Circular No. 130/2016/TT-BTC dated August 12, 2016 of the Ministry of Finance guiding the Government’s Decree No. 100/2016/ND-CP of July 1, 2016, detailing the Law Amending and Supplementing a Number of Articles of the Law on Value-Added Tax, the Law on Excise Tax and the Law on Tax Administration, and amending a number of articles of various circulars on taxes

CIRCULAR

Guiding the Government’s Decree No. 100/2016/ND-CP of July 1, 2016, detailing the Law Amending and Supplementing a Number of Articles of the Law on Value-Added Tax, the Law on Excise Tax and the Law on Tax Administration, and amending a number of articles of various circulars on taxes^[1]

Pursuant to Law No. 78/2006/QH11 on Tax Administration and Law No. 21/2012/QH13 Amending and Supplementing a Number of Articles of the Law on Tax Administration;

Pursuant to Law No. 13/2008/QH12 on Value-Added Tax and Law No. 31/2013/QH13 Amending and Supplementing a Number of Articles of the Law on Value-Added Tax;

Pursuant to Law No. 106/2016/QH13 Amending and Supplementing a Number of Articles of the Law on Value-Added Tax, the Law on Excise Tax and the Law on Tax Administration;

Pursuant to Law No. 14/2008/QH12 on Enterprise Income Tax and Law No. 32/2013/QH13 Amending and Supplementing a Number of Articles of the Law on Enterprise Income Tax;

Pursuant to the Government’s Decree No. 83/2013/ND-CP of July 22, 2013, detailing a number of articles of the Law on Tax Administration and the Law Amending and Supplementing a Number of Articles of the Law on Tax Administration;

Pursuant to the Government’s Decree No. 218/2013/ND-CP of December 26, 2013, detailing and guiding the implementation of a number of articles of the Law on Enterprise Income Tax;

Pursuant to the Government’s Decree No. 100/2016/ND-CP of July 1, 2016, detailing the Law Amending and Supplementing a Number of Articles of the Law on Value-Added Tax, the Law on Excise Tax and the Law on Tax Administration;

Pursuant to the Government’s Decree No. 215/2013/ND-CP of December 23, 2013, defining the functions, tasks, powers and organizational structure of the Ministry of Finance;

At the proposal of the General Director of Taxation,

The Minister of Finance promulgates the Circular guiding the implementation of the Government’s Decree No. 100/2016/ND-CP of July 1, 2016, detailing the Law Amending and Supplementing a Number of Articles of the Law on Value-Added Tax, the Law on Excise Tax and the Law on Tax Administration, and amending a number of articles of various circulars on taxes, as follows:

Article 1. To amend and supplement a number of articles of the Ministry of Finance’s Circular No. 219/2013/TT-BTC of December 31, 2013, guiding the implementation of the Law on Value-Added Tax and the Government’s Decree No. 209/2013/ND-CP of December 18, 2013, detailing and guiding the implementation of a number of articles of the Law on Value-Added Tax (amended and supplemented under the Ministry of Finance’s Circular No. 119/2014/TT-BTC of August 25, 2014, Circular No. 151/2014/TT-BTC of October 10, 2014, and Circular No. 26/2015/TT-BTC of February 27, 2015), as follows:

1. To amend and supplement Article 4 as follows:

a/ To amend and supplement Clause 9, Article 4 as follows:

“9. Healthcare and animal health services, including medical examination and treatment and disease prevention for humans and livestock, birth control, convalescence and functional rehabilitation for patients, care for elderly people and people with disabilities; transportation of patients, rent of patient rooms and beds at medical establishments; test, scanning, radiograph, blood and blood preparations for patients.

Care for elderly people and people with disabilities covers also medical care, nutritional care and organization of cultural, sports, recreational, physiotherapy and functional rehabilitation for them.

In case a medical treatment service package (as provided by the Ministry of Health) covers also curative medicines, the revenue from these curative medicines is also not subject to VAT.”

b/ To amend and supplement Clause 16, Article 4 as follows:

“16. Mass transit, covering mass transit by bus and tramcar along specified routes within provinces, urban centers and in their vicinities as prescribed by the traffic law.”

c/ To amend and supplement Clause 23, Article 4 as follows:

“23. Exported products being natural resources and minerals not yet processed into other products or already processed into other products with a total value of natural resources and minerals plus energy cost accounting for at least 51% of the production cost of the products processed from such natural resources and minerals; and exported products being goods processed from natural resources and minerals with a total value of natural resources and minerals plus energy cost accounting for at least 51% of the production cost of the products processed from such natural resources and minerals.

a/ Natural resources and minerals are those of domestic origin, including metal minerals, non-metal minerals, crude oil, natural gas, and coal gas;

b/ The ratio of the value of natural resources and minerals and energy cost to the production cost shall be determined according to the following formula:

Of which:

The value of natural resources and minerals is the historical cost of natural resources and minerals put into processing; for exploited natural resources and minerals, their value is the cost of direct or indirect exploitation; for natural resources and minerals purchased for processing, their value is the actual purchasing price plus the cost of putting them into processing.

