CIRCULAR

Guiding the implementation of the Government’s Decree no. 156/2005/ND-CP of December 16, 2005, which amends and supplements the Decrees detailing the implementation of the special consumption tax Law and the value added tax Law

Pursuant to the Special Consumption Tax (SCT) Law and the Value Added Tax (VAT) Law;

Pursuant to November 29, 2005 Law No. 57/2005/QH11 Amending and Supplementing a Number of Articles of the SCT Law and the VAT Law;

Pursuant to the Government’s Decree No. 156/2005/ND-CP of December 15, 2005, amending and supplementing the Decrees which detail the implementation of the SCT Law and the VAT Law;

Pursuant to the Government’s Decree No. 77/2003/ND-CP of July 1, 2003, defining the functions, tasks, powers and organization structure of the Ministry of Finance,

The Ministry of Finance hereby provides the following implementation guidance:

PART A: REGARDING SCT

I. Part B of the Finance Ministry’s Circular No. 119/2003/TT-BTC of December 12, 2003, and Points 2 and 3 of Circular No. 18/2005/TT-BTC of March 8, 2005, on SCT bases and SCT rates, are replaced with the following new Point B:

“B. Tax bases and tax rates:

SCT bases include tax calculation price of taxable goods or service and tax rate.

Payable SCT = SCT calculation price x SCT rate

I. SCT calculation prices:

SCT calculation prices of goods or services are specified as follows:

1. For home-made goods: the SCT calculation price shall be the sale price, exclusive of VAT and SCT, set by production establishments, and specified as follows:

                                                    VAT-exclusive sale price
SCT calculation price       =      ————————————
                                                             1 + SCT rate

VAT-exclusive sale prices shall be determined according to the provisions of the VAT Law.

Where establishments producing SCT-liable goods sell goods via their branches, outlets or dependent units, the price serving as a basis for SCT calculation shall be the VAT-exclusive sale price set by such branches, outlets or dependent units. For production establishments that sell goods via sale agents which sell goods at the fixed price for commissions, the price serving as a basis for determination of the SCT calculation price shall be the VAT-exclusive sale price fixed by such production establishments without subtraction of commissions.

- For canned beers, the SCT calculation price shall be determined as follows:

        SCT                     VAT-exclusive sale price - Value of can
    calculation        =     ——————————————————
        price                                         1 + SCT rate

Of which the value of can shall be set at VND 3,800 per one liter of canned beer.

For example: For canned beer: If the VAT-exclusive sale price of 1 liter of canned beer is VND 16,000, the to be-excluded value of can per liter of beer is VND 3,800 and the SCT rate of canned beer is 75%, then:

       SCT calculation                       VND 16,000 - VND 3,800
         price of 1 liter       =         ——————————————
        of canned beer                                       1 + 75%

                                               VND 12,200
                                      =     ——————     =     VND 6,971
                                                      1.75

- For SCT-liable goods which are sold via commercial business establishments, the price serving as a basis for SCT calculation shall be the VAT-exclusive sale price set by production establishments, which, however, must not be 10% lower than the average sale price set by commercial business establishments.

Where the sale price set by production establishments is lower by over 10% than the sale price set by commercial business establishments, the SCT calculation price shall be the prices set by tax office under the provisions of Point 8e, Part D of the Finance Ministry’s Circular No. 119/2003/TT-BTC of December 12, 2003.

2. For imported goods: The SCT calculation price of SCT-liable imported goods shall be determined as follows:

SCT calculation price = Import tax calculation price + Import tax

The import tax calculation price shall be determined according to the provisions of the Law on Import Tax and Export Tax. Where imported goods are eligible for import tax exemption or reduction, the import tax to be included in the SCT calculation price shall be the import tax amount left to be paid.

For import canned beers, the SCT calculation price shall exclude the value of can set at VND 3,800 per liter of beer.

