Circular No. 85/2009/TT-BTC dated April 28, 2009, of the Ministry of Finance guiding the Prime Minister’s Decision No. 58/2009/QD-TTg of April 16, 2009, adding a number of tax-related measures for implementation of the policy to stimulate investment and consumption, stop economic decline and remove difficulties for enterprises

THE MINISTRY OF FINANCE

Circular No. 85/2009/TT-BTC of April 28, 2009, guiding the Prime Minister’s Decision No. 58/2009/QD-TTg of April 16, 2009, adding a number of tax-related measures for implementation of the policy to stimulate investment and consumption, stop economic decline and remove difficulties for enterprises

Pursuant to the Value-Added Tax Law and guiding documents;

Pursuant to the Enterprise Income Tax Law and guiding documents;

Pursuant to the Ordinance on Charges and Fees and guiding documents;

Pursuant to the Tax Administration Law and guiding documents;

Pursuant to the XIIth National Assembly’s Resolution No. 21/2008/QH12 on the state budget estimate for 2009;

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;

Pursuant to the Prime Minister’s Decision No. 58/2009/QD-TTg of April 16, 2009, adding tax-related measures for implementation of the policy to stimulate investment and consumption, stop economic decline and remove difficulties for enterprises;

The Ministry of Finance guides the implementation of Decision No. 58/2009/QD-TTg as follows:

Article 1. Reduction of value-added tax rate by 50%

1. Goods and services eligible for 50% reduction of the value-added tax (VAT) rate from May 1, 2009, through December 31, 2009, under Clause 1, Article 1 of Decision No. 58/2009/QD-TTg are specifically guided as follows:

a/ Yarn, fabrics and garment, leather and footwear products of all types, including:

- Yarn of all types, including fiber of all types;

- Fabrics of all types;

- Garment products;

- Leather of all types;

- Footwear of all types;

b/ Paper of all types (except newsprint), including pulp, paper products of all types, except books under Point n, Clause 2, Article 8 of the VAT Law and paper products liable to excise tax;

c/ Cement;

d/ Bricks and roof tiles of all types, including fibro-cement sheets;

e/ Two- and three-wheeled motorcycles with a cylinder capacity of over 125 cm3.

2. The 50% VAT rate reduction applicable to goods specified in Clause 1 of this Article also applies to sub-standard products and scraps recovered from the production of those goods.

3. Goods eligible for 50% VAT rate reduction specified in Clause 1 of this Article are detailed in the list of goods under the Preferential Import Tariff attached to this Circular (below referred to as the list of goods) (not printed herein).

Goods eligible for 50% VAT rate reduction are marked with “x” in the column “Goods eligible for reduction” of the list of a number of goods eligible for 50% VAT rate reduction.

The 50% VAT rate reduction for goods on this additional list uniformly applies to the stages of importation, production, sub-contract production and trading of those goods.

4. An invoice for sale of goods or services eligible for VAT rate reduction must indicate the “10% x 50%” multiplication on the VAT rate line; VAT amount; and total amount payable by the buyer.

An invoice printed by an enterprise itself must indicate the 5% rate on the VAT rate line and the phrase “Item entitled to 50% VAT rate reduction” on the “Goods and services” line in addition to specifying the name of the goods or service.

For example: Company A sells 100 tons of cement to Company B under a contract between the two parties. The VAT-exclusive sale price is VND 1,300,000/ton. Cement is eligible for 50% VAT rate reduction. When issuing an added-value invoice for the delivery of cement to Company B within the period from May 1, 2009, through December 31, 2009, Company A shall write as follows:

“Cement” in the column “Goods and services”

Sale price: VND 1,300,000 x 100 (tons) = VND 130,000,000

VAT rate: “10% x 50%”

VAT amount: VND 6,500,000

Total payment: VND 136,500,000

Based on the added-value invoice, Company A shall declare output VAT and Company B shall declare input VAT credit according to the tax amount of VND 6,500,000 indicated in the invoice.

When declaring VAT, taxpayers shall declare as 5% on the tax-liable goods and services line (clearly stating “already reduced by 50%” in the “note” column) of the table of invoices and vouchers for goods and services sold (Form No. 01-1/GTGT attached to Circular No. 60/2007/TT-BTC).

5. Beneficiaries of the 50% VAT rate reduction also include households and individuals producing and trading in goods eligible for 50% VAT rate reduction under this Article.

Households and individuals paying VAT by the presumption method that produce and trade in different goods and services both eligible and ineligible for 50% VAT rate reduction shall separately declare revenues from each type of goods eligible for VAT reduction (clearly stating in item 3. Turnover of VAT-liable goods and services: turnover of goods eligible for 50% VAT rate reduction, of Form No. 01/THKH attached to Circular No. 60/2007/TT-BTC). Business households or individuals that fail to separately determine revenues of goods specified in this Article will be ineligible for 50% VAT rate reduction.

Article 2. Extension of the VAT payment duration for imports

1. To extend the VAT payment duration to 180 days for imports being machinery, equipment, spare parts and special-use vehicles included in technological lines which can not be manufactured at home and are imported to form fixed assets of enterprises.

