CIRCULAR guide implementation of the tax exemption and reduction prescribed in Decree No. 7/1998-ND-CP 15 January 1998 detailing the Government's enforcement of the law on domestic investment incentives (amendments) to base the tax law, the Tax Ordinance;
The implementation of Article 42 of Decree 22/1998/ND-CP on 15/01/1998 of the Government detailing the law encourages domestic investment (modified), the Ministry of Finance shall guide the implementation of tax exemption and reduction prescribed in this Decree as follows: a. the APPLICABLE OBJECT: this circular apply to objects defined in article 3 of Decree 22/1998/ND-CP on August 15 01/1998 of the Government detailing the implementation of the law on domestic investment incentives (amendments), including: i. the enterprises in the economic sectors: State-owned enterprises;
The business of political institutions, social-political, professional associations;
Limited liability companies and joint stock companies;
Individuals, business groups operating under Decree No. 66-dated 12/3/1992 of the Council of Ministers (Government).
II. by the Vietnam business settled in foreign direct investment in Vietnam.
III. Business due to long-term resident foreigners in Vietnam direct investments in Vietnam.
IV. Corporate citizen by Vietnam and Vietnam who settled abroad, with foreigners long resident in Vietnam.
V. organize, Vietnam, the Vietnam citizens settled abroad, foreigners long resident in Vietnam to buy shares or capital contribution to domestic enterprises, including enterprises are State-owned investment funds or financial autonomy.
The objects referred to in section I, II, III, IV part A to this circular just enjoy tax incentives as defined by Decree No. 7/1998/ND-CP and the guidance in part B to this circular if: works properly registered business trades.
Have registered to pay tax.
B. GUIDE the IMPLEMENTATION of I-TAX exemption exemption sales tax and income tax for investment projects to establish and develop business and production base: production base, transport, trade, services and investment projects development of production basis business, as defined in paragraph 1, article 2 of Decree No. 7/1998/ND-CP are entitled to the preferential tax rates, tax reductions, tax revenues as defined in articles 31, 32, 33, 34 of Decree No. 7/1998/ND-CP. within 10 days of being granted investment preference certificates , production facilities, business must perform the registration tax and at the same time send to the tax authorities to directly manage the proposal enjoys the preferential tax has stated in the certificate of investment incentives.
1. Records including: establishment (if applicable) and business registration certificate (certified copy or copies have the stamp of the enterprise).
Investment incentive certificates by the Ministry of planning and investment, or the people's Committee of the central-level cities (certified copy or copies are signed and stamped with the seal of the enterprise).
The tax registration form.
Menu suggestions are entitled to the preferential tax has stated in the certificate of investment incentives has the full signature of the legal representative and the seals of the unit (if available).
Within a maximum of 10 days from the date of the tax agency, records management directly to inform about the implementation of the tax exemption rate and term are tax free, tax reduction was recorded in investment preference certificates. Profile test cases of invalid or incorrect object defined by Decree No. 7/1998/ND-CP and the guidance in section A of this circular, then within a period of 7 days from the date of the application, the tax authorities must inform the unit said.
2. Perform the annual tax exemption: the reduction of sales tax; tax exemption for investment projects established and developed production base, sales by the tax authorities directly managed establishments when the annual tax. Every month of the year are tax free, tax reduction manufacturing facilities, temporary business declare and pay tax according to the tax incentives were stated in the certificate of investment incentives. Most of the year when the tax authorities tax official announcement on tax exemption, tax reduction, according to the investment incentive certificates. If the base tax amount has been paid in the year not enough compared to tax recorded in the message base are fully missing tax according to the time stated in the notice, the tax base case in overpaid compared to the number recorded in the tax notice shall be deducted from the tax of the next period. In the process of checking if the tax basis of the behavioral man, tax evasion, then in addition to the tax collection and sanctioned by law, the tax base must be filed because the result was not a tax exemption under the investment preference certificates.
With regard to investment projects are enjoying preferential tax exemption sales and income taxes as defined in articles 16, 17, 18, 19 of Decree 29/CP dated 12/5/1995 of the Government shall continue to be entitled to the preferential tariffs for the remaining time was recorded in certificates granted investment incentives and the implementation tax exemption according to the instructions in section I, part B to this circular.
For investment projects and develop production facilities, business but not eligible to enjoy preferential turnover tax, income taxes under the provisions of the law on investment incentives in the country (modified) and Decree No. 7/1998/ND-CP on 15-01-1998, are not in the scope of this circular. The tax exemption, tax relief for these objects still made according to the provisions of the law on turnover tax, the current income tax Law.
