Circular No. 43 TC/TCT guides on turnover tax for insurance and reinsurance business activities.

CIRCULAR

DIRECTIVE NO. 43/TC-TCT OF JUNE 5, 1995 ISSUED BY THE MINISTRY OF FINANCE GUIDING THE BUSINESS INCOME TAX FOR INSURANCE AND REINSURANCE OPERATIONS 

BASED ON THE LAW ON BUSINESS INCOME TAX AND CURRENT GUIDING DOCUMENTS;
TO IMPLEMENT THE BUSINESS INCOME TAX IN LINE WITH THE OPERATIONS OF INSURANCE AND REINSURANCE BUSINESSES ACCORDING TO GOVERNMENT DECREE NO. 100/CP OF DECEMBER 18, 1993 ON INSURANCE BUSINESS AND DECISION NO. 1314/TC-QĐ-TCNH OF DECEMBER 21, 1994 OF THE MINISTRY OF FINANCE, THE MINISTRY OF FINANCE GUIDES THE COLLECTION OF BUSINESS INCOME TAX FOR THESE OPERATIONS AS FOLLOWS:

I. BUSINESS INCOME SUBJECT TO TAX:

The business income subject to tax for the insurance industry (including joint-stock companies, companies, branches of domestic and foreign enterprises...) engaged in insurance and reinsurance operations in Vietnam (collectively referred to as insurance and reinsurance businesses) is defined as follows:

1. Original insurance premium: Includes the total amount of money received from organizations and individuals participating in purchasing insurance.

2. Appraisal agent fee includes the total amount of money received from organizations and individuals both domestically and internationally hiring insurance and reinsurance businesses for appraisal services; other income from insurance business activities such as claim adjustment fees, third-party claims...

3. Reinsurance acceptance fee from insurance and reinsurance businesses operating outside the territory of Vietnam.

Reinsurance acceptance fees from insurance and reinsurance businesses operating within the territory of Vietnam are not subject to business income tax (the business income tax has already been calculated on the original insurance premium).

Example: Insurance Company A receives:

a) Original insurance premium directly from insurance participants is 100 million VND.

b) Reinsurance acceptance fee from insurance and reinsurance businesses operating outside the territory of Vietnam is 50 million VND.

c) Reinsurance acceptance fee from insurance businesses operating within the territory of Vietnam is 30 million VND.

d) Reinsures again to Reinsurance Company B for 80 million VND.

Company A will have to pay business income tax on the business income including:

- Original insurance premium mentioned in point a: 100 million VND

- Reinsurance acceptance fee mentioned in point b: 50 million VND

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Total: 150 million VND

The reinsurance acceptance fee from domestic insurance businesses mentioned in point c is 30 million VND and is not subject to business income tax.

The reinsurance acceptance fee that Company A reinsures again to Company B mentioned in point d is 80 million VND, which Company B does not need to include in its business income (it is the original insurance premium of the first insurance business directly collected from organizations and individuals purchasing insurance and has already paid business income tax).

4. Reinsurance commission income: this income is recognized by insurance and reinsurance businesses from other insurance and reinsurance businesses due to reinsurance and must be included in business income for calculating business income tax.

Example: Insurance Company A reinsures for Company B (Company B accepts), the amount of reinsurance premium is 100 million VND. Company B pays Company A a reinsurance commission at a rate of 5%, which is 5 million VND. Company A will have to pay business income tax on the amount of 5 million VND received.

Other incomes such as foreign goods sales commissions, abandoned foreign goods, and other business activities... the business income of each type of activity must be separately accounted for to apply specific tax rates stipulated in the Business Income Tax Table for that activity.

In cases where only acting as brokers or agents for other businesses in insurance, the commission income from these services must be taxed according to the tax rate specified for brokerage or agency activities.

II. TAX RATE FOR BUSINESS INCOME TAX:

1. For insurance activities: tax rate of 4% (as stipulated in Point 4, Section VI of the Business Income Tax Table issued together with Government Decree No. 55/CP of August 28, 1993).

2. For other activities: must pay business income tax according to the specific tax rate prescribed for each industry or profession in the Business Income Tax Table. In cases where it is not possible to separately account for the business income of each industry or profession, the highest tax rate prescribed for the industry or profession with business operations shall be applied to the total business income of all business activities of the enterprise.

III. REGISTRATION AND DECLARATION OF PAYMENT OF BUSINESS INCOME TAX:

The declaration and registration of payment of business income tax for insurance and reinsurance operations are carried out as follows:

1. Provincial and municipal insurance companies declare and register payment of business income tax at the provincial or municipal tax office where their headquarters are located. The General Office of Vietnam Insurance Corporation and the National Reinsurance Corporation of Vietnam declare and register payment of business income tax at the Hanoi Municipal Tax Office.

In cases where joint-stock companies or companies have branches located in other localities, the branches must declare and register payment of business income tax at the provincial or municipal tax office where they are located. Joint ventures with foreign countries also implement declarations and registrations of payment of taxes as above.

2. Procedures for declaration and payment of tax: implemented according to the guidance at Points 2 and 3 of Part B, Section III of Circular No. 73A/TC-TCT dated August 30, 1993 of the Ministry of Finance.

IV. TAX EXEMPTIONS AND REDUCTIONS:

Insurance premiums for student insurance, livestock and crop insurance, health insurance, social insurance are temporarily not subject to business income tax (as stipulated in Article 13 of Government Decree No. 55/CP of August 28, 1993).

V. IMPLEMENTATION:

This circular takes effect from January 1, 1995 and replaces previous guiding documents of the Ministry of Finance regarding business income tax for insurance operations.

During implementation, if there are difficulties or obstacles, units are requested to report to the Ministry of Finance for timely research and resolution.