Circular No. 178/1998/TT-BTC guides the accounting for value-added tax applicable to Vietnam Electricity Corporation.

CIRCULAR

DIRECTIVE OF THE MINISTRY OF FINANCE NUMBER 178/1998/TT-BTC DATED DECEMBER 26, 1998 GUIDING VALUE ADDED TAX ACCOUNTING APPLICABLE TO THE VIETNAM ELECTRICITY CORPORATION

- BASED ON THE LAW ON VALUE ADDED TAX NO. 02/1997/QH9 DATED MAY 10, 1997;

- BASED ON CIRCULARS NO. 89/1998/TT-BTC DATED JUNE 27, 1998, NO. 100/1998/TT-BTC DATED JULY 15, 1998 AND NO. 146/1998/TT-BTC DATED NOVEMBER 12, 1998 OF THE MINISTRY OF FINANCE GUIDING THE CALCULATION AND REPORTING OF VALUE ADDED TAX FOR THE ELECTRICITY SECTOR;

TO ENSURE THE ACCOUNTING OF VALUE ADDED TAX (HEREINAFTER "VAT") IS CONSISTENT WITH THE CALCULATION, REPORTING, AND PAYMENT OF VAT BY THE VIETNAM ELECTRICITY CORPORATION, THE MINISTRY OF FINANCE GUIDES THE ACCOUNTING OF VAT FOR ELECTRICITY PRODUCTS OF THE VIETNAM ELECTRICITY CORPORATION AS FOLLOWS:

I- GENERAL PROVISIONS.

- THE VIETNAM ELECTRICITY CORPORATION MUST ORGANIZE VAT ACCOUNTING IN ACCORDANCE WITH THE CURRENT ACCOUNTING REGIME AND THE PROVISIONS OF THIS CIRCULAR.

- REVENUE FROM THE SALE OF ELECTRICITY SHALL BE REFLECTED IN ACCOUNT 511 OR ACCOUNT 512 AT THE SALES PRICE EXCLUDING VAT, WITHOUT REFLECTING PENALTIES FOR VIOLATIONS OF ELECTRICITY USE... (IF ANY) OR ADDITIONAL FEES UNDER THE REGULATED SYSTEM (IF ANY) USED FOR INVESTMENT AND UPGRADE OF THE ELECTRICITY NETWORK INTO THESE ACCOUNTS.

- THE VALUE OF MATERIALS, GOODS, FIXED ASSETS (FIXED ASSETS) AND SERVICES PURCHASED FOR THE PRODUCTION OF ELECTRICITY PRODUCTS AND OTHER BUSINESS ACTIVITIES SHALL BE REFLECTED AT THE PURCHASE PRICE EXCLUDING VAT (IN CASE OF VAT INVOICE OR SPECIAL DOCUMENTS).

IN CASE OF PURCHASE OF MATERIALS, GOODS, FIXED ASSETS, AND SERVICES WITHOUT A VAT INVOICE, THEY SHALL BE REFLECTED AT THE AMOUNT PAID, AND INPUT VAT SHALL NOT BE DEDUCTIBLE.

- MONTHLY, EACH POWER PLANT, TRANSMISSION COMPANY, NATIONAL SYSTEM CONTROL CENTER, PROJECT MANAGEMENT BOARD SUBORDINATE TO THE CORPORATION, AND OTHER DEPENDENT UNITS MUST BASED ON INVOICES AND DOCUMENTS FOR THE PURCHASE OF MATERIALS, GOODS, AND SERVICES, COMPLETE THE INVOICE AND DOCUMENT LIST FOR MATERIALS, GOODS, AND SERVICES PURCHASED FOR ELECTRICITY PRODUCTION ACTIVITIES. THE LIST SHALL BE COMPLETED IN THREE COPIES, ONE COPY SENT TO THE LOCAL TAX BRANCH WHERE THE UNIT IS LOCATED, ONE COPY SENT TO THE CORPORATION, AND ONE COPY RETAINED BY THE UNIT. THE FORM OF THE LIST SHALL BE PREPARED IN ACCORDANCE WITH CIRCULAR NO. 146/1998/TT-BTC DATED NOVEMBER 12, 1998 OF THE MINISTRY OF FINANCE.

