CIRCULAR

GUIDING IMPLEMENTATION OF THE REDUCTION OF VALUE ADDED TAX APPLICABLE TO A NUMBER OF GOODS AND SERVICES IN WHICH BUSINESS ENTERPRISES ARE MEETING DIFFICULTIES

Pursuant to the Law on Corporate Income Tax dated 3 June 2008 and its implementing guidelines; Pursuant to the Law on Management of Tax dated 29 November 2006 and its implementing guidelines;
Pursuant to Resolution 21/2008/QH12 of the National Assembly Legislature XII on the estimated State Budget for year 2009;
Pursuant to Decree 118/2008/ND-CP of the Government dated 27 November 2008 on functions, duties, powers and organizational structure of the Ministry of Finance;
Pursuant to Decision 16/2009/QD-TTg of the Prime Minister of the Government dated 21 January 2009 issuing tax solutions for implementing the policy on stimulating investment and sales in order to alleviate the economic down turn and relieve hardships for enterprises;
The Ministry of Finance hereby provides the following guidelines on implementation of the reduction of value added tax1:

Article 1. To reduce by fifty per cent (50%) the VAT tax rate applicable to a number of goods and services to which the ten per cent (10%) tax rate applies as stipulated in clause 3 of Section 2 of Part B of Circular 129/2008/TT-BTC dated 26 December 2008 as follows:

1. Pit [or fossil] coal, coal dust, coke, peat, coal lumps and coal bricks.

2. Basic chemicals, comprising all types of chemicals listed in Appendix 1 attached to this Circular.

3. Mechanical engineering products being means of production (except for mechanical engineering consumer products) comprising:

(a) All types of machinery and equipment such as diesel engines, mills, lathes, planers, rollers, piercing and threshing mills; all types of complete and separate equipment, electricity meters, voltage stabilizers with a capacity of over 50 KVA, water meters, bridge girder structures, warehouse frame structures and metal structure products; transport vehicles; and all types of metal spare parts and semi-finished products for the above products.

(b) Products being small production tools such as pliers, hammers, saws, chisels, shovels, hoes and sickles, trade took sets which are mechanical engineering products, and nails.

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(d) High voltage electrical equipment and transforming equipment, safety boxes, electricity measuring equipment, safety fuses (12 KV, 24 KV and 36 KV from 6A or more).

4. The various types of automobiles.

5. Automobile components comprising engines, gear boxes, clutches and sections of such goods.

6. Ships and boats.

7. The various types of casting moulds including all types of moulds used as tools for production of products or goods.

8. Explosive materials including blasting agents, fuses, detonators and other types manufactured into specialized explosive products without changing their character and effect as explosives.

9. Grindstones.

10. Artificial [or man-made] plywood made from raw materials such as bamboo, wood pulp, wood chips, wood fibre, sawdust, sugarcane refuse, rice husk and so forth, excluding natural veneered wood and natural plywood products.

11. Industrial concrete products comprising concrete bridge beams, concrete building beams and frames, concrete piles, concrete electric wire poles, concrete pipe culverts, the various types of concrete boxes, panels and non-standard pre-cast reinforced concrete units or parts (except for concrete bricks) and commercial concrete (concrete mortar).

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13. Neutral glass tubes (such as ampoules used for the purpose of injecting medicines, and test tubes).

14. Products rolled or cut from ferrous, non-ferrous or precious metal, but excluding imported gold.

Products for metallurgy, rolling and drawing of ferrous, non-ferrous or precious metals shall include metallurgical flat rolled or drawn products used as raw materials or products, such as metal products in the form of bars, bullion, plates or wire.

Products which have been manufactured or processed from metallurgical flat rolled or drawn products shall be subject to VAT rates applicable to their particular line of goods.

15. Automatic data processing machines and their sections and accessories (including computers of all types and parts of computers, specialized printers used for computers), except for uninterruptible power supply sections (UPS).

16. Cargo handling; dredging of channels, canals, river ports and sea ports; sea rescue activities.

17. Transportation (excluding international transportation) comprising transportation of passengers, luggage and cargo, and tourist transportation by air, road, rail and waterway; except for broking and agency activities where only commission is earned, and irrespective of whether the establishment directly carries out the transportation or sub-contracts it out.

18. Hotel business; and tourism services in the form of package holiday travel.

19. Printing, but excluding printing of money.

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When preparing an invoice for goods and services eligible for the VAT reduction as stipulated in article 1 above, in the line for the VAT rate, the following should be recorded: "10% by 50%", the amount of VAT; and the total amount which the purchaser must pay.

Example:

Company A sells 60 computers to Company B pursuant to a contract signed between the parties, with a price of 5,200,000 VND per computer excluding VAT. Computers are eligible for the 50% reduction of VAT rate. Accordingly, Company A must record the following when it prepares its VAT invoice and delivers it to Company B:

In the column for goods and services, record "computers".

The price to be recorded shall be 5,200,000 dong X 60 sets = 312,000,000 dong. VAT rate: "10% by 50%".

VAT amount: 15,600,000 dong.

Total price to be paid: 327,600,000 dong.

Based on this VAT invoice, Company A shall declare input VAT, and Company B shall declare creditable

VAT at the amount of tax reduced and recorded in the invoice at 15,600,000 dong.

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1. This Circular shall be of full force and effect after forty-five (45) days from the date of its signing, and shall apply to the goods and services stipulated in article 1 of this Circular from 1 February 2009 to the end of 31 December 2009.

2. Any problems arising during implementation should be promptly reported to the Ministry of Finance for resolution.

FOR THE MINISTER OF FINANCE
DEPUTY MINISTER




Do Hoang Anh Tuan