Circular No. 77/2008/TT-BTC guiding the implementation of certain measures to handle overdue tax debts

CIRCULAR

Guidelines for Implementing Certain Measures to Handle Overdue Tax Arrears

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Pursuant to Article 49 of the Law on Tax Administration, Clause 24 of Decree No. 85/2007/NĐ-CP dated May 25, 2007 of the Government detailing certain provisions of the Law on Tax Administration;

Pursuant to Decision No. 172/2001/QĐ-TTg dated November 5, 2001 of the Prime Minister on handling tax arrears write-off, extension, and cancellation of taxes and other amounts payable to the State budget for enterprises and business establishments facing difficulties due to objective reasons;

Pursuant to Decree No. 77/2003/NĐ-CP dated July 1, 2003 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

To implement the guidance of the Prime Minister as stated in Circular No. 7567/VPCP-KTTH dated December 31, 2007 of the Government Office;

The Ministry of Finance issues guidelines for implementing certain measures to handle overdue tax arrears, including other amounts payable to the State budget (hereinafter referred to collectively as "tax arrears") arising before July 1, 2007 and remaining unpaid to the State budget as follows:

I. EXTENSION OF PAYMENT FOR TAX ARREARS

1. Cases Eligible for Extension of Payment for Tax Arrears

Enterprises that are still operating and owe taxes due to financial difficulties and continuous losses over three years (2005 to 2007) shall be eligible for extension of payment, including:

a) Enterprises required to relocate their business premises out of urban areas according to the planning of the Government or the People's Committee of provinces or centrally-administered cities, experiencing financial difficulties during the relocation period leading to losses and inability to pay taxes promptly.

b) Enterprises encountering business risks leading to financial difficulties and inability to pay taxes promptly such as bankruptcy of trading partners, failure to recover debts, loss of market due to changes in import policies of other countries, damage from natural disasters, unexpected accidents, or other force majeure events.

c) Enterprises directly signing contracts with project owners or other enterprises to undertake projects funded by the State budget or Official Development Assistance (ODA) but not yet paid by the State budget, resulting in lack of funds to pay taxes and thus owing taxes.

d) Enterprises implementing infrastructure investment projects or real estate businesses granted land use rights or acquired through land auction or lease but unable to pay the State budget due to failure to clear land or hand over land. Handling as follows:

- For projects that cannot be implemented within the time limit specified in Clause 1, Article 37 of Decree No. 84/2007/NĐ-CP dated May 25, 2007 of the Government due to failure to clear land or hand over land (including partial handover according to the land handover schedule), and have been decided by the competent authority to reclaim the project land, the Tax Department will reassess the amounts payable to the State budget based on the actual area of land handed over or leased. The enterprise must immediately pay the amount notified by the tax authority.

- For ongoing projects delayed in progress, which have been extended the use of land by the competent authority in accordance with Clause 2, Article 37 of Decree No. 84/2007/NĐ-CP dated May 25, 2007, and have tax arrears related to land and transfer of land use rights, houses, or infrastructure on land, the extension of payment for corresponding tax arrears will be considered based on the delayed implementation area of the project that has been extended.

2. Duration and Amount of Tax Arrears Eligible for Extension of Payment

- Cases with financial difficulties as mentioned in Points a, b, and c, Clause 1, Section I above shall be eligible for extension of payment of all tax arrears up to a maximum of one year from July 1, 2007.

- Cases as mentioned in Point c, Clause 1, Section I above shall be eligible for extension corresponding to the time and tax arrears not paid due to non-payment by the State budget, with the extension period not exceeding one year from July 1, 2007.

During the extension period for tax arrears as mentioned above, late payment penalties will not be applied to the extended tax arrears. Upon expiration of the extension period, if the enterprise has not fully repaid the extended tax arrears, the tax authority or customs authority will impose late payment penalties and enforce collection measures against the unpaid tax arrears in accordance with the law.

3. Procedures, Documents, and Authority for Extension of Tax Arrears

a) Procedures and documents for extension include:

- A request for extension of tax and penalty payments in the form number 02/NOPT issued together with Circular No. 60/2007/TT-BTC dated June 14, 2007 of the Ministry of Finance guiding the implementation of certain provisions of the Law on Tax Administration and guiding the implementation of Decree No. 85/2007/NĐ-CP dated May 25, 2007 of the Government detailing certain provisions of the Law on Tax Administration. It should clearly state the reasons for requesting the extension of tax payment, the amount of tax and penalty requested for extension, the requested extension period, the repayment plan for tax arrears, and the commitment to pay the tax and penalty according to the plan.

- Documentation proving the reasons for requesting the extension of tax payment. Specifically, for each case as follows:

+ Financial statements of the most recent fiscal year ending before July 1, 2007 and the calculation of tax arrears as of July 1, 2007.

