Circular No. 24/TC-TCT guiding the reduction of business income tax for businesses operating in mountainous areas in 1996.

CIRCULAR

OF THE MINISTRY OF FINANCE NUMBER 24 TC/TCT DATED MAY 10, 1996 GUIDING THE REDUCTION OF BUSINESS INCOME TAX FOR BUSINESSES IN MOUNTAINOUS AREAS IN 1996

TO REDUCE BUSINESS INCOME TAX FOR BUSINESSES IN MOUNTAINOUS AREAS IN 1996

ON MOUNTAINOUS TERRITORY

Pursuant to Article 18 of the Business Income Tax Law and the Law Amending and Supplementing Certain Articles 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 some policies and measures for continued economic and social development in mountainous areas and the opinion of the Prime Minister in Official Letter No. 287/KTTH dated January 21, 1994 of the Government Office, the Ministry of Finance guides certain points regarding the continued reduction of business income tax for businesses operating in mountainous areas to be implemented in 1996 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 Law on Foreign Investment in Vietnam), which actually engage in production and business activities and generate business income within the highland and mountainous regions (excluding those mentioned in point 1b below), including:

- Businesses with a fixed place of business in mountainous areas and operating there or in other mountainous areas.

- Businesses without a fixed place of business in mountainous areas but actually operating in mountainous areas (construction, artistic performances, film screenings, etc.).

- Trading goods produced domestically from mountainous areas to other places.

b. The following subjects shall not be considered for the reduction of business income tax under this Circular:

- Fixed business households subject to business income tax under the quota method.

- New businesses that have been exempted or granted reductions in business income tax in 1996 according to Clause 3, Article 18 of the Business Income Tax Law; or have received reductions in business income tax under Article 10 of the Law on Encouraging Domestic Investment.

- Businesses 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 and towns (hereinafter referred to collectively as counties) recognized as mountainous counties by the Ethnic Minorities Commission.

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

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

Enterprise A will be entitled to a reduction in business income tax for its production activities in County X and for its sales activities in County Y; however, it must pay the full business income tax for its sales activities in Nam Dinh City.

b. Enterprise B, engaged in construction, has a fixed place of business in Nam Dinh City and undertakes a construction project in County X. Enterprise B will be entitled to a reduction in business income tax for the construction 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 for its production activities in Nam Dinh City; it will be entitled to a reduction in business income tax for its sales activities in County X.

2. Level and duration of tax reduction:

- Reduction level: For manufacturing, construction, and transportation industries, the reduction is 50% of the business income tax payable to the State budget; for other industries, the reduction is 25%. Lottery operations are only eligible for a reduction in tax for lottery tickets and scratch cards with immediate results.

- Duration of tax reduction: One year, from January 1, 1996 to December 31, 1996.

3. Implementation:

a. 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 mountainous residents 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 reducing business income tax to businesses and guide them on necessary procedures for implementation.

- To review and closely monitor both regular and irregular business activities in the region, promptly incorporating them into the tax management scope as prescribed.

- To provide continuous guidance and strict oversight of accounting practices of businesses to accurately reflect all activities, ensuring accurate and timely tax reductions, preventing tax evasion, and promoting compliance with invoice and accounting regulations.

b. Businesses operating in mountainous areas eligible for tax reduction under this Circular are responsible for:

- Presenting their establishment permits and business registration certificates to the tax authority managing the mountainous area where they conduct production and business activities.

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

- Fully declaring business income generated periodically as specified by the tax authority.

The calculation of tax reduction will be conducted directly by the tax authority managing the tax collection (Tax Department; Tax Branch) and approved immediately on the tax declaration form and notification of tax payment by the head of the tax authority.

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

c. The tax authority must clearly record the amount of business income tax payable, the amount of tax reduction, the remaining tax due, and other required indicators on tax receipts, monthly tax declarations, tax ledgers, and accounting books.

At the end of the year, the tax authority must compile a comprehensive report on the implementation of tax reduction under this Circular and submit it to the Ministry of Finance (General Department of Taxation).

This Circular takes effect from January 1, 1996, replacing Circulars No. 20 TC/TCT dated March 12, 1994, No. 07 TC/TCT dated January 7, 1995, and No. 30 TC/TCT dated April 12, 1995 of the Ministry of Finance. Any issues arising during implementation should be reported promptly to the Ministry of Finance for timely resolution.