Chương II Thông tư 06/2012/TT-BTC: Căn cứ và phương pháp tính thuế

Chapter II

BASES AND METHODS FOR TAX CALCULATION

SECTION 1. BASES FOR  TAX CALCULATION

Article 6. Bases for tax calculation

Bases for VAT calculation are taxable prices and tax rates

Article 7. Taxable prices

1. For goods, services sold by production and business establishments, VAT taxable prices are sale VAT-exclusive prices. For goods, services subject to special consumption tax, VAT taxable prices are sale prices including special consumption tax but excluding VAT.

For goods subject to environment protection tax, VAT taxable prices are sale prices including environment protection tax but excluding VAT; for goods subject to both special consumption tax and environment protection tax, VAT taxable prices are sale prices including special consumption tax, environment protection tax but excluding VAT.

2. For imported goods, VAT taxable prices are import prices at border-gates plus (+) import duties (if any), plus (+)special consumption tax (if any), plus (+) environment protection tax (if any). Import prices at border-gates are determined in accordance with provisions on taxable prices of imported goods.

For imported goods eligible for import duty exemption or reduction, VAT taxable prices are import prices plus (+) import tax determined under the tax amount payable after being exempted or reduced.

3. For products, goods and services (including purchased from outside or produced by business establishments themselves) used for exchange, presents, gifts, donations, salary substitutes, VAT taxable prices are VAT taxable prices of goods, services of the same or equivalent kinds at the same time of the happening of these activities.

Example 17: Unit A producing electric fans uses 50 of them to exchange with establishment B for steel. The fan sale price (excluding tax) is 400,000 VND/pcs. The value added taxable price is 50 x 400,000 VND = 20,000,000 VND.

For giving, offering invitations (on which clearly specifying “complimentary”) for art performances, fashion shows, beauty, model contests, sport competitions approved by competent State agencies as prescribed, taxable prices are determined as zero (0).

Establishments organizing art performances shall self-determine and bear responsibility for the quantities of invitations, list of organizations, individuals receiving invitations before the performances or sport competitions take place. Establishments committing fraud acts on collecting money from complimentary invitations shall be handled as prescribed by law provision on tax administration.

Example 18: Joint-stock company X are licensed to hold “Vietnam Beauties contest 20xx” by competent agencies. Apart from tickets printed to sell to audience, company X also prints a number of complimentary invitations to a number of guests to participate in the contest. These invitations are made under the list of receiving organizations, individuals. When declaring VAT, taxable prices of these invitations are determined to be zero (0). In case company X is detected collecting money when giving the invitations, company X shall be handled as prescribed by law provisions on tax administration.

4. Taxable prices for products, goods, services for internal consumption

For products, goods, services taken or provided by business establishments serving the business operation (internal consumption), VAT taxable prices are taxable prices of products, goods, services of the same or equivalent kinds at the time the consumption of goods, services take place. Business establishments are eligible for VAT deduction regarding the VAT invoices of internal consumption serving the production and business of goods and services subject to VAT.

Goods for internal circulation such as internal warehouse transfer, delivering materials, semi-finished products to continue the process of production within the same establishments are not subject to VAT.

Example 19: Unit A producing electric fans uses 50 of them for installing in production workshops. The sale price of these fans (excluding VAT) is 1,000,000 VND/pcs, VAT rate is 10%. The taxable price is 1,000,000 x 50 = 50,000,000 VND.

Unit A shall issue VAT invoice specifying the price for VAT calculation being 50,000,000 VND, the VAT amount is 5,000,000 VND. Unit A is eligible for tax deduction regarding the invoices of internal consumption.

Example 20: Establishment B producing garments with fibre workshops and sewing workshops. Establishment B delivers finished fibres to sewing workshops to continue the process of production, establishment B is not required to calculate and pay VAT regarding the fibres delivered to sewing workshops

For business establishments using goods, services for internal consumption serving production and business such as transport, aviation, railways, post/telecommunications that are not subject to output VAT, business establishments must impose written regulations specifying objects and limitation of goods, services for internal consumption within the prescribed authority.

5. For activities of asset leasing such as houses, offices, workshops, warehouses, wharves, yards, means of transport, machinery, equipment, VAT taxable prices are VAT-exclusive rents.

For leases with rents paid by instalment or paid in advance for a leasing term, taxable prices are the instalment amounts or the advance payments for a leasing term excluding VAT.

For leases of foreign machinery, equipment, means of transport of foreign countries which have not been produced domestically for sub-leases, the rents payable to foreign countries are deducted from the taxable prices. 

Asset rents agreed by the parties are determined under the contract. Should there be any rent bracket prescribed by law, the rents shall be determined under the price bracket.

6. For goods sold in instalment or deferred payment, VAT taxable prices are the price by lump-sum payments excluding VAT of that goods, excluding interest on instalments and deferred payments.

Example 21: The motorbike trading company sells 100cc motorbikes X, the instalment sale price excluding VAT is 25,5 million VND/pcs (including 25 million VND of the sale price and 0.5 million VND of the instalment interest), the price for VAT calculation is 25 million VND.

7. For goods processing, VAT taxable prices are VAT-exclusive processing prices under the processing contract , including remunerations, expenses on fuels, power, secondary materials and other expenses serving the goods processing.

