Circular No. 687-TCT/NV2 regarding the finalization of tax returns for the year 2000

LETTER

DECISION NO. 687/TCT/NV2 OF THE MINISTRY OF FINANCE ON MARCH 6, 2001
REGARDING THE SETTLEMENT OF TAXES FOR THE YEAR 2000

 

Respected: Provincial Tax Departments and Municipal Tax Departments directly under the Central Government.

 

In accordance with the provisions of tax laws, tax ordinances, and the state budget revenue collection system, taxpayers have the responsibility to prepare tax settlement reports for submission to the tax management authorities according to regulations.

Regarding the inspection of tax settlement reports for the year 2000, the General Department of Taxation notes the following points:

 

I. REQUIREMENTS FOR INSPECTING TAX SETTLEMENT REPORTS

 

The tax management authority has the responsibility to inspect the tax settlement reports of taxpayers according to the following specific steps:

Step 1: Inspect the annual tax settlement report of the taxpayer:

- Within a period of 60 days from the end of the fiscal year, the Provincial Tax Department or District Tax Department must notify and urge taxpayers to submit their tax settlement reports and annual financial statements within the prescribed time frame (taxpayers are responsible for the accuracy of the reported figures). Specifically:

+ Submit individual tax settlement declarations for each tax type according to the prescribed forms, specifically:

* Value Added Tax (VAT) Settlement: Form No. 10/GTGT issued together with Circular No. 89/1998/TT-BTC dated June 27, 1998 of the Ministry of Finance.

* Corporate Income Tax Settlement: Forms No. 2a and 2b issued together with Circular No. 99/1998/TT-BTC dated July 14, 1998 of the Ministry of Finance.

* Natural Resources Tax Settlement: According to the form issued in Circular No. 153/1998/TT-BTC dated November 26, 1998 of the Ministry of Finance.

* Special Consumption Tax Settlement: According to the form issued in Circular No. 168/1998/TT-BTC dated December 21, 1998 of the Ministry of Finance.

* Personal Income Tax Settlement: Form No. 06-TN issued in Circular No. 39/TC/TCT dated June 26, 1997 of the Ministry of Finance.

Based on the individual tax settlement reports, units shall compile a summary table for payment of national budget revenues due in 2000 (Form No. 1 attached).

+ Submit financial statements in accordance with Decision No. 1141 TC/CĐKT dated November 1, 1995 of the Ministry of Finance.

If the deadline passes without submission of the reports, a record shall be made and administrative penalties imposed.

Based on the figures declared by the unit on the tax settlement report and financial statement, compare necessary indicators in the settlement and related figures declared during the year (VAT declaration forms, provisional corporate income tax declaration forms...) to verify the amount of tax payable and outstanding.

- Based on the results of checking the declaration forms and reports, take the following actions:

+ Notify adjustments to the figures (if the figures declared by the unit contain errors).

+ Prepare the tax assessment.

+ Issue a notice requiring the unit to pay any outstanding taxes into the state budget (by tax type) either as declared by the enterprise or after adjustment by the tax authority.

The tax notice must clearly indicate the notification number (first, second... ) and specify the deadline for the enterprise to comply with the payment to the state budget.

- All units subject to taxation as declared must declare, prepare the annual tax settlement report, undergo declaration form checks, and receive notices to pay taxes. Tax officials conducting the checks must fill out the evaluation form (Form No. 2 attached).

Step 2: Inspection and Audit of Tax Settlements

- Through management work and the results of tax settlement report inspections, the tax management authority identifies taxpayers showing suspicious signs in their tax settlement declarations such as:

+ Having significant overdue tax debts at the time of settlement.

+ Significant discrepancies between the tax payable and paid figures declared in the tax settlement report compared to the figures managed by the tax authority.

+ Significant discrepancies between the figures in the corporate income tax settlement declaration form (Form 2a) and the estimated actual figures (Form 1a).

+ Not submitting the tax settlement report.

+ Excessive overpayment of taxes as declared in the tax settlement report.

+ Signs of violation of tax declaration procedures or concealment of taxable income...