+ For cases encountering business risks: in cases of natural disasters, fire, or unexpected accidents, there must be a report determining the extent and value of property damage by the competent authority such as the Valuation Council established by the Department of Finance, or professional valuation companies providing valuation services under contract, or the Valuation Center of the Department of Finance; In cases of partner bankruptcy or changes in import policies of other countries, evidence or explanations from the enterprise must be provided.

+ For cases relocating business premises according to the requirements of the competent state authority, there must be a decision of the competent state authority regarding the relocation of the business premises of the enterprise.

+ For business establishments with revenue from implementing projects funded from state budget sources but not yet paid, the proof documents include: economic contracts, accounts receivable reconciliation statements, and confirmation of completed work volume accepted for payment by the project owner or main contractor; documents and receipts proving realized revenue, revenue paid from state budget sources, documents determining tax arising from revenue or completed work volume, and outstanding tax.

+ For businesses implementing infrastructure investment projects and real estate operations facing difficulties: documents and texts certifying taxes due, paid, and still owed; permits for land use extension issued by competent authorities on land allocation and lease; declarations on house sales and land use rights transfer (revenue and area).

The above documents must be certified copies or copies stamped as true copies and signed by authorized representatives of the enterprise.

The application for tax debt extension is submitted to the direct tax management agency responsible for the enterprise or business establishment with tax debts.

b) Authority and time limit for handling tax debt extension

The direct tax management agency responsible for enterprises, business establishments, and individuals with tax debts (hereinafter referred to as the debtor) shall be responsible for receiving applications to extend tax payments according to its authority, current laws, and guidelines set forth in this Circular.

Within ten days from the date of receipt of complete files, the tax management agency must respond to the debtor. In cases where the tax extension application is incomplete according to regulations, within three working days from the date of file receipt, the tax management agency must notify the debtor in writing to complete the application.

For cases where tax debt extension is granted, the head of the direct tax management agency responsible for the debtor issues a document accepting the tax extension request (according to Form No. 03/NOPT issued together with Circular No. 60/2007/TT-BTC dated June 14, 2007). If the tax management agency does not accept the tax extension request of the debtor, it will inform the debtor in writing (according to Form No. 04/NOPT issued together with Circular No. 60/2007/TT-BTC dated June 14, 2007).

Specifically, for tax debts of goods exported and imported with customs declarations registered before January 1, 2007, which fall under the guidance of Point 1 of this Section, the procedures, files, and authority for tax debt extension shall be carried out according to the guidance provided in Circular No. 59/2007/TT-BTC dated June 14, 2007, issued by the Ministry of Finance, guiding the implementation of export tax, import tax, and tax management for exported and imported goods, and any amendments, supplements, or replacements to this Circular (if any).

II. HANDLING OF TAX DEBTS AND DELAY PENALTIES OF ENTERPRISES ENGAGED IN EXPORT AND IMPORT BUSINESS

1. Exemption from recovery and delay penalties for recovered taxes

a) Objectives and conditions for exemption consideration:

- Tax recoveries and delay penalties proposed for exemption of consignments with customs declarations registered with customs authorities from October 15, 1998, or earlier.

- There is a tax debt due to one of the following objective reasons, which may be considered for exemption from tax recovery and delay penalties for recovered taxes. Specifically:

+ Due to changes in tax policy (such as taxable value, tax rate), but the document was issued after the declaration date of imported goods and has retroactive effect, the enterprise had already paid taxes according to the customs authority's tax notification before the new policy took effect, and subsequently was subject to tax recovery by the customs authority.

+ Due to unclear or incorrect pre-existing customs instructions on tariff classification or valuation that did not align with the actual goods or tax laws on export and import taxes, followed by different or revised instructions. As a result, if recalculated, the tax payable would be higher than the amount notified by the customs authority, leading to tax recovery by the customs authority.

+ A commodity with multiple appraisal results or difficult classification, the customs authority could not accurately classify the tariff number during customs procedures, resulting in subsequent tax recovery for the enterprise.

b) Documents for requesting exemption from tax recovery and delay penalties, prepared by the enterprise include:

+ An enterprise letter requesting exemption from tax recovery and delay penalties, clearly explaining the reasons for the request and the amount of recovered tax.

+ Customs declaration for exported/imported goods subject to tax recovery.

+ The first tax notification from the customs authority.

+ Receipts for initial tax payments according to the customs authority's tax notification.

+ Decision or notification of tax recovery from the customs authority.

+ Receipts for tax recovery payments according to the decision or notification of tax recovery (for cases where tax recovery has been paid but delay penalties have not).

+ Decision on delay penalties for recovered taxes.

+ Trade contracts.

+ Commercial invoices, bills of lading.

+ Appraisal certificates from the appraisal agency (if available).

All documents mentioned above, except for the enterprise's letter requesting exemption from tax recovery and delay penalties, must be original copies, while the rest should be certified true copies stamped and signed by authorized representatives of the enterprise.

c) Procedures, formalities, and authority for handling exemptions from tax recovery and delay penalties:

The enterprise submits the application for exemption from tax recovery and delay penalties to the local Customs Office where the customs procedures were conducted for the consignment subject to tax recovery for verification and confirmation of the authenticity of the file.

