Circular No. 6/TC-CTN guiding the collection and payment of taxes for foreign-invested enterprises and foreign partners conducting business cooperation based on contracts.

CIRCULAR

NUMBER 6/TC-CTN OF MARCH 16, 1989

GUIDELINES FOR THE COLLECTION AND PAYMENT OF TAXES FOR ENTERPRISES WITH FOREIGN INVESTMENT CAPITAL AND FOREIGN PARTIES ENGAGED IN JOINT BUSINESS OPERATIONS BASED ON CONTRACTS.

WITH FOREIGN INVESTMENT CAPITAL AND FOREIGN PARTIES ENGAGING IN BUSINESS ON THE BASIS OF CONTRACTS.

WHERE APPLICABLE FOR REIMBURSEMENT OF INCOME TAX

Pursuant to Decree No. 139-HĐBT dated September 5, 1988 of the Council of Ministers detailing the implementation of the Law on Foreign Investment in Vietnam, the Ministry of Finance provides guidelines for the procedures of tax collection and payment for enterprises with foreign investment capital and foreign parties engaged in joint business operations based on contracts as follows:

I. INCOME TAX

1. Taxpayers and Tax Payment:

a) The profits of enterprises with foreign investment capital and foreign parties engaged in joint business operations based on contracts derived from activities in production and business fields as stipulated in the Law on Foreign Investment in Vietnam are all subject to income tax.

b) Enterprises and foreign parties engaged in joint business operations based on contracts are taxpayers of income tax.

In cases where enterprises have auxiliary business units, the income tax is calculated collectively for the enterprise, and the enterprise is responsible for paying the income tax portion of the auxiliary business units.

2. Income Subject to Tax:

- The income subject to tax of enterprises with foreign investment capital is the difference between total revenues and total expenditures of the main unit and auxiliary units (if any) within the tax year.

- The income subject to tax of foreign parties engaged in joint business operations based on contracts is the difference between revenues of the foreign party and expenditures of the foreign party incurred in implementing the joint business operation contract signed with the Vietnamese party.

a) Revenues:

Revenues of enterprises and foreign parties engaged in joint business operations include revenues from selling products produced or providing services to foreign parties and other incidental revenues obtained from any activity of the enterprise during the tax year.

In cases where enterprises and foreign parties engaged in joint business operations adopt a product-sharing method, revenue from selling products is calculated as follows:

- Revenue of the Vietnamese party is the quantity of products allocated to the Vietnamese party multiplied (x) by the commercial selling price minus discount.

- Revenue of the foreign party is the quantity of products allocated to the foreign party multiplied (x) by the international market price at the time of sale.

b) Expenditures:

- Expenditures of enterprises and foreign parties engaged in joint business operations include those specified in Clause b, Article 79, Chapter VII of Decree No. 139-HĐBT dated September 5, 1988 of the Council of Ministers detailing the Law on Foreign Investment in Vietnam.

- Interest payments, bonuses, taxes paid, fines, and depreciation deductions on assets that have reached their depreciable value are not included in other expenses.

3. Tax Collection and Payment System:

a) Calculation of Income Tax:

- The amount of income tax payable is the taxable income realized in the tax year multiplied (x) by the income tax rate prescribed for the enterprise or foreign party engaged in joint business operations recorded in the investment permit or business license issued by the State Committee for Cooperation and Investment.

- The tax year for enterprises is the financial year permitted by the enterprise.

b) Method of Income Tax Collection:

- The annual income tax of enterprises and foreign parties engaged in joint business operations is temporarily collected quarterly, and at the end of the tax year or the contract, it is settled according to actual figures. Any underpaid tax must be paid in full in the next period; any overpaid tax can be deducted from the tax due in the next period.

- For joint business operation contracts with a term of less than one year, the income tax is paid in two installments, the first installment being temporarily paid halfway through the contract term, and the final settlement is made according to actual figures upon completion of the contract.

c) Currency for Tax Payment:

Enterprises and foreign parties engaged in joint business operations that sell products or services in a particular currency must pay income tax in that currency.

d) Deadline, Place, and Procedure for Tax Payment:

Within five days of the tax payment period, enterprises or foreign parties engaged in joint business operations must declare and submit Form 1 to the tax authority at the headquarters of the enterprise.

- The tax authority will review the tax declaration and issue a notice of the tax payable to the taxpayer. If the declaration is submitted late, the tax authority has the right to determine a provisional tax payment and issue a notice.

- Within five days of receiving the tax authority's notice, enterprises and foreign parties engaged in joint business operations must pay the full tax amount into the bank designated by the tax authority.

