Circular No. 43TC/TCT guiding value-added tax on insurance and reinsurance business activities

 CIRCULAR

OF THE MINISTRY OF FINANCE NUMBER 43/TC-TCT ON JUNE 5, 1995 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 COLLECTION OF BUSINESS INCOME TAX IN LINE WITH THE ACTIVITIES OF INSURANCE AND REINSURANCE ENTERPRISES ACCORDING TO DECREE NO. 100/CP OF THE GOVERNMENT ON INSURANCE BUSINESS ON DECEMBER 18, 1993 AND DECISION NO. 1314/TC-QĐ-TCNH OF THE MINISTRY OF FINANCE ON DECEMBER 21, 1994, THE MINISTRY OF FINANCE GUIDES THE COLLECTION OF BUSINESS INCOME TAX FOR THESE ACTIVITIES AS FOLLOWS:

I. BUSINESS INCOME SUBJECT TO TAX:

The business income subject to tax for the insurance industry (including all 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 enterprises) is defined as follows:

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

2. Inspection agency fee includes the total amount of money received from organizations and individuals both domestically and internationally for hiring insurance and reinsurance enterprises to conduct inspections; other income from insurance business activities such as claim processing fees, third-party recovery fees...

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

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

Example: Insurance Company A receives:

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

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

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

d) Reinsuring again to Reinsurance Company B totaling 80 million VND.

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

- 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 enterprises mentioned in point c: 30 million VND is not subject to business income tax.

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

4. Reinsurance commission income: this income is recognized by insurance and reinsurance enterprises from other insurance and reinsurance enterprises due to reinsurance and must be recorded as business income for the purpose of 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 5 million VND received.

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

In cases where services are merely brokerage or agency services for other enterprises regarding 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 Decree No. 55/CP dated August 28, 1993).

2. For other activities: must be taxed 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 engaged in business operations shall be applied to the total business income 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 activities 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 declare and register payment of business income tax at the Hanoi Municipal Tax Office.

In cases where joint-stock companies or companies have branches 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 follow the same procedures.

2. Declaration and payment procedures: carried out according to the guidance in 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 exempt from business income tax (as stipulated in Article 13 of Decree No. 55/CP dated August 28, 1993 of the Government).

V. IMPLEMENTATION:

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

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