Circular No. 151/2014/TT-BTC dated October 10, 2014 of the Ministry of Finance guiding the implementation of the Government’s Decree No. 91/2014/ND-CP of October 1, 2014, amending and supplementing a number of articles of decrees on taxes

CIRCULAR

Guiding the implementation of the Government’s Decree No. 91/2014/ND-CP of October 1, 2014, amending and supplementing a number of articles of decrees 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. 04/2007/QH12 on Personal Income Tax and Law No. 26/2012/QH13 Amending and Supplementing a Number of Articles of the Law on Personal Income Tax;

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. 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. 65/2013/ND-CP of June 27, 2013, detailing a number of articles of the Law on Personal Income Tax and the Law Amending and Supplementing a Number of Articles of the Law on Personal Income Tax;

Pursuant to 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;

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. 91/2014/ND-CP of October 1, 2014, amending and supplementing a number of articles of decrees on taxes;

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 guides the implementation of the Government’s Decree No. 91/2014/ND-CP of October 1, 2014, amending and supplementing a number of articles of decrees on taxes, as follows:

Chapter I

ENTERPRISE INCOME TAX

Article 1.To amend and supplement Item e. Point 2.2, and Point 2.31, Clause 2, Article 6 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, providing and guiding the implementation of the Law on Enterprise Income Tax (below referred to as Circular No. 78/2014/TT-BTC), as follows:

“e/ The depreciation corresponding to the historical cost in excess of VND 1.6 billion/car for passenger cars of 9 seats or under (except automobiles used for passenger transport, travel and hotel business; automobiles used as samples and for test drive in automobile business); the depreciation of fixed assets being civil aircraft and yachts not used for cargo or passenger transport, travel and hotel business.

Passenger cars of 9 seats or under exclusively used for passenger transport, travel and hotel business are cars registered under the names of enterprises which, in their enterprise or business registration certificates, have registered one of these business lines: passenger transport, travel or hotel business, and have been licensed for doing business as prescribed in legal documents on transport, travel or hotel business.

Civil aircraft and yachts not used for cargo, passenger and tourist transport are those of enterprises having registered and accounted the depreciation of fixed assets but not registered the cargo or passenger transport, travel or hotel business in their business or enterprise registration certificates.

In case enterprises transfer or liquidate cars of 9 seats or under, the residual value of such a car shall be determined to be the actual historical cost minus (-) the accumulated depreciation of the fixed asset according to regulations on use management and depreciation of fixed assets by the time of the car transfer or liquidation.

Example 8: Enterprise A buys a car of under 9 seats with a historical cost of VND 6 billion. It liquidates the car after making 1-year depreciation. The depreciation amount is VND 1 billion according to regulations on use management and depreciation of fixed assets (the depreciation period is 6 years according to documents on fixed asset depreciation). The depreciation amount to be included in deductible expenses under tax policy is VND 1.6 billion/6 years = VND 267 million. Enterprise A liquidates the car for VND 5 billion.

Income from the car liquidation = VND 5 billion - (VND 6 billion - VND 1 billion) = 0”

“2.31. Expenses not corresponding to turnover for tax calculation, excluding the following expenses:

- Actual expenses for HIV/AIDS prevention and control at the enterprises’ workplaces, including expenses for training HIV/AIDS prevention and control officers of enterprises, expenses for HIV/AIDS prevention and control communication among enterprises’ laborers, expenses for counseling, examination and testing for HIV and expenses in support of enterprises’ laborers who are HIV-infected.

- Actual expenses for the performance of national defense and security education tasks, training and activities of militia and self-defense forces and other national defense and security tasks as prescribed by law.

- Actual expenses in support of Party and socio-political organizations in enterprises.

- Expenses of welfare nature paid directly to laborers such as expenses for weddings and funerals of laborers and their families; expenses for summer leaves and medical treatment support; expenses to support complementary training and learning at training institutions; expenses to support families of laborers affected by natural disasters, enemy sabotage, accidents and ailments; expenses for rewards for laborers’ children with good learning achievements; expenses to support travel expenses during festive and new-year holidays of laborers and other expenses of welfare nature. The total of the above-mentioned expenses must not exceed the average implemented monthly wage in the tax year of enterprises.

The determination of the average implemented monthly wage in the tax year of enterprises shall be determined by dividing the implemented wage fund in the year by 12 months. The implemented wage fund in the year is prescribed at Item c, Point 2.5, Clause 2, Article 6 of Circular No. 78/2014/TT-BTC.

Example: In 2014 enterprise A has an implemented wage fund of VND 12 billion. The average monthly wage implemented in the 2014 tax year of the enterprise shall be determined as follows: (VND 12 billion : 12 months) = VND 1 billion.

- Other particular expenses suitable to each sector or field as guided by the Ministry of Finance.”

Article 2.To amend and supplement Clause 14, Article 7 of Circular 78/2014/TT-BTC as follows:

“14. Difference resulting from the re-valuation of assets in accordance with law for capital contribution or asset transfer upon enterprise split, separation, consolidation, merger or transformation (excluding cases of equitization, reorganization and renewal of enterprises with 100% state capital) shall be determined specifically as follows:

a/ Positive or negative difference resulting from the re-valuation of assets is the difference between the re-valuated value and the residual book value of assets and shall be included once in other income (for positive difference) or deducted from other income (for negative difference) in a tax period for determining taxable incomes of enterprises having their assets re-valuated.

b/ Positive or negative difference resulting from the re-valuation of land use rights for capital contribution (in which enterprises receiving the value of land use rights may gradually allocate this value to deductible expenses), transfer upon enterprise split, separation, consolidation, merger or transformation; or for capital contribution to investment projects to build houses and infrastructure facilities for sale shall be included once in other incomes (for positive difference) or deducted from other incomes (for negative difference) in a tax period for determining taxable incomes of enterprises having their land use rights re-valuated;

Particularly, positive difference resulting from the re-valuation of land use rights contributed as capital for the creation of fixed assets used in production and business activities in which enterprises receiving the value of land use rights may neither depreciate nor gradually allocate this value to deductible expenses, may be gradually allocated to other incomes of enterprises having their land use rights re-valuated for no more than 10 years from the year the value of land use rights is contributed as capital. Enterprises shall notify the number of years they will allocate the income from such difference to other incomes when submitting dossiers of declaration for enterprise income tax finalization of the starting year of declaration of this income (the year when land use rights to be contributed as capital are re-valuated);

In case after capital contribution, enterprises continue to transfer the value of land use rights contributed as capital (including also the case of transfer of capital contribution ahead of the 10-year time limit), income from the transfer of the value of land use rights contributed as capital shall be calculated and declared for tax payment as income from real estate transfer;

The difference resulting from the re-valuation of land use rights includes the difference between the re-valuated value and book value of land use rights, for long-term land use rights, or the difference between the re-valuated value and unallocated residual value of land use rights, for definite-term land use rights.

c/ Enterprises that receive assets contributed as capital or assets transferred upon enterprise split, separation, consolidation, merger or transformation may make depreciation or amortization to expenses according to the re-valuation (unless the value of land use rights is ineligible for depreciation or amortization into expenses under regulations).”

