Circular No. 09/1998/TT-TCHQ dated November 18, 1998 of the General Department of Customs guiding the implementation of Government Decree No. 28/1998/ND-CP detailing the implementation of the Law on value added tax on export and import goods
THE GENERAL DEPARTMENT
SOCIALIST REPUBLIC OF VIET NAM
Independence - Freedom – Happiness
Hanoi, November 18, 1998
GUIDING THE IMPLEMENTATION OF GOVERNMENT DECREE No. 28/1998/ND-CP DETAILING THE IMPLEMENTATION OF THE LAW ON VALUE ADDED TAX ON EXPORT AND IMPORT GOODS
Pursuant to Law on Valued Added Tax No. 02/1997/QH9 of May 10, 1997;
Pursuant to Article 22 of Decree No. 28/1998/ND-CP of May 11, 1998 detailing the implementation of the Law on Value Added Tax;
The General Department of Customs hereby guides the implementation of the Law on Value Added Tax on import goods as follows:
I. GENERAL PROVISIONS
1. Subjects liable to Value Added Tax at import stage:
Value Added Tax is a kind of indirect tax imposed on consumers. The tax is calculated on the added value of the goods and services arising in the course of import, production, circulation and consumption.
The subjects liable to Value Added Tax are goods and services used for production, business and consumption in Vietnam except for those exempted from tax as mentioned in Article 4, Chapter I of Decree No. 28/1998/ND-CP.
For import goods, the subjects liable to Value Added Tax are import goods used for production, business and consumption in Vietnam permitted to import via Vietnamese border or from export processing zones into domestic market except for those as stipulated in Article 4, Chapter I of Decree
No. 28/1998/ND-CP mentioned below.
2. The subjects not liable to Value Added Tax on export and import goods at import stage shall include:
2.1. The goods as humanitarian aid and non-refundable aid, including aids from international organizations, foreign States, Government, Associations and non-governmental organizations to the Vietnamese Government or Vietnamese organizations, mass organizations or associations.
a) The goods as humanitarian aids and non-refundable aids must be accompanied with sufficient papers to be presented to the customs as follows:
- Written certification by competent agencies with identification of the agencies and organizations that give aids, that the goods are humanitarian aids or non-refundable aids; and
- Other papers relating to the receipt of such goods lots as prescribed for import goods.
b) The gifts to State bodies, political organizations, socio-political organizations, social organizations, socio- professorial organizations and People's Armed Forces' units.
The organs and organizations receiving the gifts which are not liable to Value Added Tax shall prepare an official letter, requesting the non-collection of Value Added Tax (attached with related papers and certifications by competent agencies to the effect that the imported goods are gifts) clearly stating the sources, quantity and category of the imported goods.
c) The belongings of foreign organizations and individuals under the diplomatic immunity quotas, the accompanied goods within the tax-free luggage quotas and belongings of Vietnamese overseas bringing along upon their return to the country.
The quantity and categories of the imported goods in the cases mentioned in Points b and c above shall be determined according to the regimes prescribed by the State.
2.2. The goods transported in transit, the goods transported via Vietnam, the goods temporarily imported for re-export and goods temporarily exported for re-import.
2.3. Kinds of imported raw materials used for:
- The production of export goods;
- The processing of export goods under production and processing contracts signed with foreign countries.
2.4. Goods and services provided for the following subjects and in the following cases shall not be liable to Value Added Tax at import stage.
The import goods directly supplied to ships, planes, trains and other means of transport leaving Vietnam for foreign countries or from foreign countries to (via) Vietnam for an on going journey to other foreign countries, such as the supply of petrol, oil, water and foods of various kinds including meals catering for passengers, supply of repair services, cleaning up of international means of transport used for the transport of goods, passengers and luggage from Vietnam to foreign countries and from foreign countries to Vietnam.
2.5. The kinds of goods imported for tax-free sale at duty-free shops, international airports, ports, railways terminals and border gates.
2.6. The gold imported in the form of ingots or pieces and the kinds of gold not yet processed into an crafts, jewelry's or other products.
