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MINISTRY Of fiNANCE      SOCIALIST REPUBLIC Of VIETNAM
   No. 51-TC-TCT        Independence-freedom-Happiness.
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                                 Hanoi, 3 July 1993.

CIRCULAR ON TAXATION Of fOREIGN INVESTMENT IN VIETNAM

Pursuant to Decree No. 18/CP dated 16 April 1993 of the Government which provides detailed regulations for the implementation of the Law on foreign Investment in Vietnam;

Pursuant to the laws and ordinances on taxation in force in the Socialist Republic of Vietnam;

The Ministry of finance issues regulations for the implementation of provisions relating to taxes which are applicable to enterprises with foreign owned capital, foreign parties to contractual business co-operation in accordance with the Law on foreign In vestment in Vietnam as follows:

PART I

Scope of Application

1. Enterprises with foreign owned capital are: joint venture enterprises and enterprises with 100% foreign invested capital established in accordance with the Law on foreign Investment in Vietnam, having activities in all fields, including joint venture e nterprises which build up the infra-structures of the special export processing zones and enterprises which belong to the SEP Zones as stipulated in the Decree No.322-HDBT dated October 18, 1991 issued by the Council of Ministers (now called the Governmen t)

2 All joint venture enterprises which are established on the basis of agreements to which the Government of the Socialist Republic of Vietnam and the Government of a foreign country are signatories. In circumstances where the agreement contains provision s on taxation for the joint venture enterprise which are inconsistent with the provisions of the Law on foreign Investment in Vietnam or the provisions of this Circular, the provisions of the agreement shall prevail.

3. All foreign parties to contractual business co-operation (hereinafter referred to as foreign contracting parties) in accordance with the Law on foreign Investment in Vietnam.

4. The following are not subject to the provisions of this Circular:

- Joint venture enterprises, enterprises with one hundred (100) per cent foreign owned capital, and foreign parties to contractual business co-operation who enter into Build-Operate-Transfer (BOT) contracts, as stipulated in article 55 of Decree No. 18 CP dated 16 April 1993 of the Government, and therefore fulfill all tax obligations to the Vietnamese Government in accordance with separate regulations.

- foreign contractors, economic organizations, and individuals who carry on business in Vietnam under investment forms which are not in accordance with the Law on foreign Investment in Vietnam.

PART II

Guidance for the Taxation of Enterprises with foreign Owned Capital and foreign Contracting Parties

A. Profits Tax

1. Taxpayers

Enterprises with foreign owned capital and foreign contracting parties must pay profit tax on all profits earned from any authorized economic operations in accordance with the provisions of the license issued by the State Committee for Co-operation and In vestment.

Where the enterprise with foreign owned capital conducts an ancillary business (a branch or a subsidiary) which makes profits, those profits shall be included in the profits of the enterprise and be subject to profits tax accordingly.

In cases where a foreign contracting party participates at the same time in several business co-operation contracts, profits tax shall be calculated separately in respect of each contract. (Each contract shall be a separate taxable entity).

2. Determining taxable profit

Taxable profit of an enterprise with foreign owned capital is the difference between the total revenue and total expenditure of the enterprise (being the principal enterprise and its branches, if any) together with its other additional income earned withi n the tax year.

Other additional income includes: rents received from leasing fixed assets (where this is not the main operation of the business), proceeds from the sale of assets of a liquidation or transfer of assets, proceeds from transfer of shares, profits earned fr om joint venture operations with other economic organizations and profits from financial dealings such as the difference between interest on deposits in banks and interest loans from banks, and the difference between prices and rates of exchange.

Taxable profit of the foreign contracting party is the difference between its total revenue and total expenditure resulting from performance of the contract signed with the Vietnamese party.

(a) Revenue

- Revenue of the enterprise with foreign owned capital or the foreign contracting party comprises of revenue from the sale of goods or from the provision of services, and other income from any activity of the enterprise or the foreign party earned within the tax year.

- In cases where a business co-operation contract is in the form of product sharing, revenue, for the purposes of calculation of profits tax, is calculated by multiplying the quantity of product received by the average market price for products of like qu ality at the time of receipt. The tax office shall determine the average market price.

(b) Expenditure

- The allowable expenditure of the enterprise with foreign owned capital or foreign contracting party, regardless of the difference in accounting standards, is determined as follows and includes:

- Costs of raw and other materials and energy required for the manufacture of principal products and by-products or for the provision of services.

