THE GOVERNMENT

DECREES:

Chapter I

GENERAL PROVISIONS

Article 1.- Value added tax is a tax calculated on the added value of goods or services in the process starting from production, circulation to consumption.

Article 2.- Subject to value added tax are goods and services used for production, business and consumption in Vietnam, except for those defined in Article 4 of this Decree.

Article 3.- Value added tax payers as defined in Article 3 of the Value Added Tax Law are organizations and individuals that produce and trade in goods and provide services subject to value added tax in Vietnam, irrespective of their business lines and trades, forms and organization (hereafter collectively referred to as the business establishments), and other organizations and individuals that import goods liable to value added tax (hereafter collectively referred to as the importers).

Article 4.- The objects which are not subject to value added tax, as defined in Article 4 of the Value Added Tax Law, Article 1 of Resolution No.90/1999/NQ-UBTVQH10 of September 3, 1999 and Article 1 of Resolution No.240/2000/NQ-UBTVQH10 of October 27, 2000 of the National Assembly Standing Committee amending and supplementing lists of goods and services not subject to value added tax and value added tax rates applicable to a number of goods and services, are specified as follows:

1. Products of cultivation (including products from planted forests), husbandry and aquaculture, which are not yet processed into other products or are only preliminarily processed and sold by organizations and/or individuals themselves;

Preliminary processing is the processing associated with the process of turning out the cultivation, husbandry or aquaculture products, through which such products have not yet become other kinds of products or goods;

2. Salt products which are made from sea water, natural rock salt, refined salt and iodized salt;

3. Goods and services subject to the special consumption tax, which shall be free from value added tax in the process of production, import or service provision, on which the special consumption tax has already been imposed;

4. Equipment, machinery and specialized transport means included in technological lines and construction materials of the types which cannot be manufactured at home and need to be imported to form fixed assets of enterprises; airplanes, derricks and ships of types which cannot be manufactured at home and are chartered from foreign countries for use in production and/or business; equipment, machinery, spare parts, specialized transport means and supplies of categories which cannot be manufactured at home and need to be imported for carrying out activities of searching, exploring and/or developing oil and gas fields.

In cases where establishments import equipment lines and machinery in complete sets which are not subject to the value added tax, but such complete lines include equipment and machinery of categories which can be manufactured at home, the value added tax shall not be imposed on the whole complete equipment lines and machinery.

The Ministry of Planning and Investment is assigned to assume the prime responsibility and coordinate with the concerned ministries and bodies in promulgating the list of equipment, machinery, spare parts, specialized transport means and construction materials of categories which can be manufactured at home to serve as basis for distinguishing them from those categories which cannot be manufactured at home, need to be imported and are not subject to the value added tax specified in this Clause.

The Finance Ministry shall guide the procedures and dossiers applicable to cases not subject to value added tax specified in this Clause;

5. Transfer of land use right, which is subject to the land use right transfer tax;

6. State-owned houses sold by the State to the current tenants;

7. Credit and investment fund services, including: capital lending and financial leasing activities of credit institutions, banks, investment funds, financial companies and capital transfer activities; securities trading activities;

8. Life insurance; insurance for school pupils, domestic animals and cultivation plants and non-commercial insurance;

9. Medical examination and treatment, prophylactic and human health care services and veterinary services;

10. Cultural, exhibition, physical training and sport activities of mass movement nature; training and competition activities free of charge or with fee but not for commercial purposes;

Art performance activities such as: song and dance, music shows, drama, circus and other art performance activities; art show organization services; production of film of various kinds;

Film import, distribution and projection: For motion pictures, regardless of themes and types; for films recorded on video tapes and disks, only newsreels, reportage and scientific films;

11. Teaching and job-training activities, including general education, foreign language and informatics teaching, and training of other jobs;

12. Radio and television broadcasting under programs financed by the State budget;

13. Printing, publishing, import and distribution of newspapers, magazines, specialized news bulletins, political books, text books (including those in forms of audio or video tapes or disks), teaching materials, books on legal documents, books in ethnic minority languages; propaganda paintings, pictures and posters; money printing;

14. Public services of sanitation and water drainage on streets and in residential quarters; maintenance of zoos, flower gardens, parks, street greenery and public lighting systems; funeral services;

15. Maintenance, repair and construction of cultural, art and public-utility works, infrastructure and houses of gratitude with funds contributed by people or from humanitarian aids, including cases where the State provides a part of funds as support which does not exceed 30% of the total actual cost of such works;

16. Public passenger transport by buses in service of people�s travel within inner cities, industrial parks or between urban centers and neighboring industrial parks at uniform fare rates set by competent bodies;

17. Geological surveys and exploration, measuring and mapping, which are classified as the State basic surveys and funded by the State budget;

18. Water irrigation and drainage in service of agricultural production; clean water exploited by organizations and individuals themselves for their daily life in rural and mountainous areas, islands, deep-lying and remote regions;

19. Weapons and military equipment for exclusive use in service of national defense and security specified by the Finance Ministry together with the Ministry of Defense and the Ministry of Public Security. For weapons and military equipment purchased or manufactured with the State budget�s funds, the tax exemption must be specified in the budget estimates;

20. Goods imported in the following cases: humanitarian aid and non-refundable aid; gifts for State bodies, political organizations, socio-political organizations, social organizations, socio-professional organizations, people�s armed force units; gifts and donations for individuals in Vietnam within the limits set by the Government; belongings and personal effects of foreign organizations and individuals brought within the diplomatic immunity limits; personal effects within the duty-free luggage limit; belongings of overseas Vietnamese brought along upon their returns to the country. The goods imported in the above-said cases shall be defined according to the regime set by the State.

