Circular No. 84/2004/TT-BTC amends and supplements Circular No. 120/2003/TT-BTC dated December 12, 2003 guiding the implementation of Decree No. 158/2003/NĐ-CP dated December 10, 2003 detailing the implementation of the Law on Value Added Tax and the Law Amending and Supplementing the Law on Value Added Tax.

CIRCULAR

Amending and supplementing Circular No. 120/2003/TT-BTC dated December 12, 2003 guiding the implementation of Decree No. 158/2003/NĐ-CP dated December 10, 2003 of the Government detailing the implementation of the Law on Value Added Tax (VAT) and the Law amending and supplementing certain articles of the VAT Law.

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Pursuant to the Law on VAT No. 02/1997/QH9 dated May 10, 1997; the Law amending and supplementing certain articles of the VAT Law No. 07/2003/QH11 dated June 17, 2003;

Pursuant to Decree No. 148/2004/NĐ-CP dated July 23, 2004 of the Government amending and supplementing Decree No. 158/2003/NĐ-CP dated December 10, 2003 of the Government detailing the implementation of the Law on VAT and the Law amending and supplementing certain articles of the VAT Law.

Pursuant to Decision No. 205/1998/QĐ-TTg dated October 19, 1998 of the Prime Minister promulgating the regulations on duty-free shops.
The Ministry of Finance guides the amendment and supplementation of some contents in Circular No. 120/2003/TT-BTC dated December 12, 2003 of the Ministry of Finance as follows:

1. Supplementing the objects not subject to VAT prescribed in Point 23, Section II, Part A as follows:

Inspection services for international transport vehicles, insurance services provided for international transport vehicles such as hull insurance or aircraft hull insurance, liability insurance for ship owners or general liability insurance for aircraft.

An international transport vehicle is a vehicle with international transportation revenue accounting for more than 50% of its total transportation revenue in a year; for international transport aircraft, it must have international flight hours accounting for more than 50% of the total flight hours of the aircraft in a year.

In cases where international transport vehicles are operated and used by domestic transport businesses, each year, the transport business shall base on the actual international transportation revenue or international flight hours achieved in the previous year to register with the direct tax authority regarding the list of international transport vehicles (according to the registration form attached to this circular) so that the tax authority can confirm it as the basis for determining non-collection of VAT on goods and services directly supplied to international transport vehicles. When selling goods and services to international transport vehicles, the business selling goods and services must request the domestic transport business using the international transport vehicle to provide a copy of the international transport vehicle registration with the tax authority (certified and stamped by the user of the international transport vehicle). Businesses providing goods and services to international transport vehicles must issue invoices clearly stating the name and number of the international transport vehicle; the number and date of the declaration form for the arrival of the transport vehicle or the permit to fly (for aircraft) if it is a foreign transport vehicle.

The business selling goods and services must retain copies of the above registration form, sales invoices, sales contracts (if any), payment vouchers for goods and services. In cases of sales through agents, the business selling goods and services must have a settlement record between the business and the agent, clearly stating the name, quantity of goods and services sold to international transport vehicles; the number and date of the international transport vehicle registration; the name and number of the international transport vehicle; the number of days of the declaration form for the arrival of the transport vehicle or the permit to fly (for aircraft) if it is a foreign transport vehicle; the invoice for goods and services sold to international transport vehicles.

In cases where newly purchased transport vehicles are put into use, the domestic transport business shall base on the business plan to determine the international transportation revenue or international flight hours to register with the tax authority according to the guidance above. If the proportion of international transportation revenue or international flight hours in the previous year does not meet the ratio of over 50% due to objective reasons such as accidents, breakdowns requiring repairs but the business plan for the registration year has an international transportation revenue or international flight hour ratio of over 50%, the enterprise must explain clearly to the tax authority to complete the registration procedures for international transport vehicles.

2. Point 14, Section II, Part A concerning the objects not subject to VAT for public sanitation services is amended and supplemented as follows:

"14 - Public services such as sanitation, drainage; maintaining zoos, flower gardens, parks, street trees, public lighting; funeral services. These services are not distinguished by the source of funding.

Street sanitation and drainage services include activities such as collecting, cleaning up, processing waste, drainage, treating wastewater for organizations and individuals without distinguishing the source of funding. If a business utilizes waste to produce other products for sale, these products will be exempt from VAT according to the guidance in Section II, Part A of Circular No. 120/2003/TT-BTC or subject to VAT according to the guidance in Section II, Part B of Circular No. 120/2003/TT-BTC. In cases where a business provides services such as cleaning and sanitation for offices for organizations and individuals, this service is subject to VAT at a rate of 10% according to the guidance in Point 3.27, Section II, Part B of Circular No. 120/2003/TT-BTC.