8. For construction and installation, VAT taxable prices are values of the constructions, construction items or the handed-over works excluding VAT.

a) For construction and installation covering materials, VAT taxable prices are construction and installation prices including VAT-exclusive material prices.

Example 22: Construction company B is contracted to work on a construction including material values, the total amount excluding VAT is 1,500 million VND including 1,000 million VND of material values excluding VAT, VAT taxable prices is 1,500 million VND.

b) For construction, installation not covering materials, machinery, equipment, VAT taxable prices are the value of construction and installation excluding the VAT-exclusive value of machinery and equipment.

Example 23: Construction company B is contracted to work on a construction not covering material values. The total VAT-exclusive value of the construction is 1,500 million VND including 1,000 million VND of the VAT-exclusive value of materials supplied by investor A, VAT taxable prices in this case is 500 million VND (1,500 million VND – 1,000 million VND).

c) For construction, installation paid by construction items or values of the completed and handed-over workloads, VAT taxable prices are based on values of construction items or of completed and handed-over workloads excluding VAT.

Example 24: Weaving company X (called party A) hires construction company Y (called party B) to work on construction and installation of the workshop expansion.

The total value of the construction excluding VAT is 200 billion VND including:

- Value of construction: 80 billion VND

- Value of equipment supplied and installed by party B: 120 billion VND.

- VAT 10%: (80 billion + 120 billion) x 10% = 20 billion VND.

- The total amount payable by party A: 220 billion VND.

- Party A:

+ Get handed-over of workshops, account into fixed asset value increase for depreciation 200 billion VND (excluding VAT)

+ 20 billion VND of VAT shall be declared and deducted from output taxes of sold goods or requested tax refund as prescribed.

In case party A accepts, gets hand over  and agrees to pay party B by each construction item (assuming  80 billion VND of the value of construction is accepted, handed-over and agreed to make payment  in advance), the taxable price is 80 billion VND.

9. For real estate business, taxable prices are real estate transfer prices minus (-) land prices deducted for VAT calculation.

a) Land prices deducted for VAT calculation are prescribed as follows:

a.1) For land allocated by the State to invest in infrastructure of houses for sales, land prices deducted for VAT calculation includes land levies payable to the State budget (not including exempted or reduced land levies) and compensations for land clearance as prescribed by law.

Example 25: In 2011, real estate company A is allocated land by the State to invest in infrastructure of houses for sale. Land levies payable (not subtracting the exempted, reduced land levies, the compensations for land clearance under the schemes approved by competent agencies) is 30 billion VND. The project is reduced by 20% of the land levies payable.

Compensations for land clearance under the approved scheme is 15 billion VND.

The total value of subtracted land is calculated as follows:

- The exempted/reduced land levy is: 30 billion x 20% = 6 billion (VND);

- The land levy payable to the State budget (not including the exempted/reduced land levy) is: 30 billion - 6 billion – 15 billion = 9 billion (VND);

- The total land price deducted to calculate VAT including land levies payable to the State budget (not including the exempted/reduce land levy) and compensations for land clearance is 9 billion + 15 billion = 24 billion (VND). The total land price deducted is allocated to the number of m² of land allowed to do business.

a.2) For State-owned land use right auctions, land prices deducted for VAT calculation are auction winning prices;

a.3) For land lease to construct infrastructure, houses for sale, land prices deducted for VAT calculation are the land rents payable to the State budget (not including the exempted/reduced land rents) and the compensations for land clearance as prescribed by law.

a.4) For business establishments receiving land use right transfer from organizations, individuals, land prices deducted for VAT calculation are land prices at the time of land use right transfer including the value of infrastructure (if any); business establishments are not eligible for deductions of input VAT of the infrastructure calculated in the deducted VAT-exclusive value of rights to use land. If it is not able to determine land prices at the time of transfer, land prices deducted for VAT calculation are land prices prescribed by People’s Committees of central-affiliated cities and provinces at the time of signing the transfer contract.

Example 26: In July 2011, company A receive the transfer of rights to use 200m² of land from individual B valued at 6 billion VND. Company A has a notarized Land use right transfer contract in compliance with law provisions on land, receipts of 6 billion payment for individual B. Company A does not invest in any construction on this land plot. In September 2012, company A transfers the rights to use land purchased from individual B stated above valued at 9 billion VND, the land price deducted for VAT calculation is the price at the time of this transfer (6 billion VND).

Example 27: In November 2011, LLC A receives the transfer of rights to use 300m² of land together with workshops on individual B’s land valued at 10 billion VND without sufficient documents to determine the land price at the time of transfer. In April 2012, LLC A transfers this 300m² of land valued at 14 billion VND, the land price deducted for VAT calculation is the land price prescribed by People’s Committees of central-affiliated cities and provinces at the time of transfer (November 2011)

Example 28: In September 2011, company B purchases 2,000m² of land with part of infrastructure from real estate company A valued at 62 billion VND of total payment price (in particular, the land price not subject to VAT is 40 billion VND, 20 million VND/m²).

On the invoice, company A specifies:

- Transfer price excluding VAT: 60 billion

- Land price not subject to VAT: 40 billion

- VAT on infrastructure: 2 billion

- Total payment: 62 billion VND

Company A shall declare and pay VAT as follows:

VAT payable = Output VAT – Deducted input VAT

Assuming the input VAT for building infrastructure of company A being 1.5 billion VND is eligible for deduction:

VAT payable = 2 billion – 1.5 billion = 0.5 billion VND

Company B continues building infrastructure and builds 10 villas (floor area = 200m²/villa) for sale. Total input VAT is 3 billion VND.

