CIRCULAR No. 32/2007/TT-BTC OF APRIL 9, 2007, GUIDING THE IMPLEMENTATION OF THE GOVERNMENTS DECREE No.

158/2003/ND-CP OF DECEMBER 10, 2003, DECREE No. 148/2004/ND-CP OF JULY 23, 2004, AND DECREE No. 156/2005/NDCP OF DECEMBER 15, 2005, DETAILING THE IMPLEMENTATION OF THE VALUE ADDED TAX LAW AND THE LAW AMENDING AND SUPPLEMENTING A NUMBER OF ARTICLES OF THE VALUE ADDED TAX LAW
Pursuant to Value Added Tax (VAT) Law No. 02/1997/QH9 of May 10, 1997; Pursuant to Law No. 07/2003/QH11 of June 17, 2003, Amending and Supplementing a Number of Articles of the VAT Law; Pursuant to the Governments Decree No. 158/2003/ND-CP of December 10, 2003, detailing the implementation of the VAT Law and the Law Amending and Supplementing a Number of Articles of the VAT Law; Pursuant to the Governments Decree No. 148/2004/ND-CP of July 23, 2004, amending and supplementing Clause 1, Article 7 of Decree No. 158/2003/ND-CP of December 10, 2003, detailing the implementation of the VAT Law and the Law Amending and Supplementing a Number of Articles of the VAT Law; Pursuant to the Governments Decree No. 156/2005/ND-CP of December 15, 2005, amending and supplementing the Decrees detailing the implementation of the VAT Law and the Law Amending and Supplementing a Number of Articles of the VAT Law; Pursuant to the Governments Decree No. 77/2003/ND-CP of July 1, 2003 defining the functions, tasks, powers and organizational structure of the Ministry of Finance; The Ministry of Finance guides value added tax (VAT) as follows: A. SCOPE OF APPLICATION OF VAT I. OBJECTS SUBJECT TO VAT AND VAT PAYERS 1. Objects subject to VAT: Subject to VAT are goods and services used for production, business and consumption in Vietnam (including goods and services purchased from organizations and individuals abroad), except for those not subject to VAT mentioned in Section II, Part A of this Circular. 2. VAT payers: All organizations and individuals engaged in producing and trading in goods and services subject to VAT in Vietnam, regardless of their business lines, forms and

organization (collectively referred to as business establishments) and other organizations and individuals that import goods or procure services subject to VAT from abroad (collectively referred as importers) shall pay VAT. Organizations and individuals engaged in producing and trading in goods or services include: 2.1. Business organizations set up and registering business under the Law on Enterprises, the Law on State Enterprise (now the Law on Enterprises) or the Law on Cooperatives; 2.2. Economic organizations of political organizations, socio-political organizations, social organizations, socio-professional organizations, peoples armed forces units, nonbusiness organizations and other organizations; 2.3. Foreign-invested enterprises and foreign parties to business cooperation contracts under the Law on Foreign Investment in Vietnam (now the Law on Investment); foreign organizations and individuals conducting business activities in Vietnam without establishing legal entities in Vietnam; 2.4. Individuals, households, independent groups of business people and other business entities engaged in production, business or import activities. II. OBJECTS NOT SUBJECT TO VAT 1. The following goods and services are not subject to VAT: 1.1. Products of cultivation (including products from plantation forests) and husbandry; cultured and fished aquatic and marine products which have not yet been processed into other products or have just been preliminarily processed then sold by producing or fishing organizations or individuals themselves and at the stage of importation. Preliminarily processed products which have not yet been further processed or not yet been processed into other products are specified as follows: a/ For cultivation products, they are products which have just been sun-dried, heatdried, cleaned, freshly preserved with chemicals, peeled, sorted out and packaged. b/ For husbandry products, cultured or fished aquatic and marine products, they are products which have just been sun-dried, heat-dried, cleaned, chilled, salted, sorted out and packaged. 1.2. Products being breeding animals and plant varieties such as breeding eggs and animals, saplings, seeds, sperms, embryos, genetic materials at the stages of rearing, importation and trading. Products that are breeding animals and plant varieties not subject to VAT are those imported and traded by establishments which have been

granted breeding animal or plant variety business registration certificates by state management bodies. For products that are breeding animals or plant varieties subject to quality standards promulgated by the State, they must satisfy the State-prescribed conditions. 1.3. Salt products, including salt made from seawater, natural rock salt, refined salt and iodized salt. 1.4. The following imports are not subject to VAT: a/ Specialized equipment, machinery and means of transport forming part of technological chains, and construction supplies of those types which cannot be produced at home and need to be imported to form fixed assets of enterprises; b/ Equipment, machinery, supplies and means of transport of those types which cannot be produced at home and need to be imported for direct use in scientific research and technological development activities; c/ Aircraft, derricks and ships of types which cannot be produced at home yet and need to be hired from abroad for use in production and business; d/ Specialized equipment, machinery, spare parts and means of transport and supplies needed for activities of prospecting, exploring and developing oil and gas fields; spare parts and equipment of aircraft, specific equipment used exclusively for aircraft (of those types which cannot be produced at home); For equipment chains and complete sets of machinery not subject to VAT as specified at this Point 4.1, imported by production and business establishments, which include equipment and machinery of those types which can be produced at home, the whole chains of equipment and complete sets of machinery are not subject to VAT. Enterprises mentioned at this Point 1.4 include enterprises set up under the Law on State Enterprises (now the Law on Enterprise), the Law on Enterprises or the Law on Cooperatives; foreign-invested enterprises and foreign parties to business cooperation under the Law on Foreign Investment in Vietnam (now the Law on Investment); foreign organizations and individuals conducting business activities in Vietnam without establishing legal entities in Vietnam. Example 1: Textile company A imports some weaving machines of a type not yet produced at home. Some electric motors forming complete units of the weaving machines are of a type which can be produced at home. These imported motors are not subject to VAT.

In order to prove that their goods are not subject to VAT at the importation stage as prescribed at this Point, the importing establishments shall produce to the customs office the following documents: + Import contract. In case of import under consignment, an import consignment contract is also required. For an establishment that has won through bidding a contract to supply goods for the subjects that will use these goods for the purposes specified at this Point, the contractwinning notice and the contract for sale to enterprises according to the bidding results are also required. For a financial leasing company importing goods for financial leasing, the financial leasing contract is also required. In case of import of goods in service of scientific research and technological development, a competent bodys document assigning the organization to carry out scientific research and technological development programs, projects or schemes or the science and technology contract between the ordering party and the contract-performing party is required. + Written certification by the enterprise director or the scientific research institution director that the imported goods will be used as fixed assets; used directly in scientific research and technological development activities, used in activities of exploring and developing oil and gas fields, or that they are of those types used exclusively for aircraft. Particularly, aircraft, derricks or ships hired from abroad and of those types which cannot be produced at home and intended to be used for production and business not subject to VAT; the hiring establishments are only required to produce to the customs office the hiring contracts signed with foreign parties. The above-said goods of those types which cannot be produced at home and need to be imported shall be determined on the basis of the list of specialized machinery, equipment and means of transport, construction supplies, materials and spare parts of those types which can be produced at home, promulgated by the Ministry of Planning and Investment. 1.5. State-owned houses sold by the State to their current tenants under the Governments Decree No. 61/CP of July 5, 1994, on house purchase, sale and dealing. 1.6. Transfer of land use rights. 1.7. Credit services and investment funds, including activities of lending capital, guaranteeing loans, discounting negotiable instruments and valuable papers such as

currencies, selling loan security assets in order to recover debts, financial leasing of financial credit institutions in Vietnam; activities of transferring capital in accordance with the Law on Enterprises, the Law on Cooperatives, the Law on State Enterprises (now the Law on Enterprises); securities trading activities, including brokerage, dealing, investment portfolio management, issuance underwriting and securities investment counseling. 1.8. Life insurance; student insurance and such person insurance services as sailor or crew member accident insurance, person accident insurance (including also insurance for accidents, life, combined hospitalization), passenger accident insurance, tourist insurance, accident insurance for drivers and driver assistants and persons aboard vehicles, insurance for sterilized persons, insurance of allowance for surgical operations, insurance for individuals lives, insurance for electricity users and other kinds of insurance related to humans; insurance for livestock, plants, other agricultural insurance, and insurance of non-commercial types such as social insurance, health insurance and labor insurance. 1.9. Medical examination, medical treatment and epidemic prevention services, birth control services, health convalescence and functional rehabilitation services for patients, and veterinary services. 1.10. Products and services in the following cultural, art, physical training and sport domains: a/ Cultural, exhibition, physical training and sport activities, organization of training activities and competitions of mass movement nature, whether or not collecting money in the form of sale of admission tickets or training charges, for non-commercial purposes. Other revenues such as proceeds from goods sale, lease of playgrounds, fair or exhibition stalls, etc., are liable to VAT. b/ Art performance activities such as classical drama, folk operetta, reformed drama, singing, dancing, music, dramas, circus; other art show activities and art performanceorganizing services provided by theaters or classical drama, folk operetta, reformed drama, singing, dancing, music, drama and circus troupes that have the operation licenses granted by competent state bodies. c/ Production of assorted films (recorded) regardless of their themes and genres. d/ Import of video films, distribution and screening of motion pictures and video documentaries: for motion pictures, regardless of their themes and genres; for film recorded in video tapes or discs, they must be documentaries, reportage and scientific films. Film genres and themes shall be determined according to regulations of the Ministry of Culture and Information.

1.11. Teaching and vocational training, including general education, teaching of foreign languages, informatics, dancing, singing, painting, music, drama, circus, physical training, sports, child nursing, and other jobs in order to train, foster and raise the educational levels and professional knowledge for everyone. 1. 12. Radio and television broadcasting under programs funded with the state budget; 1.13. Publication, import and distribution: a/ Newspapers, magazines and specialized bulletins also include transmission of pages thereof. b/ Political books are books disseminating the political lines of the Party and the State in service of political tasks, under specific themes or topics, in service of anniversaries, traditional days of organizations, levels, branches and localities; statistical books, books propagating the good people and good deeds movement; books of speeches, research and theoretical papers of Party and State leaders. c/ Textbooks (including those in the forms of audio and video tapes and discs, and data messages) are books used for teaching and learning at all educational levels from preschool to upper secondary school (including reference books for use by teachers and pupils, relevant to the contents of education curricula). d/ Course books are books used for teaching and learning in universities, colleges, professional secondary and vocational training schools. e/ Law books (containing texts of legal documents, documents, resolutions, and other regulatory documents) are books of legal documents of the State. f/ Scientific and technical books are books used for introducing and guiding scientific and technical knowledge directly related to production and various scientific and technical branches. g/ Books printed in ethnic minority languages also include books printed bi-lingual in Vietnamese and an ethnic minority language. h/ Pictures, photos, posters, leaflets and brochures for the propaganda and mass mobilization purposes, slogans, leaders pictures, the Partys flag, the national flag, the Youth Unions flag, the Young Pioneers Leagues flag. i/ Money and certificates valuable as money (checks, bonds, bills, etc.), cash remitted from abroad. j/ Audio or video tapes and discs recorded with the contents of books, newspapers, magazines or bulletins mentioned at this Point 1.13.

1.14. Public services, such as sanitation, street and residential quarter water drainage, maintenance of zoos, flower gardens, parks, street greenery, public lighting and funeral services, regardless of their payment funding sources. a/ Public services in street sanitation and street and residential quarter water drainage include activities of gathering, cleaning, transporting and treating garbage and waste matters, draining water and treating wastewater for organizations and individuals. If business establishments use waste matters for production of other products for sale, these products are not subject to VAT as guided in Section II, Part A of this Circular or are subject to VAT as guided in Section II, Part B of this Circular. If business establishments provide sanitation and water drainage services for organizations and individuals such as cleaning offices, etc., these services are subject to VAT at the rate of 10% as guided at Point 3.27, Section II, Part B of this Circular. b/ Maintenance of zoos, flower gardens, parks and trees in streets includes activities of managing, planting trees, tending and protecting birds, animals and trees in parks, zoos, public places and national gardens. c/ Public lighting is lighting of streets and lanes in residential areas, flower gardens and parks. d/ Funeral services include activities of leasing houses, hearses and cars in service of funerals by organizations providing funeral, burial and crematory services. 1.15. Maintenance, repair, restoration and construction of cultural, art and publicwelfare works, infrastructures and gratitude houses with funds contributed by people and humanitarian aid capital, including cases where the State provides capital supports not exceeding 30% of total actual costs of these works. 1.16. Mass transit by bus and tramcar of bus and tramcar transport establishments set up and operating under regulations of the Ministry of Transport to meet travel needs of people within provinces or centrally run cities, between cities, towns, districts, industrial parks and tourist resorts, and between provinces or centrally run cities and neighborly provinces, industrial parks and tourist resorts, with the points of departure and destination and itinerary of each route located within two provinces, cities; if the point of departure or destination is located in a special-grade urban center, the route must be within three provinces, cities as prescribed at Points b and c, Clause 2, Article 3 of the Regulation on management of public mass transit by bus, promulgated together with the Transport Ministers Decision No. 34/2006/QD-BGTVT of October 16, 2006, along routes with stops, travel timetables and fares prescribed by competent authorities.

1.17. The States basic surveys funded with the state budget (including geological, mineral, water resource, metro-hydrological, environmental survey and exploration; measuring and mapping). 1.18. Irrigation and water drainage in service of agricultural production; clean water exploited by organizations or individuals themselves in rural, mountainous, island, deep-lying and remote areas in service of daily life in these areas. 1.19. Weaponry and military equipment for exclusive use in defense and security. a/ The list of weaponry and military equipment for exclusive use in defense and security is included in Appendix No. 3 to this Circular (not printed herein). These weaponry and military equipment must be finished products made in complete sets or parts, accessories and packages used exclusively for assembling and maintaining finished products. When weaponry and military equipment used exclusively in defense and security need to be repaired, their repair services provided by enterprises of the Ministry of Defense or the Ministry of Public Security are not subject to VAT. b/ Weaponry and military equipment (including supplies, machinery, equipment and spare parts) used exclusively in service of defense and security are, when imported, exempt from import tax in accordance with the Export Tax and Import Tax Law, or are, when imported within annual quotas approved by the Prime Minister, not subject to VAT. Dossiers and procedures for the import of weaponry and military equipment which are not subject to VAT at the importation stage must comply with current regulations on procedural dossiers for import tax exemption, import tax exemption consideration and import tax refund. 1.20. Goods imported in the following cases: humanitarian aid or non-refundable aid goods (including imported goods belonging to the source of non-refundable ODA capital); gifts for state agencies, political organizations, socio-political organizations, social organizations, socio-professional organizations and/or peoples armed forces units; presents and gifts for individuals in Vietnam; personal effects of foreign organizations and individuals within diplomatic immunity limits; and personal effects in duty-free luggage limits; personal effects brought along by overseas Vietnamese upon their return to the country. The quantities of imported goods of those categories not subject to VAT at the importation stage are equal to the import tax-free quantities prescribed in the Export Tax and Import Tax Law and guiding documents.

Imported goods of organizations and individuals that enjoy diplomatic immunities under the Ordinance on Diplomatic Immunities enjoy the VAT privileges and immunities according to current regulations. If these organizations or individuals purchase goods and services in Vietnam and pay VAT thereon, they shall be refunded the paid VAT amounts under the guidance at Point 8, Section I, Part D of this Circular. The subjects, goods and procedural dossiers for enjoying VAT privileges and immunities guided at this Point are as guided in the Finance Ministrys Circular No. 08/2003/TT-BTC of January 15, 2003, guiding the refund of VAT to diplomatic missions, consular offices and representative agencies of international organizations in Vietnam. For imported humanitarian or non-refundable aid goods, written certification by the Ministry of Finance is required. Dossiers and procedures for the handling of imported goods which are not subject to VAT at the importation stage must comply with current regulations on procedural dossiers for import tax exemption, import tax exemption consideration and import tax refund. 1.21. Goods sold to international organizations and foreigners for use as humanitarian aid or non-refundable aid to Vietnam; The procedure for international organizations or foreigners to purchase goods in Vietnam for use as humanitarian aid or non-refundable aid to Vietnam and enjoy VAT exemption: International organizations or foreigners shall send to the selling units documents clearly stating the names of the international organizations or foreigners purchasing goods for use as humanitarian aid or non-refundable aid to Vietnam, the quantity or value of the purchased goods; and written certification by the Ministry of Finance of such aid. When selling these goods, the units shall make invoices as guided at Point 5.1, Section IV, Part B of this Circular, clearly indicating on these invoices that the goods are sold to foreign organizations or individuals for use as non-refundable aid or humanitarian aid and not subject to VAT, and keep the above-said documents of the international organizations or Vietnamese representative agencies for tax declaration and finalization. 1.22. Goods transferred from border gate to border gate, transited or transported by land through the Vietnamese territory; goods temporarily imported for re-export, goods temporarily exported for re-import, raw materials and materials imported for the production or processing of goods for export under export production or processing contracts signed with foreign parties.

