Circular No. 78/1997/TT-BTC guides the implementation of tax and financial benefits for cooperatives as stipulated in Government Decrees No. 15/CP and No. 16/CP.

CIRCULAR

Guidelines for implementing tax and financial incentives for Cooperatives as prescribed

pursuant to Decrees 15/CP and 16/CP of the Government

Based on current laws on taxes and finance;

Based on Decree No. 15/CP on "Policies Encouraging Cooperative Development" and Decree No. 16/CP on "Conversion, Registration of Cooperatives and Organization of Activities of Cooperative Federations" of the Government dated February 21, 1997;

To implement the directives of the Prime Minister in Circular No. 4166/KTN of the Government Office dated August 20, 1997 regarding guidance on the implementation of Decrees 15/CP and 16/CP of the Government to concretize the implementation of the Law on Cooperatives.

The Ministry of Finance provides guidelines for implementing tax and financial incentive regimes for Cooperatives related to the above regulations as follows:

I. SUBJECTS AND SCOPE OF APPLICATION

1. Scope of application:

The subjects eligible to benefit from tax and financial incentives under this Circular are: Newly established Cooperatives, Cooperative Federations, and People's Credit Funds (hereinafter referred to collectively as Cooperatives) that have been issued a Business Registration Certificate in accordance with the Law on Cooperatives.

2. Scope of Application:

The provisions on tax and financial incentives in this Circular apply to Cooperatives within the scope defined in Point 1, Section I hereof which engage in production and business activities in all sectors such as: production, construction, transportation, commerce, services, and other business activities.

3. The tax and financial incentive regime stipulated in this Circular does not apply to Cooperatives that were registered and operating before the Law on Cooperatives came into effect and now implement conversion and re-registration according to the Law on Cooperatives and Decree No. 16/CP dated February 21, 1997 of the Government on "conversion, registration of Cooperatives and organization of activities of Cooperative Federations."

II. TAX INCENTIVES

Cooperatives must strictly comply with the system of registration, declaration, collection, and payment of various taxes and fees in accordance with current legal regulations. Below are the guidelines for tax incentives for Cooperatives:

1. Regarding turnover tax and income tax.

Newly established Cooperatives that have been issued a Business Registration Certificate in accordance with the Law on Cooperatives shall be considered new establishments and entitled to tax incentives applicable to new establishments, as follows:

a. Cooperatives engaged in agricultural production (cultivation, animal husbandry, aquaculture, salt-making...) shall be exempt from turnover tax and income tax.

Cooperatives located in rural areas that provide direct services to agricultural, forestry, fishery, and salt-making production such as irrigation, land preparation, storage of goods and livestock, plant protection, production and repair of salt-making tools... shall be exempt from turnover tax and exempt from income tax for two years (24 months) from the date they generate income from these activities. Services provided to other entities not directly serving agricultural production shall not enjoy the tax incentives stipulated herein.

b. Newly established Cooperatives engaged in production and business activities in small-scale industry and handicrafts (as specified in Section I of the Turnover Tax Table attached to Decree No. 96/CP dated December 27, 1995) shall be granted:

- A 50% reduction in turnover tax for one year (12 months) from the month of generating turnover; Cooperatives still facing significant difficulties, if they incur losses in the following year after the tax reduction period, may continue to enjoy a 50% reduction in turnover tax for an additional period, but the total duration of tax reduction shall not exceed two years (24 months). For newly established production Cooperatives in mountainous and island regions, the total duration of tax reduction shall not exceed three years (36 months) from the first month of tax reduction.

- Exemption from income tax for two years (24 months) from the date of generating income and a 50% reduction in income tax payable for the next two years (24 months); for newly established production Cooperatives in mountainous and island regions, the tax reduction period may be extended by an additional two years.

c. Cooperatives engaged in distant sea fishing operations established and issued a Business Registration Certificate in accordance with the Law on Cooperatives from March 6, 1997 to May 28, 1997 shall be exempt from turnover tax for two years (24 months) from the date of issuance of the Business Registration Certificate and exempt from income tax for two years (24 months) from the date of generating income.