On April 01, 2012, company B is contracted to sell 01 villa to customer C, the transfer price excluding VAT of 01 villa is 10 billion, land prices deducted for VAT calculation for 01 villa being sold:

- The value of land use rights (excluding value of infrastructure) at the time of receiving transfer from company A for 01 villa being sold is: 20 million x 200m² = 4 billion (VND)

- The value of infrastructure allocated for 01 villas is:

(20 billion : 2,000m²) x  200m² = 2 billion (VND)

- The value of land use rights (including the value of infrastructure) at the time of receiving transfer from company A deducted when determining the taxable price of 01 villa being sold is: 6 billion VND.

On the invoice, company B specifies:

- The transfer price of 01 villa: 10 billion VND

- The land price deducted not subject to VAT: 6 billion VND

- VAT: 0.4 billion VND [(10 billion – 6 billion) x 10%]

- Total amount payable: 10.4 billion VND

Assuming company B sold 10 villas within the month, when Company B declares and pays for VAT, the VAT payable = the output VAT - the deducted input VAT = 0.4 billion x 10 villas – 3 billion = 1 billion VND.

VAT on the value of infrastructure being 2 billion VND specified on the invoice of receiving the transfer from company A regarding the 10 villas shall not be declared and deducted.

a.5) For real estate establishments conducting business in the form of build-transfer (BT) and exchanging works for lands, land prices deducted for VAT calculation are prices at the time of signing the BT contract as prescribed by law.

b) For construction and trade of infrastructure, buiding houses for sale, for transfer or for lease, prices for VAT calculation are the collected amounts by the progress of the project or the progress of money collection specified in the contracts.

10. For agent activities, brokerage of goods and services purchase, entrustment of export/import for remunerations or commissions, taxable prices are the VAT-exclusive remunerations, commissions collected from these activities

11. For goods, services using receipts that the printed prices thereof already included VAT such as stamps, transport tickets, lotteries…, the VAT-exclusive prices are determined as follows:

12. For electricity supplied by hydropower plants being dependent-accounting units of the Vietnam Electricity Group, VAT taxable prices to determine the VAT amounts to be paid in the localities where the plants are situated are equal to 60% of the average commercial electricity sale price of the previous year excluding VAT. If the average commercial electricity sale price of the previous year is not determined, VAT taxable prices shall be determined under the tentative prices announced by the Group but not lower than the average commercial electricity sale price of the previous year. Upon determining the average commercial electricity sale price of the previous year, declarations for difference adjustment shall be made in the declaration period of the month when the official price is determined. The determination of the average commercial electricity sale price of the previous year must be made no later than March 31 of the following year.

13. For casino, prized video games, betting entertainment services, taxable prices are the amounts collected from these activities including special consumption tax minus prize amounts paid to customers.

The taxable price is calculated as follows:

Example 29: An establishment conducting casino business records the following figures in the tax period:

- Collected amounts from exchange for customers at the counters before playing: 43 billion VND.

- Amounts paid to customers after playing: 10 billion VND.

Actually-collected amount: 43 billion VND - 10 billion VND = 33 billion VND.

Amount of 33 billion VND is the revenue of the business establishment including VAT and special consumption tax.

The taxable price is calculated as follows:

14. For transport, loading/unloading, VAT taxable prices are transport freights and loading/unloading charges excluding VAT, regardless of establishments directly transporting/loading/unloading  or hiring others to perform.

15. For tourism services in form of package contract (including meals, accommodations, travels), the package price is considered as VAT-inclusive price.

The taxable price are calculated as follows:

For package prices including air tickets for tourist coming and leaving Vietnam, meals, accommodation, sightseeing and a number of expenses paid abroad (with legitimate documents), the amounts collected from customers to defray the expenses stated above are deducted from the price (revenue) for VAT calculation.

Example 30: Ho Chi Minh city tourism company performs the tourism contract with Thailand in form of package for 50 tourists in 05 days in Vietnam with the total amount being 32,000 USD. The Vietnam party must cover all expenses on air tickets, meals, accommodations, sightseeing under the agreed program; the two-way air ticket amount thereof is 10,000 USD, the exchange rate is 1USD = 20,000 VND.

The VAT taxable prices of this contract is determined as follows:

+ VAT taxable revenue:

( 32.000 USD - 10.000 USD) x 20.000 VND = 440.000.000 VND

+ The VAT taxable prices:

Example 31: Hanoi tourism company is contracted to take tourists from Vietnam to China at the package price of 400USD/person in five days, Hanoi tourism company must pay to China tourism company 300USD/person, the revenue for VAT calculation of Hanoi tourism company is 100USD/person (400 USD - 300 USD).

16. For pawning services, the amounts receivable from these services including the interest receivable from pawn loans and other revenue from the sale of pawned items (if any) are considered VAT-inclusive prices.

The taxable price are calculated as follows:

Example 32: Pawning company has 110 million VND of revenue in the tax period.

VAT taxable prices is determined:

17. For VAT taxable books sold at the released prices (cover prices) as prescribed by the Law on Publication, such prices are considered VAT-inclusive prices to calculate VAT and revenues of the establishments. For books sold at prices different from that on the cover, VAT shall be calculated on the sale prices.