- Goods sold to international organizations and foreigners for purposes of humanitarian aid or non-refundable aid to Vietnam; goods and/or services sold to subject enjoying diplomatic immunities according to the Ordinance on Diplomatic Immunities; projects funded by non-refundable ODA capital;

21. Goods which are border-gate transshipped, transited or transported through the Vietnamese territory; goods temporarily imported for re-export; goods temporarily exported for re-import; raw materials and materials imported for production or processing of export goods under the production or processing contracts with foreign countries;

22. Goods and services directly supplied to international transport means and consumers outside Vietnam, except for the repair of machinery, equipment and transport means for foreign countries and labor export services;

23. Technology transfer under the provisions of Chapter III of the Civil Code of the Socialist Republic of Vietnam. For technology transfer contracts accompanied by machinery and equipment, the tax exemption shall be effected to the transferred technological value; computer software, excluding those for export;

24. Gold imported in form of ingots or pieces and gold of various kinds not yet processed into fine-art articles, jewelry or other products. Gold in ingots or pieces and unprocessed gold shall be defined in conformity with international standards;

25. Export products which are minerals already exploited but not yet processed into other products and specified as follows:

- Crude oil;

- Slate stone, sand, rare earth;

- Gems;

- Manganese, tin, iron, chromite, emenhite and apatite ores.

The Finance Ministry shall base itself on the requirements of the State management over natural resources and minerals in each period to propose to the Government to readjust, amend and supplement the kinds of natural resources and minerals defined in this Clause;

26. Goods and services of business individuals with a monthly average income level lower than the minimum wage level prescribed by the State for State employees. Such income is determined by the turnover from business activities minus (-) reasonable expenses for such business activities;

Organizations and individuals that purchase, sell and/or import goods or provide services not subject to the value added tax as defined in this Article shall not be entitled to the deduction or reimbursement of input value added tax on goods and services in the value added tax-free process.

Chapter II

TAX CALCULATION BASES AND METHOD

Article 5.- The bases for calculating value added tax are the tax calculation prices and tax rates.

Article 6.- The value added tax calculation prices of goods and services defined in Article 7 of the Valued Added Tax Law are specified as follows:

1. For goods and services sold by production or business establishments, they shall be the sale prices without value added tax.

2. For imported goods, they shall be the border-gate import prices plus (+) import tax. The border-gate import prices shall be determined according to the regulations on import tax calculation prices.

3. For goods and services used for exchange or internal consumption, as gifts or donations, they shall be the value added tax calculation prices of goods or services of the same or equivalent type at the time such activities are conducted.

4. For property leasing activities, irrespective of types of property and leasing forms, they shall be leasing prices without tax. In cases where the rental is paid in installments or in advance for a certain leasing duration, they shall be such rental without value added tax paid in installments or in advance.

For cases of leasing foreign derricks, machinery, equipment and/or transport means of types which cannot be manufactured at home for sub-lease, the tax calculation prices shall be entitled to minus the leasing prices to be paid to foreign countries;

5. For goods sold by mode of installment payment, they shall be the non-tax selling prices of such goods paid in lump-sum (excluding the installment payment interests), but not calculated according to the amount of money paid in each installment.

6. For the goods processing activities, they shall be the non-tax processing prices (including remuneration, fuel, power, auxiliary materials and other processing expenses).

7. For construction or installation activities, they shall be the non-tax construction or installation prices of projects, project units or completed work volume performed. In cases where the project construction or installation is settled according to the unit prices and work unit volume completed and handed over, the value added tax shall be calculated on the value of the completed and handed-over work volume.

- For activities of investing in the construction of houses for sale or construction of infrastructure for transfer by units assigned land by the State, the tax calculation price shall be the selling prices of houses or infrastructure attached to land, minus (-) the land use levy amount payable to the State budget;

- For activities of investing in the construction of infrastructure for lease, the tax calculation price shall be entitled to minus (-) the land leasing prices payable to the State budget.

8. For real estate dealing activities, the tax calculation price shall be entitled to minus (-) the land value subject to the land use right transfer tax;

9. For goods and service sale-purchase agency or brokerage activities with commissions, non-tax prices to serve as tax calculation basis shall be the commissions earned from such activities;

10. For particular goods and services entitled to the use of payment vouchers in which the inscribed payment prices are the prices which have included value added tax, the non-tax prices to serve as tax calculation basis shall be determined by the prices that have included tax divided by [1+(%) of the tax rates of such goods and services].

The tax calculation prices of goods and/or services defined in this Article shall also include additional collections and surcharges enjoyed by the business establishments.

The Finance Ministry shall provide specific guidance on the value added tax calculation prices of goods and services specified in this Article.

