1. For region III: The construction of market places, trade shops of the State or trade-service cooperatives in geographical areas under the programs on construction of centers of mountainous or high-land commune clusters under Decision No. 35/TTg of January 13, 1997 of the Prime Minister (now under Program 135) shall comply with Joint Circular No. 666/2001/TTLT/BKH-UBDTMN-BXD-BTC of August 23, 2001 guiding the management of investment in and construction of infrastructure works under Program 135.

2. For region II: The construction of market places and trade shops of the State or the trade-service cooperatives in the geographical areas not covered by the programs on building centers of commune clusters shall be considered by the provincial People’s Committee presidents in terms of the following conditions in order to decide on the construction investment from the local budget:

- Market places and shops must be included in the planning.

- There are burning demands for formation of markets in order to step up goods exchange, stabilize people’s life and develop commodity production.

3. For region I: The construction of market places and trade shops according to the guiding principle that "The State and business people do it jointly":

- The State shall partly provide budget support for investment in the construction of market infrastructure such as ground leveling, electricity supply, water supply and drainage, sanitation system,…

- The business people shall contribute capital to the construction of architectural works at goods-selling places: kiosks, stalls, market houses, and are entitled to use business areas in the markets according to provisions in the capital- contributing contracts between business people and the market-managing agencies.

- Mobilizing capital from medium- or long-term credit loans at preferential interest rates.

- Encouraging other forms of investment as provided for by law.

4. The provincial Trade- Tourism Services (hereinafter called Trade Services for short) shall base themselves on the market development planning and other conditions to coordinate with concerned branches in drawing up plans on development of markets and trade shops of the State or trade-service cooperatives, and submit them to the provincial People’s Committees for decision.

The Trade Services shall perform the function of specialized management of market activities according to the Trade Ministry’s Circular No. 15/TM-CSTTTN of October 16, 1996. The administrative management of markets shall comply with the provisions on decentralization of market management in Section II of Circular No. 15/TM-CSTNTN of October 16, 1996 of the Trade Ministry.

III. REGARDING THE ENTERPRISE INCOME TAX EXEMPTION AND REDUCTION, THE LENDING INTEREST RATE REDUCTION FOR BUSINESS PEOPLE IN MOUNTAINOUS REGIONS, ISLANDS, AND AREAS INHABITED BY ETHNIC MINORITY PEOPLE

1. Application subjects

Subjects entitled to enterprise income tax exemption or reduction are business people of all economic sectors, who carry out trade activities in mountainous regions, islands, and/or areas inhabited by ethnic minority people, including:

- State enterprises;

- Enterprises of political organizations, socio-political organizations, social organizations, socio-professional organizations, people’s armed force units, administrative and non-business agencies;

- Foreign-invested enterprises operating under the Law on Foreign Investment in Vietnam;

- Cooperatives;

- Enterprises operating under the provisions of the Enterprise Law;

- Cooperative teams, households and individuals with business registration and operating under Decree No.02/2000/ND-CP of February 3, 2000 of the Government on business registration.

The above-listed subjects shall enjoy enterprise income tax exemption or reduction under the guidance in this Joint Circular only when:

- They register their business and operate in strict accordance with the registered business lines.

- They register and declare taxes strictly according to law provisions.

- They open accounting books, make book entries and keep the accounting books, invoices, vouchers and papers related to trade activities strictly according to law provisions.

2. Geographical areas of application

The mountainous, island and ethnic minority areas shall enjoy the application of provisions on tax exemption and reduction in Section I of this Joint Circular.

3. Contents of enterprise income tax exemption and reduction

Business people conducting trade activities in mountainous, island and/or ethnic minority areas shall enjoy enterprise income tax exemption and reduction as follows:

a/ The enterprise income tax exemption and reduction levels and durations.

a.1/ For business people doing business in region III of the mountainous regions, islands, and areas inhabited by ethnic minority people:

- For subjects enjoying the profit tax exemption or reduction as prescribed in Decree No.20/1998/ND-CP: They shall continue to enjoy the enterprise income tax exemption or reduction for the durations and according to the levels they are enjoying.

- For subjects having not yet enjoyed tax exemption or reduction: To effect the enterprise income tax exemption for the first four years as from the time the taxable income is generated and the 50% reduction of the payable enterprise income tax for 7 subsequent years; if employing 20 or more laborers on average in the year, they shall also enjoy the 50% reduction of the payable enterprise income tax for two more years.

a.2/ For business people doing business in region II of the mountainous regions, islands, and areas inhabited by ethnic minority people with social policy goods items as well as agricultural and forest products with freight subsidies:

- For subjects enjoying the profit tax exemption or reduction as prescribed in Decree No.20/1998/ND-CP: They shall continue to enjoy enterprise income tax exemption or reduction for the durations and according to the levels they are enjoying.

