VIETNAM TAX & INVESTMENT
TECHNICAL UPDATE FEBRUARY 2004
CEPT rates applicable to products sold by Export Processing Enterprises into domestic market
On 19 January 2004, the MOF released Official Letter 736/TC/HTQT providing guidelines on the import duty applicable to products sold by Exporting-Processing Enterprises (“EPEs) into the domestic market.
According to this Official Letter, these products will be subject to the CEPT rates if they meet the requirements set out below. This is effective for customs declarations lodged on or after 1 July 2003. The conditions include:
The products are included in Vietnam’s tariff for implementation of CEPT/AFTA for the 2003-2006 period, which was issued with Decree 78/2003/ND-CP; and
They satisfy the requirements of ASEAN content, which is certified by the relevant Certification of Origin.
The Official Letter also mentions the refund of import duty with respect to products sold by EPEs into the domestic market which satisfy the above requirements (these enterprises have paid import duty at a duty rate higher than that under CEPT). The said EPEs will be refunded the difference between the import duty paid and that payable under the CEPT tariff. For EPEs which have not paid import duty yet, their duty will be recalculated based on the CEPT rate. The procedures of tax refund will be in accordance with the prevailing regulations.
Recently, the GDT issued a number of rulings providing guidelines on VAT applicable to construction contracts which were concluded before 1 January 2004 and were not completed in 2003.
Under these rulings, if a constructor entered into a construction and installation contract before 1 January 2004 with the budgeted and approved prices including 5% VAT, and the construction and installation were not completed by 31 December 2003, the VAT rate of 5% still applies to the outstanding construction and installation work of the said contract.
The constructor must report the relevant local tax authorities on the construction and installation contracts which are still entitled to apply the VAT rate of 5% in accordance with the above provision.
Decision 16/2004/QD-BTC dated 12 February 2004 of the MOF stipulates the fees for export quota for garment and textile products sold to the EU and US markets.
This Decision will be of full force and effect as of 9 March 2004 and applies to shipments with bill(s) of lading signed on or after the above effective date. This Decision replaces Decision 83/2003/QDBTC dated 17 June 2003 of MOF stipulating the fees for export quota for garment and textile products sold to the US market, and abolishes the regulations on fees for export quota for garment and textile sold products to the EU market as stipulated in Decision 118/2002/QD-BTC dated 25 September 2002 of the Minister of Finance.
Decision 17/2004/QD-BTC dated 12 February 2004 of the MOF provides guidelines on import tariff applicable to liquor and motorcycles originated from EU member states.
According to this Decision, the duty rates will be 80% and 70% applicable to liquor and motorcycles, respectively, provided that the above products satisfy certain conditions on origin and bill of lading.
This Decision is of full force and effect as of 12 February 2004 and applicable to customs declarations submitted on or after 1 January 2004.
Decree 99/2004/NDCP dated 25 February 2004 of the Government releases Vietnam’s tariff applicable for the 2004 - 2008 period under the fast-tracked program for implementation of the Frame Agreement on ASEAN-China Comprehensive Economic Co-operation.
The Decree is of full force and effect as of 1 January 2004.
Decision 19/2004/QD/BTC dated 16 February 2004 of the MOF stipulates the tariff to realise the roadmap of import duty reduction under the Agreement on Textile and Garment between Vietnam and the US for 2003-2005 the period.
Penalties for administrative offences in taxation
Decree 100/2004/ NDCP dated 25 February 2004 of the Government provides guidelines on penalties for administrative offences in taxation, which applies to organisations and individuals who intentionally or unintentionally breach tax laws, but are not categorised as criminals.
Administrative offences in taxation include:
Offences in tax registration, tax declaration, preparation and filing of tax finalisations;
Offences in the collection and payment of tax and fines;
Breaches of the regulations on tax audits and inspections; and
Tax evasion activities.
Penalties for some of the administrative offences in taxation are as follows:
Fines ranging from VND50,000 to VND25 million will apply to a late registration and filing of regular tax declarations and tax finalisations;
Fines between VND2 million to VND5 million will apply to: (i) income payers (organisations and individuals) who fail to withhold tax liability and fines with respect to persons subject to penalties for administrative offences in taxation; and (ii) banks, finanical and credit institutions which fail to deduct from accounts of persons subject to penalties for administrative offences in taxation for settlements of tax liabilities and fines to the State Budget;
Fines which equal to two (2) to three (3) times of the evaded tax amount will apply to the failures of invoice issuance and tax declaration with respect to the sales of goods and provision of services;
Fines which equal to three (3) to five (5) times of the evaded tax amount will apply to cases where two (2) separate accounting systems and books of accounts are established with different recordings with an aim of understating amounts of tax payable or overstating amounts of tax refunds and concessions.
This Decree takes effect as of 17 March 2004 and abolishes Decree 22/CP dated 17 April 1996.
Chu Lai Open Economic Zone
Circular 11/2004/TTBTC dated 25 February 2004 of the MOF provides guidelines on the financial regime applied to Chu Lai Open Economic Zone (“Chu Lai OEZ”).
The Circular and its preferential treatments will apply to all foreign and domestic investors in Chu Lai OEZ.
The investors in Chu Lai OEZ will be entitled to the most favourable incentives applicable to projects in areas of specially difficult socio-economic conditions as stipulated in the current regulations.
Particularly, projects in Chu Lai OEZ will be entitled to enjoy a four (4) year tax holiday starting from the first profitmaking year, a 50% reduction of CIT payable for the subsequent nine (9) years, and 10% CIT for 15 years from the commencement of operation.
FIEs in Chu Lai OEZ will be entitled to enjoy the import duty exemption with respect to production materials, components and supplies for five years (5) from the commencement of operation.
The Circular also contains detailed provisions on preferential treatments in terms of importy duty, SST, VAT, fees, charges and land rental, etc.
This Circular takes effect as of 18 March 2004.
Industrial Zones in Thai Binh
Decision 15/2004/QDTTg dated 29 January 2004 of the Prime Minister stipulates establishment of the Management Board of Industrial Zones in Thai Binh province.
This Decision is of full force and effect from 18 February 2004.
Decision 04/2004/QDTTg dated 8 January 2004 of the Prime Minister approves the Agreement on Aviation Transportation between the Government of Socialist Republic of Vietnam and the United States of America signed on 4 December 2003.
Fees and charges
Circular 06/2004/TTBTC dated 04 February 2004 of the MOF provides guidance for implementation of Decree 106/2003/ND-CP dated 23 September 2003 of the Government providing guidance on penalties for administrative offences in the field of fees and charges.
The Circular will be of full force and effect as of 4 February 2004.
Circular 01/2004/TT-BKH dated 2 February 2004 of the MPI provides guidelines for implementation of Decree 66/2003/ND-CP dated 12 June 2003 of the Government on amendment of and supplementation to a number of articles of the Regulations on Tendering.
The Circular is of full force and effect as of 19 February 2004.