Article 3.To amend and supplement Clause 3, Article 8 of Circular 78/2014/TT-BTC as follows:

“3. Incomes from the performance of scientific research and technological development contracts in accordance with the law on science and technology are exempted from tax during the period of contract performance for no more than 3 years from the date of earning revenue from the performance of the contracts;

Incomes from the sale of products turned out with technologies applied for the first time in Vietnam in accordance with law and the guidance of the Ministry of Science and Technology are exempted from tax for no more than 5 years from the date of earning revenue from the sale of products;

Incomes from the sale of products turned out from trial production during the period of trial production must comply with relevant law.

a/ To be exempted from tax, incomes from the performance of scientific research and technological development contracts must satisfy the following conditions:

- The scientific research activity registration is certified;

- Such scientific research and technological development contract is certified by a competent state management agency in charge of science.

b/ Incomes from the sale of products turned out with technologies applied for the first time in Vietnam are eligible for tax exemption when such technologies are certified by a competent state management agency in charge of science.”

Article 4.To amend and supplement Clause 9, Article 8 of Circular 78/2014/TT-BTC as follows:

“9. Incomes from the performance of state-assigned tasks of the Vietnam Development Bank in development investment and export credit activities; incomes from the provision of loans to the poor and other policy beneficiaries by the Social Policy Bank; incomes of the Vietnam Asset Management Company; incomes from revenue-earning activities in the performance of state-assigned tasks of state-owned financial funds: Vietnam Social Security Fund, Deposit Insurance, Health Insurance Fund, Vocational Training Support Fund, Overseas Employment Support Fund of the Ministry of Labor, War Invalids and Social Affairs, Farmers Support Fund, Vietnam Legal Aid Fund, Public-Utility Telecommunications Fund, Local Development Investment Fund, Vietnam Environmental Protection Fund, Fund for Credit Guarantee for Small- and Medium-Sized Enterprises, Cooperative Development Support Fund, Poor Women Support Fund, Overseas Citizen and Legal Entity Protection Fund, Housing Development Fund, Small- and Medium-Sized Enterprise Development Fund, National Science and Technology Development Fund, and National Technology Renovation Fund, incomes from the performance of state-assigned tasks of the Land Development Fund and other state funds operating for not-for-profit purposes under regulations or decisions of the Government or the Prime Minister on their establishment and operation in accordance with law.

Units that earn incomes other than those from revenue-earning activities in the performance of state-assigned tasks shall calculate and pay tax for such incomes under regulations.”

Article 5.To add the following Points e and g to Clause 5, Article 18 of Circular 78/2014/TT-BTC:

“a/ For licensed investment projects for which investment amounts and phases have been registered together with investment schedules in their first investment registration dossiers sent to the investment licensing agency, in case their actually implemented subsequent stages, which are regarded as component projects of the first licensed investment project, are implemented according to schedule (except cases offorce majeureevents, difficulties due to objective causes in ground clearance, settlement of administrative procedures by state agencies, natural disasters, fires or other difficulties andforce majeureevents), these component projects of the first investment project are eligible for tax incentives for the remaining duration of the first investment project counting from the time the component projects earn incomes eligible for incentive.

For investment projects licensed before January 1, 2014, which are implemented in phases like the case above, their component projects are eligible for tax incentives at the levels currently applicable to first investment projects for their remaining duration counting from January 1, 2014.

For incomes of component projects of first investment projects before January 1, 2014, which have enjoyed enterprise income tax incentives under legal documents before January 1, 2014, these tax incentives may not be adjusted.

During the implementation of component projects in different phases mentioned above, if investors are permitted by the state management agency in charge of investment (defined in Investment Law No. 59/2005/QH11 of November 29, 2005, and guiding legal documents) to extend the implementation of the projects and the enterprises strictly implement the projects according to the extended time, they are also allowed to enjoy tax incentives as prescribed above.

g/ For investment projects of enterprises currently enjoying tax incentives, if in the 2009-2013 period, they made additional investment in machinery and equipment regularly used in the process of production and business not under any new investment project and expanded investment project, the increased income from this additional investment is also eligible for tax incentive at the level which the projects are applying for the remaining period counting from the 2014 tax year.”

Article 6.To amend and supplement Clause 3, Article 20 of Circular 78/2014/TT-BTC as follows:

“3. Tax exemption for 2 years and 50% reduction of payable tax amounts for 4 subsequent years are applicable to incomes from the implementation of new investment projects specified in Clause 4, Article 19 of Circular No. 78/2014/TT-BTC and incomes of enterprises from the implementation of new investment projects in industrial parks (except industrial parks located in geographical areas with favorable socio-economic conditions).

Geographical areas with favorable socio-economic conditions mentioned in this Clause are urban districts of special-grade urban centers or centrally run grade-I urban centers and provincial grade-I cities, excluding urban districts of special-grade urban centers or centrally run grade-I urban centers and provincial grade-I cities, which have just been established from rural districts since January 1, 2009; in case an industrial park is located in both favorable and unfavorable geographical areas, the determination of tax incentives for the industrial park shall be based on the actual field location of the investment project).

The determination of special-grade and grade-I urban centers mentioned in this Clause must comply with the Government’s Decree No. 42/2009/ND-CP of May 7, 2009, on classification of urban centers and legal documents amending this Decree (if any).”

Article 7.To add the following Clause 8 to Article 23 of Circular 78/2014/TT-BTC:

“8. Enterprises which still have some time of enjoying tax incentives under the export percentage condition and have to stop enjoying such tax incentives due to the implementation of the commitments to the World Trade Organization (WTO) for textile and garment activities from January 11, 2007, and for other activities from January 1, 2012, may choose to combine non-concurrently or asynchronously incentives regarding tax rates and tax exemption and reduction periods in order to continue enjoy enterprise income tax incentives for the remaining period from 2007, for textile and garment activities or from 2012 for other activities, corresponding to the tax incentive conditions they actually meet (in addition to the condition on export percentage and use of domestic materials) prescribed in legal documents on enterprise income tax which were effective in the period from the time the enterprises were granted establishment licenses to before the effective date of the Government’s Decree No. 24/2007/ND-CP of February 14, 2007, detailing the implementation of the Law on Enterprise Income Tax, or prescribed in legal documents on enterprise income tax at the time the tax incentives were adjusted due to the implementation of the WTO commitments.

In case enterprises chose an adjustment plan under previous documents (regardless of whether or not they have been subjected to tax examination and inspection), if making adjustment under the guidance in this Circular is more beneficial, enterprises are allowed to make re-adjustment under the guidance in this Circular. They shall make additional declaration under the Law on Tax Administration and guiding documents without being handled for wrong declaration acts when making re-adjustment. After making additional declaration, enterprises have paid tax amounts higher than payable tax amounts, the difference shall be cleared against the tax amounts payable for the subsequent tax period or be refunded under regulations. In case enterprises had made adjustment under the WTO commitments for textile and garment activities under previous documents and were then sanctioned for tax-related violations, if they have paid fines and late payment interests, no adjustment is allowed.”

Chapter II

VALUE-ADDED TAX

Article 8.To amend and supplement Point a, Clause 8, Article 4 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 (below referred to as Circular No. 219/2013/TT-BTC), as follows:

“a/ Credit extension services in the following forms:

- Loan provision;

- Discount and rediscount of negotiable instruments and other valuable papers;

- Bank guarantee;

- Financial leasing;

- Issuance of credit cards.

In case credit institutions collect charges related to the issuance of credit cards, charges collected from customers in the credit extension service process (card issuance charge) under credit institutions’ regulations on lending to customers, such as charge for immature loan repayment, fine for late repayment, debt rescheduling, loan management and other charges in the credit extension process are not liable to value-added tax (VAT).