- For subjects having not yet enjoyed tax exemption and reduction: They shall be exempt from enterprise income tax for the first two years as from the time the taxable income is generated and enjoy the 50% reduction of payable enterprise income tax for five subsequent years; if they employ 20 or more laborers on average in the year, they shall enjoy the 50% reduction of the payable enterprise income tax for two more years.

a.3/ For business people doing business in region I, directly selling social policy goods items and business people directly conducting business activities in regions I and II of the mountainous regions, islands, and areas inhabited by ethnic minority people, when selling goods (other than those mentioned in Item a.2, of Clause a, Sub-section 3 of Section III of this Joint Circular):

- For subjects enjoying the profit tax exemption or reduction as prescribed in Decree No.20/1998/ND-CP: They shall continue to enjoy the enterprise income tax exemption or reduction for the durations and at the levels they are enjoying.

- For subjects having not yet enjoyed tax exemption and reduction: They shall be exempt from enterprise income tax for the first two years as from the time the taxable income is generated and enjoy the 50% reduction of the payable enterprise income tax for four subsequent years; if they employ 20 or more laborers on average in the year, they shall enjoy the 50% reduction of the payable enterprise income tax for two more years.

In order to enjoy tax exemption and reduction according to Items a, b and c, Point 3.1, Section 3, Part III of this Joint Circular, the business people must account separately the taxable turnover and income of trade activities, which arise in the mountainous, island, ethnic minority areas for use as bases for the tax offices to determine and effect the tax exemption and reduction.

b/ Competence, order and procedures for consideration of enterprise income tax exemption and reduction

The tax exemption and reduction for business people under the provisions of Decree No.02/2002/ND-CP and the guidance in this Joint Circular shall be effected by the tax offices which directly manage the tax payment by business people at the time of annual tax settlement.

Quarterly, business people may temporarily declare and pay tax at the tax exemption or reduction rates prescribed at Point 3, Section III of this Joint Circular. At the end of the year, upon the final settlement, the tax offices shall make official approval on the tax declaration and calculation forms and issue tax notices clearly stating the tax amounts to be paid, the tax amounts exempt or reduced. If the tax amounts temporarily paid in the year by business people are inadequate as compared with the payable tax amounts inscribed in the tax notices, the business people shall have to fully pay the deficit tax amounts strictly according to the time limit inscribed in the tax notices; where the temporarily paid tax amounts are larger than the tax amounts inscribed in the tax notices, the overpaid tax amounts shall be subtracted from the payable tax amounts of the subsequent year.

The tax offices may only effect the tax exemption and reduction under the guidance in this Joint Circular to business people who declare and pay enterprise income tax with the direct managing tax offices in the mountainous, island and ethnic minority areas where arise trade activities entitled to preferences.

If the business people simultaneously enjoy the enterprise income tax exemption or reduction according to Clause 1, Article 1 of Decree No.02/2002/ND-CP and the enterprise income tax exemption or reduction according to the Law on Enterprise Income Tax and the Government’s Decree No.30/1998/ND-CP of May 13, 1998 detailing the implementation of the Law on Enterprise Income Tax, the tax exemption and reduction shall comply with the provisions where the highest exemption and/or reduction rates are prescribed.

4. Responsibilities of business people and tax offices

a/ Business people doing business in mountainous regions, islands, and/or areas inhabited by ethnic minority people, who are entitled to the application of this Circular, shall have the responsibility to:

- Produce their founding permits and business registration certificates to the local managing tax offices.

- Fully declare the taxable turnover and income periodically under the guidance of the tax offices.

Those business people who violate the regime of tax registration and declaration; the regime of accounting books and vouchers shall not be entitled to tax exemption and reduction according to the provisions in this Joint Circular and, depending on the seriousness of their violations, be sanctioned according to law provisions.

b/ The tax offices at all levels shall have the responsibility to:

- Guide and inspect business people in the implementation of this Joint Circular.

- In the course of inspecting the business people’s obligation to pay tax periodically, inspecting the final tax settlement, if detecting that business people have committed acts of falsely declaring or evading tax, apart from stopping the tax exemption and reduction under the provisions of this Joint Circular, the tax offices shall have to retrospectively collect the full tax amounts to be paid by the business people according to law, consider the seriousness of their violations and sanction them according to law provisions on handling administrative violations in the field of tax.

