CIRCULAR

GUIDING THE IMPORT TAX REDUCTION FOR GOODS OF LAO ORIGIN

Pursuant to the Agreement on Economic, Cultural, Scientific and Technical Cooperation between the Government of the Socialist Republic of Vietnam and the Government of the Lao Peoples Democratic Republic, signed on January 16, 2004, the Finance Ministry hereby guides the import tax reduction for goods of Lao origin as follows:

A. SCOPE OF APPLICATION:

Goods made in the Lao Peoples Democratic Republic and imported into Vietnam by Vietnamese enterprises of all economic sectors having the legal person status shall be entitled to the import tax rate equal to 50% of the preferential import tax rate prescribed in the preferential import tariff (except for goods banned from import into Vietnam and goods on Vietnams list of completely excluded goods for the implementation of the CEPT/AFTA), if they satisfy the following conditions:

1. Having the certificate of origin (C/O) issued by competent agencies of Laos. Specific regulations on certificates of origin (C/O) of goods shall be uniformly applied to goods imported from Vietnam or Laos on the basis of consultation and agreement between Laos Trade Ministry and Vietnams Trade Ministry.

2. Being imported under contracts for goods sale and purchase into Vietnam through border-gates officially opened on the Vietnam-Laos border.

In cases where import goods fully satisfy the conditions for application of the import tax rate equal to 50% of the preferential import tax rate, and concurrently meet all the conditions for enjoying CEPT particularly preferential tax rate, the lower one of these two tax rates shall apply.

B. SPECIFIC GUIDANCE

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1. Determination of import goods purchasing prices:

1.1. Bases for determination:

Import goods purchasing prices are determined on the basis of goods purchase and sale contracts and in accordance with lawful and valid vouchers related to the goods purchase and sale. Import goods purchasing prices include insurance cost (I) and freight (F).

1.2. Import goods purchasing prices determined according to prices inscribed in goods purchase and sale contracts must be added with and subtracted for adjusting amounts according to the following guidance:

1.2.1. Amounts which must be added into prices inscribed in goods purchase and sale contracts for determining the import goods purchasing prices:

1.2.1.1. In cases where the prices inscribed in goods purchase and sale contracts are exclusive of freight (F) and insurance cost (I), such freight and insurance cost must be added into such prices to determine the import goods purchasing prices. If no lawful and valid voucher is available for the determination of freight and insurance cost, the freight shall be calculated equal to 15% of the prices inscribed in the goods purchase and sale contracts and the insurance cost equal to 0.3% of these prices inclusive of freight, for determining the import goods purchasing prices.

In cases where importers transport goods by themselves, they must have a detailed list of freights. If the freight is for goods of different types, the importers must distribute such freight on the basis of unit freight rate for each type of goods or the volume or weight of each type of goods or the value of each type of goods in the import goods lot.

1.2.1.2. In cases where import goods include goods guaranteed under goods purchase and sale contracts (including cases of consigned cargoes) but the prices inscribed in the goods purchase and sale contracts are not calculated separately for the guaranteed goods, the import goods purchasing prices shall cover the value of guaranteed goods.

1.2.2. Amounts to be subtracted from prices inscribed in goods purchase and sale contracts for determining the import goods purchasing prices:

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1.2.2.1.1. Such deferred payment interest rate is stated in the goods purchase and sale contracts;

1.2.2.1.2. Such deferred payment is related only to the very import goods lot with the price being determined, not related to other goods lots.

1.2.2.2. In cases where import goods are sold on discount, the discount amounts shall be subtracted from the prices inscribed in the goods purchase and sale contracts for determining the import goods purchasing prices if the following conditions are fully met:

1.2.2.2.1. The agreement on price discount must be made in writing before the goods are loaded onto transport means in Laos, and be submitted together with import goods declarations.

1.2.2.2.2. The discount is made for the very import goods lot with their prices being determined, not related to other goods lots.

1.2.2.3. In cases where import goods are provided with insurance and transport services by enterprises operating in Vietnam, the amounts of value added tax on insurance cost (I) and freight (F) shall be subtracted from the prices inscribed in the goods purchase and sale contracts for determining the import goods purchasing prices.

2. Tax calculation prices of import goods shall be their purchasing prices if they fully meet the following conditions:

2.1. Condition (1): The import goods must comply with goods purchase and sale contracts.

A goods purchase and sale contract must contain all principal contents of a contract as prescribed by the Commercial Law.

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Any amendments and/or supplements to the terms in the already signed goods purchase and sale contracts must be completed before the goods are loaded onto transport means in Laos, and be submitted together with the import goods declarations.

2.2. Condition (2): Payment for the whole value of the import goods lot must be made via bank in a currency agreed upon by the two parties

In cases where the payment for the whole value of the import goods lot is made via bank before the registration of the import goods declaration, the vouchers on payment for the goods lot must be submitted together with the declaration upon carrying out the import procedures to prove to the customs office that the purchaser has actually paid via bank for the whole value of the import goods lot.

In cases where the payment is made after the registration of the import goods declaration, the goods purchase and sale contract must clearly state the payment time limit and the purchaser must make a commitment with the customs office to additionally submit, upon payment, the payment vouchers to prove the actual via-bank payment for the whole value of the import goods lot to the customs office. The payment vouchers must conform

2.3. Condition (3): Importers pay value added tax (VAT) by deduction method. Upon carrying out the import procedures, importers must submit (once) to the customs offices (where the import procedures are carried out) copies of the registrations for VAT calculation by deduction method, which are consented by the tax offices where they have registered for tax payment (copies affixed with true-copy stamps of the importers).