II. Income Tax Exemption for the project to expand capacity, production, research, development and technological innovation of the production base, the existing business. Article 35 of Decree No. 7/1998/ND-CP stipulates: "the basis of the production, trade, transport, services of investment project in the form stipulated in paragraph 2, article 2 of this Decree shall be exempt from income tax for the year 1st profit increase since the year incurred taxable profits. Use the profit to reinvest in the profit not subject to taxation ". To be tax-exempt as defined above, the production base, the business must make sure the following conditions: real spending on investments, regardless of the actual number from the capital budget, capital source additional self: the basic construction investment, investment fund development, basic depreciation.
The investment must be tied to economic performance expressed in number of years after the higher profit of the previous year (in investment).
With respect to the profits obtained during the year, if business has actually spent to reinvest under the investment project has been approved by the competent authority are not charged to the taxable profit for the year.
In the year are tax free, production facilities, business referred to in section II. B to this circular are to temporarily hold back part of the tax return is filed, but not more than 50% of the profits tax increase under the investment project and not more than 30% of the tax payable under the plan of the facility. Most of the year when the tax tax authorities checked with the above conditions to notices of exemption or reasons refused to make tax free for the base. The base case is the tax amount temporarily paid in the year of the facility was deducted tax after their States.
For example: A company in 1997, raising capital to expand production. The total taxable profits made in 1997 is 500 million and the total taxable profits made in 1998 was 600 million. As such, the increase in profits tax exemption is 100 million.
Also the above example if company A in 1998 has used 50 million from profits made to reinvest according to investment projects approved this non-profit then the calculated on taxable profits. Then the total taxable profit in 1998 is 550 million and the increase in profits tax exemption of 50 million.
III. Tax free income or personal income tax for the profit enjoyed by organizations and individuals to directly buy shares or capital contribution to domestic enterprises, including State-owned enterprises are diversifying to own investment funds or financial autonomy.
According to the provisions of article 39 of Decree 22/1998/ND-CP shall: organize, Vietnam, the Vietnam citizens settled abroad, foreigners long resident in Vietnam to buy shares or capital contribution to domestic enterprises, including enterprises are State-owned investment funds or financial autonomy income tax exemption, or personal income taxes, including the additional income tax (if any) for the profit enjoyed in three consecutive years since enjoyed. Tax deadlines are determined by the fiscal year of the business or financial autonomy investment funds mentioned above. To make the exemption under regulations on the business or investment Fund financial self interest when divided for organizations and individuals to purchase shares or capital contribution must have decided to divide the interest, which clearly the content: time to start buying stock or capital contribution.
The level of buying stock or capital contribution.
The number of times divided by the interest rate and the interest rate is divided by each time for each individual organization to buy shares or capital contribution.
The decision to divide the interest rate must be signed by the legal representative and stamped with the seal of the enterprise or investment Fund financial autonomy as a base to the tax authorities make tax free for organizations and individuals to purchase shares or capital contribution.
Tax authorities only made for tax-exempt organizations, individuals produce split decisions of the business interest or investment Fund (notarized copy or copy has a stamp of the enterprise) and private tax free for each account or capital stock of individual organizations.
Tax authorities directly managed the income tax or personal income tax of organizations and individuals to purchase shares or which carry the exemption tax or personal income tax for the profit to be divided and to inform about the tax exemption number when the official annual tax.
For example: Company A has two stock purchase accounts of company B and company c. company's buying stock Account B, 02/1998 and is divided into interest rates in 1998. Account of company C of the purchase of shares in June 1998, but in 1998 without interest, to the new interest rate is split in 1999. The tax exemption for each account of shares mentioned above are as follows:-income tax Exemption within a period of 3 consecutive years 1998, 1999, 2000 with respect to profit from buying shares of the company account B. income tax exemption within a period of 3 consecutive years 1999, 2000, 2001 with respect to profit from buying shares of the company accounts c. IV. Reduce tax resources as defined in article 38 of Decree 22/1998/ND-CP. According to the provisions of article 38 of Decree 22/1998/ND-CP: the objects referred to in section I, II, III, IV of section A of this circular have investment projects in category A made in the region in the category B or category C areas attached to Decree No. 7/1998/ ND-CP mentioned above if there are mineral resources mining (except oil and gas) 50% reduction of the payable tax payable resources during the year within 3 years since first starting to harnessing.
Base certificate of investment incentives, tax authorities directly managed mining facilities implemented tax relief resources for the base when annual tax. In the year reduced taxes, mining facilities still have to fully resource tax payable. Most of the year when the tax agency out tax notices of tax are reduced. The number of formal reduction resources tax will be deducted from the tax payable resources number of subsequent tax period of the facility.
