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MINISTRY Of fiNANCE SOCIALIST REPUBLIC Of VIETNAM
No. 59-TC-TCT Independence-freedom-Happiness
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Hanoi, 2 November 1991.
The Ministry of finance provides guidance and makes detailed provisions for implementation as follows:
A. TURNOVER TAX
I. The Ministry of finance, pursuant to the turnover tax rates issued in conjunction with the Law on Turnover Tax dated 30 June 1990 which was amended and added to by the State Council in its meeting dated 10 September 1991, and pursuant to article 1 of Decree No. 325-HDBT of the Council of Ministers dated 19 October 1991 reformulates and issues with this Circular a tariff of turnover taxes to replace those issued with Circular No. 45-TC-TCT of the Ministry of finance dated 4 October 1990.
II. The Ministry of finance makes detailed provisions for the application of the new amendments of and additions to the new tax rates as follows:
Section 1: Production Branch
1. Where a factory produces and sells clinker to another factory the turnover tax shall be five per cent of the total sale. In the event that the clinker is not sold to another factory but is used to produce cement then tax on turnover of cement sha ll be collected.
2. Where a factory pursuant to an economic contract produces ice and sells it to a fishing enterprise for freezing sea products either in a factory or at sea, the turnover tax shall be two per cent. Where the quantity of ice sold to the fishing ente rprise is not calculated precisely then the factory producing ice shall pay a turnover tax at a rate of six per cent of its total sales of ice.
3. Printing and publishing of all types of books and magazines:
3.1 A turnover tax rate of zero per cent shall apply in respect of the printing and publishing of all types of books on politics, textbooks, books on science and technology, books for children (economics and foreign languages), special magazines for p rofessions, photographs of leaders, people's daily newspapers, the People's Army newspaper, youth newspapers, children's newspapers, and books and newspapers printed in the languages of minorities.
3.2 A turnover of tax rate of one per cent shall apply in respect of the printing and publishing of other types of books and newspapers including recording of musical cassettes, video tapes, discs for political music programs, national tuition, and fi lm production, development and printing.
3.3 A turnover tax rate of four per cent shall apply in respect of the printing and publishing of the following:
cultural materials such as calendars, pictures, postcards;
trademark labels;
other printing materials such as all types of advertisements, forms, vouchers, documents, lottery tickets;
other activities of the printing and publishing profession such as cutting, lining, making and repairing printing plates.
4. A turnover tax rate of six per cent shall apply to all products referred to in this section which are processed from raw materials into finished products. This turnover tax rate shall apply to the sum paid by customers which shall reflect the exp enses incurred in their production including total wages, fuel, power, depreciation of machinery and any disbursements.
5. A turnover tax rate of one per cent shall apply to the production of breeding animals such as buffalo, cattle, pigs, goats, sheep and poultry such as hens, roosters, ducks, perching ducks and geese. This tax rate shall apply to the turnover upon sale after breeding.
6. A turnover tax rate of one per cent shall apply to the production of moulds or machinery for use in production using raw materials and other materials such as iron, wood, plastic and rubber to serve the various economic sectors: for example tools and implements used for agriculture, fishing, timber, salt production, and accessories and spare parts for production tools and implements.
7. The turnover tax rate applicable to the commerce branch shall apply to the purchase or sale of fixed assets by a manufacturer.
Section 2: Transport Branch
A turnover tax rate of one per cent shall apply to the transport of passengers in cities and provincial capitals.
Section 3: Commerce Branch
1. A turnover tax rate of one per cent shall apply to essential goods produced domestically or imported as follows:
- sale of foods, vegetables, fresh and raw foods (except canned foods);
- sale of pharmaceutical products for human consumption or for treatment of animals and poultry, including western and oriental drugs;
- sale of liquid foods, and materials used for producing energy (except petrol);
- sale of raw materials, other materials, technical materials, fertilizers, pesticide, second hand materials and products; and
- sale of machinery, equipment, accessories, transport vehicles (except passenger cars which have fifteen (15) seats or less, bicycles and motorbikes) experimental, medical and educational instruments (for teaching and practice), children's toys, young pl ants, seedlings, seeds and young breeding animals.
2. A turnover tax rate of two per cent shall apply to goods produced domestically (except the goods specifically referred to in sub-clause 1 above).
3. A turnover tax rate of four per cent shall apply to goods imported for consumption (except the goods specifically referred to in clause 1 above).
In particular:
- sale of beer: ten (10) per cent;
- sale of cosmetics, videos, petrol: eight per cent; and
- sale of motor vehicles with fifteen seats or less, televisions, motorbikes, canned foods, soft drinks: six per cent.
