Pursuant to the Law on Export Tax and Import Tax; the Law on Enterprise Income Tax and the Law on Value Added Tax;

Pursuant to Decision No.205/1998/QD-TTg of October 19, 1998 of the Prime Minister promulgating the Regulation on duty-free shops;

Pursuant to Circular No.172/1998/TT/BTC of December 22, 1998 of the Ministry of Finance guiding the implementation of Decree No.54/CP of August 28, 1993, Decree No.94/1998/ND-CP of November 17, 1998 of the Government detailing the implementation of the Law on Export Tax and Import Tax and the Laws Amending and Supplementing a Number of Articles of the Law on Export Tax and Import Tax;

After consulting the Ministry of Trade and the General Department of Customs, the Ministry of Finance hereby guides the implementation of the financial, accounting and tax regimes applicable to the business form of duty-free shops as follows:

I. OBJECTS OF APPLICATION

This Circular shall apply to the shops trading in duty-free goods (hereafter referred to as duty-free shops) which have been licensed to sell goods to exit and entry passengers at sea ports, international airports, land-road or railway border checkpoints and downtown duty-free shops; and shops selling goods to diplomatic subjects specified in Decree No.73/CP of July 30, 1994 of the Government.

II. TAX PAYMENT, COLLECTION AND EXEMPTION REGIME

1. Regarding import tax, special consumption tax and value added tax applicable to goods imported for sale at duty-free shops to subjects eligible for tax exemption:

- Goods imported for sale at duty-free shops shall be exempt from import tax and special consumption tax and shall not be liable to value added tax.

- All goods sold at duty-free shops must be affixed with "Vietnam Duty Not Paid" stamps printed and issued by the concerned enterprises according to the form approved by the Ministry of Finance (the General Department of Tax), which shall be managed according to the regime of management of seals and stamps issued together with Decision No.529/QD of December 22, 1992 of the Minister of Finance.

The tax exemption dossiers shall include:

- The certificate of duty-free goods trading qualification granted by the Ministry of Trade (for duty-free shops of Vietnamese enterprises) or investment license granted by the Ministry of Planning and Investment (for foreign-invested duty-free shops);

- The import permit issued by the Ministry of Trade or the agency authorized by the Ministry of Trade in cases where:

+ To-be-imported goods are cigars, cigarettes and/or those subject to conditional export and/or import;

+ Goods are imported for sale at foreign-invested duty-free shops.

- The foreign trade contract;

- The import goods declaration (with actual import certification by the border-gate customs authority);

- The entrusted import contract (for entrusted import goods).

The provincial/municipal Customs Department shall examine the above-prescribed dossier, issue a tax exemption decision, monitor and make settlement of the sold goods volume according to the prescribed regime.

2. The application of enterprise income tax and value added tax to business activities of duty-free shops shall comply with the Law on Enterprise Income Tax; the Law on Value Added Tax and the sub-law guiding documents of the Government and the Ministry of Finance and other current regulations, more concretely:

- For Vietnamese enterprises not covered by the Law on Foreign Investment in Vietnam, the applicable enterprise income tax rate shall be 32% (thirty two per cent) on the taxable income. For foreign-invested enterprises, the applicable rates of enterprise income tax and tax on transfer of profit abroad shall comply with the regulations stated in their licenses granted by the Ministry of Planning and Investment.

- The shops selling goods to entry passengers, when importing goods items with unit prices exceeding the prescribed duty-free limits as permitted, shall have to declare such goods to the customs authorities where the import procedures are carried out for full calculation and payment of tax amount for the excess value before selling such goods. Duty-free shops shall have to make separate declarations of the goods value for which tax(es) must be paid by the customers, for the payment of tax(es) as prescribed.

- For goods which need to be re-exported or brought out of the areas controlled by duty-free shops for sale on the domestic market, all tax obligations must be fulfilled as prescribed. If such goods are on the list of goods subject to conditional import, the Ministry of Trade�s permits are required.

3. Regarding the goods already imported and lawfully circulated on the Vietnamese market and goods made in Vietnam and sold at duty-free shops:

Goods already imported and being circulated on the market, and goods manufactured or processed in the country, and sold to duty-free shops for sale to subjects eligible for tax exemption shall be considered export goods. The concerned units shall have to pay export tax according to the Law on Export Tax and Import Tax and shall be reimbursed import tax, special consumption tax and/or value added tax according to the provisions of the current tax laws for such goods or raw materials and materials imported for production of such goods.

The procedures for reimbursement of import tax, special consumption tax and/or value added tax for imported goods which are being lawfully circulated on the Vietnamese market, raw materials and materials for production of goods sold to duty-free shops shall comply with the Ministry of Finance�s current regulations on reimbursement of tax(es) for raw materials and materials imported for production of export goods and goods temporarily imported for re-export. Particularly, the foreign trade contract shall be replaced by economic contract for goods sale and purchase between the selling unit and the duty-free shop, and goods sale invoice(s) or value added invoice(s).

4. Damaged, inferior-quality or broken goods at duty-free shops must be destroyed under the supervision by the provincial/municipal Customs Departments, customs authorities in charge of the shops and the shops� representatives. On the basis of the destruction records, the Directors of the provincial/municipal Customs Departments shall issue decisions on tax exemption for the destroyed goods. In cases where damaged or inferior-quality goods at duty-free shops are not destroyed but re-exported, the Directors of the provincial/municipal Customs Departments shall inspect such goods and issue decisions on tax exemption for goods volumes which are actually re-exported.

III. ACCOUNTING REGIME

The accounting of the duty-free shops� activities shall be conducted according to the enterprise accounting regime (in Decision No.1141-TC/CDKT of November 2, 1995 of the Minister of Finance) and the current amending and supplementing circulars.

IV. REPORTING, INSPECTION AND HANDLING OF VIOLATIONS

Duty-free shops that sell goods to subjects other than the prescribed ones or arbitrarily sell goods on the Vietnamese market without permission of the functional agencies shall all be considered tax dodgers, subject to retrospective collection of all import tax, special consumption tax and value added tax amounts (on raw materials imported for production of such goods) as well as exempted taxes, and shall be sanctioned according to provisions of Circular No.172/1998/TT-BTC of December 22, 1998 of the Ministry of Finance.

The General Department of Customs shall have to organize and inspect the implementation of regulations on duty-free goods sale at the duty-free shops according to provisions of this Circular. Annually, the Ministry of Finance shall coordinate with the Ministry of Trade, the General Department of Customs and the concerned branches in organizing inspections at some important duty-free shops. When necessary, the Ministry of Finance shall assume the prime responsibility for conducting extraordinary inspections.

Quarterly, after the customs authorities make the tax settlement for the goods sold at the duty-free shops, such duty-free shops shall have to send reports on their business situation to the Ministry of Finance, the Ministry of Trade, the Ministry of Planning and Investment and the General Department of Customs.

V. ORGANIZATION OF IMPLEMENTATION

This Circular takes effect 15 days after its signing. All the previous guidance contrary to the provisions of this Circular shall cease to be effective.

The General Department of Customs shall have to guide the procedures for tax exemption and management of goods traded at duty-free shops according to provisions of Part C, Section II, Point 5 of Circular No.172/1998/TT/BTC of December 22, 1998 of the Ministry of Finance and the provisions of this Circular.

Any problems arising in the course of implementation shall be reported by the concerned units to the Ministry of Finance for timely solution.

For the Minister of Finance

Vice Minister