Goods not subject to VAT in this case shall be handled by customs offices. Dossiers and procedures for the determination and non-collection of VAT in this case must comply with current regulations on procedural dossiers for import tax exemption, import tax exemption consideration, temporary import tax exemption and import tax refund. 1.23. Goods and services supplied to the following subjects: a/ Services of registry of vehicles owned by organizations and individuals abroad (except when these vehicles are bare-boat chartered or time-chartered for shipping activities in accordance with law); b/ Re-insurance services to foreign countries; insurance of exported goods transported by land, sea, river, railway and air, crude oil sold to foreign countries; insurance of imported goods by land, sea, river, railway and air from foreign countries to airports, ports or land border gates of Vietnam; services of insurance of facilities and equipment of foreign contractors (including oil vessels bearing foreign nationalities), used by foreign oil contractors or subcontractors for prospecting, exploring and exploiting oil in the exclusive economic zone of Vietnam (including overlapping areas which Vietnam and states with adjacent or opposite coasts have agreed to place under the joint exploitation regime), including equipment which underwent maintenance and repair in the territorial waters or seaports of Vietnam; insurance services provided for vehicles owned by organizations and individuals in foreign countries. c/ International transportation means transportation of Vietnamese cargoes and passengers to abroad and from abroad to Vietnam or transportation of cargoes and passengers between foreign ports. When transportation service-providing establishments sign contracts for transportation of cargoes and passengers from Vietnam to abroad, revenues from transportation services which are not subject to VAT are those actually collected from customers. When such transportation services cover also domestic transportation and revenues from domestic transportation and international transportation are inseparable, revenues not subject to VAT include also those from domestic transportation. d/ Goods and services supplied directly for international transportation are those sold by Vietnam-based business establishments directly to vehicles engaged in international transportation for use for international transportation activities or for those vehicles, including: d.1/ Goods and services provided for use for international transportation activities, such as food rations, drinks; towels and paper tissues; vehicle cleaning services; life buoys and parachutes; towage of seagoing vessels; aircraft landing and take-off navigation,

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wharves; mooring and unmooring of seagoing vessels; passenger loading bridges; and some other goods and services directly provided for international transport. d.2/ Goods and services provided for assuring the operation of vehicles engaged in international transportation, such as petrol and oil, repair, painting and maintenance of vehicles and some other goods and services supplied to ensure the operation of vehicles engaged in international transportation, excluding services of registry, insurance, repair, painting and maintenance directly provided for vehicles owned by Vietnamese organizations and individuals or bare-boat chartered or time-chartered by Vietnamese organizations and individuals from foreign organizations and individuals, which are all subject to VAT as guided in Part B of this Circular. Vehicles engaged in international transportation mentioned at this Point 1.23.d.2 include: + Vehicles owned by foreign organization and individuals carrying out international transportation activities; + Vehicles owned by Vietnamese organizations and individuals or bare-boat chartered or time-chartered by Vietnamese organizations and individuals from foreign organizations and individuals for carrying out international transportation activities; e/ Goods on sale at duty-free shops at international airports, sea ports, railway stations and border gates. f/ National reserve goods sold by the national reserve agency. g/ Goods and services sold and purchased or bartered between organizations and individuals in non-tariff zones and exported by organizations and individuals in nontariff zones to foreign countries; h/ Goods and services consumed abroad, excluding exported goods and services subject to the VAT rate of 0%. i/ For activities for which charges and fees are collected according to state regulations on charges and fees, these collected charges and fees are not subject to VAT, except for those collected as service charges. 1.24. Technology transfer, computer software, excluding software for export. a/ Technology transfer shall be determined under the provisions in Part 6, Chapter 36 Technology Transfer of the Civil Code of the Socialist Republic of Vietnam and guiding documents. For contracts on technology transfer accompanied by machinery and equipment, VAT is not imposed on the value of the transferred technology only.

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b/ Computer software (excluding computer software for export) includes software products and software services as prescribed by law. 1.25. Post, telecommunications and Internet services universalized under the Governments programs. 1.26. Gold imported in the form of bar or ingot and gold not yet fashioned into fine-art articles, jewelry or other products. Gold in the form of bar or ingot and unfashioned gold shall be determined in accordance with international regulations. 1.27. Export products that are exploited mineral resources not yet processed into other products, specifically as follows: a/ Crude oil. b/ Stone slabs, sand, rare earth. c/ Gems. d/ Manganese, tin, iron, chromite, emenite and apatite ores. 1.28. Products that are artificial parts used for substitution of diseased peoples organs; crutches, wheelchairs and other tools used exclusively for the disabled. 1.29. Goods and services of business individuals with average monthly incomes lower than the minimum salary level prescribed by the State for state employees. Incomes shall be determined as revenues from business activities minus (-) reasonable expenses for these business activities. District-level Tax Departments shall, in coordination with tax advisory councils, inspect, determine and list business households with low incomes and not liable to pay VAT, and notify these business households thereof in writing. In the period when the business households are notified not to be liable to pay VAT, if their business situation changes so that their incomes are higher than the prescribed income level, district-level Tax Departments shall notify the business households thereof and put them into the category liable to pay VAT as from the month the business households earn incomes higher than the prescribed level. 2. Business establishments are not entitled to input VAT credit and refund with respect to goods and services used for the production and trading of goods and services not subject to VAT prescribed in this Section II and shall include them in the historical costs of fixed assets, the value of raw materials and materials or business expenses.

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B. TAX BASES AND TAX CALCULATION METHODS The bases for calculating VAT are taxable prices and tax rates. I. VAT CALCULATION PRICES The VAT calculation prices of goods or services shall be specifically determined as follows; 1. For goods and services sold or supplied by production and business establishments to other subjects, their VAT calculation prices are VAT-exclusive sale prices. For goods and services subject to special consumption tax, their VAT calculation prices are sale prices inclusive of special consumption tax but not VAT. The taxable prices of goods or services cover also additional levies and surcharges collected in addition to the goods or service prices which are enjoyed by business establishments, excluding those which business establishments shall remit into the state budget. When business establishments apply discounted sale prices, the VAT calculation prices are discounted sale prices indicated on the invoices. 2. For imported goods, their VAT calculation prices are the import prices at the border gates plus (+) the import tax (if any) and plus (+) the special consumption tax (if any). The import prices at the border gates serving as a VAT calculation base shall be determined according to regulations on taxable prices of imported goods. For imported goods eligible for import tax exemption or reduction, their VAT calculation prices are the prices of the imported goods plus (+) the import tax to be paid after the exemption or reduction. 3. For products, goods and services used for barter and sales promotion or as presents, gifts or salary payments, their VAT calculation prices shall be determined as equal to the taxable prices of products, goods or services of the same or equivalent types at the time such activities are carried out. Example 2: Establishment A manufactures electric fans. It exchanges 50 fans with establishment B for iron and steel at the sale price (exclusive of VAT) of VND 400,000/fan. The VAT amount payable for these exchanged fans is: VND 400,000/fan x 50 fans x 10% = VND 2,000,000 4. For products, goods or services delivered by business establishments for consumption not in service of production and business or for the production and trading of goods and services not subject to VAT, their taxable prices are the sale prices of products, goods or services of the same or equivalent types at the time of consumption.

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Goods internally transferred within a production and business establishment, such as goods delivered between internal warehouses, and supplies and semi-finished products delivered for further processing, are not subject to VAT calculation and payment. 5. For services supplied by foreign parties to consumers in Vietnam, their VAT calculation prices are the service prices payable by Vietnamese parties to foreign parties. Example 3: Company A in Vietnam hires a foreign company to repair seagoing ships. If the contractual price payable to the foreign company is VND 100 million, company A shall calculate and pay VAT of 10% of VND 100 million. 6. For services of leasing assets such as houses, offices, workshops, warehouses, wharves, yards, means of transport, machinery, equipment, etc., their VAT calculation prices are tax-exclusive rents. In case of leasing with rent paid in installments or prepaid for a leasing term, VAT shall be calculated on the basis of each installment or the prepaid rent, including also amounts collected in other forms such as those for renovation, repair and upgrading of leased houses at the lessees request. The asset rent agreed upon by the involved parties shall be determined according to the contract. When the rent bracket is prescribed by law, the rent shall be determined to be within the prescribed bracket. 7. For goods sold on installment or deferred payment, their taxable prices are the lumpsum VAT-exclusive sale prices (excluding interests on installment or deferred payments), regardless of the amount of each installment or deferred payment. Example 4: A motorbike trading company sells 100 cc Honda motorbikes. The lumpsum VAT-exclusive sale price is VND 25.5 million (including the installment payment interest of VND 0.5 million). The VAT calculation price is VND 25 million/motorbike. 8. For goods processing, their taxable prices are the VAT-exclusive processing prices consisting of charges, costs of fuel, power, auxiliary materials and other processing expenses incurred by the processing parties. 9. For construction and installation 9.1. For cases of construction and installation involving the contracted supply of raw materials and materials, the taxable prices also include the VAT-exclusive value of raw materials and materials. Example 5: Construction company A enters into a work construction contract, covering also the value of construction supplies. The total payment value exclusive of VAT is VND 1,500 million, of which the value of construction supplies is VND 1,100 million. Then the VAT calculation price is VND 1,500 million.

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9.2. For cases of construction and installation without the contracted supply of raw materials and materials, the taxable price is the VAT-exclusive construction and installation value, which is not added with the value of raw materials and materials. Example 6: Construction company X is contracted to build a work with supplies provided by the work owner. If the VAT-exclusive construction value, excluding the value of construction supplies, is VND 600 million, then the VAT calculation price is VND 600 million. 9.3. For cases of construction and installation with payments to be made for each completed and taken-over construction item or based on the value of the completed and taken-over construction and installation volume, the taxable price is the VAT-exclusive value of a completed and taken-over construction item or work volume. Example 7: Textile company X (called party A) hires construction company Y (called party B) to perform construction and installation to expand a workshop. The total VAT-exclusive value of the work is VND 200 billion, of which: - The construction and installation value is VND 80 billion - The value of equipment supplied and installed by party B is VND 120 billion. + Party B additionally charges a 10% VAT of VND 20 billion + The total amount payable by party A is VND 220 billion: + Party A receives the workshop, accounts it as an increase of VND 200 billion (the VAT-exclusive value) in the value of its fixed assets for depreciation purposes. - The VAT of VND 20 billion already paid is credited against the output tax of the sold goods or is requested to be refunded according to regulations. If party A accepts to make payment to party B per construction item (presuming that the workshop construction is completed first and paid for first), when party A calculates the amount of VND 80 billion to be paid for the workshop construction, it shall add a 10% VAT for payment to party B. The payable amount inclusive of VAT is VND 80 billion + VND 8 billion = VND 88 billion. 10. For business establishments that are assigned land by the State for building technical infrastructures for transfer accompanied with the transfer of land use rights, the VAT calculation prices are the actual transfer prices exclusive of VAT minus (-) land use levies to be remitted into the state budget based on land prices prescribed by provinciallevel Peoples Committees at the time of land assignment. When a competent state body auctions the rights to use land on which already exist infrastructures in accordance with the land law and the business establishment later purchases the rights to use such land

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for building houses and infrastructures for sale, the VAT calculation price is the actual price of the transfer of houses and infrastructures accompanied by the transfer of land use rights minus (-) the winning bid price of the land use rights at the auction. For business establishments that lease land from the State for investment in infrastructures in industrial parks, hi-tech parks or other economic zones as prescribed by the Government for sub-lease, the VAT calculation price is the VAT-exclusive rent minus the land rent to be remitted into the state budget. Example 8: Housing Investment and Development Company X is assigned by the State 10,000 m2 of land for building houses for sale, of which 3,000 m2 is used for building internal roads in the planned area and not liable to land use levy. The rate of land use levy payable into the state budget is VND 2,000,000/m2. The company sells one house on a land area of 50 m2 at the sale price and land use right transfer levy without VAT of VND 800 million (of which the house price is VND 600 million and the land use right transfer levy is VND 200 million). The VAT calculation price of the above-said house is: VND 800 million - (50 m2 x VND 2,000,000/m2) = VND 700 million The output VAT is: VND 700 million x 10% = VND 70 million Example 9: Industrial Park Infrastructure Investment and Dealing Company Y is leased by the State 500,000 m2 of land for 50 years for building technical infrastructures for lease. The land rent rate is VND 300,000/m2/year. After making investment in infrastructures, company Y leases 5,000 m2 to company Z for 20 years for building a manufacturing plant with the land rent rate exclusive of VAT (not including publicfacility charges) of VND 800,000/m2/year. Company Z pays the infrastructure rent once a year. The VAT calculation price for annual revenues from the lease of infrastructures is: (5,000 m2 x VND 800,000) - (5,000 m2 x VND 300,000) x 01 year = VND 2,500,000,000. The VAT is: VND 2,500,000,000 x 10% = VND 250,000,000. 11. For real estate dealing activities, the VAT calculation price of a house or infrastructure affixed to land is allowed to exclude the land price calculated according to the price prescribed by the provincial-level Peoples Committee at the time of receipt of ownership or use of the real estate. 12. For ocean shipping agency services, brokerage services, export and import consignment as well as other services entitled to remuneration or commissions, their VAT calculation price is the earned remuneration or commission exclusive of VAT.

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13. For transportation, loading and unloading, the VAT calculation price is the freight or loading and unloading charge exclusive of VAT, regardless of whether the establishment directly undertakes the transportation, loading and unloading or hires such service. 14. For goods and services of specific nature for which documents such as freight tickets, construction lottery tickets are used and recorded with the payment price inclusive of VAT, the VAT-exclusive price shall be determined as follows: The VAT- exclusive price The payment price (proceeds from the sale of tickets, stamps) = 1 + The tax rate (%) applicable to such goods or service

15. For tourist services in the form of tours under contracts signed with tourists at package prices (inclusive of meal, accommodation and travel), these package prices shall be regarded as VAT-inclusive prices. Where the package prices cover also air fares for tourists coming from abroad into Vietnam and from Vietnam to abroad, expenses for meals, lodgings and sight-seeing and some other expenses incurred abroad (if evidenced with valid receipts), amounts collected from tourists to cover these expenses are not liable to VAT in Vietnam. Example 10: The Ho Chi Minh City Tourist Company performs a package tour contract with Thailand for 50 tourists for five days in Vietnam with the total payment of USD 32,000. The Vietnamese side has to pay for airfares, meals, accommodation, and sightseeing tours under the agreed program, of which the airfares from Thailand to Vietnam and vice versa cost USD 10,000. The output VAT under this contract shall be determined as follows: + Turnover subject to VAT is: USD 32,000 - USD 10,000 = USD 22,000 + The output VAT is: USD 22,000 x 10% = USD 2,000 1 + 10% + The establishments turnover used for calculation of its business result is: USD 32,000 - USD 2,000 = USD 30,000 + The creditable input VAT shall be determined according to regulations for calculation of the payable VAT amount.

