Circular No. 42/1999/TT-BTC guides the implementation of financial, accounting, and tax regimes for duty-free shops operating in Vietnam.

CIRCULAR

Guidelines for the implementation of financial, accounting, and tax regimes for

duty-free shops operating in Vietnam

Pursuant to the Law on Export Duties and Import Duties; the Law on Corporate Income Tax; the Law on Value Added Tax;

Pursuant to Decision No. 205/1998/QĐ-TTg dated October 19, 1998 of the Government Chairman promulgating the Regulations on Duty-Free Shops;

Pursuant to Circular No. 172/1998/TT-BTC dated December 22, 1998 of the Ministry of Finance guiding the implementation of Decree No. 54/CP dated August 28, 1993, and Decree No. 94/1998/NĐ-CP dated November 17, 1998 of the Government detailing the implementation of the Law on Export Tax, Import Tax, and Laws amending and supplementing certain provisions of the Law on Export Tax, Import Tax;

After exchanging opinions with the Ministry of Trade and the General Department of Customs, the Ministry of Finance provides guidelines for the implementation of financial, accounting, and tax regimes for duty-free shops as follows:

I/ APPLICABLE OBJECTS:

This Circular applies to duty-free shops (hereinafter referred to as duty-free shops) permitted to sell goods to outbound and inbound passengers at seaports, international airports, land border gates, railway border gates, downtown areas (Downtown Duty-Free Shops); and shops selling goods to diplomatic personnel under Decree No. 73/CP dated July 30, 1994 of the Government.

II/ REGIME OF PAYMENT, COLLECTION, AND EXEMPTION FROM TAXES:

1/ Import tax, special consumption tax, and value-added tax on imported goods intended for sale to tax-exempted customers at duty-free shops:

- Goods imported for sale at duty-free shops are exempt from import tax, special consumption tax, and are not subject to value-added tax.

- All goods sold at duty-free shops must be affixed with a "Vietnam duty not paid" label printed and issued by the enterprise according to the model approved by the Ministry of Finance (General Department of Taxation) and managed under the stamp control regime stipulated in Decision No. 529/QĐ dated December 22, 1992 of the Minister of Finance.

The procedures for tax exemption include:

- A certificate of eligibility to operate duty-free goods issued by the Ministry of Trade (for domestic enterprises) or an investment license issued by the Ministry of Planning and Investment (for foreign-invested enterprises);

- A letter of permission to import issued by the Ministry of Trade or an authorized agency if:

+ The goods are cigars, cigarettes, or items subject to export or import conditions.

+ Goods imported for sale at duty-free shops with foreign investment.

- Foreign trade purchase and sale contracts;

- Declaration forms for imported goods (with confirmation of actual import by the customs authority at the port of entry);

- Entrusted import agency agreements (if the goods are entrusted imports).

Based on the above-mentioned documents, the provincial or municipal customs authority shall inspect, issue decisions on tax exemptions, monitor, and settle accounts for the goods sold according to the prescribed regulations.

2/ Corporate income tax and value-added tax on the operation of duty-free shops shall be implemented in accordance with the Law on Corporate Income Tax; the Law on Value-Added Tax, and sub-Laws guiding these laws issued by the Government and the Ministry of Finance, as currently regulated, specifically:

- For domestic enterprises not governed by the Law on Foreign Investment in Vietnam, the corporate income tax rate applicable is 32% (thirty-two percent) on taxable income. For enterprises with foreign investment, the corporate income tax rate and the tax on profit repatriation abroad shall be implemented according to the provisions in the investment permit issued by the Ministry of Planning and Investment.

- For shops selling goods to inbound passengers who are allowed to import items exceeding the tax-exempt standard, when importing such items, they must declare to the customs authority handling the import procedures to pay the full tax on the excess value before selling the goods. Duty-free shops must separately declare the value of goods that customers must pay taxes on and submit the required taxes according to the regulations.

- For goods requested to be re-exported or taken out of the management area of duty-free shops for domestic consumption, they must fulfill tax obligations according to the relevant regulations, and if the goods belong to the list of conditionally imported goods, they must obtain permission from the Ministry of Trade.

3/ Goods already imported and legally circulating in the Vietnamese market and goods produced in Vietnam brought into duty-free shops for sale:

Goods permitted to be imported and circulating in the market; goods produced or processed domestically and sold to duty-free shops for sale to tax-exempt customers are considered exported goods. Units must pay export tax according to the Law on Export Tax, Import Tax, and can have import tax, special consumption tax, and value-added tax refunded according to the current regulations of the relevant tax laws for the imported goods or raw materials used to produce the aforementioned goods.

Procedures for refunding import tax, special consumption tax, and value-added tax on goods legally circulating in the Vietnamese market, raw materials for producing goods sold to duty-free shops are carried out according to the current regulations of the Ministry of Finance regarding refunds for raw materials imported for production of export goods and temporarily imported goods for re-export, except that the foreign trade purchase and sale contract is replaced by an economic purchase and sale contract between the selling unit and the duty-free shop, and sales invoices or value-added tax invoices.

4/ For damaged, low-quality, or broken goods at duty-free shops, they must be destroyed under the supervision of the Provincial Customs Bureau, the directly responsible customs office, and representatives of the duty-free shop. Based on the destruction record, the Director of the Customs Bureau issues a decision exempting tax on the destroyed goods. In cases where damaged, low-quality goods...at duty-free shops are not destroyed but re-exported abroad, the Director of the Customs Bureau will inspect and issue a decision not to collect tax on the actually re-exported goods.

III/ ACCOUNTING REGIME:

Activities of duty-free shops shall be recorded according to the enterprise accounting system (Decision No. 1141 TC/CĐKT dated November 2, 1995 of the Minister of Finance) and current circulars guiding amendments and supplements.

IV/ REPORTING, INSPECTION, AND SANCTIONS FOR VIOLATIONS:

In cases where duty-free shops sell goods to non-designated recipients or擅自在国内市场销售未获相关职能机关许可的免税商品，一律视为逃税漏税行为，将追缴全部进口关税、特别消费税（如适用进口原材料生产该商品）、已免除的所有税费，并根据财政部第172/1998/TT-BTC号通函于1998年12月22日的规定进行处罚。

The General Department of Customs is responsible for organizing and inspecting the implementation of duty-free sales regulations at duty-free shops as stipulated in this Circular. Annually, the Ministry of Finance will coordinate with the Ministry of Trade, the General Department of Customs, and relevant sectors to conduct focused inspections at some duty-free shops. If necessary, the Ministry of Finance will take the lead in conducting surprise inspections.

After each quarter, the customs authority that has settled taxes on goods sold at duty-free shops must submit a report on business operations at those shops (with attached reporting forms) to the Ministry of Finance, the Ministry of Trade, the Ministry of Planning and Investment, and the General Department of Customs.

V/ IMPLEMENTATION:

This Circular shall take effect fifteen days from the date of issuance. Any previous guidance that contradicts the provisions of this Circular shall be invalidated.

The General Department of Customs is responsible for guiding the procedures for tax exemptions and management of goods sold at duty-free shops as specified in Part C, Section II, Point 5 of Circular No. 172/1998/TT-BTC dated December 22, 1998, issued by the Ministry of Finance, and the provisions of this Circular.

During the implementation process, if there are any difficulties, units are requested to report them to the Ministry of Finance for timely resolution.