Circular No. 92/2004/TT-BTC guiding tax incentives for the Uong Bi Thermal Power Plant Expansion Project and the Ca Mau Thermal Power Plant Project

CIRCULAR

Guidelines for implementing tax incentives for the Uong Bi Thermal Power Plant Expansion Project and the Ca Mau Thermal Power Plant Project

 Uong Bi Expansion and the Ca Mau Thermal Power Plant Project

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Based on current tax laws and guiding documents;

Pursuant to Decision No. 358/QD-TTg dated April 13, 2004 of the Prime Minister regarding the pilot application of certain tax policies for the Uong Bi Thermal Power Plant Expansion Project and the Ca Mau Thermal Power Plant Project;

The Ministry of Finance provides guidelines for implementing tax incentives for the Uong Bi Thermal Power Plant Expansion Project and the Ca Mau Thermal Power Plant Project as follows:

I. APPLICABLE OBJECTS:

Vietnam Electricity Equipment Joint Stock Corporation (the main contractor under the EPC contract, hereinafter referred to as LILAMA), subsidiaries of LILAMA (hereinafter referred to as subsidiaries), domestic and foreign subcontractors (including construction contractors, manufacturers, installers, and suppliers of machinery, equipment, goods directly contracted with LILAMA, hereinafter referred to as subcontractors) participating in the implementation of the Uong Bi Thermal Power Plant Expansion Project and the Ca Mau Thermal Power Plant Project (hereinafter referred to as the Project) are eligible for tax incentives as provided in this Circular.

II. TAX INCENTIVES:

1. Incentives for Value Added Tax (VAT), Import Duties, and Import Surcharges:

1.1. Goods exempt from import duties, import surcharges (if applicable), and not subject to VAT upon importation:

Goods imported to form fixed assets for the Project (hereinafter referred to as goods) that are types not yet produced domestically or are produced domestically but do not meet technical standards shall be exempt from import duties, import surcharges (if applicable), and shall not be subject to VAT, including:

- Specialized equipment, machines, transportation vehicles;

- Spare parts, components, detachable parts, accessories, molds, jigs, accompanying equipment, machines;

- Raw materials, semi-finished products, construction materials for manufacturing equipment, machines within production lines, or for manufacturing spare parts, components, detachable parts, accessories, molds, jigs, accompanying equipment, machines;

- Construction materials.

1.2. Confirmation of Detailed List of Imported Goods Exempt from Taxes

Based on the list of goods already produced domestically issued by the Ministry of Planning and Investment; the list of goods already produced domestically but not meeting technical standards issued by the Ministry of Industry; technical design and project implementation schedule, the project sponsor (for the Uong Bi Thermal Power Plant Expansion Project, it is Vietnam Electricity Corporation; for the Ca Mau Thermal Power Plant Project, it is Vietnam Oil and Gas Corporation) confirms the detailed list of quantities and types of goods imported for the Project for LILAMA.

Based on the approval document of the Ministry of Trade regarding the total value of goods permitted to be imported duty-free for each Project; the detailed list of quantities and types of goods imported for the Project confirmed by the project sponsor, and the contracts signed between LILAMA and subsidiaries, subcontractors participating in the Project, LILAMA confirms the detailed list of quantities, types, and values of imported goods according to each contract for each subsidiary and subcontractor and provides one original copy to each subsidiary and subcontractor. The value of imported goods recorded in the detailed list confirmed by LILAMA for subsidiaries and subcontractors constitutes part of the total value of imported goods permitted to be duty-free as approved by the Ministry of Trade for each Project.

The detailed list confirmed by the project sponsor for LILAMA and the detailed list confirmed by LILAMA for subsidiaries and subcontractors serve as the basis for customs authorities to process duty-free imports for enterprises.

1.3. Customs Procedures and Documents for Duty-Free Imported Goods:

1.3.1. Customs Procedures:

LILAMA, subsidiaries, and subcontractors participating in importing goods for the Project may only register to open customs declarations at one customs authority that they find most convenient.

Based on the detailed list of quantities and types of goods imported for the Project confirmed by the project sponsor and the approval document of the Ministry of Trade regarding the total value of goods permitted to be duty-free for each Project presented by LILAMA, the customs authority where LILAMA registers to open declarations will issue to LILAMA a tracking and offsetting value record sheet for imported goods.