The energy cost consists of the costs of fuel, electricity and thermal energy.

The value of natural resources and minerals and energy cost shall be determined based on their book value according to the table of production costs.

Production costs include direct material cost, direct labor cost, and overhead costs. Indirect expenses such as sale and management expenses, financial expense and other expenses are not included in the production costs.

The value of natural resources and minerals, energy cost and production costs shall be determined based on the previous year’s finalization statements; for newly established enterprises that have no previous year’s finalization statements, such value and costs shall be determined based on their investment plans.

c/ Enterprises that produce (including direct exploitation or purchase for processing) products being natural resources and minerals with a total value of natural resources and minerals plus energy cost accounting for at least 51% of the production cost of products processed from such natural resources and minerals are liable to pay VAT when exporting these products.

In case enterprises do not export but sell the products to other enterprises for export, the latter shall declare VAT as for products of the same type directly exported by the producing enterprises, and pay export duty under regulations.”

2. To amend and supplement Clause 3, Article 9 as follows:

“3. Cases ineligible for the 0% tax rate include:

- Offshore reinsurance; transfer of technologies or intellectual property rights abroad; offshore capital transfer, credit extension or securities investment; derivative financial services; outbound post and telecommunications services (including post and telecommunications services provided to organizations and individuals in non-tariff zones; and provision of prepaid mobile phone cards with codes and par value overseas or in non-tariff zones); exported products being natural resources or minerals mentioned in Clause 23, Article 4 of this Circular; tobacco, liquor and beer imported and then exported; and goods and services provided to individuals without business registration in non-tariff zones, except other cases prescribed by the Prime Minister.

Tobacco, liquor and beer imported and then exported are not liable to output VAT upon exportation but are ineligible for input VAT credit.

- Petrol and oil domestically sold to automobiles of business establishments operating in non-tariff zones;

- Automobiles sold to organizations and individuals operating in non-tariff zones;

- Services provided by business establishments to organizations and individuals operating in non-tariff zones, including lease of houses, conference halls, offices, hotels, warehouses and storage yards; transportation of workers; and catering services (except the provision of industrial meals and catering services in non-tariff zones);

- The following services provided in Vietnam to overseas organizations and individuals are ineligible for the 0% tax rate:

+ Sports competitions, art, cultural and recreational performances, conferences, hotels, training, advertising and travel;

+ Online payment;

+ Services attached with the sale, distribution and consumption of products and goods in Vietnam.”

3. To amend and supplement Article 18 as follows:

“1. A business establishment that pays VAT by the credit method and has an input VAT amount not fully credited in a month (in case of monthly declaration) or in a quarter (in case of quarterly declaration) may have such amount credited in the subsequent period.

If a business establishment that has a VAT amount not fully credited arising before the tax period of July 2016 (in case of monthly declaration) or before the tax period of the third quarter of 2016 (in case of quarterly declaration) fully satisfies the conditions for VAT refund as guided in Clause 1, Article 18 of Circular No. 219/2013/TT-BTC, the tax office shall refund the tax amount to it in accordance with law.

Example: Enterprise A makes VAT declaration on a quarterly basis; in the tax period of the third quarter of 2016, it has a VAT amount not fully credited of VND 80 million, then it may have this amount credited in the tax period of the fourth quarter of 2016. If in the tax periods of the fourth quarter of 2016 and first and second quarters of 2017, the enterprise still has a VAT amount not fully credited, it shall carry forward this amount to the tax period of the third quarter of 2017 and subsequent tax periods for credit.

2. A business establishment newly established under an investment project that has made business registration and registered to pay VAT by the credit method, or an oil and gas prospecting, exploration and development project that remains in the investment stage of one year or longer and has not yet been put into operation, is entitled to claim VAT refund for goods and services used for investment in each year, except the case guided at Point c, Clause 3 of this Article. If the accumulated VAT amount for goods and services purchased for investment is VND 300 million or over, it shall be refunded.

3. VAT refund for investment projects

a/ If an operating business establishment paying VAT by the credit method has an investment project (except the case guided at Point c, Clause 3 of this Article and except investment projects to build houses for sale or lease without forming fixed assets) being at the investment stage and located in the same province or city of its headquarters, it shall make a separate declaration for this project and carry forward the project’s input VAT amount for clearing against the declared VAT amount for its ongoing production and business activities. The VAT amount of the investment project to be carried forward must not exceed the payable VAT amount for the business establishment’s production and business activities in the period.

After clearing, if the investment project’s remaining input VAT amount is VND 300 million or over, the VAT shall be refunded  to the project.