Based on these signs, depending on the severity of each taxpayer and the management area; the tax management department will develop an inspection and audit plan. This plan is based on the level of violation by the taxpayer and the inspection and audit capacity of the tax authority; it is not necessary to inspect and audit all taxpayers. The head of the tax authority decides on the members of the inspection and audit team, which may be led by the Tax Investigation and Litigation Department or the Tax Management Department, with other departments participating. When conducting inspections and audits, they must follow the procedures specified in Decision No. 1439 TCT/QĐ/TTr dated October 29, 1999 of the General Department of Taxation regarding the issuance of inspection and audit procedures for tax settlement reports at business establishments.

The head of the tax authority signs the inspection decision and notifies the inspected unit in advance.

- The results of the "inspection and audit" must be recorded in a protocol, specifying the inspection period, contents inspected, reasons for increases or decreases in the inspected indicators. The inspection team leader (team leader, squad leader), director, and chief accountant of the inspected unit must sign to confirm responsibility for the inspection and audit results.

II. CONTENTS OF THE TAX SETTLEMENT INSPECTION

 

In addition to implementing the inspection of tax settlement reports for the year 2000 as stipulated, the General Department of Taxation provides additional guidance on the following specific points:

 

1. Value Added Tax (VAT):

1.1. VAT Settlement:

According to Article 14 of Decree No. 28/1998/NĐ-CP dated May 11, 1998 of the Government, all business establishments belonging to all economic sectors, foreign-invested enterprises, and dependent units that have been assigned a tax code at the local level (except small and medium-sized households paying tax based on fixed turnover rates and occasional traders paying tax per transaction) must carry out VAT settlement.

The VAT settlement year is calculated according to the Gregorian calendar. In cases where units are approved by the Ministry of Finance to settle accounts according to a different fiscal year if settling according to the Gregorian calendar is difficult, they can settle VAT according to the fiscal year.

1.2. For construction activities at locations other than the headquarters:

1.2. WITH RESPECT TO CONSTRUCTION ACTIVITIES AT A LOCATION OTHER THAN THE HEADQUARTER'S LOCATION:

In the case where the entity is a dependent accounting unit using the tax code and invoices of the main entity, the dependent entity must declare and pay VAT at the location where the construction project is carried out at a rate of 1% on the value of the completed and handed-over project, the settlement of VAT shall be conducted at the main entity.

1.3. For export cases:

- For entities exporting directly or entities accepting agency to export under the form of small-scale exports, the documents must meet the conditions as guided in Circular No. 1699 TCT/NV6 dated April 3, 1999 of the General Department of Taxation regarding "VAT on goods exported through border trade," in order to apply a tax rate of 0%.

- For goods exported under agency: goods exported are subject to a VAT rate of 0% and are eligible for VAT refund, procedures and documents for refund are stipulated in Point 1 - Part D of Circular No. 89/1998/TT-BTC dated July 26, 1998 of the Ministry of Finance; the entity entitled to refund is the entity with exported goods, the entity accepting agency to export must fully record the name of the entity with goods for agency export in Box 3 of the customs declaration to have grounds to determine the entity with exported goods entitled to a 0% tax rate. If Box 3 is not filled, it must be noted to check to avoid situations where the agency entity takes advantage of agency export documents to enjoy a 0% tax rate.

1.4. Output VAT:

Output VAT is determined based on the tax rate and the selling price of goods, service provision price. In case of inspection revealing that the price recorded on the invoice is lower than the actual payment price, VAT must be supplemented and penalties applied according to regulations.

In the case of entities selling goods on commission if they sell goods at the designated price and earn commission, the taxable price is the price recorded in the agency sales contract. In the case of entities selling goods on commission selling at prices other than the designated price, the earned commission must be subject to VAT.

1.5. Deduction of input VAT:

Business entities subject to VAT under the deduction method are entitled to deduct input VAT at a rate of 3% as stipulated in Circular No. 106/1999/TT-BTC dated August 30, 1999 of the Ministry of Finance, applicable to purchase invoices for goods which are legitimate sale invoices and are subject to VAT, deductions are not applicable to invoices for goods not subject to VAT and service provision invoices.

