Circular No. 26/2000/TT-BTC guides the implementation of the Law on Value Added Tax for publishing, printing, and distribution activities of publications.

CIRCULAR

Guidelines for Implementing the Value Added Tax Law

concerning publishing, printing, and distribution activities

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

Pursuant to Decree No. 28/1998/NĐ-CP dated May 11, 1998 of the Government detailing the implementation of the Value Added Tax Law and Decree No. 102/1998/NĐ-CP dated December 21, 1998 of the Government amending and supplementing certain provisions of Decree No. 28/1998/NĐ-CP;

Pursuant to the provisions of the Publishing Law and guiding documents; Decision No. 2607/VHTT-QĐXBI dated August 26, 1997 of the Minister of Culture and Information promulgating the "Regulations on the Organization and Operation of Printing"; Decision No. 2501/QĐ-CXB dated August 15, 1997 of the Minister of Culture and Information promulgating the "Regulations on the Organization and Operation of Distribution of Publishing Products". Decision No. 75/1999/QĐ/BVHTT dated November 8, 1999 of the Minister of Culture and Information promulgating joint venture regulations on printing and distribution of publishing products.

To implement the Value Added Tax Law in accordance with business operations in the publishing, printing, and distribution sectors, the Ministry of Finance provides guidelines for implementing the Value Added Tax Law for these activities as follows:

I SCOPE OF APPLICATION OF VALUE ADDED TAX

1. Objects Subject to Value Added Tax:

The objects subject to value added tax include publishing, printing, exporting, importing, and distributing various types of publishing products, including:

Books; documents; paintings; photographs; calendars; maps; atlases; sheet music; couplets, scrolls, and posters, catalogs, flyers, and advertising brochures.

Books published on materials other than paper or audio tapes, audio discs, video tapes, video discs that contain book content.

Other types of publishing products

2. Objects Not Subject to Value Added Tax:

The objects not subject to value added tax include publishing, printing, importing, and distributing publishing products, including:

Printed newspapers (including newspaper page transfer activities), magazines, specialized newsletters.

Political books are books promoting political ideology and policies of the Party and State, serving specific political tasks, commemorations, traditional days of organizations, levels, sectors, and localities; books summarizing good people and deeds, classic works of Party and State leaders.

Textbooks are books used for teaching and learning from preschool to secondary education.

Coursebooks are books used for teaching and learning in universities, colleges, vocational high schools, and vocational training institutions.

Legal texts books are books compiling legal normative documents such as directives, circulars, decrees, ordinances, laws, resolutions, and party documents.

Books printed in ethnic minority scripts of Vietnam are books serving the needs to improve literacy among ethnic minorities, including books printed in ethnic minority scripts, bilingual books in common script and ethnic minority script.

Paintings, photographs, posters, flyers, and brochures for propaganda, mobilization, slogans, leader portraits, Communist Party flags, Youth League flags, Young Pioneer flags, national flags.

Audio tapes, audio discs, video tapes, video discs replacing books or containing content related to books not subject to value added tax.

3. Taxpayers:

The taxpayers are organizations and individuals engaged in publishing, printing, exporting, importing, and distributing publishing products subject to value added tax as specified in Point 1, Section I of this Circular.

II METHODS OF CALCULATING TAX

The value added tax payable is calculated using the deduction method.

Value added tax payable = value added tax output - deductible value added tax input.

A. FOR VALUE ADDED TAX OUTPUT:

Value added tax output is determined based on the taxable value multiplied by the value added tax rate.

The taxable value is the price excluding value added tax.

The value added tax rate is stipulated in current guiding documents and uniformly applied throughout all stages of publishing, printing, and distribution. Specifically:

a. A 5% rate applies to all types of books (including audio tapes and discs with book content), except books exempted from tax as specified in Point 2, Section I of this Circular.

b. A 10% rate applies to all other publishing products, except those exempted from tax as specified in Point 2, Section I and those subject to tax as specified in Subsection a, Part A, Section II of this Circular.