With regard to investment projects granted investment preference certificates before the date of the Decree No. 7/1998/ND-CP effective enforcement, if the exploitation of mineral resources to the date the Decree 7/1998/ND-CP effect that is yet to come, then, are tax relief resources for the remaining period.
For example, company X is granted investment preference certificates, 02/1996 has a project to build roads (category A) in Three Closely-Quang Ninh district (category B) and quarrying to perform projects on from April 1997 (the first exploitation of mineral resources) are tax relief resources for the remaining period as follows : 50% reduction of resource tax payable from March 2, 1998 to October 31, 4/2000 (Decree No. 7/1998/ND-CP effective from 1/2/1998).
In the same time, if businesses have newly invested projects reduce resource tax according to the provisions of article 38 of Decree 22/1998/ND-CP, has been the resource tax exemption under the provisions of the Ordinances of tax resources, only to be tax free, tax relief in one of two specified on.
V. Long, reduce land rents.
The exemption, reduction of land rents for businesses according to the provisions of article 27, and 28 of Decree No. 7/1998/ND-CP by the tax authorities to directly manage the enterprise perform when the tax settlement. Every year, in free time, reduce land rents when the tax, the tax authorities must inform the amount of land rent exemption, reduction for enterprises. For enterprises have investment projects in the manufacturing, trading on the branches in category A in Industrial Zones, export processing zones, hi-tech zone, the tax agency notice 50% reduction under ground rent reviews that State the lease, not including the value of the infrastructure works of the infrastructure development company. The announcement of the tax agency is writing the legal value to the enterprise deducted the amount of rent payable for the infrastructure development companies in the country according to the lease signed between the two sides.
For enterprises that have been granted investment preference certificates before 1/2/1998 (the date the Decree No. 7/1998/ND-CP of effect) then apply the exemption, reduction of land lease under the provisions of article 27, and 28 of Decree No. 7/1998/ND-CP for the remaining time period since October 1, 1998.
In the same time, if businesses of free objects, reduce land rents as defined in article 27, and 28 of Decree 22/1998/ND-CP, subject to the exemption, reduction of land lease under the provisions of Decree No. 87/CP dated 17/12/1996 of the Government regulations detailing the implementation of the Ordinance on the rights and obligations of the Organization in the country are State land rent, only to be waived, reduced in one of two specified on.
VI. Duty free imports.
1. The free imported tax once as for the equipment, machinery, means of transport investment projects stipulated in clause 1, article 37 of Decree No. 7/1998/ND-CP is done as follows: the base of investment incentive certificates, business production facilities have been licensed establishment or be adjusted production scale expansion business, alternative, technology innovation must have technical-economic explanation of which specify the number of categories, machinery and equipment, means of transport imported under each purpose mentioned in clause 1, article 37 of Decree 22/1998/ND-CP and Ministry of Commerce review decided to list specific tax exemption.
Base directory of machines, equipment, means of transport imported tax free lump under the provisions of clause 1, article 37 of Decree No. 7/1998/ND-CP issued by the Ministry of Commerce for each facility, the Bureau of customs of the central cities, made the tax exemption for the base when the fact of importing (importing cases mandated the requested customs authority Import facility mandated to present the contract which clearly mandate the category of machinery, equipment, means of transport in accordance with the list of tax exempt Ministry of Commerce).
2. Exempt from import duty for raw materials imported for the formation of fixed assets of enterprises as defined in paragraph 2, article 37 of Decree 22/1998/ND-CP: base investment preference certificates, enterprises having investment projects established and growing business manufacturing facility has been granted license or additional registration category business, when the need to import raw materials for the formation of fixed assets are planning to import, specify the list of raw materials, materials imported according to the purposes stated in paragraph 2, article 37 of Decree 22/1998/ND-CP and Ministry of trade duty free catalog review according to each specific purpose. (Particularly for imported raw materials, according to item 2. b, above 37 Thing then business must be certified by the Ministry of science-technology and the environment).
The import plan base of business and the category of raw materials, imported by the import tax exemption for commercial enterprises, the Bureau of customs of the central cities, made tax free imports for business when in fact imported. Quarterly the Customs Bureau to gather import turnover and the number of duty free imports for businesses as defined in clause 1, Article 37 2 of Decree No. 7/1998/ND-CP reported the Ministry of finance and the General Department of customs.