The gold in the form of ingots, pieces and the kinds of gold not yet processed shall be determined in conformity with the international regulations.
2.7. The kinds of equipment, machinery and specialized means of transport which cannot be produced at home and are imported by the establishments having investment projects for use as fixed assets under projects.
Where the establishments import whole lines of equipment and machinery which fall into the category not liable to Value Added Tax but in these lines there are also kinds of equipment and machinery which can be produced at home, Value Added Tax shall not be levied on such whole lines.
Dossiers determining kinds of equipment, machinery and specialized means of transport for which the importing establishments shall not have to pay Value Added Tax at import stage shall comprise the following categories:
- The investment projects approved or licensed by the competent levels (for investment projects).
- Import contracts or plans, clearly stating the import origins and kinds of equipment, machinery and specialized means of transport imported for use as fixed assets under the investment projects.
- Certification by the ministries, specialized management bodies or specialized provincial management agencies of the kinds of equipment, machinery and specialized means of transport imported by establishments for use -as fixed assets which cannot be produced at home.
The importing establishments shall prepare and forward the above-said dossiers to Customs Offices when making declarations at the latter to serve as the basis for determining the import items not liable to Value Added Tax. Customs Offices shall base themselves on the goods items actually imported and the dossiers of the business establishments to determine specifically the imported items not liable to Value Added Tax.
2.8. Arms and weapons of specialized use in service of national defense and public security, the lists of which shall be specifically determined by the Ministry of Defense and the Ministry of Public Security after consulting and reaching agreement with the Ministry of Finance which shall make a written confirmation thereof.
2.9. Technological transfer shall be determined according to the stipulations in Chapter III "Technology Transfer" of the Civil Code of the Socialist Republic of Vietnam and the documents guiding the implementation thereof. For technological transfer contracts accompanied by machinery and equipment, the non-collection of the tax shall be applied only to the part of the transferred technology value.
2.10. The imported goods subject to Special Consumption Tax at import stage shall not be liable to Value Added Tax.
2.11. Export products which are the exploited mineral resources and not yet processed into other products, namely:
- Crude oil, coal, slab stone, sand, rare earth and precious stones; and
- Manganese, tint, iron, chromate, hematite and appetite ores.
3. Payers of Value Added Tax on import goods.
The payers of Value Added Tax according to the stipulations in Article 3 of the Law on Value Added Tax are organizations and individuals engaged in the import of goods and services subject to taxes in Vietnam, irrespective of their business lines and trades, forms of business organization and other organizations and individuals importing taxable goods (hereafter commonly called importers).
II. BASIS FOR CALCULATION OF TAX ON IMPORT GOODS
The bases for calculation of Value Added Tax are tax calculation prices and tax rates.
1. The prices for calculation on the Value Added Tax on import goods
The prices for calculation of Value Added Tax on import goods are import prices at the border-gates plus (+) import tax.
The border-gate import prices serving as the bases for Value Added Tax calculation shall be determined according to the regulations on prices for calculation of tax on import goods.
For example: The price for calculation of the import tax for importing a TV set in CBU (completely- built-up) form is VND 2,000,000 per unit
- The import tax rate is 30% (thirty per cent)
- The Value Added Tax rate is 10% (ten per cent)
- The import tax to be paid is:
VND 2,000,000 x 30% = VND 600,000
The price for calculation of Value Added Tax is:
VND 2,00,000 + VND 600,000 = VND 2,600,000
The Value Added Tax to be paid is :
VND 2,600,000 x 10% = VND 260,000
- Where the import goods are totally exempt from import tax, the prices for calculation of the Value Added Tax on the import goods shall be the prices determined for the calculation of import tax.
- Where import goods are partially exempt from import tax, the prices for calculation of the Value Added Tax shall be those determined as the prices for calculation of import tax plus the part of import tax to be paid (after subtracting the part of the import tax which has been reduced).