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Example 11: Hanoi Tourist Company performs a contract for taking tourists from Vietnam to China on a five-day tour at the package price of USD 400/person. If it has to pay a Chinese tourist company USD 300/person, its taxable turnover is USD 100/person (USD 400 - USD 300). 16. For pawning services, the VAT calculation price is the amount to be collected from this service, including interests receivable from pawn loans and other proceeds from the sale of pawned articles (if any) Revenues from this service, which are determined as above, are VAT-inclusive prices. Example 12: A pawning company generates in the tax period a pawning turnover of VND 110 million. + The output VAT is determined as follows: VND 110 million x 10% = VND 10 million 1 + 10% + The companys pawning turnover determined for calculation of its business results is: VND 110 million - VND 10 million = VND 100 million 17. For books, newspapers and magazines sold at their distribution prices (cover prices) under the provisions of the Publication Law, these sale prices shall be determined as VAT-inclusive prices for calculation of VAT and the establishments turnover (for VAT-liable ones). For books, newspapers and magazines which are not sold at their cover prices, VAT shall be calculated on the basis of sale prices. Publication is a process of turning out publications from the manuscript stage to the stage of distributing such publications to customers. Example 13: The Literature Publisher sells literary books to a book distribution company: The cover price (VAT-inclusive price) is VND 6,300/book. The distribution charge (25%) is VND 1,575/book The taxable price shall be determined as follows: + If the Publisher distributes its publication through the distribution establishment, the taxable price of the publication shall be determined as follows:

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The taxable price at the publishing stage

The cover price - The distribution charge 1 + The tax rate

The taxable price at the publication stage (the Literature Publisher) is: VND 6,300 - VND 1,575 = VND 4,500/book 1 + 5% The output VAT at the publishing stage is: VND 4,500/book x 5% = VND 225/book. The total payment amount is: VND 4,500/book + VND 225/book = VND 4,725/book The VAT calculation price at the distributing stage (at the book distribution company) is: VND 6,300 = VND 6,000/book 1 + 5% The output VAT is: VND 6,000/book x 5% = VND 300/book The VAT payable at the book distribution stage is: VND 300/book - VND 225/book = VND 75/book (Presuming that there is no other input VAT). + If the Publisher directly distributes its publication to users, the VAT calculation price of the publishing activity shall be determined as follows: The VAT calculation price at the publishing stage = The cover price 1 + The tax rate

If the Publisher consigns the sale of its publication at the fixed (agents) price, the use of invoices and documents, the VAT declaration and payment by the Publisher and the consignee are the same as in the case where the goods are sold at their fixed prices through commission agents. The sale prices printed on book covers minus distribution expenses must not be lower than the standard-page cost. When the sale price printed on the book cover minus distribution expenses is lower than the standard-page cost and the publisher has the input VAT higher than the output VAT, it is not entitled to tax refund.

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18. For printing activities, the taxable price is the printing cost. If a printing establishment performs printing contracts with the payment price covering also the printing cost and the paper cost, the taxable price also includes the paper cost. 19. For the services of assessment agency, agency for indemnity consideration, and agency for claim against third parties, of the insurance business service, the taxable price is the earned remuneration or commission, including the amounts collected by the insurance business unit. The time for determining the VAT calculation price under the guidance in Section I of Part B is the time a business establishment completely transfers the right to own or use goods or services (for cases of construction and installation, it is the time of test and takeover of completed works, work items, construction or installation volumes), regardless whether or not it has collected the money. II. VAT RATES The VAT rates for goods and services are applied as follows: 1. The 0% tax rate is applicable to exported goods and services, including also goods processed for export, construction and installation of overseas works and exportprocessing enterprises works; goods sold to duty-free shops; exported goods and services not subject to VAT (excluding international transportation; goods and services provided directly for international transportation; overseas tour services; services of post and telecommunications from abroad to Vietnam; overseas credit, financial investment and securities investment services, and goods and services mentioned at Points 1.27, Section II, Part A of this Circular). 1.1. Exported goods include goods exported overseas, including those exported under consignment, goods sold to export-processing enterprises, and goods falling into cases regarded as exports prescribed by the Government, such as: a/ Transitionally processed goods as prescribed in the commercial law regarding activities of international goods purchase and sale and activities of goods purchase, sale and processing agency with foreign countries. b/ Processed goods for on-spot export as prescribed in the commercial law regarding activities of international goods purchase and sale and activities of goods purchase, sale and processing agency with foreign countries. c/ Goods exported for sale at overseas fairs and exhibitions. 1.2. Exported services and services provided to export-processing enterprises for their production/business activities, except for services used for personal needs (services of

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transporting workers to and from workplaces, providing food rations for workers of export-processing enterprises, etc.). Exported services are services provided directly to organizations or individuals overseas and consumed outside the Vietnamese territory if they fully meet the following conditions: service-providing establishments have contracts signed with overseas purchasers in accordance with the Commercial Law; overseas purchasers pay for services to service-providing establishments based in Vietnam. 2. The tax rate of 5% are applicable to the following goods and services: 2.1. Clean water in service of production and daily life, exploited by water production and trading establishments from natural water sources and supplied to water users (excluding clean water exploited by establishments and individuals themselves in rural and mountainous areas, islands, remote or deep-lying areas in service of production and daily life in such areas, which is not subject to tax, and assorted beverages falling into the 10% tax rate group). 2.2. Fertilizers, ores used for fertilizer production; insecticides, pesticides and growth stimulants for livestock and plants. a/ Fertilizers include organic and inorganic fertilizers such as phosphorous fertilizers, nitrogenous fertilizers (urea), NPK fertilizer, mixed nitrogenous fertilizer, phosphorous fertilizer, potassium fertilizer, micro-biological fertilizer, etc. b/ Ores used as raw materials for fertilizer production like apatite ore used for production of phosphorous fertilizer, muddy soil for production of micro-biological fertilizer. c/ All kinds of insecticides, cockroach killers, rodenticides, termiticides, pesticides, fungicides, herbicides, growth inhibitors or stimulants for livestock and plants, etc. 2.3. Specialized medical equipment, machinery and instruments, such as scanners and radiographs of all kinds for medical examination and treatment, devices and instruments used exclusively in surgery, wound treatment, ambulances, blood-pressure, cardiac and vascular meters, syringes and needles, blood transfusion instruments, contraceptive devices and other specialized medical equipment; medical cotton, bandages, gauzes and medical hygienic bandages. 2.4. Curative and preventive medicines for human and animal use (including also vaccines, immuno-biologicals, distilled water for preparation of injections); pharmacochemical products, pharmaceutical materials used for production of curative and preventive medicines on the lists of goods included in Appendices 1 and 2 promulgated together with this Circular (not printed herein).

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2.5. Teaching and learning aids, including models, drawings, rulers, writing boards, chalks, compasses used for teaching and learning purposes, and specialized teaching, learning, research and laboratory equipment and instruments. 2.6. Printing of products not subject to VAT prescribed at Point 1.13, Section II, Part A of this Circular (except printing of money and certificates valuable as money). 2.7. Childrens toys. 2.8. Books (excluding those not subject to VAT specified at Point 1.13, Section II, Part A of this Circular). 2.9. Magnetic tapes and discs, programmed or not. 2.10. Cultivation and husbandry products, cultured and fished aquatic and marine products that have not yet been processed or have only been preliminarily processed such as cleaning, shelling, sun-drying, heat-drying, chilling or salting at the trading stage (except for the objects specified at Point 1.1, Section II, Part A of this Circular). 2.11. Fresh and raw foodstuffs, foods; forest products (except timber and bamboo shoots), not yet processed at the trading stage. Foods include paddy, rice, maize, potatoes, manioc, wheat; rice, maize, potato, manioc and wheat flour. Fresh and raw foodstuffs are foodstuffs that have not yet been processed but have only been preliminarily processed such as cleaning, shelling, slicing, chilling or sun-drying, and remain fresh and raw, such as cattle and poultry meat, shrimps, crabs, fish, and other aquatic and marine products Unprocessed forest products are forest products exploited from natural forests and of the groups of bamboo, rattan of various kinds, mushrooms, Jews ear fungus; roots, leaves, flowers, medicinal plants, plant resins, and other forest products. 2.12. Sugar and by-products in sugar production, including molasses, bagasse, dregs. 2.13. Products made of jute, rush, bamboo, rattan and/or leaves are those made or processed from jute, rush, bamboo, rattan and/or leaves as main raw materials, such as jute carpets, jute yarns, jute bags, coconut fiber carpets, mats made of jute or rush, ropes and strings made of bamboo, coconut fiber; curtains and blinds made of bamboo of various kinds, bamboo brooms, conical hats, etc. 2.14. Preliminarily processed cotton is shelled, seeded and classified cotton. 2.15. Feeds for cattle, poultry and for other domestic animals, including those kinds unprocessed or mixed such as bran, groundnut cakes, fish powder, bone powder, etc.

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2.16. Scientific and technological services are activities in service of scientific research and technological development such as data processing, computing and analysis in service of scientific research and technological development; elaboration of feasibility and pre-feasibility study reports, and experimental solutions to create new technologies and new products; activities related to intellectual property as guided in the Science and Technology Ministrys Circular No. 08/2006/TT-BKHCN of April 4, 2006, providing guidance on intellectual property services; services on information on and application of scientific and technological knowledge and practical experience. 2.17. Services in direct support of agricultural production, including activities of plowing and harrowing agricultural land; digging, embanking and dredging canals, ditches, ponds and lakes for agricultural production; farming, cultivating and tending plants, preventing and combating pests and diseases; gathering, picking, harvesting, preliminarily processing and preserving agricultural products. 2.18. Coal, coal dust, coke, peat, briquette, caked coal. 2.19. Earth, rock, sand, gravel (excluding products made of earth, rock, sand or gravel like sawn rocks, tiling stones and granite stones). 2.20. Base chemicals, including chemicals on the list in Appendix 1 promulgated together with this Circular (not printed herein). 2.21. Mechanical products (excluding those used as consumer goods), including: a/ Machinery and equipment such as: generators, mills, lathes, planers, rolling and extruding mills, punchers; equipment in complete sets and equipment in separate units; electricity- measuring devices, stabilizers of over 50 KVA, water-measuring devices, girder structures, warehouse frames and metal structures; assorted automobiles (except for automobiles subject to special consumption tax), ships and boats of all kinds and other kinds of means of transport; assorted metal accessories and semi-finished products of the above-named products (including spare parts, semi-finished products of automobiles subject to special consumption tax). b/ Production tools such as borers, small farm machines, sawing machines of all kinds, planers, rice threshers, water pumps with a capacity of over 10 m3/h; soil preparing and harvesting machinery and tools. c/ Products that are small production tools such as pincers, hammers, saws, chisels, shovels, hoes, sickles and scythes, kits that are mechanical products, nails. d/ Fence nets of steel of from B27 to B41, barbed wires, metal roofing sheets, stress metal cables, metal conveyors.

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e/ Switching cabinets, protective cabinets, control cabinets, medium-tension and hightension measurement cabinets; transformers, medium-tension and high-tension kiosks; medium-tension and high-tension isolation circuit breakers; medium-tension and hightension underground cable and box terminals; fuses (12 kV, 24 kV, 36 kV from 6A and higher). 2.22. Molds of all kinds, including those used as tools for production of commodity products shaped by molds, such as molds of machine details, molds for production of assorted tubes. 2.23. Explosive materials, including explosives, delay fuses, detonators and those processed into special-use explosive products without changing the properties of explosive materials. 2.24. Grindstone. 2.25. Newsprint. 2.26. Insecticide sprayers. 2.27. Preliminarily processed rubber latex, such as crepe latex, rubber sheet, crumb rubber and coagulated latex. 2.28. Preliminarily processed pine resin. 2.29. Artificial pressed boards made from raw materials like bamboo, wood pulp, chips and fibers, sawdust, bagasse, rice husk, etc., excluding plywood products. 2.30. Industrial concrete products, including bridge beams, house beams and frames, piles, electric poles, circular sewers and box culverts of all kinds, non-standard prefabricated panels and structures of reinforced concrete (except bricks), commercial concrete (mortar). 2.31. Tires and sets of tires and inner tubes, of a size 900-20 or larger. 2.32. Neutral glass tubes (tubes and ampoule-shaped tubes used to contain injections, test tubes). 2.33. Nets, ropes and fibers for knitting fishing nets, including assorted fishing nets, fibers, ropes of a special kind used for knitting fishing nets, regardless of their production materials. 2.34. Metallurgical, rolled or drawn products of ferrous, non-ferrous and precious metals, except imported gold specified at Point 1.26, Section II, Part A of this Circular. Products from the metallurgy, rolling or extrusion of ferrous, non-ferrous and precious metals include direct products of metallurgical, rolling and extrusion industries in the

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form of raw materials or products, such as metal products in the form of bar, rod, sheet or wire. For metallurgical, laminated and drawn products which have been manufactured and processed into other products, their tax rates shall be determined according to the goods items. 2.35. Automatic data processors, parts and accessories thereof (including computers and their parts and accessories, printers used exclusively for computers), except electricityaccumulating parts. 2.36. Repair of machinery, equipment and means of transport that are mechanical products. 2.37. Maintenance, repair and restoration of historical and cultural relics, museums, except activities specified at Point 1.15, Section II, Part A of this Circular. 2.38. Transportation, including cargo, luggage and passenger transportation, regardless of whether establishments directly perform or hire others to perform such jobs, except for brokerage and agency activities for commissions; cargo and luggage loading and unloading. 2.39. Services of registry of vehicles and equipment of the transport sector. 2.40. Dredging of canals, fairways, river ports and sea ports; recovery of sunken property and salvage activities. 2.41. Distribution and screening of video films. 3. The 10% tax rate are applicable to the following goods and services: 3.1. Petroleum oil, gas, ores and other mineral products. 3.2. Commercial electricity sold by electricity generation and trading establishments. 3.3. Electronic products. 3.4. Mechanical products for use as consumer goods. 3.5. Consumer electric articles. 3.6. Chemical products (other than base chemicals at Point 2.20, Section II, Part B of this Circular), cosmetics. 3.7. Electric wires, telephone wires, other conducting wires (except types of wires being products which have just undergone the rolling and drawing stage at Point 2.34, Section II, Part B of this Circular). 3.8 Welding rods.

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3.9. Yarn, fabrics, garments and embroidery articles; baby nappy; womens sanitary napkins. 3.10. Paper (excluding newsprint at Point 2.25, Section II, Part B of this Circular) and paper products. 3.11. Leather and leatherette products. 3.12. Sugar, milk, confectionery, beverage and other processed foodstuffs, except those foodstuffs subject to the VAT rate of 5%. 3.13. Ceramic, pottery, glass, rubber and plastic products, wood and wood products; cement, bricks, tiles and other construction materials (except for products subject to the VAT rate of 5%). 3.14. Construction and installation. 3.15. Houses and infrastructures of establishments that are assigned or leased land by the State or are transferred land use rights from other organizations or individuals for investment in the construction thereof for sale or transfer. 3.16. Technical infrastructure leasing by establishments that are assigned land or leased land by the State or are transferred land use rights from other organizations or individuals for investment in technical infrastructures for lease in industrial parks, hitech parks and other economic zones according to the Governments regulations. 3.17. Postal, mail, telecommunications and Internet services (except postal, mail, telecommunications and Internet services universalized under the Governments program at Point 1.25, Section II, Part A of this Circular). 3.18. Lease of houses, offices, warehouses, ports, storage yards, workshops, machinery, equipment and means of transport. 3.19. Legal consultancy and other consultancy services. 3.20. Audit, accounting, survey and designing services, insurance, including insurance brokerage (except types of insurance not subject to VAT specified at Point 1.8, Section II, Part A of this Circular). 3.21. Photographing, film printing and development, tape recording, dubbing and renting; duplicating; video recording. 3.22. Hotel, tourist and food and drink catering services. 3.23. Goods and services subject to special consumption tax. 3.24. Gold, silver and gems (except imported gold at Point 1.26, Section II, Part A of this Circular).

