Circular No. 69/2002/TT-BTC guiding the implementation of Decision No. 41/2002/QD-TTg dated March 18, 2002 of the Prime Minister on preventing tax revenue loss from value-added tax and corporate income tax through sales prices in automobile and two-wheeled motorbike trading activities.

CIRCULAR

Guidelines for implementing Decision No. 41/2002/QD-TTg dated March 18, 2002 of the Prime Minister on preventing tax revenue loss from value-added tax and corporate income tax through sales prices in automobile and two-wheeled motorbike trading activities

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Pursuant to Decree No. 28/1998/NĐ-CP dated May 11, 1998 of the Government detailing the implementation of the Law on Value-Added Tax;

Pursuant to Decree No. 30/1998/NĐ-CP dated May 13, 1998 and Decree No. 26/2001/NĐ-CP dated June 4, 2001 of the Government detailing the implementation of the Law on Corporate Income Tax;

Pursuant to Decree No. 176/1999/NĐ-CP dated December 21, 1999 of the Government on Stamp Duty;

Pursuant to Decision No. 41/2002/QD-TTg dated March 18, 2002 of the Prime Minister on preventing tax revenue loss from value-added tax (VAT) and corporate income tax (CIT) through sales prices in automobile and two-wheeled motorbike trading activities.

The Ministry of Finance provides guidelines for implementing Decision No. 41/2002/QD-TTg of the Prime Minister as follows:

I. GENERAL PROVISIONS

1. Objects:

Business entities selling automobiles and two-wheeled motorbikes that record sale prices on invoices provided to consumers lower than actual market prices shall be subject to back taxes for VAT and CIT based on the price determined according to the minimum price list for automobiles and two-wheeled motorbikes used for calculating stamp duty, as prescribed by provincial People's Committees, and shall also be subject to administrative penalties under applicable laws, specifically as follows:

- Business entities selling automobiles and two-wheeled motorbikes directly issuing invoices to consumers (including organizations and individuals purchasing automobiles and two-wheeled motorbikes) recording prices on invoices lower than the minimum price for stamp duty calculation.

- Business entities selling automobiles and two-wheeled motorbikes delivering goods and issuing invoices to dealers at prices compliant with regulations but recording payment prices lower than the stamp duty calculation price in the location where the business entity has its headquarters shall be subject to back taxes for VAT and CIT based on the stamp duty calculation price in the location where the business entity has its headquarters.

In cases where the payment price recorded on invoices is higher than the stamp duty calculation price, VAT and CIT shall be calculated based on the price recorded on the invoice for tax purposes.

2. Temporary non-applicability cases:

a. Domestic production and assembly enterprises selling products at unified prices nationwide or regionally shall calculate VAT and CIT based on the prices announced by the enterprise at each time point.

Unified selling prices set by the enterprise must be publicly disclosed and reported to the direct tax management authority. If a business entity records an invoice price lower than the announced price and reports it to the direct tax management authority, the business entity will be subject to back taxes for VAT and CIT based on the reported price.

b. Dealers selling at the regulated price and only earning commissions as stipulated in Point 2, Section II, Part C of Circular No. 122/2000/TT-BTC dated December 29, 2000 of the Ministry of Finance guiding the implementation of Decree No. 79/2000/NĐ-CP dated December 29, 2000 of the Government detailing the implementation of the Law on Value-Added Tax.

c. Business entities listing prices and selling at listed prices, if the listed price is consistent with the stamp duty calculation price or up to 5% lower than the stamp duty calculation price, may calculate taxes based on the listed price. In cases where listed prices do not comply with these provisions, they will be subject to back taxes for VAT and CIT based on the stamp duty calculation price.

Business entities calculating taxes based on listed prices must report the listed prices to the direct tax management authority.

- Automobiles and two-wheeled motorbikes of organizations and individuals already holding registration certificates issued by competent state management authorities (including: automobiles and two-wheeled motorbikes previously used by diplomatic missions, international organizations, and foreign individuals exempted from import duties and VAT at the import stage, and exempted from stamp duty now resold), business entities purchasing them for resale or accepting consignment sales.

II. REGARDING THE PRICES AS BASIS FOR CALCULATING VAT AND CIT

According to Article 2 of Decision No. 41/2002/QD-TTg dated March 18, 2002 of the Prime Minister, the sales price serving as the basis for back taxes for VAT and CIT on automobiles and two-wheeled motorbikes is determined based on the minimum price list for automobiles and two-wheeled motorbikes used for calculating stamp duty, as issued by provincial People's Committees. To align with the pricing rules for VAT and taxable income for CIT as stipulated in the Law on Value-Added Tax and the Law on Corporate Income Tax, the Ministry of Finance provides guidance on determining the prices for VAT calculation and taxable income for CIT calculation for business entities selling automobiles and two-wheeled motorbikes to consumers as follows:

1. Regarding the price for VAT calculation:

The price for VAT calculation is the price excluding tax, determined by the following formula:

For used automobiles imported from abroad without registration, the price for tax calculation is determined based on the stamp duty calculation price for new imported automobiles of the same type and the percentage of remaining value of the vehicle as determined by the Customs Authority for calculating import duties and VAT at the import stage.