After clearing, if the investment project’s remaining input VAT amount is less than VND 300 million, this amount shall be carried forward to the project’s input VAT amount of the subsequent period of tax declaration.

Example: Company A is headquartered in Hanoi. In July 2016, it has an investment project in Hanoi, which is at the investment stage. Company A makes a separate declaration of input VAT for this project. In August 2016, the project’s input VAT amount is VND 500 million; the payable VAT amount for the company’s ongoing production and business activities is VND 900 million. Company A shall clear the input VAT amount of VND 500 million against the payable VAT amount (VND 900 million). So the company has to pay a VAT amount of VND 400 million in the tax period of August 2016.

Example: Company B is headquartered in Hai Phong. In July 2016, it has an investment project in Hai Phong, which is at the investment stage. Company B makes a separate declaration of input VAT for this project. In August 2016, the project’s input VAT amount is VND 500 million; the payable VAT amount for the company’s ongoing production and business activities is VND 200 million. Company B shall clear the input VAT amount of VND 200 million against the payable VAT amount (VND 200 million). So in the tax period of August 2016, the company has an input VAT amount of VND 300 million not fully credited for the project and is entitled to claim VAT refund for such project.

Example: Company C is headquartered in Ho Chi Minh City. In July 2016, it has an investment project in Ho Chi Minh City, which is at the investment stage. Company C makes a separate declaration of input VAT for this project. In August 2016, the project’s input VAT amount is VND 500 million; the payable VAT amount for the company’s ongoing production and business activities is VND 300 million. Company C shall clear the input VAT amount of VND 300 million against the payable VAT amount (VND 300 million). So in the tax period of August 2016, the company has an input VAT amount of VND 200 million not fully credited for the project. Company C is not entitled to claim VAT refund for such project and shall carry forward VND 200 million to the project’s input VAT amount in the tax declaration period of September 2016.

Example: Company D is headquartered in Da Nang city. In July 2016, it has an investment project in Da Nang city, which is at the investment stage. Company D makes a separate declaration of input VAT for this project. In August 2016, the project’s input VAT amount is VND 500 million; the VAT amount not fully credited for the company’s ongoing production and business activities is VND 100 million. So in the tax period of August 2016, the input VAT amount (VND 500 million) shall be refunded for the project; the VAT amount not fully credited (VND 100 million) shall be credited in the tax period of September 2016.

b/ If an operating business establishment paying VAT by the credit method has a new investment project (except the case guided at Point c, Clause 3 of this Article and except investment projects to build houses for sale or lease without forming fixed assets) which is located outside the province or centrally run city of its headquarters and still at the investment stage, has not yet been put into operation and made business and tax registration, the business establishment shall make a separate tax declaration dossier for this project and, at the same time, carry forward the project’s input VAT amount for clearing against the declared VAT amount for its ongoing production and business activities. The VAT amount to be carried forward for the project must not exceed the payable VAT amount for the business establishment’s production and business activities in the period.

After clearing, if the new investment project’s remaining input VAT amount is VND 300 million or over, the project is entitled to claim VAT refund.

After clearing, if the new investment project’s remaining input VAT amount is less than VND 300 million, this amount shall be carried forward to the project’s input VAT amount of the subsequent period of tax declaration.

For a business establishment that establishes project management units or branches outside the province or centrally run city of its headquarters in order to manage, on its behalf, one or more than one investment project in different localities, if these project management units or branches have their own seals as prescribed by law, keep books and documents in accordance with the accounting law, have bank accounts and have made tax registration and obtained tax identification numbers, they shall make separate tax declaration and tax refund dossiers at local tax offices with which they have made tax registration. When an investment project to establish an enterprise and procedures for business registration and tax payment registration have been completed, the business establishment being the project owner shall transfer the project’s arising VAT amount, refunded VAT amount and VAT amount not yet refunded to the newly established enterprise for tax declaration and payment.

To be entitled to claim VAT refund under Clause 2 or 3 of this Article, an investment project must be one specified by the investment law.

Example: Company A is headquartered in Hanoi. In July 2016, it has a new investment project in Hung Yen province, which is at the investment stage and has not yet put into operation and made business and tax registration. Company A makes a separate declaration of input VAT for this project in Hanoi in the VAT declaration form applicable to investment projects. In August 2016, the project’s input VAT amount is VND 500 million; the payable VAT amount for the company’s ongoing production and business activities is VND 900 million. Company A shall clear the input VAT amount of VND 500 million against the payable VAT amount (VND 900 million). So the company has to pay a tax amount of VND 400 million in the tax period of August 2016.

Example: Company B is headquartered in Hai Phong. In July 2016, it has a new investment project in Thai Binh province, which is at the investment stage and has not yet been put into operation or made business and tax registration. Company B makes a separate declaration of input VAT for this project in Hai Phong in the VAT declaration form applicable to investment projects. In August 2016, the project’s input VAT amount is VND 500 million; the payable VAT amount for the company’s ongoing production and business activities is VND 200 million. Company B shall clear the input VAT amount of VND 200 million against the payable VAT amount (VND 200 million). So in the tax period of August 2016, the company has an input VAT amount of VND 300 million not fully credited for the project. Company B is entitled to claim VAT refund for this project.

