Circular No. 25/2018/TT-BTC guiding the Government's Decree No. 146/2017/NĐ-CP dated December 15, 2017, and amending and supplementing certain provisions of Circular No. 78/2014/TT-BTC dated June 18, 2014, issued by the Ministry of Finance, and Circular No. 111/2013/TT-BTC dated August 15, 2013, issued by the Ministry of Finance.

CIRCULAR

Guiding the Government's Decree No. 146/2017/NĐ-CP dated December 15, 2017 and amending and supplementing certain Articles of Circular No. 78/2014/TT-BTC dated June 18, 2014 of the Ministry of Finance, Circular No. 111/2013/TT-BTC dated August 15, 2013 of the Ministry of Finance

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Pursuant to the Securities Law No. 70/2006/QH11 dated June 29, 2006 and the Law No. 62/2010/QH12 amending and supplementing certain articles of the Securities Law dated November 24, 2010;

Pursuant to the Individual Income Tax Law No. 04/2007/QH12 dated November 21, 2007 and the Law No. 26/2012/QH13 amending and supplementing certain articles of the Individual Income Tax Law dated November 22, 2012;

Pursuant to the Enterprise Law No. 68/2014/QH13 dated November 26, 2014;

Pursuant to the Law No. 71/2014/QH13 amending and supplementing certain articles of various tax laws dated November 26, 2014;

Pursuant to the Law No. 106/2016/QH13 dated April 6, 2016 amending and supplementing certain articles of the Value Added Tax Law, the Special Consumption Tax Law, and the Tax Administration Law;

Pursuant to the Government's Decree No. 65/2013/NĐ-CP dated June 27, 2013 detailing certain provisions of the Individual Income Tax Law and the Law amending and supplementing certain articles of the Individual Income Tax Law;

Pursuant to the Government's Decree No. 12/2015/NĐ-CP dated February 12, 2015 detailing the implementation of the Law amending and supplementing certain articles of various tax laws and amending and supplementing certain articles of various tax decrees;

Pursuant to the Government's Decree No. 100/2016/NĐ-CP dated July 1, 2016 detailing the implementation of the Law amending and supplementing certain articles of the Value Added Tax Law, the Special Consumption Tax Law, and the Tax Administration Law;

Decree No. 146/2017/NĐ-CP dated 15 the 12 of the Government in 2017 amending and supplementing certain articles of the Government's Decree No. 100/2016/NĐ-CP dated July 1, 2016 and the Government's Decree No. 12/2015/NĐ-CP dated February 12, 2015;

Pursuant to Decree No. 87/2017/NĐ-CP dated July 26, 2017, issued by the Government, stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

At the proposal of the Director General of the State Revenue Administration,

The Minister of Finance issues this Circular guiding the Government's Decree No. 146/2017/NĐ-CP dated December 15, 2017 amending and supplementing certain Articles of Circular No. 78/2014/TT-BTC dated June 18, 2014 of the Ministry of Finance, Circular No. 111/2013/TT-BTC dated August 15, 2013 of the Ministry of Finance as follows:

“23. Export products are natural resources, minerals extracted without being processed into other products.

Export products are goods directly processed from raw materials mainly consisting of natural resources, minerals with the total value of natural resources, minerals plus energy costs accounting for 51% or more of the production cost of the product, except for some cases as stipulated in Clause 1, Article 1 of the Government's Decree No. 146/2017/NĐ-CP.

a) Natural resources, minerals are domestic-origin natural resources including: Metal minerals; non-metal minerals; crude oil; natural gas; coal gas.

b) The determination of the proportion of the value of natural resources, minerals and energy costs in the production cost shall be carried out according to the following formula:

Where:

The value of natural resources, minerals put into processing is determined as follows: For directly extracted natural resources, minerals, it is the direct and indirect extraction costs excluding transportation costs from the extraction site to the processing site; for natural resources, minerals purchased for further processing, it is the actual purchase price excluding transportation costs from the purchase site to the processing site.

Energy costs include: fuel, electricity, heat.

The value of natural resources, minerals and energy costs is determined based on the book value consistent with the Cost Calculation Table.