THE CORPORATION SHALL BE RESPONSIBLE FOR AGGREGATING THE INVOICE AND DOCUMENT LIST OF INPUT VAT DEDUCTIBLE OF DEPENDENT UNITS AND INPUT VAT DEDUCTIBLE GENERATED AT THE HEADQUARTERS TO COMPLETE THE LIST AND CALCULATE THE AMOUNT OF INPUT VAT DEDUCTIBLE.

INPUT VAT DEDUCTIBLE GENERATED AT POWER PLANTS, TRANSMISSION COMPANIES, NATIONAL SYSTEM CONTROL CENTER, AND OTHER DEPENDENT UNITS SHALL NOT BE DEDUCTED AT THE UNIT BUT SHALL BE DEDUCTED AT THE VIETNAM ELECTRICITY CORPORATION.

- INPUT VAT DEDUCTIBLE GENERATED AT THE HEADQUARTERS OF ELECTRICITY COMPANIES I, II, AND III SHALL NOT BE DEDUCTED AT THE HEADQUARTERS OF ELECTRICITY COMPANIES I, II, AND III BUT SHALL BE ALLOCATED AND DEDUCTED AT THE PROVINCE AND CITY ELECTRICITY COMPANIES. THE LEVEL AND STANDARDS FOR ALLOCATING INPUT VAT TO PROVINCE AND CITY ELECTRICITY COMPANIES ARE PROVIDED IN POINT 2.2, SECTION II OF CIRCULAR NO. 146/1998/TT-BTC DATED NOVEMBER 12, 1998 OF THE MINISTRY OF FINANCE.

II- VAT ACCOUNTING.

1- AT THE CORPORATION.

- MONTHLY, BASED ON THE REPORT OF PRODUCTION AND BUSINESS COSTS GENERATED AT POWER PLANTS, TRANSMISSION COMPANIES, NATIONAL SYSTEM CONTROL CENTER, PROJECT MANAGEMENT BOARDS SUBORDINATE TO THE CORPORATION, AND OTHER DEPENDENT UNITS, THE CORPORATION'S ACCOUNTANT SHALL RECORD:

DEBIT ACCOUNT 154 - WORK IN PROGRESS (1541)

d. Transfer the residual balance of the Unemployment Compensation Reserve Fund as specified in Item 5 of this Circular as follows:

CREDIT ACCOUNT 336 - INTERNAL PAYABLE.

- MONTHLY, BASED ON THE INVOICE AND DOCUMENT LIST OF INPUT VAT DEDUCTIBLE OF DEPENDENT UNITS AND INPUT VAT DEDUCTIBLE GENERATED AT THE HEADQUARTERS, THE CORPORATION'S ACCOUNTANT SHALL CHECK AND DETERMINE THE INPUT VAT DEDUCTIBLE TO BE PAID TO UNITS, RECORDING:

Debit Account 133 - Deductible VAT

CREDIT ACCOUNT 336 - INTERNAL PAYABLE.

- BASED ON THE INVOICE FOR THE SALE OF ELECTRICITY TO ELECTRICITY COMPANIES, THE ACCOUNTANT SHALL REFLECT THE REVENUE FROM THE SALE OF ELECTRICITY AT THE SALES PRICE EXCLUDING VAT, RECORDING:

DEBIT ACCOUNT 136 - INTERNAL RECEIVABLE (TOTAL AMOUNT PAYABLE)

CREDIT ACCOUNT 3331 - VAT PAYABLE

CREDIT ACCOUNT 512 - INTERNAL SALES REVENUE (SALES PRICE EXCLUDING VAT).