Duty-free imports in the above case, if used on other purposes or be allowed to resell access to the hefty tax filing import has been exempted in the State budget. Number of access tariffs filed is determined on the basis of the tax rates, tax rates, rates as required by the law on the export tax, import tax at the time of the sale or alienation of use to other purposes. Within 10 days of sale assignment or use of imported goods to other purposes, business must declare to the Customs the place of registered enterprises import declarations of goods or customs authority where businesses are located, or where the Customs authorities sell goods concessions. So the deadline on that business does not declare, if caught, the addition must Access the import tax exemption filing, also be sanctioned according to the regulations of the law on the export tax, import tax.
Tax authorities directly responsible enterprise management supervises the use of imported tax free in the above case, if the use of the wrong purpose then imports in addition to collecting sales tax, income tax (if any) under the provisions of the law on turnover tax, Tax Law , was the right decision to visit currency import tariffs and sanctions under the provisions of the law on the export tax, import tax; the case of the import tax is not in his jurisdiction, it must transfer the records to the superior tax resolution.
3. The import duty for raw materials, disconnected parts, extra objects and means imported to manufacture exported goods prescribed in article 37 of Decree 22/1998/ND-CP is done according to the instructions in point 1.1 circular No. 85/1997/TT/BTC dated November 13, 1997 revised guidelines , some additional points in the circular No. 72 A/TC-TCT 30/8/1993, no. 107 TC, TCT on December 30, 1993 and 53 number TC/TCT on 13/7/1995 of the Ministry of finance about the export tax, import tax.
4. Patents, technical know-how, technological processes, technical services to which are exempted from the taxes related to technology transfer.
For the project have been granted investment preference certificates before 1/2/1998 (the date the Decree No. 7/1998/ND-CP of effect) then apply the exemption of import tax as defined in article 37 of Decree No. 7/1998/ND-CP and instructions in section VI, part B to this circular for the remaining period of from the date of 12/2/1998.
VII. Transfer of profits abroad.
Vietnam people settled abroad UN-invested in the form stipulated in article 2 of Decree No. 7/1998/ND-CP, long-term resident foreigners in Vietnam to buy shares, called capital, capital gains or capital contribution to the enterprise as defined in paragraph 3 article 2 of Decree No. 7/1998/ND-CP When transferring profits earned abroad only to pay a tax equal to 5% of the amount transferred abroad.
How to determine tax, tax procedures applied follow point 2, point 3 section II, part II of circular No. 74TC/TCT on October 20, 1997 Guide to make regulations with respect to the form of investment according to the law on foreign investment in Vietnam.
After enjoying the preferential tax rates as stipulated in Decree No. 7/1998/ND-CP and the guidance in this circular, if the owner changes, the new owner still continue to enjoy preferential tax rates, tax reductions were recorded in the certificate of investment incentives for the remaining time period and has the responsibility to fulfill the obligations of the the former owner to enjoy tax incentives, tax relief.
The case was entitled to tax incentives under the condition of investment projects, but in the process, change the owner of the registered condition leads to varying tax incentives under Decree No. 7/1998/ND-CP, the latest within 5 days investor must declare to the competent authority to regulate investment preference certificates accordingly.
The owner has a deceptive behavior to enjoy tax incentives, or when investment conditions change deliberately not declared to be entitled to preferential taxes higher, then in addition to refund the taxes have been incentives, depending on the degree of offense that the owner must be sanctioned administratively or prejudice criminal liability under the law.
Tax officers, other individuals taking advantage of the prerogatives, powers deliberately made a mistake under the guidance of this circular cause damage to the State budget, then depending on the extent to which violations were disciplined, administrative sanction, or prejudice criminal liability as required by law. The tax authorities the responsibility to closely manage the projects of the law to encourage investment in the country, the conditions under which the registered owner for each project in management of related preferential tax free, tax reduction, on the one hand creates favorable conditions for the investors in the project implementation process; on the other hand timely detection, prevent acts of abuse to tax evasion. The tax authorities must set up tracking books, full retention of documents related to the exemption, the tax reduction for each project and investment quarterly, year to report on the total tax and the tax amount temporarily waived, reduced, actual tax exemption and reduction for the audience to enjoy investment incentives as defined in Decree No. 7/1998/ND-CP of the Government.
This circular is in effect from 1 March 1998 and replaces circular No. 94 TC, TCT on 22/12/1995 of the Ministry of Finance shall guide the procedure, the order authority, exemption, tax relief under the law to encourage domestic investment and to Decree No. 29/CP dated 12/5/1995 of Government Law enforcement detailed regulations to encourage investment in the country.
In the process if there are problems and obstacles, the base, the branches, the timely reflection of the local Ministry of finance to study additional instructions./.