Circular No. 118/2010/TT-BTC dated August 10, 2010 of the Ministry of Finance guiding financial and tax regimes applicable to traders of bottled liquefied petroleum gas

THE MINISTRY OF FINANCE

Circular No. 118/2010/TT-BTC of August 10, 2010, guiding financial and tax regimes applicable to traders of bottled liquefied petroleum gas

Pursuant to Enterprise Income Tax Law No. 14/2008/QH12 of June 3, 2008, and its guiding documents;

Pursuant to Value-Added Tax Law No. 13/2008/QH12 of June 3, 2008, and its guiding documents;

Pursuant to the Tax Administration Law and its guiding documents;

Pursuant to May 10, 2002 Price Ordinance No. 40/2002/PL-UBTVQH and its guiding documents;

Pursuant to the Government’s Decree No. 107/2009/ND-CP of November 26, 2009, providing liquefied petroleum gas trading;

Pursuant to the Government’s Decree No. 118/2008/ND-CP of November 27, 2008, defining the functions, tasks, powers and organizational structure of the Ministry of Finance;

The Ministry of Finance guides financial and tax regimes applicable to traders of liquefied petroleum gas cylinders as follows:

Part A

GENERAL PROVISIONS

Article 1. Scope of regulation

This Circular provides financial and tax regimes applicable to traders of liquefied petroleum gas cylinders of different types in the market (excluding disposable liquefied petroleum gas cylinders and in-vehicle autogas cylinders).

Article 2. Subjects of application

This Circular applies to traders of bottled liquefied petroleum gas (bottled LPG traders) and traders of LPG cylinders (excluding importers of liquefied petroleum gas defined in Clause 2, Article 2 of the Government’s Decree No. 107/2009/ND-CP of November 26, 2009).

Article 3. Interpretation of terms

In this Circular, the terms below are construed as follows:

1. Liquefied petroleum gas as defined in Clause 1, Article 3 of the Government’s Decree No. 107/2009/ND-CP of November 26, 2009, is below referred to as LPG.

2. LPG cylinder means a bottle or container with a volume of less than 1,000 liters used to contain liquefied petroleum gas, which meets the standards specified in Clauses 3 and 4, Article 3 of the Government’s Decree No. 107/2009/ND-CP of November 26, 2009.

3. Bottled LPG trader means an enterprise or dealer, general agent, agent or shop trading in bottled liquefied petroleum gas;

4. LPG cylinder trader means an enterprise buying or producing liquefied petroleum gas cylinders for sale.

Part B

CLASSIFICATION OF LPG CYLINDERS AND COST ALLOCATION TIME

Article 4. Classification of LPG cylinders

LPG cylinders valued at under VND 10 million/piece shall be allocated to costs for tools, devices and packages circulated for production and business. Enterprises which currently record these LPG cylinders as fixed assets shall shift to record them as tools and devices.

LPG cylinders valued at VND 10 million/piece or higher shall be recorded as fixed assets. Their depreciation time complies with the Finance Ministry’s Circular No. 203/2009/TT-BTC of October 20, 2009.

Article 5. Cost allocation time for LPG cylinders valued at under VND 10 million/piece

Since LPG cylinders valued at under VND 10 million/piece is a special tool or device to be used for over one year, the cost allocation time for them is as follows:

- To have their cost accounted as reasonable expenses for determining enterprise income tax-liable incomes, in addition to required invoices and documents, LPG cylinders must retain their original design and have been inspected for technical safety by competent agencies with still valid inspection results.

- For (reusable and refillable) LPG cylinders with a volume of up to 300 ml/piece, their costs shall be allocated once in the fiscal year when they are put into use.

- For cylinders with a volume of over 300 ml/piece:

+ For metal (steel) and mixed (steel and composite) LPG cylinders, their costs shall be allocated between 5 and 10 years.

+ Particularly for non-metal (composite) LPG cylinders with high quality and long use time, their costs may be allocated for a longer time, but not more than 15 years.

The allocation of LPG cylinder costs under this Article applies only to owners of LPG cylinders. Bottled LPG gas traders shall register the cost allocation time for LPG cylinders with tax agencies directly managing them.

Part C

FINANCIAL AND TAX REGIMES

Article 6. For sale of LPG cylinders

Traders of bottled LPG and LPG cylinders selling LPG cylinders (both reusable and disposable) shall account revenues and expenses under the current law on corporate accounting and declare and pay taxes under the laws on value-added tax and enterprise income tax.

Sellers of LPG cylinders shall issue value-added invoices, calculate, declare and pay value-added tax and account into revenues when determining enterprise income tax-liable incomes for sold LPG cylinders like other goods.