18. For printing activities, taxable prices are printing costs. For printing establishments performing print contracts that the total payment amounts cover both printing costs and paper costs, taxable prices are included paper costs.

19. For services of assessment agents, compensation examination agents, agents claiming compensation from third parties, agents handling compensated goods wholly enjoyed remunerations or commissions, the VAT taxable prices are remunerations or commission enjoyed (not yet subtracted any expense) collected by the insurers excluding VAT.

20. For service provisions performed both in Vietnam and abroad, taxable prices are the value of services performed in Vietnam stipulated in the service providing contracts. For contract not separating the value services performed in Vietnam, taxable prices are determined by the ratio (%) of expenses arisen in Vietnam on the total expense.

Example 33: Joint-stock company B provides service of seminar and survey for Center X, the service includes 2 part: organizing seminars in Vietnam and organizing survey and study in Thailand. The contractual value of the entire service package is 500 million VND in which the value of seminar organizing services in Vietnam is 150 million VND; the expense on air tickets from Thailand to Vietnam (and vice versa), meals, accommodations, survey and study in Thailand under the program is 350 million VND.

VAT taxable prices = the VAT-inclusive value of services performed in Vietnam/(1 + VAT rate). In particular: taxable prices is determined:

Example 34: Company D provides services of consultancy, survey, making feasibility report for the investment project in Lao for company X. The total revenue excluding VAT that company D receives is 5 billion VND. The contract between the two enterprises that are not be separated the revenue collected from services performed in Vietnam and that in Lao. The calculated expense in Lao (on survey, exploration) is 1,5 billion VND and expense in Vietnam (on synthesizing, making report) is 2,5 billion VND.

21. For service purchases prescribed in clause 5 Article 3 of this Circular, taxable prices are the total amount payable in the service contract excluding VAT.

22. Taxable prices for goods, services prescribed from clause 1 to clause 21 of this Article are inclusive of extra charges and additional fees apart from the prices for goods, services that business establishments collect.

For business establishments applying form of sale price reduction, commercial discounts for customers (if any), VAT taxable prices are the prices reduced, discounted commercially for customers. For price reduction, commercial discounts based on quantities or revenue from goods, services, the discounted, reduced amounts of the sold goods shall be calculated and adjusted on goods sale, services invoices of the last purchase or in the following period. For amounts of price reduction, commercial discounts made at the end of the program (period) of price reduction or the sold goods discounts, establishments shall issue adjustment invoices enclosed with the list of invoices required to adjust, amounts, taxes of adjustment. Based on the adjustment invoices, the buyer and the seller shall declare, adjust revenues from purchases, sales, output taxes, input taxes.

Taxable prices are calculated in Vietnam dong. Tax payers collecting revenue in foreign currency must convert them into Vietnam dong at the average exchange rates on the inter-bank foreign currency market announced by the State Bank at the time of revenue generation to determine the taxable prices.

Article 8. The time of determining VAT taxable prices

1. For sale of goods, it is the time of the transfer of rights to use or own goods to purchasers, regardless of those being paid or unpaid

2. For service provisions, it is the time of completing the service provision or the time of service providing invoice issue, regardless of those being paid or unpaid.

3. For electricity and fresh water supply, it is the date of recording electricity or consumed water indicators on the gauges for making bills.

4. For real estate business, infrastructure construction, building houses for sale, transfer or lease, it is the time of collecting money under the contractual progress of the project or the collection. Based on the collected amounts, business establishments shall declare output VAT arisen in the period.

5. For construction and installation, it is the time of acceptance and handover of the construction, construction items, completed workloads of construction and installation regardless of those being paid or unpaid.

6. For imported goods, it is the time of customs declaration registration.

Article 9. 0% tax rate

1. 0% tax rate is applicable to export goods, services, constructions, installations of works for processing and exporting enterprises; international transport; goods, services not subject to VAT when being exported, except for cases not being applied 0% tax rate guided in clause 3 of this Article.

a) Exported goods includes:

- Goods exported to foreign countries, including entrustment of export;

- Goods being sold in non-tariff zones as prescribed by the Prime Minister; goods being sold to duty-free shops;

- Cases considered export as prescribed by law:

+ Goods being transitionally processed as prescribed by commercial law provisions on purchases, sales of international goods and agent services of sales, purchases and goods processing with foreign parties.

+ Goods exported on-spot as prescribed by law.

+ Goods exported to be sold in overseas fairs and exhibition.

b) Export services include services directly provided for organizations, individuals overseas or organizations, individuals in non-tariff zones.

Overseas organizations are foreign organizations without permanent establishments in Vietnam and not being VAT payers in Vietnam;

Overseas individuals are foreigners not residing in Vietnam, Vietnam citizens residing overseas and not present in Vietnam during the provision of services.

Organizations, individuals in non-tariff zones are organizations, individuals applied business registration and other cases as prescribed by the Prime Minister.

c) International transport prescribed in this clause includes passenger, luggage, goods transport by international routes from Vietnam to abroad or from abroad to Vietnam, or both the departure and arrival are overseas, regardless of having means of direct transport or not. For international transport contracts include domestic routes, such domestic routes are considered belonging to the international transport.

