b) A number of products and services in the fields of culture, arts, physical training and sports:

- Cultural activities, exhibitions and physical training as well as sport activities of mass movement characters, with training and competitions being organized free of charge or with charge collection but not for business purposes. If charges are collected for the above-said activities in form of admission tickets for art performances, sport competitions or exhibitions, the ticket sale turnover shall not be subject to VAT. But other sources of revenue such as those from the sale of goods at fairs or exhibitions, charges collected from such services as leasing stadiums, grounds, exhibition pavilions’ shall be liable to VAT.

- Art performance activities such as singing, dancing, music, drama, circus shows; other art performance activities and services for organization of art shows.

- Production of assorted films (recorded films), regardless of their themes and forms.

- The import, distribution and projection of films (recorded films): for cinematographic films, it is regardless of their themes and types; for video tape or disc films, they are only documentary, reportage, scientific films. The kinds and topics of films shall be determined according to the regulations of the Ministry of Culture and Information.

c) Printing, publication, import, distribution of: newspapers, magazines, specialized bulletins, political books, text books (even in forms of recorded audio or video tapes or discs), teaching stuffs, books on legal documents (books containing legal documents, political documents, resolutions, other regulatory documents); books published in ethnic minority people’s languages, pictures, photos, posters; money printing.

d) Goods imported in cases of: humanitarian aid, non-refundable aid; gifts to State bodies, political organizations, socio-political organizations, social organizations, socio-professional organizations, people’s armed forces units; belongings of foreign organizations and individuals under the diplomatic immunity criteria; personal effects within the duty-free luggage limits; belongings brought along by overseas Vietnamese upon their returns to the country. Goods imported in cases defined at this point shall be determined according to the State’s regulations.

Goods sold to international organizations and foreigners for use as humanitarian aid, non-refundable aid to Vietnam. Vietnamese organizations which have used humanitarian aid or non-refundable aid money of foreign organizations or individuals to buy goods in Vietnam shall be refunded the paid VAT amounts inscribed on VAT invoices upon the goods purchase.

- Business establishments selling goods to international organizations and foreigners for use as humanitarian aid or non-refundable aid to Vietnam shall not have to calculate VAT for such goods. When selling goods to these subjects, the business establishments shall have to request the buyers to produce the certifications by the international organizations or representative agencies of Vietnam, clearly inscribing the names of the international organizations, the foreigners buying the goods for humanitarian aid or non-refundable aid for Vietnam, the volume and categories of goods to be purchased. The goods selling establishments shall still make and hand the VAT invoices as prescribed but without calculating VAT; therefore, the line for VAT inscription must be crossed and the written certifications by the international organizations or Vietnamese representative bodies must be kept to serve as basis for tax declaration and settlement. The input VAT of goods sold to these subjects shall be deducted by the business establishments when calculating the VAT amounts to be paid or to be refunded.

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The goods buying establishments must file their tax reimbursement requests to the Tax Departments of the provinces or cities where they are headquartered, clearly inscribing the VAT amounts requested for reimbursement. The tax reimbursement request must be enclosed with:

+ The official dispatch of the competent body, assigning the organization to buy goods with such source of money, which clearly inscribes the money amount and types of goods to be purchased (in case of the copy, it must be sealed for certification of being duplicated from the original).

+ The list of goods purchase receipts (according to set form No.03/GTGT issued together with Circular No.89/1998/TT-BTC of the Finance Ministry) and the copies of goods purchase receipts affixed with stamps of the goods buying organizations. The provincial/municipal Tax Departments, after receiving the dossiers requesting the tax reimbursement, shall have to examine the dossiers and reimburse the tax on the case by case basis within 15 days after the receipt of complete dossiers.

- International organizations and foreigners that buy goods for humanitarian aid or non-refundable aid to Vietnam, Vietnamese organizations which use humanitarian aid money of foreign organizations or individuals to buy goods in Vietnam shall be refunded the VAT amounts inscribed on the goods purchase added value receipts as from October 1, 1999.