Article 7.- The value added tax rates prescribed in Article 8 of the Value Added Tax Law, Article 2 of Resolution No.90/1999/NQ-UBTVQH10 of September 3, 1999 and Article 2 of Resolution No.240/2000/NQ-UBTVQH10 of October 27, 2000 of the National Assembly Standing Committee amending and supplementing the list of goods and services not subject to value added tax, and value added tax rates applicable to a number of goods and services, are specified as follows:

1. The tax rate of 0% shall be applicable to: export goods, including those subject to the special consumption tax and goods processed for export; the service of repairing machines, equipment and transport means for foreign countries; computer software for export; labor export services.

Export goods include those exported to foreign countries, exported into export processing zones or exported to export processing enterprises as well as other specific cases regarded as exports according to the Government�s regulations.

2. The tax rate of 5% shall be applicable to the following goods and services:

- Pit coal;

- Mechanical engineering products (excluding those used as consumer goods);

- Products from the metallurgy, rolling or extrusion of ferrous, non-ferrous and precious metals, other than imported gold specified in Clause 24, Article 4 of this Decree;

- Molds of all kinds;

- Base chemicals;

- Computers, computer component sets;

- Explosive materials;

- Welding rods;

- Tires and sets of tires and inner tubes, of a size of 900-20 or larger;

- Goods subject to special consumption tax in the process of commercial business, for which tax shall be paid by the tax deduction method;

- Grindstone;

- Newsprint paper;

- Insecticide sprayers;

- Earth, stone, sand, gravel;

- Electric cable for a voltage of 600 V or higher;

- Nets, ropes and fibers for knitting fishing nets;

- Clean water in service of production and daily life, other than clean water not subject to tax defined in Clause 18, Article 4 of this Decree and beverage of the 10% tax rate group;

- Fertilizers, ores used for fertilizer production; insecticide, pesticide and growth stimulants for domestic animals and cultivation plants;

- Specialized medical equipment, machinery and instruments; medical cotton and sanitation bandage;

- Artificial limbs, crutches, wheelchairs and other special-use tools for the disabled;

- Curative and preventive medicines for human beings and domestic animals, chemical-pharmaceutical products, pharmaceutical materials used for the production of curative and preventive medicines;

- Neutral glass tubes (tubes and molded tubular vessels);

- Teaching and learning aids, including models, pictures, writing boards, chalk, rulers, compasses for teaching and learning purposes and specialized teaching, researching or lab equipment and tools;

- Children�s toys;

- Books of all kinds, except for those of types not subject to the value added tax specified in Clause 13, Article 4 of this Decree;

- Cultivation, husbandry and aquaculture products that have not yet been processed or have gone through only the preliminary processing form, such as cleaning, chilling or sun-drying, and including animal breeds, plant saplings, seeds, except for those directly produced and sold by organizations and individuals and not subject to tax according to the provisions of Clause 1, Article 4 of this Decree;

- Unprocessed forest products (excluding timber and bamboo shoots); fresh and raw foodstuffs and foods;

Unprocessed forest products are those exploited from natural forests such as rattan, bamboo of various species, mushrooms, Jew�s ear fungus; medicinal roots, leaves, flowers and plants and other forest products;

Fresh and raw foodstuffs are those not yet processed or only preliminarily processed;

Foods include paddy, rice, maize, potatoes and manioc;

- Products made of jute, rush, bamboo of various species and assorted leaves, which are manufactured and processed from jute, rush, bamboo of various species and assorted leaves as main raw materials;

- Artificial pressed boards;

- Preliminarily processed home-grown cotton, which is peeled, seed-removed and classified cotton;

- Preliminarily processed rubber latex;

- Feeds for cattle, poultry and other domestic animals;

- Construction and installation;

- Houses, technical infrastructure of establishments assigned land by the State for investment therein and construction thereof for business purposes;

- Maintenance, renovation and/or restoration of historical and cultural relics and museums, except activities specified in Clause 15, Article 4 of this Decree;

- Scientific and technical services, including activities of scientific and technical research, application and instruction;

- Dredging of canals, navigation lanes, river ports and sea ports; salvage and rescue activities;

- Transport, loading and unloading;

- Services in direct service of agricultural production, including activities of plowing and harrowing agricultural land; digging, embanking and dredging canals, ditches, ponds and lakes in service of agricultural production; farming, cultivating, tending plants, preventing and combating pests and diseases; collecting and harvesting agricultural products;

- Magnetic tapes and disks, whether recorded or not;

- Distribution and projection of video films;

3. The tax rates of 10% shall be applicable to the following goods and services:

- Petroleum oil, gas, ores and other mineral products;

- Commercial electricity sold by electric power production and trading establishments;

- Mechanical engineering products for use as consumer goods;

- Electronic products;

- Chemical products (other than base chemicals), cosmetics;

- Fibers, fabrics, garments and embroidering items;

- Leather and leatherette products;

- Paper (excluding newsprint paper) and paper products;

- Sugar, milk, confectionery, beverage and other processed foodstuffs;

- Ceramic, pottery, glass, rubber and plastic products, wood and wood products; cement, bricks, tiles and other construction materials (except for products in the 5% tax rate group);

- Postal, mail and telecommunications services;

- Lease of houses, offices, warehouses, ports, storage yards, plants, workshops, machinery, equipment and transport means;

- Consultancy, auditing, accounting, survey and designing services;

- Photographing, printing and developing films, cassette tape recording, dubbing and renting; video shooting;

- Hair dressing, tailoring, fabric dyeing and laundry;

- Hotel, tourist and food and drink catering services;

- Other goods and services which are not defined in Article 4 and Clauses 1, 2 and 4 of Article 7 of this Decree;

4. The tax rate of 20% shall be applicable to the following goods and services:

- Gold, silver and gems purchased and/or sold by business establishments;

- National construction lottery and other forms of lottery;

- Sea shipping agency;

- Brokerage services.