Example: Company C is headquartered in Ho Chi Minh City. In July 2016, it has a new investment project in Dong Nai province, which is at the investment stage and has not yet been put into operation and made business and tax registration. Company C makes a separate declaration of input VAT for this project in Ho Chi Minh City in the VAT declaration form applicable to investment projects. In August 2016, the project’s input VAT amount is VND 500 million; the payable VAT amount for the company’s ongoing production and business activities is VND 300 million. Company B shall clear the input VAT amount of VND 300 million against the payable VAT amount (VND 300 million). So in the tax period of August 2016, the company has an input VAT amount of VND 200 million not fully credited for the project. Company C is not entitled to claim VAT refund for this project and shall carry forward VND 200 million to the project’s input VAT amount of the tax declaration period of September 2016.

Example: Company D is headquartered in Da Nang city. In July 2016, it has a new investment project in Quang Nam province, which is at the investment stage and has not yet been put into operation and made business and tax registration. Company D makes a separate declaration of input VAT for this project in Da Nang city on the VAT declaration form applicable to investment projects. In August 2016, the project’s input VAT amount is VND 500 million; the VAT amount not fully credited for the company’s ongoing production and business activities is VND 100 million. So in the tax period of August 2016, the input VAT amount (VND 500 million) shall be refunded, and the VAT amount not fully credited (VND 100 million) shall be credited in the tax period of September 2016.

c/ A business establishment is not entitled to claim VAT refund but may carry forward the VAT amount not credited for its investment project under the investment law to the subsequent period in the following cases:

c.1/ The investment project has a charter capital smaller than the registered one as prescribed by law. The business establishment is not entitled to claim tax refund if it submits a dossier for tax refund for the project since July 1, 2016, and, by the date of dossier submission, has not had a sufficient charter capital amount it has registered under law.

c.2/ The business establishment conducting conditional business lines implements the investment project while failing to fully satisfy the business conditions prescribed by the Investment Law, such as having not obtained a license for conducting conditional business lines, a certificate of eligibility to conduct conditional business lines, or a competent state agency’s written permission for conducting conditional business lines; or failing to satisfy the conditions for conducting conditional business lines without having to obtain a written certification or approval as prescribed by the investment law.

c.3/ The business establishment conducting conditional business lines implements the investment project while failing to fully maintain the business conditions during operation, such as having its license for conducting conditional business lines, certificate of eligibility to conduct conditional business lines, or a competent state agency’s written permission for conducting conditional business lines revoked; or failing to meet the conditions for making conditional business investment as prescribed by the investment law. In this case, the period for non-refund of VAT shall be counted from the time the business establishment has one of the above papers revoked or from the time a competent state agency detects through inspection that the business establishment fails to meet the conditions for making conditional business investment.

c.4/ The investment project exploiting natural resources and minerals is licensed since July 1, 2016, or the investment project producing products and goods has a total value of natural resources and minerals plus energy cost accounting for 51% or over of the production cost under the project.

The determination of natural resources and minerals, the valuation of natural resources and minerals, and the time for valuation of natural resources and minerals and energy cost must comply with Clause 23, Article 4 of this Circular.

4. Tax refund for exported goods and services

a/ In a month (in case of monthly declaration) or a quarter (in case of quarterly declaration), a business establishment that has an input VAT amount of VND 300 million or over not credited for exported goods or services is entitled to claim VAT refund on a monthly or quarterly basis.  If the input VAT amount not credited in a month or quarter is less than VND 300 million, such amount shall be credited in the subsequent month or quarter.

If in a month or quarter, a business establishment both exports and domestically sells goods or services, it shall separately account the input VAT amount used for the production and trading of exported goods or services. If it is impossible to make such separate accounting, the input VAT amount for exported goods or services shall be determined based on the ratio between the turnover from exported goods or services and the total turnover from goods or services of the VAT declaration periods counting from the tax declaration period following the preceding period of tax refund to the current period of request for tax refund.

If, after clearing the input VAT amount for exported goods or services (including the input VAT amount separately accounted and the input VAT amount distributed based on the above ratio) against the payable VAT amount for domestically sold goods or services, the remainder is VND 300 million or over, the business establishment is entitled to claim tax refund for the exported goods or services. The refundable VAT amount must not exceed the turnover from exported goods or services multiplied (x) by 10%.