2. Regarding VAT rates:

a) The following goods and services in the 10% tax rate group shall be transferred to the 5% tax rate group:

- Coal, coke, peat;

- Engineering products (except consumer engineering);

- Basic chemical.

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b) Goods, services: Hotels, tourism, food catering in the 20% tax rate group shall be transferred to the 10% tax rate group.

- Hotels and tourism are determined according to criteria set by branch-managing bodies or according to business licenses.

- Food catering business, regardless of popular or high-class foods and drinks.

Goods and services stated at Points 2a and 2b, which previously enjoyed 50% VAT reduction according to Clause 3, Article 1 of Decree No.78/1999/ND-CP of August 20, 1999 of the Government shall, as from May 25, 2000, not be entitled to the 50% VAT reduction, but transferred to the application of new tax rates specified at Point 2 of this Circular.

c) The construction and installation of projects and project components in foreign countries and for export processing enterprises shall be considered the export products liable to the VAT rate of 0%.

- Construction/installation activities entitled to the VAT rate of 0% must be evidenced with the following dossiers:

+ The construction contract clearly stating the project, project component constructed and installed abroad and/or for export-processing enterprises.

+ The project (or project component) settlement bill upon the hand-over completion.

+ Certification by the customs office of the supplies, raw materials of the enterprise, which have been bought and used for the project, project component built abroad or in export-processing enterprise.

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d) A 50% reduction of VAT rates for the following activities: Construction and installation; construction of houses for sale or infrastructure for assignment by business establishments which are assigned land therefor by the State; construction of infrastructure for lease by business establishments which are leased land by the State for investment therein.

Installation activities entitled to the 50% reduction of VAT rates are activities of installing machinery, equipment, electricity and water supply networks affixed to the construction projects. For materials and commodities supplied to construction and installation units, the tax rates shall apply according to commodity categories, even when the materials and commodities supplier undertakes the installation for the construction project. For business establishments which deal in houses and land or house leasing and do not fall under the above-mentioned subjects, the VAT rate of 10% shall apply.

e) Tires and sets of tire and inner tube sized 900-20 or larger shall be entitled to 50% reduction of VAT rates.

f) For activities of processing goods liable to VAT, the tax rates prescribed for goods categories shall apply. For example: The processing of apparel articles, the tax rate of 10% prescribed for apparel articles shall apply; production and processing of specialized medical equipment, the tax rate of 5% for medical instruments shall apply. For production-processing of goods categories not liable to VAT, the VAT shall not be imposed.

g) For activities of repairing machinery, equipment, transport means� which are engineering products and liable to the VAT tax rate of 5%, the tax rate applicable to repair activities shall be 5%.

h) For discarded materials and faulty products where are recovered then sold out, the VAT rate of 5% shall apply.

3. On VAT calculation prices:

- For enterprises assigned land by the State for construction of houses and/or technical infrastructures for sale or assignment in association with the land use right transfer, the prices for VAT calculation for houses and infrastructures to be sold or assigned shall be the sale or assignment prices (without VAT), subtracting the land use levy to be paid to the State budget.

- For activities of trading in houses and/or infrastructures, the VAT calculation prices shall be the sale prices without VAT, minus the land value for which the land use right transfer tax was already calculated.

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4. VAT deduction:

Those business establishments that pay VAT by deduction method and directly purchase unprocessed agricultural, forestry and/or aquatic products sold by State farms and production stations with sale invoices or added value invoice but without inscribing VAT shall be entitled to tax deduction in percentage (%) prescribed for each goods category.

Those enterprises that purchase goods eligible for calculation of input VAT deduction in percentage (%) as prescribed shall be entitled to tax deduction calculation if they transfer the purchased goods to other establishments for processing.