Article 7. Deposits for LPG cylinders

Deposits for LPG cylinders under this Circular shall be collected by LPG cylinder owners from end-users. When such deposits are collected through a distribution network (comprising general agents, agents and LPG cylinder shops), those agents and shops shall carry out necessary procedures on behalf of LPG cylinder owners with direct users.

1. Level of deposit for LPG cylinders:

The uniform level of deposit for LPG cylinders (those fully meeting the conditions for filling LPG for circulation which meets Vietnamese standards or national regulations promulgated by competent authorities) applicable to general agents, agents and shops trading in bottled LPG, business shops and users shall be set by their owners, which must not exceed 100% of the value of bought LPG cylinders of each type at the time nearest to the depositing time (including valves installed inside LPG cylinders and excluding value-added tax).

For LPG traders that manufacture LPG cylinders themselves for sale, the uniform level of deposit for LPG cylinders must not exceed 100% of the actual ex-warehousing value at the time nearest to the depositing time (excluding value-added tax) plus actual expenses for putting them into use (if any).

2. Collection of deposits for LPG cylinders:

- When collecting deposits for LPG cylinders from customers, traders of bottled LPG and LPG cylinders shall issue a receipt according to a form used within the whole distribution network and a written notice of the deposit level to consumers.

A receipt of deposit for LPG cylinders shall be made in one copy, which comprises the counterfoil and stock. LPG traders shall keep the counterfoil and consumers shall keep the stock, which must fully and specifically indicate the name of the LPG cylinder owner with its seal, name of the agent authorized to collect deposits, name of the user, the deposit level under which document of the owner (specifying the deposit amount), time and term of deposit under agreement, type of LPG cylinders for which the deposit is paid (weight, type (steel/mixed/composite), brand and origin of deposited LPG cylinders), specifying the time and the amount refundable to the customer under agreement when the customer returns cylinders. Intermediary distribution parties such as general agents and agents shall keep copies of the receipt.

- Bottled LPG traders owning LPG cylinders shall notify in writing to units within their distribution network of the level and adjusted level of deposit for LPG cylinders and the refundable amount upon return of LPG cylinders. Such notice must specify the level of deposit and the time for applying this level and the refundable amount corresponding to the cost allocation time under Point 3 of this Article.

- LPG cylinder owners shall collect deposits indicated in receipts of deposit for LPG cylinders from direct users (including also cases of collection through general agents, agents and shops trading in bottled LPG). Apart from deposits collected according to receipts of deposit for LPG cylinders, general agents, agents and shops trading in bottled LPG (other than LPG cylinder owners) may not collect any other amount related to the depositing.

3. Accounting of incomes from deposits

- Traders of bottled LPG and LPG cylinders (LPG cylinder owners) that receive deposits for LPG cylinders from customers shall record those deposit amounts into an account for monitoring deposits.

- Annually when allocating costs under Article 5 of this Circular, they shall transfer deposit amounts to other incomes when determining enterprise income tax-liable incomes. The transfer time corresponds the time of allocating costs for LPG cylinders to LPG trading expenses.

For example: In 2009, LPG trader A owns cylinders with the cost of cylinders transferred to the item of expenses of VND 400,000/piece and the transfer time of 10 years, i.e., trader A allocates a cylinder cost of VND 40,000/piece. The trader sets the deposit level of 100% of the value of bought cylinders and collects VND 400,000 as deposit for one cylinder. So the trader shall transfer to other incomes of 2009 a deposit amount for one cylinder as VND 400,000 : 10 = VND 40,000.

- When arise deposit amounts payable to customers when they return LPG cylinders the costs of which are not fully allocated, units shall deduct such amounts from the deposits paid by customers (before transferring them to other incomes).

Part D

ORGANIZATION OF IMPLEMENTATION

Article 8. This Circular takes effect 45 days from the date of its signing and applies on October 1, 2010. To annul documents guiding the accounting of deposits, cost allocation and depreciation of LPG cylinders which are contrary to this Circular.

Article 9. For traders of bottled LPG and LPG cylinders entering into contracts on lease, lending and deposit of LPG cylinders before the effective date of this Circular:

- Those currently transferring incomes and allocating costs of LPG cylinders under the Ministry of Finance’s previous guidance shall continue doing so for the remaining time.

- Those having allocated costs of LPG cylinders but having not transferred incomes under the Ministry of Finance’s previous guidance shall transfer all incomes corresponding to the cost allocation time to other incomes when determining enterprise income tax-liable incomes in 2010.

Article 10. Any problems arising in the course of implementing this Circular should be reported to the Ministry of Finance for prompt settlement.-

For the Minister of Finance
Deputy Minister
DO HOANG ANH TUAN