Circular No. 09/2011/TT-BTC dated January 21, 2011 of the Ministry of Finance guiding value-added tax and enterprise income tax on insurance business

APPLY 0% VAT FOR INSURANCE SERVICE FOR FOREIGNERS

On January 21, 2011, the Ministry of Finance issued the Circular No. 09/2011/TT-BTC guiding value-added tax and enterprise income tax on insurance business

VAT-liable objects include Non-life insurance and non-life insurance consultancy and brokerage services; assessment, indemnity examination and third party’s refund-claiming agency services; other goods and services liable to VAT under the VAT law which arise during the operation process of companies engaged in insurance activities.

The VAT calculation price is the VAT-exclusive original insurance premium, covering also surcharges and additional charges in addition to the service charges which an insurance enterprise is entitled to enjoy, excluding surcharges and compulsory appropriations it has to remit into the state budget.

For assessment, indemnity examination and third party’s refund-claiming agents and agents handling goods eligible for 100% indemnity for remuneration or commission, the VAT calculation price is the VAT-exclusive remuneration or commission amount (not yet deducted to pay any expenses) collected by the concerned insurance enterprise; for insurance brokerage enterprises, the VAT calculation price is the VAT-exclusive insurance brokerage commission amount minus the reduced amount of insurance brokerage commission (if any).

The tax rate of 0% applies to insurance services, including insurance services, insurance brokerage services and assessment, indemnity examination, third party’s refund-claiming and 100% indemnity-eligible goods handling agency services, provided to enterprises located in non-tariff zones or overseas organizations and individuals. The tax rate of 10% applies to other insurance business activities under tax-liable objects.

Some expenses of insurance enterprises which are allowed to be deducted are specified as follows: expenses for payment of indemnities under original insurance policies (original insurance indemnities, for non-life insurance, or payment of insurance money, for life insurance; expenses for original insurance indemnities of life insurance enterprises must be paid in conformity with insurance scope and insurance conditions; reinsurance ceding charges; appropriations for setting up professional provisions under the insurance business law; expenses for payment of insurance and insurance brokerage commissions and so on.