Based on the files prepared by the enterprise, the local Customs Office checks against the provisions stated in Point 1a of this Section and processes accordingly.

- In cases where conditions for exemption from tax recovery and late payment penalties are met, the local Customs Office shall issue a report and proposal for handling, along with the entire application for tax recovery exemption submitted by the enterprise to the General Department of Customs, specifying the following:

+ Subjective and objective reasons (as mentioned above), circumstances, and contents of the matter leading to incorrect calculation (or notification) of the amount of tax due, thus necessitating tax recovery;

+ The initial amount of tax notified;

+ The amount of tax to be recovered;

+ The amount of tax recovery and late payment penalty proposed for exemption.

- In cases where the enterprise's application does not meet the conditions for tax recovery exemption and late payment penalty exemption as prescribed, the local Customs Office shall respond to the enterprise and require it to pay the full amount of tax recovery and late payment penalty according to the regulations.

Based on the application and report sent by the provincial or municipal Customs Office, the General Department of Customs will review and submit to the Ministry of Finance for a decision on tax recovery exemption and late payment penalty exemption for the enterprise.

2. Debt cancellation of taxes and late payment penalties

a) Objectives and conditions for debt cancellation:

- Tax debts and late payment penalties of consignments declared to customs authorities after October 15, 1998, up to June 30, 2007, which have not been paid into the state budget.

- There are objective reasons due to policy changes or unclear guidance documents as follows:

+ New tax policy documents (such as taxable value, tax rate) issued after the declaration of imported goods and retroactively applied, resulting in a lower tax payable if recalculated compared to the amount notified by the customs authority.

+ Previous customs guidance on commodity codes and taxable values that were unclear or inconsistent with the actual goods or tax laws, subsequently corrected by new guidance. As a result, the enterprise would be subject to tax recovery upon recalculation.

b) Application for debt cancellation and penalties, including:

+ A letter proposing tax debt and penalty cancellation, detailing the reasons for the request, the incorrect tax calculation, the notified tax amount (penalty), the correct tax amount after recalculation, and the tax and penalty amounts proposed for cancellation;

+ Import/export declaration forms for tax debt cancellation;

+ Tax notification from the customs authority;

+ Decision on tax recovery by the tax management agency (if applicable);

+ Decision on late payment penalty (if applicable);

+ Trade contracts.

+ Commercial invoices;

+ Inspection certificate from the inspection agency (if applicable);

+ Description of product characteristics, nature, and structure provided by the manufacturer (if applicable).

All documents listed above, except for the enterprise's letter requesting debt cancellation and penalty cancellation, must be original copies, while the rest should be certified true copies.

c) Procedures, formalities, and authority for debt cancellation:

The enterprise submits the application for tax debt and penalty cancellation to the local Customs Office responsible for the customs procedures of the consignment in question for verification and confirmation of the authenticity of the application.

Based on the application submitted by the enterprise, the local Customs Office will verify against the provisions of Clause 2a Section of this Article and handle accordingly:

- In cases meeting the conditions for debt cancellation as prescribed: The local Customs Office will send the entire application and issue a report to the General Department of Customs, proposing tax and penalty cancellation for the enterprise. The report must specify the following:

+ Reasons for the incorrect tax calculation and the basis for recalculating the tax;

+ The notified tax amount (penalty);

+ The recalculated tax amount;

+ The tax and penalty amounts proposed for cancellation;

+ Confirmation that the enterprise falls within the scope of debt cancellation as guided by Clause 2a Section of this Article and commits to responsibility for the proposed cancellation.

- In cases where the enterprise's application does not meet the conditions for debt cancellation as prescribed: The local Customs Office will respond to the enterprise.

Based on the application and report sent by the provincial or municipal Customs Office, the General Department of Customs will review and submit to the Ministry of Finance for a decision on debt cancellation for the enterprise.

3. For cases falling under the objectives and meeting the conditions specified in Points 1.a and 2.a but lacking the required documentation as stipulated in Points 1.b and 2.b of this Section, the provincial or municipal Customs Office will guide enterprises to collect the remaining documents in the application, report, and propose solutions for the General Department of Customs to report to the Ministry of Finance for individual case consideration.

IV. IMPLEMENTATION

This Circular takes effect fifteen days after its publication in the Official Gazette.

For other tax debts not covered by the above guidelines, they will be handled according to the Tax Administration Law and current guiding documents of the Ministry of Finance.

The General Department of Taxation, the General Department of Customs, the Tax Bureaus, and the Customs Offices of centrally administered cities and provinces are responsible for guiding, inspecting, and handling tax debts according to this Circular.

Any issues encountered during the implementation of this Circular should be reported to the Ministry of Finance for study and resolution./.