Maintaining zoos and parks includes management, planting, caring for, protecting birds, animals, and plants in zoos, parks, public areas, national parks.

Funeral services include activities such as renting houses, cars for funerals provided by funeral service organizations; burial, cremation.

Activities that charge fees and levies according to state fee and levy regulations are not subject to VAT."

3. Point 1, Section II, Part B concerning the zero percent VAT rate is amended and supplemented as follows:

"1- Zero percent tax rate: applicable to exported goods and services, construction activities for projects abroad, and projects of export processing enterprises. Exported goods and services include processed goods for export; goods sold to duty-free shops; goods and services not subject to VAT when exported (except travel agency services abroad; reinsurance services abroad; credit, financial investment, and stock market investment services abroad, and goods and services specified in Point 23, Point 27, Section II, Part A of Circular No. 120/2003/TT-BTC).

- Exported goods include goods exported overseas, consigned exports, sales to export processing enterprises, and other cases considered as exports according to government regulations, such as:

+ Goods for export processing that are transferred according to Article 17 of Decree No. 57/1998/NĐ-CP dated July 31, 1998, detailing the implementation of the Law on Trade regarding export, import, processing, and agency purchase and sale of goods with foreign countries. In this case, it applies to goods processed for export by the direct processing entity under a processing contract signed with a foreign party (called the delivery entity), but the processed goods have not been exported overseas and instead are transferred to another domestic entity (called the receiving entity) at the direction of the foreign party to continue processing into finished products according to the contract signed with the foreign party, with the processing fee directly paid by the foreign party.

+ Goods consigned for export processing. In this case, the entity signs a direct processing contract with a foreign party but subcontracts the processing to another entity. The entity signing the direct processing contract with a foreign party only receives commission on the processing fee.

+ Goods produced by Vietnamese enterprises and sold to foreign entities but delivered to other Vietnamese enterprises at the direction of the foreign side (referred to as local export goods) to be used as raw materials for producing and processing export goods.

+ Goods exported for sale at overseas trade fairs and exhibitions.

- Exported services and services provided to export processing enterprises for their production and business operations, excluding services for personal consumption:

Exported services are those directly provided to organizations and individuals abroad and consumed outside Vietnam if they meet the following conditions: the service provider must have a contract signed with the buyer abroad in accordance with the Law on Trade; the foreign buyer pays the service fee to the service provider in Vietnam."

4. Amend and supplement Point 2.27, Section II, Part B as follows:

"2.27 Raw rubber such as crepe rubber, sheet rubber, ribbon rubber, and granulated rubber."

5. Amend and supplement the third paragraph after Point 3.27, Section II, Part B as follows:

Repair and warranty services apply a 10% VAT rate. Specifically, repair services for machinery, equipment, and transportation vehicles, which are mechanical products, and inspection services for transportation means and equipment apply a 5% rate.

6. Supplement Point 1.2.c, Section III, Part B on determining the deductible VAT input tax for agricultural, forestry, aquaculture, and fishing production units with closed-loop production systems, centralized accounting of production and business results using agricultural and forestry products; aquaculture and fishing products as raw materials to produce taxable products (including unprocessed agricultural, forestry, and aquatic products for export or processed products subject to VAT) as follows:

Business entities can declare and deduct VAT on purchased goods and services used for production and business operations at all stages: basic construction investment, production, and processing; if the entity sells unprocessed or minimally processed agricultural, forestry, aquaculture, and fishing products that are not subject to VAT, then the deductible VAT on purchased goods and services will be calculated based on the percentage of sales revenue from taxable goods and services compared to total sales revenue. The declaration and payment of VAT shall be carried out at the main office.

7. Supplement Point 1.2d, Section III, Part B on the conditions and procedures for services provided to export processing enterprises, construction, and installation of projects abroad, and projects of export processing enterprises to be deductible and refunded for VAT input tax as follows:

- Service providers supplying services to export processing enterprises, construction, and installation of projects abroad, and projects of export processing enterprises must have contracts signed between the service provider and the export processing enterprise or foreign party in accordance with the Law on Trade.

- Service providers supplying services to export processing enterprises; construction and installation of projects for export processing enterprises must pay according to the guidelines set forth in Point 1.2.d3, Section III, Part B of Circular No. 120/2003/TT-BTC.

8. Supplement Point 2, Section II, Part C on declaring and paying VAT for certain cases as follows:

- Business entities acting as agents selling goods and services not subject to VAT; business entities acting as agents for postal services, insurance, lottery, and airline ticket sales according to the prescribed prices by the principal and earning commissions shall not declare and pay VAT on the revenue from goods and services sold through agency and the commission revenue earned from agency services."