For example: A lot of imported goods with the value for calculation of import tax of VND 200,000,000 for some objective reasons the import tax is reduced by 50% (fifty percent) of the payable tax amount. It is known that the import tax rate is 40% (per cent) and the Value Added Tax rate is 10% (ten percent) then:
The import tax to be paid shall be:
VND 200,000,000 x 40% = VND 80,000,000
The import tax is exempt by 20% (per cent) and the remaining payable amount shall be:
VND 80,000,000 x 80% = VND 64,000,000
The Value Added Tax to be paid shall be:
(VND 200,000,000 + VND 64,000,000) x 10% = VND 26,000,000
Goods subject to the collection of import tax arrears and at the same time also of Valued Added Tax arrears (as mentioned in section VI, Circular
No. 72A-TC/TCT guiding the implementation of Decree No. 54/CP on export-import taxes).
- The goods being presents and gifts that exceed the limits prescribed for tax exemption and are imposed with import tax on the excessive portions, the price for calculation of Value Added Tax shall be determined according to the formula set out above.
2. The Value Added Tax rates:
The Value Added Tax rates shall comply with the stipulations in Article 8 of the Law on Value Added Tax and Article 7 of Decree No. 28/1998/ND-CP which are specified in the Table guiding the Value Added Tax rates applicable to import goods, promulgated by the General Department of Customs after consulting with the Ministry of Finance.
III. METHODS FOR CALCULATING VALUE ADDED TAX ON IMPORT GOODS
General provisions on methods for calculating Value Added Tax
1. Methods for calculating Value Added Tax on import goods
Payable The value for Import Value
Value Added = calculation of + Tax x Added
Tax the imported Tax rate goods liable to Value Added Tax
The tax calculation value of imported goods for calculating import tax is also used for the calculation of Valued Added Tax. Where in a lot of goods, the goods items pose different Value Added Tax rates, the Value Added Tax shall be calculated separately for each item, then making the total Value Added Tax for the whole lot.
- Value Added Tax calculation order:
Step 1 : Determination of import items liable to Value Added Tax for calculating import tax first to serve as the basis for calculating Value Added Tax. Following are the concrete cases:
+ Where the whole lot of imported goods liable to both import tax and Value Added Tax, the import tax shall be calculated first which shall serve as the basis for calculating the Value Added Tax according to the above-said formula.
+ Where the lot of imported goods contains only in number of items liable to Value Added Tax, the import tax shall be calculated for the lot, before determining the for calculating Valued Added Tax for those items liable to such tax and calculating the Value Added Tax for such items.
+ Where the whole lot of imported goods contains items eligible for import tax exemption or reduction but not for the Value Added Tax exemption or
reduction, the prices for tax calculation shall be determined as mentioned in Point 1, Section II "Basis for Tax Calculation" hereof.
Step 2: Calculation of Value Added Tax:
+ Determination of the calculation value of the import goods liable to value Added Tax.
+ Accurate determination of the payable import tax amount for the goods liable to Value Added Tax;
+ Determination of Valued Added Tax rates applicable to those goods items;
+ Calculation of the Value Added Tax according to the formulary given above.
Step 3: Tax notice and the period for tax calculation:
The period for calculation of Value Added Tax and tax notice shall be the same as stipulated for export-import taxes.
A tax notice must clearly state the payable tax amount for each kind of tax and the time limit for tax payment.
2. Use of Value Added Tax collection receipts and the way to make inscriptions on the receipts
- The use of export- import tax receipts and receipts CTT52 for Value Added Tax on import goods shall commence from January 1, 1999 as stipulated by the Ministry of Finance.
- Clear and separate inscription of each kind of tax-import, special consumption and Value Added Tax-must be made on receipts, and
- Tax receipts shall be issued to tax payers to serve as the basis for making final settlement, deduction and reimbursement of the Value Added Tax at the subsequent production and consumption stages at home.
IV. CUSTOMS DECLARATIONS AND PAYMENT OF VALUE ADDED TAX ON IMPORT GOODS
1. Provisions on customs declarations:
- Business establishments and importers of goods liable to Value Added Tax shall make the declarations and payment of Value Added Tax according to each time of importation together with the import tax declaration with the Customs Offices that collect import tax.