Subjects entitled to claim tax refund in some cases are prescribed as follows: In case of export entrustment, these subjects are establishments that have goods exported under entrustment; in case of intermediary processing, these subjects are establishments that sign export processing contracts with foreign partners; for goods exported for construction of overseas works, these subjects are enterprises that have goods and supplies exported for construction of overseas works; or for goods exported on the spot, these subjects are business establishments that have goods exported on the spot;

b/ Business establishments are not entitled to claim tax refund for goods imported and then exported, goods not exported in customs operation areas as prescribed by the Customs Law, the Government’s Decree No. 01/2015/ND-CP of January 2, 2015, providing detailed guidance on the scope of customs operation areas and responsibility for coordination in the prevention and control of cross-border goods smuggling and illegal transportation, and guiding documents.

Example: Trading company A imports 500 air-conditioners from Japan and has paid VAT at the stage of importation. Then it exports these 500 air-conditioners to Cambodia. So the company is not required to calculate output VAT; the VAT amount already paid at the stage of importation for these 500 air-conditioners and the input VAT amount for transportation and storage services shall not be refunded but shall be credited.

Example: Production and trading limited liability company B exports cassava starch to China via paths or border crossings outside customs operation areas, so it is not entitled to claim VAT refund for the exported cassava starch.

c/ Tax offices shall refund tax before conducting inspection to exports-producing taxpayers that have not been handled for their acts of cross-border goods smuggling or illegal transportation, tax evasion, tax fraud or trade fraud for two consecutive years; and taxpayers that are not classified as high-risk ones under the Law on Tax Administration and guiding documents.

Example: In September 2016, company C requests VAT refund for its goods exported to Hong Kong. In June 2015, the company was handled for its tax evasion under the tax law. The tax office shall conduct an inspection before refunding tax to the company.

5. A business establishment paying VAT by the credit method is entitled to claim VAT refund upon its ownership transformation, enterprise transformation, merger, consolidation, division, splitting, dissolution, bankruptcy or operation termination if it has an overpaid VAT amount or has an input VAT amount not fully credited.

When a business establishment that is still at the investment stage and has not yet been into operation is dissolved, goes bankrupt or terminates operation without any arising output VAT amounts for its main business activities under the investment project, it is not required to adjust the declared, credited or refunded VAT amount. It shall notify the managing tax office of its dissolution, bankruptcy or operation termination under regulations.

After completing the procedures prescribed by the law on dissolution and bankruptcy, the business establishment shall comply with the laws on dissolution and bankruptcy and tax administration, for the refunded VAT amount; and is not entitled to claim the VAT amount not yet refunded.

A business establishment that terminates operation without any arising output VAT amounts for its main business activities shall pay the refunded tax amount into the state budget. If selling a VAT-liable asset, the business establishment is not required to adjust the corresponding input VAT amount for the sold asset.

Example: In 2015, enterprise A, which is still at the investment stage and has not yet commenced its production and business operation, has an input VAT amount of VND 700 million refunded in August 2015. Due to difficulties, in February 2016, the enterprise decides to carry out bankruptcy procedures and sends a written notice of the bankruptcy to the tax office, so pending the completion of legal procedures for bankruptcy, the tax office shall not recover the refunded VAT amount. Twenty days before enterprise A completes legal procedures for official bankruptcy in October 2016, it sells one (1) of its invested asset; in this case it is not required to adjust the corresponding input VAT amount for the sold asset (the tax amount refunded by the tax office). For unsold assets, enterprise A shall make adjusted declaration for payment of the refunded VAT amount.

6. VAT refund for programs and projects funded with non-refundable official development assistance (ODA) or non-refundable or humanitarian aid

a/ For projects funded with non-refundable ODA: Program or project owners or principal contractors or organizations designated by foreign donors to manage programs or projects are entitled to claim refund of VAT amounts already paid for goods and services purchased in Vietnam for these programs or projects;

b/ Vietnam-based organizations that use humanitarian aid money of foreign organizations or individuals to purchase goods and services for programs or projects funded with non-refundable or humanitarian aid in Vietnam are entitled to claim refund of VAT amounts already paid for these goods and services.

Example: The Red Cross Society receives from an international organization an aid of VND 200 million to purchase humanitarian relief goods for inhabitants in disaster-hit provinces. The VAT-exclusive value of purchased goods is VND 200 million and the VAT amount is VND 20 million. The Red Cross Society will be refunded VND 20 million under regulations.

The refund of VAT amounts already paid for programs and projects funded with non-refundable ODA must comply with the Finance Ministry’s guidance.

7. Persons entitled to diplomatic privileges and immunities under the law on diplomatic privileges and immunities who purchase goods or services in Vietnam for use are entitled to claim refund of paid VAT amounts written in added-value invoices or payment documents showing VAT-inclusive prices.

8. Foreigners and overseas Vietnamese holding passports or entry papers issued by competent foreign authorities are entitled to claim tax refund for goods which they purchase in Vietnam and carry abroad upon their exit. The VAT refund must comply with the Ministry of Finance’s guidance on VAT refund for goods which foreigners and overseas Vietnamese purchase in Vietnam and carry abroad upon their exit.

