Circular No. 82/1997/TT-BTC guides the implementation and application of import tax valuation prices based on foreign trade contracts.

CIRCULAR

CIRCULAR NO. 82/1997/TT-BTC OF NOVEMBER 11, 1997 OF THE MINISTRY OF FINANCE ON GUIDELINES FOR IMPLEMENTATION AND APPLICATION OF IMPORT DUTY VALUATION BASED ON FOREIGN TRADE CONTRACTS

Pursuant to the authority and principles for valuation for tax purposes as stipulated in Article 7 of Decree No. 54/CP dated August 28, 1993 of the Government detailing the implementation of the Law on Export Tax and Import Tax and the Law Amending and Supplementing Certain Provisions of the Law on Export Tax and Import Tax. To address difficulties arising in practice regarding the valuation of imported goods and gradually align with international practices, the Ministry of Finance provides guidelines for applying the valuation based on foreign trade contracts as follows:

A. APPLICABLE OBJECTS:

Units, organizations, enterprises with legal personality, and foreign-invested enterprises established under the Law on Foreign Investment in Vietnam, permitted by Vietnamese state agencies to operate production and business activities in Vietnam, directly importing (or entrusting importation) goods through formal import procedures, having foreign trade purchase and sale contracts, and making full payment of the value of the consignment through banks.

B. IMPORT DUTY VALUATION:

As specified in Section II of Circular No. 72A TC/TCT dated August 30, 1993 of the Ministry of Finance guiding the implementation of Decree No. 54/CP dated August 28, 1993 of the Government detailing the implementation of the Law on Export Tax and Import Tax and the Law Amending and Supplementing Certain Provisions of the Law on Export Tax and Import Tax.

C. CASES AND CONDITIONS FOR APPLYING THE VALUATION BASED ON FOREIGN TRADE PURCHASE AND SALE CONTRACTS:

I. For goods not included in the list of items subject to state management of duty valuation, the following conditions must be met:
The foreign trade purchase and sale contract must be lawful and valid; specifically:

It must contain all essential elements of a contract as prescribed in Article 50 of the Trade Law adopted by the National Assembly of the Socialist Republic of Vietnam on May 10, 1997, including:

- Name of goods:

- Quantity:

- Specifications, quality:

- Price:

- Payment method:

- Place and time of delivery.

Particularly, the fifth element (payment method) must clearly indicate in the contract that the full value of the imported consignment will be paid through a bank. The payment method recorded in the contract cannot be changed after receiving the goods and completing customs procedures. In case of changes to this clause, the enterprise must promptly report to the customs authority so that the customs authority can re-determine the duty valuation according to regulations.

- As for the fifth content (payment method), it is required that the contract clearly state the payment of 100% of the value of the imported consignment to be made through a Bank. The form of payment recorded in the contract shall not be changed after receiving the goods and completing customs procedures. In case there is a change to this clause, it must be promptly reported to the Customs authority so that the Customs authority can re-determine the import tax valuation in accordance with the regulations.

II. For goods listed in the group of items subject to state management of duty valuation, if imported by entities specified in Part A above as raw materials or components directly used in production and assembly, and if the price stated in the contract is lower than the minimum duty valuation price set by the Ministry of Finance and the General Department of Customs, the duty may be calculated based on the price stated in the foreign trade contract upon registration by the enterprise with the Provincial or Municipal Customs Office, which will review the file according to the following regulations to approve each specific case. If the enterprise has objections to the local customs authority's handling, the enterprise has the right to appeal to the higher competent authority in accordance with the Law on Export Tax and Import Tax.

The conditions for consideration include:

1. Fulfilling all conditions as prescribed in Point I above;

2. Having production technology chains that are genuinely invested in and have sufficient production capacity to produce products using imported materials and components; confirmation from the competent authority must be obtained. For enterprises established under the Law on Foreign Investment in Vietnam, the production and assembly technology chains must meet technical requirements and business functions consistent with the investment permit.

3. Importing and entrusted importing units and enterprises must not have overdue customs duties (confirmed by the Customs authority) and must maintain good accounting records and invoices (confirmed by the direct tax management authority);

4. Entrusted import agency contracts must comply with the regulations of the Ministry of Trade if they involve entrusted imports.

Cases of providing imported materials and components between domestic enterprises with independent economic accounting (including units within the same Group Corporation or Joint Stock Company, etc.) shall not be considered as "directly entering production."

Regarding declaration procedures:

+ Enterprises importing and entrusted enterprises importing must register with the local Customs Office where the import procedures are handled regarding the importation of raw materials and components for direct use in production and assembly by the enterprise.

+ After obtaining approval from the Customs authority to apply the contract price for tax calculation, enterprises importing raw materials and components for direct use in production must present the approval opinion of the Customs authority and submit detailed import documentation for each shipment immediately upon import to the direct tax management authority for monitoring and management purposes to determine production costs in product pricing and accounting records of the enterprise.

+ For parts of imported raw materials and components included in the list of goods subject to state-managed tax prices, which were taxed at a contract price lower than the minimum tax price specified, if they are not directly used in production but transferred or sold to other enterprises or organizations, then within two days of transfer or sale, the unit or enterprise must report to the Customs Office handling the import procedures and the local tax authority managing the enterprise for knowledge and recalculation of taxes according to the price at the time of transfer.

III. For goods listed in the group of items subject to state-managed tax prices, if the contract price recorded on the sales contract is higher than the price specified in the Price List of the Ministry of Finance and the Price List of the General Department of Customs, the import tax price will be applied based on the contract price recorded on the foreign trade sales contract.

In cases where legitimate and valid foreign trade sales contracts meet the conditions for applying the contract price as stipulated in Points I and II above, but the contract price is excessively low and unreasonable, the local Customs Office must promptly report to the General Department of Customs and the Ministry of Finance for guidance on implementation. The handling of such cases follows the principle of applying the minimum tax price, and the General Department of Customs will issue a decision based on consensus with the Ministry of Finance.

D. VIOLATION HANDLING

If fraud is discovered in foreign trade contracts; failure to declare changes in the intended use of raw materials and components taxed based on the contract price to the Customs authority, or violation of provisions in this Circular, in addition to full recovery of import duties and special consumption taxes (if applicable), penalties for tax evasion will be imposed according to the current Export Tax Law, Import Tax Law, Special Consumption Tax Law, and Decree No. 22/CP dated April 17, 1996 of the Government on administrative penalties in the field of taxation, and Circular No. 45 TC/TCT dated August 1, 1996 of the Ministry of Finance guiding the implementation of Decree No. 22/CP mentioned above.

For repeated violations (from the second occurrence onwards), the Customs authority will not allow units, organizations, or enterprises to continue implementing the provisions of this Circular.

E. IMPLEMENTATION ORGANIZATION:

This Circular takes effect from December 1, 1997. Previous regulations contrary to this Circular are abolished.

The General Department of Customs guides local Customs Offices to monitor and implement tax calculations based on contract prices, promptly detect and handle cases of misrepresentation to evade taxes.

Local Customs Offices must compile and evaluate cases of tax calculation based on foreign trade contract prices monthly (thirty days) and report to the General Department of Customs and the Ministry of Finance (according to the attached reporting form).

During implementation, any difficulties should be reported promptly to the Ministry of Finance and the General Department of Customs for research and appropriate supplementation or amendment.