In the case of invoices recording multiple types of goods, when preparing the list, the total value of purchased goods from that invoice should be recorded but must exclude the amount paid for services and goods not subject to VAT.

For cases where input VAT deduction is made based on the purchase price of goods declared on the list, business entities must prepare in accordance with the regulations clearly stating the name, address of the seller, type of goods, quantity, and payment price consistent with payment vouchers, material receipt forms, procurement personnel, the person preparing the list, and the director must bear responsibility for the accuracy of the declared data.

For VAT already paid at the import stage, the VAT payment receipt at the import stage must be checked. In cases where there is no VAT payment receipt for imported goods, proof of money transfer for VAT payment at the import stage must be provided; enterprises must adjust input VAT according to the adjustment notice from the customs authority and the decision on VAT refund at the import stage (if applicable).

1.6. Reduction of VAT:

For production and business entities subject to VAT under the deduction method in the initial years of applying VAT, if losses occur due to the VAT payable being higher than the tax calculated based on previous income tax rates, they may be considered for reduction of VAT payable.

Only businesses subject to corporate income tax are eligible for consideration of VAT reduction. The amount of VAT eligible for reduction is guided in Point 2, Section II, Part H of Circular No. 122/200/TT-BTC dated December 29, 2000 of the Ministry of Finance.

In cases where enterprises operate on a full-industry accounting basis and subordinate units implement bookkeeping, if temporary reductions have been granted by local tax authorities during the year, subordinate units must compile the temporary reductions with confirmation from the local tax authorities and send them to the tax authority managing the headquarters to implement the formal reduction decision.

For commercial banks, the settlement of VAT is also implemented according to the guidance in Directive No. 261 TCT/NV2 dated January 19, 2001 of the General Department of Taxation.

2. Special consumption tax:

Determining the objects of special consumption tax, taxable price, tax rate, and special consumption tax payable is carried out according to the guidance in Circular No. 168/1998/TT-BTC dated December 21, 1998 of the Ministry of Finance and implementing regulations for the Special Consumption Tax Law.

Note:

For production entities subject to special consumption tax selling goods through branches, stores, or subordinate entities (distribution centers...), the selling price serving as the basis for calculating special consumption tax is the price sold by these branches, stores, or subordinate entities of the production entity; for production entities selling goods through agents who sell at designated prices and earn commissions, the price serving as the basis for calculating special consumption tax is the price sold by the agent before deducting the commission.

3. Collection of State Budget Capital Usage Fee

The collection of State Budget Capital Usage Fee is implemented according to Circular No. 33 TC/TCT dated June 13, 1997 of the Ministry of Finance "guiding the system of State Budget Capital Usage Fee collection," noting:

- The source for paying the State Budget Capital Usage Fee is the remaining income after paying corporate income tax (including additional corporate income tax, if any) as prescribed.

- If the remaining income after paying corporate income tax (including additional corporate income tax, if any) is less than the State Budget Capital Usage Fee payable, then the officially payable State Budget Capital Usage Fee for the year-end settlement is equal to the remaining income.

- For state-owned enterprises engaged in the production and trading of goods and services: lottery, cement, postal and telecommunications, electricity, oil, ship agency, bottled water, carbonated beverages, with high income due to lower VAT compared to previous turnover taxes, the source and method of determining the State Budget Capital Usage Fee payable is the difference between the remaining income after paying corporate income tax (including additional corporate income tax) and the amount required to be paid into the State Budget due to lower VAT compared to previous turnover taxes.

- For enterprises implementing shareholding reform or joint venture capital contribution, the source of revenue for the use of capital contributions shall be taken from the profit distributed according to regulations.

4. Corporate income tax:

4.1. Reasonable expense review: Determining reasonable expenses deductible for taxable income calculation shall be carried out in accordance with Clause III, Part B of Circular No. 99/1998/TT-BTC dated July 14, 1998 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 and guided at Subparagraph b, Point 3, Clause I, Part II of Circular No. 89/1999/TT-BTC dated July 16, 1999 of the Ministry of Finance, noting:

- The original cost of fixed assets, the useful life of fixed assets, and the depreciation method of fixed assets shall be implemented in accordance with the management, use, and depreciation system for fixed assets issued together with Decision No. 166/1999/QĐ-BTC dated December 30, 1999 of the Minister of Finance.

