Circular No. 28/2006/TT-BTC guides the refund of special consumption tax for domestically produced cigarette exports bearing foreign trademarks that have already paid special consumption tax domestically.

CIRCULAR

Guidelines for refunding special consumption tax on domestically produced cigarettes exported with foreign trademarks that have already paid special consumption tax in Vietnam

exported from domestic production for export with foreign labels that have already

paid the special consumption tax domestically

Pursuant to the provisions of Article 3, 4, and 12 of Decree No. 149/2003/NĐ-CP dated December 4, 2003 of the Government detailing the implementation of the Special Consumption Tax Law;

Pursuant to Decree No. 77/2003/NĐ-CP dated July 1, 2003 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

To implement the Prime Minister's directive regarding the refund of special consumption tax for domestically produced cigarettes with foreign trademarks exported, as stated in Official Letter No. 68/VPCP-KTTH dated January 6, 2006 of the Government Office, the Ministry of Finance provides guidelines for the refund of special consumption tax as follows:

I. Refund Objectives for Special Consumption Tax.

Directly exporting enterprises selling cigarettes with foreign trademarks produced in Vietnam shall be refunded the special consumption tax they have paid at the cigarette production stage.

II. Conditions for Export Enterprises Selling Domestic Cigarettes with Foreign Trademarks to Be Eligible for Refund of Special Consumption Tax.

Export enterprises selling domestic cigarettes with foreign trademarks eligible for refund of special consumption tax paid at the production stage must meet the following conditions:

1. The enterprise must have a minimum net asset value of 20 billion VND. The net asset value is based on item 410 of the Balance Sheet as of December 31, 2005, verified by an independent auditing agency. In cases where state-owned enterprises have not yet received audit results from the auditing agency, the net asset value will be based on the confirmation provided by the directly managing financial management authority.

2. The enterprise must comply well with tax laws and commercial laws, without any tax fraud or commercial fraud since January 1, 2005.

3. The enterprise must be recommended in writing by the relevant ministry, sector, or central-level organization (for enterprises established or granted business registration certificates by central-level authorities) or by the provincial People's Committee (for enterprises established or granted business registration certificates by local authorities) to be eligible for refund of special consumption tax on domestically produced cigarettes with foreign trademarks for export, and such recommendation must be submitted to the Ministry of Finance and the Ministry of Trade.

4. The enterprise must have cigarette sales recorded in its business registration certificate and must have directly exported domestically produced cigarettes with foreign trademarks for at least 10 million packs over the past three years prior to the effective date of this Circular. The quantity of exported cigarettes is determined based on export documents such as written export contracts, bank payment vouchers, and customs declaration forms confirmed by customs authorities.

5. Exported cigarettes eligible for tax refund must be purchased directly from foreign tobacco branches in Vietnam or from first-tier distributors (with tobacco business licenses issued by the Ministry of Trade) of these branches.

6. Exported cigarettes must be sold under written contracts in compliance with commercial and export regulations, transported via international seaports, and delivered using containers.

7. Payment for exported cigarettes must be made by the overseas buyer through a bank using freely convertible foreign currency via letters of credit (L/C) or telegraphic transfers (T/T). If the exporting enterprise purchases cigarettes from domestic businesses for export, payment must be made via bank transfers.

8. The enterprise must separately account for income generated from cigarette exports before offsetting it against losses from other business activities. The amount of special consumption tax refunded to exporting enterprises selling domestically produced cigarettes with foreign trademarks must be included in the taxable income for corporate income tax purposes.

III. Determination of the Amount of Special Consumption Tax Eligible for Refund.

The amount of special consumption tax eligible for refund is based on the actual quantity of exported cigarettes and the special consumption tax declared and paid at the production stage.

The amount of special consumption tax paid at the production stage is determined by the Ministry of Finance (General Department of Taxation) based on the declarations made by cigarette production units.

- The price for calculating special consumption tax used as the basis for determining the amount of special consumption tax eligible for refund is the price used by the production unit to declare and pay special consumption tax at the same time as the invoice date for cigarette sales by foreign tobacco branches in Vietnam or first-tier distributors selling to exporting enterprises.

- The special consumption tax rate applicable to cigarettes is set forth in Circular No. 115/2005/TT-BTC dated December 16, 2005, issued by the Ministry of Finance, guiding the implementation of Decree No. 156/2005/NĐ-CP dated December 15, 2005, of the Government amending and supplementing decrees detailing the implementation of the Special Consumption Tax Law and the Value Added Tax Law.

In cases where the cigarette production unit changes the price for calculating special consumption tax, the General Department of Taxation will determine and notify the new price to the Tax Departments to ensure that the maximum amount of special consumption tax eligible for refund does not exceed the amount declared and paid to the State budget.

