Thông tư 99/1998/TT-BTC

CIRCULAR No CIRCULAR No. 99/1998/TT-BTC OF JULY 14, 1998 GUIDING THE IMPLE-MENTATION OF DECREE No. 30/1998/ND-CP OF MAY 13, 1998 OF THE GOVERNMENT THAT DETAILS THE IMPLEMENTATION OF THE LAW ON ENTERPRISE INCOME TAX Pursuant to the Law on Enterprises Income Tax passed by the IX National Assembly on May 10, 1997; Pursuant to Decree No. 30/1998/ND-CP of May 13, 1998 detailing the implementation of the Law on Enterprise Income Tax; The Ministry of Finance hereby provides the following guidances: A. SCOPE OF APPLICATION OF ENTERPRISE INCOME TAX I. ENTERPRISE INCOME TAX PAYERS: According to Article 1 and Article 3 of the Law on Enterprise Income Tax and Article 1 of Decree No. 30/1998/ND-CP of May 13, 1998 of the Government detailing the implementation of the Law on Enterprise Income Tax, the following organizations and individuals engaged in goods production, trading and/or service provision (referred collectively to as business establishments) that have taxable incomes shall all have to pay enterprise income tax: 1. Organizations engaged in goods production and trading and/or service provision: - State enterprises, including State business enterprises and State public utility enterprises; - Limited liability companies, joint stock companies; - Foreign-invested enterprises and foreign parties to business cooperation contracts under the Law on Foreign Investment in Vietnam; - Foreign companies and organizations doing business in Vietnam not under the Law on Foreign Investment in Vietnam; - Political organizations, socio-political organiza-tions, socio-professional organizations, people's armed forces units and administrative, non-business units engaged in goods production and trading and/or service provision; - Cooperatives, cooperation groups; - Private enterprises; - Other organizations engaged in goods production, trading and/or service provision. 2. Domestic individuals engaged in goods production, trading and/or service provision: - Individual business people and groups of business people. - Households - Individual practitioners: medical doctors, lawyers, accountants, auditors, painters, architects, musicians, and others; - Individuals leasing such property as houses, land, means of transport, machinery and equipment or other kinds of property; - Peasant households and/or individuals engaged in cultivation, husbandry and aquaculture that fully meet the two conditions of having a commercial goods value of over 90 million VND/year and an income of over 36 million VND/year, shall have to pay enterprise income tax on income in excess of 36 million VND/year. For example: A peasant family household or individual has a commercial goods value of 150 million VND/year and an income of 60 million VND/year. Such peasant household or individual shall have to pay enterprise income tax with a sum of: (60 million dong - 36 million dong) x 32% = 7.68 million dong 3. Foreign companies conducting business activities through their permanent establishments in Vietnam. Foreign companies are considered as conducting business activities through their permanent establishments in Vietnam in the following cases: a/ Such companies have in Vietnam: executive offices, branches, offices (except for trade representative offices which are not allowed to conduct business activities under Vietnamese laws), factories, workshops, goods reception-delivery warehouses, means of transport, mines, oil or gas fields, natural resource exploration and exploitation sites or equipment and facilities in service of natural resource exploration; b/ Such companies have in Vietnam: construction sites, construction, installation or assembly projects; activities of supervising construction, installation or assembly projects; c/ Such companies are engaged in the provision of services (including consultancy service) in Vietnam through their employees or other subjects authorized by the companies to provide services for one or a number of projects; d/ Such companies have in Vietnam brokerage agents, commission agents or agents of any other type; e/ Such companies authorize subjects in Vietnam to sign contracts in the companies' name or to act as their permanent representatives in delivering goods and/or providing services in Vietnam. In cases where the double taxation avoidance agreements concluded by the Socialist Republic of Vietnam otherwise provide for the permanent establishments, such agreements shall apply. 4. Foreigners conducting business in Vietnam or having incomes generated in Vietnam from such sources as property leasing, capital lending, technology transfer, stock contribution, share and/or bill purchase... II. NON-PAYERS OF ENTERPRISE INCOME TAX SHALL INCLUDE: 1. Cooperatives, cooperation groups and other economic collectives having incomes from cultivation, husbandry and aquaculture. 