For cases where subsidiaries and subcontractors carry out imports of goods for the Project, when these entities handle import procedures, they must present to the customs authority where LILAMA registers for customs procedures a set of documents, including:

- Import contract of the subsidiary, subcontractor;

- Detailed list of quantities, types, and values of goods imported for the Project under the aforementioned import contract confirmed by LILAMA.

- Detailed list of quantities, types, and values of goods imported for the Project confirmed by the project sponsor for LILAMA.

- Tracking and offsetting value record sheet for imported goods issued by the customs authority to LILAMA.

- Application for allocation of imported goods under the contract of the subsidiary, subcontractor.

LILAMA is responsible for providing subsidiaries and subcontractors with the detailed list of quantities, types, and values of goods imported for the Project confirmed by the project sponsor and the tracking and offsetting value record sheet for imported goods.

Based on the documents presented by subsidiaries and subcontractors, the customs authority will offset the value of imported goods in the tracking record sheet and confirm in the application for allocation of imported goods for subsidiaries and subcontractors; this application for allocation of imported goods will be handed over to subsidiaries and subcontractors to handle customs procedures at the place where they register to open declarations.

1.3.2. Customs Documents:

The entities mentioned in Section I of this Circular, including enterprises with import business functions that have been contracted by LILAMA for agency imports, when importing goods exempted from tax as specified in Item 1.1, Point 1, Section II of this Circular, in addition to having all customs documents listed in Point 2, Section II of Decision No. 56/2003/QD-BTC dated April 16, 2003, issued by the Minister of Finance, must also have the following certificates:

- In cases where LILAMA directly imports:

+ Approval document of the Ministry of Trade regarding the total value of materials and equipment permitted to be imported tax-exempt for the Project;

+ Detailed list of quantity, type of tax-exempt goods imported for the Project confirmed by Vietnam Electricity Corporation or Vietnam Oil and Gas Corporation.

In cases where LILAMA entrusts others to import, the importer must additionally have the Entrusted Import Contract.

- For member units and subcontractors importing:

+ Detailed list of quantity, type, value of goods imported for the Project under the import contract confirmed by LILAMA.

+ Application form for extracting imported goods for the contract already confirmed by the customs authority where LILAMA processes customs procedures.

The customs authority where enterprises register to open declarations has the responsibility to inspect the actual imported goods, compare them with the documents to determine that the imported goods fall within the scope of tax exemption according to the guidance in this Circular and confirm the exemption of import tax, surtax (if applicable), and non-payment of VAT.

1.4. Recovery of Tax:

In cases where imported goods subject to tax exemption are used for purposes other than those exempted, the importer must declare and pay the full amount of import tax, surtax (if applicable), and VAT that were exempted at the time of importation. Specifically:

- If the change of purpose is approved by the competent state authority, the deadline for declaring taxes is 2 working days from the date the decision approving the change of purpose becomes effective. The payment deadline is 10 days from the date recorded in the Customs Authority's Recovery Tax Decision.

- If the change of purpose is approved by the competent state authority but the importer does not report to declare and pay taxes or uses the goods for purposes other than those exempted without authorization and is discovered during inspection, in addition to paying the full amount of tax that was exempted at the time of importation, depending on the nature and degree of violation, they may be fined from 1 to 5 times the amount of fraudulent tax. The deadline for declaring taxes is 2 working days from the date of discovery during inspection. The payment deadline is 10 days from the date recorded in the Customs Authority's Recovery Tax Decision.

2. Corporate Income Tax Benefits:

LILAMA and its member units implementing the Project shall apply a corporate income tax rate of 20% on income derived from the implementation of the Project. LILAMA and its member units must separately track and account for income from the implementation of the Project to apply the 20% tax rate; if these units cannot separately account for this income, the 28% tax rate will apply.

Revenue and expense accounting to determine taxable income from the implementation of the Project shall be carried out in accordance with the provisions of the Law on Corporate Income Tax and current guiding documents, specifically:

Revenue for calculating taxable income is the total amount paid from the implementation of the Project, excluding VAT paid by the investor according to the progress of completion to LILAMA (for work directly implemented by LILAMA); for work implemented by member units with independent economic accounting, revenue is the total amount, excluding VAT from the implementation of the Project paid by LILAMA to the member units.

Reasonable expenses are accounted for based on the principle that direct costs serving the Project are directly allocated to the Project's expenses, while indirect costs are allocated according to the actual revenue ratio.

III. IMPLEMENTATION

This Circular takes effect 15 days after its publication in the Official Gazette. During implementation, if there are difficulties or obstacles, units are advised to report to the Ministry of Finance for timely resolution.