4. A turnover tax rate of two per cent and an income tax rate of three per cent (in total five per cent) shall apply to the business of trade in lots. The amount of tax to be paid shall be calculated on the value of each lot of goods according to the ir market price at the place of loading. Where a declaration of tax is not made at the place of loading then the value of goods for the purpose of calculating tax to be paid shall be the price of the goods at the unloading place or the place where the go ods are discovered or sold.
5. A turnover tax rate of twelve (12) per cent shall apply to the activities of wholesale agencies which are authorized by other persons to sell goods on their behalf pursuant to clause B-I-4 of Circular No. 45-TC-TCT of the Ministry of finance dated 4 October 1990. The turnover tax shall be calculated on the commission received. If the requirements are not satisfied then the turnover tax rate shall apply to the turnover of the goods sold.
6. Turnover tax in respect of trading businesses shall be calculated on the basis of either:
- the sale price of goods; or
- the difference between the sale price and purchase price of goods.
The calculation of turnover tax based on the difference between the sale price and purchase price of goods shall apply to a shop selling goods (except in the case of trade in lots) which keeps proper books of account and vouchers accepted by the tax offic e.
6.1 The tax rates applicable to each group of goods is as follows:
- purchase and sale of all types of salt: four per cent;
- publication of books and magazines: four per cent;
- purchase and sale of primary products, sea products, vegetables and fruits, fresh and raw foods: ten (10) per cent;
- purchase and sale of alcohol, beer, electrical goods, refrigerators, air-conditioners, motor-cycles, motor vehicles with fifteen (15) seats or less, cosmetics, petrol: sixteen (16) per cent;
- purchase and sale of gold, silver, precious stones: fifteen (15) per cent; and
- purchase and sale of other goods: fourteen (14) per cent.
6.2 The conditions which apply to the calculation of turnover tax on the basis of the difference between sales and purchase prices are as follows:
(a) Tax payers shall strictly observe the Ordinance on Accounting and Statistics of the State Council promulgated by Order No. 06-LCT-HDNN dated 10 May 1988 and other legal documents issued by the Council of Ministers, Ministry of finance and Gener al Department of Statistics for its implementation.
(b) Tax payers shall maintain a system of vouchers and document keeping in accordance with the provisions of the Decision No. 54-TC-TCT of the Ministry of finance dated 20 february 1991. Orders shall be required for the purchase of goods. Invoices s hall be issued upon sale of goods. Orders and invoices shall be in the standard forms issued by the Ministry of finance or in forms acceptable to the Ministry of finance.
(c) Tax payers who pay turnover tax on the difference between the sale price and purchase price shall register with the tax office (according to the form attached to this Circular).
(d) Tax payers shall obtain approval from the Taxation Department or tax office directly responsible for the collection of turnover tax, for the turnover tax to be collected on the basis of the difference between the sale price and purchase price of g oods.
After receiving approval from the tax office for turnover tax to be calculated on the basis of the difference between the sale price and purchase price of goods, the tax payer shall ensure that the calculation takes place in accordance with the stipulated provisions. If the provisions are breached then the tax payer shall be dealt with in accordance with the provisions in force at the time.
6.3 Calculation of the difference between the sale price and purchase price of goods:
(a) formula for calculation of the difference:
actual total sale actual total purchase
The difference = price during the - price during the
period of period of
calculation calculation
- purchase price means the actual price paid to the seller and recorded in the invoice of the seller or in the delivery note of the goods (excluding transport fees, loading, unloading and packing expenses).- sale price means the actual sale price stated in the invoice of the seller.
- the difference between sale price and purchase price of goods shall include:
transport expenses: transport, loading and unloading during trading;
management expenses: salaries, depreciation and other expenses; and
revenue received during trading.
(b) Determination of the difference according to the books of account:
- chart of accounts: in respect of the trading activities of a business, account No. 40 shall reflect the total amount of expenses incurred in the production of goods or material sold and the value of the total turnover of sales plus other expenses and r evenue. The above figures shall be the basis upon which the performance of the enterprise during the period of calculation may be determined. In terms of accounting, the difference between the sale price and purchase price shall be the difference betwee n the figures contained in the credit column of account 40 (entered on a double entry basis with the corresponding debit entries being in the debit column of accounts 50, 51 and 61) and the figures entered in the debit column of account 40 (entered on a d ouble entry basis with the corresponding credit entries being in the credit column of: account 20 recording the purchase of goods (for example by hand delivery recorded in sub-account 3); account 23 recording goods; or account 25 recording goods on consig nment).
In order specifically to monitor every activity, account 40 shall be divided into five sub-accounts:
sub-account 401 for principal production and business activity.
sub-account 402 for auxiliary production and business activity.
sub-account 403 for joint venture activity.
sub-account 404 for finance transactions.
sub-account 405 for other transactions.