9. Business establishments that have tax refund decisions of competent authorities in accordance with law and cases of VAT refund under treaties to which the Socialist Republic of Vietnam is a contracting party.”

Article 2. To amend and supplement the Ministry of Finance’s Circular No. 195/2015/TT-BTC of November 24, 2015, guiding the implementation of the Government’s Decree No. 108/2015/ND-CP of October 28, 2015, as follows:

1. To amend and supplement Clauses 1 and 2, Article 5 as follows:

“The price for calculating excise tax on a goods or service is the goods sale or service provision price exclusive of excise tax, environmental protection tax (if any) and value-added tax (VAT), set by the production and business establishment, which shall be determined as follows:

1. For domestically produced goods or imported goods, it is the selling price set by the producer or importer. If the selling price set by the producer or importer does not match the market price, the tax office shall assess tax under the Law on Tax Administration. The price for excise tax calculation shall be determined as follows:

Of which, the VAT-exclusive selling price shall be determined under the law on value-added tax, and environmental protection tax shall be determined under the law on environmental protection tax.

a/ In case a producer or an importer of excise tax-liable goods sells goods via its dependent cost-accounting subsidiary, the price used for excise tax calculation is the selling price set by such subsidiary. If such producer or importer sells goods via an agent that sells the goods at the price fixed by the former and earns commissions, the selling price for excise tax calculation is the commission-inclusive selling price set by the producer or importer;

b/ In case excise tax-liable goods are sold to trading establishments that have parent company-subsidiary relationship or that are subsidiaries within the same parent company of the producer or importer, or to trading establishments that have affiliate relationship, the selling price for excise tax calculation may be at most 7% lower than the average price in a month set by the trading establishments that purchase goods directly from the producer or importer.

In case a producer or an importer establishes different intermediary trading establishments that have parent company-subsidiary relationship or that are subsidiaries within the same parent company or that have affiliate relationship, the selling price for excise tax calculation may be at most 7% lower than the average price in a month set by such trading establishments for trading establishments having no parent company-subsidiary relationship, being other than subsidiaries of the same parent company or having no affiliate relationship with the producer or importer. Particularly for automobiles, the average selling price set by trading establishments for comparison is the selling price exclusive of furnishings and accessories installed at the request of customers.

A producer or an importer and a trading establishment shall be regarded as having affiliate relationship under this Point when one of them directly or indirectly holds at least 20% of investment capital of the other.

In case the selling price for excise tax calculation set by the producer or importer of excise tax-liable goods is over 7% lower than the average selling price set by the trading establishments, the price for excise tax calculation is the price set by the tax office under the law on tax administration.

Example: Beer Corporation B owns beer B trademark and sells main ingredients to beer B producers being its members.

The producers sell beer B products to beer B trading single-member limited liability company being a subsidiary of Beer B Corporation.

Beer B trading single-member limited company sells beer B products to regional trading joint stock companies being its subsidiaries.

Regional trading joint stock companies sign contracts to sell beer B products to tier-1 agents (that have no parent company-subsidiary relationship with Beer B Corporation, beer B trading single-member limited company or regional trading joint stock companies); and tier-1 agents sell beer B products to tier-2 agents, restaurants and consumers.

The producers shall calculate, declare and pay excise tax based on their selling price, which may be at most 7% lower than the average selling price of the same products in a month set by regional trading joint stock companies.

2. For imported goods at the stage of importation, the price for excise tax calculation shall be determined as follows:

Price for excise tax calculation = Price for import duty calculation + Import duty

The price for import duty calculation shall be determined under the law on import duty and export duty. For imported goods eligible for import duty exemption or reduction, the price for import duty calculation is exclusive of the exempted or reduced import duty amount.”

2. To amend and supplement Clauses 4 and 5, Article 5 as follows:

“4. For processed goods, the price for excise tax calculation is the taxable price of goods sold by the hiring party or the selling price of products of the same or similar type at the time of sale, exclusive of VAT, environmental protection tax (if any) and excise tax.

If the hiring party sells processed goods to a trading establishment, the price for excise tax calculation shall be determined under Point b, Clause 1 of this Article.

5. For goods produced under a business cooperation contract between the producer and the establishment that uses or owns a goods trademark (brand name) or producing technology, the price for excise tax calculation is the selling price exclusive of VAT and environmental protection tax (if any) set by such establishment. If the producer produces goods under a franchise license and transfers them to Vietnam-based branches or representative offices of a foreign company for sale, the price for excise tax calculation is the selling price set by such branches or representative offices.

If such branches or representative offices sell the goods to trading establishments, the taxable price shall be determined under Point b, Clause 1 of this Article.”