Example 35: Transport company X in Vietnam has international ships. This company is contracted to transport goods from Singapore to Korea. The revenue collected from goods transport from Singapore to Korea is the revenue from international transport.

d) Services of aviation, maritime providing directly for overseas organizations or through agents, include:

Aviation services applying 0% tax rate: airway meal supply; aircraft takeoff and landing; aircraft parking, aircraft security; passenger, luggage, goods security scanning; luggage conveyers at terminals; ground commercial and technical services; aircraft protection; aircraft towing, aircraft pilotage: passenger embark/disembark ramp leases; incoming and outgoing flight control; crew/passenger transport within the aircraft parking lot; goods loading, checking; passenger services on international airways from Vietnam airports (passenger service charges).

Maritime services applying 0% tax rate: ship tugging, maritime pilotage; maritime salvage; wharves, buoys; loading/unloading; mooring/unmooring; opening/closing cargo hold hatches; hold cleaning; cargo inspection, delivery and registration.

đ) Other goods and services:

- Work construction and installation for processing and exporting enterprises.

- Goods, services not subject to VAT when being exported, except for cases not applying 0% tax rate as guided in clause 3 of this Article;

- Airplane, ship repairs services provided for foreign organizations, individuals.

2. Condition for applying 0% tax rate

a) For exported goods:

- Having exported goods sale, processing contract; export entrusting contract;

- Having receipts of payment for exported goods through banks and other documents as prescribed by law;

- Having customs declarations as prescribed in clause 2 Article 16 of this Circular.

b) For export services:

- Having service providing contracts with organizations, individuals overseas or organizations, individuals in non-tariff zones;

- Having receipts of payment for exported goods through banks and other documents as prescribed by law;

- Having written commitments of overseas organizations being foreign organizations without permanent establishments in Vietnam or not being VAT payers in Vietnam; written commitments of overseas individuals being foreigners not residing in Vietnam, Vietnam citizens residing overseas and not present in Vietnam during the provision of services.

For particularly aircraft and ship repairs services provided for overseas organizations and individuals, it is necessary to complete import procedures when bringing aircrafts and ships into Vietnam and export procedures when the repair is done apart from the conditions on receipts stated above in order to be eligible for 0% tax rate.

c) For international transport:

- Having passenger/luggage/goods transport contracts between the transporters and the transport hirers by international routes from Vietnam to abroad or from abroad to Vietnam or both departure and arrival points are overseas in appropriate forms prescribed by law. For passenger transport, the transport contracts are tickets. International transport establishments must comply with the law provisions on transport.

- Having receipts of payment through banks or other payment methods considered payments through banks. For individual transport, it is required to have direct receipts of payment.

d) For aviation and maritime services:

d.1) Aviation services applying 0% tax rate must be performed within the international airports, aerodromes, cargo terminals and meet the following conditions:

- Having service providing contracts with overseas organizations, foreign airlines or written service requests of overseas organizations, foreign airlines;

- Having service receipts of payment through banks or other payment methods considered payments through banks. For irregular, unscheduled and non-contracted services provided for overseas organizations, foreign airlines, it is necessary to have direct receipts of the overseas organizations, foreign airlines.

The conditions on contracts and receipts stated above are not applicable to passenger services on international flights from Vietnam international airports (passenger service charges).

d.2) Maritime services applying 0% tax rate must be performed within the port areas and meet the following conditions:

- Having service contracts with overseas organizations, ship agents or written service requests from overseas organizations or ship agents;

- Having receipts of service payment through banks by overseas organizations or receipts of service payment through banks by the ship agents to the service providing establishments or other payment methods considered payment through banks.

3. Cases not applying 0% tax rate includes:

- Reinsurance to abroad; technology transfer, intellectual property right transfer to abroad; capital transfer, credit funding, securities investment to abroad; derivative financial services; outgoing post/telecommunication services (including post/telecommunication services provided for organizations, individuals in non-tariff zones; provision of mobilephone card included number code, face value sent to abroad or into the non-tariff zones); exported products being exploited natural resources, minerals not being processed into other products; goods, services provided for individuals without business registration in non-tariff zones, except for other cases as prescribed by the Prime Minister;

- Gasoline, oil sold to business establishments in non-tariff zones for cars purchased domestically;

- Cars sold to organizations, individuals in non-tariff zones.

- Services provided for organizations, individuals in non-tariff zones include: leases of houses, workshops, halls, offices, hotels, warehouses, yards; worker transport; eating and drinking services (except for catering services, eating and drinking services in non-tariff zones).

- The post-provision services performed in Vietnam provided for overseas organizations, individuals not applying 0% tax rate include:

+ Sport competitions, art/cultural performances, entertainments, conventions, hotels, trainings, advertisings, travel services;

+ Online payment services, digitalization services.

The cases not applying 0% tax rate prescribed in this clause shall apply the corresponding tax rate of goods, services being sold and supplied domestically.

Article 10. The tax rate of 5%

1. Fresh water serving production and life, excluding bottled water and other beverages subject to application of 10% tax rate.

2. Fertilizer, fertilizer producing ore; pesticides and growth stimulants for livestock and plants.

a) Fertilizer includes organic and inorganic fertilizers such as: potassium fertilizer, nitrogenous fertilizer, NPK fertilizer, mixed nitrogenous fertilizer, phosphate fertilizer, potash fertilizer; microbiological fertilizer and other kinds of fertilizers.

b) Fertilizer producing ores are the one making materials for fertilizer production such as Apatite ore for potassium fertilizer production, mud for microbiological fertilizer production.

c) Pesticides and growth stimulants for livestock and plants.

