Decision No. 468/TC-QĐ-TCT on piloting the collection of Value Added Tax (VAT)

Pursuant to …;

Regarding the pilot collection of Value Added Tax (VAT)

THE MINISTER OF FINANCE

Pursuant to Decision No. 155/HĐBT dated October 15, 1988 of the Council of Ministers (now the Government) on the functions, tasks, and organizational structure of the Ministry of Finance;

Pursuant to Decree No. 196/HĐBT dated December 11, 1989 of the Council of Ministers (now the Government) on the tasks, powers, and state management responsibilities of ministries;

Pursuant to Point 1, Section II of the Resolution on the State Budget for 1993 of the National Assembly of the Socialist Republic of Vietnam, Session IX, Second Meeting, adopted on December 23, 1992, which states "To entrust the Government with implementing the pilot collection of Value Added Tax (VAT) to draw lessons for drafting this Law on Tax," and the decision of the Prime Minister in Office of the Government's letter No. 1101/KTTH dated March 22, 1993, assigning the Ministry of Finance to prepare the content, organize and direct, select appropriate points to implement the VAT pilot to draw lessons for drafting this Law;

DECISION:

Article 1. Enact the VAT regime for the pilot implementation attached to this decision.

Article 2. Implement the pilot VAT for certain industries and enterprises instead of paying turnover tax under the current Law on Turnover Tax.

The industries and enterprises implementing the pilot VAT shall be decided by the Ministry of Finance after consultation with relevant ministries, sectors, and localities.

Article 3. Every three months and six months, there will be a preliminary review of the results of the pilot implementation, timely researching and amending any unreasonable aspects of the VAT regime, gradually drawing lessons towards drafting the Law on VAT to submit to the Government for submission to the National Assembly to replace the current Law on Turnover Tax.

Article 4. This decision takes effect from July 1, 1993.

REGIME OF VALUE ADDED TAX (VAT)

(Enacted together with Decision No. 468 TC/TCT/QĐ dated July 5, 1993 of the Minister of Finance on the pilot implementation of VAT)
Organizations and individuals belonging to various economic components engaged in production, construction, transportation, and services subject to turnover tax under the current Law on Turnover Tax, who meet the conditions stipulated in Article 2 below, may apply for the pilot implementation of VAT (VAT).

PART I
GENERAL PROVISIONS

Article 1. Conditions for applying VAT:

Article 2. 1- Have implemented accounting systems in accordance with the national accounting regulations, accurately reflecting all revenues and production and business expenses;

Apply a system of purchase and sale invoices issued by tax authorities, complying with prescribed recording requirements;

2- A3- Be approved by the Minister of Finance to participate in the VAT pilot program.

Temporarily not applying the VAT pilot program to the following activities:

Article 3. 1- Agricultural production subject to agricultural tax or land use tax;

2- Production of goods for export and production of items subject to special consumption tax;

3- Catering industry and some service activities;

4- Enterprises with foreign investment capital.

The basis for calculating tax is the added value and tax rate.

PART II
BASIS FOR TAXATION AND TAX RATE

Article 4. The calculation of VAT payable must be applied using one of the two methods below:

Article 5. 1- The deduction method of VAT paid at previous stages (referred to as the deduction method): The VAT payable is the difference between the VAT calculated on total taxable revenue and the VAT paid at previous stages; formula for calculation.

VAT payable amount

taxable revenue

Calculation formula:

Taxable revenue is the amount from selling goods, income from construction, freight charges, and income from service activities consistent with the characteristics of each business activity (as stipulated in Article 8 of the Law on Turnover Tax).

Article 6. The VAT paid at previous stages that can be deducted is the VAT paid by the seller recorded on the sales invoice received by the buyer for storage during the period for production and business purposes.

Article 7. In cases where materials and goods are purchased from businesses not participating in the VAT pilot program, the VAT deductible at previous stages is calculated by multiplying the purchase price according to the purchase invoice by the turnover tax rate of those materials and goods; if the specific tax cannot be determined, it can be deducted up to a maximum of 5%. The specific deductible tax rate is determined based on the condition that the VAT payable of the taxpayer does not fall below the turnover tax payable under the current turnover tax regime. If there is no valid invoice or document, no deduction is allowed.

Purchased materials and goods eligible for VAT deduction or deduction of previously paid turnover tax include raw materials, fuel, semi-finished products, finished goods, spare parts, and other consumables directly related to production and business operations, equivalent to the standard usage ratio for each product unit.

For machinery, equipment, transport vehicles, and buildings purchased as fixed assets, VAT or previously paid turnover tax deductions are temporarily not applicable when calculating the VAT payable of the enterprise.

The cost of purchased materials and goods corresponding to taxable revenue (under the difference method) is determined based on the purchase invoice price or actual payment documentation.

Article 8. For imported materials and goods, the CIF price plus import duties and additional fees (if any).

The VAT rate has three levels: 5%, 10%, and 15%. Detailed tax rates for each business activity are set out in the annexed decision.

Article 9. The rates of value-added tax are set at three levels: 5%, 10%, and 15%. The detailed rate table for each business sector shall be issued together with this Decision.

Where a business entity engages in multiple industries, it must pay VAT at the applicable rate for each industry. If separate accounting for each industry cannot be conducted, the entity shall pay at the highest applicable rate among the industries engaged in.

CHAPTER III
REGISTRATION, DECLARATION, PAYMENT OF TAX

Article 10. Business entities applying the pilot VAT system shall be responsible for:

Declaring registration information on capital, labor, industry, activities, products, and business locations with the tax authority;

Strictly adhering to the state's regulations on accounting records, vouchers, and invoices;

Providing accounting records, vouchers, and invoices upon request from the tax authority;

Reporting changes in business location or industry at least five days before such changes occur.

