Circular No. 164/1998/TT-BTC guiding value-added tax (VAT) for postal and telecommunications services activities

CIRCULAR

GUIDELINES ON VALUE ADDED TAX (VAT) FOR POST AND TELECOMMUNICATION SERVICES ISSUED BY THE MINISTRY OF FINANCE UNDER DECREE NO. 164/1998/TT-BTC, DATED DECEMBER 17, 1998

Pursuant to the Value Added Tax Law No. 02/1997/QH dated May 10, 1997;
Pursuant to Decree No. 28/1998/NĐ-CP dated May 11, 1998 of the Government detailing the implementation of the Value Added Tax Law;
The Ministry of Finance has issued Circular No. 89/1998/TT-BTC dated June 27, 1998 to guide the implementation of Decree No. 28/1998/NĐ-CP dated May 11, 1998 of the Government detailing the implementation of the Law on Value Added Tax;
To ensure the implementation of the Law on Value Added Tax is appropriate for the operation of post and telecommunications services, the Ministry of Finance provides specific guidance on VAT for these services as follows:

I - SCOPE OF APPLICATION OF VAT

1- Taxable objects:

The objects subject to VAT for post and telecommunications services include:

- Postal services: Stamps; Parcels; Mail items; Flower deliveries; other postal services;

- Telecommunications services including: Telephone; prepaid phone cards; telegrams; telex, fax; telephone installation; other telecommunications services;

- International postal and telecommunications services carried out in Vietnam.

2 - Objects not subject to VAT:

- International postal and telecommunications services paid by foreign postal and telecommunications companies to Vietnamese postal and telecommunications companies according to international practice.

- International postal and telecommunications services performed from abroad into Vietnam;

- Services of issuing press and distributing newspapers, domestic television broadcasting.

3 - Objects liable for VAT payment:

The objects liable for VAT payment are companies engaged in postal and telecommunications activities specifically:

- Independent accounting companies; Foreign parties contracting joint ventures in accordance with the Law on Foreign Investment in Vietnam (referred to as independent accounting companies).

- Vietnam Post and Telecommunications Corporation including:

+ Head Office of the Corporation.

+ Provincial Post Offices, cities directly under the Central Government, International Telecommunications Companies (ITC), Inter-Provincial Telecommunications Companies (IPC), Inter-Provincial and International Postal Service Companies (IPSC), Data Communication Transmission Companies (DCTC), Telecommunication Service Companies (TSC), Central Press Distribution Companies (CPDC), Central Post Office (referred to as companies);

+ Centers belonging to companies where these centers are located in different provinces from the province where the company's headquarters is located.

+ Other organizations engaged in postal and telecommunications service activities.

II - METHODS OF CALCULATING VAT

VAT payable by companies, corporations, and subordinate units shall be calculated using the tax deduction method:

VAT output tax and VAT input tax are determined as follows:

1. OUTPUT VALUE ADDED TAX:

- VAT on goods and services sold is equal to the quantity of goods and services sold multiplied (x) by the selling price, multiplied (x) by the VAT rate.

- The selling price is determined as the price excluding VAT. For stamps and prepaid phone cards, the selling price includes VAT; when calculating VAT output tax for stamps and prepaid phone cards, the price excluding VAT must be recalculated as the basis for taxation.

Example 1: In January 1999, Post Office Province A had total revenue from stamp sales of 11 million VND. Revenue without VAT and VAT output tax for stamp sales in January 1999 are:

- VAT output tax = 10 million VND x 10% = 1 million VND

- For business entities providing postal and telecommunications services that charge additional service fees or surcharges which the entity benefits from, the taxable amount includes such fees or surcharges.