- Business entities conducting construction and installation activities at locations other than where their main office is located, with affiliated units in different localities that fall under the category of VAT taxpayers based on a percentage of turnover, when declaring and paying VAT at their main office must supplement additional information on the tax return explanation form regarding the number of tax returns filed, the amount of VAT payable, the number of supporting documents, and the amount of VAT paid at the locality where the construction and installation works are carried out or where sales take place for the tax authority to manage the business entity's basis for calculating the VAT already paid, still to be paid, or overpaid. When settling annual VAT, the business entity must simultaneously obtain confirmation from the tax authority at the locality where the construction and installation works are carried out or where sales take place regarding the amount of VAT due and the amount of VAT already paid.

9. Supplement Point 3, Section I, Part D as follows:

When the investment project to establish a new enterprise has been completed and all registration procedures for business operations and tax payment have been finalized, the business entity which is the investor must consolidate the generated VAT, refunded VAT, and unrefunded VAT of the project to hand over to the newly established enterprise for it to declare, pay taxes, and request VAT refunds according to regulations from the directly managing tax authority.

10. Supplement the third bullet point in Point 6, Section I, Part D as follows:

In cases where the project owner who is eligible for VAT refund is not a business entity and does not have a business registration certificate, they can only receive a refund upon issuance of a Decision establishing the Project Management Board and the project owner authorizing the Project Management Board to handle the VAT refund procedures.

11. Procedures for declaring and paying VAT:

a. Issued together with this Circular is the VAT tax return form (Form No. 01/GTGT), the monthly tax return explanation form (Form No. 01B/GTGT), and the annual VAT adjustment tax return form (Form No. 11/GTGT) to replace the previous VAT tax return form (Form No. 01/GTGT) and the previous annual tax settlement form (Form No. 11/GTGT) issued along with Circular No. 120/2003/TT-BTC.

b. Amend the declaration and payment procedures for VAT for business entities subject to the deduction method that engage in gold, silver, precious stones, foreign currency trading activities and pay VAT under the direct payment method:

- For goods and services taxed under the deduction method, business entities shall prepare the VAT tax return forms according to Form Nos. 01/GTGT, 01B/GTGT, and 11/GTGT issued together with this Circular.

- For gold, silver, precious stones, and foreign currency trading activities, business entities shall prepare the VAT tax return forms according to Form Nos. 07A/GTGT and 12A/GTGT issued together with Circular No. 120/2003/TT-BTC.

- Business entities must submit the VAT tax return forms according to Form Nos. 01/GTGT, 01B/GTGT, 11/GTGT, 07A/GTGT, and 12A/GTGT mentioned above to the tax authority.

- The VAT payable by the business entity during the period is summarized from the VAT generated on the VAT tax return forms according to Form Nos. 01/GTGT, 07A/GTGT, and 12A/GTGT. If there is undeducted input VAT on the VAT tax return form according to Form No. 01/GTGT and VAT payable on the VAT tax return forms according to Form Nos. 07A/GTGT and 12A/GTGT, the business entity cannot offset the undeducted input VAT against the payable VAT.

12. Amend and supplement Section IV, Part C on annual settlement as follows:

Business entities subject to the deduction method for VAT must prepare and submit the annual VAT adjustment tax return form (Form No. 11/GTGT) to the Tax Authority.

The deadline for business entities to submit the annual VAT adjustment tax return form to the tax authority is no later than 60 days from December 31 of the year being adjusted. The adjusted VAT figures on the annual VAT adjustment tax return form will be used to adjust the monthly VAT tax return form for February of the following year. In cases where the annual VAT adjustment tax return form is prepared later than the specified time, the business entity will adjust the monthly VAT tax return form for the month in which the annual VAT adjustment tax return form is completed.

Business entities undergoing mergers, consolidations, divisions, spin-offs, dissolutions, bankruptcies, ownership transfers, or changes in corporate form must declare VAT according to Form No. 01/GTGT and submit the annual VAT adjustment tax return form according to Form No. 11/GTGT to the tax authority within 45 days from the date of the decision on mergers, consolidations, divisions, spin-offs, dissolutions, bankruptcies, ownership transfers, or changes in corporate form.

Business entities bear responsibility for the accuracy of the figures on the annual VAT adjustment tax return form. If business entities report inaccurately to evade or underpay taxes, they will be subject to penalties as stipulated by law.

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

From January 1, 2004, business entities providing services to export processing enterprises, if they have complete procedures as guided in this Circular, have calculated VAT, issued VAT invoices, settled payments at prices inclusive of VAT, and declared and paid VAT, then both the business entity and the export processing enterprise must prepare a price adjustment record according to the zero percent VAT rate and a VAT invoice to adjust the previously declared VAT for these invoices.

During implementation, if there are difficulties, please report them to the Ministry of Finance for supplementary guidance.

Truong Chi Trung

(Signed)