CIRCULAR No.82/1997/TT/BTC OF NOVEMBER 11, 1997 GUIDING THE APPLICATION OF IMPORT TAX CALCULATION PRICES UNDER FOREIGN TRADE CONTRACTS

Pursuant to the competence and principles for determining tax calculation prices as prescribed in Article 7, Decree No.54-CP of August 28, 1993 of the Government detailing the implementation of the Law on Import and Export Taxes and the Law on Amendments and Supplements to a Number of Articles of the Law on Import and Export Taxes.

To settle the arising problems related to prices for import tax calculation and to step by step apply them in accordance with international practices, the Ministry of Finance provides the following guidances for the application of tax calculation prices under foreign trade contracts:

A.- SUBJECTS OF REGULATION

Subject to regulation are units, organizations, enterprises with legal person status and enterprises with foreign investment ital established under the Law on Foreign Investment in Vietnam, which are allowed by the competent State agency(ies) of Vietnam to conduct production and business activities in Vietnam, directly involved in import (or consigned import) of goods according to official quotas under foreign trade contracts and which pay 100% of the value of the lots of goods through a bank.

B.- PRICES FOR IMPORT TAX CALCULATION

The prices for import tax calculation are provided for in Section II, Circular No.72A-TC/TCT of August 30, 1993 of the Ministry of Finance guiding the implementation of Decree No.54/CP of August 28, 1993 of the Government that details the implementation of the Law on Import and Export Taxes and the Law on Amendments and Supplements to a Number of Articles of the Law on Import and Export Taxes.

C.- CASES AND CONDITIONS FOR THE APPLICATION OF TAX CALCULATION PRICES UNDER FOREIGN TRADE CONTRACTS

I.- Goods outside the list of commodities with tax calculation prices controlled by the State shall have to fully meet the following conditions:

The foreign trade contract is lawful and regular; Concretely:

- It must contain all basic contents of a commercial contract as prescribed in Article 50 of the Commercial Law passed by the National Assembly of Socialist Republic of Vietnam on May 10, 1997, including:

+ Names of goods;

+ Quantity;

+ Specifications, quality;

+ Prices;

+ Mode of payment;

+ Place and time for delivery and receipt of goods.

- Particularly, point 5 (mode of payment) must be stated clearly in the contract, i.e. the payment of 100% of the value of a lot of import goods shall be effected through a bank. The mode of payment already stated in the contract must not be changed after the goods have been received and the customs procedures have been completed. Any change to such clause must be promptly reported to the customs agency so that the latter may re-determine the prices for import tax calculation as prescribed.

II.- With regard to goods on the list of commodities with tax calculation prices controlled by the State, which are imported by subjects mentioned in Part A to use as materials and raw materials in direct service of production and assembly, if the contractual prices are lower than the prices prescribed in the minimum tax calculation price index announced by the Ministry of Finance and the General Department of Customs, the contractual prices shall be considered for application, provided that the enterprise has registered with the customs department of the province or city directly under the Central Government and the concerned customs department shall examine the dossier as prescribed below for ratification thereof on a case-by-case basis. If the enterprise complains about the settlement by the local customs agency, it is entitled to lodge its complaint to the higher-level competent agency in accordance with the provisions of the Law on Import and Export Taxes.

Conditions for being considered for the application of contractual prices:

1. Meeting all conditions prescribed in Point I above;

2. Having technological lines for the production of such products, with real investment therein and ability to manufacture products from those imported materials and raw materials. This must be certified by the higher-level management agency. As for enterprises with foreign investment ital, established under the Law on Foreign Investment in Vietnam, their production and assembly technologies must meet the prescribed technical conditions and the enterprises' production and business functions must conform with their investment licenses.

3. Being a unit or enterprise involved in import or consigned import activities, that has paid all import-export taxes (with certification by the customs agency) and duly observed the regulations on accounting books, receipts and vouchers (certified by the tax agency directly managing it);

4. Having a consigned import contract made in accordance with the regulations of the Ministry of Trade, if it is the consigned import.

The supply of imported materials and raw materials by a domestic independent business cost-accounting enterprise to another (including units of the same corporation or union) shall not be considered "direct input into production."

About the declaration and registration procedures:

+ An enterprise undertaking the import or consigned import shall have to register with the customs department of the locality where it fills the import procedures for the import of materials and raw materials which shall be put directly into production or assembly by the enterprise.

+ An enterprise importing materials and raw materials to be put directly into production, after obtaining permission from the customs agency for application of the contractual prices to tax calculation, shall have to produce the written approval of the customs agency and the import dossier for each lot of goods right after the goods have been imported to the tax agency directly managing the enterprise so that the tax agency may keep track of for management and using them as basis for determining the production cost in the product's price as well as for entering in the enterprise's book of accounting.

+ For imported materials and raw materials on the list of commodities with tax calculation prices controlled by the State, which have been taxed according to the contractual prices that are lower than the minimum prices prescribed for tax calculation, if they are not directly put into production but sold or transferred to other enterprises, units or organizations, after two days from such sale or transfer, the involved units or enterprises shall have to declare with the customs agency of the locality where the procedures for the import of the lot of goods have been completed and with the tax agency directly managing them for the re-calculation of the import tax according to the prices at the time of transfer.

III.- With regard to goods on the list of commodities with tax calculation prices controlled by the State, the contractual prices of which conform with those stated in the documents related to the purchase and sale of goods and are higher than those prescribed in the price index announced by the Ministry of Finance and the General Department of Customs, the prices for import tax calculation shall be the prices stated in the foreign trade contracts.

For a lawful and valid foreign trade contract eligible for tax calculation according to the contractual prices as mentioned in Points I and II above, if the selling and buying prices stated in the contract are too low or too absurd, the local customs agency shall promptly report to the General Department of Customs and the Ministry of Finance for guidance. The consideration and settlement of this case shall be based on the principle of applying the minimum tax calculation prices and shall be decided by the General Department of Customs after consulting the Ministry of Finance.

D.- HANDLING OF VIOLATIONS

If an enterprise is detected to have made a fraudulent foreign trade contract; if it fails to declare to the customs agency any change in the use purposes of materials and raw materials, which have been taxed according to the prices stated in the foreign trade contract; or if it violates the provisions of this Circular, it shall, besides having to pay the import tax and the special consumption tax (if any) arrears, be sanctioned for tax evasion in accordance with the provisions of the Law on Import Tax and Export Taxes, the Law on Special Consumption Tax, Decree No.22-CP of April 17, 1996 of the Government on the sanctions against administrative violations in the field of taxation, and Circular No.45-TC/TCT of August 1st, 1996 of the Ministry of Finance guiding the implementation of Decree No.22-CP.

For a repeated violation (for the second time or more), the customs agency shall not allow the violating unit, organization or enterprise to continue applying the provisions of this Circular.

E.- ORGANIZATION OF IMPLEMENTATION

This Circular takes effect from December 1st, 1997. The earlier provisions contrary to this Circular are now annulled.

The General Department of Customs shall provide guidance for the provincial/municipal customs departments to duly supervise, manage and conduct the tax calculation according to the contractual prices as well as to detect and handle in time acts of making false tax statement and evading tax.

Every month (once every 30 days), the provincial/municipal customs departments shall have to sum up and assess the application of the contractual prices for tax calculation and report to the General Department of Customs and the Ministry of Finance (according to the prescribed form).

In the course of implementation, any arising problem must be promptly reported to the Ministry of Finance and the General Department of Customs for consideration and appropriate supplement and amendment.

For the Minister of Finance

Vice Minister