- Wages, salaries, and allowances paid to both foreign and Vietnamese employees on the basis of labour contracts which are in accordance with the Regulations on Labour for Enterprises with foreign Owned Capital issued with Decree No. 233-HDBT dated 22 Jun e 1990 of the Council of Ministers (now the Government).

- Depreciation of fixed assets used in the manufacturing operation. The rate of depreciation of fixed assets must be in accordance with the rates stipulated in Circular No. 31 TC/TCDN dated 15 July 1992 of the Ministry of finance. In the event that the enterprise or foreign contracting party depreciates fixed assets at a rate which is higher than the rates stipulated in Circular 31 TC/TCDN, the written approval of the Ministry of finance must be obtained.

- Costs of the acquisition or of the right to use any technical documents, patents or license and costs of technical services.

- Management expenses of the enterprise including: administrative expenses, maintenance expenses for buildings and research facilities, expenses for labour safety and environmental protection, awards for discoveries and inventions, recruitment and trainin g expenses, and expenses for fire prevention and safety.

- Taxes paid or imposts in the nature of taxation.

- Interest payments on loans, provided that the interest rates of these loans are reasonable.

- Expenditure which relates directly to the sale of products or the provision of services such as maintenance, packaging, and advertising.

- Payments to social security funds for employees which, according to the provisions of article 46 of Decree No. 233-HDBT dated 22 June 1990, is an obligation of the enterprise.

- Insurance premiums for the assets of the enterprise.

- Losses brought forward from previous years. Joint venture enterprises and enterprises with one hundred (100) per cent foreign owned capital are permitted to bring forward losses of any financial year to set off against the profits of the following five years. Once the enterprise discover the loss it can immediately bring forward that loss to the following year.

- Other expenditure not referred to above provided that it does not exceed five per cent of the total amount of expenditure.

All expenditure claimed must be supported by suitable documentary evidence and, regardless of what the expenditure is, the taxable entity must have the suitable documentary evidence before the expenditure can be used for the purpose of calculating taxable profit.

The enterprise or foreign contracting party shall not be permitted to treat the following as allowable expenditure for the purpose of calculating taxable profit:

- Expenditure on materials and energy used for purposes such as lending or sale, disposal and exchange of property or gifts which is not related to the earning of taxable profits.

- Depreciation of fixed assets in excess of the standard rates stipulated by the Ministry of finance, or depreciation of fixed assets which have already been fully depreciated.

- Loss of any assets or materials, as result of theft, natural disasters, and unidentified causes; bad debts.

- Loss as a result of disruption of production, regardless of its cause.

- Losses which have been paid out by insurance companies.

- Payments which the enterprise has the responsibility to pay such as damages paid as a result of a breach of economic contract, fines paid in respect of breaches of the law, and penalties for late repayment of a loan.

- Interest paid by investors on loans used for the purpose of contribution to the prescribed capital of the enterprise or the amount in the nature of interest paid by a Vietnamese investor to the State of Vietnam which provided capital to the Vietnamese p arty for contribution to the prescribed capital of the enterprise.

- Loan interest paid by the enterprise, applicable to the portion of any loan in excess of two hundred and thirty four (234) per cent of the legal prescribed capital of the enterprise, provided that this provision shall not apply in cases where the approv al of the State Committee for Co-operation and Investment is obtained for the prescribed capital of the enterprise to be less than thirty (30) per cent of the total invested capital.

- Losses resulting from the sale or transfer of shares.

3. Determining the amount of profits tax payable

The profits tax to be paid shall be the amount of taxable profits earned within the tax year multiplied by the profits tax rate stipulated in the license issued by the State Committee for Co-operation and Investment to the enterprise or the foreign contra cting party.

The tax year shall be the financial year used by the enterprise with foreign owned capital or foreign contracting party in preparation of its accounts.

4. Procedures for payment of profits tax

The profits tax shall be collected on a provisional basis every three months according to the declaration submitted at the end of the previous tax year or, where the contract has been terminated, profits tax shall be collected according to the actual resu lts of the business at that time.

Profits tax, in respect of business co-operation contracts the duration of which are less than one year, shall be collected in two installments, the first to be collected provisionally halfway through the contract and the second upon its expiry, adjusted according to the actual results of the business at that time.

