:

b) VAT input tax deductible for electricity products is the total VAT amount recorded on purchase invoices for goods and services of the Corporation's Office and dependent units.

Each month, power plants, transmission companies, National Power System Dispatch Center, project management units under the Corporation, and other dependent units base their entries in the Invoice and Receipt Register for Purchased Goods and Services Used in Electricity Production (according to the model below) on purchase invoices and receipts. The Register is prepared in three copies: one copy sent to the Tax Department where the unit is headquartered, one copy sent back to the Corporation as the basis for determining deductible VAT input tax at the Corporation level, and one copy retained by the unit. Other declaration forms are implemented according to the provisions of Circular No. 89/1998/TT-BTC dated June 27, 1998 of the Ministry of Finance.

Example:

In January 1999, Uong Bi Thermal Power Plant (a dependent unit of Vietnam Electricity Corporation) compiled the VAT input tax for electricity production activities from purchase invoices into the Register as follows.

INVOICE AND RECEIPT REGISTER FOR PURCHASED GOODS AND SERVICES

January 1999

Business Name: Uong Bi Thermal Power Plant

Address: Quang Ninh Province

Unit of Measurement: thousand dong

January 31, 1999

The Corporation is responsible for consolidating the VAT input tax deductible registers of dependent units and VAT input tax deductible arising at the Corporation's Office to prepare the Register (according to the model attached to this Circular), calculate the deductible VAT input tax, file the declaration form with the Hanoi City Tax Department, and pay VAT according to regulations.

For goods and services purchased from the Corporation's Office as well as from dependent units used both for electricity production and non-electricity production and business activities, the Corporation and each dependent unit must separately account for deductible VAT input tax and non-deductible VAT input tax. If separate accounting is not possible, the allocation method specified in Point 1, Section III, Part B of Circular No. 89/1998/TT-BTC dated June 27, 1998 of the Ministry of Finance shall be applied to determine the deductible VAT input tax.

For power plants, transmission companies, National Power System Dispatch Center, and dependent units of the Corporation that do not pay VAT on electricity products, if they engage in other taxable goods and services production and business activities, each unit must declare and pay VAT according to the provisions of Circular No. 89/1998/TT-BTC dated June 27, 1998 of the Ministry of Finance.

2. For Electricity Companies:

2.1. For Hanoi Electricity Company and Ho Chi Minh City Electricity Company. Hanoi Electricity Company and Ho Chi Minh City Electricity Company are responsible for declaring and paying VAT on electricity products they sell.

a) VAT output tax on electricity products is determined as follows:

The selling price including VAT for electricity sold to different types of users is defined according to the price set for each type of user. In cases where electricity is sold based on progressive pricing according to consumption volume, the VAT taxable price is calculated based on the progressive selling price, excluding any penalties (if applicable) and additional charges for grid improvement investments which are not included in the industry's revenue. Separate invoices must be issued for other service fees such as meter installation fees, meter sales, etc.; these are consolidated at the end of the period for declaration and calculation of VAT payable.

Example:

The selling price of electricity for household use is 500 dong per kWh (excluding VAT). The People's Committee of Ho Chi Minh City stipulates an additional charge of 30 dong per kWh. This additional charge is used for grid improvement in the city. On the electricity invoice, the following should be clearly stated:

* Selling price per unit: 500 dong per kWh

* VAT: 50 dong per kWh (10% of 500 dong)

* Additional charge: 30 dong per kWh.

* Total payment: 580 dong per kWh

b) VAT input tax deductible for electricity products at the company includes:

* VAT input tax recorded on invoices for electricity purchases from the Corporation and external units (if any).

* VAT input tax recorded on invoices for goods and services directly serving the electricity business of the Company.

2.2. For Electricity Companies I, II, and III:

Value-added tax (VAT) on electricity products of Companies I, II, III shall be declared and paid at the localities where their headquarters are located by the provincial and municipal power companies under these companies when selling electricity; Companies I, II, and III only declare and pay VAT on other goods and services traded by the company (if any).

a) The output VAT of electricity products shall be determined as prescribed for the Hanoi Power Company and Ho Chi Minh City Power Company,

b) Input VAT for deduction for provincial and municipal power companies includes:

- Input VAT arising at provincial and municipal power companies

- Input VAT allocated by the company

The input VAT of the company allocated to the directly affiliated power companies includes: input VAT of electricity products purchased from the Holding Company, input VAT of materials, goods, and services arising at the company's office and auxiliary units used in electricity trading activities.