4.1.2. Raw material, material, fuel, energy, goods, and processing, manufacturing, transportation, loading and unloading, storage, purchasing costs must have invoices and certificates in accordance with the regulations of the Ministry of Finance.

- In cases where materials and goods purchased are agricultural, forestry, fishery products or small-scale services from non-business individuals or production and business establishments, the establishment must prepare a list clearly stating the name, address of the seller, quantity of goods, unit price, total amount, service supply price; the director of the production and business establishment approves the expenditure and bears responsibility under the law. If the business establishment declares a purchase price higher than the market price at the time of purchase on the list, the tax authority will set a price level to determine the cost for corporate income tax calculation.

- If the entity pays VAT under the deduction method, revenue and expenses do not include VAT; if paying VAT under the direct payment method, revenue and expenses include VAT.

- For materials and goods that deduct input VAT based on a percentage (%) based on sales invoices and purchase lists, the business establishment can only record production and business expenses to calculate corporate income by purchase volume, minus (-) the amount already deducted for VAT.

4.1.3. Salary and wage expenses, amounts having the nature of salary and wages:

- For state-owned enterprises: In principle, salary included in reasonable expenses to determine taxable income shall not exceed the unit price of salary approved by the competent authority, consistent with the workload completed and the state-prescribed salary unit price construction regulation stipulated in Government Decree No. 28/CP dated March 28, 1997 on reforming and managing salaries and incomes in SOEs, Circular No. 13/LĐ-TBXH-TT dated April 10, 1997 of the Ministry of Labor, Invalids and Social Affairs guiding the implementation of the method of constructing salary unit prices and managing salaries and incomes in SOEs, Joint Circular No. 18/1998/TTLT-BLĐTBXH-BTC dated December 31, 1998 of the Ministry of Labor, Invalids and Social Affairs and the Ministry of Finance guiding the determination of the actual salary fund when state-owned enterprises fail to meet budget submission and profit targets, Joint Circular No. 19/1999/TTLT-BLĐTBXH-BTC dated August 14, 1999 of the Ministry of Labor, Invalids and Social Affairs and the Ministry of Finance supplementing Circular No. 18/1998/TTLT-BLĐTBXH-BTC dated December 31, 1998 of the guidance documents for Government Decree No. 28/CP (mentioned above).

Note: In cases where enterprises have yet to make a profit and have not established labor standards or have not had salary unit prices approved by the competent authority, the actual salary fund shall not exceed the basic salary fund determined by multiplying the average number of employees actually used annually by (x) the average salary rate (including grade coefficient and allowance coefficient according to the state-prescribed system) and the minimum wage prescribed by the state.

- For non-state economic establishments: The determination of salary and wage expenses to determine taxable income is based on the agreement between the employee and the production and business establishment and is consistent with the registered salary unit price with the tax authority. In cases where the actual salary paid is lower than the salary recorded in the expense account according to the contract, only the actual salary paid is counted as an expense. In cases where the unit does not have an agreement or has not registered the salary with the tax authority, the salary and wage expenses included in reasonable expenses to determine taxable income are based on the labor wage standard decided by the People's Committee of the province or city.

4.1.4. Meal expenses during shift changes:

Meal expenses during shift changes for workers shall be decided by the director of the production and business establishment in line with production and business efficiency but the expense per person shall not exceed the minimum wage prescribed by the state for civil servants (in 2000, it was VND 180,000/person/month).

4.1.5. Expenses for labor protection and uniforms:

Only expenses for labor protection and uniforms in kind can be recorded as reasonable expenses to determine taxable income.

4.1.6. Advertising, marketing, promotional, contact, reception, transaction, foreign affairs, conference, and other types of expenses (excluding the expenses already guided in Clause III, Part B, Circular No. 99/1998/TT-BTC dated July 14, 1999 of the Ministry of Finance) must have supporting documents in accordance with regulations and be linked to production and business results but shall not exceed the prescribed limit.