Basing itself on the tax rates prescribed in this Article, the Finance Ministry shall specifically guide the application of such tax rates to goods and services of various kinds.

Article 8.- The value added tax calculation methods defined in Article 9 of the Value Added Tax Law are specified as follows:

1. The tax deduction method:

The payable value added tax amount shall be determined as being the output value added tax amount minus (-) the deductible input value added tax amount.

a/ An output value added tax amount shall be equal to the tax calculation price of taxable goods or service to be sold or provided multiplied (x) by the value added tax rate of such goods or service.

In cases where an establishment sells goods or provides services subject to value added tax but fails to specifically inscribe the non-tax selling price and the value added tax on added value invoices, the output value added tax shall be calculated on the selling price of such goods or services, except for cases where invoices or vouchers stating payment price already with value added tax are allowed to be used.

b/ Deductible input value added tax shall be equal to the total value added tax amount stated in the added value invoices for purchase of goods or services with vouchers of payment of value added tax on import goods used for production of or trading in goods or services subject to value added tax, and tax amount to be deducted at the rate prescribed in Article 9 of this Decree.

c/ The tax deduction method shall be applied to all business establishments, except for those subject to the method of direct calculation on added value as defined in Clause 2 of this Article.

2. The method of direct calculation on the added value:

The payable value added tax amount shall be equal to the added value of taxable goods or services to be sold multiplied (x) by the value added tax rate applicable to such goods or services.

a/ The added value of goods or services shall be equal to the payment price of goods sold or service provided minus (-) the payment price of corresponding purchased goods or services.

The payment price of goods or services purchased or sold is the actual purchase or sale price stated on the purchase or sale invoice of such goods or services, including value added tax and additional collections and/or surcharge enjoyed by the seller and paid by the purchaser.

The payment price of goods or services purchased shall be determined by the value of purchased goods or services, including the value added tax, which have been used by the business establishments for production of or trading in to be sold goods or services subject to the value added tax.

In cases where a business establishment fails to fully effect the purchase and/or sale of goods and services with invoices and vouchers to be used as basis for determining added value according to the above stipulations, such added value shall be determined as follows:

- For business establishments that sell goods or services with all required invoices and vouchers, thus accurately determining their turnover from the sale of goods or services, but fail to sufficiently acquire purchase invoices of goods or services, the added value shall be determined by the turnover multiplied (x) by the percentage (%) of the added value calculated on the turnover.

- For business individuals who fail to apply or improperly apply the invoices for purchase and sale of goods or services, the tax authorities shall base themselves on the business situation of such individuals to fix the taxable turnovers; and the added value shall be determined by the turnover multiplied (x) by the percentage (%) of the added value calculated on the turnover.

b/ The percentage (%) of the added value on the turnover to serve as basis for calculating added value shall be set by tax authorities suited to each business line or trade.

The Finance Ministry shall guide the determination of specific added value for each business line or trade.

c/ The method of direct calculation on added value shall be applied only to the following subjects:

- Vietnamese individuals engaged in the production and/or business activities and foreign organizations and individuals doing business in Vietnam not under the Law on Foreign Investment in Vietnam, that fail to fully implement regulations on accounting, invoices and vouchers to serve as basis for tax calculation by the tax deduction method;

- Business establishments trading in gold, silver, gems and foreign currencies, which are subject to the value added tax, have to pay tax by method of direct calculation on added value. In cases where an establishment that pays tax by the tax deduction method and conducts business activities of purchasing and/or selling gold, silver and gems, it shall be entitled to calculate and declare tax separately paid for such business activities of purchasing and/or selling gold, silver and gems by the method of direct calculation on added value.

Article 9.- Deduction of input value added tax

1. Business establishments that pay value added tax by the tax deduction method shall be entitled to the deduction of input value added tax as follows:

a/ Value added tax of goods and services purchased for use for the production of and trading in goods and services subject to the value added tax shall be fully deducted;

b/ Input value added tax of goods and services purchased for use for the production of and trading in both goods and services subject to value added tax and those not subject to value added tax, only input tax on goods and services used for the production of and trading in goods and services subject to value added tax shall be deducted.

The business establishments shall have to separately account deductible input tax and non-deductible one; in cases where they cannot to do so, they shall be entitled to deduct according to the percentage (%) between the taxable turnover and the total sale turnover.

c/ Any deductible input tax incurred in a month shall be declared and deducted upon the calculation of payable tax amount of such month.

Particularly for fixed assets, if the deductible input tax amount is large, it shall be gradually deducted or reimbursed according to the provisions of Article 15 of this Decree.

Business establishments that have been paying value added tax by the method of direct calculation on added value, when switching to apply the tax deduction method, shall only be entitled to input value added tax deduction as prescribed for invoices and vouchers arising from the date of calculating value added tax by the tax deduction method.

d/ Production and/or business establishments that pay value added tax by the tax deduction method shall be entitled to input value added tax deduction according to the percentage (%) on the prices of goods and services purchased without added value invoices according to the following regulations:

- The rate of 2% shall be applicable to unprocessed agricultural, forestry or aquatic products; earth, stone, sand, gravel and discarded materials of all kinds purchased without invoices. Business establishments that purchase the above-said articles shall have to make the lists thereof under the tax authority�s guidance.