2. Peasant households and individuals having a commercial agricultural output value of up to 90 million dong/year and an income of up to 36 million dong/year. B. TAX CALCULATION BASES AND TAX RATES Bases for the calculation of enterprise income tax, as prescribed in Article 6 of the Law on Enterprise Income Tax, are taxable incomes and tax rates. I. TAXABLE INCOMES: (calculated according to the calendar year or fiscal year) shall include taxable incomes from production, business and/or service activities, including taxable incomes from production, business and/or service activities abroad and other taxable incomes. According to Article 7 of the Law on Enterprise Income Tax, taxable incomes shall be determined as follows: Taxable incomes in the tax-calculation period = Turnover for calculating taxable incomes in the tax-calculation period - Reasonable costs in the tax- calculation period + Other taxable incomes in the tax-calculation period II. TURNOVER FOR CALCULATING TAXABLE INCOMES According to Article 3 of Decree No.30/1998/ND-CP of May 13, 1998 of the Government detailing the implementation of the Law on Enterprise Income Tax, the turnover for calculating taxable incomes is the total sum earned from the goods sale and/or service provision (without value added tax), including price subsidies, surcharges and surtax enjoyed by business establishment. For example: A sale invoice of enterprise A states: - The selling price: 100,000 dong. - The value added tax (10%): 10,000 dong. - The payment price: 110,000 dong. - So, enterprise A's turnover subject to the calculation of taxable incomes shall be 100,000 dong. The remaining 10,000 dong shall be the tax amount to be paid to the State. If the business establishment pays value added tax directly on the added value, the turnover for calculating taxable incomes shall be the price with value added tax actually paid by the buyer. For example: Enterprise B calculates its tax directly on the added value. It is entitled to use only common invoices. If such an invoice reflects a payment price of 110,000 dong, this shall be at the same time the turnover for calculating taxable incomes. In a number of specific cases, the turnover for calculating taxable incomes shall be determined as follows: 1. For goods sold by installment payment, it shall be the turnover of the sold goods calculated according to the selling price paid in lump sum, excluding interests on deferred payment. 2. For goods and services used for exchange, as gifts or donations, it shall be calculated according to the selling prices of products, goods and services of the same or similar kinds on the market at the time of making such exchange, gift or donation. 3. For products for self-consumption, it shall be the production costs of such products. 4. For goods processing, it shall be the earnings from the processing, including labor wages, costs of fuel, power, auxiliary materials and other costs in service of the goods processing. 5. For property leasing activities, it shall be the rentals collected in each period according to the leasing contracts. In cases where the lessees pay rentals in advance for several years, such turnover shall be the total sum of money collected. 6. For credit activities, it shall be the interests on loans to be collected in the tax calculation period. 7. For insurance and re-insurance business activities, it shall be the sum to be collected from the original premiums, the expertise agent fees, the re-insurance fees, the re-insurance commissions and other revenues. In cases where a production, business or service establishment has turnover in foreign currency(ies), it shall have to convert such turnover into Vietnam dong at the average actual buying/selling rates on the inter-bank foreign exchange market, announced by the State Bank at the time of collecting such foreign currency(ies). III. THE REASONABLE EXPENSES ALLOWED TO BE SUBTRACTED WHEN CALCULATING TAXABLE INCOMES According to Article 9 of the Law on Enterprise Income Tax; and Article 4 of Decree No.30/1998/ND-CP of May 13, 1998 of the Government detailing the implementation of the Law on Enterprise Income Tax, the reasonable expenses related to taxable incomes in the tax calculation period are guided in detail as follows: 1. Depreciation of immovable property used for production, business or service activities according to the regulations on the management, use and depreciation of immovable property issued together with Decision No.1062-TC/QD/CSTC of November 14, 1996 of the Minister of Finance. In cases where a Vietnamese party contributes the value of its land use right to a joint venture's legal capital or to the capital of an economic cooperation with foreign party(ies), the depreciation must ensure the full calculation of the land use right value from the time the foreign-invested enterprise or the joint venture starts production, business and/or service activities till the completion of the project. 