3. Feed for cattle, poultry and other kinds of food for livestock including processed or unprocessed feed such as bran, mash, oil cakes, fish powder, bone powder, shrimp powder and other kinds of feed for cattle, poultry and livestock.

4. Services of digging, embanking and dredging channels, canals, ponds and lakes for agricultural production; services of cultivating, tending, preventing and eliminating pests for plants; services of preliminarily processing and preserving agricultural products (except for dredging in-field channels and canals prescribed in clause 3 Article 4 of this Circular).

Services of preliminary processing and preserving agricultural products includes drying, peeling, husking, slicing, grinding, salting, freezing and other usual means of preservation.

5. Products from cultivation, breeding, aquatic/maritime products that have not been processed or have just been through preliminary process such as cleaning, drying, peeling, husking, slicing, salting, freezing and other usual means of preservation at the trading stage.

Unprocessed products from cultivation guided in this point include grain, rice, corn, potatoes, cassava, wheat.

6. Preliminarily processed rubber latex such as crepe, Ribbed Smoked sheets, strips or granules; preliminarily processed pine resin; nets, net ropes and yarns for weaving fishing nets, yarns and ropes for exclusive use in weaving fishing nets, regardless of materials.

7. Raw and fresh food; unprocessed forest products at the trading stage, except for timber, bamboo sprout and products prescribed in point 1 Article 4 of this Circular.

Raw and fresh food includes food not being cooked or processed into other products, or food after being through preliminary process in forms of cleaning, peeling, slicing, freezing, drying still staying fresh and raw such as meat, shrimp, crab, fish and other aquatic/maritime products. For seasoned food, 10% tax rate shall apply.

Unprocessed forest products include products exploited from natural forests: rattan, bamboo, mushroom, cat’s ear fungus, roots, leaves, medicinal plants, resin and other forest products.

Example 36: LLC A producing seasoned fresh cat-fish under this process: after being caught, fresh cat-fish are sliced and seasoned with sugar, salt, solpitol and then packed, frozen. These products are not subject to 5% tax rate but subject to 10% one.

8. Sugar; by-products in sugar production including molasses, bagasse, dregs.

9. Products made of jute, sledge, bamboo, sorrel chit, rattan, neohouzeaua, leaves, straw, coconut shell, water hyacinth and other handicrafts made of materials from agriculture being products produced and processed from jute, sledge, bamboo, rattan, neohouzeaua, leaves such as: just carpets, jute yarns, jute bags, coir carpets, jute or sledge mat, sorrel broom, ropes, strings made of bamboo, coir; bamboo blinds and curtains, bamboo brooms, palm-leaf hats; bamboo chopsticks, preliminarily processed cotton; news paper.

10. Machinery, equipment serving agricultural production including plowing machines, harrowing machines, transplanting machines, sowing machines, grain plucking machines, combined harvester-threshers, harvesters, pesticide sprayers or spraying machines.

11. Medical equipment and tools including exclusive machinery and tools used in medicine such as: scanners, projectors serving diagnosis and treatment; exclusive equipment and tools serving surgery, injury treatment; ambulances; blood-pressure and cardiovascular gauges, blood transfusion devices; syringes, needles; birth control instruments and other exclusive equipment for medicine.

Medical cotton, bandages, gauzes and medical hygienic bandages; preventive and curative medicines, including finished medicines, materials for medicine production except for functional foods; vaccines, medical biological products, distilled water for preparation of injections and transfusion fluids; chemicals for medical tests and sterilization; hat, clothing, face masks, gloves, surgery tools, pelvic limb covers, shoe covers, towels, medical gloves.

12. Teaching aids serving teaching and studying include models, pictures, boards, chalks, rulers, compass and exclusive equipment for teaching, research and scientific experiments.

13. Cultural activities, exhibitions, sport; art performances; film production, film importation, publication and projection.

a) Cultural activities, exhibitions, sport except for revenue from activities such as: goods sale, lease of yard, booths at fairs and exhibition.

b) Art performances such as: traditional drama and musicals, singing, dancing, music, plays, circus; other art performances and performance organizing services of theaters or traditional drama and musical, singing, dancing, music, plays, circus troupes with operation license issued by competent State agencies.

c) Film production; film importation, publication and projection except for products prescribed in clause 15 Article 4 of this Circular.

14. Toys; books of all kinds except for VAT non-taxable books prescribed in clause 15 Article 4 of this Circular;

15. Scientific and technological services being activities serving science research and technology development; activities relating to intellectual property; services of information, dissemination and application of technological and scientific knowledge and practical experiences under contractual services of science and technology prescribed in the Law on Science and Technology, excluding online games and Internet-based entertainment services.

Article 11. The tax rate of 10%

The tax rate of 10% is applicable to goods, services not being prescribed in Article 4, Article 9 and Article 10 of this Circular.

VAT rates prescribed in Article 10, Article 11 are uniformly applicable to each kind of goods, services at the stages of importation, production, processing or commercial business.

Example 37: If the garments are applied 10% tax rate, these products are all applied 10% tax rate at stages of importation, production, processing and commercial business.

Scraps, wastes collected to recycle and reuse shall be applied the VAT rates of their kinds when being sold.