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3.25. Ocean shipping agency. 3.26. Brokerage services. 3.27. Repair and warranty services (excluding services at Point 2.36, Section II, Part B of this Circular). 3.28. Goods not specified in Section II, Part A; Points 1 and 2, Section II, Part B of this Circular. The above VAT rates are applicable uniformly to each type of goods or service at the importation, production, processing or trading stage. In the course of implementation, if there arises any case involving the application of a VAT rate according to the Preferential Import Tariff which is inconsistent with the guidance provided in this Circular or involving the inconsistent application of a VAT rate to imported and homemade goods of the same type, the local tax office and customs office shall still collect VAT at the rate they has notified or replied to the business establishments, and at the same time, sum up and report these cases to the Ministry of Finance. The Ministry of Finance shall provide guidance in pursuance to the provisions of the Governments Decree No. 158/2003/ND-CP of December 10, 2003, Decree No. 148/2004/ND-CP of July 23, 2004, and Decree No. 156/2005/ND-CP of December 13, 2005. Example 14: If garments are subject to the tax rate of 10%, then this goods item is subject to the tax rate of 10% at the importation, production, processing or trading stage. 4. The application of VAT rates to some specific cases is as follows: 4.1. For construction and installation establishments that signed before January 1, 2004, construction and installation contracts with VAT-inclusive prices at the VAT rate of 5% but construction and installation works remained uncompleted by December 31, 2003, they may continue enjoying the VAT rate of 5% for the remaining construction and installation items or volume under the contracts. 4.2. For business establishments that have investment projects on construction of houses or infrastructures for sale and already signed contracts for sale of houses or infrastructures with prices inclusive VAT at the VAT rate of 5%, and collected from purchasers at least 30% of the contractual value before January 1, 2004, they are allowed to enjoy the VAT rate of 5% for these contracts. 4.3. Scraps and defective products which are collected for re-cycling or re-use are, when sold, subject to the VAT rate applicable to such goods items. Example 15: Iron and steel scraps collected by establishments are, when sold, subject to the tax rate of 5%; recovered plastic wastes are, when sold, subject to the VAT rate of 10%, as applicable to plastic products.

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III. VAT CALCULATION METHODS VAT payable by business establishments shall be calculated by either of the two methods: the tax credit method and the method of tax calculation directly based on added value. When business establishments liable to pay VAT by the tax credit method also trade in gold, silver, gems or foreign currencies, they shall separately account this business activity for calculation of tax directly based on added value. The subjects of application and the determination of payable VAT amounts by each method are as follows: 1. The tax credit method: 1.1. The subjects of application are business establishments and organizations, enterprises established under the Law on State Enterprises (now the Law on Enterprises), the Law on Enterprises Law or the Law on Cooperatives, foreign-invested enterprises and other business establishments and organizations allowed to apply the tax credit method under the guidance of the Ministry of Finance, except those applying the method of tax calculation directly based on added value mentioned at Point 2 of this Section. 1.2. Determination of payable VAT amounts: The payable VAT amount In which: a/ The output VAT amount is equal to (=) the taxable price of the taxable goods sold or service provided multiplied by (x) the VAT rate applicable to this goods or service. Business establishments paying tax calculated by the tax credit method shall, when selling goods or providing services, calculate and collect VAT on the goods sold or services provided. On invoices made for sold goods or provided services, business establishments shall write the VAT-exclusive sale price, the VAT amount and the total amount payable by the purchaser. If on an invoice only the payment amount is stated but not the VAT-exclusive price and the VAT amount, the amount of VAT on the goods sold or the service provided shall be calculated based on the payment amount. Example 16: An enterprise sells iron and steel. The VAT-exclusive sale price of 6 iron rods is VND 4,600,000/ton; the 5% VAT amount is VND 230,000/ton; but if on some of its sale invoices only the sale price of VND 4,800,000/ton is stated, the VAT amount calculated on the basis of sale turnover shall be determined as follows: VND 4,800,000/ton x 5% = VND 240,000/ton, instead of calculation based on the VAT= The output The creditable VAT input VAT amount amount

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exclusive price of VND 4,600,000/ton and the turnover is thus re-determined as VND 4,560,000 (= VND 4,800,000 - VND 240,000). Enterprises that buy steel are also not entitled to input VAT credit with respect to invoices on which the VAT amount is not indicated. Business establishments shall observe the accounting, invoice and receipt regime prescribed by the law on accounting, invoices and receipts and guided in Section IV, Part B of this Circular. For wrong VAT rates stated on invoices which are not adjusted yet by business establishments themselves but are detected through inspection by tax offices, they shall be handled as follows: For business establishments selling goods or providing services: If the VAT rate stated on invoices is higher than that prescribed in legal documents on VAT, VAT shall be declared and paid at the VAT rate stated on invoices. If the VAT rate stated on invoices is lower than that prescribed in legal documents on VAT, VAT shall be declared and paid at the VAT rate prescribed in legal documents on VAT. b/ The input VAT amount is equal to (=) the total VAT amount stated on the added value invoices for purchased goods or services (including also fixed assets) used for the production of and trading in goods and services subject to VAT or the VAT amount stated on vouchers on import tax payment for imported goods or VAT payment made on behalf of foreign parties under the guidance of the Ministry of Finance for application to foreign organizations and individuals doing business in Vietnam without establishing legal entities in Vietnam. If purchased goods and services are of the kinds for which special-type invoices written with VAT-inclusive payment prices may be used, business establishments may base themselves on these VAT-inclusive prices and the calculation method mentioned at Point 14, Section I, Part B of this Circular to determine the VAT-exclusive price and the creditable input VAT amount. Example 17: In the period, company A made payment for input services of special type eligible for tax credit: The total payment price is VND 110 million (inclusive of VAT). This service is subject to the 10% tax rate. The creditable input VAT amount shall be calculated as follows: VND 110 million x 10% = VND 10 million 1 + 10% As a result, the VAT-exclusive price is VND 100 million and the VAT amount is VND 10 million.

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For wrong VAT rates indicated on invoices which are not adjusted yet by business establishments themselves but are detected through inspection by tax offices, they shall be handled as follows: For business establishments purchasing goods or services: If the VAT rate stated on invoices is higher than that prescribed in legal documents on VAT, input VAT shall be credited at the VAT rate indicated on invoices. If the VAT rate stated on invoices is lower than that prescribed in legal documents on VAT, input VAT shall be credited at the VAT rate prescribed in legal documents on VAT. c/ Determination of creditable input VAT: c.1/ The creditable input VAT is the VAT on goods or services used for the production of and trading in goods and services subject to VAT. c.2/ When purchased goods or services are used for the production of and trading in goods or services both subject and not subject to VAT, only the input VAT amount of the goods or services used for the production of and trading in goods or services subject to VAT is creditable; the input VAT amount not allowed to be credited may be accounted as costs of goods and services not subject to VAT. Particularly for fixed assets used for the production of and trading in goods and services, all input VAT amount is creditable. For fixed assets invested, purchased or donated for use for the following purposes, the corresponding VAT stated on invoices or documents on the purchase of goods and services for the formation of these fixed assets shall not be included in the creditable input VAT but shall be included in the historical costs of these fixed assets: fixed assets exclusively used for the manufacture of weaponry and military equipment used in defense and security; houses used as office buildings and equipment exclusively used for credit operations of credit institutions, reinsurance companies, life insurance companies, securities trading companies, hospitals and schools; fixed assets used for welfare purposes in business establishments (irrespective of their investment capital sources). c.3/ Input VAT amounts may be credited for establishments engaged in agricultural production, forestry, rearing or fishing aquatic or marine products if they organize closed production processes, account their production and business results in a centralized manner, and use products at the stage of agricultural production, forestry; rearing and fishing aquatic or marine products as raw materials for continued production and processing into products subject to VAT (including unprocessed agricultural, forest or aquatic products for export or processed products subject to VAT). These creditable input VAT amounts shall be determined as follows: Business establishments may declare and credit VAT on goods and services purchased for

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production and business at all stages of capital construction investment, production and processing; if they sell goods that are unprocessed or preliminarily processed agricultural, forest, aquatic or marine products not subject to VAT, the VAT amount of these purchased goods and services may be credited according to the proportion (%) of the turnover from goods or services subject to VAT to the total turnover from sold goods or services. VAT declaration and payment shall be conducted at their head offices. c.4/ For purchased goods or fixed assets which are lost, damaged due to natural disasters, fires or unexpected incidents, or stolen, and if organizations and individuals responsible for paying compensations therefor are identified, the input VAT of these goods shall be included in the value of damaged goods to be compensated but shall not be credited. c.5/ The creditable input VAT amount of goods and services arising in a month may be declared for credit immediately when the tax amount payable in that month is determined, regardless of whether these goods or services have been delivered for use or still remain in stock, except for input VAT of goods and services used for construction and installation to form fixed assets of business establishments which have neither commenced operation nor paid any output VAT, or for input VAT of fixed assets which amounts to VND 200 million or more and is allowed to be gradually credited on a quarterly basis (every three consecutive months not dependent on the calendar year). When added value invoices or input VAT payment vouchers of purchased goods and services are made but not yet declared in the month, they may be declared for credit in three subsequent months at most, counting from the declaration time of the month when such invoices are made. For corporation offices that are not directly engaged in business operations and subsidiary administrative and non-business units such as hospitals, clinics, sanatoriums, institutes, training schools, etc., not liable to pay VAT, they are not entitled to input VAT credit or refund for goods and services purchased in service of their activities. When these units also deal in goods and services subject to VAT, they shall separately register, declare and pay VAT for these activities. Example 18: The office of Corporation A is not directly engaged in production and business activities and operates with the budget contributed by subsidiary units. If it leases the unused space of the house (office building), it shall separately account, declare and pay VAT for the office-leasing operation. The input VAT of goods and services used for the operation of the Corporations office shall neither be credited nor refunded. The Corporations office shall pay such input VAT with its budget contributed by its subsidiary units.

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c.6/ The input VAT of goods (including also goods purchased from outside or produced by enterprises themselves) which are used by enterprises for sales promotion and advertisement in various forms in service of the production and trading of goods and services subject to VAT is creditable. d/ To be entitled to input VAT credit or refund, exported goods and services (excluding those specified at Point 1e and Point 1f, Section III of Part B) must meet all the following conditions and procedures: d.1/ Contracts on sale of goods, processing of goods (for cases of goods processing), provision of services for foreign organizations or individuals. For cases of export consignment, export consignment contracts and written records of the liquidation of export consignment contracts (if contracts have been terminated) or written records of periodical comparison of liabilities between the export consignor and the export consignee, clearly stating the quantity and category of products, the value of the goods already exported under consignment; the serial number and date of the export contract signed between the export consignee and the foreign party; the serial number and date of, and amount of money stated on, the voucher on the via-bank payment made by the export consignee to the foreign party; the serial number and date of, and the amount of money stated on, the voucher on the payment made by the export consignor to the export consignee; the serial number and date of the export consignees customs declaration on the exported goods. d.2/ Customs declarations of exported goods, with the certification by the customs offices that the goods have been exported. In some cases, procedures related to customs declarations shall be specifically carried out as follows: - For business establishments exporting software products abroad or selling to exportprocessing enterprises in the forms of documents, records or packaged databases, in order to enjoy input VAT credit or refund, they shall fill in procedures related to customs declarations as for ordinary goods. - For business establishments exporting software services abroad or selling them to export-processing enterprises, in order to enjoy input VAT credit or refund, they are not required to produce customs declarations upon exportation. However, if these services are exported via electronic means abroad or sold to export-processing enterprises, business establishments shall comply with all regulations on procedures of certification that the purchaser has received software exported via electronic means in accordance with the law on e-commerce. - For business establishments selling goods to export-processing enterprises for the operation of offices, such as stationery, food, foodstuffs and technological articles, they

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must have customs declarations on exported goods in order to enjoy the VAT rate of 0% (excluding electricity and water). If business establishments fail to fill in customs declarations, this case shall be regarded as domestic consumption and subject to output VAT declaration according to regulations. d.3/ Via-bank payment for exported goods and services must comply with the following provisions: - Payment for exported goods and services must be made via bank. Via-bank payment means the transfer of money from the importers account into the exporters account opened at banks in the payment form as agreed upon in the contract and required by the banks. Payment vouchers are credit notes of the exporters bank of the amount of money already received from the importers bank account. If the money for exported goods is paid partially into the account held by the exporting business establishment and partially into the account held by the lawful or authorized representative of the business establishment, the exporting enterprise is only entitled to credit of input VAT on the portion of the exported goods quantity corresponding to the portion of turnover paid by the foreign party into its account. In case of deferred payment, the agreement thereon must be expressed in the export contract, and when payment is due, the business establishment must have via-bank payment vouchers. In case of export consignment, the export consignee shall make via-bank payment to the foreign party. - The following cases of payment shall also be regarded as via-bank payment: + When payment for exported goods or services is cleared against foreign loans, business establishments must satisfy all the following conditions, procedures and dossiers: * Borrowing contract (for financial loans of under one year); or loan registration certification paper of the State Bank of Vietnam (for loans of over one year). * Voucher on the transfer of money via bank by the foreign party into Vietnam. The mode of payment for exported goods or services by clearing against foreign loans must be stated in the export contract. * Written certification by the foreign party of the loan deduction. * When there is any difference between the value of exported goods or services and the foreign loan, such difference must be paid via bank. Vouchers on such via-bank payment are as guided at this Point. + When the goods- or service-exporting establishment makes via-bank payment for exported goods or services but the foreign party authorizes a third party that is a

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foreign-based organization or individual to make payment, and the authorized payment is stated in the export contract (or an annex thereto, if any). + When the foreign party authorizes its Vietnam-based representative office to make payment into the exporters account and the authorized payment is stated in the export contract (or an annex thereto, if any). + When the foreign party requests a third party that is a Vietnam-based organization to make clearing payment to the foreign party by paying via bank the amount of money payable by the foreign party to the exporter and this request for clearing payment is stated in the export contract (or an annex thereto, if any) and there is a payment voucher which is the credit note of the exporters bank of the amount already received from the third partys account, at the same time, the exporter shall produce the written record of comparison of liabilities with certifications of the foreign party and the third party. + When the foreign party makes payment from its current account opened at a credit institution in Vietnam, this payment must be stated in the export contract (or an annex thereto, if any). Payment vouchers are credit notes of the exporters bank of the money received from the current account of the foreign purchaser that has signed the contract. - Other cases of payment for exported goods and services as prescribed by the Government: + In case of labor export where cash is collected by business establishments directly from laborers, receipts of cash paid by laborers are required; + When business establishments export goods for sale at overseas fairs or exhibitions, if they collect and transfer home in cash the currencies of the countries where such trade fairs or exhibitions are organized, they shall produce to the customs offices vouchers declaring the foreign currencies collected from the goods sale and transferred home and vouchers on remittance of such money amounts into banks in Vietnam. + In case of exporting goods or services to repay the Governments foreign loans, the commercial banks certification that the exported goods lot has been accepted by the foreign country for debt payment or that the document set has been forwarded to the foreign country for debt payment as required; payment vouchers in this case are subject to specific guidance of the Ministry of Finance; + The case where exported goods or services are paid with goods means the one where goods (including goods processed for export) or services are exported to foreign organizations or individuals (referred to as foreign parties for short) but the payment between Vietnamese enterprises and foreign parties is made in the form of clearing between the value of exported goods or services or exported goods-processing charges and the value of goods or services purchased from foreign parties.