Note: The total expenses for determining the limit are the items listed from Point 1 to Point 10 in Clause III, Part B, Circular No. 99/1998/TT-BTC mentioned above, excluding advertising, marketing, promotional, reception, conference, transaction, foreign affairs, and other types of expenses.

4.1.7. Provision for contingencies:

Provisions for inventory write-downs, doubtful debts, and securities write-downs at enterprises shall be made in accordance with Circular No. 64 TC/TCDN dated September 15, 1997 of the Ministry of Finance, and non-state enterprises also apply this circular.

For the establishment and use of provisions to handle risks in banking activities of credit institutions, the provisions issued together with Decision No. 488/2000/QĐ-NHNN dated November 27, 2000 of the Governor of the State Bank of Vietnam shall apply.

4.1.10. Expenses that are not considered reasonable expenses for determining taxable income according to Point 15, Section III, Part B of Circular No. 99/1998/TT-BTC.

* General Principles:

All expenses must be supported by valid vouchers. Any expenses without vouchers or with invalid vouchers must be excluded from deductible costs when calculating income tax.

4.2. Other taxable income items as specified in Section IV, Part B of Circular No. 99/1998/TT-BTC should be noted:

In cases where domestic enterprises form joint ventures through contracts, the income from joint venture contracts must be subject to corporate income tax. The party receiving the joint venture has the responsibility to declare and pay the corporate income tax. After paying the corporate income tax, the distributed income portion does not need to be included in the taxable income for stable corporate income tax calculation but must be aggregated into the total income for supplementary corporate income tax (if applicable) and to cover related joint venture activity costs.

4.3. Corporate Income Tax Rate:

- The corporate income tax rate applied is 32%, except for production and business establishments which are subject to a 25% tax rate for a period of three years starting from January 1, 1999, as stipulated in Point 1.a, Section V, Part B of Circular No. 99/1998/TT-BTC dated July 14, 1998.

- For new investment projects in sectors, industries, and areas eligible for investment incentives, the preferential corporate income tax rate shall be applied according to Article 20 of Decree No. 51/1999/NĐ-CP dated July 8, 1999 of the Government detailing the implementation of the Law on Encouraging Domestic Investment (amended) No. 03/1998/QH10, and guided by Circular No. 146/1999/TT-BTC dated December 17, 1999 of the Ministry of Finance.

- Other income not falling within sectors, industries, and areas eligible for investment incentives shall be subject to a corporate income tax rate of 32%. However, entities applying a single tax rate of 25% for the first three years as prescribed by the Government, if they have other income, will also be subject to a corporate income tax rate of 25%.

- For production and business establishments operating in different industries, separate accounting for each activity must be conducted to apply the corresponding tax rates. If separate accounting cannot be done, then the highest tax rate must be applied. If a production and business establishment has other income, the highest tax rate must also be applied.

4.4. Supplementary Corporate Income Tax:

Business establishments with high income, in addition to paying corporate income tax at a rate of 32%, if the remaining income exceeds 12% of the current net asset value at the year-end settlement date, the excess income must be subject to supplementary corporate income tax at a rate of 25%.

The net asset value used as the basis for determining the excess income subject to supplementary corporate income tax shall be implemented according to the guidance provided in Circular No. 887 TC/TCT dated February 6, 2001 of the Ministry of Finance regarding the settlement of supplementary corporate income tax. The net asset value for calculating supplementary corporate income tax is determined as follows:

- For enterprises applying accounting regulations under Decision No. 1141 TC/QĐ/CĐKT dated November 1, 1995 and financial reporting regulations as stipulated in Decision No. 167/2000/QĐ-BTC dated October 25, 2000 of the Minister of Finance, the sources of net assets to determine supplementary corporate income tax (TNDN) include:

+ Operating capital;

+ Revaluation differences of assets;

+ Exchange rate differences;

+ Undistributed profits;

+ Capital for basic construction investment.