Production cost of the product includes: Direct material costs, direct labor costs, and common production costs. Indirect costs such as sales expenses, management expenses, financial expenses, and other expenses are not included in the production cost of the product.

The ratio of the value of natural resources, minerals and energy costs to the production cost of the product is determined based on the final settlement of the previous year and this ratio is applied consistently during the export year. In the first year of exporting the product, the ratio of the value of natural resources, minerals and energy costs to the production cost of the product is determined according to the investment plan and this ratio is applied consistently during the export year; if there is no investment plan, the ratio of the value of natural resources, minerals and energy costs to the production cost of the product is determined based on the actual situation of the exported product.

c) If the enterprise does not export but sells to another enterprise for export, the enterprise purchasing the goods for export must declare VAT as if the product was produced and exported directly by the enterprise.

d) Provincial Tax Departments shall coordinate with relevant state management agencies within their jurisdiction according to the functions and responsibilities of each agency to guide enterprises engaged in production and business activities involving the export of products made from natural resources, minerals to determine whether the exported product is a processed or unprocessed natural resource, mineral product based on the characteristics of the product and the production process, and to declare accordingly.

In the case where an enterprise declares that the product has been processed into another product but the production process is not sufficient to determine that it is another product, the Tax Department is responsible for reporting to the General Department of Taxation to coordinate with relevant Ministries and State Management Agencies based on the export product production process of the enterprise to determine whether the exported product is an unprocessed natural resource, mineral or a processed product according to the law.

"4. Refund of tax on exported goods and services

a) A business entity declaring monthly (in cases of monthly declaration) or quarterly (in cases of quarterly declaration) that has exported goods and services, including situations where: imported goods are subsequently exported to non-tariff zones; imported goods are subsequently exported abroad, has an input VAT amount not yet deducted of VND 300 million or more, shall be entitled to refund the VAT monthly or quarterly; in cases where the input VAT amount not yet deducted is less than VND 300 million during the month or quarter, it shall be carried forward to the next month or quarter for deduction. If a business entity has both exported goods and services and consumed domestically in a given month or quarter, the business entity must separately account for the input VAT used for producing and trading exported goods and services. In cases where separate accounting is not possible, the input VAT of exported goods and services will be determined based on the ratio between the revenue from exported goods and services over the total revenue from goods and services in the periods of VAT declaration, starting from the period immediately following the last refund period up to the current refund request period.

The input VAT of exported goods and services (including separately accounted input VAT and allocated input VAT according to the aforementioned ratio) if, after offsetting with the output VAT payable for domestically consumed goods and services, the remaining amount is VND 300 million or more, the business entity shall be entitled to a refund for exported goods and services. The amount of VAT refunded for exported goods and services shall not exceed ten percent of the revenue from exported goods and services.

The subjects eligible for VAT refunds in certain export scenarios include: for consignment exports, the entity with consigned goods for export; for subsequent processing exports, the entity that signs an export processing contract with foreign parties; for goods exported for overseas construction projects, the enterprise exporting goods and materials for such projects; for goods exported at the place of origin, the business entity exporting goods at the place of origin.

b) A business entity shall not be entitled to a VAT refund in cases where: imported goods are subsequently exported without conducting the export procedures within the customs territory as prescribed by the Customs Law; exported goods are not exported within the customs territory as prescribed by the Customs Law.

c) The tax authority shall implement pre-refund and post-inspection for taxpayers engaged in the production of exported goods who have not been penalized for smuggling, illegal cross-border transportation of goods, tax evasion, or commercial fraud for two consecutive years; taxpayers who do not fall under high-risk categories as defined by the Tax Administration Law and its implementing regulations.

Article 6, Clause 2, Paragraphs e of Point 2.2, b of Point 2.6, Point 2.11, and Point 2.30 of Circular No. 78/2014/TT-BTC dated June 18, 2014 of the Ministry of Finance (amended and supplemented by Article 4 of Circular No. 96/2015/TT-BTC dated June 22, 2015 of the Ministry of Finance) shall be amended as follows:

"In cases where a company transfers a portion of capital or the entire company according to the provisions of the law, if there is a transfer of assets, the transferee company may only deduct depreciation expenses for fixed assets transferred that meet the conditions for depreciation according to the residual value recorded in the books of the transferring company."