Charges for ordinary card transactions not in the credit extension process, such as charge for re-grant of credit card PINs, charge for provision of copies of transaction invoices, charge for claiming refunds in the use of cards, charge for credit card loss notification, charge for credit card destruction, charge for credit card conversion and other charges are liable to VAT.

- Domestic factoring; international factoring, for banks licensed to provide international payment;

- Sale of loan security assets by credit institutions or judgment enforcement agencies or borrowers under the authorization by lenders to pay secured loans, specifically:

+ Loan security assets on sale are assets belonging to security transactions already registered with competent agencies in accordance with the law on registration of security transactions.

+ The handling of loan security assets must comply with the law on security transactions.

Upon the expiration of the debt payment time limit, if the person having the loan security asset is unable to pay the debt and has to hand over the asset to the credit institution for handling in accordance with law, the parties shall carry out procedures for handover of the security asset under regulations.

In case the credit institution receives the security asset in lieu of performance of the debt payment obligation, it shall account an increase in the value of assets used for production or business under regulations. When the credit institution sells the asset liable to VAT to serve its business operation, it shall declare and pay VAT under regulations.

Example 3: In March 2014, Enterprise A, which is a business establishment paying VAT by the credit method, mortgages a machinery and equipment chain to borrow from Bank B a loan of a 1-year term (the debt payment deadline is March 31, 2015). By March 31, 2015, as Enterprise A is unable to pay its debt and has to hand over the asset to Bank B, Enterprise A shall, upon handing over the asset, carry out asset handover procedures in accordance with the law on handling of security assets. If Bank B sells the loan security asset to recover the debt, the sold asset is not liable to VAT.

Example 3a: In December 2014, Enterprise B, which is a business establishment paying VAT by the credit method, mortgages its workshops attached to land and land use rights to borrow from Commercial Bank C a loan of a 1-year term with the debt payment deadline of December 15, 2016. Commercial Bank C and Enterprise B have registered the security transaction (mortgage of workshops attached to land and land use rights) with a competent agency. By December 15, 2016, Enterprise B is unable to pay its debt and Commercial Bank C issues a demortgage approval document for Enterprise B to sell its workshops for paying the debt. In January 2017, Enterprise B sells its workshops for debt payment, which are not liable to VAT.

- The credit information provision service provided by units or institutions of the State Bank to credit institutions for use in their credit extension activities in accordance with the Law on the State Bank of Vietnam.

Example 4: X is a unit of the State Bank and licensed by the State Bank to provide the credit information service. In 2014, X signs contracts on provision of credit information to a number of commercial banks to serve their credit extension activities and other activities. In this case the revenue from the provision of credit information to serve credit extension activities is not liable to VAT, while the revenue from the provision of credit information to serve other activities of these commercial banks not in accordance with the Law on the State Bank of Vietnam is liable to VAT at the rate of 10%.

- Other forms of credit extension provided by law.”

Article 9. To amend and supplement Clause 3, Article 14 of Circular No. 219/2013/TT-BTC as follows:

“3. Input VAT on fixed assets, machinery and equipment, including input VAT on lease, warranty and repair of these assets, machinery and equipment, in the following cases may not be credited but shall be included in the historical costs of these fixed assets or in deductible expenses under the Law on Enterprise Income Tax and guiding documents: fixed assets exclusively used for the manufacture of weapons and military equipment for national defense and security purposes; fixed assets, machinery and equipment of credit institutions and reinsurance, life insurance and securities businesses, health establishments and training institutions; civil aircraft and yachts not used for commercial transport of cargo and passengers, tourist or hotel business.

For fixed assets being passenger cars of 9 seats or under (excluding automobiles used for cargo or passenger transportation or for tourist or hotel business; automobiles used as samples and for test drive for automobile business) which are valued at more than VND 1.6 billion (exclusive of VAT), the input VAT amount for the value exceeding VND 1.6 billion may not be credited.”

Article 10.To amend and supplement Point c, Clause 3, Article 15 of Circular No. 219/2013/TT-BTC as follows:

“c/ For goods or services valued at VND 20 million or higher purchased on deferred or installment payment, business establishments shall declare and credit input VAT based on goods or service purchase contracts, value-added invoices and via-bank payment documents of these goods or services. If via-bank payment documents are not available yet as the payment under contracts is not yet due, business establishments may still declare and credit input VAT.

Upon payment, if via-bank payment documents are unavailable, business establishments shall declare and reduce input VAT amounts already credited for the value of goods or services without via-bank payment documents in the tax period in which cash payments arise (even when the tax agency and functional agencies have issued decisions on inspection and examination of the tax period in which the declared and credited VAT amounts arise).”

Chapter III

PERSONAL INCOME TAX

Article 11.To amend and supplement Item dd.1, Point dd, Clause 2, Article 2 of the Ministry of Finance’s Circular No. 111/2013/TT-BTC of August 15, 2013, guiding the implementation of the Law on Personal Income Tax, the Law Amending and Supplementing a Number of Articles of the Law on Personal Income Tax and the Government’s Decree No. 65/2013/ND-CP of June 27, 2013, detailing a number of articles of the Law on Personal Income Tax and the Law Amending and Supplementing a Number of Articles of the Law on Personal Income Tax (below referred to as Circular No. 111/2013/TT-BTC), as follows:

“dd/ Other monetary or non-monetary benefits other than salaries and wages paid by employers to taxpayers in any form:

dd.1/ House rents, charges for electricity, water and associated services (if any), excluding housing built and provided free of charge by employers for workers in industrial parks; housing built by employers in economic zones, geographical areas with difficult socio-economic conditions or areas with extremely difficult socio-economic conditions provided free of charge for their workers.

For an individual who lives in his/her working office, his/her taxable income is determined based on house rents or depreciation costs, charges for electricity, water and other services which are calculated according to the proportion of the area used by such individual to the total area of his/her working office.

House rents paid by employers and calculated as taxable income shall be determined according to the actually paid amounts but must not exceed 15% of the total taxable income (exclusive of house rents) received from such employers.”

Article 12.To amend and supplement Point c, Clause 2, Article 26 of Circular No. 111/2013/TT-BTC as follows:

“c/ Resident individuals who earn income from salaries and wages or business activities shall make declaration for tax finalization if they have to pay additional tax amounts or request refund of overpaid tax amounts or clearing of overpaid tax amounts in the subsequent tax period, except the following cases:

c.1/ The payable tax amount is smaller than the temporarily paid tax amount and taxpayers do not request tax refund or clearing in the subsequent period;

c.2/ Business individuals or households have incomes from business activities and have paid tax according to the presumption method;

c.3/ Individuals and households have the sole income from lease of houses or land use rights and have paid tax according to declaration in the locality where such house or land is located;

c.4/ Individuals earn income from salaries or wages under labor contracts of three (3) months or more in a unit and earn other incomes in other units, which on average do not exceed VND 10 million a month in the year and from which the income payers have withheld tax at source at the rate of 10%. These incomes do not need tax finalization if these individuals make no request;

c.5/ Individuals earn income from salaries and wages under labor contracts of three (3) months or more in a unit and earn other incomes from lease of houses or land use rights, which on average do not exceed VND 20 million a month in the year, and have paid tax in the locality where such house or land is located.  These incomes do not need tax finalization if these individuals make no request;

c.6/ Individuals who earn income for acting as insurance, lottery or multi-level marketing agents for whom income payers have withheld personal income tax. These incomes do not need tax finalization.”