- For enterprises applying accounting regulations under Decision No. 1177 TC/QĐ/CĐKT dated December 23, 1996 of the Minister of Finance concerning the accounting system for small and medium-sized enterprises, the net asset value is determined as follows:

+ Operating capital;

+ Exchange rate differences and revaluation of assets;

+ Funds formed from post-tax profits (excluding bonus and welfare funds);

+ Undistributed profits.

Method of determining each item: 2 final periods - Number of periods Number + initial

In case of negative figures (-), they must be deducted from the total net assets.

For households engaged in business that have not implemented accounting systems under Decision No. 1141 TC/QĐ/CĐKT and Decision No. 1177 TC/QĐ/CĐKT and thus cannot determine their net assets, they temporarily do not need to pay supplementary corporate income tax.

Note: For production and business establishments with joint venture activities, the net assets do not include the capital contributions of participating parties and do not reduce the net assets by the capital of the establishment involved in the joint venture when calculating supplementary corporate income tax.

For production and business establishments that cannot distinguish net assets for activities subject to supplementary corporate income tax and those temporarily exempted from supplementary corporate income tax or exempted from supplementary corporate income tax, the determination of the amount of supplementary corporate income tax payable shall be carried out in the following sequence:

- Determine the supplementary corporate income tax based on the remaining income and the common net assets of all activities.

- The amount of supplementary corporate income tax payable equals the supplementary corporate income tax multiplied by the ratio of the income from activities subject to supplementary corporate income tax to the total taxable income.

Example: Enterprise A engages in trade, transportation, and construction with a net asset value of 15 billion VND, earning 3 billion VND in revenue during the year, with the following results: trade income 1.5 billion VND, financial income 0.4 billion VND, extraordinary income 0.1 billion VND, construction income 1.5 billion VND, transportation loss 0.5 billion VND (transportation and construction activities are temporarily exempt from supplementary corporate income tax). The determination of supplementary corporate income tax for Enterprise A is as follows:

+ Stable corporate income tax:

* Transportation and construction activities (same tax rate offset):

(1.5 billion - 0.5 billion) x 25% = 1 billion x 25% = 0.25 billion

* Trade, financial, and extraordinary activities:

(1.5 billion + 0.4 billion + 0.1 billion) x 32% = 2 billion x 32% = 0.64 billion

+ Remaining income after stable corporate income tax:

(2 billion + 1 billion) - (0.25 billion + 0.64 billion) = 2.11 billion

+ Additional income tax on the remaining total income:

[2,11 billion - (15 billion x 12%)] x 25% = 0.077 billion

+ Additional corporate income tax payable by company A:

2 billion VND

0.077 billion x = 0.051 billion

3 billion

4.5. Corporate Income Tax due to Lower VAT than Revenue:

State-owned enterprises with high income due to lower VAT payable compared to revenue shall make additional income tax payments according to the guidance provided in Circular No. 2406 TC/TCT dated June 13, 2000 of the Ministry of Finance and Circular No. 3156 TCT/NV1 dated July 18, 2000 of the General Department of Taxation.

4.6. Loss Carryforward:

According to the Law on Corporate Income Tax, production and business establishments that incur losses after settlement with the tax authority may carry forward their losses as follows:

- Losses from years prior to 1998 can be carried forward for two years (as stipulated in the Law on Corporate Income Tax).

- Losses from years starting from 1999 can be carried forward for five years.

In cases where the tax settlement has not been finalized, the loss amount will be temporarily calculated based on the annual settlement report of the establishment. After verification by the direct tax management agency, the enterprise is allowed to carry forward the loss and adjust its business results according to the final settlement figures of the tax authority.

Specifically, state-owned enterprises are permitted to carry forward losses according to the notification in Official Letter No. 689/VPCP-KTTH dated February 23, 2001 of the Government Office regarding the handling of accumulated losses.

Specifically: If the loss due to objective reasons still exists until December 31, 1998, and has already been carried forward for two years, if there is still a cumulative loss, it can continue to be handled by carrying forward losses from 1999 and subsequent years but not exceeding five years including the time the enterprise was previously allowed to carry forward losses.