- AT THE END OF THE PERIOD, THE ACCOUNTANT SHALL CALCULATE AND DETERMINE THE INPUT VAT DEDUCTIBLE IN THE PERIOD, RECORDING:

DEBIT ACCOUNT 3331 - VAT PAYABLE

CREDIT ACCOUNT 133 - VAT DEDUCTIBLE.

- PROVIDE (PAY) PRODUCTION COSTS AND INPUT VAT TO DEPENDENT UNITS, RECORDING:

DEBIT ACCOUNT 336 - INTERNAL PAYABLE

Credit Accounts 111, 112...

- OTHER CONTENTS REGARDING VAT ACCOUNTING SHALL BE IMPLEMENTED IN ACCORDANCE WITH THE CURRENT ACCOUNTING REGIME.

2- VAT ACCOUNTING AT POWER PLANTS, TRANSMISSION COMPANIES, NATIONAL SYSTEM CONTROL CENTER, PROJECT MANAGEMENT BOARDS SUBORDINATE TO THE CORPORATION, AND OTHER DEPENDENT UNITS (HEREINAFTER "DEPENDENT UNITS").

- WHEN PURCHASING MATERIALS, GOODS, FIXED ASSETS, AND SERVICES FOR ELECTRICITY PRODUCTION AND BUSINESS WITH A VAT INVOICE, THE ACCOUNTANT SHALL REFLECT THE VALUE OF MATERIALS, GOODS, FIXED ASSETS, AND SERVICES AT THE PURCHASE PRICE EXCLUDING VAT, RECORDING:

DEBIT ACCOUNT 152, 153, 211, 627, 642... (PURCHASE PRICE EXCLUDING VAT)

Debit Account 133 - Deductible VAT

CREDIT ACCOUNT 111, 112, 331... (TOTAL AMOUNT PAYABLE).

- MONTHLY, DEPENDENT UNITS SHALL BASED ON INVOICES AND DOCUMENTS FOR PURCHASES, COMPLETE THE INVOICE AND DOCUMENT LIST FOR MATERIALS, GOODS, AND SERVICES PURCHASED FOR ELECTRICITY PRODUCTION ACTIVITIES IN ACCORDANCE WITH THE REGULATED SYSTEM TO SERVE AS THE BASIS FOR DETERMINING INPUT VAT DEDUCTIBLE AT THE CORPORATION. BASED ON THE DATA ON THIS LIST, THE ACCOUNTANT SHALL REFLECT AND TRANSFER INPUT VAT DEDUCTIBLE BUT NOT DEDUCTIBLE AT DEPENDENT UNITS BUT DEDUCTIBLE AT THE CORPORATION, RECORDING:

DEBIT ACCOUNT 136 - INTERNAL RECEIVABLE

CREDIT ACCOUNT 133 - VAT DEDUCTIBLE.

- VAT ACCOUNTING FOR OTHER BUSINESS ACTIVITIES OUTSIDE ELECTRICITY PRODUCTION SHALL BE IMPLEMENTED IN ACCORDANCE WITH THE CURRENT ACCOUNTING REGIME.

3- VAT ACCOUNTING AT HANOI ELECTRICITY COMPANY AND HO CHI MINH CITY ELECTRICITY COMPANY.

- BASED ON THE INVOICE FOR THE PURCHASE OF ELECTRICITY FROM THE CORPORATION, THE ACCOUNTANT SHALL REFLECT THE COST OF ELECTRICITY PRODUCTION AT THE PURCHASE PRICE EXCLUDING VAT, RECORDING:

DEBIT ACCOUNT 154 - WORK IN PROGRESS (PURCHASE PRICE EXCLUDING VAT)

Debit Account 133 - Deductible VAT

CREDIT ACCOUNT 336 - INTERNAL PAYABLE (TOTAL AMOUNT PAYABLE).