- The rate of 3% shall be applicable to goods and services subject to value added tax and purchased from production and/or business establishments that pay tax by the method of direct calculation on added value and with sale invoices; goods being unprocessed agricultural, forestry or aquatic products purchased from production establishments with added value invoices but not subject to value added tax in the production process; goods subject to special consumption tax purchased by the commercial business establishments from production establishments for sale; indemnities of insurance business activities.

e/ For business establishments that purchase goods and/or services of particular nature and are entitled to use vouchers stating payment prices which have included value added tax, the prices already with tax shall serve as basis for determining non-tax prices and deductible input value added tax according to the calculation method defined in Clause 10, Article 6 of this Decree.

f/ In cases where a business establishment in Vietnam that has signed contracts with a foreign contractor and paid value added tax on the latter�s behalf, the establishment shall be entitled to input tax deduction regarding the value added tax amount it had paid on the foreign contractor�s behalf.

2. The basis for determining the deductible input tax amount as prescribed above shall be as follows:

a/ For purchased goods or services, it shall be the value added tax amount stated in the added value invoices for the goods or service purchase; for cases where the tax has been paid on the seller�s behalf, it shall be the voucher of tax payment on the seller�s behalf.

b/ For import goods, it shall be the already paid value added tax amount stated on the voucher of payment of value added tax on such import goods.

c/ For purchased goods or services, which are entitled to deduction according to Point d, Clause 1 of this Article, it shall be the actual purchase price inscribed on the list of purchased goods or that inscribed on sale invoices or added value invoices. In cases where the price of purchased goods or services inscribed on the list is incompatible with the market price, the tax authority shall base itself on the market price to fix the price for calculating deductible tax amount.

d/ For purchased goods or services with the use of vouchers stating payment price which has included value added tax, such vouchers shall serve as basis for calculating the deductible input tax amount according to the provisions at Point e, Clause 1 of this Article.

Article 10.- Business establishments shall have to effect the purchase and sale of goods and services with full invoices and vouchers as prescribed by law. Invoices for purchase and sale of goods and services prescribed for business establishments shall be as follows:

1. Business establishments that pay tax by the tax deduction method shall have to use the added value invoices. When making goods or service sale invoices, the business establishments shall have to fully and accurately inscribe the following details: non-tax sale prices, additional collections and surcharges (if any) outside the sale prices, value added tax, payment prices that have included tax.

2. Business establishments that directly pay tax on the added value shall use goods sale invoices. The sale prices of goods or services inscribed on invoices shall be the payment prices that have included value added tax.

3. Business establishments that use self-printed invoices and vouchers shall have to register the form(s) of such self-printed invoices and vouchers with the Finance Ministry (the General Department of Tax) and shall be entitled to use them only after being notified in writing of the permission for use.

4. Business establishments that directly retail their goods to consumers at a sale price lower than the set price, they shall have to make added value invoices or sale invoices; if they fail to make invoices, they shall have to make lists of retailed goods according to the form set by the tax authority to serve as basis for the value added tax calculation; in cases where the purchasers request added value invoices or sale invoices, they shall have to make such invoices according to the regulations.

The Finance Ministry shall prescribe the regime of managing and using invoices and vouchers; issue invoices and vouchers and inspect the use thereof according to the provisions of this Article.

Chapter III

TAX REGISTRATION, DECLARATION, PAYMENT AND FINAL SETTLEMENT

Article 11.- Business establishments shall have to register their tax payment as follows:

1. All business establishments liable to pay value added tax as defined in Article 3 of this Decree, including their attached units and affiliates, shall have to register with the tax authorities of the localities where the establishments conduct their business activities, their business locations, business lines and trades, labor, capital, tax payment places and other relevant criteria under the tax authorities� guidance.

For newly set up establishments, the time limit for tax payment registration shall be ten days after they are granted business registration certificates; in cases where such business establishments have not yet been granted the business registration certificates but wish to conduct business activities, they shall have to register their tax payment before conducting such business activities. In case of a merger, amalgamation, split-up, division, transformation of enterprise ownership form, dissolution, bankruptcy or change in their business lines, business places, the business establishments, which have already registered their tax payment, shall also have to notify the tax authorities thereof within five days before such changes occur.

2. In cases where a business establishment that pays tax by the method of direct calculation on added value fully meets the following conditions: observing the regulations on invoices, vouchers and accounting books; registering and paying tax strictly according to the regime; and voluntarily registering to apply the tax payment by the tax deduction method, the tax authority shall, after inspecting and certifying that such business establishment has properly and fully met the above-said conditions, notify such establishment of its approval for implementation. If in the implementation courses the establishment fails to materialize all the prescribed conditions, the tax authority shall issue a notice to suspend the application of the tax deduction method.

The Finance Ministry shall guide the procedures for registering the tax payment and the competence to consider and permit the business establishments that are currently paying tax by the method of direct calculation on added value to apply the tax deduction method according to the provisions of this Article.

