Circular No. 71/2010/TT-BTC dated May 7, 2010 of the Ministry of Finance guiding tax assessment for automobile and motorbike traders that write the prices of automobiles and motorbikes on invoices issued to consumers lower than normal market prices

THE MINISTRY OF FINANCE

Circular No. 71/2010/TT-BTC of May 7, 2010, guiding tax assessment for automobile and motorbike traders that write the prices of automobiles and motorbikes on invoices issued to consumers lower than normal market prices

Pursuant to November 29, 2006 Law No. 78/2006/QH11 on Tax Administration and the Government’s Decree No. 85/2007/ND-CP of May 25, 2007, detailing a number of articles of the Law on Tax Administration;

Pursuant to June 3, 2008 Law No. 13/2008/QH12 on Value-Added Tax and the Government’s Decree No. 123/2008/ND-CP of December 8, 2008, detailing and guiding a number of articles of the Law on Value-Added Tax;

Pursuant to June 3, 2008 Law No. 14/2008/QH12 on Enterprise Income Tax and the Government’s Decree No. 124/2008/ND-CP of December 11, 2008, detailing a number of articles of the Law on Enterprise Income Tax;

Pursuant to November 21, 2007 Law No. 04/2007/QH12 on Personal Income Tax and the Government’s Decree No. 100/2008/ND-CP of September 8, 2008, detailing a number of articles of the Law on Personal Income Tax;

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

In furtherance of the Prime Minister’s directing opinions in Official Letter No. 4736/VPCP-KTTH of July 13, 2009, the Ministry of Finance guides tax assessment for automobile and motorbike trading as follows:

Chapter I

GENERAL PROVISIONS

Article 1. Subjects of application

Automobile or motorbike traders that write the prices of automobiles or motorbikes on invoices issued to consumers lower than normal market prices will be subject to assessment of selling prices based on normal market prices and of payable tax amounts.

Article 2. Interpretation of terms

1. Automobile and motorbike traders include organizations and individuals trading in automobiles or motorbikes and establishments manufacturing or assembling automobiles or motorbikes for sale.

2. Normal market price means the actual selling price in the market under normal conditions.

For domestically manufactured or assembled automobiles and motorbikes, selling prices announced by manufacturers will be considered normal market prices.

3. Automobile and motorbike consumers are organizations and individuals that buy automobiles or motorbikes and pay registration fee upon making registration of the rights to use or own automobiles or motorbikes. Business organizations and individuals (with business registration certificates and tax identification numbers) that buy automobiles or motorbikes for business purposes (for sale) will not be considered automobile and motorbike consumers.

Article 3. Cases of non-application

1. Automobile or motorbike traders that post up selling prices in accordance with normal market prices and sell automobiles or motorbikes at these prices or prices of 5 per cent lower. In this case, taxes will be calculated based on posted prices (posted prices must be notified to managing tax offices). Establishments which post up selling prices of automobiles or motorbikes but fail to comply with the above regulation will be subject to assessment of selling prices based on normal market prices and of payable tax amounts.

2. Domestic automobile or motorbike manufacturers and assemblers that sell their products at prices applicable nationwide and in each region or locality. In this case, value-added tax (VAT) and enterprise income tax (EIT) will be calculated based on prices applied by the manufacturers or assemblers at the time of calculation. Selling prices set by manufacturers must be publicly announced and notified to managing tax offices. Automobile or motorbike traders that write selling prices on invoices lower than the prices announced and notified to managing tax offices will be subject to tax assessment based on their notified prices.

3. Sale agents that sell goods at prices set by their principals and only enjoy commissions under the law on VAT.

4. Business establishments that buy used automobiles and motorbikes with registration certificates issued by competent state management agencies for sale or receive them for consignment sale.

Article 4. Determination of normal market prices for use as a ground for assessment of selling prices and payable tax amounts

1. Principles of determining normal market prices

Normal market prices will be determined based on the database collected by tax offices on selling prices declared by business establishments with tax offices; price information provided by other state management agencies (customs offices, price appraisal centers under provincial-level Finance Departments and Industry and Trade Departments) and the Vietnam Automobile Manufacturers’ Association (VAMA); buying and selling prices of automobiles and motorbikes of the same categories in the same localities or other localities; information collected from consumers; and prices of automobiles or motorbikes published on the mass media such as newspapers, magazines, market bulletins or websites.