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Exported goods or services paid with goods must satisfy additional dossier requirements as follows: * The mode of payment with goods for exported goods is stated in the export contract. * The foreign partys goods or service purchase contract; * The customs declaration on imported goods paid for exported goods or services. * The foreign partys written certification of the clearing payment between the exported goods or services and the imported goods or services purchased from the foreign party. * When there is a difference after the clearing payment of the value of exported goods or services against the value of imported goods or services, such difference must be paid via bank. Vouchers on such via-bank payment are as guided at this Point. + When goods are exported to the bordering countries under the Prime Ministers Decision No. 254/2006/QD-TTg of November 7, 2006, on management of border trade with the bordering countries, the guidance of the Ministry of Finance and the State Bank shall be followed. + Some cases of exported goods and services with special forms of payment as decided by the Prime Minister. d.4/ Added value invoices on the sale of goods or services or return of processed goods to foreign parties or export-processing enterprises. e/ Conditions, procedures and dossiers for input VAT credit in some cases where goods are regarded as exported goods: e.1/ Transitionally processed goods as prescribed in the commercial law regarding activities of international goods purchase and sale and activities of goods purchase, sale and processing agency with foreign countries: - Export processing contract and annexes thereof (if any) signed with the foreign party, clearly stating the goods-receiving establishment in Vietnam. - Added value invoice clearly stating the processing charge and quantity of processed goods returned to the foreign party (on the basis of the charge indicated in the contract signed with the foreign party) and the name of the goods-receiving establishment designated by the foreign party; - Bill on delivery of transitionally processed products (referred to as the delivery bill for short), with certifications of the deliverer and the receiver of transitionally processed products and certification of the customs office managing the processing contract of the deliverer and receiver.

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- Payment for goods processed for foreign countries must be made via bank under the guidance at Point 1.2.d.3 of this Section. The procedures for delivery and receipt of transitional processed goods and delivery bills are as guided by the General Department of Customs. Example 19: Company A signs with a foreign party a contract to process 200,000 pairs of shoe soles for export. The processing charge is VND 800 million. The contract clearly states that the shoe soles will be delivered to company B in Vietnam for production of finished shoes. In this case, company A falls into the subject engaged in transitional processing of products for export. In making a voucher to deliver shoe soles to company B, company A should write clearly the quantity, category and specifications of products delivered. The whole turnover of VND 800 million from the processing of shoe soles is subject to the VAT rate of 0%. e.2/ Processed goods exported on-spot as prescribed in the commercial law regarding activities of international goods purchase and sale and activities of goods purchase, sale and processing agency with foreign countries: - Contract on goods sale, signed with the foreign party, clearly stating the goods items, quantity, value, name and address of the goods-receiving enterprise in Vietnam. - Customs declaration of on-spot exports and imports, with the certification of the customs office that the goods have been delivered to the enterprise in Vietnam designated by the foreign party. - Payment for goods sold to a foreign trader but delivered in Vietnam must be made via bank in a freely convertible foreign currency. Via-bank payment vouchers are as guided at Point d.3 of this Section. - Added value invoice of on-spot exported goods, clearly stating the name of the foreign purchaser, the goods-receiving enterprise and the goods delivery place in Vietnam. - On-spot exported goods of foreign-invested enterprises must comply with the provisions of their investment licenses. e.3/ Goods exported for the execution of offshore investment projects of Vietnamese enterprises making offshore investment: - Customs declaration on exports. - List of goods exported for the execution of an offshore investment project, granted by the Ministry of Trade (clearly stating the types, quantities and value of these goods). - Offshore investment certificate, granted by the Ministry of Planning and Investment.

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- Written approval of the investment project or document of equivalent legal validity as prescribed by the law of the host country. - Export consignment contract (for cases of export consignment). For business establishments with exported goods or goods regarded as exported goods mentioned at Point e above, if they have the customs offices certification (for exported goods) but lack other procedures and documents as required for each particular case, they are not required to calculate the output VAT but are not entitled to input VAT credit. Particularly for the cases of transitionally processed goods and on-spot exported goods, if the business establishments lack one of the documents as prescribed, they shall calculate and pay VAT as for domestically consumed goods. For business establishments providing export services, if they do not satisfy the condition of via-bank payment or the condition for being regarded as via-bank payment, they are not required to calculate output VAT but are not entitled to input VAT credit. f/ For business households paying VAT directly calculated on the basis of added value which have been permitted to pay the tax by the tax credit method, they may credit the VAT on the goods and services purchased from the month they are permitted to pay the tax by the tax credit method; for goods and services purchased before that month, they are not entitled to input VAT credit. 1.3. The bases for determining creditable input tax amounts as guided at Point 1 of this Section include the VAT amounts stated on the added value invoices of purchased goods or services; vouchers on the VAT payment at the importation stage; vouchers on the VAT payment on behalf of the foreign parties under the guidance of the Ministry of Finance, applicable to foreign organizations and individuals conducting business activities not in any investment form under the Law on Foreign Investment in Vietnam. Business establishments may not calculate and credit input VAT in the following cases: Added value invoices are used at variance with law provisions, i.e., they are not written with the VAT (except for special cases where added value invoices may be written with VAT-inclusive prices); the sellers name, address or tax identification number is not written or written incorrectly so that the seller is unidentifiable; VAT payment invoices and vouchers are fake; invoices are erased or improperly modified, false invoices (invoiced goods or services are not actually sold); invoices are written with a value not true to the real value of goods or services purchased, sold or exchanged. 2. Method of calculation of VAT directly on the basis of added value 2.1. Subjects of application of the method of tax calculation directly on the basis of added value include: a/ Vietnamese individuals engaged in production and business;

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b/ Foreign organizations and individuals that conduct business in Vietnam without establishing legal entities in Vietnam and fail to satisfy all the conditions on accounting, invoices and vouchers serving as a basis for tax calculation by the tax credit method; c/ Establishments trading in gold, silver, gems and foreign currencies. 2.2. Determination of payable VAT amounts: The payable = VAT amount The added value of taxable goods or service x The VAT rate applicable to such goods or service

The added value of the goods or service = The turnover of the goods sold or the service provided - The cost of the goods sold or service provided For some business lines, the added value is determined as follows: a/ For production and business activities, it is the difference between the sale turnover and the turnover of purchased goods or services used in production and business. When business establishments cannot account the turnover of purchased supplies, goods or services corresponding to the turnover of sold goods, the added value shall be determined as follows: The cost of goods sold is equal to (=) The turnover left at the beginning of the period plus (+) the purchase turnover in the period minus (-) the turnover left at the end of the period. Example 20: Establishment A produces wood articles. In the month, it sells 150 products and earns a total sale turnover of VND 25 million. b/ The value of supplies and materials purchased for the production of these 150 products is VND 19 million, of which: + Principal raw material (timber): VND 14 million. + Other materials and services purchased from outside: VND 5 million. The VAT rate is 10%. The VAT amount payable by establishment A shall be calculated as follows: + The added value of the sold products: VND 25 million - VND 19 million = VND 6 million. + The payable VAT amount: VND 6 million x 10% = VND 0.6 million. c/ For construction and installation, it is the difference between the amounts earned from the construction and installation of works or work items minus (-) the cost of

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materials and supplies, the cost of power, transportation, services purchased from outside and other expenses for the construction and installation of works or work items. d/ For transport activities, it is the difference between the collected transport freight, loading and unloading charges minus (-) the cost of petrol and oil, spare parts and other expenses for transportation activities. e/ For food and drink catering activities, it is the difference between the amounts earned from the sale of foods and drinks, the service charges and other revenues minus (-) the cost prices of goods and services purchased for the food and drink catering. f/ For the trading in gold, silver, gems and foreign currencies, the added value is the difference between the turnover from the sale of gold, silver, gems or foreign currencies minus (-) the cost of the sold gold, silver, gems or foreign currencies. g/ For business establishments paying VAT calculated by the tax credit method and engaged in the trading in gold, silver, gems or foreign currencies subject to application of the method of tax calculation directly based on added value, they shall separately account input VAT amounts for declaration of the VAT payable for goods and services of different business activities and subject to different tax calculation methods. Where they cannot make separate accounting, the creditable input VAT tax amount shall be determined according to the proportion of the turnover of goods and services subject to VAT calculated by the tax credit method to the total turnover of goods sold in the period. h/ For commercial banks, the total turnover arising in a period includes turnover from banking services; turnover from loan and deposit interests; turnover from other operations, and the difference earned from the trading of foreign currencies, gold, silver and gems (difference = turnover cost of the sold gold, silver, gems or foreign currencies). i/ For other business activities, it is the difference between the amount earned from business activities minus (-) the cost of goods and services purchased for the performance of such business activities. The above turnover of goods or services sold includes also surcharges and charges collected in addition to the sale price and earned by business establishments, regardless of whether or not they have been collected. The above turnover of purchased goods and services includes also various taxes and charges already paid and included in the payment prices of goods and services purchased.

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j/ Business establishments paying VAT calculated directly on the basis of added value may not include the value of assets purchased from outside, invested or constructed as fixed assets in the turnover from purchased goods or services for the purpose of added value calculation. 2.3. For each business establishment, the method of determination of added value serving as a basis for calculation of payable VAT is as follows: a/ For business establishments that maintain sufficient invoices, vouchers and accounting records for all sales and purchases of goods and services, the added value shall be determined on the basis of the sale and purchase prices indicated on vouchers (for VAT payers making declarations). b/ For business establishments that have sufficient invoices and vouchers for the sale of goods and services, are able to accurately determine the turnover from the sale of goods and services according to goods and service sale invoices but have insufficient invoices for the purchase of goods and services, the added value shall be determined as the turnover multiplied by (x) the percentage (%) of added value in the turnover. c/ For business individuals (households) that have no or insufficient goods and service sale and purchase invoices, the tax offices shall base themselves on the business situation of each household to impose the turnover for tax calculation; the added value shall be determined as the imposed turnover multiplied by (x) the percentage of added value %) in turnover. Invoices used as a basis for VAT calculation by this method are those used in accordance with law. Invoices which are not used in accordance with law as guided at Point 1.3, Section III, Part B of this Circular shall not be used as a basis for VAT calculation. The General Department of Taxation shall guide provincial-level Tax Departments in determining the percentage (%) of added value in turnover to serve as a basis for VAT calculation, which is suitable to each business line and is reasonable across different localities. IV. GOODS AND SERVICE PURCHASE AND SALE INVOICES AND VOUCHERS Business establishments, when purchasing or selling goods and services, shall abide by the regime on invoices and vouchers as prescribed by law. 1. Business establishments paying VAT by the tax credit method, when selling goods or providing services subject to VAT, shall use added value invoices (except where they

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are permitted to use special-type invoices and vouchers written with VAT-inclusive payment prices). 2. Business establishments paying tax calculated directly on the basis of added value, when selling goods or services, shall use goods sale invoices. 3. When making invoices, business establishments shall fully and correctly fill in all items on the invoices. For added value invoices, they shall clearly write the VATexclusive sale price, surcharge and charge collected in addition to the sale price (if any), the VAT, and the total VAT-inclusive payment price; if the VAT-exclusive sale price and the VAT are not separated and only the payment price is written, the output VAT shall be calculated on the basis of such payment price. 4. Lawful invoices and vouchers are: 4.1. Invoices issued by the Finance Ministry (the General Department of Taxation) and supplied by tax offices to business establishments. 4.2. Invoices printed according to set forms by business establishments for their own use, which has already been approved by the General Department of Taxation. 4.3. Special-type invoices and vouchers of other kinds, which are permitted for use. 4.4. Invoices and vouchers purchased, sold and used in the following cases are considered illegal: a/ Purchasing and selling invoices without prescribed contents, except for purchase of invoices issued by tax offices; b/ Purchasing, selling and using invoices already written with economic data but not accompanied by the purchase and sale of goods or services; c/ Purchasing or using fake invoices or invoices of other business establishments for sale or for legalizing goods or services purchased without vouchers or sold goods or services for the purposes of tax fraud or sale of goods without tax declaration and payment; d/ Purchasing, selling or using invoices with different values of goods or services written on different invoice originals; e/ Purchasing, selling or using expired invoices; f/ Invoices of purchase of goods or services written with the time of purchase before the date on which the business establishment is determined to have escaped as notified by the tax office, which are, however, concluded to be illegal by the tax office, police office or another functional body.

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g/ Invoices of purchase of goods or services written with the time of purchase at which there is no notice on the escape of the business establishment issued by the tax office, which are, however, concluded to be illegal by the tax office, police office or another functional body. The General Department of Taxation shall guide the process and procedures for determining and notifying that a business establishment has escaped. 5. The use and writing of invoices and vouchers in some cases is guided as follows: 5.1. Production and business establishments paying VAT by the tax credit method, when selling goods or services not subject to VAT; selling goods and services to VATexempt entities; selling gold, silver, gems or foreign currencies, shall use added value invoices. On these value added invoices only the line for writing the sale price is written with the VAT-exclusive price while the lines for writing the tax rate and VAT amount are left blank and crossed out. In case of selling goods or services not subject to VAT or to VAT-exempt entities, the invoices must clearly state that the goods are not subject to VAT or are sold to a VAT-exempt entity. 5.2. For export and import business establishments paying VAT by the tax credit method which undertake to import goods under consignment for other establishments, when delivering the goods, they shall make invoices as follows: If the import consignee, when delivering goods imported under consignment, has paid VAT at the importation stage, it shall make an added value invoice for use by the import consignor as a basis for declaration and credit of input VAT on goods imported under consignment. When the import consignee has not yet paid VAT at the importation stage, when delivering the imported goods, it shall fill in the ex-warehousing-cum-internal transport bill issued by the Finance Ministry (the General Department of Taxation) and make the internal transfer order for use as a voucher for circulation of the goods on the market. Only after paying VAT at the importation stage for goods imported under consignment can the establishment make the invoice according to the above regulations. An added value invoice on the delivery of goods imported under consignment shall be written with: a/ The VAT-exclusive sale price covering the value of goods actually imported at CIF price, the import tax, the special consumption tax and other amounts payable according to regulations at the importation stage (if any). b/ The VAT rate and VAT amount as indicated in the tax payment notice of the customs office. c/ The total payment amount (= a + b).

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The import consignee shall make a separate added value invoice for the commission paid for the consigned import. 5.3. Production and business establishments (including those engaged in the processing of goods for export) which pay VAT by the tax credit method and export goods subject to VAT, when exporting goods, shall use added value invoices. When delivering goods for transport to border gates or places where export procedures are carried out, if having no ground yet to make an added value invoice, the establishment shall use an ex-warehousing-cum-internal transport bill issued by the Finance Ministry (the General Department of Taxation) together with the internal transfer order as a voucher for circulation of the goods on the market. After completing the procedures for the export of goods, the establishment shall make an added value invoice for exported goods. In case of export of goods under consignment (including export of processed goods under consignment for other establishments), when delivering goods to the export consignee, the consignor shall use an ex-warehousing-cum- internal transport bill issued by the Finance Ministry (the General Department of Taxation) together with the internal transfer order. After the goods are actually exported, with the certification thereof by the customs office, basing itself on the export consignee voucher for comparison and certification of the quantity and value of the actually exported goods, the goods export consignor shall make an added value invoice for VAT payment and refund declaration. In this case, the export business establishment shall keep the second original. If the export business establishment has registered with the tax office for printing and circulating by itself invoices which will be used for exported goods and issued to foreign customers, it shall use those invoices for tax declaration, payment and refund. 5.4. Use of invoices and vouchers for goods consumed internally, donated, presented as gifts, used for sales promotion or advertisement: a/ For goods or services delivered for internal consumption in service of the production of and trading in goods or services subject to VAT, business establishments shall use added value invoices clearly stating that the goods are provided free of charge for internal consumption in service of production and business. They shall use these invoices as accounting documents. b/ For goods and services used for barter, donation or presentation as gifts, sales promotion, advertising, reward or wage payment to laborers or for internal consumption not in service of production and business or in service of the production of and trading in goods or services not subject to VAT, business establishments shall make added

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value invoices (or sale invoices) with full contents and the calculated VAT amount like sale invoices issued to customers. 5.5. For goods and services sold at discount prices which are stated on their invoices, these invoices must clearly state the discount percentage or rate, the VAT-exclusive sale price (discount sale price), VAT and total payment price inclusive of VAT. If the price reduction is applied on the basis of the quantity or turnover of the actually purchased goods or service, which must reach a certain level, the amount of money for the sold goods shall be adjusted on the invoice of the last purchase of goods or service or of the purchase of goods or service in the next period. This invoice must show its serial number and the discounted amount of money. If the customer no longer purchases the goods, the business establishment shall make an order of payment of the money to the customer as prescribed. 5.6. For production and business establishments which deliver and transfer goods to their dependent cost-accounting establishments such as branches, shops in other localities (provinces or centrally run cities) for sale or transfer among branches and dependent units; which receive goods back from dependent cost-accounting units; or which deliver goods to commission agents for sale at fixed prices, basing themselves on the mode of business organization and cost-accounting, they may opt for either of the two following ways of using invoices and vouchers: Using added value invoices as a basis for VAT declaration and payment in each unit and at each independent stage; using ex-warehousing-cum-internal transport bills issued by the Finance Ministry (the General Department of Taxation), together with the internal transfer orders for goods internally transferred; using the delivery bills for goods for agency sale, issued by the Finance Ministry (the General Department of Taxation) for goods delivered to agents, together with the internal transfer orders. Production and business establishments may only use either of the two ways of using invoices and documents stated at this Point and, before using it, shall notify in writing the selected way to their managing tax office. Dependent cost-accounting units and units acting as agents in various forms, when selling goods, shall make invoices as prescribed, and at the same time, to make lists of sold goods (according to form No. 02/GTGT promulgated together with this Circular, not printed herein), and send them to the establishments which have delivered the goods to them or delivered goods for agency sale so that these establishments can make added value invoices for goods actually consumed. When an establishment has a large sale volume and turnover, such a list may be made every 5 or 10 days. When the sold goods are subject to different VAT rates, different lists must be made for sold goods subject to each VAT rate.