Example 38: Sauce dreg being scrap collected from the process of fish sauce production shall be applied the tax rate of sauce dreg when it is sold. Sauce dreg being used as feed for cattle or fertilizer or materials for fertilizer production shall be applied 5% tax rate when it is sold.

Establishments trading diverse goods or providing diverse services applying different VAT rates must declare VAT separately at each rate prescribed for each kind of goods/service; in case the tax rates are not separated, establishments must calculate and pay at the highest tax rate for goods/services that they produce, trade or provide.

During the course of implementation, if VAT rates prescribed in the VAT tariff under the List of preferential tariff contrary to guidance of this Circular, they shall be applied in accordance with guidance of this Circular. For VAT rates not being uniformly applicable to the same kind of goods imported or produced domestically, local tax agencies and local customs agencies shall report to the Ministry of Finance to get timely guidance for uniform implementation.

Section 2. TAX CALCULATION METHODS

Article 12. Tax deduction method

1. Tax deduction methods are applicable to: business establishments fully performing regulations on accounting, invoices, documents as prescribed by law provisions on accounting, invoices documents and registering tax payment under tax deduction methods; except for subjects applying the direct tax calculation on added value guided in Article 13 of this Circular.

2. Determination of VAT amount payable:

In which:

a) The output VAT amount is equal to the total VAT amount of sold goods, services written on the VAT invoice.

VAT written  on VAT invoices is equal to the taxable prices of sold taxable goods, services multiplied by (x) the VAT rates of those goods, services.

In case of using receipts on which the total amount payable is the VAT-inclusive one, the output VAT is determined by the total amount payable minus (-) the taxable prices prescribed in clause 11 Article 7 of this Circular.

Business establishments subject to tax calculation by tax deduction methods must calculate and pay VAT of goods, services being sold. When issuing sale or service invoices, business establishments must specify the VAT-exclusive prices, VAT amount and the total amounts payable by the purchasers. For invoices only specifying the total amount payable (except for special documents) not presenting VAT-exclusive prices and VAT, the VAT of the goods, services being sold must be calculated on the total amount payable written on invoices and documents.

Example 39: The enterprise selling steel with sale price of F6 steel is 11,000,000 VND/ton; 10% VAT equals 1,100,000 VND/ton. For enterprises only specifying the sale price being 12,100,000 VND/ton on a number of invoices, the VAT calculated on sale revenue shall be 12,100,000 VND/ton x 10% = 1,210,000 VND/ton instead of calculated on the VAT-exclusive price being 11,000,000 VND/ton.

Business establishments must comply regulations on accounting, invoices, documents as prescribed by law on accounting, invoices and documents. Invoices recorded with wrong VAT rates but not being adjusted by business establishments, then detected by tax agencies during the inspection shall be handled as follows:

For business establishments trading goods or providing services: if the VAT rates written on invoices are higher than the prescribed VAT rates in legal documents on VAT, such establishments must declare and pay VAT at the rates written on the invoices; if the VAT rates written on invoices are lower than the prescribed VAT rates in legal documents on VAT, such establishments must declare and pay VAT at the rates prescribed in legal documents on VAT.

b) Input VAT is equal to (=) the total VAT amount on VAT invoice of goods, services (including fixed assets) serving production and business of VAT taxable goods, services, the VAT amount on tax receipts of imported goods or receipts of VAT payment on behalf of foreign parties under the Ministry of Finance’s guidance regarding foreign organizations without Vietnam’s legal entities and foreign individuals conducting business or earning revenues in Vietnam.

For purchased goods, services are the one used special documents on which the payment prices are the VAT-inclusive one, the VAT-exclusive prices and input VAT are determined based on the VAT-inclusive prices and the calculation methods guided in clause 11 Article 7 of this Circular.

The deductible VAT amount is determined under the principles of VAT deduction prescribed in Article 14, Article 15, Article 16, Article 17 of this Circular.

Example 40: In the period, company A pays the deductible input services being special type:

The total amount payable is 110 million VND (included VAT), this kind of service is applied 10% tax rate, the deductible input VAT is calculated as follows:

The VAT-exclusive price is 100 million VND, VAT is 10 million VND.

In case invoices recorded with wrong VAT rates but not being adjusted by business establishments detected by tax agencies during the inspection shall be handled as follows:

For business establishments purchasing goods, services: if the VAT rates written on invoices are higher than the prescribed VAT rates in legal documents on VAT, the input tax shall be deducted at the tax rates prescribed in legal documents on VAT; if detected that sellers have declared and paid at the tax rates written on invoices and the tax agencies directly managing such sellers have verified, the input tax shall be deducted at the tax rates written on invoices; if the VAT rates written on invoices are lower than the tax rates prescribed in legal documents on VAT, the input tax shall be deducted at the tax rates written on the invoices.

Article 13. Direct calculation method on added value

1. The method of direct calculation on added value is applicable to the following subjects:

a) Individuals, business households failing to observe or inadequately observing the regulations on accounting, invoices, documents as prescribed by law.

b) Foreign organizations, individuals conducting business not in compliance  the Law on Investment and other organizations (including economic organizations of political organizations, socio-political organizations, social organizations, socio-professional organizations, People’s armed force units, non-business organizations and other organizations) failing to observe or inadequately observing the regulations on accounting, invoices, documents as prescribed by law, except for foreign organizations, individuals providing goods, services for petroleum exploration, exploitation and development.