2. Taxable income for CIT calculation:

Business income subject to corporate income tax is determined in accordance with the provisions set forth in Point 1, Section II, Part B of Circular No. 18/2002/TT-BTC dated February 20, 2002, issued by the Ministry of Finance to guide the implementation of Decree No. 26/2001/NĐ-CP dated June 4, 2001 and Decree No. 30/1998/NĐ-CP dated May 13, 1998 of the Government detailing the implementation of the Law on Corporate Income Tax. Accordingly, business income subject to corporate income tax is calculated based on the taxable value-added tax price as specified above in Point 1.

III/ TAX DECLARATION AND PAYMENT AND TAX CALCULATION METHODS

1/ Regarding Value-Added Tax:

a/ Tax Declaration and Payment: Business establishments selling motor vehicles and two-wheeled motorcycles with engines, regardless of whether they fall under the application scope or temporary non-application cases, must prepare and submit to the tax authority monthly tax declaration forms for value-added tax along with detailed lists of goods purchased and sold according to the model specified in Point 1, Section II, Part C of Circular No. 122/2000/TT-BTC dated December 29, 2000, issued by the Ministry of Finance to guide the implementation of Decree No. 79/2000/NĐ-CP dated December 29, 2000 of the Government detailing the implementation of the Law on Value-Added Tax. They must also prepare and submit detailed lists of motor vehicles and two-wheeled motorcycles sold according to Model No. 01/XOT-XM attached to this Circular.

b/ Tax Calculation Method:

b1/ In cases temporarily not applying the provisions set forth in Point 2, Section I above, tax declaration and payment shall be carried out according to current regulations stipulated in other normative legal documents.

b2/ Business establishments selling motor vehicles and two-wheeled motorcycles that violate selling prices will be subject to back taxes as follows:

Based on the number of motor vehicles and two-wheeled motorcycles sold directly to consumers and transferred to dealers for sale during the period, the establishment must declare and pay taxes which are reflected in the sales invoice and voucher list (Model No. 02/GTGT) and the detailed list of motor vehicles and two-wheeled motorcycles sold (Model No. 01/XOT-XM). The declared figures must match the accounting books and sales invoices. Based on the self-declared figures from the business establishment, the tax authority will compare and determine the quantity of vehicles subject to back taxes, set the taxable value-added tax price as the basis for calculating the amount of back taxes.

The amount of back value-added tax is determined as follows:

For business establishments selling motor vehicles and two-wheeled motorcycles that pay value-added tax directly, each month they must declare their business revenue based on sales invoices reflecting revenue. Based on the revenue declaration form, the tax authority will compare the revenue reflected on sales invoices with the price for stamp duty (price including value-added tax) to determine the difference between the assessed revenue and the declared revenue. The entire difference between the assessed revenue and the declared revenue is considered as value-added tax. The back tax amount is determined using the following formula:

c/ Decision on Back Taxes:

To distinguish between the tax payable based on the declaration of the business establishment and the tax due to the invoice price being lower than the regulated price, the tax authority issues a Decision on Back Taxes according to Model No. 02/XOT-XM (for business establishments managed by the Tax Bureau) and Model No. 03/XOT-XM (for business establishments managed by the Tax Office) to be handed over to the taxpayer.

The Decision on Back Taxes is issued monthly and handed over to the taxpayer at the same time as the notification of value-added tax payment. The deadline for paying back taxes according to the Decision on Back Taxes is synchronized with the tax payment deadline notified in the tax payment notice.

2/ Regarding Corporate Income Tax:

Based on the business income subject to corporate income tax as stated in Point 2, Section II of this Circular, the tax authority requires business establishments to re-determine the provisional quarterly corporate income tax. For business establishments calculating tax directly based on value-added tax, the business income subject to corporate income tax is determined based on the stamp duty price (including value-added tax).

If the business establishment does not adjust its declaration, the tax authority will base the provisional taxable income and tax payable for each quarter on the business income subject to corporate income tax and estimated costs, and notify the business establishment to temporarily pay into the state budget.

IV/ VIOLATION HANDLING AND APPEAL

1/ Business establishments selling motor vehicles and two-wheeled motorcycles that violate tax declaration procedures will be penalized according to the Law on Value-Added Tax, the Law on Corporate Income Tax, and Decree No. 22/CP dated April 17, 1996 of the Government regarding administrative penalties in the field of taxation.