Article 12.- Business establishments and importers shall have to make value added tax declaration according to the following regulations:

1. An establishment that trades in goods or services subject to value added tax shall have to make monthly written value added tax declaration and submit the tax registration form together with the list of goods or services purchased and sold for use as basis for determining the monthly payable tax amount to the tax authority within the first ten days of the following month. Even in cases where there is no turnover from the sale of goods or services, where input tax and output tax do not arise, the business establishment shall still have to make and submit its written tax declaration to the tax authority. The establishment shall have to fully declare the tax strictly according to the set form and take legal responsibility for the accuracy of its declaration.

In cases where foreign organizations and/or individuals, which have not yet set up their offices or executive offices in Vietnam, supply goods or services subject to value added tax to Vietnamese organizations and/or individuals for consumption, such Vietnamese organizations and individuals shall have to pay value added tax and make value added tax payment declaration on behalf of the foreign parties. The payable value added tax shall be calculated on the prices of goods or services to be paid to the foreign parties.

2. A business establishment or an importer that imports goods subject to value added tax shall have to make and submit a value added tax declaration upon each importation, together with import tax declaration with the import tax collecting agency.

3. A business establishment that trades in different kinds of goods and/or services subject to different value added tax rates shall have to declare the value added tax according to the tax rate set for each kind of goods or services. If such business establishment fails to determine payable tax amount according to each tax rate, it shall have to calculate and pay tax at the highest tax rate applicable to goods and services it produces or trades in.

In cases where a business establishment, which purchases and/or sells gold, silver and gems and is engaged in the processing and fashioning of such products, fails to account separately the turnover from and taxes on such activities, a tax rate of 20% shall be collectively applied to both processing and fashioning activities and the method of direct tax calculation on added value shall be applied.

Article 13.- Value added tax shall be paid into the State budget according to the following regulations:

1. Business establishments shall have to directly pay value added tax in full and on time into the State budget according to the tax payment notices issued by the tax authorities.

The deadline for tax payment for a month as inscribed in a tax notice shall not be later than the 25th day of the following month.

For households and individuals that conduct business activities in areas far from the State treasury offices or conduct itinerant and irregular business activities, the tax authorities shall organize the tax collection and remittance into the State budget. The tax authorities shall have to remit the collected tax amounts into the State budget within 3 days; particularly for mountainous areas, island and areas difficult to access, such time limit shall be 6 days after the tax amounts are collected.

2. Business establishments and individuals that import goods shall have to pay value added tax upon each importation.

The deadlines for issuing a notice on and for payment of, value added tax on import goods shall be the same as those for the import tax notice and payment. For import tax-free goods, the deadline for value added tax declaration and payment shall be the same as prescribed for goods subject to import tax.

In cases where imported goods (including materials, machinery, equipment...), which are not subject to value added tax upon importation, are sold or used for other purposes, the concerned establishments shall have to declare and pay value added tax as prescribed for other goods.

3. A business establishment shall be entitled to have its overpaid tax amount in a tax calculation period deducted from the payable tax amount of the following period or shall have to pay the outstanding tax amount from the previous period, if any. A business establishment that pays value added tax by the tax deduction method and has the input tax amount larger than the payable output tax amount, shall be entitled to the deduction of the difference for the following taxation period. In cases where a business establishment makes new investment in fixed assets and has a large deductible input tax amount, it shall be entitled to gradual tax deduction or reimbursement according to provisions of Article 15 of this Decree.

4. Value added tax shall be paid into the State budget in Vietnam dong.

In cases where a business establishment has its turnover, output tax and input tax in foreign currency(ies), it shall have to convert them into Vietnam dong at the inter-bank market�s exchange rates at the time such foreign currency amounts are generated, so as to determine the payable tax amount.

The Finance Ministry shall guide in detail the tax payment procedures applicable to each tax payment method and each kind of tax payers defined in this Article.

Article 14.- Business establishments shall have to make the annual tax final settlement with the tax authorities. A tax final settlement year shall be the solar calendar year. Within 60 days after a year�s end, the business establishments shall have to submit their tax final settlement reports to the tax authorities and fully pay the outstanding tax amounts into the State budget within 10 days from the date the tax final settlement reports are submitted. In case of overpayment, such overpaid amounts shall be deducted from the tax amounts to be paid in the following period.

In case of a merger, amalgamation, split-up, division, dissolution or bankruptcy, a business establishment shall also have to make the tax final settlement and submit the report thereon to the tax authority within 45 days from the date the decision on such merger, amalgamation, split-up, division, dissolution or bankruptcy is issued.

The business establishment shall have to declare the total payable tax amount, the paid tax amount, the outstanding amount or overpaid amount up to the prescribed date for tax final settlement. It shall have to fully and accurately declare the indexes and data according to the set form of tax final settlement and send the tax final settlement to the tax authority of the locality where the establishment has registered its tax payment within the time limit prescribed above.

The Finance Ministry shall set form and guide the final settlement of value added tax as prescribed in this Article.

Article 15.- The reimbursement of value added tax already paid according to Article 16 of the Value Added Tax Law shall be specified as follows:

1. Business establishments that pay tax by the tax deduction method shall be considered for tax reimbursement if their deductible input tax is larger than their output tax for a period of 3 consecutive months or more. Business establishments which seasonally or periodically export goods in large volumes, if their input value added tax on their export goods is larger than their output tax, shall be considered for value added tax reimbursement for each period.