- Reflect fully and clearly the tax amounts to be paid, the tax amounts to be exempt or reduced; the remaining payable tax amounts and other indexes on receipt vouchers, tax declaration forms, tax registers and tax accounting books. At year-end, the Tax Departments of the provinces and centrally-run cities shall fully sum up the situation of tax exemption and reduction according to the provisions in this Joint Circular and report them to the Finance Ministry (the General Tax Department).

5. Regarding the lending interest rates under Clause 2, Article 1 of Decree No.02/2002/ND-CP: To comply with the guidance of the State Bank of Vietnam and the Finance Ministry.

IV. REGARDING THE FOSTERING AND RAISING OF THE PROFESSIONAL QUALIFICATIONS FOR OFFICIALS AND CADRES MANAGING STATE ENTERPRISES OPERATING IN MOUNTAINOUS REGIONS

Annually, the Trade Ministry draws up plans and budget estimates for professional fostering of officials and cadres managing the State enterprises operating in mountainous regions, islands, and/or areas inhabited by ethnic minority people in the training budget of the Ministry, and comply with the assigned budget estimates.

V. PRICE AND FREIGHT SUBSIDY FOR SALE OF SOCIAL POLICY GOODS ITEMS, THE PURCHASE OF A NUMBER OF PRODUCTS MANUFACTURED IN MOUNTAINOUS REGIONS, ISLANDS, AND AREAS INHABITED BY ETHNIC MINORITY PEOPLE

1. Selling social policy goods items (the essential items with price subsidy, freight subsidy) in mountainous regions, islands, and/or areas inhabited by ethnic minority people.

a/ Subjects entitled to enjoy the policy of price subsidy, freight subsidy for a number of goods items sold in mountainous regions, islands, areas inhabited by ethnic minority people:

Goods items with price subsidy, freight subsidy, are sold to all subjects living in the geographical areas prescribed in Section I, Clause 1 of this Circular, at sale spots prescribed by the provincial People’s Committees.

All price-subsidized and/or freight-subsidized goods items must be strictly managed, with special attention being paid to the following goods items: plant varieties, aquatic breeds, iodized salt. The provincial People’s Committees shall stipulate the implementation modes as well as managerial measures in order to ensure that goods are delivered to the right beneficiaries, in adequate quantity, with proper quality, on the right time, at the right places and the prescribed prices.

b/ Lists of social policy goods items sold in mountainous regions, islands, and/or areas inhabited by ethnic minority people shall be decided by the Committee for Ethnic Minorities and Mountainous Regions for each period.

The minister-director of the Committee for Ethnic Minorities and Mountainous Regions shall base him/herself on the requirement and policy of encouraging the socio-economic development in mountainous regions, islands and areas inhabited by ethnic minority people as well as the consultation with the concerned ministries, branches and People’s Committees of the provinces with mountainous regions, islands, and/or areas inhabited by ethnic minority people to decide on the adjustment of the lists of price-subsidized and/or freight-subsidized goods items to suit each period.

c/ The transportation distance for freight subsidy, the places of delivery and reception of price-subsidized and/or freight-subsidized goods items and the price items entitled to price subsidy for goods items with price subsidy and/or freight subsidy for sale in mountainous regions, islands, and areas inhabited by ethnic minority people, shall comply with the appendix to this Circular.

Where it is necessary to adjust the transportation distances for freight subsidy, the places of delivery and reception of price-subsidized and/or freight-subsidized goods and items entitled to price subsidy for each goods item, the Trade Ministry shall assume the prime responsibility for the re-adjustment and the promulgation of legal documents guiding the implementation thereof.

d/ Methods of determining unit prices for price subsidy, freight subsidy:

- The freight subsidy unit price shall be calculated according to the following formula:

4. The provincial People’s Committees shall decide to select traders for effecting the purchase and sale of price-subsidized and/or freight-subsidized goods through forms of bidding or appointment of traders who satisfy all conditions on networks, material foundations, personnel,… and assign them the task of selling price-subsidized and/or freight-subsidized goods items and buying products entitled to consumption freight subsidy.

5. The provincial People’s Committee presidents shall have to direct the implementation and organize the regular, periodical inspection of the implementation of price and freight subsidy policy to every goods-selling spot strictly according to the provisions of the Government’s Decree No.02/2002/ND-CP and Decree No.20/1998/ND-CP, ensuring that people in mountainous regions, islands and ethnic minority areas can buy policy goods in the prescribed quantity, at the prescribed prices and with the prescribed quality, at prescribed places, and sell products turned out in difficult regions at reasonable prices. They must strictly handle errors, particularly fraudulent acts in declaring and settling price and freight subsidy funding; combat wastefulness and loss of state budget and be answerable to the Prime Minister for the implementation results.

