Circular No. 44/1999/TT-BTC provides guidance on tax incentives for Cooperatives

CIRCULAR

Guidelines on tax incentives for cooperatives

Pursuant to the Law on Cooperatives adopted by the National Assembly on March 20, 1996, and the guiding documents for implementation;

Pursuant to current laws on taxation and land revenue collection;

The Ministry of Finance guides the implementation of tax incentive regimes for cooperatives as follows:

I. SCOPE OF APPLICATION

The subjects eligible for tax incentives under this Circular are cooperatives, cooperative unions, and people's credit funds (hereinafter referred to collectively as cooperatives) established and granted business registration certificates according to the Law on Cooperatives adopted by the National Assembly on March 20, 1996, and the guiding documents for implementation.

II. TAX INCENTIVE REGIMES

The tax incentive regimes applicable to each type of tax for specific forms of production and business operations of cooperatives shall be implemented as follows:

1. Regarding stamp duty:

a) Cooperatives shall pay stamp duty according to Point 2, Section I of Circular No. 69-TC/TCT dated November 5, 1996 issued by the Ministry of Finance.

b) Retail stores, shops, and dependent business units of cooperatives shall pay stamp duty according to Point 3, Section I of Circular No. 69-TC/TCT dated November 5, 1996 issued by the Ministry of Finance.

c) Members or groups of members (collectively referred to as members) who undertake tasks assigned by the cooperative do not need to pay separate stamp duty. Cooperative members are defined as follows:

+ For members of commercial cooperatives: must meet the conditions, rights, and obligations of cooperative members as stipulated in Government Decree No. 41/CP dated April 29, 1997 promulgating the Model Charter of Commercial Cooperatives;

+ For members of agricultural cooperatives: must meet the conditions, rights, and obligations of cooperative members as stipulated in Government Decree No. 43/CP dated April 29, 1997 promulgating the Model Charter of Agricultural Cooperatives;

+ For members of industrial and construction cooperatives: must meet the conditions, rights, and obligations of cooperative members as stipulated in Government Decree No. 44/CP dated April 29, 1997 promulgating the Model Charter of Industrial and Construction Cooperatives;

+ For members of transportation cooperatives: must meet the conditions, rights, and obligations of cooperative members as stipulated in Government Decree No. 45/CP dated April 29, 1997 promulgating the Model Charter of Transportation Cooperatives;

+ For members of fisheries cooperatives: must meet the conditions, rights, and obligations of cooperative members as stipulated in Government Decree No. 46/CP dated April 29, 1997 promulgating the Model Charter of Fisheries Cooperatives.

To have grounds for determining the exemption from stamp duty for cooperative members, cooperatives must fully account for and record the income, expenses, and results of each member's tasks in the overall production and business results of the cooperative. If the activities of each member are not recorded in the overall production and business results of the cooperative, the exemption from stamp duty as guided in this Circular will not be implemented.

2. Regarding corporate income tax:

a) For newly established entities:

a.1. Newly established production, construction, and transportation cooperatives are exempt from corporate income tax for the first two years from the date they start generating taxable income and are entitled to a 50% reduction in corporate income tax payable for the next two years. In cases where the cooperatives are established in mountainous, island, or other difficult areas, the period for tax reduction can be extended by an additional two years.

a.2. Newly established production, construction, and transportation cooperatives operating in sectors and industries eligible for investment incentives are exempted and reduced in taxes as follows:

+ Investment in counties outside mountainous, island, and other difficult areas is exempt from corporate income tax for the first two years from the date of generating taxable income and is entitled to a 50% reduction in corporate income tax payable for the next three years.

+ Investment in difficult areas is exempt from corporate income tax for the first three years from the date of generating taxable income and is entitled to a 50% reduction in corporate income tax payable for the next five years.

+ Investment in counties inhabited by ethnic minorities, in mountainous regions, and on islands is exempt from corporate income tax for the first four years from the date of generating taxable income and is entitled to a 50% reduction in corporate income tax payable for the next seven years.

+ Investment in counties inhabited by ethnic minorities in highland mountainous regions is exempt from corporate income tax for the first four years from the date of generating taxable income and is entitled to a 50% reduction in corporate income tax payable for the next nine years.

a.3. Newly established trading and service cooperatives operating in sectors and industries eligible for investment incentives are exempted and reduced in taxes as follows:

+ Investment in counties outside ethnic minority, mountainous, island, and other difficult areas is entitled to a 50% reduction in corporate income tax payable for the first two years from the date of generating taxable income.

+ Investment in difficult areas is exempt from corporate income tax for the first year from the date of generating taxable income and is entitled to a 50% reduction in corporate income tax payable for the next three years.

+ Investment in counties inhabited by ethnic minorities, in mountainous regions, and on islands is exempt from corporate income tax for the first two years from the date of generating taxable income and is entitled to a 50% reduction in corporate income tax payable for the next four years.