For foreign organizations, individuals providing goods, services for petroleum exploration, exploitation and development, the Vietnam parties shall be responsible for making deduction and payment as a substitute at the ratio prescribed by the Ministry of Finance. For foreign organizations, individuals registering, declaring and paying under the deduction method, the paid tax amount at the ratio prescribed by the Ministry of Finance shall be deducted from the tax amount payable.

c) Business of gold, silver and gems

For business establishments conducting both gold, silver, gem trading and gold, silver, gem fashioning, tax rates of these activities are calculated under the method of direct calculation on added value.

2. Determining the VAT amount payable

 The VAT amount payable under the method of direct calculation on added value is equal to the added value of sold goods, services subject to tax multiplied by (x) the tax rates applicable to such goods, services.

a) The added value of goods, services is determined equal to the total amount payable of goods, services being sold minus (-) the total amount payable of corresponding goods, services being purchased.

Total amount payable of goods, services being sold are the actual sale prices written on goods, services invoices including VAT and other extra fees, charges earned by the seller regardless of those being paid or unpaid.

The total amount payable of goods, services being purchased are equals to the VAT-inclusive value of goods, services being purchased or imported serving production and business of the corresponding VAT taxable goods, services being sold.

Determining added value regarding the following lines:

- For production and business activities, the added value is the difference amount between sale and purchase of materials, goods, services serving production and business. If business establishments fail to account the purchase of materials, goods, services and the corresponding sale, the added value is determined as follows:

The cost price of goods sold is equal to (=) the inventory amount at the beginning of the period plus (+) the purchase amount in the period minus (-) the inventory amount at the end of the period.

Example 41: Establishments A producing furniture sells 150 products in the month. The total sale amount is 25 million VND.

The value of supplies and materials purchased to produce 150 products is 19 million VND, including:

+ Primary material (wood): 14 million VND.

+ Other purchased materials and services:  5 million VND.

The VAT rate is 10%, the VAT amount payable by establishment A is calculated as follows:

+ The added value of products being sold: 25 million VND – 19 million VND = 6 million VND.

+ The VAT amount payable: 6 million VND x 10% = 0.6 million VND.

- For construction and installation, the added value is the difference amount between the revenue from construction and installation of works, construction items minus (-) expenses on purchased material, powers, transport, services and other expenses serving the construction and installation of of works, construction items.

- For transportation, the added value is the difference amount between the charges of transport, loading/unloading minus (-) expenses on fuel, spare parts and other expenses serving the transportation.

- For eating and drinking business, the added value is the difference amount between the revenue from eating and drinking sale, service charges and other revenue minus (-) the prime costs of purchased goods, services serving the eating and drinking business.

- For gold, silver and gem business, the added value is the difference amount between the revenue from gold, silver and gem sale minus (-) the cost price of gold, silver and gems being sold.

- For business establishments subject to VAT calculation under the tax deduction method trading gold, silver, gems applying the method of direct calculation on added value, such establishments must separately account the input VAT to declare the VAT amount payable of goods, services under each operation of business and tax calculation method.

If the establishments may not separately account the input VAT, such establishments shall be apportioned the deductible input VAT to the corresponding ratio of revenue from VAT taxable goods, services calculated under tax deduction method on the total sale revenue earned in the period in which the revenue from VAT taxable goods, services is the total revenue of VAT taxable goods, services being paid under the tax deduction method; the total revenue from the sale of goods, services in the period includes: revenue from VAT taxable goods, services; revenue from VAT non-taxable goods, services and the difference amount between the sale prices and the purchase prices of the gold, silver, gem business (excluding negative (-) differences).

- For other business, the added value is the difference amount between the amount colleted from the business minus (-) the cost prices of goods, services purchased to serve such business.

- Business establishments subject to VAT payment under the method of direct calculation on added value shall not count the value of purchased assets for investing in fixed assets in the amount of purchased goods, services to calculate the added value.

If in a tax period, there is negative (-) added value of gold, silver or gems, such negative value shall be offset against the positive (+) added value of gold, silver or gems. If there is no positive (+) added value or the positive (+) added value is not enough to cover the negative (-) added value, the deficit shall be forwarded to be included in the added value of the subsequent tax period of the year. At the end of the calendar year, the negative (-) added value shall not be forwarded to the subsequent year. Business establishments shall declare the added value in accordance with the Declaration 03/GTGT promulgated together with this Circular.

b) For business establishments (except for enterprises applying tax deduction method, business households, business individuals) selling, providing goods, services with adequate invoices of the goods, services being sold under the regulations or being able to determined correctly the revenue from sale of goods, services written on contracts or receipts but not having adequate invoices of purchased input goods, services, the added value is determined equal to the revenue multiplied by (x) the ratio (%) of added value calculated on the revenue.

The ratio (%) of the added value calculated on the revenue as the basis for determining the added value is prescribed as follows:

- Trading (goods distribution and supply): 10%

- Services, construction (except for construction covering materials): 50%

- Production, transport, services attached with goods, construction covering materials: 30%

c) Business activities; business households, business individuals failing to implement or inadequately implementing the regulations on accounting, invoices, documents as prescribed by law must pay tax at the value added rate (%) prescribed by the Ministry of Finance.