The deductible input VAT allocated by the company to provincial and municipal power companies shall be calculated according to the following formula:

Based on the above allocation rate, the input VAT for each provincial and municipal power company shall be determined according to the following formula:

Example:

In the first quarter of 1999, based on the plan for purchasing and selling electricity and the price of electricity purchased from the Holding Company, Power Company I estimated that the deductible input VAT in the quarter would be 100 billion VND, including:

+ Input VAT of electricity products purchased from the Holding Company is 98 billion VND

+ VAT input tax collected from invoices for goods and services used in electricity operations at the Company's Office and auxiliary units is 2 billion VND.

The planned electricity volume assigned by the company to provincial and municipal power companies directly under it in the first quarter of 1999 is 1 billion kWh. Among which, 100 million kWh was assigned to Haiphong Power Company:

The input VAT allocation rate of the company for provincial and municipal power companies is determined as follows:

100 billion VND / 1 billion kWh = 10 million VND/million kWh

The allocated input VAT for Haiphong Power Company is:

100 million kWh x 10 million VND/million kWh = 1,000 million VND.

Quarterly, the power companies notify the allocated input VAT for provincial and municipal power companies so that they can determine the deductible input VAT based on this information. This allocation amount is provisional, when consolidating the actual figures monthly or quarterly, the company will adjust according to the actual figures by adjusting the allocation amount of the next month (quarter). At the end of the year, the company must determine the allocation amount based on actual figures as the basis for determining the final settlement of VAT for the company and provincial and municipal power companies.

* Provincial and municipal power companies base on the input VAT allocation rate provided by the company and the input VAT arising at provincial and municipal power companies; actual electricity sales volume to determine the VAT payable and prepare the relevant schedules as prescribed in Circular No. 89/1998/TT-BTC dated June 27, 1998, issued by the Ministry of Finance.

Where:

Example:

In January 1999, Haiphong Power Company sold 100 million kWh of electricity

- Output VAT is 1,500 million VND:

- Input VAT is 1,150 million VND

Of which: + Input VAT allocated by the company is 1,000 million VND;

+ Input VAT arising at the facility is 150 million VND.

- VAT payable is 350 million VND.

The declaration and calculation of output VAT for the Hanoi Power Company, Ho Chi Minh City Power Company, and provincial and municipal power companies under Companies I, II, and III shall be carried out according to Schedule No. 02/GTGT issued together with Circular No. 89/1998/TT-BTC dated June 27, 1998, issued by the Ministry of Finance. Due to the large volume of electricity sold, the schedule only records one line "Commercial Electricity."

III - IMPLEMENTATION

1. The Vietnam National Power Corporation is responsible for guiding its subordinate units to declare, calculate, and pay VAT according to the guidelines set forth in this circular.

For units engaged in production and trading of goods and services subject to VAT, each unit must declare and pay VAT according to the guidelines set forth in Circular No. 89/1998/TT-BTC dated June 27, 1998, issued by the Ministry of Finance.

2. Regarding electricity prices:

- The price of commercial electricity (sold to consumers) is based on the state-regulated price. The corporation must specifically determine the price excluding VAT as the basis for calculating output VAT.

- The internal electricity price of the corporation sold to member units is regulated by the corporation and reported to the Ministry of Finance (General Department of Taxation).

Power companies must send notifications of the quarterly VAT allocation amounts for electricity products to the tax authority where the company is headquartered and the tax authorities in the provinces and cities where the provincial and municipal power companies under the company are headquartered.

3. Regarding invoices and documents:

Electricity invoices must be implemented in accordance with the invoice and document system; if the corporation and power companies need to implement self-printed invoices, they must register with the tax authority as prescribed.

For electricity invoices collected in December 1998 included in revenue to determine the 1998 business results without recording VAT, the current invoices may still be used.

4. This circular takes effect from January 1, 1999. Matters not addressed in this circular shall be implemented according to Circular No. 89/1998/TT-BTC dated June 27, 1998, issued by the Ministry of Finance, guiding the implementation of Decree No. 28/1998/NĐ-CP dated May 11, 1998, issued by the Government detailing the implementation of the Law on Value-Added Tax.

During the implementation process, if there are any difficulties, units are requested to report to the Ministry of Finance for consideration and resolution.

SCHEDULE OF INPUT VAT

Month...Year...

Name of entity:...

Address: …

Unit of measurement...

 Chief Accountant

(Major Technical Specifications and Other Information)

Note:

The General Corporation's Office shall prepare a detailed list of VAT on goods and services generated at the General Corporation's Office according to Form No. 03/GTGT issued together with Circular No. 89/1998/TT-BTC dated June 27, 1998, of the Ministry of Finance.

On the basis of the Value-Added Tax Input Tax Credit Schedule issued at the General Company Office and the Schedules sent up by subordinate units, the General Company prepares a consolidated Value-Added Tax Input Tax Credit Schedule for electricity products (the centralized accounting portion). Each Power Plant and each subordinate unit records one line in the Schedule, consolidating the "Total" column of the General Company Office and the subordinate units.