The enterprise with foreign owned capital or foreign contracting party shall, no later than five days after the end of the tax payment period referred to above, make a profits tax declaration in the form of form No. 1 attached to this Circular and submit it to the local tax office where the head managing office of the enterprise or foreign contracting party is located in Vietnam and the local tax office shall examine the declaration, calculate the amount of profits tax, and give notice to the enterprise o r foreign contracting party of the amount to be paid. In the event that the enterprise or foreign contracting party fails to submit a profits tax declaration within the prescribed time limit the local tax office shall have the power to determine the amou nt of profits tax to be paid on an interim basis, give notice of profits tax to be paid, and penalize the late submission of the declaration.

No later than five days after the date of receipt of the notice of profits tax to be paid, the enterprise with foreign owned capital or the foreign contracting party shall pay in full the amount stated in the notice to the State Treasury office nominated by the tax office.

No later than three months after the end of the tax year, the enterprise with foreign owned capital or foreign contracting party shall submit a statement of accounts which has been audited by an independent auditing firm and a profits tax declaration for the year to the local tax office where the head managing office of the enterprise or foreign contracting party is located. The local tax office shall assess the profits tax to be paid in accordance with part IV of this Circular.

5. Refund of profits tax for reinvestment

(a) Any foreign economic organization which, or individual who, uses its or his share of profit for reinvestment in Vietnam, for a period of more than three years, shall be given a refund by the Ministry of finance for profits tax paid on the amount reinv ested.

The refund shall not be paid where the foreign party to an enterprise with foreign owned capital has not yet contributed, in full, its contribution to the prescribed capital as stated in the license issued by the State Committee for Co-operation and Inves tment.

(b) The amount of profits tax to be refunded in respect of reinvested profit shall be calculated as follows:

Th  = L x S 
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    100% - S

L :is the share of profits (after payment of profits tax) reinvested.

S : is the profits tax rate stated in the license.

(c) Procedures for refund of profits tax for reinvestment:

To receive a refund for profits tax paid in respect of reinvested profits, foreign economic organizations or individuals shall provide the following documents to the local collecting tax office where its head managing office is located:

- decision approving the reinvestment issued by the State Committee for Co-operation and Investment;

- declaration in the form of form No. 2 attached to this Circular stating the reinvested profit.

Upon receipt of the above documents, the tax office shall proceed to examine them and calculate the profits tax amount to be refunded and forward the application and relevant documents to the Ministry of finance (Department of Budget) which shall make the refund to the reinvestor.

B. Withholding Tax

1. Taxable profit and taxpayers subject to withholding tax

Profits earned by foreign economic organizations or individuals as the result of investing capital in any of the forms stipulated in the Law on foreign Investment in Vietnam including tax refunded on the amount of profits reinvested shall, when transferre d out of Vietnam, be subject to payment of withholding tax.

foreign economic organizations or individuals shall, when transferring their profits out of Vietnam, be subject to payment of withholding tax.

2. Determining the amount of tax payable

The amount of withholding tax to be determined shall be equal to the profit amount proposed to be transferred abroad, multiplied by the withholding tax rate stipulated in the license issued by the State Committee for Co-operation and Investment.

Where a foreign economic organization or individual transfers its profits abroad in the form of finished products or goods, they shall not only be liable for payment of export duty but also for payment of an amount of withholding tax which is the result o f multiplying the following: the quantity of products exported; the fOB price stated in the contract; and the withholding tax rate. Where no such contract is available or the contract does not stipulate a selling price, the price shall be the average fOB price of that particular class of goods in the market determined by the tax office as at the date on which the products were exported.

3. Procedure for payment of withholding tax

Withholding tax shall be collected in respect of each transfer.

Whenever transferring profits abroad, the foreign economic organization or individual shall make a declaration to the tax office which office deals directly with the profits tax collection of the business establishment in which the foreign economic organi zation or individual has invested capital. The declaration shall be in the form of form No. 3 attached to this Circular.

Within two business days of receipt of such a declaration, the tax office shall examine it, calculate the withholding tax payable, and give notice to the tax payer of the withholding tax to be paid.

Upon receipt of such a notice from the tax office, the foreign economic organization or individual shall pay the withholding tax at the office of the State Treasury nominated by the tax office, and the State Treasury shall issue to the tax payer a withhol ding tax receipt stating the amount of withholding tax paid and the transfers in respect of which it was paid.

