Circular No. 71/2010/TT-BTC guides the determination of tax for business establishments selling automobiles and motorcycles with engines when the sale price recorded on invoices provided to consumers is lower than the usual market transaction price.

CIRCULAR

Guidelines for determining tax on business establishments selling automobiles and two-wheeled motorcycles with engines regarding recording sale prices lower than usual market transaction prices on invoices given to consumers

machine recording the selling price of automobiles and two-wheeled motorcycles with engines on invoices provided to consumers is lower than the usual market transaction price

violative vehicle

­­­­Pursuant to the Law on Tax Administration No. 78/2006/QH11 dated November 29, 2006; Government Decree No. 85/2007/NĐ-CP dated May 25, 2007 detailing certain provisions of the Law on Tax Administration;

Pursuant to the Law on Value Added Tax No. 13/2008/QH12 dated June 3, 2008; Government Decree No. 123/2008/NĐ-CP dated December 8, 2008 detailing and guiding implementation of certain provisions of the Law on Value Added Tax;

Pursuant to the Law on Corporate Income Tax No. 14/2008/QH12 dated June 3, 2008; Government Decree No. 124/2008/NĐ-CP dated December 11, 2008 detailing certain provisions of the Law on Corporate Income Tax;

Pursuant to the Law on Personal Income Tax No. 04/2007/QH12 dated November 21, 2007; Government Decree No. 100/2008/NĐ-CP dated September 8, 2008 detailing certain provisions of the Law on Personal Income Tax;

Pursuant to Decree No. 118/2008/NĐ-CP dated November 27, 2008, of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

To implement the Prime Minister's directive in Circular No. 4736/VPCP-KTTH dated July 13, 2009, the Ministry of Finance issues guidelines for determining tax on automobile and two-wheeled motorcycle sales activities as follows:

PART I
GENERAL PROVISIONS

Article 1. Scope of application

Business establishments selling automobiles and two-wheeled motorcycles that record sale prices on invoices given to consumers lower than usual market transaction prices shall be determined to sell at usual market transaction prices and the amount of tax payable shall be determined accordingly.

Article 2. Interpretation of Terms

Article 1. Business establishments selling automobiles and two-wheeled motorcycles include organizations and individuals engaged in commercial trade of automobiles and two-wheeled motorcycles with engines; production and assembly establishments selling automobiles and two-wheeled motorcycles with engines.

Clause 2. The usual market transaction price is the actual transfer price on the market under normal conditions.

For domestically produced automobiles and two-wheeled motorcycles with engines, the sale price announced by the manufacturer shall be considered the usual market transaction price.

Article 3. Consumer of automobiles and two-wheeled motorcycles with engines: Organizations and individuals purchasing automobiles and two-wheeled motorcycles with engines to pay stamp duty when registering ownership and usage rights of automobiles and two-wheeled motorcycles with engines. Organizations and individuals engaged in commercial trade (having business registration certificates and tax identification numbers) purchasing automobiles and two-wheeled motorcycles with engines for resale purposes shall not be considered consumers of automobiles and two-wheeled motorcycles with engines.

Article 3. Cases Not Subject to Application

Clause 1. In cases where business establishments selling automobiles and two-wheeled motorcycles with engines publicly announce prices consistent with usual market transaction prices and sell at those prices or up to 5% lower, taxes shall be calculated based on the announced prices (announced prices must be reported to the direct tax management agency at each time point). If business establishments selling automobiles and two-wheeled motorcycles with engines publicly announce prices but sell contrary to regulations, they shall be determined to sell at usual market transaction prices and the amount of tax payable shall be determined accordingly.

Clause 2. In cases where domestic production and assembly establishments sell their products at unified prices nationwide or in specific regions, value added tax and corporate income tax shall be calculated based on the prices announced by the production and assembly establishments at each time point. Unified sale prices set by production establishments must be publicly disclosed and reported to the direct tax management agency. If business establishments selling automobiles and two-wheeled motorcycles with engines record invoices at prices lower than the announced prices and report this to the direct tax management agency, the business establishment shall be determined to pay taxes based on the announced prices.

Clause 3. Business establishments acting as agents selling at prices stipulated by the selling establishments shall only enjoy commissions as regulated by the Law on Value Added Tax.

Clause 4. Automobiles and two-wheeled motorcycles with engines from organizations and individuals already registered by competent state management agencies and have been used, which business establishments purchase for resale or accept consignment sales.

Article 4. Determining the market transaction price as the basis for setting prices and taxes payable

1. Principles for determining the market transaction price

The market transaction price is determined based on the database collected by the tax authority from: declared sales prices by businesses to the tax authority; price information from other state management agencies (customs authorities, appraisal centers under provincial finance departments, provincial industry and trade departments); Vietnam Automobile Manufacturers Association (VAMA); purchase and sale prices of similar types of cars and two-wheeled motorcycles by businesses in the same locality or in other localities; consumer information; car and two-wheeled motorcycle prices published in media such as newspapers, magazines, market news, websites.