The extended tax payment duration is counted consecutively from the date of registering customs declarations, including holidays and weekends under law, and applies to import declarations registered with customs offices from May 1, 2009, through December 31, 2009. The final day of the extended tax payment duration under this Clause which falls on a holiday prescribed by law will be the workday following that holiday.

2. Machinery, equipment, spare parts and special-use vehicles under Clause 1 of this Article are those not on the Ministry of Planning and Investment-promulgated list of machinery, equipment, special-use vehicles, construction supplies, materials, supplies and parts which can be manufactured at home.

Imports being complete lines of equipment and machinery eligible for extension of VAT payment duration under Clause 1 of this Article which include locally made equipment and machinery are also eligible for extension of VAT payment duration.

To determine goods’ eligibility for extension of VAT payment duration in the stage of importation under this Article, an importer shall produce to the customs office the following documents:

- Import contract;

Import entrustment contract, in case of entrusted import.

Contract-winning notice and sale contracts signed with goods users according to bidding results, in case the importer wins a contract to supply goods to be used for the purpose specified in this Article.

Financial leasing contract, in case the importer is a financial leasing company importing goods for lease.

- The enterprise director’s written certification of imports to be used as fixed assets.

3. Goods specified in Clause 1 of this Article which have enjoyed an extended tax payment duration but have their use purpose changed (e.g., sale or liquidation) during the extended tax payment duration are subject to declaration and payment of VAT having enjoyed an extended payment duration in the stage of importation to the customs office where their customs declarations are registered. The time for calculating VAT is the time of changing the use purpose.

4. Importers of goods specified in Clause 1 of this Article may pay VAT in a lump sum for imports having enjoyed an extended tax payment duration or pay VAT by installments but the last installment must not go beyond the extended tax payment duration.

Enterprises are not subject to fines on late payment for VAT paid in installments within 180 days from the date of registering customs declarations.

Article 3. Reduction of enterprise income tax

1. To reduce by 30% enterprise income tax (EIT)  payable in the fourth quarter of 2008 for enterprises’ incomes from the production or sub-contract yarn production, weaving, dyeing, garment production and leather and footwear production (below referred to as activities eligible for tax reduction).

Activities eligible for tax reduction shall be based on the current law on classification of national economic industries.

2. Determination of to-be-reduced EIT amounts

To-be-reduced EIT amount in the fourth quarter of 2008 equals 30% of the payable EIT amount for the quarter’s incomes from activities eligible for tax reduction. The EIT amount for incomes from activities eligible for tax reduction in the fourth quarter of 2008 as a basis for determining to-be-reduced tax amount may be determined by enterprises by either of the following methods:

- Determination based on enterprises’ business cost accounting;

- Determination by dividing by four the total payable EIT amount in 2008 for incomes from activities eligible for tax reduction.

When enterprises cannot separately account incomes from activities eligible for EIT reduction, incomes eligible for tax reduction shall be determined according to the proportion of incomes from activities eligible for tax reduction in the enterprises’ total turnover from business activities.

For enterprises which produce both shoes and slippers, incomes from activities eligible for tax reduction also include incomes from slipper production.

For enterprises which are enjoying EIT incentives under the EIT law, the 30% EIT reduction shall be calculated based on the remaining tax after deducting the EIT incentives under the EIT law.

The fourth quarter of 2008 under this Article covers October, November and December of 2008.

3. Implementation order and procedures: The 30% EIT reduction in the fourth quarter of 2008 for incomes from activities eligible for tax reduction complies with Section II of the Finance Ministry’s Circular No. 03/2009/TT-BTC of January 13, 2009.

Enterprises which have declared and remitted their 2008 EIT into the state budget and finalized tax payment may compile additional declaration dossiers according to Circular No. 60/2007/TT-BTC of June 14, 2007, to enjoy the 30% reduction of EIT paid in the fourth quarter of 2008. The to-be-reduced EIT amount in the fourth quarter of 2008 may be deducted from the payable tax amount of the next tax period or be refunded according to regulations.

4. The EIT reduction under this Circular applies to enterprises which have implemented the invoice and voucher accounting and registered to pay tax by declaration.

Article 4. Reduction of registration fees

1. To reduce by 50% the registration fee for passenger automobiles of under 10 seats (including driver seat), which is applicable to dossiers of registration fee declaration submitted to tax agencies from May 1, 2009, through December 31, 2009, regardless that the vehicles are registered for the first time or the second time onward.

2. Automobiles eligible for 50% registration fee reduction under this Article do not include three-wheeled taxis (xe lam) and automobiles designed to carry both passengers and cargo.

3. To declare registration fees on the registration fee declaration (Form No. 02/LPTB attached to the Finance Ministry’s Circular No. 60/2007/TT-BTC of June 14, 2007) in item 2, Part B “Payable registration fee amount (VND)”: To add “Equals the asset value for registration fee calculation (for passenger automobiles of under 10 seats, including driver seat) multiplied by (x) registration fee rate (%) multiplied by (x) 50%.”

Article 5. Organization of implementation and effect

1. This Circular takes effect on May 1, 2009, through December 31, 2009.

2. In the course of implementation, any arising problems should be reported to the Ministry of Finance for prompt guidance and settlement.

For the Minister of Finance
Vice Minister
DO HOANG ANH TUAN