The SCT calculation price of one liter of imported canned beer is as follows:

SCT calculation price = Import tax calculation price + Import tax - VND 3,800

3. For bottled liquors or beers, the value of bottle must not be excluded when SCT thereon is calculated.

4. For processed goods: The SCT calculation price shall be the VAT-exclusive and SCT-exclusive sale price set by processee-establishments and specified as follows:

        SCT                             VAT-exclusive sale price
    calculation                     set by processee-establishment
      price of          =      ————————————————
    processed                                   1 +SCT rate
       goods

5. For goods sold by installment payment: The SCT calculation price shall be the VAT-exclusive and SCT-exclusive sale price of goods sold by lump-sum payment, excluding installment interests).

6. The tax calculation price of SCT-liable services shall be the service provision price exclusive of VAT and SCT, set by business establishments, and determined as follows:

       SCT                        VAT-exclusive service price
   calculation       =      ———————————————
       price                                   1 + SCT rate

For example: VAT-exclusive turnover earned in a period by an establishment from dancing hall business is VND 30,000,000.

       SCT                   VND 30,000,000
   calculation      =   ——————————
       price                           1 + 30%

                        =  VND 23,076,923

The VAT-exclusive service price serving as a basis for determination of the SCT calculation price of a number of services is specified as follows:

- For dancing hall business, it shall be the VAT-exclusive prices of business activities at dancing halls;

- For massage services, it shall be the VAT-exclusive turnover from massage services, including steam bath and sauna services.

- For golf business, it shall be the actual VAT-exclusive turnover from the sale of membership cards and playing tickets, including playing charges paid by golf club members and deposits (if any). Where deposits are returned to depositors, the establishment shall be refunded the paid tax amount by crediting it in the payable tax amount of the subsequent period; if the establishment cannot have it credited, they shall have the tax refunded according to regulations. For golf business establishments that deal in other goods or services not subject to SCT, such goods or services shall not be subject to SCT.

For example: Hotel, food-catering, goods sale or game business activities, such goods or services conducted by golf business establishments shall not be subject to SCT.

- For casino and jackpot games, it shall be the VAT-exclusive sale turnover, excluding the paid prize money, namely the money amount (exclusive of VAT) gained from the pre-game exchange for players at exchange counters, gaming tables or machines, minus the change returned to players.

- For entertainment with bet tickets, it shall be the turnover from the sale of bet tickets minus the prizes paid to winners (exclusive of VAT), excluding the turnover from the sale of tickets for watching entertainment games.

- For lottery services, it shall be the lottery ticket price exclusive of VAT.

- The SCT calculation price of SCT-liable goods or services used for sale promotion, exchange, internal consumption or donation shall be the SCT calculation price of goods or services of the same or equivalent kinds at the time such activities are carried out.

The SCT calculation price of home-made goods or services subject to SCT shall include the amounts (if any) collected in addition to the sale price of goods or services by the establishments.

Where taxpayers have goods or service sale turnover in a foreign currency, they must convert such foreign currency amount into Vietnam dong at the inter-bank average exchange rate announced by the State Bank of Vietnam at the time of generation of such turnover in order to determine the tax calculation prices.

II. SCT rates

According to the provisions of Clause 2, Article 1 of November 29, 2005 Law No. 57/2005/QH11 Amending and Supplementing a Number of Articles of the SCT Law and the VAT Law, applicable SCT rates are specified as follows:

SPECIAL CONSUMPTION TARIFF

The SCT rates shall apply to SCT-liable goods, regardless of whether they are imported or home-made.

The application of SCT rates to a number of goods and services in the Tariff is specified as follows:

1. Medicated liquors mean liquid medicines for human use for the purposes of disease prevention and treatment and reduction of disease symptoms, which are granted circulation registration numbers by competent health agencies.

Medicated liquor-producing establishments must obtain medicated-liquor production permits and certificates of registration of appellations, trademarks, labels and quality of their medicated liquor products, issued by health agencies or competent agencies. Imported medicated liquors must be certified and granted import permits by health agencies or competent agencies.