4.7. Adjustment of Corporate Income Tax Settlement Figures:

- The General Director of the enterprise must bear responsibility for the accuracy of the settlement figures for corporate income tax submitted to the tax authority. During the submission period, if the enterprise needs to adjust the figures, the following procedures apply:

+ If the tax authority has not issued a payment notice (step 1 of the inspection), the enterprise should submit the adjusted tax settlement to replace the old one and attach a letter explaining the replacement of the old settlement, clearly stating the date of the replaced tax settlement.

+ If the tax authority has issued a payment notice (step 1 of the inspection), the enterprise should submit a supplementary report to modify the adjusted indicators.

- In cases of tax exemption or reduction after corporate income tax settlement: The decision on tax exemption or reduction is based on the taxable income generated each year, in principle, the reduction amount, if tax has already been paid in the exempted year, it will be determined as overpayment for that year and deducted from the tax payable of the next year.

5. Individual Income Tax Settlement

Regarding individual income tax, it is implemented according to the guidance provided in Circular No. 15/2000/TT-BTC dated May 10, 2000 of the Ministry of Finance. Note:

5.1. For individuals receiving income in kind, such income must be converted into monetary value based on the average market price in the locality at the time of receipt, as specified by the Tax Bureau, to determine the taxable income.

5.2. For income of individuals received from agencies paying commissions, incentives, etc., the paying agency is responsible for withholding individual income tax according to the non-resident income tax rate before payment. If no tax is withheld, the paying agency must pay the tax on behalf of the individual. The amount paid on behalf cannot be included in expenses to determine corporate income tax but must be deducted from post-tax income.

5.3. Any additional individual income tax payable after tax settlement must be deducted from the individual's income and cannot be recorded as an expense.

5.4. In case of individuals receiving NET (tax-free income), it must be converted into taxable income according to the following formula:

5.4.1- For Vietnamese citizens and other individuals residing in Vietnam

 

Unit: 1,000 VND

Actual Income (AI)	Taxable income
Over 2,000 to 2,900	AI - 200 0,9
Over 2,900 to 3,700	AI - 500 0,8
Over 3,700 to 5,100	AI - 900 0,7
Over 5,100 to 6,300	AI - 1,500 0,6
Over 6,300 to 7,300	AI - 2,300 0,5
Over 7,300 to 8,000	AI - 3,300 0,4
Over 8,000	AI - 4,700 0,28

 

Example: The average monthly actual income of a Vietnamese citizen is 4,830,000 VND, then the income including tax is:

4.830.000 - 900.000   0,7

=

5.614.285

5.4.2. For foreigners residing in Vietnam and Vietnamese citizens working and serving abroad:

 

Actual Income (AI)	Taxable income
Over 8,000 to 18,800	AI - 800 0,9
Over 18,800 to 42,800	AI - 2,800 0,8
Over 42,800 to 63,800	AI - 7,800 0,7
Over 63,800 to 87,800	AI - 15,800 0,6
Over 87,800	AI - 27,800 0,5

 

In cases where individuals receive NET income and the portion of income from salaries accounts for 70% or more, only the salary income is used to convert into taxable income. The taxable income after conversion must be added to the remaining 30% income to determine the total taxable income and calculate the amount of tax payable based on the income tax table. Specifically, for housing allowance (for foreigners), the ceiling limit does not exceed 15% of the converted salary income.

6. Tax Settlement for Enterprises with Foreign Investment:

- Branches of foreign organizations operating in Vietnam (including branches of foreign banks) shall declare, pay taxes, and settle taxes according to the guidance provided in Circular No. 08/2001/TT-BTC dated January 18, 2001 of the Ministry of Finance.

- With respect to the transfer of income tax out of the country for income actually transferred from July 1, 2000, and corporate income tax on advance payments from businesses engaged in infrastructure leasing, these will be implemented according to the Circular of the Ministry of Finance guiding the implementation of Decree No. 24/2000/NĐ-CP dated July 31, 2000 of the Government detailing the implementation of the Law on Foreign Investment in Vietnam.

7. Import Duty:

Goods and materials imported for purposes eligible for duty-free import but which change their intended use during the year and no longer qualify for duty-free import must have the import duty recovered according to regulations.