Cooperatives engaged in distant sea fishing operations established and issued a Business Registration Certificate in accordance with the Law on Cooperatives from May 29, 1997 onwards shall enjoy tax incentives as prescribed in Decision No. 358/TTg dated May 29, 1997 of the Prime Minister on tax incentives for offshore mineral exploitation activities and the guiding documents of the Ministry of Finance for this Decision.

d. Cooperatives engaged in rough handling and painting operations shall enjoy a 50% reduction in turnover tax for two years (24 months) from the date of issuance of the Business Registration Certificate and exemption from income tax for two years (24 months) from the date of generating income.

đ. Cooperatives engaged in production and business activities in highland mountainous areas, islands, and other difficult regions as defined by the Government shall be exempt from turnover tax for two years (24 months) from the date of issuance of the Business Registration Certificate and exempt from income tax for two years (24 months) from the date of generating income.

2. Regarding business license tax

Business units affiliated with Cooperatives, households, and individuals engaged in business when assigned tasks by the Cooperative shall not pay business license tax directly but the Cooperative shall be responsible for paying it on their behalf. The rate of business license tax shall be implemented in accordance with the legal regulations on business license tax applicable to each type of entity.

According to Clause 2 of Article 13 of Decree No. 44/1998/NĐ-CP dated June 29, 1998 of the Government, assets under the management and use of state enterprises being privatized and transferred to the ownership of joint-stock companies are exempt from registration fees.

Production assets contributed by members to Cooperatives and member shares when transferred for use by other members within the Cooperative shall not be subject to stamp duty.

4. Regarding land rental fees and land use fees.

a. Cooperatives allocated land by the State for agricultural, forestry, aquaculture, and salt-making production shall not be required to pay land use fees.

b. Cooperatives located in rural mountainous, island areas that undertake the task of providing direct services to agricultural production, forestry, aquaculture, salt production, if they must lease land from the State for their headquarters or production workshops, shall be exempted from paying land rent for a period of five years (60 months) starting from the date they obtain the Business Registration Certificate under the Law on Cooperatives.

c. Other cooperatives (excluding those specified in points a and b of this item) which have been issued a Business Registration Certificate under the Law on Cooperatives and fall within the category of land lessees as defined by the laws on land shall be granted a 50% reduction in land rent for a period of two years (24 months) starting from the date they obtain the Business Registration Certificate under the Law on Cooperatives.

5. Other financial incentives.

In addition to being able to borrow business capital (including medium and long-term loans) from the commercial banking system at the conditions and interest rates set by the banks, cooperatives may also borrow funds from economic and social programs, the National Employment Resolution Fund, the National Investment Support Fund, and other state development funds as prescribed by the Government. They can also accept and implement investment projects from various sources of capital and foreign aid from countries and international organizations when the cooperatives meet the conditions stipulated by the State.

III. PROCEDURES, SEQUENCES AND AUTHORITY FOR EXEMPTIONS AND REDUCTIONS OF TAXES

To ensure accurate determination of the eligible entities and the amount of tax exemptions and reductions as prescribed, cooperatives must satisfy the following conditions before they can be exempted or reduced from taxes according to the guidelines set forth in this Circular:

Operating in accordance with the registered business activities;

Strictly adhering to regulations concerning the use of purchase and sale invoices, service provision documentation, accounting systems, statistical records, tax registration, and full tax declarations as required by current laws.

1. Exemption and reduction of business income tax and profit tax.

a. Procedures and documents for exemption and reduction of tax:

The application for exemption and reduction of business income tax and profit tax by cooperatives must be submitted to the tax management authority, including:

The Business Registration Certificate under the Law on Cooperatives dated March 20, 1996, clearly stating the business sectors and products produced and traded;

The tax declaration form with confirmation from the tax authority.

b. Authority for exemption and reduction of tax:

The Director of the Tax Revenue Office has the authority to grant exemptions and reductions of business income tax and profit tax for cooperatives as stipulated in this Circular after reporting to the higher-level Tax Bureau Director for review and approval.

2. Exemption and reduction of land rent.

The application for exemption and reduction of land rent by cooperatives must be submitted to the tax management authority, including:

The Business Registration Certificate under the Law on Cooperatives dated March 20, 1996, clearly stating the business sectors and products produced and traded;

The tax declaration form with confirmation from the tax authority.