+ Investment in counties inhabited by ethnic minorities in highland mountainous regions is exempt from corporate income tax for the first two years from the date of generating taxable income and is entitled to a 50% reduction in corporate income tax payable for the next five years.

For cooperatives engaged in comprehensive production and business operations, if their business registration certificate includes functions such as production (or construction, or transportation), and if the cooperative separately accounts for the income and expenses of each activity, then the tax incentive standards for each specific form of production and business operation as stipulated in this Circular shall apply. If separate accounting is not possible, only the tax incentives applicable to trading and service cooperatives shall be implemented.

b) For expansion of production investment:

Cooperatives engaged in production, construction, transportation that invest in building new production lines, expanding scale, innovating technology, improving the ecological environment, enhancing production, construction, and transportation capacity shall be exempt from Corporate Income Tax on additional income for the first year and have their additional Corporate Income Tax reduced by 50% for the next two years due to new investments.

The method for determining the additional income eligible for tax exemption and reduction under this clause shall be carried out in accordance with the provisions of Clause 3, Section I, Part D, Circular No. 99/1998/TT-BTC dated July 14, 1998, issued by the Ministry of Finance guiding the implementation of Decree No. 30/1998/NĐ-CP dated May 13, 1998, of the Government detailing the implementation of the Law on Corporate Income Tax.

c) In cases where they relocate to areas with investment incentives:

Cooperatives relocating to mountainous regions, islands, and other difficult areas as defined by the Government shall be exempt from Corporate Income Tax for three years starting from when they begin generating taxable income.

d) For specific other cases:

- Cooperatives earning income from agricultural planting, animal husbandry, aquaculture activities which fall within the category not subject to Corporate Income Tax.

- Cooperatives directly providing technical services for agricultural, forestry, fishery, salt production activities such as irrigation, land preparation, product preservation, livestock and plant protection, pest control, salt production and repair tools, agricultural and fishing equipment, water management services... shall be exempt from Corporate Income Tax on income derived from these activities. Services provided for other entities not directly serving agricultural production shall not enjoy the tax benefits stipulated herein.

- Rural cooperatives providing electricity supply services to farming households and simple cooperative loading and unloading services shall be exempt from Corporate Income Tax for two years starting from when they generate taxable income from these activities.

đ) Authority to review and application forms for tax exemptions and reductions:

The authority to review and application forms for tax exemptions and reductions shall be implemented strictly in accordance with the provisions of Section II, Section III, Part D, Circular No. 99/1998/TT-BTC dated July 14, 1998, issued by the Ministry of Finance guiding the implementation of Decree No. 30/1998/NĐ-CP dated May 13, 1998, of the Government detailing the implementation of the Law on Corporate Income Tax.

3- Regarding stamp duty:

a) Preferential treatment regarding stamp duty for specific cases, as follows:

- Production materials of members (subject to stamp duty) that have paid stamp duty and contributed as capital to the Cooperative, when the Cooperative registers ownership and usage rights, shall be exempt from paying stamp duty;

- Production materials registered under the Cooperative's ownership and usage rights, when these materials are transferred between members within the Cooperative for use, shall not be required to pay stamp duty;

- In cases where the Cooperative returns production materials to members who must then register their own ownership and usage rights, stamp duty must be paid.

b) Authority to review and application forms for stamp duty exemptions and reductions:

- Application forms for stamp duty exemptions and reductions of Cooperatives must be submitted to the local stamp duty collection agency where the Cooperative is headquartered, including:

+ Business registration certificate according to the Law on Cooperatives dated March 20, 1996, clearly stating the business sectors and products produced and traded;

+ Relevant property documents as required when registering for stamp duty payment.

- The head of the stamp duty collection agency has the authority to decide on stamp duty exemptions and reductions for Cooperative assets in accordance with this Circular.

III. REGARDING LAND RENT

1. Rural cooperatives located in mountainous, island areas performing direct service functions for agricultural, forestry, aquaculture, salt production if they need to lease land from the State for headquarters and production workshops shall be exempt from land rent for five years starting from the date of issuance of the business registration certificate according to the Law on Cooperatives;

2. Other cooperatives (not falling under the provisions of point 1 of this section) that have been issued a business registration certificate according to the Law on Cooperatives and are subject to land leasing as prescribed by the law on land shall have their land rent reduced by 50% for the first two years from the date of issuance of the business registration certificate according to the Law on Cooperatives. In cases where land use fees were previously paid to the State, such payments shall be handled in accordance with current land laws.

c) Authority to review and application forms for land rent exemptions and reductions:

- Application forms for land rent exemptions and reductions of Cooperatives must be submitted to the tax authority, including:

+ Business registration certificate according to the Law on Cooperatives dated March 20, 1996, clearly stating the business sectors and products produced and traded;

+ Tax declaration registration form confirmed by the tax authority.

- The Director of the Tax Department has the authority to review and decide on land rent exemptions and reductions for Cooperatives in accordance with this Circular.