If a business establishment selling motor vehicles and two-wheeled motorcycles misrepresents the quantity and type of vehicles sold, leading to a reduction in the tax payable, it will be considered as fraudulent tax evasion as stipulated in Section II of Circular No. 30/2001/TT-BTC dated May 16, 2001, issued by the Ministry of Finance amending and supplementing Circular No. 128/1998/TT-BTC dated September 22, 1998, issued by the Ministry of Finance guiding the implementation of Decree No. 22/CP dated April 17, 1996 of the Government regarding administrative penalties in the field of taxation. In addition to being required to pay back taxes, such establishments will also face fines ranging from one to five times the amount of back taxes.

2/ Business establishments selling motor vehicles and two-wheeled motorcycles that record selling prices on invoices given to consumers lower than the actual market prices will, in addition to being subject to back taxes for value-added tax and corporate income tax, be administratively penalized for tax violations as follows:

- Administrative penalty for procedural violations as stipulated in Point 1c, Article 1, Decree No. 22/CP dated April 17, 1996 of the Government regarding administrative penalties for tax violations.

- If there is sufficient evidence to prove tax fraud, the penalty for tax evasion will be imposed according to Point 1b, Article 3 of the aforementioned Decree No. 22/CP.

3/ In cases where violators do not comply with tax payments and administrative penalties for tax violations as decided by the tax authority, the tax authority may apply coercive measures to collect taxes. If they still refuse to pay, the tax authority may suspend the supply of sales invoices to the business establishment.

4/ A business subject to violation handling has the right to appeal against the decision on tax recovery or administrative penalty for tax violations issued by the tax authority. The procedures and jurisdiction for resolving appeals shall be carried out in accordance with the provisions of the Value Added Tax Law and the Corporate Income Tax Law.

V/ IMPLEMENTATION

Local Tax Departments shall base on the guidance provided in this Circular to disseminate to businesses the implementation of tax declaration and payment in accordance with regulations.

To ensure accurate and full tax collection and prevent tax loss or over-collection, the tax authority must regularly investigate and survey to fully understand the market price fluctuations of automobiles and motorcycles. In cases where market prices fluctuate by more than 5%, the Provincial Tax Departments shall coordinate with the Department of Finance and Prices to report to the People's Committee of the province or centrally-administered city to adjust the Table of Prices for Vehicle Purchase Tax Collection for automobiles and motorcycles to align with market realities as a basis for recovering VAT and corporate income tax.

This Circular takes effect fifteen days from the date of issuance.

During the implementation process, if there are any difficulties, organizations and individuals are requested to promptly reflect them to the Ministry of Finance for supplementary guidance.

 

MODEL NUMBER 01/OTO-XM

TABLE OF QUANTITY OF AUTOMOBILES AND MOTORCYCLES SOLD

Month... Year 200...

Name of Business...

Address... Code Number:

Date... Month... Year 200... Date... Month... Year 200...

Preparer of the Table Accountant-in-Charge

(Signature, full name) (Signature, full name)

This table is used by all businesses that generate sales revenue from selling automobiles and motorcycles. Businesses must prepare and submit it to the tax authority along with the monthly VAT tax return. The submission deadline is no later than the 10th day of the following month.

Instructions:

1/ Column (2): Clearly record the name, type, and model year of vehicles sold during the month.

2/ Column (4): Record the total quantity of vehicles sold during the period.

3/ Column (5): Record the total quantity of retail sales and sales to agents for commission.

4/ Column (6): Record the total settlement price according to invoices for retail sales and sales to agents for commission.

5/ Column (7): Record the quantity of vehicles subject to tax recovery as specified in Article 1, Section I, which were actually sold at a settlement price lower than the market price (price for vehicle purchase tax).

6/ Column (8): Record the total settlement price recorded on invoices for the quantity of vehicles listed in column 6.

7/ Column (9): Record the total price fixed by the tax authority (quantity of vehicles reflected in column 6 multiplied by the price for vehicle purchase tax).

In cases where automobile and motorcycle businesses have not violated regulations, the part determined by the tax authority should be consistent with the declared figures.

MODEL NUMBER 02/OTO-XM

DECISION OF THE DIRECTOR OF THE PROVINCE TAX DEPARTMENT

ON THE RECOVERY OF VALUE ADDED TAX AND CORPORATE INCOME TAX FROM BUSINESSES THAT RECORD SALES PRICES LOWER THAN THE PRICE FOR VEHICLE PURCHASE TAX ON SALES INVOICES.