Article 13.To amend and supplement Clause 5, Article 30 of Circular No. 111/2013/TT-BTC as follows:

“5. Persons who were transferred real estates from July 1, 1994, to before January 1, 2009, and submit valid dossiers of application for land use right or house and other land-attached asset ownership certificates on January 1, 2009, or after and obtain approval of a competent state agency, shall pay personal income tax only once. Persons who were transferred real estates before July 1, 1994, are not required to pay personal income tax.

From January 1, 2009, the effective date of the Law on Personal Income Tax, individuals who transfer real estate under notarized contracts or hand-written transfer papers shall pay personal income tax on each transfer.”

Chapter IV

TAX ADMINISTRATION

Article 14.To amend Point dd, Clause 1, Article 10 of 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 (below referred to as Circular No. 156/2013/TT-BTC), as follows:

“dd/ If a taxpayer suspends business and incurs no tax, he/she is not required to submit a tax declaration dossier for the business suspension period. If a taxpayer suspends business for less than the whole calendar year or fiscal year, he/she shall still submit an annual tax finalization dossier.

dd1/ A taxpayer that has carried out business registration procedures at a business registration office shall send a written notice of the business suspension or resumption to that business registration office.

The business registration office shall notify the tax agency of the taxpayer’s business suspension or resumption within 2 (two) working days after receiving the written notice of the taxpayer. For a taxpayer that registers his/her business suspension, the tax agency shall notify the business registration office of his/her tax debt within 2 (two) working days after receiving the information from the business registration office.

dd2/ A taxpayer that has registered for the grant of a tax identification number directly with the tax agency shall, before suspending his/her business, send a written notice to the managing tax agency at least 15 (fifteen) days before the suspension. A notice must state:

- Name and address of the head office, tax identification number;

- Business suspension period, beginning date and ending date of the suspension;

- Reasons for suspension;

- Full name and signature of the at-law representative of the enterprise, the representative of the business group, or the business household head.

At the end of the business suspension period, the taxpayer shall make a tax declaration under regulations. If the taxpayer resumes his/her business ahead of time, he/she shall send a written notice to the managing tax agency and concurrently submit a tax declaration dossier under regulations.”

Article 15.To amend and supplement Point b, Clause 2, Article 11 of Circular No. 156/2013/TT-BTC as follows:

“b/ Quarterly declaration of VAT

b.1/ Taxpayers eligible to declare VAT quarterly

Quarterly tax declaration applies to taxpayers that earn a total revenue of VND 50 billion or less from the sale of goods and provision of services in the previous year.

Taxpayers that have just begun production and business activities shall declare VAT quarterly. After full 12 months of production and business, from the subsequent calendar year, whether they shall make VAT declaration monthly or quarterly will depend on the revenue from the sale of goods and provision of services in the previous calendar year (full 12 months).

Example 21:

- Enterprise A that begins its production and business from January 2015, shall make VAT declaration quarterly. It shall base itself on its revenue in 2015 (full 12 months of the calendar year) to determine whether it shall make VAT declaration monthly or quarterly.

- Enterprise B that begins its production and business from August 2014, shall make VAT declaration quarterly in 2014 and 2015. It shall base itself on its 2015 revenue to determine whether it shall make VAT declaration monthly or quarterly.

Taxpayers themselves shall determine their eligibility to declare tax monthly or quarterly.

Any taxpayer eligible to declare VAT quarterly that wishes to declare tax monthly shall send a notice (made according to Form No. 07/GTGT to this Circular) to its managing tax agency not later than the deadline for submission of the VAT declaration of the first month of the tax year in which it wishes to declare VAT monthly.

b.2/ Period of quarterly tax declaration

- VAT shall be declared monthly or quarterly throughout the calendar year and the 3-year cycle. Particularly, the first stable cycle begins on October 1, 2014, and ends on December 31, 2016.

Example 22: In 2013, enterprise C earns a total revenue of VND 38 billion, thus it is eligible to declare VAT quarterly from October 1, 2014. If the revenue earned in 2014, 2015 or 2016 as declared by the enterprise (including additional declaration) or determined through examination or inspection is VND 55 billion, enterprise C shall continue declaring VAT quarterly until the end of 2016. The declaration cycle shall be re-determined from 2017 based on the revenue earned in 2016.

Example 23: In 2013, enterprise D earns a total revenue of VND 57 billion, thus it shall declare VAT monthly. In 2014, the revenue declared by the enterprise or determined through examination or inspection is VND 48 billion, then enterprise D shall still declare VAT monthly until the end of 2016. The declaration cycle shall be re-determined from 2017 based on the revenue earned in 2016.

- During the cycle of stable quarterly declaration, if a taxpayer or the tax agency detects through examination and inspection that the revenue earned in the year preceding the cycle is over VND 50 billion, and thus the taxpayer is ineligible to declare VAT quarterly in that cycle, then the taxpayer shall declare VAT monthly from the year following the year of detection until the end of the cycle.

Example 24: In 2013, enterprise E declares a total revenue of VND 47 billion in the VAT declaration, which makes it eligible to declare VAT quarterly from October 1, 2014. In 2015, the tax agency conducts an inspection and concludes that the taxable revenue earned in 2013 is VND 52 billion, VND 5 billion higher than the declared revenue. So, enterprise E shall declare VAT monthly from 2016. From 2017, the declaration cycle shall be re-determined based on the revenue earned in 2016.

Example 25: In 2013, enterprise G declares a total revenue of VND 47 billion in the VAT declaration, which makes it eligible to declare VAT quarterly from October 1, 2014. In 2015, enterprise G makes an additional declaration that the taxable revenue earned in 2013 is actually VND 52 billion, VND 5 billion higher than the declared revenue. So, enterprise G shall declare VAT monthly from 2016. From 2017, the declaration cycle shall be re-determined based on the revenue earned in 2016.

- During the cycle of stable monthly declaration, if the taxpayer or the tax agency detects through examination and inspection that the revenue earned in the year preceding the cycle is VND 50 billion or less, and thus the taxpayer is eligible to declare VAT quarterly, then the taxpayer may choose whether to declare VAT monthly or quarterly from the year following the year of detection until the end of the cycle.

- For enterprises that have made quarterly tax declaration before this Circular takes effect, their first cycle of declaration shall be counted until the end of December 31, 2016.

b.3/ Method of determining revenue from the sale of goods and provision of services in the preceding year as a condition for determining the eligibility to declare VAT quarterly

- The revenue from the sale of goods and provision of services is the total of revenues in the VAT declarations in the tax periods in a calendar year (including taxable and non-taxable revenues).

- In case a taxpayer declares tax at the head office for their affiliate units, the revenue from the sale of goods and provision of services includes also revenues earned by their affiliate units.”

Article 16.To amend Article 12 of Circular No. 156/2013/TT-BTC as follows:

“Article 12. Declaration of enterprise income tax

1. Responsibility to submit enterprise income tax declaration dossiers to the tax agency:

a/ Taxpayers shall submit enterprise income tax declaration dossiers to their managing tax agency;

b/ In case a taxpayer has an affiliate unit that practices independent accounting, such affiliate unit shall submit its enterprise income tax declaration dossier to its managing tax agency;

c/ In case a taxpayer has an affiliate unit that practices dependent accounting, such affiliate unit is not required to submit enterprise income tax declaration dossiers. The taxpayer shall include the enterprise income tax incurred by such affiliate unit in the taxpayer’s enterprise income tax declaration;

d/ In case a taxpayer has a manufacturing facility (including processing or assembling facility) that practices dependent accounting and is located outside the province or centrally run city where the taxpayer’s head office is located, the taxpayer shall include the enterprise income tax incurred by the manufacturing facility in the taxpayer’s enterprise income tax declaration;

dd/ If a dependent-accounting member unit of an economic group or a corporation has been able to determine their revenue, expenses and taxable income, it shall declare and pay enterprise income tax to its managing tax agency;

e/ If a member unit conducts a business other than the common business of its group or corporation and can separately account the revenue from such business, it shall declare its enterprise income tax to its managing tax agency.