3. In cases where import goods are on the list of goods subject to State management over their tax calculation prices, their tax calculation prices shall be the ones specified in the minimum price table. In cases where the import goods purchasing prices are higher than the prices specified in the minimum price table, the former shall apply to tax calculation.

4. In cases where import goods are not on the list of goods subject to State management over their tax calculation prices and fail to fully meet the conditions for the application of the tax calculation prices being the import goods purchasing prices as guided at Point 2 above, the customs offices of the localities where enterprises import goods shall base themselves on the methods of determining the tax calculation values of import goods according to the principles of the Agreement implementing Article 7 of the General Agreement on Tariff and Trade prescribed in the Governments Decree No. 60/2002/ND-CP of June 6, 2002 and guided in the Finance Ministrys Circular No. 118/2003/TT-BTC of December 8, 2003 to determine the tax calculation prices of import goods of Lao origin.

II. CURRENCY AND EXCHANGE RATE FOR DETERMINATION OF TAX CALCULATION PRICES

1. Tax calculation prices shall be determined in Vietnam dong.

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For foreign currencies not transacted on the inter-bank foreign currency market, the tax calculation prices shall be determined on principle of cross rate between the US dollar-Vietnam dong actual buying and selling rate on the inter-bank market and the exchange rates between US dollar and other foreign currencies on the international market, announced by Vietnam State Bank.

III. TIME OF DETERMINING TAX CALCULATION PRICES AND IMPORT TAX RATES

Time of determining tax calculation prices and import tax rates for import goods shall be the date the customs declarers register their import goods declarations.

IV. PROCEDURES FOR PRODUCING AND CHECKING CERTIFICATES OF ORIGIN OF GOODS (C/O):

Enterprises importing Lao goods, which wish to enjoy the import tax rate equal to 50% of the preferential import tax rate, shall have to submit to the customs offices the original certificates of origin (C/O), enclosed with the prescribed import documents when carrying out the import procedures.

Where enterprises have no C/O to submit when carrying out the import procedures, the customs offices, when calculating tax, shall temporarily apply the ordinary tax rate or the CEPT particularly preferential tax rate (if fully meeting the conditions therefor) and accept the C/O submission to be delayed within 30 days as from the date of submitting import goods declarations. After submitting C/O, enterprises shall be considered for reimbursement of overpaid tax amounts (if any) (the difference between already paid tax amounts calculated at the ordinary tax rate or the CEPT particularly preferential tax rate and the tax amounts calculated at the import tax rate equal to 50% of the preferential import tax rate prescribed in the preferential import tariff).

Importing enterprises shall be held responsible before law for the legality and validity of their submitted C/O. If any C/O frauds are detected, importing enterprises shall be handled according to the current law provisions.

When having doubts about the truthfulness and accuracy of C/O, the customs offices shall request enterprises to supply documents to prove. The maximum time limit for enterprises to additionally submit vouchers shall be 30 days after the date of submitting the C/O. Pending the re-checking results, the application of the import tax rate equal to 50% of the preferential import tax rate for the goods lot shall be temporarily postponed, while the ordinary tax rate or CEPT particularly preferential tax rate (if the conditions therefor are fully met) shall apply. Concurrently, the procedures for releasing goods shall continue being carried out if such goods are not banned or restricted from import and there is no doubt about false declarations thereof. In cases where the goods owners have enough documents to prove the truthfulness and accuracy of their C/O, they shall be considered for reimbursement of overpaid tax amounts (if any) (the difference between already paid tax amounts calculated at the ordinary tax rate or the CEPT particularly preferential tax rate and the tax amounts calculated at the import tax rate equal to 50% of the preferential import tax rate prescribed in the preferential import tariff).

V. Other regulations on tax calculation bases, tax payment registration and declaration, regimes of tax collection and payment, tax reporting, tax exemption and reduction, tax reimbursement, retrospective tax collection, handling of violations and settlement of complaints shall comply with the current provisions of the Law on Export Tax and Import Tax; the Law Amending and Supplementing a Number of Articles of the Law on Export Tax and Import Tax and the current guiding documents.

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This Circular takes effect 15 days after its publication in the Official Gazette and applies to import goods declarations registered with the customs offices as from January 16, 2004 (the effective date of the 2004 Agreement on economic, cultural, scientific and technical cooperation between the Government of the Socialist Republic of Vietnam and the Government of the Lao Peoples Democratic Republic). The stipulations in the previous legal documents which are contrary to the guidance in this

Cases of importing goods of Lao origin with the import goods declarations registered with the customs office as from January 6, 2004 (eligible for application of the import tax rate equal to 50% of the preferential import tax rate and tax calculation prices according to the guidance in this Circular), for which tax has been paid at the ordinary tax rate or the CEPT particularly preferential tax rate (if the conditions therefor are fully met), shall be eligible for reimbursement of overpaid tax amounts (if any). The reimbursed overpaid tax amounts shall be the differences between the tax amounts already paid by enterprises and the import tax amounts calculated at the import tax rate equal to 50% of the preferential import tax rate and tax calculation prices for application under the guidance in this Circular. Enterprises shall contact the customs departments of the localities where they have imported the goods to carry out the procedures for tax reimbursement. Each dossier of tax reimbursement application comprises:

+ The written request for reimbursement of overpaid tax amount

+ The import goods declaration already liquidated with the customs office

+ The goods purchase and sale contract, and lawful and valid vouchers related to the goods purchase and sale

+ Documents proving the truthfulness and accuracy of certificate of origin (C/O) under the guidance in this Circular.

Any problems arising in the course of implemen-ting this Circular should be promptly reported by the concerned organizations and individuals to the Finance Ministry for study and further guidance./.

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