2. Business establishments that pay tax by the tax deduction method and make investment in the procurement of fixed assets, shall be considered for reimbursement of input tax on fixed assets as follows:

a/ For a business establishment that has made new investment and registered for tax payment with the tax authority, but has no output tax, if its investment period is one year or more, it shall be considered for input tax reimbursement for each year. An establishment that has a large input tax amount of its invested assets to be reimbursed, it shall be considered for quarterly tax reimbursement.

b/ For a business establishment that has made extensive or intensive investment, if after 3 months of deduction, the undeducted amount of input tax on the investment assets is still larger than the deducted amounts; it shall be considered for reimbursement of the undeducted tax amount.

3. For business establishments that have overpaid tax amounts in their tax final settlement upon a merger, amalgamation, split-up, division, dissolution or bankruptcy, they shall be considered for reimbursement.

4. Value added tax shall also be reimbursed to projects funded by the official development assistance (ODA) sources:

a/ For projects funded by non-refundable ODA sources: The project owners or principal contractors shall be reimbursed the value added tax amounts already paid in the purchase prices of goods and/or services used for their projects.

b/ For projects non-refundably invested by the State with ODA sources: The project owners or principal contractors shall be reimbursed the value added tax amounts paid upon the import and purchase of goods and services at home for use for their projects.

5. Vietnam-based organizations that use humanitarian aids or non-refundable aids from foreign organizations and individuals for purchasing goods in Vietnam shall be reimbursed the value added tax amounts already paid inscribed in added value invoices upon the purchase of such goods for use as aids.

6. Business establishments that have tax reimbursement decisions of the competent bodies as defined by law.

To be entitled to tax reimbursement, business establishments shall have to send their tax reimbursement applications and dossiers to the local tax collection managing authorities. The tax authorities shall have to check and determine the tax amounts to be reimbursed and then carry out the tax reimbursement procedures or request the competent bodies to make the tax reimbursement to the concerned establishments.

The Finance Ministry shall prescribe the procedures, time limit and competence to settle the tax reimbursement provided for in this Article.

Article 16.- The tax authorities shall have the following tasks, powers and responsibilities:

1. To guide the business establishments that have made business registration in implementing the value added tax registration, declaration and payment regime strictly according to the provisions of the Value Added Tax Law.

To send first notices to business establishments that fail to properly implement the regulations on tax registration, declaration and payment. If after first notices are issued, the notified establishments still fail to implement, they may handle such tax-related administrative violations. Upon inspecting and detecting business establishments that have conducted business activities without business registration, they shall request such establishments to make tax registration, declaration and payment as prescribed by law and handle tax-related administrative violations committed by such establishments.

2. To send to business establishments notices on the payable tax amounts and the tax payment deadlines within the prescribed time limit. A tax payment notice must be sent to a tax payer within three days before the date of tax payment inscribed in such notice. The deadline for tax payment for a month shall not be later than the 25th day of the following month.

To issue another notice on the payable tax amount and fine for deferred tax payment according to the provisions of Clause 2, Article 19 of the Value Added Tax Law, if past the tax payment deadline inscribed in the notice, the notified business establishment still fails to pay tax. The period of deferred tax payment shall be calculated as from the 26th day of the following month. For import goods and other cases, such period shall be calculated as from the date of tax payment as prescribed by law and inscribed in the tax notice. If such establishment still fails to pay tax and fine as stated in the notice, the tax authority may apply or request the competent bodies to apply handling measures prescribed in Clause 4, Article 19 of the Value Added Tax Law in order to ensure the full collection of tax and fine. If such business establishment once again fails to pay full amount of tax and fine after such handling measures have been applied, the tax authority shall forward the dossier to law enforcing bodies for further handling.

3. To examine and inspect the tax declaration, payment and final settlement by business establishments strictly according to the provisions of law.

4. To handle tax-related administrative violations and settle tax-related complaints according to the provisions of law.

5. To request the tax payers to provide accounting books, invoices, vouchers and other files and documents related to the tax calculation and payment; to request concerned credit institutions, banks and other organizations as well as individuals to provide documents related to the tax calculation and payment.

6. To keep and use data and documents provided by business establishments and other subjects in compliance with the prescribed regime.

Article 17.- Tax authorities may set value added tax amounts that must be paid by tax payers in the following cases where the latter:

1. Fail to implement or improperly implement the regulations on accounting, invoices and vouchers.

For business establishments that pay value added tax by the method of direct calculation on the added value that have not yet effected or improperly effected the purchase and/or sale of goods and/or services with invoices and vouchers, the tax authorities shall base themselves on the business situation to determine the added value and payable tax amounts by the tax calculation method prescribed in Clause 2, Article 8 of this Decree.

For individuals engaged in medium- and small-scale business activities, the tax amount set to be paid each time may serve as basis for tax collection for a period of 6 months or 12 months, depending on the business line, the price fluctuation and the business situation of such tax payers. The tax authority shall have to publicly announce the tax level set for such tax payers.