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5.7. Business establishments acting as goods collection and purchase agents in various forms, when delivering goods to the collection and purchase-consigning establishments, shall make invoices for goods they collect and purchase and for commissions they enjoy (if any). 5.8. When business establishments purchase goods for which sellers have issued invoices and which the business establishments have received, if the business establishments return part or the whole of these goods after detecting that they are of wrong specifications or poor quality, before returning such goods to the sellers, they shall make invoices clearly stating that the goods are returned to the sellers due to wrong specifications or poor quality, and the VAT amount. These invoices serve as a basis for purchasers and sellers to adjust the already declared purchase and sale turnovers and VAT amounts. When the purchaser has no invoices, upon the return of goods, the purchaser and the seller shall make a written record or written agreement clearly stating the type, quantity and value of the returned goods calculated according to the VAT-exclusive price and the VAT amount written on the sale invoice (serial number and date of the invoice), the reason for the return. This written record or agreement shall be sent together with the invoice to the seller. This written record shall be kept together with the sale invoice for use as a basis to adjust the sellers declared sale turnover and VAT amounts. When the seller has delivered goods and made an invoice while the purchaser has not yet received the goods but, after detecting that goods are of wrong specifications or poor quality, the purchaser decides to return part or the whole of the goods, upon return of the goods, the purchaser and the seller shall make a written record clearly stating the type, quantity, the VAT-exclusive value and VAT amount of the returned goods as stated on the sale invoice (serial number, mark and date of the invoice) and the reason for the return. The goods shall be returned to the seller together with the invoice so that the latter can re-make an added value invoice for the received goods and use it as a basis for adjusting its turnover and output VAT amount. 5.9. When business establishments have sold or supplied goods or services and made invoices therefor but then have adjusted the sale prices (up or down) because their goods or services are of poor quality or wrong specifications, the sellers and the purchasers shall make written records thereof or written agreements clearly stating the quantity and specifications of the goods, the level of price increase (decrease) as written on the sale invoice (serial number and date of the invoice and time), the reason for price increase (decrease), and at the same time the sellers shall make invoices with the adjusted prices. Such an invoice must clearly state the adjusted price of the goods or service under invoice no, mark. Basing themselves on the invoices with the

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adjusted prices, the sellers and the purchasers shall declare their adjusted purchase and sale turnovers, output and input VAT amounts. In all cases of using invoices with adjusted prices, business establishments may not write negative (-) numbers. 5.10. Business establishments which deliver goods for mobile sale shall use exwarehousing-cum-internal transport bills, issued by the Finance Ministry (the General Department of Taxation), together with internal transfer orders and, when selling goods, make invoices as prescribed. 5.11. Business establishments which directly retail goods or provide services of a value below the prescribed level are not required to make invoices; if a purchaser requests an invoice, they shall make an invoice as prescribed; when they do not make any invoices, they shall make retail lists (according to form No. 06/GTGT promulgated together with this Circular, not printed herein) for tax calculation purposes. 5.12. For construction establishments having construction and installation projects which are executed for a long time and for which payment is made according to execution progress or completed and taken-over work volume, they shall make invoices of payment for the completed and taken-over construction volume. Added value invoices must clearly state the VAT-exclusive turnover and the VAT amount. When the construction works have been completed and the invoices of payment for the value of the works have been made but the payable value of the construction volume is reduced in the process of approving the settlement of the value of the capital construction works, invoices and vouchers for the adjusted payable value of the works shall be made as in the case prescribed at Point 5.9 of this Section. 5.13. For business establishments which are assigned or leased land by the State for investment in the construction of houses for sale or lease or infrastructures for sale or lease, for transportation services with turnover from international transportation; and international tour services, invoices shall be made as follows: a/ The line for sale price shall be written with the VAT-exclusive sale price of the house or infrastructure (the house sale price and the land use rights transfer price are written separately), the infrastructure rent, transportation or package tour service turnover. b/ The line for the taxable price shall be written with the house sale price (or infrastructure rent) minus the land use levy or land rent payable to the state budget or the winning bid price; tourist turnover minus expenses arising overseas such as those for meals, accommodation and transportation; transportation turnover minus international transportation turnover.

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c/ The lines for the VAT rate and amount shall be written with the payment price as prescribed. If a business establishment investing in the construction of houses for sale collects money from buyers before constructing houses and delivers houses as agreed upon in contracts, before collecting money from customers, it shall issue receipts but not invoices. When it delivers houses to buyers, it shall make added value invoices as guided above. 5.14. Financial leasing establishments which lease assets subject to VAT shall make invoices as prescribed, Establishments engaged in financial leasing activities, when leasing assets subject to VAT, shall make added value invoices (for assets purchased at home) or vouchers of VAT payment at the importation stage (for imported assets). The total VAT amounts written on financial leasing service invoices must match the VAT amounts written on added value invoices (or vouchers of VAT payment at the importation stage). For cases where assets purchased for financial leasing are not subject to VAT and added value invoices or vouchers of VAT payment at the importation stage are not available, VAT must not be written on invoices. When the VAT on financial leasing assets has been fully credited and the asset ownership right has been transferred to the lessees, the lessor shall transfer to the lessees the whole dossiers of the origin of assets as prescribed by law. 5.15. For foreign currency trading establishments conducting foreign currencypurchasing and -selling activities abroad, they shall make detailed lists of trading turnovers for each kind of foreign currency. They shall keep all vouchers on transactions with purchasers or sellers abroad strictly according to the law on accounting. For foreign currency-buying and -selling activities conducted at home, invoices must be made according to regulations. 5.16. For establishments engaged in buying and selling gold, silver and gems, if they buy them from non-business individuals who have no invoices, they shall make lists of purchased goods according to form No. 04/GTGT promulgated together with this Circular (not printed herein). 5.17. Export-processing enterprises, when selling goods or services, shall use sale invoices (or invoices issued by themselves) according to the Finance Ministrys regulations. 5.18. Invoices and vouchers for contributed and transferred assets are as follows: a/ Asset-contributing parties are non-business individuals or organizations:

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a.1/ When non-business individuals or organizations contribute their assets as capital to limited liability or joint-stock companies, vouchers for contributed assets are written certifications of capital contributions, written records of delivery and receipt of assets. If contributed assets are brand-new assets, which have not yet been used and accompanied by lawful invoices accepted by the capital delivery and receipt council, the value of these contributed assets is the VAT-inclusive value written on the invoice. The contributed capital-receiving party may not make declaration for credit of VAT amount written on the asset purchase invoice of the capital-contributing party. a.2/ When an individual uses his/her own property or the value of land use rights for setting up a private enterprise or law firm, he/she is not required to carry out procedures for the transfer of property ownership or land use rights to the private enterprise. If he/she has no lawful voucher evidencing the cost of his/her property, a written valuation of the property made by a valuation organization defined by law is required as a basis for accounting the value of fixed assets. b/ Asset-contributing or -transferring parties are business establishments: b.1/ For assets contributed as capital to enterprises, the following documents are required: written record of the contribution of capital for production and business, joint-venture or affiliation contract; written record of the valuation of the asset by the council for delivery and receipt of contributed capital amounts of the capitalcontributing parties (or written valuation of a specialized valuation organization as defined by law), enclosed with a dossier set of the origin of the asset. b.2/ For assets transferred between dependent cost-accounting member units of the same business establishment; assets transferred upon division, splitting, consolidation, merger or transformation of enterprises, business establishments with transferred assets must have asset transfer orders enclosed with the dossier sets of the origin of transferred assets, and are not required to make invoices. For assets transferred between independent cost-accounting units or member units with full legal entity status in the same business establishment, business establishments with transferred assets shall make added value invoices, declare and pay VAT according to regulations. 5.19. For organizations, individuals and administrative non-business units producing or trading in goods or services subject to VAT on an irregular basis and without invoices, they shall be given separate invoices by the tax office for use in each specific case. For business or non-business individuals or households that directly sell their used personal items and property (except for property of business individuals and households that use property directly in the production and business process) are not required to

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make invoices for these personal items and property and declare and pay VAT and enterprise income tax. Business establishments that purchase these personal items and property for business or take them on consignment for sale shall make lists of purchased goods or goods sold under consignment and take responsibility for these lists (made according to form No. 11 promulgated together with this Circular, not printed herein). 5.20. Production and business organizations and individuals that put up their goods for auction shall make invoices for their sold goods according to regulations on printing, distribution, use and management of invoices. For auctioned personal items and property, individuals are not required to make invoices, declare and pay VAT and enterprise income tax; receipts, payment vouchers and auction dossiers constitute a set of documents to be used by property-selling and -buying organizations and individuals for accounting purposes. 5.21. Business organizations and individuals that sell their goods for judgment enforcement shall make invoices for sold goods according to regulations on printing, distribution, use and management of invoices. For personal items and property sold by individuals or business individuals and households for judgment enforcement, these individuals and households are not required to make invoices and declare and pay VAT and enterprise income tax; receipts, payment vouchers and dossiers of auction or sale of property for judgment enforcement constitute a set of documents which are used by property-buying organizations and individuals for accounting purposes. 5.22. For equitized state companies delivering assets which are eligible for exclusion from the enterprise value to a debt-purchasing and selling company, when carrying out delivery and receipt procedures, the parties shall make a written record of the delivery and the state companies are not required to issue invoices to the debt-purchasing and selling company. When the debt-purchasing and-selling company sells these assets, it shall make VAT invoices, declare and pay VAT according to regulations. 5.23. For business establishments transferring capital in accordance with law, when delivering assets included in the value of capital transferred to the capital transferee, they shall make added value invoices. These invoices must clearly state that the goods are transferred capital. The line for sale price shall be written with the VAT-exclusive price and the lines for VAT rate and VAT amount shall be left blank and crossed out. 5.24. For business establishments receiving funds from other business establishments for providing sales promotion, advertisement, marketing and warranty services and carrying out other activities in support of the sale of products they themselves produce or import into Vietnam, all of these funds shall be determined as VAT-inclusive turnover and the funded business establishments shall determine VAT-exclusive turnover and VAT amount for making added value invoices according to regulations. If

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the business establishments use these funds for performing other jobs not in support of the sale of products or services they themselves produce, provide or import into Vietnam, they are not required to make added value invoices but shall issue receipts upon receipt of these funds. For funding business establishments, they shall base themselves on the funding contract and their business regulations on sales promotion policies to make spending vouchers clearly stating that the funds are in support of marketing expenses or payment of sales promotion prizes. 5.25. For business establishments that donate, borrow, lend or return goods, they shall make added value invoices according to regulations applicable to the case of purchase and sale of ordinary goods. C. TAX REGISTRATION, DECLARATION, PAYMENT AND FINALIZATION I. TAX PAYMENT REGISTRATION 1. Business establishments, including companies, factories, enterprises, branches and stores attached to principal business establishments, shall register tax payment with provincial-level Tax Departments, and business individuals shall register tax payment with district-level Tax Departments regarding business locations, business lines, labor, capital, tax payment venues and other relevant issues according to set tax payment registration forms and under the guidance of tax offices. For newly set-up establishments, the time limit for tax payment registration is 10 days from the date they are granted investment licenses or business registration certificates and seals; when those establishments have not yet been granted the business registration certificates but already conducted business activities, they shall register for tax payment before conducting business activities. If establishments which have made the tax payment registration change their business lines, move their business offices to other places, undergo merger, dissolution, bankruptcy, consolidation, division or splitting, or establish new companies, factories, enterprises, branches, stores, etc., they shall make additional registration with the tax offices at least 5 days before making such changes. 2. For production or business establishments which are headquartered in one locality (province or centrally run city) while having their dependent cost-accounting establishments, including companies, factories, enterprises, branches or stores, directly selling goods in another locality, they shall register for tax payment with the tax office of the locality where they are headquartered and their dependent cost-accounting units shall also register VAT payment with the tax office of the locality where they are based. Particularly, organizations and individuals that provide consultancy, survey or designing

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services or perform consultancy or service contracts, shall register, declare and pay VAT with the tax office of the locality where they are headquartered. 3. Construction and installation establishments shall make tax payment registration with the tax office of the locality where they are headquartered. Where construction and installation projects are executed in another locality (province or centrally run city) by their dependent establishments that do not have the legal entity status such as groups, teams, project management units, etc., the construction establishments shall also register, declare and pay VAT with the tax office of the locality where the construction is carried out. 4. When establishments contract business activities to collectives or individuals by the mode of taking accountability for business results, such collectives or individuals shall directly register, declare and pay VAT with the tax office of the locality where they conduct business activities. 5. For business establishments applying the method of tax calculation directly based on added value, if properly and fully meeting conditions on goods or service purchase and sale with sufficient invoices and vouchers, making entries into accounting books strictly according to regulations, declaring and paying VAT strictly according to regulations and voluntarily registering for VAT payment by the tax credit method, they may apply the tax credit method for tax calculation. The establishments shall make and send written tax payment registrations (according to form No. 09/GTGT promulgated together with this Circular, not printed herein) to the tax offices where they have registered for tax payment. Upon receiving the registrations from the establishments, the tax offices shall check and promptly inform the establishments of whether or not they are permitted to apply the tax payment by the VAT credit method (in case of disapproval, clearly stating the reason therefor) within 30 days from the date of receiving the requests from the establishments. The establishments may pay tax by the tax credit method only when they are so permitted by the tax offices. For business individuals (or households) liable to pay tax calculated directly on the basis of added value, if they are permitted to pay tax by the tax credit method but fail to strictly observe the prescribed conditions in the course of implementation, the tax offices shall apply the method of assessing payable tax amounts and issue notices on termination of the tax payment by the tax credit method. 6. Regarding the grant of tax identification numbers to tax payers: Business establishments which have made tax payment registration with the tax offices shall be granted by the tax offices tax identification numbers and tax registration certificates.

