VIETNAM TAX & INVESTMENT
TECHNICAL UPDATE JANUARY 2004
Converting FIEs into shareholding enterprises
On 29 December 2003, the MPI and MOF promulgated Inter-Ministerial Circular 08/2003/TTLT-BKH-BTC providing guidelines for the implementation of a number of provisions of Decree 38/2003/ND-CP dated 15 April 2003 of the Government on converting a number of FIEs into shareholding companies.
Under this Circular, profit-making FIEs which apply for conversion into shareholding companies will be considered by the licensing authority. The following enterprises, however, will not be considered for such conversion:
Enterprises to which foreign parties or joint venture parties or foreign investors committed to transfer assets to the State of Vietnam or Vietnamese parties without compensation;
Enterprises which have unearned revenue, such as enterprises engaged in property development of industrial parks, export processing zones and new urban areas; houses/apartments construction for sale or for lease; office building for lease; golfcourts; golf membership cards for sale; and sub-lease of land where receipts are collected in advance;
Enterprises which invest under the forms of BT, BOT, and BTO;
Enterprises of which investment capital as stated in the Investment License is more than USD70 million or less than USD1 million;
Enterprises of which accumulated losses at the time of applying for conversion (after being offset by profits of the immediate previous fiscal year) are still higher than or equal to the owner’s equity; and
Enterprises of which unrecoverable bad debts at the time of applying for conversion are higher than the owner’s equity.
The Circular provides three forms of enterprise conversion (depending on enterprise type): (1) retaining the value of enterprises and investors; (2) transferring part of the enterprise value to new shareholders; and (3) retaining the value of the enterprise or transferring part of its capital and issuing more shares to mobilise additional investment capital.
The value of an enterprise for conversion purposes is the total value of existing assets recorded in the enterprise’s books of account which are independently audited within six months before filing of the conversion application.
The Circular also provides detailed guidelines on application dossiers and procedures for conversion, favourable CIT reatments applied to shareholding companies, and share transfer by foreign founding shareholders, etc.
The Circular is of full force and effect as of 22 January 2004.
TAX
VAT
Official letter 06 TC/TCT dated 2 January 2004 of the MOF provides guidance on the confirmation of VAT refunds issued by project owners to main foreign contractors which implement preferential ODA projects subsidied by the State Budget.
In case the project owner is unable to determine amounts of the refundable and non-refundable VAT (to confirm the main contractor’s VAT refund entitlement in accordance with Circular 41/2002/TTBTC dated 3 May 2002 of the MOF), the project owner will be resposible for checking and confirming: (1) the value of work completed at the time of the VAT refund application; and (2) the actual payments at such time.
CIT
Official letter 4500 TCT/CS dated 18 December 2003 of the GDT provides guidance on CIT exemption in case of false declaration and evasion of tax.
Enterprises, which are entitled to a CIT exemption in accordance with the Law on CIT or the Law on Promotion of Domestic Investment, are still allowed to enjoy their CIT exemption in case they make false declaration of tax. These enterprises however are subject to statutory administrative penalties.
Import Duty
Circular 09/2003/TTBTM dated 15 December 2003 of the MOF provides guidelines for implementation of Decision 91/2003/QD-TTg dated 9 May 2003 of the Prime Minister on the application of tariff quota to imported goods in Vietnam for 2004.
From 1 January 2004, tariff quota will be applied to seven items: tobacco leaves, salt, cotton, condensed milk, noncondensed milk, maize corn and poultry eggs.
The Circular replaces Circular 04/2003/TT-BTM dated 10 July 2003 of the MOF providing guidance on implementation of Decision 91/2003/QDTTg, and is of full force and effect from 4 January 2004.
Decision 1723/ TCHQ/ QD/KTTT dated 22 December 2003 of the GDC releases the form for declaration of dutiable prices for imported goods and provides instructions on customs declaration, applicable to imported goods of which the taxable price is subject to Circular 118/2003/TT/BTC dated 8 December 2003 of the MOF detailing Decree 60/2002/ND-CP dated 6 June 2002 of the Government.