C. Export Duty and Import Duty

All goods and commodities which enterprises with foreign owned capital and foreign contracting parties are permitted to export from and import into Vietnam, including goods of the Vietnamese market sold into export processing zones and goods from export p rocessing zones sold into the Vietnamese market, shall be subject to export duty or import duty which is payable in accordance with the Law on Export and Import Duties.

1 Exemption from and reduction of export and import duty

In addition to the cases of exemption from, and reduction of, export and import duty provided for in the Law on Export and Import Duties, enterprises with foreign owned capital and foreign contracting parties shall also be considered for exemption from, o r reduction of, duty in accordance with article 35 of the Law on foreign Investment in Vietnam and article 76 of Decree No. 18-CP dated 16 April 1993 of the Government. When importing goods exempted from duty in accordance with the above, an enterprise w ith foreign owned capital and foreign contracting party shall carry out the formalities for duty exemption with the Ministry of finance in accordance with the following provisions:

(a) for cases of duty exemption stipulated in article 76 of Decree No. 18-CP dated 16 April 1993 of the Government:

- Whenever an enterprise with foreign owned capital and foreign contracting party import goods which are, according to article 76 of Decree No. 18-CP dated 16 April 1993, exempted from duty, they must, within thirty (30) days as from the date of receipt o f the tax notice of the customs office or within ten (10) days as from the date the customs office completes its inspection of the consignment of imports, carry out the procedures for exemption from duty with the Ministry of finance (General Department of Taxation). The application file for the exemption from duty shall include:

- Application requesting the exemption from duty for a particular consignment submitted by the enterprise with foreign owned capital or foreign contracting party to the Ministry of finance.

- Official letter issued by the Ministry of Commerce, permitting foreign invested capital enterprises or foreign contracting parties to import materials or goods under the tax exemption cases as stipulated at Article 76 of the Decree No. 18/CP dated April 16, 1993 and stating clearly the items, quantity, types and value of the free-duty imported goods.

- Licences for goods export import in respect of each time of import / export granted by the Ministry of Commerce.

- Customs declaration on export - import goods in relation to the incoming goods that have been checked by the Customs office.

+ No later than 3 days from the date of receipt of application for exemptions from export-import duties, the General Tax Department shall issue an official letter to the enterprises or foreign contracting parties either to confirm duty-exemption or to not ify the reason why the enterprises or foreign contracting parties cannot be considered for duty exemption so that the latter can assess the import duty to be paid of the incoming goods with the Customs Office.

Contacting offices for application for exemption form export import duties:

Hanoi: General Department of Tax, 10 Phan Huy Chu.

Ho Chi Minh City: Representative office of the General Department of Tax, 138 Nguyen Thi Minh Khai.

(b) for cases of export and import duty exemptions stipulated in the Law on Export and Import Duties and in article 35 of the Law on foreign Investment, the procedures for making an application shall be in accordance with the guidance provisions of Circul ar No. 8 TC/TCT dated 31 March 1992 of the Ministry of finance.

4. Declaration and collection of export and import duty

All exported and imported commodities of enterprises with foreign owned capital or foreign contracting party which are exempted from payment of duty as stated above shall, if sold or otherwise disposed of in Vietnam, be subject to approval of the Ministry of Commerce and the payment of import duty.

Within two days of the date of such sale or disposal, the enterprise with foreign owned capital or the contracting party concerned shall deliver a declaration (in the form of form No. 4 attached hereto) to the customs office of the local province or city where the enterprise has its head managing office (or alternatively the tax office in the event that no customs office exists within that particular locality), or to the customs office or tax office of the locality where the goods are sold or disposed of. In the event that the enterprise or contracting party fails to submit a declaration within the time limit referred to above, it shall be fined pursuant to the provisions of the Law on Export and Import Duties.

Any import duty to be imposed on exempted goods shall be determined on the basis of a number of factors including the rate of duty, the rate of exchange, and the dutiable value at the time of sale or disposal in accordance with the provisions of the Law o n Export and Import Duties. The dutiable value shall be determined in accordance with the List of Minimum Dutiable Value promulgated by the Ministry of finance at the time of sale or disposal.

In the event that the goods are permitted to be sold or disposed of are in fact fixed assets, the value of which has been depreciated, their value for the purposes of the calculation of any tax to be paid shall be their actual sale price as evidenced by l awful receipt and all relevant documentation.

Tax offices shall be responsible for the inspection of the usage of exports and imports exempted from duty and where the tax office discovers that an enterprise with foreign owned capital or foreign contracting party has sold, or otherwise disposed of any exempted commodity, the tax office and customs office shall collect the outstanding duty and deal with the breach in accordance with the provisions of the law.