2. Market transaction price as the basis for setting prices and taxes payable

The market transaction price is determined based on the Minimum Price List for Cars and Two-Wheeled Motorcycles for Stamp Duty Collection issued by the People's Committees of provinces and centrally-administered cities in accordance with the provisions of the law.

The People's Committee of the province or city issues the Minimum Price List for Cars and Two-Wheeled Motorcycles for Stamp Duty Collection in accordance with the provisions of the law to serve as the basis for calculating stamp duty for cars and two-wheeled motorcycles, and apply it to set the selling price and determine the amount of tax payable for businesses dealing in cars and two-wheeled motorcycles as specified in Article 1 of this Circular.

PART II
DETERMINATION OF TAX

Article 5. Declaration of the number of cars and motorcycles sold monthly

Businesses dealing in cars and motorcycles must prepare a declaration form of the number of cars and two-wheeled motorcycles sold (attached to this Circular) and submit it to the tax authority along with the monthly VAT declaration.

Article 6. Determination of the selling price and the amount of VAT payable using the determination method

The amount of VAT payable using the determination method is determined based on the determined selling price; the number of cars and two-wheeled motorcycles sold at a price lower than the market transaction price as stipulated in Article 4 of this Circular (referred to collectively as the number of violating vehicles); the rate of VAT and the VAT tax rate.

The amount of VAT payable using the determination method is calculated as follows:

The VAT rate used for determination is 10% as prescribed in point b Clause 1 Article 8 Decree 123/2008/NĐ-CP dated December 8, 2008 of the Government detailing and guiding the implementation of certain provisions of the Law on Value Added Tax.

The determined selling price is the market transaction price as stipulated in Article 4 of this Circular (converted to a price excluding VAT).

The determination of the declared VAT payable for the number of violating vehicles is as follows:

- For businesses dealing in cars and two-wheeled motorcycles subject to VAT under the deduction method:

The VAT output and VAT input of the number of violating vehicles are determined based on the sales VAT invoice, purchase VAT invoice, or import VAT payment receipt for the number of violating vehicles, and do not include VAT input related to other costs associated with selling the number of violating vehicles such as management expenses, depreciation of fixed assets.

Businesses dealing in cars and two-wheeled motorcycles subject to VAT under the deduction method are not allowed to offset the additional VAT payable for the number of violating vehicles against the remaining deductible VAT of the inspection period or audit period.

- For businesses dealing in cars and two-wheeled motorcycles subject to VAT under the direct payment method:

Article 7. Determination of corporate income tax payable by the prescribed method

The corporate income tax payable by the prescribed method shall be determined based on the prescribed selling price; the number of vehicles in violation and the percentage of corporate income tax.

The corporate income tax payable by the prescribed method shall be determined as follows:

The determined selling price is the market transaction price as stipulated in Article 4 of this Circular (converted to a price excluding VAT).

The percentage of corporate income tax payable is 2% as stipulated in Clause 3, Article 11 of Decree No. 124/2008/NĐ-CP dated December 11, 2008 of the Government detailing and guiding the implementation of certain provisions of the Law on Corporate Income Tax.

Taxable income of the number of vehicles with violations shall be determined as follows:

Revenue from the number of vehicles in violation shall be determined according to the VAT invoice for sales (the amount declared by the business entity) converted to a price without VAT.

Deductible expenses of the number of vehicles in violation are actual expenses incurred related to the number of vehicles with violations and have valid invoices and documents in accordance with the Corporate Income Tax Law (the amount declared by the business entity).

Additional corporate income tax payable for the number of vehicles in violation shall be combined with the corporate income tax payable for the number of cars and two-wheeled motorcycles sold without violations, the corporate income tax payable for other business activities, and offset against the corporate income tax already paid during the inspection period or audit period.

Article 8. Determination of individual income tax liable income by the prescribed method

For business entities dealing in cars and two-wheeled motorcycles subject to individual income tax, the individual income tax liable income by the prescribed method shall be determined based on the prescribed selling price; the number of vehicles in violation and the percentage of taxable income issued by the Ministry of Finance.

The prescribed selling price shall be determined according to the Minimum Price List for Cars and Two-Wheeled Motorcycles for Stamp Duty Collection (converted to a price without VAT).

Individual income tax liable income by the prescribed method shall be determined as follows:

The determination of individual income tax payable shall be carried out based on the provisions of the Law on Individual Income Tax and guiding documents.

Chapter III
IMPLEMENTING PROVISIONS

Article 9. Effective Date

This Circular takes effect 45 days from the date of signature.

During the implementation process, if there are difficulties or obstacles, units and business entities are requested to promptly report to the Ministry of Finance for timely resolution./.