Circular No. 181/1998/TT-BTC guides accounting for value-added tax on postal and telecommunications services activities.

CIRCULAR

OF THE MINISTRY OF FINANCE NUMBER 181/1998/TT-BTC DATE DECEMBER 26, 1998 GUIDING ACCOUNTING FOR VALUE ADDED TAX ON TELECOMMUNICATION SERVICES

- Pursuant to the Law on Value Added Tax No. 02/1997/QH9 dated May 10, 1997;

- Pursuant to Circular No. 89/1998/TT-BTC dated June 27, 1998, Circular No. 100/1998/TT-BTC dated July 15, 1998, and Circular No. 164/1998/TT-BTC dated December 17, 1998 of the Ministry of Finance guiding value added tax on telecommunication services;

To ensure appropriate accounting for value added tax (VAT) in accordance with tax calculation, declaration, and payment, the Ministry of Finance hereby guides accounting for VAT on telecommunication services as follows:

I - GENERAL PROVISIONS.

1 - This Circular applies to Vietnam Post and Telecommunications Corporation and independent accounting entities not directly under Vietnam Post and Telecommunications Corporation that engage in telecommunication services (hereinafter referred to as independent accounting entities engaged in telecommunication services).

- Vietnam Post and Telecommunications Corporation and independent accounting entities engaged in telecommunication services must organize VAT accounting according to current regulations and provisions of this Circular.

2 - Accounting for sales revenue and the value of materials, goods, fixed assets, and purchased services:

- Revenue from telecommunication services shall be reflected in Account 511 or Account 512 at the selling price excluding VAT.

- The selling price of stamps (including printed stamps and paper stamps, prepaid phone cards) includes VAT. Accounting must determine the selling price excluding VAT and the output VAT according to Circular No. 164/1998/TT-BTC dated December 17, 1998 of the Ministry of Finance to reflect sales revenue and output VAT payable.

- The value of materials, goods, fixed assets, and purchased services used for telecommunication services and other business activities shall be reflected at the purchase price excluding VAT (in cases where there is a VAT invoice or special invoice).

In cases where materials, goods, fixed assets, and services are purchased without a VAT invoice, they shall be reflected at the payment price, and input VAT cannot be deducted.

3 - Accounting for distribution and transfer of revenue, output VAT, and VAT payable:

- In cases where units engage in telecommunication services with other units through revenue sharing, total revenue to be shared and output VAT must be accounted for as the basis for determining VAT payable by each unit. The unit receiving revenue share must issue a VAT invoice according to prescribed regulations and send it to the unit paying the revenue share for documentation purposes.

- In cases where revenue is transferred between dependent units where income tax payments are centralized at headquarters, only revenue without VAT is transferred. Input VAT and output VAT generated by the unit are declared and accounted for by that unit.

- Each month, provincial post offices and companies under Vietnam Post and Telecommunications Corporation must calculate and prepare documents for transferring 40% of the VAT payable to the General Office of the Corporation to serve as a fund for allocation to units according to regulations. Two copies should be made: one copy retained by the unit and one copy sent to the General Office of the Corporation. When Vietnam Post and Telecommunications Corporation reallocates VAT payable to provincial post offices and companies under the Corporation with a negative difference (-) between output VAT and input VAT, a VAT reallocation document must be prepared in two copies: one copy sent to the units and one copy retained at the General Office of the Corporation.

II - ACCOUNTS

1 - Supplement Account 337 - Revenue to be Shared: This account is used to reflect revenue to be shared, already shared, and still to be shared in cases where units engage in telecommunication services through revenue sharing with other units.

Contents and structure of Account 337:

Debit Side: - Revenue from shared charges distributed to units;

              - Revenue from shared charges received.

Credit Side: Revenue to be shared.

Credit Balance: Reflects revenue from shared charges yet to be shared.

2 - Supplement Account 3386 - Amounts Payable for Collected Charges:

- This account is used to reflect amounts payable, paid, and still payable for collected charges to other units (including revenue from charges and output VAT).

- In cases where amounts payable for collected charges are owed to dependent accounting units, they are reflected in Account 336 "Amounts Payable Internally" and not in Account 3386.

Contents and structure of Account 3386:

Debit Side: Amounts of collected charges paid to units (including revenue from charges and output VAT).

Credit Side: Amounts of collected charges payable (including revenue from charges and output VAT).

Credit Balance: Amounts of collected charges still payable.

III - ACCOUNTING FOR VAT.