D. Turnover Tax, Special Sales Tax

1. Where enterprises with foreign owned capital and foreign contracting parties wish to sell their products and goods in the Vietnamese market, or provide services in Vietnam, they shall pay turnover tax or special sales tax in accordance with the Law on Turnover Tax or Law on Special Sales Tax.

2. The basis upon which the amount and rate of any turnover tax or special sales tax are to be calculated, and the cases of exemption from, or reduction of tax shall be determined in accordance with the provisions of the Law on Turnover Tax, the Law on Sp ecial Sales Tax, and any decrees or circulars which regulate the implementation of these laws.

3. Procedures for tax payment

In relation to each month, the enterprise with foreign owned capital or foreign contracting party shall no later than within the first five days of each subsequent month, duly complete and submit to the tax office a declaration of any turnover tax or spec ial sales tax for the previous month. (Such declaration shall be in form No. 5 attached hereto).

Where the enterprise has subsidiaries, those subsidiaries must submit declarations and pay turnover tax to the tax office of the particular locality where they are located.

Manufacturers of goods which are subject to special sales tax shall submit declarations and pay special sales tax in the locality where their manufacturing plants are located.

Within five days of the date of receipt of such declaration of the enterprise with foreign owned capital or foreign contracting party (or any ancillary businesses), the tax office shall examine, calculate and provide to it a notice of the amount of tax to be paid.

The enterprise with foreign owned capital or foreign contracting party shall within five days of the receipt of that notice, pay in full the amount specified in the notice to the office of the State Treasury nominated by the tax office.

E. Royalties

1. In accordance with the provisions of the Ordinance on Royalties dated 30 March 1990, enterprises with foreign owned capital or foreign contracting parties which exploit any of the natural resources of Vietnam shall pay royalties.

2. The specific rate of royalty, in respect of each circumstance, shall be considered and determined by the Ministry of finance and State Committee for Co-operation and Investment, based on the conditions of the exploitation, the quality of the particular resource, transport and exploitation expenses, and by taking into account accepted international practices. A specific rate applicable to each project shall then be in accordance with the provisions of the tariff in Decree No. 6-HDBT dated 7 January 199 1.

The quantity of natural resources exploited and the value for the purpose of calculating royalties shall be determined in accordance with the provisions of the Ordinance on Royalties and Decree No. 6-HDBT dated 7 January 1991.

3. Declaration and payment of royalties

Within five days prior to the commencement of operations, incorporation, or dissolution, enterprises with foreign owned capital or foreign contracting parties must register the operation for the exploitation of natural resources with the tax office direct ly responsible for the collection of tax. (The registration shall be in accordance with form 6 attached hereto).

In relation to each month, the enterprise with foreign owned capital or foreign party shall, within the first five days of each subsequent month, submit to the tax office a declaration of any royalties (in accordance with form 7 attached hereto). Upon rec eipt of such declaration, the tax office shall examine, calculate and notify the enterprise or foreign contracting party of the amount of tax to be paid. The enterprise or foreign contracting party shall within five days of the receipt of that notice, pa y in full the amount specified in the notice to the office of the State Treasury nominated by the tax office.

f. Other financial Obligations

Other types of tax applicable to, and other financial obligations of, enterprises with foreign owned capital and foreign contracting parties shall be regulated by the provisions of the relevant laws currently in force of the Socialist Republic of Vietnam.

PART III

Currency in which Tax is to be Paid and Calculation of Tax to be Collected in Accordance with the Groups of the Budget

A. Currency in which Tax is to be Paid

Enterprises with foreign owned capital or foreign contracting parties which are liable for payment of tax pursuant to Part II of this Circular shall make payment in either Vietnamese currency or in a foreign currency approved by the Ministry of finance.

Any conversion from foreign currency into Vietnamese currency and vice versa shall take place in accordance with the foreign exchange rates published by the foreign Trade Bank of Vietnam at the time when such payment are made.

B. Calculation of Tax to be Collected in accordance with the Current Budget

The income accruing to the State Revenue as a result of taxes collected from the enterprise with foreign owned capital or foreign contracting party shall be calculated into chapter 16 of the current budget.

Depending on each particular type of tax levied, its actual collection shall be designated to one of the following sections and calculated accordingly:

Profits tax: Section 19, with suitable type, category, class.