If a method of tax declaration other than those guided at this Point must be applied, the economic group or corporation concerned shall report it to the Ministry of Finance for separate guidance.

2. Enterprise income tax declaration shall be made for each income earned, for annual finalization or finalization when a decision on the division; consolidation; merger; transformation; dissolution; or operation termination of an enterprise is made. In case of transformation in which the new enterprise takes over all tax obligations of the transformed enterprise (such as transformation from limited liability company into joint-stock company and vice versa; from enterprise with 100% of state capital into joint-stock company and other cases prescribed by law), no tax finalization declaration shall be made up to the time when the decision on the transformation is issued, the enterprise shall only make annual tax finalization declaration under regulations.

Cases of enterprise income tax declaration for each income earned:

- Cases of real estate transfer by enterprises that have no real estate trading function or by enterprises that have the real estate trading function and wish to make such declaration.

- Cases of capital transfer by foreign organizations that do business or earn income in Vietnam (referred to as foreign contractors) but do not operate under the Law on Investment or the Law on Enterprises.

3. Enterprise income tax finalization declaration

a/ Enterprise income tax finalization declarations shall be made annually and when a decision on the division, consolidation, merger, transformation, dissolution, or operation termination of an enterprise is made;

b/ An enterprise income tax finalization declaration dossier must comprise:

b.1/ An enterprise income tax finalization declaration, made according to Form No. 03/TNDN to this Circular;

b.2/ The annual financial statement or financial statement up to the time a decision on division, consolidation, merger, transformation, dissolution or operation termination of the enterprise is made;

b.3/ Appendix(ces) enclosed with the tax declaration issued together with Circular No. 156/2013/TT-BTC and this Circular (depending on actual circumstances of taxpayers):

- Appendix on production and business results, made according to Form No. 03-1A/TNDN, No. 03-1B/TNDN or No. 03-1C/TNDN issued together with Circular No. 156/2013/TT-BTC.

- Appendix on loss carry-forward, made according to Form No. 03-2/TNDN issued together with Circular No. 156/2013/TT-BTC.

- Appendices on enterprise income tax incentives:

+ Form No. 03-3A/TNDN: enterprise income tax incentives for new businesses that are established from an investment project, for businesses that are relocated, and for new investment projects, issued together with Circular No. 156/2013/TT-BTC.

+ Form No. 03-3B/TNDN: enterprise income tax incentives for businesses that invest in new production lines, expansion, technology innovation, environmental improvement, or production capacity increase (expansion investment), issued together with Circular No. 156/2013/TT-BTC.

+ Form No. 03-3C/TNDN: enterprise income tax incentives for businesses that employ ethnic minority people, or manufacturing, construction or transport businesses that employ many female workers, issued together with Circular No. 156/2013/TT-BTC.

- Appendix on enterprise income tax paid overseas that is deductible in the tax period, made according to Form No. 03-4/TNDN issued together with Circular No. 156/2013/TT-BTC.

- Appendix on enterprise income tax on real estate transfer, made according to Form No. 03-5/TNDN issued together with this Circular.

- Appendix on report on the setting aside and use of the science and technology fund (if any), made according to Form No. 03-6/TNDN issued together with Circular No. 156/2013/TT-BTC.

- Appendix on information about related transactions (if any), made according to Form No. 03-7/TNDN issued together with Circular No. 156/2013/TT-BTC.

- Appendix on calculation of enterprise income tax incurred by the enterprise that has dependent-accounting manufacturing facilities that are located outside the province or centrally run city where the enterprise’s head office is located (if any), made according to Form No. 03-8/TNDN issued together with Circular No. 156/2013/TT-BTC.

- In case an enterprise has an overseas investment project, other dossiers and documents required by the Ministry of Finance must be submitted in addition to the above-mentioned documents.

4. Enterprise income tax declaration for real estate transfer in accordance with the law on enterprise income tax

a/ If an enterprise makes a real estate transfer in the province or centrally run city where its head office is located, it shall make tax declaration at its managing tax agency (provincial-or district-level Tax Department). In case an enterprise has its head office in one province or city but makes a real estate transfer in another, it shall submit the tax declaration dossier to the provincial- or district-level Tax Department decided by the director of the Tax Department of the locality where the real estate transfer takes place.

b/ Enterprises that do not regularly make real estate transfer shall submit a provisional enterprise income tax declaration whenever a real estate transfer is made. Such enterprises are those that have no real estate trading function.

An enterprise income tax declaration dossier for each real estate transfer is the declaration of tax on income from real estate transfer, made according to Form No. 02/TNDN issued together with this Circular.

At the end of the tax year, the tax on income from real estate transfer shall be separated when making the enterprise income tax finalization declaration at the head office. At the head office, enterprise income tax on real estate transfer shall be handled as follows: If the paid tax is lower than the payable tax stated in the enterprise income tax finalization declaration, the enterprise shall pay the deficit into the state budget. If the paid tax is higher than the payable tax stated in the enterprise income tax finalization declaration, the overpaid tax amount shall be subtracted (-) from the owed enterprise income tax on other business operations, or from the enterprise income tax payable in the subsequent period, or refunded under regulations. If the real estate transfer suffers a loss, the enterprise shall monitor such loss separately, offset it against the profit earned from other business operations (if any) (applicable from January 1, 2014), and carry it forward to the subsequent years in accordance with the law on enterprise income tax.

c/ Enterprises that regularly make real estate transfer shall pay provisional enterprise income tax on a quarterly basis under regulations. Such enterprises are those that have the real estate trading function.

At the end of the tax year, the enterprise shall carry out enterprise income tax finalization procedures for all real estate transfers for which provisional enterprise income tax has paid every quarter or for each real estate transfer made.

At the head office, enterprise income tax on real estate transfer shall be handled as follows: If the paid tax is lower than the payable tax stated in the enterprise income tax finalization declaration, the enterprise shall pay the deficit into the state budget. If the paid tax is higher than the payable tax stated in the enterprise income tax finalization declaration, the overpaid tax amount shall be subtracted (-) from the owed enterprise income tax on other business operations, or from the enterprise income tax payable in the subsequent period, or refunded under regulations. If the real estate transfer suffers a loss, the enterprise shall monitor such loss separately, offset it against the profit earned from other business operations (if any) (applicable from January 1, 2014), and carry it forward to the subsequent years in accordance with the law on enterprise income tax.

d/ In case an enterprise implements an investment project on infrastructure and housing for sale or for lease and collects advances from customers according to implementation schedule in any form:

- If the enterprise is able to determine the expense corresponding to the recorded revenue (including also pre-deducted expense of the uncompleted items of the project corresponding to the recorded revenue), it shall pay enterprise income tax on the revenue minus the expense.

- If the enterprise is unable to determine the expense, it shall pay a provisional enterprise income tax at 1% of the received revenue, and such revenue is not included in the taxable revenue in the year.

When handing over the real estate, the enterprise shall make an official finalization of the enterprise income tax on real estate transfer.