1 - When purchasing materials, goods, fixed assets, and services with a VAT invoice for use in telecommunication services, accounting reflects the value of materials, goods, fixed assets, and services purchased at the purchase price excluding VAT, and input VAT is reflected in Account 133, recorded as:

Debit Accounts 152, 153, 154, 627, 642... (At the purchase price excluding VAT)

Debit Account 133 - Deductible VAT

Credit Accounts 111, 112, 331... (Total payment amount).

2 - When revenue from telecommunication services is generated, accounting reflects revenue at the selling price excluding VAT, recorded as:

Debit Accounts 111, 112, 131, ... (Total payment amount)

Credit Account 3331 - VAT Payable

Credit Account 511 - Sales Revenue.

3 - In cases where units engage in telecommunication services through revenue sharing with other units, at the unit paying the revenue share, record:

+ When generating revenue from telecommunication services, accounting bases on the VAT invoice or special invoice to determine the selling price excluding VAT and output VAT, recorded as:

Debit Accounts 111, 112, 131, ... (Total payment amount)

Credit Account 3331 - VAT Payable

Credit Account 337 - Revenue to be Shared.

+ When determining the amount of revenue from charges that the unit receives according to the specified ratio, accounting reflects revenue from telecommunication services, recorded as:

Debit Account 337 - Revenue to be Shared

Credit Account 511 - Sales Revenue.

+ Determining the amount of revenue from charges and output VAT related to telecommunication services to be shared with other units, when sharing revenue, upon receipt of the VAT invoice from the unit receiving the revenue share, accounting records as:

Debit Account 337 - Revenue from postal and telecommunications service fees (Revenue sharing portion)

Debit Account 133 - VAT deductible (Output VAT sharing portion)

Credit Account 3386 - Amount to be paid for collected service fees.

When paying the collected service fees to the units entitled to share, record:

Debit Account 3386 - Amount to be paid for collected service fees

Credit Accounts 111, 112, ...

For units entitled to share revenue and output VAT from postal and telecommunications services, accountants shall base on the prescribed sharing ratio to calculate and determine the shared revenue from service fees and output VAT to issue VAT invoices (one copy for retention and one copy sent to the unit required to share). Based on the VAT invoice, accountants shall reflect revenue at the price excluding VAT and VAT, record:

Debit Accounts 111, 112, etc. (Total payment amount - total collected service fees)

Credit Account 3331 - VAT Payable

Credit Account 511 - Sales Revenue (Shared service fee revenue, price excluding VAT)

In cases where revenue is transferred between dependent units with consolidated corporate income tax payments at the headquarters, only revenue without VAT is transferred:

At the unit required to transfer, based on supporting documents and invoices reflecting the amount of revenue from postal and telecommunications services to be transferred to dependent units, record:

Debit Account 511 - Sales Revenue

Credit Account 336 - Internal Payable.

At the internal unit receiving the transferred revenue without VAT from postal and telecommunications services, accountants shall base on supporting documents and invoices reflecting the transferred service fee revenue, record:

Debit Accounts 136, 111, 112,...

Credit Account 511 - Sales Revenue.

If a provincial or municipal post office has a larger output VAT than input VAT in a period, according to the VAT system, it only needs to pay 60% of the VAT due to the provincial or municipal tax authority, while 40% of the VAT due is transferred to the General Corporation of Posts and Telecommunications to form a balancing fund for provincial or municipal post offices with smaller output VAT than input VAT. The 40% of the VAT due transferred to the General Corporation to form the balancing fund, record:

Debit Account 3331 - VAT Due for Payment

Credit Account 336 - Internal Payable (Details of VAT due transferred to the General Corporation).

At the General Corporation of Posts and Telecommunications, accountants shall reflect 40% of the VAT due from provincial and municipal post offices to form the balancing fund, record:

Debit Account 136 - Internal Receivable

Credit Account 3331 - VAT Payable.

If a provincial or municipal post office has a smaller output VAT than input VAT, it will be provided funds from the balancing fund by the General Corporation of Posts and Telecommunications. The amount provided from the balancing fund by the General Corporation, the accountant of the provincial or municipal post office records:

Debit Accounts 136, 111, 112, ...

Credit Account 133 - VAT Deductible.

The amount the General Corporation of Posts and Telecommunications must provide from the balancing fund to provincial and municipal post offices, the accountant of the General Corporation records:

Debit Account 133 - Deductible VAT

Credit Accounts 336, 111, 112.

III - IMPLEMENTATION ORGANIZATION.

The Vietnam Posts and Telecommunications Group is responsible for implementing and guiding subordinate units to perform accounting for VAT in accordance with this Circular.

This Circular takes effect from January 1, 1999. Issues regarding accounting for VAT not covered in this Circular shall be implemented in accordance with current accounting regulations.

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

TRAN VAN TA

(Signed)