2. Costs of raw materials, materials, fuel, energy and goods actually used in production, business and/or service activities related to the turnover and taxable incomes in a given period, which shall be calculated according to the reasonable materials wastage norms and the actual ex-warehouse prices. a/ The reasonable materials wastage levels: - The director of an enterprise shall have to elaborate and approve the reasonable materials wastage levels on the basis of the materials wastage norms issued by the competent level as well as the specific conditions of the enterprise. For an enterprise with the Managing Board, the General Director shall elaborate the materials wastage norms and submit them to the Managing Board for approval. - At the year-end, the enterprise shall have to make final account settlement of materials wastage, ensuring that it shall not exceed the already ratified norms and notify the tax agency thereof. b/ The actual ex warehouse prices shall include: - Prices of materials purchased from outside, including: prices stated in the seller's invoice (without value added tax) plus the purchasing expenses such as the costs of transport, loading and unloading, preservation, insurance premium, loss-related expenses, rents of warehouses, sorting and recycling fees. For import goods, the import tax amount and surcharges (if any) shall be added. - For materials purchased for use in the production of goods which are not subject to value added tax or subject value added tax which is calculated directly on the added value, the actual ex warehouse prices shall cover also the value added tax. - Prices of self-made materials, including: the actual ex warehouse prices plus the actual expenses arising in the material self-making process. - Prices of materials for outside processing, including: the actual exwarehouse prices of materials brought out for processing plus the processing charges, costs of loading, unloading and transportation from the enterprise's warehouse to the place of processing and vice versa. The above-mentioned prices of materials of different kinds and the costs of processing, transportation, loading/unloading, preservation and purchase must be evidenced by vouchers and/or invoices as prescribed by the Ministry of Finance. In cases where the materials and/or goods are agricultural, forest or aquatic products purchased directly from producers, the enterprise shall have to make a list, clearly stating the name(s), address(es) of the producer(s), the goods quantities, unit prices and the total payment; the enterprise's director shall ratify the expenditure and take responsibility before law therefor. 3. Salaries, wages, mid-shift meal allowances and other payments of the salary or wage nature. The enterprise's salary-expense shall include salaries, wages and other allowances of the salary or wage nature to be paid to laborers participating in the enterprise's business activities. The expense for salaries, wages and other allowances of the salary or wage nature paid to laborers is determined for each type of enterprise as follows: a/ For State enterprises: On principle, the salaries must be based on the actual expenses but must not exceed the salary price unit ratified by the competent State agency and the completed work volume. - The salary price unit shall be determined on the basis of the labor norms issued by the competent agency and the salary regime promulgated by the State. - The actual salary-expenses must ensure the principle that the salary increase rate is lower than the labor productivity increase rate. b/ For other enterprises: The salaries, wages and other payments of salary or wage nature paid to the laborers shall be determined by one of the following methods: - If the enterprise has elaborated the salary price unit on the basis of labor norms which have been ratified by the competent State agency, the salaries shall be calculated into the reasonable costs according to the actual expenses but must not exceed the salary price unit and the completed work volume as provided for State enterprises. - If the enterprise applies the labor contract regime or the collective labor agreement regime, the salaries, wages and other payments of salary or wage nature shall be determined according to the labor contracts or the collective labor agreements. - Apart from the above-said cases, salaries and wages paid to the laborers, which are based on the average income of each trade or branch in localities, shall be decided by the provincial/municipal People's Committee. The provincial/municipal Tax Departments shall, in coordination with the provincial/municipal labor agencies and on the basis of the salary regime applicable to State enterprises and the price situation in the localities, determine the average salaries, wages and allowances for each trade or branch in the localities then submit them to the provincial/municipal People's Committees for decision so as to apply them to tax calculation in each period. The following expenses shall not be calculated into the expenses for salaries and wages: - Salaries and wages of private enterprise owners or heads of production, business and/or service households. - Salaries and wages of founding members of companies who do not directly run production, business and/or service activities. c/ Expenses for laborers' mid-shift meals: shall be decided by the enterprise's director in conformity with the production and/or business results but the level of expenses for each laborer must not exceed the minimum wage level set for State employees by the State. 