The calculation of the difference is demonstrated in the following example:
In accordance with the example in the above diagram the specific calculation of the actual difference as the basis for determination of the tax to be paid by the tax payer is as follows:
1. sale figure (50 + 100 + 10) = 160 million
2. cost of goods for sale (90 +20 + 10) = 120 million
3. difference (1 - 2) = 40 million
4. tax to be paid = 14% of 40 million = 5.6 million
(c) Books of account and inspection of books of account:
Depending on the nature of its business the tax payer shall comply with the accounting standards relating to daily transactions journals, ledgers and other journals. In order to determine the actual sale price and purchase price a detailed book for accoun t 40 shall be maintained in which entries are made recording sales and results. The purchase price of goods for sale shall be determined first.
The value of materials and goods calculated in the accounts shall reflect their actual value. In reality, the materials and goods of the tax payers will be purchased from many sources, on many occasions and for different actual prices. Due to this the b usiness units shall adopt methods for determining the purchase price of their goods in accordance with the nature of their business and the level of skill of its management. The value of the purchase price of goods for sale shall be based on the actual s ale price, a previous sale price or the average sale price of previous sales. In reality however, many trading businesses use the calculation price.
The calculation price of materials and goods means a standard price fixed within the business and which is used consistently throughout the period of calculation or for one year. The calculation price may be the budgeted price, or price fixed by the Stat e for the sale or purchase of materials.
The quantity of materials and goods to be credited or debited in a detailed account (in vouchers, detailed books, and record of goods received and delivered) shall be valued according to their calculation price. The accounting method to be used in order to adjust the value of materials and goods in accordance with actual price is as follows:
The value of materials The value of The ratio of
and goods leaving materials the actual price
the warehouse = and goods x to the
according to according to account price
actual price the calculation
price
The actual price The actual price
of the stock of of materials and
materials and + goods added to
goods at the start stock during the
The ratio between of the period of period
the actual calculation
price and the = htmlhtmlhtmlhtmlhtmlhtml----
calculation The calculation The calculation
price price of materials price of materials
and goods in + and goods added
stock at the to stock during
beginning of the the period
period of
calculation
The ratio of materials and goods may be calculated for each group of goods or each item of goods and materials.Where tax payers adopt the method of keeping a book of vouchers the calculations relating to goods, their sale and purchases of them for the business shall be recorded in the following detailed lists and books:
List No. 8: total additions to and decreases of stock and the balance remaining
List No. 9: costs of goods sold
List No. 10: goods delivered for sale (Account 25)
List No. 11: payments received from the purchaser (Account 61)
Detailed book No. 3: sales and results
Detailed book No. 4: payments from purchasers
The calculation of actual tax to be paid shall be based on the above books of account.
6.4 Monthly payment of provisional turnover tax:
(a) A determination of the ratio of the difference between the sale price and purchase price shall be used as the basis upon which to calculate a provisional payment of turnover tax.
- The actual difference between the purchase price and the sale price for the last three months of the previous year will be used to determine the ratio between the sale price and the purchase price for comparing with the actual turnover in order to calcu late provisional tax for the period.
The actual difference will be determined quarterly and at the end of each year in order to determine the amount of tax to be paid.
for example where goods were sold in the previous period to a value of one hundred and sixty (160) million:
Value of the purchase price for sale is one hundred and twenty (120) million.
The differential ratio between sale price and purchase price
160 - 120
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160
In the event that the composition of goods in the group changes the above ratio shall be adjusted accordingly.(b) Calculation of provisional turnover tax to be paid during the tax period.
The basis upon which turnover tax shall be calculated on turnover during the tax period and tax rate to be applied in respect of each group of goods in order to calculate the provisional tax payable shall be that contained in the following formula:
Provisional tax = turnover x new ratio or ratio x tax rate
in the previous period
In the example referred to above the monthly turnover of goods is $60 million and the tax rate 14%Provisional tax = 25% x 14% x 60 million = 2.1 million
payment
6.5 Calculation of tax paid quarterly and yearly:
(a) The determination of tax paid shall be based on the quarterly calculation of the tax payer (as shown in clause 6.3)
(b) Calculation of additional tax to be paid or refunded:
Tax to be paid = total tax - total provisional
or refunded to be paid tax paid
in accordance
with the
calculation
Section 4: Service Branch1. A turnover tax rate of half of one (0.5) per cent shall be applied to the turnover resulting from the sale of foreign currency by foreign currency trading businesses. Where the turnover of a production business is in foreign currency and that pro duction business converts its foreign currency into Vietnamese currency, such conversion shall not be subject to payment of turnover tax.