- Based on the electricity sales invoice, the accountant records the revenue from electricity sales at the price excluding VAT, recorded as:

Debit Account Nos. 111, 112, 131... (Total payment amount)

CREDIT ACCOUNT 3331 - VAT PAYABLE

Credit Account No. 511 - Revenue from Sales (At the price excluding VAT).

- Other contents regarding VAT accounting shall be implemented according to the current accounting regulations.

4- Accounting for VAT at Electricity Companies I, II, and III.

- When purchasing materials, fixed assets, services for electricity production and business operations, the company's accountant reflects the value of purchased materials, assets, and services at the price excluding VAT, recorded as:

Debit Account Nos. 152, 153, 211, 642... (At the purchase price excluding VAT)

Debit Account 133 - Deductible VAT

CREDIT ACCOUNT 111, 112, 331... (TOTAL AMOUNT PAYABLE).

- Based on the electricity purchase invoices from the Holding Company, the accountant records the production and business operation costs at the internal purchase price excluding VAT, recorded as:

Debit Account No. 154 - Work-in-Progress Production and Business Costs (At the purchase price excluding VAT)

Debit Account 133 - Deductible VAT

CREDIT ACCOUNT 336 - INTERNAL PAYABLE.

- Quarterly, Electricity Companies I, II, and III calculate and allocate the deductible VAT input tax of their electricity production and business activities to provincial and city power companies according to Circular No. 146/1998/TT-BTC dated November 12, 1998, issued by the Ministry of Finance.

Based on the allocation table of deductible VAT input tax for provincial and city power companies, the accountant records the allocated deductible VAT input tax for provincial and city power companies, recorded as:

DEBIT ACCOUNT 136 - INTERNAL RECEIVABLE

CREDIT ACCOUNT 133 - VAT DEDUCTIBLE.

- When receiving payments from provincial and city power companies for the allocated deductible VAT input tax, recorded as:

Debit Account Nos. 111, 112...

Credit Account No. 136 - Internal Receivables.

- Quarterly, Account No. 133 at Electricity Companies I, II, and III may have a credit balance, but at year-end, it only has a debit balance.

- VAT accounting for other business activities outside electricity products shall be carried out according to the current accounting regulations.

5- Accounting for VAT at Provincial and City Power Companies under Electricity Companies I, II, and III.

- When purchasing materials, goods, fixed assets, services for production and business operations, the accountant reflects the value of purchased materials, goods, fixed assets, and services at the price excluding VAT, recorded as:

Debit Account Nos. 152, 156, 211, 641, 642... (At the purchase price excluding VAT)

Debit Account 133 - Deductible VAT

CREDIT ACCOUNT 111, 112, 331... (TOTAL AMOUNT PAYABLE).

- Reflecting the deductible VAT input tax allocated by Electricity Companies I, II, or III for deduction at provincial and city power companies, recorded as:

Debit Account No. 133 - Deductible VAT

CREDIT ACCOUNT 336 - INTERNAL PAYABLE.

- Based on the electricity sales invoice, the accountant records the revenue from electricity sales at the price excluding VAT, recorded as:

Debit Account Nos. 111, 112, 131... (Total payment amount)

CREDIT ACCOUNT 3331 - VAT PAYABLE

Credit Account No. 511 - Revenue from Sales (At the selling price excluding VAT)

- Other contents regarding VAT accounting shall be implemented according to the current accounting regulations.

III- IMPLEMENTATION ORGANIZATION.

1- The Vietnam Electricity Holding Corporation is responsible for guiding its subordinate units to implement VAT accounting according to this Circular.

2- This Circular takes effect from January 1, 1999, and other contents regarding VAT accounting not specified in this Circular shall be implemented according to the current accounting regulations..

DURING THE IMPLEMENTATION, IF THERE ARE ANY DIFFICULTIES, UNITS ARE ADVISED TO REPORT TO THE MINISTRY OF FINANCE FOR REVIEW AND RESOLUTION.