DIRECTOR OF THE PROVINCE TAX DEPARTMENT...

Pursuant to Decision No. 314/TC/QĐ-TCCB dated August 21, 1990 of the Minister of Finance regarding the establishment of the National Tax Department;

Pursuant to the Value Added Tax Law No. 02/1997/QH9 dated May 10, 1997;

Pursuant to Decision No. 41/2002/QĐ-TTg dated March 18, 2002 of the Prime Minister on preventing VAT and corporate income tax losses through sales prices in automobile and motorcycle trading activities;

Pursuant to Circular No. /2002/TT-BTC dated August 2002 of the Ministry of Finance guiding the implementation of Decision No. 41/2002/QD-TTg dated March 18, 2002 of the Prime Minister on preventing VAT and corporate income tax losses through sales prices in automobile and motorcycle trading activities;

Pursuant to the Minimum Pricing Table for Vehicle Purchase Tax issued together with Decision No... dated... Month... Year... by the Chairman of the People's Committee of the province, centrally-administered city...;

Pursuant to Table No. 01/XOT,XM prepared on... Month... Year... by the business.

Based on the proposal of the Head of the Tax Revenue Management Department...

Pursuant to …;

Article 1: Recover the value added tax as stipulated in Point 1, Section I of Circular No.../2002/TT-BTC dated... Month 4, 2002 of the Ministry of Finance guiding the implementation of Decision No. 41/2002/QD-TTg dated March 18, 2002 of the Prime Minister on preventing VAT and corporate income tax losses through sales prices in automobile and motorcycle trading activities, for the company... located at... Tax code:...

The amount of recovered tax is:...

Article 2: The company... is responsible for paying the recovered tax amount into the temporary account number... of the Province Tax Department opened at the State Treasury of the province, centrally-administered city... within five days from the date this Decision takes effect. If the entity does not comply voluntarily, the tax authority will handle it according to the law.

Article 3: This Decision takes effect from the date of signature. The Heads of Information Processing and IT Departments, Tax Revenue Management Department, and the Director of the company... are responsible for implementing this Decision.

Place of Receipt:                                                                      DIRECTOR OF THE PROVINCE TAX DEPARTMENT

- Company

- To be filed: HC

MODEL NUMBER 03/OTO-XM

DECISION OF THE HEAD OF THE DISTRICT TAX DEPARTMENT

ON THE RECOVERY OF VALUE ADDED TAX AND CORPORATE INCOME TAX FROM BUSINESSES THAT RECORD SALES PRICES LOWER THAN THE PRICE FOR VEHICLE PURCHASE TAX ON SALES INVOICES.

HEAD OF THE DISTRICT TAX DEPARTMENT...

Pursuant to Decision No. 315/TC/QĐ-TCCB dated August 21, 1990 of the Minister of Finance regarding the establishment of the District Tax Department;

Pursuant to the Value Added Tax Law No. 02/1997/QH9 dated May 10, 1997;

Pursuant to Decision No. 41/2002/QĐ-TTg dated March 18, 2002 of the Prime Minister on preventing VAT and corporate income tax losses through sales prices in automobile and motorcycle trading activities;

Pursuant to Circular No. /2002/TT-BTC dated August 2002 of the Ministry of Finance guiding the implementation of Decision No. 41/2002/QD-TTg dated March 18, 2002 of the Prime Minister on preventing VAT and corporate income tax losses through sales prices in automobile and motorcycle trading activities;

Pursuant to the Minimum Pricing Table for Vehicle Purchase Tax issued together with Decision No... dated... Month... Year... by the Chairman of the People's Committee of the province, centrally-administered city...;

Pursuant to Table No. 01/XOT,XM prepared on... Month... Year... by the business.

Based on the proposal of the Head of the Tax Revenue Management Team...

Pursuant to …;

Article 1: Recover the value added tax as stipulated in Point 1, Section I of Circular No.../2002/TT-BTC dated... Month 4, 2002 of the Ministry of Finance guiding the implementation of Decision No. 41/2002/QD-TTg dated March 18, 2002 of the Prime Minister on preventing VAT and corporate income tax losses through sales prices in automobile and motorcycle trading activities, for the company... located at... Tax code:...

The amount of recovered tax is:...

Article 2: The company... is responsible for paying the recovered tax amount into the temporary account number... of the District Tax Department opened at the State Treasury of the district, county... within five days from the date this Decision takes effect. If the entity does not comply voluntarily, the tax authority will handle it according to the law.

Article 3:This Decision shall take effect from the date of signature. The team leaders of the management teams and the director of the company... are responsible for implementing this Decision.

Place of Receipt:                                                                     DIRECTOR OF THE TAX BRANCH

- Company

- TO BE FILED: ADMINISTRATION