Circular No. 81/2000/TT-BTC guides the handling of VAT for sugar factories.

CIRCULAR

REGARDING THE GUIDANCE ON VALUE ADDED TAX TREATMENT FOR SUGAR MILLS

BASED ON Decision No. 65/2000/QĐ-TTg dated June 7, 2000 of the Prime Minister on reducing value added tax (VAT) payable by sugar manufacturing enterprises, the Ministry of Finance hereby provides guidance as follows:

I. ELIGIBLE ENTITIES FOR VAT REDUCTION:

1. Sugar manufacturing enterprises that pay VAT under the deduction method encountering difficulties in production and business operations leading to losses shall be eligible for a reduction in VAT payable on sugar products and by-products recovered during the sugar production process (such as syrup, bagasse, mud residue), collectively referred to as recovered by-products.

2. In cases where an enterprise produces both sugar and other by-products, separate accounting must be conducted for each product's business results. If an enterprise producing sugar also manufactures other by-products from recovered by-products (such as bio-fertilizers, pressed boards...) without being able to separately account for each product's business results, the VAT reduction applicable to sugar products and corresponding recovered by-products will be based on the actual annual loss of the enterprise but not exceeding the VAT payable on those products.

II. LEVEL OF VAT REDUCTION:

1. For the year 1999, the reduction in VAT payable corresponds to the actual loss but shall not exceed the VAT payable for the year.

VAT                         VAT output tax  VAT input tax deductible

VAT =          of sugar products and - deducted from sugar products

payable                      recovered by-products sold                   and various types of recovered by-products

2. For the year 2000, a temporary reduction of 50% of the monthly VAT payable on sugar products and recovered by-products sold is allowed. At the end of the year, if the temporarily reduced VAT exceeds the actual loss, the enterprise must pay the difference (temporarily reduced VAT minus actual loss) to the state budget within ten days from the date of completing the annual financial report according to current regulations. If the temporarily reduced VAT still leaves a loss, the enterprise may further reduce the VAT payable by the amount of the actual loss, but the maximum reduction shall not exceed the annual VAT payable.

In cases where even after a 50% reduction in VAT, the enterprise still incurs a loss, it can further reduce the VAT payable by the amount of the actual loss, but the maximum reduction shall not exceed the annual VAT payable.

III. DOCUMENTATION FOR VAT REDUCTION APPLICATION:

Sugar manufacturing enterprises suffering losses shall prepare an application for VAT reduction including:

A letter requesting VAT reduction from the enterprise explaining cost prices, selling prices without VAT, and VAT rates for each product.

Annual financial reports for the year requesting VAT reduction.

Final tax settlement report clearly stating the VAT payable, temporarily reduced VAT, and remaining VAT payable.

An evaluation and review after checking the final tax settlement report.

IV. PROCEDURE AND AUTHORITY FOR VAT REDUCTION APPLICATION:

1. PROCEDURE FOR VAT REDUCTION APPLICATION:

The enterprise's VAT reduction application is submitted to the direct tax collection authority.

The tax authority receiving the application is responsible for reviewing the application, verifying the accuracy of the data, and determining the production and sales results of sugar products and recovered by-products.

Within fifteen days from the date of receipt of the complete application, the tax authority will examine and issue a decision on VAT reduction within its jurisdiction. If the matter falls outside its jurisdiction, it must submit a proposal to the higher-level tax authority for consideration and decision.

2. AUTHORITY TO PROCESS VAT REDUCTION:

In 2000, the temporary reduction of 50% of the monthly VAT payable on sugar products and recovered by-products sold is declared by the enterprise director to the tax authority monthly and the enterprise bears responsibility for the accuracy of the declaration before the law.

After the fiscal year ends, based on the approved tax settlement, the authority to process VAT reduction is as follows:

VAT reduction below one billion VND is decided by the Director of the Tax Department. The Tax Department is responsible for notifying the unit and sending a copy to the General Department of Taxation for reporting.

VAT reduction of one billion VND or more is decided by the Director of the General Department of Taxation.

I. HANDLING REMAINING ISSUES:

a. Recovered by-products (such as syrup, bagasse, mud residue) sold out apply a VAT rate of 5% as stipulated in Point 2h of Circular No. 49/2000/TT-BTC dated May 31, 2000 of the Ministry of Finance. In cases where the recovered by-products sold have different VAT rates than specified, the enterprise declares and pays VAT based on the actual rate stated on the sales invoice.

b. In 1999, if a sugar manufacturing enterprise incurred losses and paid more VAT on sugar products and recovered by-products than the amount prescribed in Decision No. 65/2000/QĐ-TTg dated June 7, 2000 of the Prime Minister and this circular, the Director of the Tax Department issues a decision to refund the excess VAT paid to the enterprise. If the payment was insufficient, the enterprise must immediately pay the remaining VAT to the state budget.

c. In the first six months of 2000, sugar manufacturing enterprises that did not implement the temporary 50% reduction in monthly VAT payable can now temporarily reduce their VAT payable by 50% for the first six months of 2000. If the VAT paid by the enterprise exceeds the amount payable after the 50% reduction, the excess can be offset against the VAT payable for the next three months. If the excess is not fully offset within three months, the Director of the Tax Department issues a decision to refund the excess VAT to the enterprise. If the payment was insufficient, the enterprise must immediately pay the remaining VAT to the state budget.

4. COMBINED REPORTS:

Each quarter, provincial and municipal tax departments handling VAT for sugar manufacturing enterprises must submit combined reports to the General Department of Taxation on the last day of the reporting quarter.

The General Department of Taxation is responsible for compiling the data on VAT reductions for sugar manufacturing enterprises to report to the Minister of Finance.

V. Implementation Organization:

This circular takes effect from the date of signature.

During implementation, if there are any difficulties, units are advised to promptly reflect them to the Ministry of Finance (General Department of Taxation) for study and resolution./.