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For project owners (or their authorized representatives like project management units), the foreign principal contractors that are entitled to VAT refund and have not yet been given tax identification numbers shall carry out the procedures with the Tax Department of the locality where they are based so as to be granted tax identification numbers. II. DECLARATION OF VAT PAYABLE TO THE STATE BUDGET Production and business establishments and goods importers shall declare payable VAT amounts according to the following regulations: 1. Establishments trading in goods and services subject to VAT shall make and send to tax offices monthly VAT calculation declarations together with the lists of goods purchased and sold according to set forms (forms No. 01/GTGT, 02/GTGT, 03/GTGT, 04/GTGT, 05/GTGT, 06/GTGT, 07A/GTGT, 07B/GTGT and 07C/GTGT promulgated together with this Circular, not printed herein). The deadline for submitting these monthly declarations to tax offices is the 10th day of the following month. The establishments shall fully and accurately fill in the tax declaration forms and take responsibility for the accuracy of the declaration. When a business establishment has sent the declaration form to the tax office but then detects errors in the figures declared before the tax payment deadline, it shall notify the tax office thereof and concurrently make a new declaration form in replacement of the incorrect one. If it detects errors after the tax payment deadline, the establishment shall make adjustments in the declaration form of the subsequent month. 2. The declaration of payable tax in some cases where establishments pay VAT by the tax credit method is as follows: 2.1. For business establishments that produce or trade in both goods and services subject to VAT and not subject to VAT but cannot separately account the creditable input VAT, the creditable input VAT shall be calculated according to the proportion (%) of the turnover from the sale of goods and services subject to VAT to total turnover from the sale of goods and services in the period. Monthly, business establishments shall temporarily calculate the creditable input VAT according to the proportion (%) arising in the declaration month; when making tables of allocation of creditable VAT of purchased goods and services in a year, they shall adjust the whole years creditable input VAT amount according to the actual proportion (%) based on the sale turnover of the whole year (by December 31). 2.2. For construction and installation establishments that organize dependent units which do not have the legal entity status such as construction groups, teams, project management units, for carrying out construction and installation in localities (provinces or centrally run cities) other than the places where they are headquartered, the

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construction and installation units or their parent establishments shall declare the turnover and VAT payable in the localities where the works or work items are currently constructed at the rate of 2 % of the VAT-exclusive payment prices of the works or work items. The construction and installation establishments shall declare and finalize VAT according to regulations with the tax offices of the localities where they are headquartered. The VAT amounts already paid in the localities where works are constructed shall be regarded as paid VAT amounts when the construction establishments make VAT payment declaration at their headquarters. Dependent costaccounting units which build works or work items in other localities shall use tax identification numbers and invoices of their superior units; and use VAT declaration forms (according to form No. 07C/GTGT promulgated together with this Circular, not printed herein). If construction and installation establishments sign construction and installation contracts (contractors) but then assign parts of the jobs or works to other establishments (sub-contractors) for performance, they shall register and declare with the tax offices of the localities where the construction and installation projects exist their construction and installation contracts and their subcontracts signed with other establishments so that the sub-contracted establishments can declare and pay VAT in the localities for the work values they have performed. If the construction and installation establishments (subcontractors) fail to register, declare and pay tax, the construction and installation establishments (principal contractors) shall declare and pay VAT on the whole value of the works under the contracts. For business establishments that construct and install works or have dependent units in localities other than the localities where they are headquartered or have dependent units based in localities other than the localities where they are headquartered and liable to pay VAT in proportion of turnover to the tax offices of the localities where they construct works or work items, when declaring and paying VAT at their headquarters, business establishments shall additionally declare in the written explanations of monthly VAT declaration forms the serial number of the VAT declaration form, the VAT amount payable, the serial number of the VAT payment receipt and the VAT amount already paid in the localities where exist construction and installation works or sale places so that the tax offices managing the business establishments can have grounds for calculating the paid, payable or overpaid VAT amounts. 2.3. For construction and installation establishments that construct and install such works or work items which relate to many localities as roads, power transmission lines, water, petrol or gas pipe lines, etc., and cannot determine the turnover and expenditures of the works arising in each locality, they shall register, declare and pay VAT in the localities where they are headquartered.

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2.4. For business establishments acting as agents selling goods and services not subject to VAT and business establishments acting as agents providing postal, insurance, lottery and air ticket sale services which provide these services at the prices fixed by their principal establishments and enjoy commissions therefrom, they are not required to declare and pay VAT on turnover from goods and services they have sold and on agency commissions they have earned. 2.5. Establishments having their goods sold through agents (which sell these goods at the prices fixed by goods owners for commission) shall base themselves on invoices made for goods sold through agents as prescribed at Point 5.6, Section IV, Part B of this Circular to make annual tax payment declarations for goods sold by these agents as provided for in this Circular. Establishments that are dependent cost-accounting units based in localities other than the places where their principal establishments are headquartered, such as branches, shops directly selling goods or providing services, etc., shall base themselves on input and output invoices of goods transferred and goods directly purchased by themselves to declare and pay VAT in the localities where they are based. 2.6. Establishments acting as agents selling goods subject to VAT in various forms shall declare, calculate and pay VAT on the goods they have sold and on agency commissions they have earned. If establishments acting as agents selling goods at prices fixed by the goods owners for commission sell goods at prices lower than those fixed by the goods owners, they shall declare and pay tax on the basis of the sale prices set by the goods owners. Establishments acting as collecting and purchasing agents in various forms shall declare and pay VAT on the goods they have collected and purchased and on commissions they have earned (if any). 2.7. For goods and services purchased for use in the production of and trading in goods and services subject to VAT for which the input tax has been credited or refunded, if they are then used for the production of and trading in goods and services not subject to VAT or for other non-production and -trading purposes, business establishments shall declare and pay VAT on these purchased goods or services, which have been used for other purposes as mentioned above, according to their residual value or their book value which has not yet been allocated at the time of change of the use purpose. For fixed assets which are purchased for use for the production of and trading in goods or services for which the input tax has been credited or refunded, if they are then used for non-production and -trading purposes (including the case where business

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establishments receive money as compensation for the fixed assets which are attached to land areas recovered under decisions of competent state bodies), business establishments which have these fixed assets shall declare and pay VAT on their residual value or their book value which has not yet been allocated. For goods and services (including fixed assets) purchased for use in the production of and trading in goods and services not subject to VAT (for which the input VAT tax has not yet been credited), if they are then used for the production of and trading in goods and services subject to VAT, business establishments may declare and are entitled to credit or refund of the input VAT on these purchased goods or services (including fixed assets) according to their residual value or their book value. The input VAT on activities of constructing houses for laborers of business establishments may be wholly credited if such houses are included in fixed assets of the enterprises. If business establishments sell these houses to their employees, they shall declare and pay VAT thereon according to regulations. 2.8. For establishments that use goods or services for internal consumption not in service of production and business, like transport, aviation, railways or post, not subject to output VAT calculation, they shall issue specific regulations on target consumers and control limits of internally consumed goods or services, which are subject to approval in writing by competent bodies. 2.9. Agents selling construction lotteries for commissions are not required to declare and pay VAT, which shall be declared and paid by construction lottery companies at their offices. 2.10. For corporations and companies with affiliated establishments, the declaration of payable VAT shall be made as follows: a/ For independent cost-accounting establishments and dependent cost- accounting establishments such as companies, enterprises, factories, branches or shops, which have incomplete legal entity status, seals and bank accounts and directly sell goods or services and earn revenues therefrom, they shall declare and pay VAT by the tax credit method in the localities where the business establishments are headquartered. b/ For dependent cost-accounting establishments which are based in localities other than the localities where the companies or corporations are headquartered, have no legal entity status, seals or bank accounts, but directly sell goods or services and earn revenues therefrom, the companies or corporations shall grant tax identification numbers to these dependent cost-accounting units and these units shall use invoices of their superior units; the companies or corporations shall use VAT declaration forms (form No. 07C/GTGT promulgated together with this Circular, not printed herein) to

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declare and pay VAT in the localities where their turnovers are generated equal to 1% of VAT-exclusive turnover for goods and services subject to the tax rate of 5% and equal to 2% of VAT-exclusive turnover for goods and services subject to the tax rate of 10%. The corporations or companies shall determine and declare accurately the VAT amounts payable according to regulations to the tax offices of the localities where they are headquartered. The VAT amounts already paid by their dependent cost-accounting establishments in the localities shall be regarded as paid VAT amounts when the companies or corporations declare and pay VAT at their head offices. c/ For dependent cost-accounting establishments based in the same localities (provinces or centrally run cities) where their superior establishments, such as companies or corporations, are headquartered, the companies or corporations shall declare and pay tax for their dependent cost-accounting establishments. If dependent cost-accounting establishments which have incomplete legal person status, seals and bank accounts, directly sell goods or services, and declare fully input and output VAT, wish to declare and pay tax on their own, they shall make registration for tax payment, grant of dependent tax identification numbers, and use of separate invoices. d/ For dependent cost-accounting establishments based in localities (provinces or centrally run cities) other than the localities where the companies or corporations are headquartered, if they do not directly sell goods, thus generating no turnover, and cannot fully account the input tax, they shall declare and pay tax at the head-offices of the companies. Corporations and companies shall base themselves on the situation of their own business organization and operation to determine and register specific entities liable to declare and pay tax at the tax offices of the localities where they are headquartered. In case of necessity to apply VAT declaration and payment different from the above guidance, corporations or companies may do so only after obtaining written approval of the Ministry of Finance. 2.11. Financial leasing service business establishments are not required to declare and pay VAT for financial leasing services. They shall declare and calculate tax for assets financially leased or purchased by other units which are subject to VAT according to invoices made under Point 5.14, Section IV, Part B of this Circular. The establishments shall only declare VAT for financial leasing services as guided in this Circular according to forms No. 02/GTGT and No. 03/GTGT (not printed herein) set for leased assets subject to VAT. On form No. 03/GTGT, only the VAT item column 10- VAT will be filled in with the VAT of the leased assets allocated in

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accordance with added value invoices made for the turnover of the financial leasing service in the declaration period. When the lessee fails to perform the contract and thus the lessor has to recover the assets, the lessor shall have notify the lessee thereof and determine clearly the VAT amounts already paid and not yet paid. When the lessor continues to lease such assets to another unit, it shall calculate the VAT amount not fully collected for continued collection under the new contract. When the assets are leased for a period of time before the lessor sells them to the lessee or another establishment, the lessor shall calculate VAT for the sold assets, make added value invoices and may only credit the input VAT of the assets not yet fully collected. When the lessor and the lessee jointly pool capital for the purchase of the assets and the lessor only collects the rent (principal and interest) corresponding to its contributed capital amount, the invoice on the purchase of assets for lease shall be managed by the lessor till the asset ownership is transferred to the lessee. The VAT amount corresponding to the capital amount contributed by the lessor shall be included in the first-time receipt. When a financial leasing contract has been completed, the VAT amount has been paid fully by the lessee and the two parties agree to continue the lease, the invoice made for the subsequent turnover will be VAT-exclusive. 2.12. Business establishments that pay tax by the tax credit method and are engaged in gold, silver, gem or foreign-currency trading activities subject to payment of tax calculated directly on the basis of added value shall declare and pay VAT as follows: a/ For goods and services subject to tax calculated by the tax credit method, the establishments shall make detailed declarations (according to form No. 01/GTGT promulgated together with this Circular, not printed herein) on which item 24 shall be left blank. + The establishments make detailed declarations separately for gold, silver, gems trading activities and foreign-currency trading activities (according to form No. 07A/GTGT promulgated together with this Circular, not printed herein), filling in relevant items on goods or foreign currencies. On the basis of the above detailed declarations, the establishments shall sum them up and fill in the VAT declaration forms (according to form No. 01/GTGT promulgated together with this Circular, not printed herein). Such declaration forms shall only be filled in items 24, 40, 41, 42 and 43.

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Monthly, business establishments shall submit to tax offices consolidated VAT declarations and detailed VAT declarations enclosed with the list of vouchers on goods and services purchased and sold according to forms No. 02/GTGT, 03/GTGT and 04/GTGT (for gold, silver and foreign currencies purchased from sellers without invoices). For such business establishments as banks with dependent cost-accounting units based in the same locality, these dependent units shall make lists of goods and services purchased and sold for archive at the principal establishments. In synthesizing and making the lists of goods and services purchased and sold, the principal establishments shall only sum up the general figures on the lists made by their dependent units. 2.13. Air transportation companies shall declare and pay VAT for air transportation activities in the localities where they are headquartered. 2.14. For business establishments that sell goods subject to VAT at prices prescribed by the State and enjoy price and freight subsidies provided by the State, when selling such goods, they shall calculate the output VAT so as to declare and pay VAT on goods at the state-prescribed prices. Price and freight subsidies provided from the state budget are not subject to VAT and are included by the establishments in their incomes for enterprise income tax calculation. 2.15. For the offices of corporations which are not directly engaged in business activities and not liable to pay VAT, when selling assets, even those subject to VAT, they are not required to calculate, declare and pay VAT on the sold assets. When selling assets, the units shall make invoices according to form HD/TS/TL-3L provided in the Finance Ministers Decision No. 55/2000/QD-BTC of April 19, 2000, promulgating the Regulation on management of the disposal of state assets in administrative and nonbusiness agencies (invoices issued by provincial-level Finance and Pricing Services). Production and business establishments which buy liquidated assets are not entitled to credit of the input VAT. 2.16. Business establishments, upon their merger, dissolution, bankruptcy or ownership transformation, when selling assets that are subject to VAT, shall calculate, declare and pay VAT thereon. When selling these goods, they shall make invoices as prescribed, and declare and pay VAT thereon. 2.17. For business establishments that have dependent cost-accounting units that declare and temporarily pay VAT in percentage in localities other than the places where the business establishments are headquartered, these business establishments shall declare to the tax offices of the places where they are headquartered the total output VAT amount, the credited input VAT amount, the payable VAT amount, the VAT amount

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already paid on the total turnover of goods sold or services provided (including the VAT amount already paid in proportion on the works, work items, turnover from the sale of goods and services in other provinces or centrally run cities), and the tax amount to be paid into the state budget. 2.18. Business establishments are not required to declare and pay VAT in the following cases: - Money received as compensation for land, supports for land and resettlement due to land recovery; - Assets contributed to the capital of newly established enterprises; - Transfer of assets between dependent cost-accounting units in the same enterprise; - Transfer of assets upon division, splitting, consolidation, merger or transformation of enterprises; - Payments claimed from third parties in insurance activities; - Amounts collected on others behalf not related to the sale of goods and services of business establishments. 2.19. For business establishments receiving funds from other business establishments for providing sales promotion, advertisement, marketing and warranty services and carrying out other activities in support of the sale of products they themselves produce or import into Vietnam, all of these funds shall be determined as VAT-inclusive turnover and the funded business establishments shall issue invoices and declare and pay VAT and enterprise income tax (if any) according to regulations. The VAT amount shall be calculated according to the following formula: Total earned turnover Payable VAT = (100% + % VAT rate) x % VAT rate

If the business establishments use these funds for performing other jobs not in support of the sale of products or services they themselves produce, provide or import into Vietnam, they are not required to declare and pay VAT but shall declare and pay enterprise income tax according to regulations. 3. Business establishments and importers that import goods subject to VAT shall make and submit VAT declarations upon each importation at the same time with declaring import tax to the import tax-collecting customs offices. 4. Import and export business establishments which undertake the consigned import of goods subject to VAT shall make VAT declaration as follows:

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Establishments undertaking the consigned import of goods are not required to declare and pay VAT for goods imported under consignment but shall declare added value invoices made for the imported goods already returned to the import-consigning establishments to the tax offices on list No. 02/GTGT, together with invoices and vouchers of other goods and services sold. Invoices for goods imported under consignment are presented separately on the list. 5. Business establishments trading goods in lots shall declare and pay tax upon each goods lot with the district-level Tax Departments of the localities where they purchase the goods before transporting the goods away (except for the cases of VAT exemption under the Governments regulations). The payable tax amount for goods lots shall be calculated directly on the basis of added value. 6. Business establishments dealing in assorted goods and services with different VAT rates shall declare VAT according to each tax rate prescribed for each kind of goods or service; if they cannot determine tax as per tax rate, they shall calculate and pay tax at the highest tax rate applicable to the goods or services which they deal in. 7. Business establishments shall make and submit declarations to tax offices even when no goods or service sale turnover or input tax and output tax arises. 8. Business establishments trading in gold, silver, foreign currencies and gems and business establishments paying tax calculated directly on the basis of added value, which maintain adequate invoices, vouchers and accounting records for their goods and service purchase and sale are not required to pay VAT if the added value is negative (-) when declaring the payable tax of the month; the negative added value shall be carried forward and cleared against the arising added value of the following month for calculating payable VAT amounts and make tax finalization for the whole year, but the negative added value of the tax finalization year must not be carried forward to the subsequent year. 9. For non-business units and other organizations engaged in the production of and trading in goods and services subject to VAT, they shall register, declare and pay VAT and enterprise income tax as provided for by law. When units cannot account and determine separately the costs and input VAT of taxable goods and services, the payable VAT and enterprise income tax amounts shall be determined on the basis of the turnover and added value percentage (%) and enterprise income percentage (%) calculated based on turnover and assessed by the tax offices for tax declaration and payment. 10. Foreign organizations and individuals engaged in production and business activities in Vietnam not in any form of investment under the Law on Foreign Investment in

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Vietnam (now the Law on Investment) (collectively referred to as foreign contractors) shall declare and pay VAT according to separate regulations of the Finance Ministry. Organizations or individuals in Vietnam acting as goods or service sale agents for foreign organizations or individuals shall declare and pay VAT on goods and services for the foreign parties. 11. For goods imported directly by contract-winning establishments (including those imported under consignment) and prescribed at Point 1.4, Section II, Part A of this Circular for sale to enterprises for use as fixed assets for the approved investment projects, these goods are not subject to VAT calculation and payment. Upon delivery for sale or return of goods imported under consignment, the establishments shall make invoices as guided at Point 5.1, Section IV, Part B of this Circular. 12. Lists of goods and services purchased and sold to be submitted together with monthly tax declarations to tax offices shall be made in some cases as follows: 12.1. For goods and services which are retailed directly to consumers, such as electricity, water, petrol and oil, postal services, hotel services, food and drink catering, passenger transportation services, gold, silver, gem and foreign currency trading, retail of other consumer goods and services, tax declaration may be made for their aggregate retail turnovers rather than according to each invoice. 12.2. For goods and services which are purchased from retailers, a consolidated list may be made for each group of goods or services subject to the same tax rate; listing according to each invoice is not required. III. VAT PAYMENT VAT payers shall pay VAT in full and on time into the state budget. The order and procedures for tax payment are as follows: 1. For business establishments that pay tax by the tax credit method shall pay VAT into the state budget after submitting VAT declarations to tax offices. The deadline for paying tax in a month is the 20th of the subsequent month. For business establishments that have deposit accounts at banks, they shall carry out tax payment procedures by making papers on the remittance of money into the state budget. The time of tax payment into the state budget is the date the bank receives and carries out the procedures to deduct and remit money from the establishments account into the state budget and record it on the paper on remittance of money into the state budget. For business establishments paying tax in cash, the time of tax payment into the state budget is the date the treasury or tax office receives the tax amounts.

