Circular No. 08/2002/TT-BTC dated January 23, 2002 of the Ministry of Finance guiding the application of import tax calculation prices under foreign trade contracts

CIRCULAR

GUIDING THE APPLICATION OF IMPORT TAX CALCULATION PRICES UNDER FOREIGN TRADE CONTRACTS

Pursuant to the competence and the principles for determining tax calculation prices prescribed in Article 7 of the Government’s Decree No.54/CP of August 28, 1993 detailing the implementation of the Law on Export Tax and Import Tax and the Law Amending and Supplementing a Number of Articles of the Law on Export Tax and Import Tax;

Pursuant to the provisions of Article 59 of the Government’s Decree No.24/2000/ND-CP of July 31, 2000 detailing the implementation of the Law on Foreign Investment in Vietnam;

In order to create favorable conditions for units and enterprises to take initiative in calculating business efficiency and to step by step prepare for the implementation of international commitments regarding the value for import tax calculation, the Ministry of Finance hereby guides the application of import tax calculation prices under foreign trade contracts as follows:

I. SCOPE OF APPLICATION

1. Objects of application

Objects of application of tax calculation prices under foreign trade contracts are goods of organizations and individuals permitted to be imported through the Vietnamese border-gates, except for those specified in Section 2, Part I of this Circular.

2. Cases where tax calculation prices under foreign trade contracts shall not be applied

2.1. For import goods on the list of goods items with import tax calculation prices controlled by the State (other than those subject to price management by the State mentioned in Section 2, Part III of this Circular) with their contractual prices lower than those specified in the minimum price index promulgated by the Finance Ministry, the import tax calculation prices shall be those specified in such minimum price index.

2.2. For import goods not on the list of goods items with import tax calculation prices controlled by the State and ineligible for application of import tax calculation prices under foreign trade contracts; goods imported by other modes without purchase-sale contracts (non-commercial imports, goods imported by border residents, etc.) or without via-bank payment (goods in barter, goods rendered as remuneration...), the import tax calculation prices shall be those set by the General Customs Department in conformity with the principle for determining import tax calculation prices prescribed in Article 7 of the Government’s Decree No.54/CP of August 28, 1993 detailing the implementation of the Law on Export Tax and Import Tax.

3. Some terms used to in this Circular shall be construed as follows:

- Actual payment price means the total money amount already paid or to be paid by the buyer to the seller for import goods.

- Inspection prices means price levels determined on the basis of actual import prices of goods, prescribed by the General Customs Department, serving as a basis for checking import prices, and uniformly applied at all border-gates.

- Normal transaction conditions means those under which goods prices shall be negotiated by a certain mode in accordance with pricing practices on the market, and whereby the seller and the buyer shall not accord each other any special privilege.

II. DETERMINATION OF IMPORT TAX CALCULATION PRICES

Tax calculation prices applicable to import goods are buying prices of customers at import border-gates, including freight (F) and insurance (I) under goods purchase contracts and in conformity with other vouchers related to the goods purchase. Buying prices at import border-gates are the total money amount already paid or to be paid by the buyer to the seller for import goods (actual payment prices).

1. In cases where import goods-buying prices have not yet covered freight (F) and insurance (I), the importing organizations and individuals shall have to produce valid vouchers or invoices evidencing the said expenses to the customs office for purpose of determining the import tax calculation prices. If the importing organizations and individuals fail to produce required vouchers for figuring out freight and insurance, the customs office shall calculate freight and insurance according to the uniform guidance of the General Customs Department.

2. In case of purchase and sale by mode of deferred payment: The tax calculation prices of import goods shall not cover deferred payment interest, if the following conditions are fully met:

- Such deferred payment interest is inscribed in goods purchase and sale contracts;

- Prices inscribed in commercial invoices conform to actual payment prices of import goods excluding deferred payment interest.

- Deferred payment interest relates only to the import lot currently subject to price determination, but not to other goods lots.

Interest amount deducted from import tax calculation prices must not exceed the ceiling interest rates applicable to domestic foreign-currency loans announced by the State Bank of Vietnam.

3. In cases where the seller gives a price discount to the buyer, the tax calculation prices of import goods shall be reduced with such discount if the following conditions are met:

- The agreement on price discount must be made in writing before the seller completes procedures for shipping goods to the buyer with reason(s) for such discount clearly stated;

- The price inscribed in commercial invoice must conform to the price level already discounted as agreed upon;

- The actual payment price must conform to the discount price level;

- The price discount is effected for that very import lot, other goods lots are irrelevant.

The price discount to be deducted from the import tax calculation price shall not exceed 10% of the total value of such goods as inscribed in the contract.

In cases where actual payment prices of import goods on the list of goods items with import tax calculation prices controlled by the State, after subtracting the price discount, are lower than those inscribed in the minimum tax calculation price index promulgated by the Finance Ministry, such minimum price index shall apply.

III. CONDITIONS FOR APPLICATION OF IMPORT TAX CALCULATION PRICES UNDER FOREIGN TRADE CONTRACTS

1.Import goods eligible for application of import tax calculation prices under foreign trade contracts must fully meet the following conditions:

- Condition (1):Foreign trade contracts must be made in writing, with full principal contents of a contract prescribed in Article 50 of the Commercial Law passed by the National Assembly on May 10, 1997, of which a number of principal contents are specified as follows:

+ Names of goods: shall be ordinary commercial names;

+ Quantity;

+ Prices;

+ Payment mode: Trade contracts must clearly show that the payment for 100% of the import goods lot’s value is effected via commercial banks in a certain currency agreed upon by the two parties strictly according to such international payment modes as L/C, TTR, T/T, D/A, D/P.