2. Normal market prices will serve as a ground for the assessment of selling prices and payable tax amounts.

Normal market prices will be determined based on tables of minimum prices of automobiles and motorbikes used for registration fee calculation which are promulgated by provincial-level People’s Committees according to law.

Provincial-level People’s Committees shall promulgate tables of minimum prices of automobiles and motorbikes used for registration fee calculation according to law for use as a ground for the calculation of registration fee for automobiles and motorbikes as well as the assessment of selling prices and payable tax amounts for automobile and motorbike traders specified in Article 1 of this Circular.

Chapter II

TAX ASSESSMENT

Article 5. Declaration of quantities of automobiles and motorbikes sold every month

Automobile and motorbike traders shall send to tax offices a statement of the quantity of sold automobiles and motorbikes (made according to the form enclosed with this Circular - not printed herein), together with their monthly VAT returns.

Article 6. Assessment of selling prices and payable VAT amounts

The payable VAT amount shall be assessed based on the assessed selling price; the quantity of automobiles or motorbikes sold at prices lower than normal market prices stated in Article 4 of this Circular (referred to as quantity of violating vehicles); the added value percentage and the VAT rate.

The payable VAT amount shall be assessed as follows:

The percentage of the added value used for tax assessment is 10% under Point b, Clause 1, Article 8 of the Government’s Decree No. 123/2008/ND-CP of December 8, 2008, detailing and guiding a number of articles of the Law on Value-Added Tax.

The assessed selling price is the normal market price determined under Article 4 of this Circular (converted into VAT-exclusive price).

The VAT amount already declared for the quantity of violating vehicles shall be determined as follows:

The output VAT and input VAT amounts of the quantity of violating vehicles shall be determined based on value-added sale invoices, value-added purchase invoices or documents on VAT payment in the stage of importation of violating vehicles and do not include input VAT amounts on other expenses related to the sale of these vehicles such as management cost and fixed asset depreciation.

Automobile and motorbike traders paying VAT by the credit method are not allowed to subtract the VAT amount payable for the quantity of violating vehicles which is determined through assessment from the credited VAT amount in the inspection period.

- For automobile and motorbike traders paying VAT by the method of direct calculation:

Article 7. Assessment of payable EIT amounts

The payable EIT amount shall be assessed based on the assessed selling price, the quantity of violating vehicles and the EIT rate.

The payable EIT amount shall be assessed as follows:

The assessed selling price is the normal market price determined under Article 4 of this Circular (converted into VAT-exclusive price).

The EIT percentage is 2% under Clause 3, Article 11 of the Government’s Decree No. 124/2008/ND-CP of December 11, 2008, detailing and guiding a number of articles of the Law on EIT.

The taxed income from the quantity of violating vehicles will be determined as follows:

Turnover from the quantity of violating vehicles shall be determined based on value-added sale invoices (turnover declared by business establishments) and converted into VAT-exclusive prices.

Deductible expenses for the quantity of violating vehicles are actually arising expenses related to these vehicles and have lawful invoices and documents under the law on EIT (amounts declared by business establishments).

The EIT amount to be additionally paid for the quantity of violating vehicles shall be added to the EIT amount payable for the quantity of automobiles and motorbikes sold in accordance with regulations and the EIT amount payable for other business activities and may be offset against the paid EIT amount in the inspection period.

Article 8. Assessment of incomes liable to personal income tax

For automobile and motorbike traders that are liable to pay personal income tax (PIT), the payable PIT amount shall be assessed based on the assessed selling price, the quantity of violating vehicles and the percentage of taxable income prescribed by the Ministry of Finance.

The assessed selling price shall be determined according to the table of minimum prices of automobiles and motorbikes used for registration fee calculation (converted into VAT-exclusive price).

The PIT-liable income amount shall be assessed as follows:

The payable PIT amount shall be determined under the Law on PIT and its guiding documents.

Chapter III

IMPLEMENTATION PROVISIONS

Article 9. Effect

This Circular takes effect 45 days from the date of its signing.

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

For the Minister of Finance
Deputy Minister
DO HOANG ANH TUAN