IV. Procedures and Formalities for Identifying Eligible Refund Objectives for Special Consumption Tax.

- Export enterprises selling cigarettes must submit a written request to the Tax Department in their locality for a refund of special consumption tax on exported cigarettes, including detailed information about the conditions outlined in Points 1, 2, 3, and 4 of Section II, copies of the business registration certificate (certified and stamped as true copies), and written opinions from the local Department of Commerce and Tourism regarding the enterprise's compliance with commercial laws.

BASED ON THE WRITTEN REQUEST OF THE ENTERPRISE ENGAGED IN TOBACCO LEAF EXPORT, THE TAX DEPARTMENT SHALL CHECK THE CONDITIONS FOR THE ENTERPRISE ENGAGED IN TOBACCO LEAF EXPORT AS GUIDED BY POINTS 1, 2, 3, AND 4 OF SECTION II TO DETERMINE THE ELIGIBLE SUBJECTS FOR VAT REFUND ON TOBACCO LEAF EXPORTS; SEND A WRITTEN NOTICE TO THE ENTERPRISE FOR INFORMATION, AND SIMULTANEOUSLY FORWARD IT TO THE MINISTRY OF FINANCE AND THE MINISTRY OF TRADE FOR REPORTING.

V. DOCUMENTS FOR APPLICATION FOR VAT REFUND.

ENTERPRISES EXPORTING FOREIGN-LABELED TOBACCO LEAF PRODUCED IN VIETNAM, WHICH ARE ELIGIBLE FOR VAT REFUND, SHALL SUBMIT A WRITTEN APPLICATION FOR VAT REFUND (IN ACCORDANCE WITH ATTACHED FORM) TO THE PROVINCIAL OR CITY TAX DEPARTMENT WHERE THE ENTERPRISE IS HEADQUARTERED, ALONG WITH THE FOLLOWING COMPLETE SET OF DOCUMENTS:

- INVOICE LIST FOR TOBACCO LEAF PURCHASES (FORM 01-BK).

- INVOICE LIST FOR TOBACCO LEAF EXPORT SALES (FORM 02-BK).

- INVENTORY LIST FOR TOBACCO LEAF EXPORTS, IMPORTS, AND STOCKS (FORM 03-BK).

- BUSINESS RESULTS REPORT FOR EXPORTED TOBACCO LEAF (ATTACHED FORM). IF THE RELATED EXPENSES FOR EXPORTED TOBACCO LEAF ARE NOT SEPARATELY ACCOUNTED FOR, THE ENTERPRISE SHALL ALLOCATE THEM AS PERCENTAGES (%) OF REVENUE. IN CASES WHERE EXPENSES AND INCOME RELATED TO EXPORTED TOBACCO LEAF HAVE NOT BEEN FULLY ACCOUNTED FOR (BECAUSE VAT REFUNDS HAVE NOT YET BEEN ISSUED), THE ENTERPRISE SHALL ACCOUNT FOR THEM BASED ON PROVISIONAL CALCULATIONS.

- EXPORT DECLARATION FORM CONFIRMED BY THE CUSTOMS AUTHORITY REGARDING THE QUANTITY OF FOREIGN-LABELED TOBACCO LEAF PRODUCED IN VIETNAM EXPORTED THROUGH INTERNATIONAL SEAPORTS VIA CONTAINERS, IN ACCORDANCE WITH THE GUIDELINES OF THE GENERAL CUSTOMS DEPARTMENT.

- WRITTEN SALE CONTRACT BETWEEN THE EXPORT ENTERPRISE AND FOREIGN TRADERS; WRITTEN PURCHASE CONTRACT BETWEEN THE EXPORT ENTERPRISE AND THE FOREIGN TOBACCO BRANCH IN VIETNAM OR THE PRIMARY DISTRIBUTOR OF THE FOREIGN TOBACCO BRANCH IN VIETNAM, IN ACCORDANCE WITH THE COMMERCE LAW.

- PAYMENT DOCUMENTS FROM FOREIGN BUYERS THROUGH COMMERCIAL BANKS IN THE FORM OF LETTERS OF CREDIT (L/C) OR TELEGRAPHIC TRANSFERS (TTr), IN ACCORDANCE WITH CURRENT REGULATIONS OF THE STATE BANK AND AGREEMENTS IN THE EXPORT CONTRACT; PAYMENT DOCUMENTS THROUGH BANK TRANSFERS FROM THE EXPORT ENTERPRISE TO THE FOREIGN TOBACCO BRANCH IN VIETNAM OR PRIMARY DISTRIBUTORS.