- The declarations of export and import goods and other papers used in customs declaration shall comply with the stipulation in the Export - Import Tax Law and the Customs� regulation.
- Where import goods are not liable to Value Added Tax importers shall submit papers serving as proof in accordance with the procedures prescribed
herein and other documents of the Ministry of Finance and the General Department of Customs.
2. Provisions on the payment of Value Added Tax:
- The time limit for payment of Value Added Tax shall be the same as that prescribed for payment of export-import taxes according to the current law on export- import taxes
- For goods exported and imported by entry, exit and non-commercial channel and imported via land borders, which do not fail into the category of export-import on official scale and import goods which are consumer ones, the Value Added Tax must be paid immediately upon their import.
- Value Added Tax shall be paid to the State Budget in VND. Where tax payers make payment in foreign currencies, the tax money shall be converted into VND at the average buying rate of exchange announced by the State Bank at the time of tax calculation.
- Where enterprises make direct payment of tax to the State budget in VND, such payment shall be made in strict conformity with the Chapters, Categories, Items, Grades and Entries of the Indexes of the State Budget. Where the Custom make direct collection of Value Added Tax, the tax must be paid to the State Treasuries in VND and entered in the specialized collection accounts of the Customs opened at the State Treasuries. The procedures and time limit for payment of such tax shall be the same as stipulated for export-import taxes.
V. HANDLING OF TAX VIOLATIONS
1. The tax payers violating the Law on Value Added Tax shall be dealt with as follows:
a) If failing to comply with the provisions on the procedures for customs registrations and declarations they shall, depending on the seriousness of violations, be subject to warning or pecuniary fines as prescribed in the Ordinance on the Handling of Administrative Violations.
b) If delaying payment of tax or fines stated in tax notices, tax-collecting orders or sanction decisions, they shall, besides having to pay in full the taxes or fines as stipulated by law, be subject to a fine equal to 0.1% (one- thousandth) of the late payment sum for each day of late payment.
c) If falsely declaring or evading taxes, they besides having to pay in full the taxes as stipulated, shall be liable to pecuniary fines equal from 1 to 5 times the tax amount falsely declared or evaded. Where the tax evasion amount is large or a serous violation is committed despite previous sanction for administration violation, they shall be examined for penal liability according to law.
d) If failing to pay tax or fines, they shall be handled as follows:
- To deduct their deposits at banks, treasuries or credit organizations for the payment of tax or fines;
The banks, treasuries or credit organizations shall have to deduct money from the tax payers' accounts in order to make payment of tax or fines to the State Budget in accordance with the stipulations on tax handling by tax offices or competent agencies before collecting debts;
- To seize goods and exhibits as a guarantee for collection in full of the tax and fines;
- To make inventory of properties in compliance with the provisions of law as a guarantee for collection in full of the outstanding tax and fine amounts.
The handling of Value Added Tax violations mentioned above shall comply with the procedures defined in legal documents on handling of tax violations.
2. Competence to handle tax violations:
Where the Customs Authorities discover violations of tax law by exporters and/or importers, inspection must be made to determine clearly the acts of violation, their seriousness and causes, the responsibilities of the organizations and individuals committing acts of violation and dossiers must be compiled as stipulated.
The Customs shall base themselves on the stipulations and levels of sanctions against administrative violations in the field of taxation and on the competence to issue sanctioning decisions as stipulated in Decree No. 16/CP guiding the implementation of the Ordinance on Sanctions Against Administrative Violations in the Field of Customs and Decree No. 22/CP on Sanction Against Administrative Violations in the Field of Taxation.
VI. COMPLAINTS AND STATUTE OF LIMITATION FOR IMPLEMENTATION
1. Rights and responsibilities of tax payers.
According to Article 23 of the Law on Value Added Tax, organizations and individuals shall have the right to lodge complaints against customs officials incorrect implementation of the Value Added Tax Law on establishments.