IV. PROCEDURES FOR TAX EXEMPTION AND REDUCTION APPLICATIONS

In all cases, Cooperatives applying for tax exemptions and reductions must submit tax exemption and reduction applications in accordance with regulations to the tax authority managing the Cooperative. The tax exemption and reduction application of the entity submitted to the tax authority must be the original copy with complete administrative procedures of the document. If the application contains copies of documents: if the copy is a document or certificate issued by other agencies or units such as the business registration certificate, establishment decision... it must bear a certified copy stamp; if the copy is a document of the entity itself such as final accounts or related certificates, it must bear a sent copy stamp of the entity.

When receiving tax exemption and reduction applications, the tax authority managing the Cooperative must check the received application, determine whether the application has been properly and fully prepared in accordance with regulations, whether there are any missing or incorrect parts, whether it falls within the scope of tax exemptions and reductions as stipulated by law, compare the application with reality, and clearly identify relevant figures and situations related to the tax exemption and reduction application.

If the application is incomplete or incorrect, the Cooperative must be promptly requested to supplement and correct it.

In cases where the Cooperative's request does not fall under the tax exemption or reduction provisions stipulated by law, the tax authority must provide a written response to the unit, clearly stating the reasons for not considering the exemption or reduction.

For cases of tax exemption or reduction that are outside the jurisdiction of the tax authority managing the Cooperative, after reviewing and examining the file and the actual situation of the Cooperative, the tax authority shall issue a written opinion and send it to the higher-level tax authority for consideration and resolution. The tax authority must also forward the entire reviewed file of the unit along with the tax authority's recommendation letter, while simultaneously notifying the unit in writing about the status of the file transfer. The file sent to the higher-level tax authority must clearly list the file contents.

In cases where tax exemption or reduction is granted, the tax authority deciding on such exemption or reduction must issue a tax exemption or reduction decision and send it to the Cooperative receiving the exemption or reduction.

Based on the tax exemption or reduction decision, the tax authority shall settle the amount of tax payable with the Cooperative and re-determine the profit or loss results and other revenue payments to the State budget.

The authority responsible for the tax exemption or reduction decision has the responsibility to retain and manage the tax exemption or reduction file according to the prescribed regulations.

Within a maximum period of thirty days from the date of receipt of the file, the tax authority receiving the file to process tax benefits for the Cooperative as stipulated in this Circular shall be responsible for issuing a tax exemption or reduction decision or informing the entity of the reasons for not processing or not granting the benefit.

V. RESPONSE TO OBSTACLES AND COMPLAINT RESOLUTION

The resolution of obstacles, complaints, and the time limit for responding to tax-related obstacles and complaints concerning Cooperatives shall be carried out in accordance with Circular No. 51/1998/TT-BTC dated April 16, 1998, issued by the Ministry of Finance, guiding procedures for tax collection and payment, authority to examine tax exemptions and reductions, and tax settlement regarding business income tax and profit tax, as well as procedures for resolving tax-related obstacles.

||| VI. IMPLEMENTATION ORGANIZATION

- This Circular takes effect from January 1, 1999, and replaces Circular No. 78/1997/TT-BTC dated November 4, 1997, of the Ministry of Finance, and Circular No. 25/1998/TT-BTC dated March 4, 1998, amending and supplementing Circular No. 78/1997/TT-BTC dated November 4, 1997, of the Ministry of Finance, guiding the implementation of tax and financial benefits for Cooperatives as stipulated in Decrees No. 15/CP and No. 16/CP of the Government. All previous guidance from the Ministry of Finance in this field that contradicts this Circular or is not covered by this Circular shall cease to be effective.

- The implementation of tax benefits for Cooperatives during the period before the effectiveness of this Circular shall continue to follow the provisions in previous circulars of the Ministry of Finance. If there is a change in the duration of the benefit or a new benefit regime specified in this Circular differs from those in previous circulars of the Ministry of Finance, adjustments will be made to apply to the remaining benefit period (if any) starting from the date this Circular becomes effective.

- New Cooperatives established and enjoying tax and financial benefits guided by this Circular are those newly established or converted (if applicable) and have obtained a business registration certificate according to the Law on Cooperatives from the date this Circular becomes effective.

- The handling of debts owed by Cooperatives from the date this Circular becomes effective shall be implemented in accordance with Decision No. 95/1998/QĐ-TTg dated May 18, 1998, of the Prime Minister on debt settlement in phase II and related implementing guidelines.

- Cooperatives eligible for benefits under the guidance of this Circular may also enjoy other preferential policies (if any) as stipulated by law.

- Local financial authorities and tax authorities have the responsibility to monitor, urge, and guide Cooperatives to comply with current tax and financial policies and the content stipulated in this Circular.

- Any violation of the provisions of this Circular will be handled according to current laws.

During the implementation process, if any obstacles arise, units are requested to promptly report them to the Ministry of Finance for research and supplementary guidance.