Based on the specific characteristics of each activity, the Ministry of Finance provides detailed guidance on declaring and calculating value added tax as follows:

1. For Publishing Activities:

Publishing activities involve the process of producing publications from manuscript preparation to distribution to consumers.

a. Self-Publishing Publishers:

Value added tax output is determined based on the taxable value multiplied by the tax rate. The cover price of the publication includes value added tax. When calculating value added tax for publications, it must be converted to the taxable value according to the formula:

                                      Cover Price (or payment price)

Taxable Value =       -----------------------------

                                                 1 + tax rate

In cases where publishers distribute through distribution organizations, the taxable value of the publication is determined according to the formula:

                                                  Cover Price Distribution Fee

             Taxable Value =     ----------------------

                                                    1 + tax rate

In cases where publishers sell publications directly to end-users, the taxable value of the publishing activity is determined according to the formula:

                                                     Cover Price (or payment price)

             Taxable Value =        -----------------------------

                                                           1 + tax rate

For publications sent for consignment sales, publishers use the consignment sale inventory dispatch form (Form No. 04/XKĐL-8LL issued along with Circular No. 140/1999/TT-BTC dated December 2, 1999 of the Ministry of Finance). This dispatch form is used to track consigned books. When the publication is paid for, the publisher issues a value added tax invoice clearly stating the consignment dispatch number...date...year...The publisher may supplement additional information suitable for management requirements and register with the tax authority.

In cases of exchange transactions, they are considered sales transactions and thus require issuance of invoices.

b. Joint Venture Publishers:

Publishers conducting joint publishing ventures with domestic organizations and individuals shall comply strictly with the provisions of the Publishing Law and guiding documents. For all forms of joint publishing, publishers have the responsibility to pay Value Added Tax (VAT) according to the following regulations:

b1 Publishers jointly publishing with business organizations and individuals:

Publishers performing services in the publishing process such as being responsible for editing, proofreading manuscripts, organizing printing, registering publication plans...and collecting management fees shall declare and calculate VAT on the collected management fees. This revenue is revenue without VAT.

Example: Publisher A enters into a joint publishing contract with Organization B to publish a literary book with a quantity of 10,000 copies, cover price at 6,300 VND per copy. Publisher A collects a management fee of 7% on the cover price, assuming the management fee does not include VAT. When the publication is released, Publisher A issues a VAT invoice for the management fee revenue as follows:

Management Fee: 10,000 copies x 6,300 VND/copy x 7% = 4,410,000 VND

Output VAT = 4,410,000 VND x 10% = 441,000 VND

In cases where the partner fully distributes the publication, besides declaring and calculating VAT on the management fee, the publisher also has the responsibility to declare and calculate output VAT on the entire publication. The partner is responsible for paying the VAT to the publisher. The publisher must separately track the sales volume of the joint publication and not include it in the publisher's revenue. The taxable price for VAT is determined by the formula:

                                                Cover Price Distribution Fee

             Taxable Price for VAT =      -----------------------

                                                  1 + tax rate

Wherein: the cover price minus distribution fee cannot be lower than the standard production cost.

After the publication is approved by the Director of the Publisher for release, the Publisher has the responsibility to issue a VAT invoice to the partner so that the partner can base their tax accounting for deductible input VAT if the partner is a unit taxed under the deduction method and record expenses for units taxed under the direct payment method. Expense vouchers for publishing activities, either directly paid by the publisher or the partner, are declared for input VAT for each party.

Example:

In May 1999, Publisher A entered into a joint publishing contract with Organization B to publish a literary book with a quantity of 10,000 copies:

Cover printing cost: 6,000 VND/copy

Distribution fee (30%):   6,000 x 30% = 1,800 VND/copy

When Publisher A delivers books to Organization B, VAT is calculated as follows:

                                   6.000 1.800

Taxable Price for VAT =    -------------- = 4,000 VND/copy

                                  1 + 5%

Output VAT:  4,000 x 5% =  200 VND/copy

Publisher A issues a VAT invoice to Organization B for 10,000 copies, with VAT amounting to 2,000,000 VND

If Organization B is a unit taxed under the deduction method, it accounts for deductible input VAT of 2,000,000 VND. In June, Organization B self-distributes 2,000 copies of the book and determines output VAT.