Article 11. Business entities have the obligation to:

Self-declare and calculate the VAT due for the previous month, submit the declaration form to the tax authority within the first five days of the following month. The business entity may simultaneously pay the tax along with submitting the declaration form;

Pay VAT according to the periodic payment schedule announced by the tax authority: 5 days, 10 days, 15 days, or monthly. The periodic payment schedule will be determined based on the total monthly tax liability for each specific entity.

Article 12. The tax authority has the duty and authority to:

1. Guide and inspect business entities to strictly comply with registration, declaration, payment of VAT, accounting systems, vouchers, and invoices;

2. Determine appropriate periodic tax payment deadlines based on the business situation and tax liabilities of each entity, review the tax calculation declarations to determine the tax payable, and notify the monthly tax payable amount to the entity;

3. Require business entities to provide complete documentation related to tax declaration and payment;

4. Have the right to assess the VAT payable in cases where business entities fail to declare and provide relevant documentation for tax calculation;

In cases where a business entity disagrees with the assessed tax amount, it has the right to appeal to the higher-level tax authority that issued the assessment. During the appeal process, the business entity must still pay the assessed tax amount.

5. Prepare administrative penalty records and impose administrative penalties within their authority, or refer criminal responsibility for violations of the VAT regime;

6. Examine and resolve complaints and reports regarding VAT.

PART IV
TAX REDUCTION AND EXEMPTION

Article 13. The following situations qualify for reduced VAT:

1. Business entities experiencing significant difficulties due to natural disasters, enemy attacks, or unexpected accidents;

2. Business entities operating in mountainous areas, islands; conducting scientific research, applying new technologies; newly established and operational, testing new production lines; producing goods to replace imported goods, if encountering difficulties leading to losses, may be eligible for reduced VAT, but the reduction cannot exceed 50% of the tax payable and the reduction period cannot exceed two years. For business entities operating in mountainous areas and islands, the reduction period cannot exceed three years.

In addition to the above cases, if applying the pilot VAT results in losses due to the VAT payable being higher than the income tax under the current Income Tax Law, then the VAT may be reduced to ensure the establishment of the three funds as prescribed and avoid losses, but the reduction must still ensure that the VAT paid equals the income tax under the current system.

CHAPTER V
SANCTIONS AND REWARDS

Article 14. Violations of the VAT regime shall be handled according to the provisions of Article 19 of the Income Tax Law; Decree No. 01-CP dated October 18, 1992, "Government Decree on the Regulation of Administrative Penalties in the Field of Tax"; and Circular No. 11-TC/TCT dated February 24, 1993, of the Ministry of Finance, "Guidelines for Implementing Government Decree No. 01-CP dated October 18, 1992 on Administrative Penalties in the Field of Tax."

Article 15. The head of the tax authority directly managing the tax affairs of business entities may issue decisions to impose penalties and apply the measures stipulated in Article 14.

Article 16. Individuals obstructing or inciting obstruction of investigations and handling of violations of this regime shall be subject to administrative penalties or criminal prosecution depending on the severity of the violation.

Tax officials or other individuals abusing their positions or powers to cover up violations, embezzle tax money, etc., shall be required to compensate and may also face disciplinary action, administrative penalties, or criminal prosecution depending on the severity of the violation.

Article 17. The tax authority shall implement reward systems for tax officials who successfully fulfill their assigned tasks and individuals who discover violations of the VAT regime.

Chapter VI
IMPLEMENTATION

Article 18. Business entities implementing the VAT regime instead of the current Income Tax Law must comply with all provisions of this regime.

Article 19. The Director of the General Department of Taxation shall be responsible for guiding the organization and inspection of the implementation of the pilot VAT regime according to this system, regularly summarizing experiences, and promptly proposing amendments to regulations that are not suitable.

Article 20. The VAT regime shall take effect from July 1, 1993.

VAT RATE TABLE

Attached to the VAT collection regulation

(Details of Article 9)

1- A 5% rate applies to:

Coal mining, mineral resources (excluding gold, silver, precious stones, oil, gas, natural gas);

Water supply production and distribution;

Logging, other forest products;

Fishing for aquatic and marine products;

Rice milling;

Fertilizer and pesticide production;

Basic chemical production;

Agricultural production not subject to agricultural tax;

Machinery and equipment manufacturing, transportation vehicles;

Production of laboratory, medical, educational, musical instruments, and parts;

Urban and city transport of goods and passengers;

Children's toy production;

Pharmaceutical and veterinary drug production;

Paper pulp and paper production.

2- A 10% rate applies to:

Production, construction, transportation, and service activities not specified in the 5% rate category (Group 1) and the 15% rate category (Group 3).

3- A 15% rate applies to:

Oil, gas, natural gas extraction;

Production of sweet water, soft drinks.

Production and assembly of electronic products;

Cement production (including clinker);

Production of various types of cosmetics;

Photography, printing, photocopying.

4- The tax rate applied for collection under the difference method for commercial activities, banking credit, gold and silver trading, foreign currency trading as prescribed in the Value Added Tax Law.

(For salt production activities, food service industry, service activities such as science and technology, education, renting shops, household items, wedding halls, cars, conference rooms, machinery and equipment, transportation means, hotels, dancing, horse racing, lottery, ship agency services, brokerage services... cultural, artistic and public service activities not yet subject to VAT and not specified in this tax rate table)./