The Director of the Tax Bureau has the authority to grant exemptions and reductions of land rent for cooperatives as stipulated in this Circular.

3. Exemption and reduction of stamp duty.

The application for exemption and reduction of stamp duty by cooperatives must be submitted to the local stamp duty collection management agency where the cooperative's headquarters is located, including:

The Business Registration Certificate under the Law on Cooperatives dated March 20, 1996, clearly stating the business sectors and products produced and traded;

Relevant property-related documents as required for the registration of stamp duty payment.

The head of the stamp duty collection management agency has the authority to decide on the exemption and reduction of stamp duty for cooperative properties as stipulated in this Circular.

4. Sequence of procedures for exemption and reduction of taxes.

In all cases, cooperatives requesting exemptions and reductions of taxes must submit an application for exemption and reduction of taxes in accordance with the prescribed regulations to the tax management authority. Upon receipt of the application for exemption and reduction of taxes, the tax management authority must check the received documents, determine whether they fall within the scope of tax exemptions and reductions as prescribed by law, verify whether the documents are complete and correct according to the regulations, compare the documents with reality, and clarify the relevant figures and situations related to the request for exemption and reduction of taxes.

If the documents are incomplete or contain errors, the cooperative must be promptly requested to supplement and correct them.

In cases where the Cooperative's request does not fall under the tax exemption or reduction provisions stipulated by law, the tax authority must provide a written response to the unit, clearly stating the reasons for not considering the exemption or reduction.

For cases where the exemption and reduction of taxes do not fall within the jurisdiction of the tax management authority, after reviewing and examining the documents and the actual situation of the cooperative, the tax authority must issue a written opinion to the higher-level tax authority for resolution, and send the entire reviewed and examined file along with the tax authority's recommendation letter to the higher-level tax authority, while informing the cooperative in writing about the progress of the file transfer. The file sent to the higher-level tax authority must clearly list the file contents.

In cases where the exemption and reduction of taxes are approved, the tax authority granting the exemption and reduction must issue a decision on the exemption and reduction of taxes and send it to the cooperative receiving the exemption and reduction and related units for implementation.

Based on the decision on the exemption and reduction of taxes, the tax authority will settle the tax payable with the cooperative and re-evaluate the profit and loss results and other revenues paid to the state budget.

The authority responsible for deciding on the exemption and reduction of taxes must keep and manage the tax exemption and reduction files in accordance with the prescribed regulations.

5. Time limit for considering and deciding on tax exemptions and reductions.

Within a maximum period of thirty days from the date of receipt of the application, the tax authority receiving the application for tax benefits for cooperatives as prescribed in this Circular must issue a decision on the exemption and reduction of taxes or notify the entity of the reasons for non-resolution or rejection.

6. Legal nature of the application for exemption and reduction of taxes.

The application for exemption and reduction of taxes submitted by the entity to the tax authority in accordance with the above provisions must be the original document with all administrative procedures completed. In cases where the application includes copies of documents: if the copy is a document or certificate issued by another agency or unit such as the Business Registration Certificate, Decision on Establishment..., it must bear a certified copy stamp; if the copy is a document of the entity itself such as settlement statements or other related certificates, it must bear a copy sent stamp of the entity.

IV. HANDLING REMAINING ISSUES WHEN IMPLEMENTING
THE TRANSITION AND REGISTRATION OF BUSINESS ACTIVITIES UNDER THE LAW ON COOPERATIVES

1. Regarding land

In cases where cooperatives were assigned land by competent state authorities before September 9, 1996 (the effective date of the Ordinance amending and supplementing the Ordinance on the rights and obligations of domestic organizations granted land and leased land by the State), and now fall within the category of land lessees as defined by the laws on land, they shall pay land rent as follows:

If the land use fee has not been paid, or if it has been paid but the funds originate from the State Budget (previously subsidized by the State), then the land rental fee must be paid to the State starting from January 1, 1996;

If the land use fee has been paid and the funds do not originate from the State Budget, then the amount shall be included in the land rental fee according to the general guidelines of the Ministry of Finance.