                                   6.000

Taxable Price for VAT = ------- = 5,714 VND/copy

                                 1 + 5%

Output VAT = 5,714 x 2,000 x 5% = 571,400 VND

Assuming input VAT is 57,000 VND

The VAT payable by Organization B in June = 571,400 VND - 57,000 VND - 2,000,000 VND = 1,485,600 VND. Thus, in this month, Organization B does not need to pay VAT. From July onwards, for these books, there will only be output VAT generated, no more input VAT. For the unpaid input VAT from June (1,485,600 VND), the unit will be deducted from the VAT payable when declaring and calculating VAT in subsequent periods.

If Organization B is a unit taxed under the direct payment method, based on the VAT invoice from Publisher A, Organization B records the purchase cost as expense to calculate taxable income for Corporate Income Tax (CIT).

b2. Publishers jointly publishing with business organizations and individuals engaged in both trading and distribution: Publishers fully distributing the joint publications shall declare VAT as if they were self-publishing.

b3. In cases where publishers jointly publish with organizations such as public institutions, or individuals like authors who are not registered for business and taxation, Publishers have the responsibility to calculate and pay output VAT as stipulated for joint publishing ventures, collect VAT on behalf of individuals, and withhold CIT at the rate set by local tax authorities.

2. For printing units:

a. For printing activities (including paper in the printing price):

Output VAT is determined based on the taxable price for VAT multiplied by the VAT rate for printing activities. The taxable price for VAT for printing activities is the price excluding VAT.

b. For printing activities not including paper:

Output VAT is determined by multiplying the taxable price for VAT by the VAT rate. The taxable price for VAT includes printing labor costs, fuel, power, auxiliary materials, and other expenses (excluding paper costs).

The VAT rate for this activity is determined according to the applicable VAT rate for printed products.

3. For distribution services of publications:

The cover price of publications includes VAT. Therefore, the taxable price for VAT for distribution services is determined by the formula:

                                  Cover price minus distribution fee at the subsequent stage (if any)

 Taxable Price for VAT =        -----------------------------------------For retail sales of goods valued below 100,000 VND or when customers do not request invoices, the distribution unit must prepare a retail sales list according to current regulations.

                                               1 + tax rate

For consigned goods: the unit must account separately using the consignment sales delivery note (Form No. 04/XKDL-8LL issued along with Circular No. 140/1999/TT-BTC dated December 2, 1999 of the Ministry of Finance) to determine the corresponding input VAT for sold goods.

B. DEDUCTIBLE INPUT VAT:

Deductible input VAT is determined according to the principle:

Deductible input VAT is the VAT on the VAT invoice for purchased goods and services, and 3% on the sales invoice for all other types of goods purchased from businesses.

Input VAT deductible is the amount of input VAT on the VAT invoice for purchased goods and services, and 3% on the sales invoice for all other types of goods purchased from businesses.

For printing activities of various types of publications subject to VAT that solely use special paper imported materials, if the VAT input tax of such special paper can be separately accounted for, then it is permitted to declare the entire input tax when calculating the VAT.

Entities that have both goods and services subject to VAT and those not subject to VAT must separately account for the VAT input tax of goods and services subject to VAT and those not subject to VAT to determine deductible input tax, non-deductible input tax, and VAT payable. In cases where businesses cannot separately account for the VAT input tax, the allocation method based on the ratio (%) of VAT taxable revenue to total revenue shall be applied to determine the deductible VAT input tax.

III. IMPLEMENTATION

Regarding invoices and documents: The entity directly issues invoices to customers according to specific circumstances: If the entity falls under the category of taxpayers applying the deduction method for VAT, they should issue VAT invoices, wherein activities not subject to VAT shall have the tax rate and VAT columns crossed out. If the taxpayer applies the direct payment method, they should issue regular sales invoices.

This Circular takes effect fifteen days after the date of signature. Other contents not guided by this Circular will still be implemented according to the provisions of Circular No. 89/1998/TT-BTC dated June 27, 1998, Circular No. 175/1998/TT-BTC dated December 24, 1998, and Circular No. 106/1999/TT-BTC dated August 30, 1999 issued by the Ministry of Finance. All guiding documents for implementing VAT that have been issued but are inconsistent with the guidance provided in this Circular are hereby abolished.

During implementation, if there are any difficulties, organizations and individuals are advised to report to the Ministry of Finance for study and resolution./.