- Within three months of closing the financial year, enterprises and foreign parties engaged in joint business operations must submit an accounting report to the tax authority. Based on the confirmed accounting report, the tax authority will determine and notify enterprises and foreign parties engaged in joint business operations about the tax payable for the year, provisional tax paid, underpaid tax, and overpaid tax.

- If there are unclear points in the enterprise's accounting report, the authority may require the enterprise and foreign parties engaged in joint business operations to verify and restate the accounting report before settling the tax payable.

e) Payment of Taxes into the Budget:

Income tax is paid into Chapter 96, Section 19, Type, Item, Sub-item of the current budget classification.

4. Refund of Income Tax for Reinvestment:

a) Economic organizations or individuals from abroad using distributed profits for reinvestment for three years or more will be refunded the income tax paid on the reinvested profit portion.

If economic organizations or individuals from abroad have not fully contributed the statutory capital as stated in the enterprise's permit and use distributed profits to contribute additional capital to meet the statutory requirement, this will not be considered reinvestment and they will not be eligible for a refund of the income tax paid.

b) The refund of income tax for reinvested profits is determined as follows:

Amount of income tax refunded = Distributed profit used for reinvestment x Income tax rate

- The corporate income tax rate (as stated in the investment permit)

The Chief Accountant Director of the enterprise (company)

The enterprise pays tax in which currency, the refund will be made in that currency.

c) Procedures for refunding income tax:

When requesting a refund of corporate income tax for reinvested profits, economic organizations and foreign individuals must present the following documents to the provincial, municipal, or centrally-administered city tax authority where the enterprise's headquarters is located:

Decision allowing reinvestment issued by the State Committee on Cooperation and Investment.

Declaration on reinvested profits (in accordance with the guidance of the tax authority).

Upon receiving all required documents, the tax authority shall calculate the amount of corporate income tax to be refunded and process the refund for the reinvestor.

To facilitate and expedite the refund process for reinvestors, the Ministry of Finance temporarily authorizes the Director of the Provincial, Municipal, or Centrally-Administered City Department of Finance, where there is foreign investment, to use account 640 "Central Government Budget Revenue" within their jurisdiction to process refunds for reinvestors, while also having the responsibility to promptly report to the Ministry of Finance (State Budget Department) regarding the amount of tax refunded. In Hanoi, the Ministry of Finance (State Budget Department) will directly process refunds for reinvestors.

II. WITHDRAWAL TAX ON PROFITS REMITTED ABROAD

1. Taxable objects and taxpayers:

a) Profits distributed to economic organizations or foreign individuals participating in investment under any form stipulated in the Law on Foreign Investment in Vietnam, when transferring profits out of the territory of the Socialist Republic of Vietnam, are subject to withdrawal tax on profits remitted abroad.

b) Economic organizations or foreign individuals have the responsibility to pay the withdrawal tax on profits remitted abroad.

2. Tax Collection and Payment System:

a) CALCULATING TAX:

The amount of withdrawal tax on profits remitted abroad payable is calculated by multiplying the amount of profits transferred abroad by (x) the tax rate specified in the foreign investment permit issued by the State Committee on Cooperation and Investment.

b) Currency for payment of tax:

If profits are transferred abroad in the currency of any country, then the tax must be paid in that same currency.

c) Tax collection procedures:

- Withholding tax on profit transfer out of the country is collected each time profits are transferred out of the country.

Each time transferring profits abroad, economic organizations or foreign individuals must declare to the tax authority directly managing the corporate income tax collection from enterprises with foreign economic organizations or individuals contributing capital.

Upon receipt of the declaration, the tax authority shall calculate the tax within one working day and issue a notice of the tax due to the organization or individual.

Upon receipt of the tax notice, the organization or individual must go to the bank to pay the tax when processing the money transfer abroad.

d) Payment into the budget:

Withdrawal tax on profits remitted abroad is collected into Chapter 96, Section 19, appropriate type, item, and sub-item of the current state budget classification.

III. ENTERPRISE INCOME TAX AND VALUE ADDED TAX.

1. Enterprises and foreign partners engaged in joint business operations, if they engage in service activities generating Vietnamese currency revenue, must pay enterprise income tax according to the Regulations and current Tax Laws on commercial and industrial taxes.

2. Enterprises and foreign partners engaged in joint business operations, if they sell products in the domestic market, must pay enterprise income tax or value added tax depending on the specific goods as follows:

a) For goods not included in the list of taxable items, enterprise income tax must be paid. The amount of tax payable is calculated by multiplying the sales revenue by (X) the current enterprise income tax rate.

b) For goods listed as taxable items, value added tax must be paid. The amount of tax payable is calculated by multiplying the quantity of goods sold by (X) the taxable price, and then by (X) the current value added tax rate applicable to each item.