3. To amend and supplement Clause 1, Article 6 as follows:

“1. Excise tax rates must comply with Clause 4, Article 1 of November 26, 2014 Law No. 70/2014/QH13 Amending and Supplementing a Number of Articles of the Law on Excise Tax; Clause 2, Article 2 of April 6, 2016 Law No. 106/2016/QH13 Amending and Supplementing a Number of Articles of the Law on Value-Added Tax, the Law on Excise Tax and the Law on Tax Administration; and Article 5 of the Government’s Decree No. 108/2015/ND-CP of October 28, 2015.

In case a business establishment imports automobiles prior to July 1, 2016, but sells them since this date, it shall, upon the sale, declare and pay excise tax at the rates prescribed in Law No. 106/2016/QH13 Amending and Supplementing a Number of Articles of the Law on Value-Added Tax, the Law on Excise Tax and the Law on Tax Administration.”

4. To amend and supplement the first paragraph, Clause 2, Article 8 as follows:

“2. Payers of excise tax on imported goods subject to excise tax are entitled to deduction of the excise tax amount paid at the stage of importation from the excise tax amount payable on goods sold domestically. The deductible excise tax amount equals the excise tax amount for excise tax-liable imported goods sold, and must not exceed the excise tax amount for goods sold domestically. In special cases, the taxpayer may include the excise tax amount not fully deducted due to a force majeure event in expenses for calculating enterprise income tax.”

Article 3. To amend and supplement the Ministry of Finance’s Circular No. 156/2013/TT-BTC of November 6, 2013, guiding the implementation of a number of articles of the Law on Tax Administration, the Law Amending and Supplementing a Number of Articles of the Law on Tax Administration, and the Government’s Decree No. 83/2013/ND-CP of July 22, 2013 (amended and supplemented under the Ministry of Finance’s Circular No. 119/2014/TT-BTC of August 25, 2014, Circular No. 151/2014/TT-BTC of October 10, 2014, and Circular No. 26/2015/TT-BTC of February 27, 2015), as follows:

1. To amend Point a, Clause 2, Article 32 as follows:

“a/ Taxpayers shall pay a late payment interest on the tax amount to be paid in installments at the daily rate of 0.03%.”

2. To amend Point b.2, Clause 2, Article 32 as follows:

“b.2/ To pay on behalf of the taxpayer if, past the monthly deadline for installment payment of the tax amounts, the taxpayer fails to pay them, including the tax amount to be paid in installments and late payment interest at the daily rate of 0.03%.”

3. To amend and supplement Clause 2, Article 34 as follows:

“2. Determination of late payment interests

a/ For tax arrears arising since July 1, 2016, late payment interests shall be calculated at the daily rate of 0.03% of the late-paid tax amounts;

b/ For tax arrears arising before July 1, 2016, but remain unpaid after this date, late payment interests shall be calculated as follows: For the tax arrears arising before January 1, 2015, late payment interests shall be calculated under Law No. 78/2006/QH11 on Tax Administration and Law No. 21/2012/QH13 Amending and Supplementing a Number of Articles of the Law on Tax Administration; for the tax arrears arising since January 1, 2015, and since July 1, 2016, late payment interests shall be calculated under Law No. 71/2014/QH13 Amending and Supplementing a Number of Articles of the Laws on Taxes and at the daily rate of 0.03%, respectively

Example: Taxpayer B has a VAT arrear of VND 100 million under the VAT declaration form of August 2014 (this declaration form has been submitted by the prescribed deadline to the tax office); the deadline for tax payment is September 22, 2014 (because September 20 and 21, 2014, are weekends). On August 20, 2016, the taxpayer pays such tax amount into the state budget, so the number of late payment days shall be counted from September 23, 2014, to August 20, 2016, and the late payment interest to be paid is VND 34.08 million, specifically as follows:

- Before January 1, 2015, the late payment interest shall be calculated as follows:

+ From September 23 to December 21, 2014, the number of late payment days is 90: VND 100 million x 0.05% x 90 days = VND 4.5 million

+ From December 22 to December 31, 2014, the number of late payment days is 10: VND 100 million x 0.07% x 10 days = VND 0.7 million

+ From January 1 to June 30, 2015, the number of late payment days is 547: VND 100 million x 0.05% x 547 days = VND 27.35 million

+ From July 1 to August 20, 2016, the number of late payment days is 51: VND 100 million x 0.03% x 51 days = VND 1.53 million.

c/ The number of late payment days (including holidays and weekends as prescribed by law) shall be counted from the date following the tax payment deadline, the extended deadline for tax payment as prescribed by the tax law, the tax payment deadline stated in the tax office’s notice or decision to handle tax-related violations or a competent state agency’s violation-handling decision to the date the taxpayer pays the tax amount into the state budget.

Example: Taxpayer C has a VAT arrear of VND 50 million and the deadline for tax payment is August 20, 2013. On August 26, 2013, the taxpayer pays such tax amount into the state budget. So the number of late payment days is 6, counting from August 21 to 26, 2013.

