To: Provincial Departments of Taxation

The Ministry of Finance has received official dispatches from several Provincial Departments of Taxation enquiring about settlement of input VAT that remain after deduction when a business is converted into an export processing enterprise. Below are opinions of the Ministry of Finance:

Point 4 Section I Part D of Circular No. 120/2003/TT-BTC; Point 4 Section I Part D of Circular No. 32/2007/TT-BTC on eligibility for VAT refund: “Business establishments shall prepare tax statements upon their merger, consolidation, division, bankruptcy, dissolution, transfer; assignment, sale, lease of state-owned enterprises with overpaid VAT or VAT that is not completely deducted.”

Point 5 Part C of Circular No. 129/2008/TT-BTC, which came into force on January 01, 2009 on eligibility for VAT refund: “Business establishments shall prepare tax statements upon their merger, consolidation, division, bankruptcy, dissolution, transfer; assignment, sale, lease of state-owned enterprises with overpaid VAT or VAT that is not completely deducted.”

Pursuant to Circular No. 32/2007/TT-BTC and Point 3 of Circular No. 30/2008/TT-BTC on VAT: Goods/services serving operation of an export processing enterprise (except goods/services purchased by individuals serving their personal use and goods/services supplied for export processing enterprises that are not eligible for 0% tax) are eligible for 0% tax.

Pursuant to Point 1 Section II Part B of Circular No. 129/2008/TT-BTC, which came into force on January 01, 2009: Goods/services supplied by a domestic business establishment for an export processing enterprise are eligible for 0% VAT (except for goods/services that are not eligible for 0% VAT).

Therefore:

In cases where an enterprise, during its operation or investment stage without revenue, is converted into an export processing enterprise and input VAT on assets, goods and services (including land rent) purchased before the conversion is not completely deducted and such assets, goods and services are used for operation of the export processing enterprise, it will be eligible for refund of the remaining input VAT on such assets, goods and services (including land rent).

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The application for tax refund is specified in Point 9 Section I part G of Circular No. 60/2007/TT-BTC on tax administration and application for tax refund upon the taxpayer’s merger, division, dissolution, bankruptcy, transfer or shut down, according to which a competent authority’s document certifying that the enterprise is an export processing enterprise (the original or revised certificate of investment registration specifying that the enterprise is an export processing enterprise) shall be used instead of the competent authority’s decision on merger, division, dissolution, bankruptcy, transfer or shut down.

Since the date of completion of the conversion, VAT shall be applied in accordance with regulations of law on export processing enterprises.

For your reference and compliance. Difficulties that arise during the implementation of this Circular should be reported to the Ministry of Finance for consideration./.

PP MINISTER
DEPUTY MINISTER




Do Hoang Anh Tuan