Circular No. 20 TC/TCT guiding the examination and exemption of import and export taxes for forms of foreign investment in Vietnam under the Law on Foreign Investment according to Decree No. 191/CP dated December 28, 1994 of the Government

CIRCULAR

DIRECTIVE NUMBER 30/TC/TCT OF THE MINISTRY OF FINANCE ON APRIL 12, 1995 GUIDING THE REDUCTION OF BUSINESS INCOME TAX FOR BUSINESSES OPERATING IN MOUNTAINOUS REGIONS IN 1995 

Pursuant to Article 18 of the Business Income Tax Law and the Law Amending and Supplementing Certain Provisions of the Business Income Tax Law adopted at the third session of the Ninth National Assembly on July 5, 1993; Directive No. 525/TTg dated November 2, 1993 on certain policies and measures for continued economic and social development in mountainous regions; and the opinion of the Prime Minister in Government Office Circular No. 287/KTTH dated January 21, 1994, the Ministry of Finance guides certain points regarding the continued reduction of business income tax for businesses operating in mountainous regions to be implemented in 1995 as follows:

Article 1. Scope of Application:

a) The subjects eligible for the reduction of business income tax under this Circular include organizations and individuals (referred to collectively as businesses) of all economic sectors (including businesses established and operating under the Foreign Investment Law in Vietnam), which actually engage in production and business activities and generate business income within the highland and mountainous areas (excluding those mentioned in point 1b below), including:

- Entities with fixed business locations in mountainous areas and operating there or in other mountainous areas.

- Entities without fixed business locations in mountainous areas but actually operating in mountainous areas (construction, artistic performances, film screenings, etc.).

- Trading trips from mountainous areas to other places.

b) The following entities shall not be considered for tax reduction under this Circular:

- Households subject to business income tax under the quota method.

- New businesses that have been exempted or reduced from business income tax in 1995 according to Clause 3 of Article 18 of the Business Income Tax Law; or have been granted a reduction in business income tax under Article 10 of the Law on Encouraging Domestic Investment.

- Entities belonging to units with full-sector accounting.

c) The mountainous area defined as the basis for tax reduction under this Circular shall be determined based on the administrative boundaries of counties, towns, and cities (hereinafter referred to collectively as counties) recognized by the Committee for Ethnic Minorities and Mountainous Areas as mountainous counties.

Some examples: County X is recognized as a mountainous county.

Enterprise A has a fixed production location in District X and a sales location in District Y (also a mountainous district) and Nam Dinh City (not a mountainous area).

According to Point 4 of Decree No. 55/CP dated August 28, 1993 of the Government, Enterprise A will pay business income tax on its production activities at the place of production and on its commercial activities at the place of consumption. Therefore, Enterprise A will be entitled to a reduction in business income tax on its production activities in County X and on its sales activities in County Y; but must pay the full business income tax on its sales activities in Nam Dinh City.

b. Enterprise B engages in construction with a fixed business location in Nam Dinh City and undertakes a construction project in County X. Enterprise B will be entitled to a reduction in business income tax on the construction of that project in County X.

c. Enterprise C has a fixed production location in Nam Dinh City and a sales location in County X. Enterprise C must pay business income tax on its production activities in Nam Dinh City; and will be entitled to a reduction in business income tax on its sales activities in County X.

2. Level and duration of tax reduction:

- The rate of reduction: For manufacturing, construction, and transportation industries, it is 50%; for other industries, it is 25% of the business income tax payable to the State budget.

- The period of reduction is one year, from January 1, 1995 to December 31, 1995. After the end of the year, the Ministry of Finance will review the actual situation and opinions of localities to determine appropriate solutions for the following year.

3. Implementation:

To ensure that the tax reduction is applied correctly to the intended subjects and truly encourages and creates conditions for businesses to serve the production and living needs of the people in mountainous regions in accordance with Directive No. 525/TTg of the Prime Minister, the Ministry of Finance requests the Tax Departments:

- To disseminate the government's policy on tax reduction to businesses and guide them on necessary procedures to implement the policy.

- To review and closely monitor both regular and irregular business activities within their jurisdiction, promptly bringing them under tax management in accordance with the prescribed policy.

- To adjust the business income accurately to reflect the actual business operations of households paying taxes under the quota method at the specified time. At the same time, they should regularly guide and inspect accounting work of businesses to ensure comprehensive, timely, and accurate reflection of all activities, ensuring the accuracy and correctness of the tax reduction, preventing any abuse to evade taxes.

b) Establishments engaged in business in mountainous areas that are eligible for tax reduction on business revenue under this Circular shall be responsible for:

- To present the establishment permit and business registration with the tax authority in accordance with the regulations.

- Declaring and registering business income tax payments with the tax authority in accordance with regulations.

- To declare business income generated periodically as prescribed by the tax authority. The calculation of tax reduction will be directly handled by the tax authority and approved by the head of the tax department in the tax declaration form of the business in the tax ledger.

Businesses violating the declaration system, tax payment registration, bookkeeping, and accounting records as prescribed will not be eligible for the tax reduction under this Circular; and depending on the severity of the violation, they may be subject to penalties under current regulations.

The tax reduction under this Circular shall be calculated after deducting all other tax reduction amounts regarding business revenue (if any).

c) The tax authority must clearly reflect the amount of business income tax payable, the amount of tax reduction, the remaining tax payable, and other indicators as prescribed on tax collection receipts, monthly tax declarations, tax ledgers, and accounting books.

At the end of the year, the tax authority must jointly with the Department of Finance compile and submit a complete and clear report on the business income tax payable, the amount of reduction, and the remaining tax payable for each enterprise in the locality (accompanied by tax payment receipts) to the General Department of Taxation and the Ministry of Finance for consideration of the aforementioned exemptions and reductions.

This Circular takes effect from January 1, 1995, replacing Circulars No. 20 TC/TCT dated March 12, 1994 and No. 07 TC/TCT of the Ministry of Finance. During implementation, if any issues arise, localities are requested to report them to the Ministry of Finance for prompt resolution.