VI. STATE ENTERPRISES CONDUCTING TRADE ACTIVITIES IN MOUNTAINOUS REGIONS, ISLANDS AND/OR ETHNIC MINORITY AREAS

1. To expand the network of State enterprises conducting trade activities in mountainous regions, islands and ethnic minority areas so as to be able to prevail the markets for sale of social policy goods items, supplies in service of production and purchase of a number of key products turned out by local people, giving priority to communes meeting with exceptional difficulties.

State enterprises conducting trade activities must expand their shops to commune cluster centers; work out appropriate forms to use trade-service cooperatives, other State enterprises (factories, forest farms,…), schools, health stations, the contingent of teachers and prestigious persons in hamlets as goods sale and/or purchase agents. To build up links between central State enterprises and local State enterprises, between enterprises in the same localities, between economic sectors in the spirit of mutual benefit, aiming to create a smooth circulation channel between production and consumption, between mountainous, island and ethnic minority regions and other regions.

The provincial Trade Services shall assume prime responsibility and coordinate with the provincial Planning and Investment Services and other concerned branches in the provinces in the elaboration of planning on development of trade operation networks (including market places, shops run by State enterprises, trade-service cooperatives, non-State trade units…) and organize the implementation of the approved planning. The planning must conform to the socio-economic conditions in the localities, associating trade activities to population planning and production zoning, and step by step fully covering the zones without trade networks.

2. Regarding the State enterprises engaged in public-utility trade activities: To comply with the law provisions on public-utility enterprises.

The provincial Trade Services shall assume the prime responsibility and coordinate with the provincial Planning and Investment Services in examining enterprises which satisfy all conditions and wish to shift to form of public-utility enterprises and submit them to the provincial People’s Committees for decision, according to the procedural order for setting up the public-utility enterprises.

3. Working capital of State-run trade enterprises in mountainous regions, islands and ethnic minority people areas.

a/ The reasonable demands for working capital of State-run trade enterprises in mountainous regions, islands and ethnic minority people areas shall be determined on the bases of:

- The enterprises’ production and business tasks and business results.

- The situation of working capital (including self-procured capital and borrowed capital) of the enterprises in 2-3 latest years.

- The business conditions such as roads and transportation distances, weather and climate affecting the circulation process, the seasonal characters of production and consumption, the conditions on banks’ payment and credit services, people’s production and consumption practices and demands, and other factors affecting the speed of working capital circulation.

- The requirements on reserve of essential goods, particularly social policy goods items.

The enterprises shall work out plans proposing supplement of working capital and report them to the provincial Trade Services, Sub-Departments for Management of State Capital and Assets at enterprises (for localities entitled to set up Sub-Departments) or the provincial Finance Services (for localities where Sub-Departments are not organized) for inclusion into the annual budget estimates, and submit them to the provincial People’s Committees.

b/ Supplementing working capital for State enterprises engaged in trade activities:

The order for elaborating working capital plans of State enterprises engaged in trade activities in mountainous regions, islands and ethnic minority people areas shall comply with the procedures and guidance on implementation of the State Budget Law.

The working capital supplementation sources for centrally-run State enterprises shall be supplied by the central budget.

The working capital supplementation sources for locally-run State enterprises shall be supplied by local budgets. The provincial People’s Committee presidents shall decide on the additional allocation of working capital for enterprises according to the assigned budget estimates.

VII. MANAGEMENT OF RESERVE CAPITAL FOR POLICY GOODS ITEMS IN MOUNTAINOUS REGIONS, ISLANDS AND ETHNIC MINORITY PEOPLE AREAS

1. The price-and/or freight- subsidized goods items for sale in mountainous regions, islands and ethnic minority people areas, which are provided with reserve capital, include:

(1) Salt: common salt (for mixture with iodine) and iodized salt.

(2) Lighting oil.

The reserve capital shall be used mainly for region III. Depending on the specific situation of each locality, the provincial People’s Committees may add goods items which must be reserved in areas meeting with exceptional difficulties (region III).

2. The State-run trade enterprises performing the task of supplying policy goods items prescribed at Point 1 shall be adequately provided with reserve capital from the local budgets. The allocated capital amounts shall be enough to satisfy the demand for circulation reserve of policy goods items, equivalent to the consumption demand for such goods items of people in the service areas for 2 to 3 months on average. Depending on the situation of each area, the provincial People’s Committees shall prescribe the reserve duration suitable to the local situation.