 

III. IMPLEMENTATION

 

The review of the 2000 tax settlement reports faces many difficulties and obstacles due to the implementation of new tax policies and numerous adjustments in policy and system. Local tax bureaus need to focus on the following points:

1. Disseminate to the Departments, Tax Branches, and each tax officer regarding the requirements and contents of the final income tax report for the year 2000, with particular attention to adjustments in tax policies and regulations.

2. Send the final income tax report form and notify the deadline for submitting the final income tax report to taxpayers. Implement the inspection of final income tax reports according to the prescribed steps.

3. Firmly impose penalties on entities deliberately delaying or failing to pay taxes into the State Budget.

4. The tax authority managing dependent production and business units must fulfill their responsibility to inspect Value Added Tax (VAT), determine reasonable costs..., identify amounts of tax due and paid into the State Budget, and send the record to the main production and business unit and the tax authority managing that unit for the basis of settling the total tax for the entire unit. The tax authority shall not merely record the amount of tax paid without inspecting revenue and costs at dependent production and business units according to assigned responsibilities.

For state-owned enterprises, the inspection of final income tax reports is independent from the financial settlement inspection, and the tax authority bears legal responsibility for determining the amount of tax due to the State Budget of the enterprise.

The above are some specific guidelines when inspecting final income tax reports for the year 2000 for taxpayers; during implementation, if there are any difficulties, localities are requested to report in writing to the Ministry of Finance (General Department of Taxation) for timely research and resolution.

 

 

FORM NO. 1

 

SOCIALIST REPUBLIC OF VIET NAM

Independence - Freedom - Happiness

 

SUMMARY OF TAX PAYMENTS AND AMOUNTS DUE TO THE STATE BUDGET IN YEAR...
AMOUNTS DUE TO THE STATE BUDGET IN YEAR...

 

- Name of entity:

- Tax code:

- Address:

- Tel: Fax:

Year of settlement from... day... month... year... to... day... month... year...

 

Type of tax	Amount still owed from previous year (year...)	Amount arising due in settlement year (year...)	Total amount paid in year...	Amount still owed to the State Budget
1. VAT
2. Special Consumption Tax
3. Corporate Income Tax
4. Usage Fee of State Capital
Personal Income Tax
6. Other Taxes and Fees
8....
(*) The basis for budgeting expenses is based on the current regulations of the Ministry of Finance regarding travel expenses for civil servants and employees of the State going on short-term business trips abroad funded by the state budget.

 

The figures above must be accurate and truthful; if discrepancies are found upon inspection by the tax authority, the entity will be subject to penalties as stipulated by law.

..., day..., month..., year...

 

Prepared by (Sign and write full name)

…on…day…month…year… (Sign and write full name)

Credit organization branch in province/city and basic credit cooperative… (Sign and write full name)

 

 

 

MODEL NO. 2

ASSESSMENT AND EVALUATION AFTER INSPECTION OF FINAL TAX REPORT STEP 1 IN YEAR...
1. Receipt of accounting report: Date... month... year...

 

- Name of entity:

- Tax code:

- Address:

- Tel: Fax:

2. Receipt of final tax declaration form: Date... month... year...

Complete... Missing... Not submitted...

3. Receipt of summary of tax payments and submission to the State Budget: Date... month... year...

4. Tax arrears up to the settlement date

Tax...

5. Significant discrepancies between the final corporate income tax report (Form 2a) and the corporate income tax declaration (Form 1a)

5. Significant discrepancies between the final corporate income tax report (Form 2a) and the corporate income tax declaration (Form 1a)

................................................

Revenue...

Expenses...

+ Raw materials

Where:

+ Wages

6. Other signs:

................

7. Conclusion:

- No need for further tax inspection and control: ...

- Need for further tax inspection and control: ...

- Recommend comprehensive audit: ...

TAX OFFICER'S ASSESSMENT AND EVALUATION

..., date..., month..., year...

TAX NOTARY OFFICER REVIEW AND EVALUATION

(Sign clearly with full name)