Such communication forms as telegraph, telex, facsimile, e-mail and other electronic communication forms, when printed on paper, shall also be considered form of document.

If sale offers and acceptance thereof are made in various forms of document, valid as a trade contract and contain all principal details as prescribed above, they shall also be considered foreign trade contracts.

In case of any amendment and/or supplement to provisions of already signed foreign trade contracts, such must be made according to the order and procedures applicable to each type of contract. The amendment and/or supplement to contracts must be finished before the seller completes procedures for goods shipment to the buyer.

- Condition (2):Payment for 100% of imports lot value shall be made via commercial banks in a certain currency agreed upon by the two parties strictly according to such international payment modes as L/C, TTR, T/T, D/A, D/P.

In cases where the via-bank payment for the import goods lot’s value is made before goods are received, payment vouchers must be produced to the customs office upon carrying out import procedures. If the payment is made after goods are received, the trade contracts must clearly state a payment time limit.

- Condition (3):Importing enterprises shall pay value added tax (VAT) by the deduction method. Upon carrying out import procedures, the importing enterprises shall have to submit (only once) to the customs office (where import procedures are carried out) copies of written registration for VAT calculation by the tax deduction method with approval of the tax offices where the enterprises have made tax payment registration (affixed with true copy certification seals of enterprises).

2. Special cases:

2.1. For import goods of foreign-invested enterprises (subject to the Law on Foreign Investment in Vietnam), the import tax shall be calculated according to the prices inscribed in import goods invoices, provided that such prices are buying prices for actual payment, including freight (F) and insurance (I).

2.2. For goods imported by enterprises for use as raw materials or materials for direct production of products, the import tax shall be calculated according to prices inscribed in foreign trade contracts, if the following conditions are fully met:

a/ The conditions prescribed in Section 1, Part III of this Circular are fully met;

b/ The importing enterprises (or import-entrusting enterprises) have no over-due tax arrears subject to forcible payment in the import process;

c/ Imported raw materials and materials conform to the list of raw materials and materials imported for production of products already registered with the customs offices where the enterprises carry out the import procedures;

Raw materials and materials supplied among enterprises with independent cost-accounting (including units within the same corporation or union) shall not be considered the direct production inputs.

2.3. For other cases (other than those specified at Points 2.1 and 2.2, Section 2, Part III of this Circular), where the conditions prescribed in Section 1, Part III of this Circular are fully met, but the prices inscribed in trade contracts are lower than 80% of inspection price levels of the customs office, the import tax shall be calculated according to such inspection prices.

Within 30 days after the customs office issues tax notices, importers may base themselves on payment invoices and vouchers as well as other information related to import goods to prove the truthfulness and objectivity of the prices inscribed in contracts by indicating that prices inscribed in contracts are import prices for actual payment, formed under normal transaction conditions.

Within 30 days after the importers produce vouchers proving the truthfulness and objectivity of the prices inscribed in contracts, the customs office shall have to reply the former in writing. If the importers can prove the truthfulness and objectivity of the prices inscribed in their contracts, the customs office shall recalculate import tax according to the prices inscribed in contracts. In cases where the customs office disapproves the importers proving result, it shall have to give reasons for the disapproval and keep intact the prices already applied to the tax calculation.

In cases where importers disagree with handling decisions of the customs office, they may lodge complaints under guidance in Part IV of this Circular. They shall also be held responsible before law for the accuracy of prices inscribed in their contracts as well as vouchers and information already declared with the customs office.

During the time they complain about tax calculation prices, enterprises shall have to pay tax within the time limits and at the levels inscribed in tax notices of the customs office. When decisions on readjustment of payable tax amounts are issued, enterprises shall be refunded overpaid tax amount if the already paid tax amount is larger than the payable one.

IV. INSPECTION, HANDLING OF VIOLATIONS AND SETTLEMENT OF COMPLAINTS

1. Inspection:

The Finance Ministry shall coordinate with the General Customs Department in directing the local tax departments and customs department in the coordinated inspection of import tax calculation prices after the release of import goods, for cases where there appear doubts about false tax declaration for tax evasion through import tax calculation prices. The inspection of the said cases shall be based on the whole dossiers of import lots as well as accounting books, invoices and vouchers of concerned enterprises strictly according to regulations of the Finance Ministry and the General Customs Department.

2. Handling of violations:

In cases where the customs office and the tax office detect any falsities in the declaration of invoices and vouchers related to tax calculation prices of import goods, or violations of one of the provisions of this Circular, the importing or import-entrusting enterprises shall, apart from having to pay fully import tax, special consumption tax and value added tax, be sanctioned for their acts of tax evasion according to provisions of law.

3. Settlement of complaints:

Rights and responsibilities of tax payers in complaining about import tax calculation value, and responsibilities and powers of agencies in settling complaints shall strictly comply with provisions of current legal documents.

V. ORGANIZATION OF IMPLEMENTATION

This Circular takes effect as from January 20, 2002 and replaces the Finance Ministry’s Circulars No.82/1997/TT-BTC of November 11, 1997 and No.92/1999/TT-BTC of July 24, 1999. The previous stipulations which are contrary to this Circular are all hereby annulled.

The General Customs Department shall guide the local customs departments in organizing the implementation and inspect the implementation under the guidance in this Circular.

Any problems arising in the course of implementation should be promptly reported by the concerned organizations and individuals to the Finance Ministry for study and timely guidance.