3. The provincial People’s Committees shall specify the goods volume and corresponding reserve capital for each goods category, each region (I, II, III), the reserve time point and the mobilization of policy goods reserve capital for business demands at appropriate times.

4. The enterprises which are allocated capital shall have to use the capital for circulation of policy goods items. The organization of circulation reserve must meet the requirements for each goods item, in each locality and at each time. The enterprises may take initiative in organizing the circulation reserve suitable to the specific conditions of each region (I, II, III) and the goods characteristics and consumption demand.

At such time as flood seasons, new year festivals, local festivals and in areas meeting with traffic difficulties, with the practical requirements for goods reserve volume being greater than the average reserve level, the enterprises shall have to mobilize other capital sources for reserve. Beyond the above-mentioned time and areas, the enterprises may temporarily use part of the reserve capital for trading in other goods items but must refund it in time for policy goods reserve, ensuring to adequately supply goods for people.

5. The policy goods reserve capital shall be managed like the working capital and be preserved according to the regulations on financial management and business accounting for State enterprises.

Once every six months, the enterprises allocated with reserve capital must report to the provincial Finance Serves and Trade Services on the use of policy goods reserve capital. The provincial Finance Services shall sum up the situation for report to the provincial People’s Committees and the Finance Ministry.

VIII. IMPLEMENTATION ORGANIZATION

1. The Committee for Ethnic Minorities and Mountainous Regions shall assume the prime responsibility and coordinate with the concerned ministries, branches and provincial People’s Committees in organizing the materialization of the price and freight subsidy policy, monitor the results thereof and report them to the Prime Minister.

It must regularly monitor, guide and organize the inspection and supervision of the realization of the price and freight subsidy policy by localities, ministries, branches and enterprises which use the price and freight subsidy funding; detect and handle in time problems and difficulties and propose to the Government necessary solutions to ensure that the policy is implemented for the right targets, with efficiency and strictly according to the managerial regime.

2. The Trade Ministry shall monitor and report on the results of implementation of the incentive and preferential policies for traders; coordinate with the Committee for Ethnic Minorities and Mountainous Regions, concerned ministries, branches and provincial People’s Committees in organizing the implementation of the price and freight subsidy policy; guide localities in applying measures to expand markets, develop circulation of goods in the mountainous regions, islands and ethnic minority people areas.

3. The Ministry of Planning and Investment, the Finance Ministry, the Government’s Pricing Committee and relevant agencies shall coordinate with the Committee for Ethnic Minorities and Mountainous Regions and the Trade Ministry in monitoring the implementation and the settlement of problems in organizing the implementation of the policies prescribed in the Government’s Decree No.20/1998/ND-CP and Decree No.02/2002/ND-CP.

4. The provincial People’s Committees shall have to direct and organize the implementation, monitor and inspect the implementation of the policy in their localities; to detect and handle in time difficulties and problems in the course of organizing the implementation, propose to the Government and concerned ministries and branches the remedies.

5. This Joint Circular replaces the following legal documents:

- Joint Circular No.11/1998/TTLT/BTM-UBDTMN-BTC-BKHDT of July 31, 1998 of the Trade Ministry, the Committee for Ethnic Minorities and Mountainous Regions, the Finance Ministry, the Ministry of Planning and Investment guiding the implementation of Decree No.20/1998/ND-CP;

- Circular No.112/1998/TT/BTC of August 4, 1998 of the Finance Ministry guiding the implementation of tax exemption and reduction according the provisions in Article 9 of Decree No.20/1998/ND-CP of March 31, 1998 of the Government on trade development in mountainous regions, islands and ethnic minority people areas;

- Circular No.06/1998/TT/BVGCP of August 22, 1998 of the Government’s Pricing Committee guiding the principles for determining the price and freight subsidy unit prices and the retail prices of price-and/or freight-subsidized policy goods category in mountainous provinces, islands and ethnic minority people areas.

It takes implementation effect according to the implementation effect of the Government’s Decree No.02/2002/ND-CP of January 3, 2002.

If any problems or difficulties arise in the course of implementation, the ministries, branches, provincial People’s Committees and enterprises are requested to report them in time for study and additional guidance by the said ministries.

For the Trade Minister
Vice Minister
PHAN THE RUE

For the Minister-Chairman of the Committee for Ethnic
Minorities and Mountainous Regions
Vice Chairman
HOANG CONG DUNG

For the Finance Minister
Vice Minister
TRAN VAN TA

For the Minister of Planning and Investment
Vice Minister
LAI QUANG THUC