4. Expenses for scientific and technological research, excluding the expenses funded by the State or the higher-level management agencies; expenses for innovations and technical improvements, environmental protection, education, training and health within the enterprise according to the actual amounts of spending but must not be 1.3 times higher than the norms prescribed by the State. Expenses being financial supports for education, outside the enterprise, such as contribution to education promotion fund, assistance to disabled and orphaned school children..., shall be made, depending on the production and/or business situation of the enterprise, but must be evidenced with lawful vouchers and/or invoices. 5. Expenses for services purchased from outside: - Expenses for electricity, water, telephone, stationary, hiring of auditors and property insurance premiums must be evidenced with invoices and/or vouchers as stipulated by the Ministry of Finance. - Expenses for a overhaul of immovable property in order to restore the property's capability shall be accounted in the production and/or business costs in the year. If a repair costs too much, the expenses therefor shall be divided for transfer to the subsequent year. For particular immovable property the repair of which is made periodically, the enterprise shall be entitled to make advance deductions for big repair expenses from the production and/or business costs on the basis of the repair cost estimates made by the enterprise. If the advance deduction is lower than the actual amount of expenses, the enterprise shall be entitled to add the difference to the expenses; if it is higher than the actual expense, the difference shall be accounted as the reduction of the subsequent year's expenses. - Expenses for the purchase and use of technical documents, patents, technology transfer permits, trade marks... which are not regarded as immovable property, shall be gradually accounted in the business/production costs. - Rentals of immovable property shall be accounted into the production and/or business costs according to the actual payment amounts and the renting contract. In cases where the rentals of immovable property is paid in lump-sum for many years, such rentals shall be gradually accounted into the production and/or business costs according to the year of the use of such immovable property. - For contractors, expenses for services purchased from outside shall also include expenses to be paid to sub-contractors (if any). - Expenses for other services hired from outside. For business establishments which pay value-added tax by deduction method, the expenses for services purchased outside shall not include VAT. 6. Payments for women laborers as prescribed by law; labor protection expenses, expenses for the protection of the business establishment(s); deductions for the social insurance, health insurance and the trade union's fund as prescribed. The level of deduction for setting up managerial fund of a corporation shall be ratified and announced by the corporation's managing board after getting written consent from the competent finance agency. 7. Payment of interests on the loans borrowed for production, business and/or service activities from banks and/or credit institutions at the actual interest rates. Payments of interests on loans borrowed from other objects at the actual interest rates which, however, must not exceed the ceiling interest rate of loans of the same type and loan terms shall be set by the State Bank of Vietnam for credit institutions. Expenses for the payment of interests on loans borrowed for contribution to legal capital or statutory capital of foreign-invested enterprises shall not be calculated into the reasonable costs for the determination of taxable incomes. 8. Deductions for setting up the reserves for the price decrease of unsold goods, for bad debts and for the price decrease of securities at the enterprise which shall comply with the guidance of the Ministry of Finance. 9. Severance allowances for laborers as prescribed by the current regulations. 10. Expenses for the sale of goods and/or provision of services, including: expenses for preservation, packaging, transport, portage, renting of warehouses and/or storing yards, product and/or goods warranty. 11. Expenses for advertisements, marketing, sales promotion, reception of guests, ceremonies, transaction, external relations, conferences and other expenses, which must be evidenced with invoices and/or vouchers as prescribed by the Ministry of Finance, related