5. Enterprises and organizations that are eligible to pay enterprise income tax in a percentage of the revenue from the sale of goods and provision of services in accordance with the law on enterprise income tax shall declare enterprise income tax annually using Form No. 04/TNDN issued together with this Circular.

Enterprises and organizations that are eligible to pay enterprise income tax in a percentage of the revenue from the sale of goods and provision of services in accordance with the law on enterprise income tax but do not regularly sell goods and provide goods subject to enterprise income tax shall declare enterprise income tax for each goods sale or service provision according to Form No. 04/TNDN issued together with this Circular and are not required to make annual tax finalization declaration.

6. An enterprise that has a manufacturing facility (including also processing or assembling facility) that practices dependent accounting and is located outside the province or centrally run city where the enterprise’s head office is located shall include the tax incurred by the manufacturing facility in the enterprise income tax paid at the head office.

a/ Circulation of documents between state treasuries and tax agencies

An enterprise shall determine by itself the enterprise income tax payable at the tax office and dependent-accounting manufacturing facilities in accordance with the law on enterprise income tax and make an enterprise income tax payment document for the localities where the head office and manufacturing facilities are located. Such tax payment document must specify the payment into the state budget collection account at the state treasury of the same level with the tax agency at which its head office has registered tax declaration and the localities where its dependent-accounting manufacturing facilities are located. The state treasury of the locality where the enterprise’s head office is located shall transfer money and the receipt to relevant state treasuries for accounting as state budget revenue the tax amounts incurred by its dependent-accounting manufacturing facilities.

b/ Tax finalization

An enterprise shall make enterprise income tax finalization declaration in the locality where its head office is located, with the outstanding enterprise income tax amount determined to be the enterprise income tax payable under the finalization declaration minus the provisional tax amounts already paid in the localities where the head office and manufacturing facilities are located. The enterprise income tax that is payable or refundable must also be distributed in proportion to the amounts paid in the localities where the head office and manufacturing facilities are located.

7. Enterprise income tax declaration for capital transfer

a/ The income from capital transfer of an enterprise shall be regarded as another income. Any enterprise that earns incomes from capital transfer shall determine and declare the enterprise income tax for capital transfer in the annual finalization declaration.

In case an enterprise sells the whole of a single-member limited liability company in the form of capital transfer associated with real estate, it shall pay enterprise income tax for each sale and make declaration according to Form No. 06/TNDN issued together with this Circular and make annual finalization declaration in the locality where its head office is located.

b/ Any foreign organization that does business in Vietnam or earns incomes in Vietnam (referred to as foreign contractor) but does not operate in accordance with the Law on Investment and the Law on Enterprises, and makes capital transfer, shall declare enterprise income tax for each capital transfer.

The capital transferee shall determine, declare, withhold and pay the enterprise income tax payable by the foreign organization. If the transferee is also a foreign organization that does not operate in accordance with the Law on Investment and the Law on Enterprises, the company established under Vietnam’s law in which these foreign organizations have invested capital shall declare and pay the enterprise income tax payable by the foreign organizations for their capital transfers.

The deadline for submitting a tax declaration dossier is the 10^thday from the date the competent agency approves the capital transfer or the date of transfer agreed by all parties in the capital transfer contract, in case the transfer is not subject to approval.

A tax declaration dossier for income from capital transfer must comprise:

- A declaration of enterprise income tax for capital transfer (made according to Form No. 05/TNDN issued together with Circular No. 156/2013/TT-BTC);

- A copy of the transfer contract. If the transfer contract is written in a foreign language, the following major contents must be translated into Vietnamese: transferor; transferee; time of transfer; transfer contents; rights and obligations of each party; contract value; deadline, method and currency of payment.

- A copy of a competent agency’s decision on approval for capital transfer (if any);

- A copy of the certificate of capital contribution;

- Original documents of expenses.

If additional documents are required, the tax agency shall notify the transferee within the date of receipt of the dossier (if the dossier is submitted directly), or within 3 (three) working days from the date of receipt of the dossier if the dossier is sent by post or electronically.

Tax declaration dossiers shall be submitted to the tax agency with which the foreign transferor has registered for tax payment.

8. Examination of enterprise income tax finalization by enterprises upon division; consolidation; merger; transformation; dissolution; or operation termination

8.1. The tax agency shall examine the tax finalization by enterprises within 15 (fifteen) working days after receiving documents and dossiers related to the tax finalization from taxpayers upon division, consolidation, merger, transformation, dissolution or operation termination, except the cases specified at Point 8.2 of this Clause.

8.2. Cases of dissolution and operation termination not subject to tax finalization:

a/ Dissolution or operation termination of enterprises or organizations eligible to pay enterprise income tax in a percentage of the revenue from the sale of goods and provision of services in accordance with the law on enterprise income tax

b/ Dissolution or operation termination of enterprises that earn no revenue and use no invoice after being granted business registration or enterprise registration certificates;

c/ Dissolution or operation termination of enterprises liable to pay enterprise income tax according to declaration when these enterprises fully meet the following conditions:

- Having an average annual revenue (calculated from the year without tax finalization or inspection and examination to the time of dissolution or operation termination) not exceeding VND 1 billion.

- Not being sanctioned for acts of tax evasion from the year without tax finalization or inspection and examination to the time of dissolution or operation termination.

- Having paid an enterprise income tax calculated from the year without tax finalization or inspection and examination to the time of dissolution or operation termination which is higher than the enterprise income tax calculated in a percentage of the revenue from the sale of goods and provision of services.

For the cases specified at Items a, b and c of this Point, within 5 (five) working days after receiving a dossier from a taxpayer (comprising the decision on dissolution or operation termination; documents proving the taxpayer’s eligibility in one of the above cases and full payment of payable tax, if any), the tax agency shall give certification of the enterprise’s fulfillment of its tax obligation.

8.3. For cases of dissolution or operation termination of enterprises not falling in any of the cases specified at Point 8.2 of this Clause, based on the actual demand, the taxpayer-managing tax agency may place orders for and use results of, examination of tax finalization, by independent audit firms or tax procedures service providers under Article 18 of this Circular.”

Article 17. To add the following Article 12a to Circular No. 156/2013/TT-BTC:

“Article 12a. Quarterly payment of provisional enterprise income tax and annual tax finalization

Based on production and business results, taxpayers shall pay provisional enterprise tax for a quarter not later than the 30^thday of the quarter following the quarter their tax obligation arises; enterprises are not required to submit declarations for provisional enterprise income tax payable on a quarterly basis.

For enterprises required by law to make quarterly financial statements (such as state enterprises, enterprises listed on the securities market and other cases as prescribed), enterprises shall base themselves on quarterly financial statements and tax laws to determine provisional enterprise income tax payable on a quarterly basis.

For enterprises not required to make quarterly financial statements, they shall base themselves on the previous year’s enterprise income tax and projected production and business result in the year to determine the provisional enterprise income tax payable on a quarterly basis.

In case the total provisional tax amount paid in a tax period is 20% or more lower than the enterprise income tax payable according to finalization, an enterprise shall pay a late payment interest on the difference of 20% or more between the paid provisional tax amount and the tax amount payable according to finalization from the date following the final day of the deadline for payment of the tax of the fourth quarter of the enterprise to the date of actual payment of the deficit of the tax amount payable according to finalization.

In case the paid provisional enterprise income tax on a quarterly basis is less than 20% lower than the tax amount payable according to finalization and the enterprise makes payment behind the prescribed deadline (deadline for submission of annual tax finalization dossiers), it shall pay a late payment interest from the date following the deadline for tax payment to the date of actual payment of the deficit of the tax amount payable according to finalization.