2. Amend the first paragraph of Paragraph b of Point 2.6, Clause 2, Article 6 of Circular No. 78/2014/TT-BTC (amended and supplemented by Article 4 of Circular No. 96/2015/TT-BTC dated June 22, 2015 of the Ministry of Finance):

"b) Amounts of salaries and bonuses paid to employees that are not specifically stipulated in one of the following documents: Labor contracts; Collective labor agreements; Financial regulations of companies, holding companies, groups; Bonus regulations established by the Chairman of the Board of Directors, General Director, or Director according to the financial regulations of the company, holding company."

3. Amend and supplement Point 2.11, Clause 2, Article 6 of Circular No. 78/2014/TT-BTC (amended and supplemented by Article 4 of Circular No. 96/2015/TT-BTC dated June 22, 2015 of the Ministry of Finance):

3. Amend and supplement Point 2.11, Clause 2, Article 6 of Circular No. 78/2014/TT-BTC (amended and supplemented by Article 4 of Circular No. 96/2015/TT-BTC dated June 22, 2015 of the Ministry of Finance):

“2.11. The portion exceeding three million dong per month per person for contributions to voluntary retirement funds, purchasing voluntary retirement insurance, and life insurance for employees; The portion exceeding the provisions of laws on social insurance and health insurance for contributions to social welfare funds (including mandatory supplementary retirement insurance, social insurance fund, health insurance fund, and unemployment insurance fund) for employees.

Expenditures for contributions to voluntary retirement funds, social welfare funds, purchasing voluntary retirement insurance, and life insurance for employees shall be deductible expenses provided that they comply with the conditions and levels specified in one of the following documents: Employment contracts; Collective labor agreements; Financial regulations of companies, corporations, or groups; Reward regulations established by the Chairman of the Board of Directors, General Director, or Director in accordance with the financial regulations of the company or corporation.

Enterprises shall not include such expenditures in deductible costs if they fail to fulfill their obligations regarding mandatory insurance for employees (including cases where they owe money for mandatory insurance).

4. Amend the first paragraph of item 2.30, Clause 2, Article 6 of Circular No. 78/2014/TT-BTC (amended and supplemented by Article 4 of Circular No. 96/2015/TT-BTC):

"- Welfare expenditures directly benefiting employees, including: expenditures for funeral and wedding ceremonies of employees and their families; expenditures for vacations, medical treatment support; expenditures for additional knowledge acquisition at educational institutions; expenditures for supporting employee families affected by natural disasters, enemy attacks, accidents, illness; expenditures for rewarding children of employees who excel in studies; expenditures for travel expenses during holidays and festivals for employees; expenditures for accident insurance, health insurance, and other voluntary insurances for employees (excluding expenditures for purchasing life insurance for employees and voluntary retirement insurance for employees as stipulated in Point 2.11 of this Article) and other welfare expenditures. The total amount of such welfare expenditures shall not exceed one month's actual average salary of the enterprise in the tax year."

Article 4. Amend and supplement Point b Clause 4 Article 2 of Circular No. 111/2013/TT-BTC dated August 15, 2013 issued by the Ministry of Finance as follows:

"b. Income from securities transfers, including income from transferring shares, subscription rights to shares, bonds, bills, fund certificates, and other types of securities as stipulated in Clause 1, Article 6 of the Securities Law. Income from transferring shares of individuals in joint-stock companies as stipulated in Clause 2, Article 6 of the Securities Law and Article 120 of the Enterprise Law."

Article 5.Effectiveness

1. This Circular takes effect from May 1, 2018.

2. Cases arising from February 1, 2018, shall be governed by Decree No. 146/2017/NĐ-CP and implemented according to the provisions of Decree No. 146/2017/NĐ-CP and the guidance provided in Articles 1, 2, Clauses 2, 3, and 4 of Article 3 of this Circular.

3. In the course of implementation, if there are any difficulties, organizations and individuals are requested to promptly report to the Ministry of Finance for research and resolution.