THE ENTERPRISE MUST SUBMIT ORIGINAL DOCUMENTS TO THE TAX DEPARTMENT, EXCEPT FOR THE EXPORT AND IMPORT DECLARATION FORMS, TRADE CONTRACTS, AND PAYMENT DOCUMENTS, WHICH MUST BE CERTIFIED COPIES WITH THE SEAL OF THE ENTERPRISE INDICATING THAT THEY ARE TRUE COPIES. THE ENTERPRISE SHALL BE LEGALLY RESPONSIBLE FOR THE DATA AND DOCUMENTS RELATED TO THE VAT REFUND APPLICATION.

THE VAT REFUND APPLICATION DOCUMENTS SHALL BE PREPARED QUARTERLY. FOR ENTERPRISES THAT HAVE EXPORTED TOBACCO LEAF IN THE FIRST QUARTER AFTER THIS CIRCULAR TAKES EFFECT, THE ENTERPRISE SHALL SUBMIT A SINGLE VAT REFUND APPLICATION FOR TOBACCO LEAF EXPORTED FROM THE EFFECTIVE DATE OF THE CIRCULAR TO THE END OF THE QUARTER.

VI. PROCEDURE AND AUTHORITY FOR VAT REFUND.

UPON RECEIPT OF THE ENTERPRISE'S APPLICATION FOR VAT REFUND, THE TAX DEPARTMENT SHALL CONDUCT AN ON-SITE INSPECTION:

+ TO CORRECTLY IDENTIFY THE ELIGIBLE SUBJECTS FOR VAT REFUND.

+ TO CHECK THE APPLICATION DOCUMENTS, PROCEDURES, AND CONDITIONS FOR VAT REFUND IN ACCORDANCE WITH THE GUIDELINES OF THIS CIRCULAR.

SPECIFICALLY, THE TAX DEPARTMENT SHALL RECHECK THE OWNERSHIP CAPITAL CONDITION BEFORE MAKING A DECISION ON EACH VAT REFUND.

+ TO VERIFY THE QUANTITY OF TOBACCO LEAF PURCHASED, THE ACTUAL QUANTITY EXPORTED, AND THE RELATED INVOICES AND DOCUMENTS.

+ TO DETERMINE THE AMOUNT OF VAT REFUND IN ACCORDANCE WITH THE REGULATIONS.

WITHIN 15 WORKING DAYS FROM THE DATE OF RECEIVING THE ENTERPRISE'S APPLICATION FOR VAT REFUND, THE TAX DEPARTMENT SHALL CHECK THE APPLICATION DOCUMENTS AND PROCEDURES AT THE ENTERPRISE. THE INSPECTION SHALL BE CONDUCTED IN ACCORDANCE WITH THE CURRENT AUDIT AND INSPECTION PROCEDURES. WITHIN 10 DAYS FROM THE END OF THE INSPECTION, THE TAX DEPARTMENT SHALL ISSUE A DECISION ON VAT REFUND FOR THE ENTERPRISE (IN ACCORDANCE WITH ATTACHED FORM). IF THE ENTERPRISE DOES NOT QUALIFY FOR VAT REFUND, THE TAX DEPARTMENT SHALL NOTIFY THE ENTERPRISE IN WRITING.

VII. OTHER PROVISIONS.

1. BASED ON THE LIST OF FOREIGN TOBACCO BRANCHES IN VIETNAM AND PRIMARY DISTRIBUTORS OF FOREIGN TOBACCO BRANCHES WITH LICENSES TO OPERATE IN THE TOBACCO INDUSTRY ISSUED BY THE MINISTRY OF TRADE, THE MINISTRY OF FINANCE (GENERAL TAX DEPARTMENT) SHALL ANNOUNCE IN WRITING TO THE PROVINCIAL TAX DEPARTMENTS THE FOREIGN TOBACCO BRANCHES IN VIETNAM AND PRIMARY DISTRIBUTORS OF FOREIGN TOBACCO BRANCHES IN VIETNAM TO SERVE AS THE BASIS FOR DETERMINING THE CONDITIONS FOR VAT REFUND.

2. THE AMOUNT OF VAT REFUND FOR EXPORTED TOBACCO LEAF SHALL BE FUNDED FROM THE VAT REFUND FUND.

VIII. EFFECTIVE DATE.

THIS CIRCULAR SHALL TAKE EFFECT 15 DAYS AFTER ITS PUBLICATION IN THE GAZETTE. THE GUIDELINES FOR VAT REFUND IN THIS CIRCULAR SHALL APPLY TO FOREIGN-LABELED TOBACCO LEAF PRODUCED IN VIETNAM EXPORTED FROM THE EFFECTIVE DATE OF THE CIRCULAR.

DEPUTY MINISTER
DEPUTY MINISTER

(Signed)


Truong Chi Trung