In case a competent agency conducts inspection and examination after an enterprise has made annual tax finalization and detects that the payable tax is higher than the tax amount already declared for finalization by the enterprise, the enterprise shall pay a late payment interest on the additionally paid tax amount from the date following the deadline for submission of the annual tax finalization dossier to the date of actual payment of the tax.

Example 1: For the tax year of 2014, enterprise A has paid a provisional enterprise income tax of VND 80 million. When making tax finalization, the enterprise income tax payable according to finalization is VND 90 million, an increase of VND 10 million. So, the difference between the payable tax according to finalization and the provisional tax paid in the year is less than 20%. In this case, after making tax finalization, the enterprise shall pay the remaining tax amount of VND 10 million into the state budget according to the prescribed deadline. If the enterprise pays this difference late, it shall pay a late payment interest under regulations.

Example 2: The financial year of enterprise B coincides with the calendar year. In the tax year of 2015, the enterprise has paid a provisional enterprise income tax of VND 80 million. When making annual tax finalization, the enterprise income tax payable according to finalization is VND 110 million, an increase of VND 30 million.

20% of the tax amount payable according to finalization is: 110 x 20% = VND 22 million

The difference from 20% and above has a value of: VND 30 million - VND 22 million = VND 8 million.

Then, enterprise B has to pay an additional tax amount of VND 30 million after making tax finalization. At the same time, it has to pay a late payment interest on the difference from 20% and above (VND 8 million) from the date following the tax payment deadline of the fourth quarter of the enterprise (from January 31, 2016) to the date of actual payment of the deficit of the tax payable according to finalization. If the enterprise pays late the remaining tax amount (30 - 8 = VND 22 million), it shall pay a late payment interest from the date following the deadline for submission of tax finalization dossiers (from April 1, 2016) to the date of actual payment of this tax amount.

In case in 2017, the tax agency conducts tax inspection at enterprise B and detects that it has to pay an enterprise income tax of VND 160 million for the tax year of 2015, an increase of VND 50 million over the payable tax declared by the enterprise in its finalization tax dossier. For the tax increase detected through the inspection, the enterprise shall be sanctioned for this violation under regulations, in which it shall pay a late payment interest on this tax increase of VND 50 million under regulations (from April 1, 2016, to the date of actual payment of this tax amount), without separating the amount in excess of 20% from this increased tax amount.

Example 3: For the tax year of 2016, enterprise C has paid a provisional enterprise income tax of VND 80 million. When making annual tax finalization, the enterprise income tax payable according to finalization is VND 70 million. Then the overpaid tax amount of VND 10 million may be regarded as provisional tax amount paid for the subsequent year or refunded under regulations.”

Article 18. To add the following Article 12b to Circular No. 156/2013/TT-BTC:

“Article 12b. Mechanism under which the tax agency places orders for and uses results of independent audit firms or tax procedure service providers to audit tax finalization of enterprises upon dissolution or operation termination

1. Rights and responsibilities of independent audit firms or tax procedure service providers

1.1. When performing tax finalization service contracts, independent audit firms or tax procedure service providers have the following rights:

a/ To perform jobs and enjoy remuneration under contracts signed with the tax agency.

b/ To request taxpayers to fully and accurately provide necessary documents, dossiers and information relating to the tax finalization under contracts signed with the tax agency.

1.2. Responsibilities of independent audit firms and tax procedure service providers

a/ To take responsibility before law for results of performance of tax finalization services based on declaration dossiers of taxpayers. In case a competent state agency detects that a tax finalization dossier contains errors affecting the tax amount  to be paid by or refunded to the taxpayer, the independent audit firm or tax procedure service provider concerned shall submit the deficit or over-refunded tax amount into the state budget and be sanctioned like violating taxpayers;

b/ To accurately and promptly at the request of the tax agency documents to prove the preciseness of the provision of tax finalization examination services;

c/ To keep secret information about taxpayers. In case a taxpayer has adequate evidence on the independent audit firm’s or tax procedure service provider’s failure to fulfill this responsibility, thus causing damage to the taxpayer, the taxpayer has the right to request the tax agency to terminate the service contract.

2. Rights and responsibilities of tax agencies directly managing taxpayers

a/ To select and sign annual service contracts with independent audit firms or tax procedure service providers;

b/ To receive dossiers of request for tax finalization from taxpayers and hand them over to independent audit firms or tax procedure service providers that have signed service contracts;

c/ To notify taxpayers of independent audit firms and tax procedure service providers that will examine tax finalization of taxpayers;

d/ To use their funds to make payment to independent audit firms and tax procedure service providers under signed service contracts;

dd/ To unilaterally terminate contracts when detecting that independent audit firms or tax procedure service providers breach the contracts.

3. The Director General of Taxation shall issue a regulation guiding tax agencies at all levels to uniformly use funds and funding sources to pay independent audit firms and tax procedure service providers under service contracts to inspect tax finalization of enterprises upon dissolution or operation termination.”

Article 19. To amend and supplement Item a.3, Point a, Clause 1, Article 16 of Circular No. 156/2013/TT-BTC as follows:

“a.3/ Payers of incomes liable to personal income tax shall make personal income tax finalization declaration and personal income tax finalization on behalf of the authorizing individuals, regardless of whether or not tax is withheld. Organizations and individuals that have no incomes to pay are not required to make personal income tax finalization declaration.

In case a payer of incomes that dissolves or terminates operation pays incomes but does not have to withhold any personal income tax, such payer is not required to make personal income tax finalization but provides the tax agency with a list of individuals who have received incomes in the year (if any) according to Form No. 25/DS-TNCN issued together with this Circular not later than the 45^thday after the date the decision on dissolution or operation termination is made.”

Article 20. To amend and supplement Clause 2, Article 23 of Circular No. 156/2013/TT-BTC as follows:

“2. Declaration and payment of enterprise income tax for hydroelectricity generation:

Taxpayers that generate hydroelectricity shall pay provisional enterprise income tax and make tax finalization declaration under Articles 16 and 17 of this Circular.

Some specific cases of enterprise income tax declaration and payment:

a/ Hydroelectricity companies that practice independent accounting shall pay enterprise income tax in the localities where their head offices are located. If such companies have affiliate hydroelectricity units located outside the province or centrally run city where its head office is located, enterprise income tax shall be calculated and paid in the localities where its head office and affiliate hydroelectricity units are located in accordance with the law on enterprise income tax;

Dependent-accounting hydroelectricity units of electricity generation corporations of Electricity of Vietnam or the parent company of Electricity of Vietnam (EVN) (including dependent-accounting hydroelectricity companies and dependent electricity power plants) located outside the localities where EVN and electricity generation corporations are located shall calculate and pay enterprise income tax in the localities where the head office and dependent-accounting hydroelectricity units are located in accordance with the law on enterprise income tax.

b/ In case a hydroelectricity plant (having turbines, dam and primary facilities of the plant) lies in more than one province or centrally run city, the enterprise income tax payable by the plant shall be paid to the provincial budgets in proportion to the investments in the plant (including its turbines, dam and primary facilities) located in the localities concerned. The hydroelectricity unit shall send a table of enterprise income tax distribution to each locality (made according to Form No. 02-1/TD-TNDN issued together with this Circular). The hydroelectricity unit shall declare enterprise income tax in the locality where its head office is located, and concurrently send its copies of the enterprise income tax declaration, made according to Form No. 03-1/TNDN issued together with this Circular, the Appendix on calculation of enterprise income tax of the enterprise with dependent-accounting manufacturing facilities according to Form No. 03-8/TNDN issued together with Circular No. 156/2013/TT-BTC (for enterprises with dependent-accounting hydroelectricity units) and the table of enterprise income tax distribution to localities made according to Form No. 02-1/TD-TNDN issued together with this Circular to the tax agencies of the localities to which its enterprise income tax is distributed;

c/ For a hydroelectricity unit that has many hydroelectricity plants one of which is located outside the province or centrally run city where the hydroelectricity unit’s head office is located, if the expense incurred by each hydroelectricity plant cannot be determined because the unit practices centralized accounting and does not organize separate accounting for each individual hydroelectricity plant, the enterprise income tax to be paid in the locality where the hydroelectricity plant is located shall be determined to be the enterprise income tax payable in the period multiplied by (x) the ratio of electricity generated by the plant to the total electricity generated by the hydroelectricity unit.”