Example 2: Hotel A charges telephone call fees:

+ Call fee (price excluding VAT) 50,000 VND

+ Surcharge (10%) 5,000 VND

+ Taxable amount for VAT: 55,000 VND

+ VAT output tax (10%) 5,500 VND

- VAT output tax in certain cases is determined as follows:

In cases where units have cooperative contracts for postal and telecommunications services with other units under the form of revenue sharing, each unit declares and pays VAT and corporate income tax independently, the parties involved in the contract must share the VAT output tax based on the revenue as the basis for determining the VAT payable by each unit.

Example 3: Post Office Province A has a cooperative contract for service provision with Company B under the revenue-sharing ratio of Post Office Province A = 60%, Company B = 40%. In January 1999, Post Office Province A consolidated revenue without VAT at 100 million VND, VAT output tax 10 million VND, VAT and revenue received by each party are determined as follows:

- Revenue Post Office Province A receives 100 million VND x 60% = 60 million VND, Company B receives 100 million VND x 40% = 40 million VND.

Corresponding VAT output tax for Post Office Province A = 10 million VND x 60% = 6 million VND, Company B = 10 million VND x 40% = 4 million VND.

Company B must issue VAT invoices to Post Office Province A so that Post Office Province A can deduct revenue and VAT output tax.

In cases where revenue is transferred between dependent units where corporate income tax payments are centralized at the main office, only revenue without VAT is transferred; VAT output tax and VAT input tax arising from the unit are declared and paid directly by that unit.

2. VAT input tax

Entities liable for tax as stipulated in Point 3, Section I of this Circular are responsible for declaring and determining VAT input tax according to the principle: VAT input tax of goods and services purchased for production and business of taxable goods and services generated in a month shall be aggregated and declared for deduction in that month; if the VAT input tax deductible exceeds the VAT output tax in the month of declaration and payment, it may be deducted in the subsequent month of declaration and payment.

For units with revenue from taxable and non-taxable goods and services, the unit must separately account for VAT input tax of goods and services used for production and business, taxable and non-taxable goods and services to determine deductible VAT input tax and non-deductible VAT input tax, VAT payable. If the unit cannot separately account for it, the allocation method based on the percentage of revenue from taxable VAT compared to total revenue shall be applied to determine deductible VAT input tax.

Example: A company issuing newspapers declared VAT for the month has total revenue from goods and services at 200 billion VND, including 150 billion VND from newspaper issuance exempt from VAT, 50 billion VND subject to VAT, output VAT at 5 billion VND, and total input VAT in the month (which cannot be separately accounted for) at 8 billion VND. The deductible input VAT is calculated according to the proportion (%) of taxable revenue as follows:

VAT payable = 5 billion VND - 2 billion VND = 3 billion VND.

In cases where the non-taxable business revenue of an entity constitutes less than 2% of its total revenue, to simplify the monthly allocation procedure of input VAT, such entities may aggregate and allocate the input VAT related to non-taxable revenue when settling annual VAT.

Example: Province A Post Office up to May 1999 had an average monthly non-taxable revenue ratio of 2% compared to total revenue, thus it was not required to declare the allocation of input VAT until May. However, by August, if the average monthly non-taxable revenue ratio increased to 5%, then the declaration and allocation of input VAT for eight months would be necessary.

III/ DECLARATION AND PAYMENT OF VAT

1. For Independent Accounting Companies

- Independent accounting units declare and pay VAT at the local tax office where they conduct production and business activities. If the Company and these units have branches, stores... dependent on their accounting that operate within the same locality as the main office, the VAT is centrally declared and paid by the Company or unit on behalf of the subordinate branches and stores. If the branches or stores operate in another locality, they must declare and pay VAT at the local tax office where they conduct business (as defined in this Circular, locality refers to province or city).

2. For State-owned Enterprise (SOE) Vietnam Post and Telecommunications Corporation

a/ For Provincial Post Offices (referred to as Provincial Post Offices)

Provincial Post Offices are required to declare and pay VAT to the provincial tax bureau for all postal and telecommunications service operations and other services. Subordinate post offices at district, county, and commune levels do not need to declare and pay VAT but must submit a monthly declaration form detailing all revenues from postal and telecommunications services and other services, invoices and receipts for purchased goods and services, output VAT, and input VAT generated at the base level, which is sent to the Provincial Post Office for consolidated payment into the state budget (the format and submission time of the declaration form are specified by Vietnam Post and Telecommunications Corporation after obtaining written agreement from the Ministry of Finance).