Withholding tax: Section 2, with suitable type, category, class.

Export duty: Section 4

Import duty: Section 5

Turnover tax: Section 18, with suitable type, category, class.

Special sales tax: Section 17, with suitable type, category, class.

Royalties: Section 20, with suitable type, category, class.

Trade license tax: Section 16, with suitable type, category, class.

Individual income tax: Section 25

Rentals in relation to land, water and sea surface: Section 23, with suitable type, category, class.

Other taxes: Section 30, with suitable type, category, class.

PART IV

Assessments of Taxation Liability

At the end of each financial year or upon expiry of the operation or dissolution (in accordance with the Law on foreign Investment in Vietnam) of the enterprise with foreign owned capital or foreign contracting party, the tax office shall assess the amoun t of tax due and payable (hereinafter referred to as the tax assessment) by enterprises or foreign contracting parties in accordance with the following provisions.

A. Assessment of Annual Tax

Within a period of three months as of the end of each financial year, enterprises with foreign owned capital and foreign contracting parties shall submit their audited statements of account to a tax office. The tax office shall then assess the tax payabl e as follows:

1. Determination of the total tax liability for the year: based on the statements of account and other relevant accounting documents, the tax office shall examine these and calculate the exact total amount to be paid in respect of each separate type of ta x for the entire financial year. These figures shall be compared with those contained in the tax declarations submitted that year in order to determine the accuracy of those declarations.

2. Determination of the total amount of tax already paid during the year: based on the tax declarations submitted and receipts of tax paid, the tax office shall determine the amount of tax previously paid by the enterprise or foreign contracting party dur ing the year in respect of each separate type of tax.

3. Determination of tax which has been underpaid or overpaid during the year and action to be taken in the event of breach: based on the results determined in 1 and 2 referred to above, the tax office shall determine any amounts of tax which have been und erpaid or overpaid in the financial year in respect of each separate type of tax. The enterprise shall be refunded any tax which has been overpaid or alternatively, shall receive a credit in respect of that amount against the tax otherwise payable by it i n the following year. In respect of underpaid tax, the tax office shall determine the cause of underpayment, order that the owing amount be collected and if the underpayment is due to the fault of the enterprise or foreign contracting party, it may also i mpose the appropriate penalty.

When assessing the annual tax payable, the tax office shall not be permitted to set off the overpaid tax of one type against underpaid tax of another type.

B. Assessment of Tax Due upon Expiry or Dissolution of Enterprises with foreign Owned Capital and foreign Parties

Upon the termination of any business co-operation contract or the expiry or dissolution of any enterprise with foreign owned capital in accordance with the Law on foreign Investment in Vietnam, the tax office shall immediately carry out the following:

1. Determine the annual taxation liability in accordance with the procedures referred to in Part A above; and

2. Define the rights and obligations of each party to the joint venture enterprise and business co-operation contract or of foreign economic organizations or individuals belonging to enterprises with one hundred (100) per cent foreign owned capital to thi rd parties

The principal aspects of this task are:

- To examine the report of the liquidation committee of the enterprise concerned on the overall liabilities of the enterprise or contracting parties at the time operation ceased, the possible sources of repayment of those liabilities, and the specific res ponsibility of the investors for them. To control and provide guidance in the payment of liabilities in accordance with the order of priority.

- To ascertain the current invested capital of the investors recorded in the accounts of the enterprise, including all capital in cash, fixed assets, materials and commodities, and to confirm to the foreign investors that their invested capital may be tra nsferred abroad.

To determine the profit and loss, and the rights and responsibilities of the investors in relation to any such profits and losses; and

To determine the profit payable to each foreign investor for the purposes of transfer abroad, and to calculate, determine, collect and immediately pay to the State Treasury the withholding tax payable on such profit, except where the foreign investor is a ble to demonstrate by way of relevant documentation that such profit will not be transferred abroad due to any of the following reasons:

- the profit is to be used for the purposes of reinvestment in Vietnam as approved by the State Committee for Co-operation and Investment;

- the profit, in addition to income which has already been declared, is to be used to satisfy individual expenses incurred in Vietnam;

- the profit is to be used in Vietnam for some other unspecified purpose.

C. Method of Tax Assessment

Prior to preparing an annual tax assessment or a tax assessment upon the termination of operation or dissolution of an enterprise with foreign owned capital or foreign contracting party, the tax office shall issue a decision regarding a taxation examinati on and assessment of the accounts of the enterprise. This decision shall be sent, in writing, to the director of the enterprise or representative of the foreign contracting party or liquidation committee at least three days prior to the date of commencem ent of the examination.