Article 21. To amend and supplement Points a and d, Clause 1, and Point c, Clause 2, Article 31 of Circular No. 156/2013/TT-BTC as follows:

1. To add the following Points a and d to Clause 1 of Article 31:

“a/ Material damage caused by natural disasters, fires or accidents that affect production and business activities.

Material damage means the damage to a taxpayer’s property that can be calculated in monetary terms such as machinery, equipment, vehicles, supplies, goods, workshops, working offices, cash and valuable papers.

Accidents are the unexpected incidents due to external causes that directly affect a taxpayer’s production and business activities, but not due to violations of law. Accidents include traffic accidents, labor accidents, suffering from dangerous diseases; suffering from infectious epidemics at a time and in areas where infectious epidemics are announced by a competent agency, and otherforce majeurecases.

The lists of dangerous diseases are prescribed in legal documents.”

“d/ Failure to pay tax on time due to other special difficulties.

Other special difficulties include: taxpayers’ main business lines being prohibited or suspended from business at the request of competent state agencies (not due to violations of law); partners cancelling, or failing to make payment on time under, signed contracts, making taxpayers suffer losses in their production and business activities when such partners fall in one of the following cases:

- Falling bankrupt;

- Enterprise managers as prescribed in the Law on Enterprises or business household heads die unexpectedly;

-  Enterprise managers as prescribed in the Law on Enterprises or business household heads are missing.”

2. To amend and supplement Point c, Clause 2 of Article 31 as follows:

“c/ The taxpayers mentioned at Point c, Clause 1 of this Article may have the payment deadline extended for the tax debt owed by the time of request for extension. The tax amount allowed for payment extension must not exceed the state budget amount not yet paid, including also the value of consultancy, supervision, survey, design, planning of projects for the contracts for capital construction works and items directly signed between the taxpayers and the project owners, which are funded by the state budget or state budget-originated sources. The tax payment must not be extended for more than 2 years from the payment deadline.

Example 41: On December 26, 2014, the tax agency receives a request for tax payment extension from company D, which is made on December 23, 2014, enclosed with a dossier of request for tax payment extension, specifically as follows:

According to the project owner’s written certification, the state budget amount not yet paid to the taxpayer is VND 100 million. Company D owes VND 250 million in tax, including VND 60 million in VAT that is due on July 21, 2014, and VND 190 million in enterprise income tax that is due on July 30, 2014.

If the dossier of request for tax payment extension is complete, company D may extend the payment of VND 100 million in tax:

The payment of VND 60 million in VAT may be extended from July 22, 2014, and shall be paid not later than July 21, 2016.

Only 40 million VND in enterprise income tax is allowed to be paid late, counting from July 31, 2014, and shall be paid not later than July 30, 2016.

The remaining 150 million VND shall be paid by company D to the state budget.

c.1/ For tax debts the payment of which has been decided by the tax agency to be extended for 1 (one) year, at the end of the extension period, if the taxpayer has not yet received any payment from the state budget and the period from the tax payment deadline to the date of request for tax payment extension is less than 2 (two) years, the taxpayer shall still be considered for further tax payment extension not exceeding 1 (one year).

The taxpayer shall send a written request for tax payment extension and the project owner’s written certification of the amount the project owner has not yet paid to the taxpayer by the time of making the request.

Example: The state budget owes VND 100 million to taxpayer A. The taxpayer owes VND 100 million in VAT, which has the payment deadline of May 20, 2013.

The tax agency has issued a decision to extend the payment of VND 100 million in tax to May 20, 2014.

By November 26, 2014, the state budget has not yet paid VND 100 million to taxpayer A who, therefore, sends a request for tax payment extension to the tax agency. The payment of VND 100 million in tax shall be further extended not beyond May 20, 2015.”

c.2/ If the state budget pays the owed capital construction amount during the extension period, the taxpayer shall pay tax right after receiving the state budget payment, specifically as follows:

- If the paid amount is equal to or higher than the tax amount allowed for extended payment, the taxpayer shall immediately pay the tax amount into the state budget.

- If the paid amount is smaller than the tax amount allowed for extended payment, the taxpayer shall immediately pay a tax amount equal to the paid amount. The taxpayer may choose to pay part or the whole of one of the taxes allowed for payment extension.

The remaining tax amount allowed for payment extension and not yet paid by the state budget shall be allowed for payment extension until the end of the extension period or until the payment from the state budget during the extension period.

c.3/ If a competent agency detects that the taxpayer fails to pay the tax amount allowed for payment extension after receiving a payment from the state budget, a late payment interest shall be charged on the tax amount allowed for payment extension from the day following the date of receiving the payment under Article 34 of Circular No. 156/2013/TT-BTC.”

Chapter V

IMPLEMENTATION PROVISIONS

Article 22. Effect

This Circular takes effect on November 15, 2014.

Article 23. To replace the following phrases and  forms:

1. To replace the phrase “industrial parks located in urban districts of centrally run special-grade and grade-I urban centers and industrial parks located in provincially administered grade-I urban centers” in Circular No. 78/2014/TT-BTC with the phrase “industrial parks located in urban districts of centrally run special-grade and grade-I urban centers and industrial parks located in provincially administered grade-I urban centers, excluding urban districts of centrally run special-grade and grade-I urban centers and industrial parks located in provincially administered grade-I urban centers established from rural districts since January 1, 2009.”

2. To replace Forms No. 02/TNDN, No. 03/TNDN, No. 03-5/TNDN, No. 04/TNDN and No. 02-1/TD-TNDN issued together with Circular No. 156/2013/TT-BTC with new corresponding forms issued together with this Circular.

Article 24. For the near future, not to retrospectively collect enterprise income tax (including cases in which decisions on retrospective tax collection have been issued or enterprises are in the period of having their complaints settled) from establishments engaged in socialized education and training, vocational training, health, cultural, sports and environmental activities but failing to meet the conditions prescribed in the Prime Minister-issued List of detailed forms and criteria of scope and standards applicable to establishments engaged in socialized education and training, vocational training, health, cultural, sports and environmental activities until new guidelines are issued by competent state agencies.

Article 25. Implementation responsibility

1. Provincial-level People’s Committees shall direct their functional agencies to organize strict implementation of regulations of the Government and the guidance of the Ministry of Finance.

2. Tax agencies at all levels shall disseminate, and guide the implementation of, the guidance in this Circular, among organizations and individuals.

3. Organizations subject to the regulation of this Circular shall follow the guidance in this Circular.

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

For the Minister of Finance
Deputy Minister
DO HOANG ANH TUAN