Example: Taxpayer D receives a tax office’s decision to extend the deadline of May 20, 2014, for payment of the VAT amount of VND 50 million. The extended deadline is November 20, 2014. On November 21, 2014, the taxpayer pays VND 50 million into the state budget. So the number of late payment days is 1 (November 21, 2014).

Example: The tax office conducts a tax inspection for taxpayer E. On April 15, 2014, it issues a decision to handle tax-related violations, requesting this taxpayer to pay an amount of VND 500 million by the deadline of May 14, 2014. On May 30, 2014, the taxpayer pays VND 500 million into the state budget. So the number of late payment days is 16, counting from May 15 to 30, 2014.

d/ In case the tax office applies the coercive measure of distraint of assets for auction to collect tax arrears, the taxpayer shall pay a late payment interest calculated from the date following the tax payment deadline, the extended deadline for tax payment as prescribed by the tax law, or the tax payment deadline stated in the tax office’s notice or decision to handle tax-related violations or a competent state agency’s violation-handling decision to the date the tax office makes an asset distraint record.

In case the ownership rights over the auctioned assets have been handed over to the asset purchaser under law but the asset-auctioning agency fails to pay the tax amount into the state budget, this agency shall pay a late payment interest calculated from the date following the date of transfer of ownership rights to the date of payment of the tax amount into the state budget.

Late payment interests shall not be paid while auction procedures are carried out under law.

e/ In case a taxpayer declares an insufficient tax amount of the tax period arising before July 1, 2016, but after this date a competent state agency detects such insufficient declaration through inspection or the taxpayer detects it by itself/himself/herself, the late payment interest shall be calculated at the daily rate of 0.05% (or at a rate prescribed by a relevant legal document in each period) from the set date for payment through June 30, 2016, or at the daily rate of 0.03% of the insufficiently declared tax amount from July 1, 2016, to the date the taxpayer pays the tax amount into the state budget.”

Article 4. To add the following Clause 10 to Article 10 of the Ministry of Finance’s Circular No. 153/2011/TT-BTC of November 11, 2011, guiding non-agricultural land use tax:

“10. Exemption from non-agricultural land use tax shall be granted to households and individuals that have an annual payable non-agricultural land use tax amount (after subtracting the exempted or reduced tax amount (if any) under the Law on Non-Agricultural Land Use Tax and guiding documents) of VND 50,000 or less. In case a household or an individual has various land parcels within a province or centrally run city, the non-agricultural land use tax amount to be exempted under this Article shall be calculated on the total payable tax amount for all of these parcels. The order and procedures for exemption from non-agricultural land use tax under this Article must comply with the guidance of Circular No. 153/2011/TT-BTC.

For households and individuals that are eligible for exemption from non-agricultural land use tax as guided in this Circular but have paid tax into the state budget, the tax office shall refund the paid tax amounts under the Law on Tax Administration and guiding documents.”

Article 5. To add the following Point a1 to Point a, Clause 6, Article 18 of the Ministry of Finance’s Circular No. 78/2014/TT-BTC of June 18, 2014, guiding the implementation of the Government’s Decree No. 218/2013/ND-CP of December 26, 2013, guiding the implementation of the Law on Enterprise Income Tax (amended and supplemented under Clause 4, Article 10 of the Ministry of Finance’s Circular No. 96/2015/TT-BTC of June 22, 2015):

“a1/ For the period from 2009 to 2013, enterprises shall not be regarded as having made expanded investment if, in the course of production and business, they use their fixed asset depreciation funds, use after-tax profits for reinvestment, or use capital within the investment capital amount registered with a competent state management agency for additionally furnishing machinery and equipment without increasing the production and business capacity under the registered or approved business plans.”

Article 6. Effect

1. This Circular, except Clause 2 of this Article, takes effect on the effective date of Law No. 106/2016/QH13 Amending and Supplementing a Number of Articles of the Law on Value-Added Tax, the Law on Excise Tax and the Law on Tax Administration, and the Government’s Decree No. 100/2016/ND-CP of July 1, 2016, detailing the Law Amending and Supplementing a Number of Articles of the Law on Value-Added Tax, the Law on Excise Tax and the Law on Tax Administration.

2. Article 4 of this Circular applies from the tax period of 2016.

Article 7. Implementation responsibilities

1. Provincial-level People’s Committees shall direct related agencies to organize the implementation of this Circular under regulations of the Government and guidance of the Ministry of Finance.

2. Tax offices at all levels shall disseminate this Circular and guide its implementation.

3. Organizations and individuals regulated by this Circular shall follow the guidance of this Circular.

Any problems arising in the course of implementation of this Circular should be promptly reported to the Ministry of Finance for study and settlement.-

For the Minister of Finance
Deputy Minister
DO HOANG ANH TUAN