3. Collection and payment procedures for taxes:

Sales revenue generated from selling products in the domestic market in the currency of any country must be paid in that same currency.

Monthly, no later than the first five days of the month following the sale, enterprises must declare and submit the declaration form (Form No. 3) to the tax authority. The tax authority calculates the tax and issues a notice of the tax due to the enterprise. No later than five days from the date of receipt of the notice, the enterprise must pay the full amount of tax due into the designated bank as instructed by the tax authority.

Enterprise income tax is paid into Chapter 96, Section 18, appropriate type, item, and sub-item of the current state budget classification, and value added tax is paid into Chapter 96, Section 17, appropriate type, item, and sub-item of the current state budget classification.

IV. RESPONSIBILITIES OF ENTERPRISES WITH FOREIGN INVESTMENT CAPITAL AND FOREIGN PARTNERS ENGAGED IN JOINT BUSINESS OPERATIONS BASED ON CONTRACTS.

1. Declare to the tax authority about the business situation and results according to the forms and deadlines prescribed by the tax authority.

2. Present complete books, documents, necessary papers, and fully answer questions related to tax calculation when requested by the tax authority.

3. Pay the full amount of tax due as notified by the tax authority on time.

V. DUTIES AND LIMITATIONS OF THE TAX COLLECTING AUTHORITY.

1. Guide taxpayers to declare each type of tax according to regulations.

2. Inspect tax declarations, books, documents, and necessary materials, and request taxpayers to answer questions related to tax collection.

4. Prepare records and handle tax violations within the scope of authority granted by the State to the tax authority.

3. Calculate taxes and notify the taxpayer of the amount due.

VI. HANDLING VIOLATIONS AND SETTLING COMPLAINTS

- Failure to comply with reporting requirements shall result in a fine of up to 0.5% (five thousandths) of the tax due for the period in which the error occurred.

1. Tax violations will be penalized as follows:

- Misrepresentation or tax evasion shall result in a fine of up to five times the amount of misrepresented or evaded tax.

- Late payment beyond the prescribed deadline shall incur an additional daily late payment fee of 0.5% (five thousandths) of the overdue tax.

Tax violation cases are handled by the tax authority directly responsible for tax collection.

2. Authority for handling violations and disputes:

Tax complaint cases are reviewed and resolved by the tax authority directly responsible for tax collection. If the party is dissatisfied, they may appeal to a higher-level tax authority or the Ministry of Finance for resolution. During the appeal process, the taxpayer must still pay the full and timely tax due as notified by the tax authority.

The Ministry of Finance assigns the responsibility to the industry tax department to manage and organize tax collection in accordance with this Circular.

VII. IMPLEMENTATION ORGANIZATION

Any difficulties encountered during implementation should be reported promptly to the Ministry of Finance for timely resolution.

Period ... Year ...

Model No. 1

Socialist Republic of Vietnam

Independence - Freedom - Happiness

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TAX RETURN FOR PROFIT TAX

- Enterprise Name (Company)

- Main Office Address of the Enterprise (Company)

- Financial Year Starting ... Ending

- Accounting Currency

- Corporate Income Tax Rate (as recorded in the investment permit)

(signatures) (signatures, stamp)

- Account number of the enterprise ... at the Bank

(Major Technical Specifications and Other Information)

- Name of foreign economic organization or individual...

...nationality...

Form No. 2

Socialist Republic of Vietnam

Independence - Freedom - Happiness

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TAX RETURN FOR TRANSFERRING PROFITS OUT OF THE COUNTRY

- Participating in capital contribution to the enterprise...

- Head office location of the enterprise...

Amount of profit requested to transfer abroad...

withdrawn from Account number...at the bank...

- Currency transferred abroad...

- Corporate income tax rate on transferring profits abroad...

(as stated in the investment permit)...

Date Month Year 198

Confirmation by the Bank Person declaring signs and stamps

where the money transfer procedures are carried out (if any)

PAYING ENTERPRISE INCOME TAX AND VALUE ADDED TAX

- Head office address

Model No. 3

Socialist Republic of Vietnam

Independence - Freedom - Happiness

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Application for registration of groundwater extraction works (for cases of extracting water for purposes with a scale not exceeding 10 m

- Account number of the enterprise (company)...at the Bank

Month ... Year ...

- Main Office Address of the Enterprise (Company)

- Revenue from services in Vietnamese dong and revenue from product sales in the domestic market

³ Type of service

- Hotel service

(sign name) (sign name, stamp)

||| (no translation needed as it's a label for signatures)

(signature) (signature, seal)