2. A turnover tax of one per cent shall apply to turnover resulting from the use of public funds for public service activities such as: water supply; city lighting; parks; the provision of parking facilities for bicycles, motorbikes and motor vehicle s; the creation of sculptures in public places, and parks; and cultural restoration and arts projects.
3. A tax rate of fifteen (15) per cent shall apply to turnover resulting from the activities of intermediaries such as export and import agents, property agents, capital construction agents, transport of goods and passengers agents, shipping agents, finance brokers, and investment brokers.
III. further instructions on turnover tax
1. Where capital construction activity funded by the State is delayed due to the allocation of funds, the temporary measure for determination of turnover upon which tax may be calculated shall be the amount of funds actually received.
2. Turnover which results from the leasing of property shall be subject to turnover tax levied on the rent collected, in accordance with the specific tax rates of the service branch set out in the tariff.
A person who carries on a business of leased premises shall pay tax in accordance with his type of business.
3. Turnover from purchase and sale of premises shall be subject to turnover tax at a rate of two per cent. If the premises are built and sold by the tax payer turnover tax shall be levied in accordance with the branch of construction at a rate of th ree per cent on turnover.
4. Where the purchaser makes payment to the seller in the form of materials or goods and the sellers (including exporters) pay turnover tax on the turnover of sale then upon those materials and goods being sold then they shall pay turnover tax on the turnover.
5. The following activities shall, in accordance with clause 3 of article 18 of the Law on Turnover Tax, for the time being not be subject to turnover tax:
repairs to, and maintenance of streets, bridges, dykes, and dams by public funds provided by the State;
geological exploration; and
distributing of books and magazines where, at the stage of printing and publishing, they are exempted from turnover tax.
6. Turnover tax in respect of enterprises with foreign owned capital and foreign parties to contractual business co-operation pursuant to the Law on foreign Investment in Vietnam shall be levied in accordance with the Circular No. 55-TC-TCT of the Mi nistry of finance dated 1 October 1991.
B. SPECIAL SALES TAX
1. Additional details in respect of the application of this tax rate are as follows:
(a) Cigarettes: rates of tax shall be determined in relation to shredded tobacco. filter cigarettes produced using local shredded tobacco shall be subject to a rate applicable to locally manufactured cigarettes.
(b) Alcohol of all types including clear alcohol, alcohol made from fruit and fortified spirits.
- liquor with an alcohol content of over 40 degrees proof: tax rate of 50%
- liquor with an alcohol content between 30 to 40 degrees proof: tax rate of 40%;
- liquor with an alcohol content less than 30 degrees proof including alcohol made from fruit and medicinal alcohol the manufacture of which requires a licence to be issued by a medical authority and alcohol made from sugar: tax rate of 20%; and
Tax on alcohol levied in accordance with the provisions contained in article 7 of the Law on Special Sales Tax and article 5 of Decree No. 352-HDBT shall be levied on the basis of the sale price as sold by the manufacturer (including bottles, corks, bags, and labels).
2. The tax rate to be applied in respect of alcohol and cigarettes as stated in Circular No. 43-TC-TCT-CS of the Ministry of finance dated 13 August 1991 shall apply from 1 July 1991 to the end of 30 September 1991. Manufacturers who pay the special sales tax during this period in accordance with the above tax rates shall at the end of the year not be required to pay additional tax.
from 1 October 1991 the tax rate stated in Decision No. 472-NQ-HDNN8 of the State Council dated 10 September 1991 and the provisions of this Circular shall apply.
3. Pursuant to article 2 of Decree No. 325-HDBT of the Council of Ministers dated 19 October 1991 which makes detailed provisions for implementation of Decision No. 472-NQ-HDNN8 of the State Council dated 10 September 1991, the Ministry of finance sh all provide further information on the reduction of and exemption from payment of actual special sales tax as follows:
Where special sales tax is paid in respect of the revenue earned by a new factory or assembly line during its trial period and as a result losses are incurred the Minister of finance shall give consideration to reducing the special sales tax based on the specific circumstances and subject to an application submitted by the taxpayer and to the proposal of the Tax Department of the province or city concerned.
The duration of a tax reduction shall not exceed one year.
The reduction of special sales tax shall be in a sum equivalent to the loss suffered, provided that sum does not exceed fifty (50) per cent of the special sales tax due.
C. DATE Of EfFECT AND IMPLEMENTATION
1. This Circular shall be of full force and effect as of 1 October 1991.
Any previous provisions of the Ministry of finance on turnover tax and special sales tax which are inconsistent with this Circular are hereby repealed.
2. The localities concerned shall report any difficulties or inquiries arising out of the implementation of this Circular to the Ministry of finance for its examination and guidance.
for Ministry of finance
Vice Minister
PHAN VAN DINH