Enterprises liable to pay VAT by tax deduction method, that directly purchase coffee, paddy or rice from the producers without added value invoice, shall be entitled to tax deduction at the prescribed rate of 3% on the purchase prices on the list of coffee, paddy, rice purchased for export. The deduction of input tax calculated in percentages for coffee, paddy and rice purchased for domestic sale shall still comply with the provisions at Points 1a and 1b, Section II, of Circular No.106/1999/TT-BTC of August 30, 1999 of the Finance Ministry. Where paddy, rice and/or coffee are purchased for domestic sale and export too, the VAT amounts to be deducted shall be determined in proportion to the percentages of export turnover and domestic sale turnover.

5. On VAT payment declaration:

For construction and installation activities, detailed guidance is provided for some following cases:

- Cases where construction and installation units organize their dependent units such as construction teams and groups, project management boards to build and install projects in localities other than those where they are headquartered, the construction and installation unit in a locality shall have to declare and pay VAT in that locality; where the input and output VAT cannot be determined to calculate the payable VAT amount, the unit shall have to declare its turnover and pay VAT at the locality where the project or project component is constructed at the rate of 1% on the project or project component settlement price without VAT. Construction and installation units shall have to declare, pay and balance up VAT for their entire business activities according to the prescribed regimes with the tax offices of the localities where they are headquartered. Dependent cost-accounting units which undertake the construction of projects or project components in other localities shall use the tax codes and invoices of their superior units and use the VAT declaration form No.01/GTGT issued together with Circular No.89/1998/TT-BTC of June 27, 1998 of the Finance Ministry. When declaring the VAT amounts to be paid at localities where projects or project components are built, the units shall only fill in lines 1 and 2b of the declaration on turnover liable to VAT at the settlement price (without VAT), line 10 (tax amount to be paid in this month) the determined VAT amount is equal (=) to the turnover at settlement price (without VAT) multiply by (x) 1%.

- Cases where business establishments undertake the construction and installation of projects or project components relating to many localities, like the construction of traffic roads, power transmission lines, water pipelines, oil and gas pipelines, the establishments that have turnover, account input and output VAT shall have to register, declare and pay VAT at the localities where they are headquartered.

The VAT declaration form shall comply with the guidance in Circular No.89/1998/TT-BTC of the Finance Ministry and is supplemented as follows:

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+ Business establishments buying goods categories without invoices may make deduction according to the list of such goods; if such goods are not agricultural, forestry or aquatic products, they shall make the list according to form No.04/GTGT and correct the name of the list as list of goods purchased from sellers without invoices.

For goods bought with invoices, the business establishments shall have to make a separate list and also use form No.04/GTGT and change the name of the list as the list of goods bought with sale invoices.

For cases of listing purchased goods entitled to tax deduction calculation, if various kinds of goods with different tax deduction percentages are bought, a separate list must be made for each kind of purchased goods of the same tax deduction percentage.

6. VAT reimbursement, VAT reduction:

- VAT reduction for business establishments (according to Article 28 of the VAT Law) shall apply only to business establishments that pay VAT by tax deduction method and are independent cost-accounting units, which shall be considered and settled by the Tax Departments of the localities where the business establishments are headquartered.

- VAT reimbursement for business establishments being subjects which declare the VAT payment by tax deduction method shall apply only to business establishments that keep accounting books, invoices, vouchers and deposit accounts at banks.

7. Organization of implementation:

This Circular takes effect as from May 25, 2000. The provisions on goods and services not liable to VAT, the VAT calculation prices, VAT rates, VAT deduction, VAT payment declaration stated in Circular 89/1998/TT-BTC, Circular 175/1998/TT-BTC, Circular No.106/1999/TT-BTC and documents guiding VAT, which have been amended, supplemented at this Circular shall comply with the guidance in this Circular.

If any problems arise in the course of implementation, units are requested to report to the Finance Ministry for guidance on the settlement thereof.

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FOR THE FINANCE MINISTER
VICE MINISTER




Pham Van Trong