Individuals engaged in medium- and small-scale business activities shall pay tax at the rate set for each period. They shall have to declare any change in their business lines, scale or turnover to the tax authority for consideration and readjustment of the set tax level. If they fail to declare or untruthfully declare such, the tax authority may set a certain payable tax rate suitable to the business situation. Those individuals who suspend their business activities for 15 days or more shall be considered for 50% reduction of such month�s payable tax amount. If they suspend their business activities for the whole month, they shall be exempt from tax payment for that month.

The Finance Ministry shall guide the determination of the percentage (%) of added value calculated on the turnover to serve as basis for determine payable value added tax suitable to each business line or trade; the procedures for declaring the business suspension and the tax reduction for households suspending their business activities according to the provisions of this Article.

2. Fail to declare or to submit tax declaration forms within the notified time limit; or have submitted tax declaration but falsely declared the bases for determining the value added tax amount;

3. Refuse to produce accounting, invoices, vouchers and necessary documents related to the value added tax calculation;

4. Are inspected and detected to have conducted business activities without business registration, and without tax payment registration and declaration;

The tax authority shall base itself on documents related to survey of business activities of establishments or on the payable tax amounts of other business establishments with the same business lines and similar scale to set the payable tax amount for each business establishment in the above-said cases.

In cases where a business establishment disagrees with the set payable tax amount, it may lodge a complaint to the tax authority that has set the payable tax amount or to the immediate superior authority of such tax authority. Pending the settlement, such complaining business establishment or individual still has to pay tax at the rate set by the tax authority.

Chapter IV

HANDLING OF VIOLATIONS, COMMENDATION AND REWARD

Article 18.- Tax payers and tax officials who violate the Value Added Tax Law shall, depending on the nature and seriousness of their violations, be handled according to Articles 19 and 21 of the Value Added Tax Law.

Article 19.- Tax offices and tax officials that well accomplish their assigned tasks, organizations and individuals that record achievements in implementing the Value Added Tax Law and tax payers that well perform their tax obligations shall be commended and/or rewarded according to the Government�s regulations.

Chapter V

IMPLEMENTATION PROVISIONS

Article 20.- Cases eligible for value added tax reduction consideration defined in Article 28 of the Value Added Tax Law are specified as follows:

1. For business establishments that pay tax by the tax deduction method and, during the first years of application of the value added tax, suffer from losses due to the fact that the payable value added tax amounts are larger than the tax amounts they previously paid according to the turnover tax rate, they shall be considered for reduction of payable value added tax amounts. The value added tax amount to be reduced for each establishment shall correspond to the loss amount due to the above-said reason, but must not exceed the value added tax amount such establishment has to pay for the year of tax reduction.

2. The duration of value added tax reduction prescribed in this Article shall be considered annually and calculated according to the solar calendar year which shall be effected within the first 3 years, from 1999 to the end of 2001.

The tax reduction shall be considered on the basis of business result and tax final settlement of business establishments. For business establishments specified in Clause 1 of this Article that have anticipated loss from their plan year cost estimates, the tax authority shall, in order to ease the financial difficulties for such establishments, consider and give provisional value added tax reduction to them. The provisional tax reduction level shall be determined on the basis of the annual financial revenue-expenditure estimates and the previous year�s actual business situation, but must not exceed 70% of the tax amount estimated to be reduced according to the provisions of law.

The cases previously entitled to turnover tax exemption or reduction under the international agreements which Vietnam has signed or acceded to, or under the Government�s commitments, are now entitled to the corresponding value added tax exemption or reduction under such international agreements or commitments.

The Finance Ministry shall guide the procedures and stipulate the competence to consider the value added tax reduction as defined in this Article.

Article 21.- The collection of the value added tax is stipulated as follows:

1. The General Department of Tax shall have to organize the collection and reimbursement of value added tax for goods and services of domestic production and/or business establishments.

2. The General Department of Customs shall have to organize the collection of value added tax on import goods.

3. The General Department of Tax and the General Department of Customs shall have to coordinate with each other in managing the collection of value added tax throughout the country.

The Finance Ministry shall specify the organization of the value added tax collection according to the provisions of this Article.

Article 22.- The value added tax amounts to be reimbursed to eligible subjects specified in Article 15 shall be taken from the tax reimbursement fund, which is deducted from the collected value added tax amount. The Finance Ministry shall specify the tax reimbursement organization, accounting of value added tax collection and reimbursement according to the provisions of this Article.

Article 23.- This Decree takes effect as from January 1, 2001 and replaces the Government�s Decree No.28/1998/ND-CP of May 11, 1998, Decree No.102/1998/ND-CP of December 21, 1998, Decree No.78/1999/ND-CP of August 20, 1999 and Decree No.15/2000/ND-CP of May 9, 2000 detailing the implementation of the Value Added Tax Law.

The solution of problems related to the turnover tax, turnover tax final settlement, reduction and exemption and the handling of turnover tax-related violations arising before January 1, 1999 shall still comply with the corresponding provisions of the Turnover Tax Law and the Law Amending and Supplementing a Number of Articles of the Turnover Tax Law as well as the regulations on turnover tax in other relevant legal documents.

Article 24.- The Finance Minister shall guide the implementation of this Decree.

The ministers, the heads of the ministerial-level agencies, the heads of the agencies attached to the Government and the presidents of the People�s Committees of the provinces and centrally-run cities shall have to implement this Decree.

On behalf of the Government
For the Prime Minister
Deputy Prime Minister
NGUYEN TAN DUNG