When declaring VAT monthly, Provincial Post Offices must detail invoices and receipts for purchased goods and services, sales, output VAT, and input VAT generated at the provincial post office level; for invoices and receipts generated at district, county post offices, and subordinate units, they do not need to declare each individual receipt but only the aggregated totals based on the declaration forms submitted by subordinate units (each unit is recorded in one line of the declaration form), following the format prescribed in Circular No. 89/1998/TT-BTC dated June 27, 1998 issued by the Ministry of Finance.

In cases where subordinate units sell goods or provide postal and telecommunications services with each transaction amounting to less than the threshold requiring an invoice (less than 100,000 VND), for example, postal services (making phone calls, selling envelopes, etc.), if customers do not request an invoice, a retail goods and services declaration form can be prepared instead, with daily or multiple-day aggregated declarations used to issue retail invoices. For special services requiring special invoices, companies must register with the General Tax Department.

Monthly, Provincial Post Offices base their VAT payments on the declaration form, paying 60% of the VAT due to the provincial tax authority and transferring 40% to the SOE's office as a balancing fund for Provincial Post Offices with negative differences between output VAT and input VAT. In all cases, Provincial Post Offices with positive differences (VAT payable) or negative differences (VAT refundable) must declare and submit VAT declaration forms to the directly managing tax authority.

b/ For Subordinate Companies of the SOE (referred to as Subordinate Companies)

Subordinate Companies are required to declare VAT to the tax authority where the Company is headquartered. If the Company has centers located in different provinces, each center is responsible for declaring and paying VAT to the provincial tax authority according to the prescribed regulations. Centers located in the same province as the headquarters do not need to declare and pay VAT but must prepare a monthly VAT declaration form as stipulated for district and county post offices and send it to the Company for consolidation and declaration, payment into the state budget.

Monthly, Subordinate Companies follow the VAT declaration and payment procedures prescribed for Provincial Post Offices, paying 60% of the VAT due to the provincial tax authority and transferring 40% to the SOE's office.

c/ For the SOE's Office

The SOE is responsible for consolidating and declaring the total VAT payable for the entire industry based on the monthly declarations of each company. At the end of each quarter, no later than 15 days after the start of the quarter, the SOE's office is responsible for declaring the total VAT payable for the entire SOE, specifically:

1. Total output VAT

2. Total input VAT

3. VAT payable (1-2)

4. VAT paid by companies

5. VAT allocated to companies

6. Remaining VAT payable (3-4-5)

2/ Refund of VAT:

Companies and business units engaged in goods and services subject to VAT, who are required to declare and pay VAT, if they have a larger deductible input VAT than output VAT, resulting in a VAT refund situation, must prepare a refund application form and submit it to the tax authority for review and processing of the refund.

IV. IMPLEMENTATION

1) Vietnam Post and Telecommunications Corporation is responsible for guiding Provincial Post Offices and subordinate units to declare, calculate, and pay VAT according to the guidelines set out in this Circular.

2) Regarding invoices and documents: Postal and telecommunications service charge receipts must be issued in accordance with the prescribed invoice and document regulations; In cases where the Corporation and provincial post offices need to implement self-printed invoices, they must register with the tax authority as stipulated. For telephone service revenue generated in December 1998, if invoices are issued in 1998, turnover tax shall apply. Invoices issued from January 1, 1999, shall be subject to VAT.

3) This Circular takes effect from January 1, 1999. Other contents not addressed in this Circular shall continue to be implemented in accordance with the provisions of Circular No. 89/1998/TT-BTC dated June 27, 1998, of the Ministry of Finance.

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