The result of the taxation examination shall be recorded in written minutes signed by the duly authorized representative of the enterprise or foreign contracting party and representatives of the tax office which is responsible for the examination and asse ssment. The tax office concerned shall have the responsibility of sending to the General Department of Taxation of the Ministry of finance copies of the minutes and copies of the accounting report on the enterprise.

Where the enterprise with foreign owned capital or foreign contracting party does not agree with the assessment made by the tax office contained in the minutes, it may make complaint to the General Department of Taxation of the Ministry of finance. The en terprise or foreign contracting party however must strictly comply with the requirements of the assessment issued pending resolution of the complaint.

PART V

Responsibilities of Enterprises with foreign Owned Capital and foreign Contracting Parties

1. At least five days prior to the commencement of operation, dissolution, or the making of changes in relation to products, scope of production or business, or to head managing office location, enterprises and its ancillary businesses or foreign contract ing parties shall carry out all necessary registration procedures at the tax office of the province or city where the head managing office is located (in accordance with form No. 8 attached).

2. To comply strictly with all regulations relating to tax declaration while carrying on the process of manufacturing or business.

3. To produce for inspection at the request of the tax office all books of account and accounting receipts, and other necessary documents which relate to tax calculation and assessment.

4. To pay tax in full and in time.

PART VI

Powers and Duties of the Tax Office

1. To provide tax payers with the necessary guidance in order that they may register and make declarations in relation to each type of tax in accordance with the correct regulations.

2. To examine all tax declarations, books of account, receipts, and other necessary documents to calculate tax and prepare tax assessments, and to request any tax payer to explain any unclear matters which relate to the calculation and assessment of tax.

3. To calculate and provide notice to the relevant tax payer of any amounts of tax to be paid. The tax office shall have the power to determine the amount of tax payable in cases where the tax payer does not submit a tax declaration within the stipulated time.

4. To prepare the necessary minutes and deal appropriately with any breaches of the regulations in accordance with the powers stipulated by law.

5. To be responsible for the strict implementation of the Law on Taxation, and to ensure that all tax calculations are carried out faithfully, accurately, and objectively.

PART VII

Dealing with Breaches and Complaints

1.Any breaches of the regulations relating to taxation shall be subject to the following penalties:

- Where the regulations in relation to registration referred to in point 1 of part V of this Circular are breached, a penalty shall be imposed on the tax payer in accordance with the Ordinance on Administrative Penalties.

- Where the regulations in relation to the making of declarations are breached, a fine shall be imposed of up to one half of one (0.5) per cent of the amount of tax due in respect of the period for which the breach occurred;

- Where there are incidents of false declarations and tax avoidance, a fine shall be imposed of five times of offending amount.

in the case of late payment, a fine shall be imposed of one fifth of one (0.2) per cent of the delayed amount for each day on which such delay occurs.

2.The powers to deal with breaches and complaints are as follows:

breaches in relation to tax matters shall be dealt with by the tax office; and

complaints of the taxpayers in relation to tax matters shall be considered and resolved by the tax office. In the event that the taxpayer disagrees with the resolution it shall have the right to refer the complaint to a higher tax office or to the Minist ry of finance, which shall make a final decision. Pending such decision the complainant shall abide by the existing decision of the tax office.

PART VIII

Organization of Implementation

The taxation department of the provinces and cities shall be responsible for the provision of guidance to each enterprise with foreign owned capital or foreign contracting party in order that it may strictly comply with each and every regulation contained in this Circular.

Within each taxation department, specialized tax collectors shall be responsible for the collection of each type of taxation levied for which enterprises or foreign contracting parties may be liable. This specialized management group shall be responsible for the provision of reports to the General Department of Taxation of the Ministry of finance every month, quarter, and year. The reports shall contain information on the current status of tax collection and other matters which will assist in the general overseeing by the Ministry of the enterprises and foreign contracting parties in the localities for which the group are responsible.

This Circular replaces Circular 55 TC/TCT/TT dated 1 October 1991 of the Ministry of finance. All previous provisions of the Ministry of finance which are inconsistent with the provisions of this Circular are hereby repealed. This Circular shall be of ful l force and effect as of 1 August 1993.

for the Ministry of finance
Vice Minister

PHAN VAN DINH