If failing to obtain all the above-said papers, the producing/importing establishments must pay SCT at the rates set for liquors of corresponding alcoholic strength.

2. SCT-liable votive objects shall not include those being children toys and those used for decoration.”

II. To annul a number of points of the Finance Ministry’s Circular No. 119/2003/TT-BTC of December 12, 2003, and Circular No. 82/2005/TT-BTC of September 21, 2005, as follows:

1. To annul the last paragraph at Point 1b, Section I, Part C of the Finance Ministry’s Circular No. 119/2003/TT-BTC of December 12, 2003, below:

“Cigarette-producing establishments shall, apart from making trademark registration as mentioned above, also have to register with tax offices the norms of consumption of tobacco shreds used for production of each type of cigarettes, clearly stating the volume of tobacco shreds per product unit and the ratio of the volume of imported tobacco shreds (if any) to the total volume of tobacco shreds used for production of products, serving as a basis for determination of SCT rates.”

2. To annul Point 1b, Part E of the Finance Ministry’s Circular No. 119/2003/TT-BTC of December 12, 2003, regarding SCT reduction for automobile manufacturing and/or assembling establishments.

3. To annul the declaration of liquors consumed in the period, Form No. 06A/TTDB, and the declaration of bottled beers consumed in the period (of a kind sold together with bottles), Form No. 06B/TTDB, issued together with the Finance Ministry’s Circular No. 119/2003/TT-BTC of December 12, 2003, the declaration of annual adjustments of SCT calculation prices of and SCT on bottled liquors and bottled beers, Form No. 01B/TTDB, issued together with the Finance Ministry’s Circular No. 82/2005/TT-BTC of September 21, 2005, and the last paragraph of Point 2b, Section II of Circular No. 82/2005/TT-BTC below:

“At the end of a calendar year, establishments shall make a declaration of adjustments of SCT calculation prices of bottled liquors and bottled beers (of a kind sold together with bottles) according to Form No. 01B/TTDB issued together with this Circular. Declarations No. 01B/TTDB shall be made for adjusting SCT declarations of January or February of the subsequent year.”

PART B: REGARDING VAT

I. Point 1, Section II, Part A of the Finance Ministry’s Circular No. 120/2003/TT-BTC of December 12, 2003, is replaced with the following new Point 1:

“1. Products of cultivation (including products from planted forests) and husbandry; cultured and fished aquatic and marine products which have not yet processed into other products or have just been preliminarily processed then sold by producing or fishing organizations or individuals themselves and at the stage of importation.

Preliminarily processed products which have not yet been better processed or not yet processed into other products are specified as follows:

- For cultivation products, they are products which have just been sun-dried, heat-dried, cleaned or peeled.

- For husbandry products, cultured or fished aquatic and marine products, they are products which have just been sun-dried, heat-dried, cleaned or chilled.”

II. Point 2.14, Section II, Part B of the Finance Ministry’s Circular No. 120/2003/TT-BTC of December 12, 2003, is amended as follows:

“Preliminarily processed cotton means cotton which has been peeled, has its seed removed, and has been classified.”

PART C: ORGANIZATION OF IMPLEMENTATION

This Circular takes effect 15 days after its publication in “CONG BAO.” To annul the provisions contrary to the guidance in this Circular. The provisions in the Finance Ministry’s Circular No. 119/2003/TT-BTC of December 12, 2003, Circular No. 18/2005/TT-BTC of March 8, 2005, Circular No. 82/2005/TT-BTC of September 21, 2005, and Circular No. 120/2003/TT-BTC of December 12, 2003, which are not amended, supplemented or annulled in this Circular, shall still be effective. Any arising difficulties or problems arising in the course of implementation should be promptly reported by units, agencies or business establishments to the Finance Ministry for study and additional guidance.