In cases where a Cooperative is currently using land (before September 9, 1996) that originated from residential land legally used by households or individuals after being permitted by competent state authorities to use such areas for offices or factories for production and business purposes, the Cooperative does not need to convert to a leasehold form, and continues to pay taxes on houses and land according to current laws.

2. Regarding debts.

a. For Cooperatives deciding to transform, the preparatory board for transformation must establish a file to accurately determine all debts of the Cooperative, clearly identifying types of debt, forms of debt, sources of debt, and nature of debt, and must settle all debts before being allowed to transform and register business operations under the Law on Cooperatives. In cases where debts have not been fully resolved, a commitment to assume the debt (transferring the debt to the new Cooperative to continue repayment) is required to allow transformation and registration of business operations under the Law on Cooperatives.

b. In cases of dissolution of Cooperatives according to the Law on Cooperatives, all debts must be settled through formal procedures. If there is no ability to settle all debts, the provisions of the law on corporate bankruptcy shall apply.

c. For debts owed by Cooperatives to the State, the preparatory board for transformation must develop a plan to repay the debt, clearly identifying responsible parties for repayment. If there is no ability to settle the debt, the provisions of the law on corporate bankruptcy shall apply; or request competent state authorities to consider writing off, reducing, or deferring payment of specific debts to facilitate transformation and registration of business operations under the Law on Cooperatives, as follows:

For debts resulting from State investments previously made, the authority issuing the investment decision should be requested to handle the matter.

For debts owed to State enterprises that Cooperatives cannot repay due to objective reasons, they will be handled as follows:

If the debts are incurred through normal economic and commercial relations (based on mutual agreement) between the Cooperative and the enterprise, the enterprise is responsible for handling the matter according to current financial management laws.

If the debts are owed to State enterprises due to directives from the Government (or the Council of Ministers previously), the State enterprise may request the authority managing capital and assets at the enterprise with appropriate jurisdiction to handle the matter. The Department of Capital and Asset Management at Enterprises, within its functions and responsibilities, is responsible for receiving and handling debts owed by Cooperatives to State enterprises located in areas designated by provincial or city authorities under the delegation of the Director General of the Department of Capital and Asset Management at Enterprises. The Department of Capital and Asset Management at Enterprises is responsible for receiving and handling debts owed by Cooperatives to State enterprises located in areas designated by the Government, central ministries, or sectors under the delegation of the Minister of Finance.

d. For loans previously taken from State-owned banks by Cooperatives to build infrastructure serving the community such as roads, kindergartens, health stations..., these loans will be transferred to local authorities for them to continue handling according to the general policy of the State as follows:

The District Financial Office is responsible for receiving assets and related documents for assets handed over to district or commune authorities. The Provincial Department of Finance and Prices is responsible for receiving assets and related documents for assets handed over to provincial or city authorities or equivalent levels. Upon receiving transferred assets, the finance office must prepare a handover record, clearly stating the names of representatives from both the transferring and receiving sides, the finance office representative; the quantity, type, condition, quality, origin, sealing number (if applicable) of the transferred assets, and accompanying documents and files, along with signatures from representatives of both sides and the finance office.

Based on the quantity, type, condition, quality... of the transferred assets and/or market prices at the time of transfer, the finance office determines the value of the transferred assets of the Cooperative and uses local budget funds to pay according to the value of the transferred assets. If the budget has not allocated funds for this purpose, it can be drawn from the contingency fund or paid in the following fiscal year.

Cooperatives are responsible for repaying banks upon receipt of payment from the finance office.

V. IMPLEMENTATION

Cooperatives eligible for benefits under this Circular may also enjoy other preferential policies (if any) as stipulated by law.

Tax authorities, finance offices, and asset management departments at state enterprises in localities are responsible for monitoring, urging, and guiding Cooperatives to comply with current tax and financial policies and the provisions of this Circular.

Any violations of the provisions of this Circular will be dealt with according to current laws.

This Circular takes effect from March 6, 1997 (the date when Decrees 15/CP and 16/CP come into force). Previous guidelines issued by the Ministry of Finance for Cooperatives that conflict with the provisions of this Circular are hereby abolished. During implementation, if difficulties arise, units are advised to promptly report to the Ministry of Finance for further guidance and supplementation./.