Written complaints shall be forwarded to the Customs Offices that issued tax notices or handling decisions within 30 days from the date of receipt of tax-collecting orders or handling decisions Pending a resolution, the complainant must pay in full and in due time the tax and/or fine amounts already notified.
If the complaining organizations or individuals disagree with the decisions by the tax offices settling the complaints or do not receive resolutions after 30 days from date of sending such complaints, they may lodge claims to the superior tax offices or initiate a lawsuit at courts as prescribed by law.
The procedures, the order of making complaints or initiating lawsuits and examination and resolution must comply with the provisions of the laws in force.
2. Liabilities and power of tax offices
- It is stipulated in Article 24 of the Law on Value Added Tax that tax offices at various levels, when receiving written complaints about tax from tax payers, shall examine and resolve such complaints within 15 days after receiving them. For complicated cases which require much time for investigation and verification, a notification shall be made to the parties concerned and the resolution shall be made not later than 30 days from the date of receipt of complaints. Where the cases do not come under the handling competence of the tax offices, the dossiers shall be transferred or a report shall be made to the bodies competent to settle and the parties involved shall be informed thereof within 10 days from the date their written complaints are received.
- Those tax offices which, through inspection, detect and conclude that there are false declarations or evasion of tax or mistaken taxation, such offices shall be liable for collecting the tax arrears or making reimbursement of the tax or fine amounts mistakenly imposed in a 5-year period from the date of inspection and discovery of such false declarations or evasion of tax or mistaken taxation.
VII. ORGANIZATION OF IMPLEMENTATION
1. Effect of implementation:
The Law on Value Added Tax shall take effect from January 1st, 1999, From January 1st, 1999, the Customs shall collect the Value Added Tax on import goods liable to the Value Added Tax.
2. Organization of implementation
It is stipulated in Article 22 of Decree No.28/CP that:
- The General Department of Customs shall be liable for organizing the collection of Value Added Tax on import goods; which are subject to Value Added Tax.
- The General Department of Taxation and the General Department of Customs shall have to coordinate in the control of the collection of Value Added Tax throughout the country.
As from January 1st, 1999, the General Department of Customs shall apply the Customs declarations according to the new form which includes the declarations for calculation of Value Added Tax. The time for determination of the import goods and declaration for payment of Value Added Tax shall be applicable to all the import declarations registered with the Customs Offices from January 1st, 1999 onwards.
The Customs Offices shall have the task of guiding exporters and importers to make declarations and payment of Value Added Tax in strict conformity with the Law on Value Added Tax and shall make inspection to classify dossiers registered for customs procedures clearance, make correct determination of the goods liable to Value Added Tax as well as precise definition of the bases for tax calculation and shall issue tax notices indicating the payable tax amounts and the time limits for payment to the tax payers.
For non-commercial goods, goods imported via land borders (other than export and import on official scale) and import goods which are consumer ones, the Customs Offices shall carry out the export and/or import procedures, calculate and collect tax before releasing the goods.
For export goods liable to Value Added Tax at the tax rate of 0% (zero per cent), in order to provide the grounds for tax offices to inspect the settlement of Value Added Tax on enterprises having goods for export, the Customs Offices shall have to inspect the goods in order to confirm precisely the quantity of goods actually exported for reflection on the export declarations.
On the import goods declaration forms and tax receipts, the calculation of Value Added Tax and the amounts of Value Added Tax must be separated to serve as the basis for enterprises and the tax-collecting offices to deduct the input Value Added Tax.
The Customs Offices shall have to manage the dossiers of declarations for Value Added Tax calculation, account the Value Added Tax, and abide by the system of accounting and statistic reporting to promptly serve the inspection and handling of violations of the tax law and the management of collection of Value Added Tax nationwide.
Any difficulties that arise in the course of implementation of this Circular shall be reported to the General Department of Customs for study and additional guidance.
GENERAL DIRECTOR CUSTOMS
Phan Van Dinh