The Decision takes effect as of 29 December 2003.
Decision 1727/2003/QD-BTM dated 12 December 2003 of the MOF releases the Regulations on issuance of Vietnam Certificate of Origin (C/O) Form E for comodities entitled to tariff concessions under the Principal Treaty on Comprehensive Economic Coooperation between ASEAN nations and the Peoples Republic of China.
The Decision takes effect from 1 January 2004.
Tax self-assessment regime
Circular 127/2003/TT-BTC dated 22 December 2003 of the MOF provides guidance on the implementation of Decision 197/2003/QDTTg dated 23 September 2003 of the Prime Minister to carry out the pilot application of the tax selfassessment regime.
The Circular provides pilot enterprises in Ho Chi Minh City and Quang Ninh province with detailed guidance on VAT and CIT declaration and payment which are effective as of 1 January 2004.
The Circular takes effect from 4 January 2004.
Invoice
Official Letter 4610 TCT/NV5 dated 29 December 2003 of the GDT provides guidance on preparing the list of goods sold accompanying to the VAT invoice.
As indicated, business establishments selling goods of different categories and descriptions which cannot be fully stated on the VAT invoice are allowed to attach a detailed list of goods sold to the VAT invoice. The invoice and its accompaning list must fully indicate detailed information and reference as instructed in the Official Letter.
ACCOUNTING
Accounting Standards
Decision 234/2003/QD-BTC dated 30 December 2003 of the MOF issues and announces six (06) Vietnamese accounting standards (3rd phase), including:
Accounting standard 05 - Real estate investment;
Accounting standard 07 - Investment in affiliate companies;
Accounting standard 08 – Financial information about joint-venture capital contribution;
Accounting standard 21 – Financial report presentation;
Accounting standard 25 – Consolidated financial report and Investment in subsidiaries; and
Accounting standard 26 – Information about related parties.
Six Vietnamese accounting standards issued in conjunction with this Decision are applicable to enterprises of all industries and economic sectors in Vietnam.
This document shall be of full force and effect 15 days after the date of publication in the Official Gazette.
INVESTMENT
Motorcycle manufacture and assembly
Decision 37/2003/ QDBKHCN of the MOST dated 31 December 2003 issues the "Regulations on quality control, industrial property, technology transfer of imported and locally manufactured and assembled motorcycles, engines and parts thereof".
This document is of full force and effect as of 28 January 2004 and replaces Decision 01/2003/QDBKHCN dated 30 January 2003 of the MOST in this regard.
Automobile manufacture and assembly
Official Letter 5905/CV-KHCN dated 26 December 2003 of the MOI proposes Prime Minister the Plan on “Programs and proposals for development automobile manufacturing industry by year of 2010”. This proposal outlines schedule localisation of automobile and engine manufacturing.
Expansion of Export Markets
Decision 206/2003/QD-TTg of the Prime Minister dated 17 December 2003 approves the Proposal for development of export markets for the 2004-2005 period, submitted by the MOT with objectives, orientation and solutions of export market expansion.
Notably, among other solutions to develop export markets, the Proposal recommends the application of ecommerce, proceeding the study on development of a commodity trading floor for agro-products and pilot participation in forward transactions for agroproducts overseas.
This Decision is of full force and effect as of 3 January 2004
Ordinance on Prices
Decree 170/2003/ NDCP dated 25 December 2003 of the Government details implementation of some of the provisions of the Ordinance on Price.
This Decree is of full force and effect from 13 January 2004 and repeals Decision 137HDBT dated 27 April 1992 of Ministers' Council on price management and previous inconsistent regulations.
Ordinance on Commercial Arbitration
Decree 25/2004/NDCP dated 15 January 2004 of the Government makes detailed provisions for the implementation of a number of provisions of the Ordinance on Commercial Arbitration.
The Decree shall be of full force and effect in 15 days after the date of publication in the Official Gazette.
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