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Business establishments shall pay outstanding VAT amounts into the state budget within 10 days after submitting the tax finalization reports; overpaid amounts, if any, shall be deducted from the tax amounts payable in the subsequent period or be refunded if the establishments are eligible for tax refund. 2. For business organizations and individuals (households) that pay VAT calculated directly on the basis of added value and make tax declaration and payment according to the tax notices of tax offices, the deadline for tax payment is the 20th of the subsequent month. For business individuals (households) that pay tax in stable presumptive amounts, the deadline for tax payment is the time indicated in the notices of their managing tax offices. For business individuals (households) (excluding taxpayers that pay tax according to declarations) that reside in areas far from a state treasury or conduct mobile or irregular business operations, the tax offices shall organize the tax collection and payment into the state budget. Tax offices shall pay the collected tax amounts into the state budget within three days (from the date the tax is collected); particularly for mountainous, island and difficult-to-access areas, this time limit is six days. 3. Business establishments and persons that import goods shall pay VAT on imported goods upon each importation. The time limit for notification and payment of VAT on imported goods coincides with the time limit for import tax payment and notice, specifically as follows: 3.1. For goods not subject to import tax or subject to the import tax rate of 0%, the time limit for VAT declaration and payment is the same as applicable to goods subject to import tax. 3.2. For non-commercial imported goods and non-quota cross-border imported goods to which the form of tax payment notice does not apply, VAT shall be declared and paid immediately upon the importation thereof. 3.3. For imported goods for which VAT is not required to be paid upon their importation such as raw materials imported for production and processing of goods for export, gifts, donations, humanitarian aid, non-refundable aid goods, etc., if they are then delivered for sale or for use for other purposes, VAT thereon shall be declared and paid to the tax offices directly managing the establishments concerned. 4. Business establishments shall, when purchasing, buying or transporting imported goods, strictly comply with regulations on invoices and vouchers. If failing to produce fully invoices and vouchers as prescribed, they shall be handled for violations of regulations on invoices and vouchers, for tax-related administrative violations or have

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their goods (for goods imported without lawful invoices or vouchers) confiscated according to law. When paying tax, business establishments shall be given by tax offices or state treasuries tax receipts or documents certifying the tax payment. These receipts and documents are uniformly issued by the Finance Ministry. Tax offices shall guide and inspect business establishments in keeping books of accounts on the VAT amounts stated on invoices and documents as a basis for the calculation of payable and creditable VAT amounts. 5. In a tax period, if business establishments have the overpaid tax amounts of the previous period, these tax amounts may be cleared against the payable tax amounts of the subsequent period; if the previous periods tax amounts are underpaid, the outstanding tax amounts must be fully paid not later than the payable tax amount of the current period. Business establishments that move to other localities (urban districts or rural districts for tax payers directly managed by district-level Tax Departments; provinces and centrally run cities for tax payers directly managed by provincial-level Tax Departments) shall fully pay the outstanding VAT amounts and obtain certifications thereof from their managing tax offices before their relocation. For establishments that pay tax by the tax credit method, when relocating their offices, if having the input VAT amounts not yet fully credited or overpaid, they are entitled to credit of or clearing against the VAT amounts declared and paid to their managing tax offices in the localities where they move to. Business establishments shall make consolidated lists of the tax amounts due, the paid tax amounts and the overpaid tax amounts and send them to provincial-level Tax Departments for certification, serving as a basis for tax calculation and payment to the tax offices of the localities where they move to. For business establishments that pay VAT calculated by the tax credit method, if in the tax period they have the creditable input tax amounts larger than the payable output tax amounts, they may carry forward the input tax amounts not yet fully credited to the subsequent tax period. When business establishments have made investment in new fixed assets and have large creditable input tax amounts, they are entitled to gradual tax credit or tax refund under the provisions in Part D of this Circular. 6. VAT shall be paid into the state budget in Vietnam dong. Where business establishments have turnovers from goods and service purchase or sale in foreign currency(ies), these foreign-currency turnovers shall be converted into Vietnam dong at the average inter-bank exchange rates announced by the Vietnam State Bank at the time

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the foreign-currency turnovers from goods or service purchase or sale arise in order to determine the payable VAT amounts. D. REFUND OF VAT I. TAXPAYERS ENTITLED TO AND CASES OF VAT REFUND 1. Business establishments that pay tax by the tax credit method may be considered for tax refund in the following cases: a/ They have input tax amounts not fully credited for three or more consecutive months (regardless of the accounting year). The refundable tax amount is the input tax amount not yet fully credited by the time of request for tax refund. This case also covers business enterprises making new or indepth investments. Example 21: Enterprise A declares VAT with input and output VAT amounts as follows: (Unit of calculation: VND million) Tax declaration month December 2000 January 2001 February 2001 Input tax creditable in the month 200 300 300 Output tax arising in the month 100 350 200 Payable tax -100 +50 -100 Accumulative input tax amount not yet credited -100 -50 -150

In the above example, enterprise A has the accumulative input tax amount for three consecutive months larger than the output VAT amount. Enterprise A is entitled to VAT refund of VND 150 million. b/ If business establishments export goods or services in a month and have the input VAT amount thereon not yet credited reaching VND 200 million or more, they shall be considered for tax refund for the month. When business establishments both export and sell in the country goods or services, if the input VAT amount on the goods or services exported in a month which is not yet credited reaches VND 200 million or more, but it is then cleared against the output VAT amount on the goods or services sold in the country, and, as a result, the uncredited input VAT amount stated on the VAT declaration form of the month is less than VND 200 million, the business establishments are not entitled to tax refund for the month. If the uncredited input VAT amount stated on the VAT declaration form of the month is VND 200 million or more (the input VAT amount not yet fully credited covers also the input tax amount on goods

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or services sold in the country), the business establishments are entitled to tax refund for the month. In case of goods exported under consignment, transitionally processed goods or goods exported for the execution of offshore investment projects, entitled to tax refund are establishments having goods exported under consignment, transitionally processed goods for export, enterprises making offshore investment and enterprises undertaking consigned export. 2. For newly invested business establishments which have made business registration and registered to pay tax by the tax credit method but are still at the investment stage, have neither started operating nor seen any output tax yet, if the investment duration has reached one year or more, they shall still make monthly tax declarations and may be considered for input tax refund every calendar year. If the refundable input VAT amount of their invested assets reaches VND 200 million or more, the establishments shall be considered for tax refund on a quarterly basis (every three consecutive months, regardless of whether they are of the same calendar year). Example 22: A business establishment was newly set up in 2003. During 2003, it invested VND 6 billion in construction and installation and VND 2 billion in machinery and equipment. - The input VAT on supplies used in construction and installation is VND 400 million. - The VAT on machinery and equipment is VND 200 million. By the end of 2003, as the work was not put into production and business operation, the establishment earned no turnover yet and, as a result, had no payable VAT. After making the 2003 VAT finalization report with the input tax amount of VND 600 million, the establishment shall compile a dossier requesting the tax office to refund the VAT amount of VND 600 million to it. Business establishments that have an accumulated input tax amount of more than VND 200 million every quarter may request tax refund on a quarterly basis (every three consecutive months, regardless of whether they are of the same calendar year). 3. For business establishments paying tax by the tax credit method, if they have investment projects to build production establishments which are still at the investment stage, have not yet been put into operation, have not yet made business and tax payment registration, they shall make tax declarations according to form No. 01B/GTGT, make dossiers of tax refund for the investment projects for each year. If the VAT on the goods and services used for those investment projects reaches VND 200 million or more, they shall be considered for tax refund on a quarterly basis (every three consecutive months, regardless of whether they are of the same calendar year).

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After the investment project on setting up a new enterprise has been completed and all business registration and tax registration procedures have been completed, the business establishment acting as the projects investor shall sum up the projects arising VAT amounts and VAT amounts refunded and not yet refunded and deliver them to the newly set-up enterprise for making tax declaration and payment as well as VAT refund requests according to regulations to the managing tax offices. 4. Business establishments shall finalize tax upon their merger, consolidation, division, splitting, dissolution, bankruptcy, ownership transformation; or assignment, sale, contracting or lease, for State enterprises, when they have any overpaid tax amounts or input VAT amounts not yet fully credited. 5. Business establishments enjoy tax refund under decisions of competent bodies defined by law. 6. The refund of paid VAT amounts for ODA-funded projects is subject to separate regulations of the Ministry of Finance. 7. Vietnamese organizations that use humanitarian aid or non-refundable aid money of foreign organizations or individuals for the purchase of goods in Vietnam for use as aid will be refunded the VAT paid upon the goods purchase as indicated on the added value invoices. Example 23: The Red Cross Society is provided with VND 200 million as aid from international organizations for the purchase of humanitarian aid goods for inhabitants in the provinces hit by natural disasters. The VAT-exclusive value of purchased goods is VND 200 million and the VAT is VND 10 million. The Red Cross Society will be refunded, as prescribed, a tax amount of VND 10 million. Business establishments and organizations entitled to VAT refund under the guidance at Points 1, 2, 3, 4, 5 and 7 of this Section I must be those which are liable to pay tax by the tax credit method, have obtained business registration certificates or investment licenses; have own seals as prescribed by law, keep accounting books and records according to regulations on accounting; and have deposit bank accounts according to their tax identification numbers. If business establishments have compiled dossiers requesting tax refund, they may not include the input tax amounts requested to be refunded in the creditable tax amounts of the month following the time of compilation of the tax refund dossiers. If in the month preceding the tax refund-requesting time, the establishments have some overpaid VAT amounts, they may add the overpaid VAT amounts to the VAT amounts requested to be refunded in the period; if the establishments have some underpaid tax amounts, they shall pay them fully into the state budget before they are refunded tax.

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8. For subjects entitled to diplomatic privileges and immunities under the Ordinance on Diplomatic Privileges and Immunities, if purchasing goods or services in Vietnam, they shall be refunded the VAT stated on valued added invoices. Vietnam-based business establishments which sell goods or services to these subjects shall still calculate VAT amounts when making added value invoices. The subjects, goods, services, procedures and dossiers for tax refund in this case are as guided in Circular No. 08/2003/TT-BTC of January 15, 2003. II. VAT REFUND DOSSIERS 1. For cases mentioned at Points 1a, 2 and 3, Section I, Part D of this Circular, a VAT refund dossier comprises: 1.1. A written request for VAT refund, clearly stating the reason therefor, the tax amount requested to be refunded, and the refund time (made according to form No. 10/GTGT promulgated together with this Circular, not printed herein). 1.2. A consolidated declaration of the arising output tax amount, the creditable input tax amount, the paid tax amount (if any), and the input tax amount which is larger than the output tax amount requested to be refunded. 1.3. A list of goods and services purchased and sold in the period which relate to the determination of input and output VAT amounts (forms No. 02/GTGT and 03/GTGT promulgated together with this Circular, not printed herein). Particularly for purchased goods and services for which special-type invoices written with VAT-inclusive payment prices are issued, form No. 05/GTGT promulgated together with this Circular (not printed herein) shall be used. When the monthly tax declarations have been made fully and accurately in consistence with the consolidated declarations, the establishments are not required to submit the list of purchased and sold goods and services of the months for which tax refund is requested. In case of adjustment of the creditable input VAT amounts and the output VAT amounts of the months during the tax refund period, the establishments shall declare the creditable input VAT amount, the output VAT arising in each month in the tax refund period; for the adjusted tax amounts, they shall give clear explanations thereon. 2. VAT refund dossiers for the cases prescribed at Point 1.b, Section I, Part D of this Circular: 2.1. For exported goods or services which are paid in cash, a VAT refund dossier comprises: a/ The documents specified at Point 1 of this Section.

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b/ A written record of the liquidation of the contract on consignment of export or consignment of processing of goods for export (if the contracts have been terminated) or the written record of periodical comparison of liabilities between the export consignor and the export consignee (for export consignment or export processing consignment). c/ A list of documents, signed and stamped by the establishment, clearly stating: c.1/ The serial number and date of the export declaration of exports (for export consignment, the serial number and date of the export declaration of the consignment consignee must be clearly stated). c.2/ The serial number and date of the export contract or the serial number and date of the export consignment or processing consignment contract, for export consignment or export processing consignment). c.3/ The mode of payment, serial number, date and money amount of the voucher on payment for exported goods or services. 2.2. For exported goods or services which are paid with goods, a VAT refund dossier comprises: a/ The documents specified at Point 1 of this Section. b/ A list of documents, signed and stamped by the establishment: b.1/ The serial number and date of the goods or service export contract signed with the foreign party. b.2/ The serial number and date of the contract on purchase of imported goods or services by the foreign party (referred to as the import contract for short) for clearing against the exported goods or services. b.3/ The serial number and date of the export declaration of the exported goods. b.4/ The serial number and date of the import declaration of the import goods purchased from the foreign party for clearing against the exported goods or services. b.5/ The serial number and date of the written confirmation with the foreign party of the money amount cleared between the exported goods or services and the imported goods or services purchased from the foreign party. If there remains some difference after the clearing payment has been made between the value of the exported goods or services and that of the imported goods or services, such difference must be paid via bank and the business establishments shall also declare in an enclosed list the serial number and date of the via-bank payment voucher, and the paid amount.

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Goods and service export contracts or contracts on import and purchase of goods or services signed with foreign parties must strictly comply with the provisions of the Commercial Law. They must clearly state the quantities, categories and value of goods or services, the sale (purchase) prices, the processing charges (for goods processing), the form of clearing between the value of exported goods or services and that of imported goods or services purchased from foreign parties. For business establishments that produce or process goods for export and make clearing payment against imported goods under long-term contracts with foreign parties, they shall register with the tax offices their export contracts, import contracts and plans on payment with foreign parties. They shall regularly produce written certifications of the quantities and value of goods used for clearing payment with foreign parties. 2.3. For on-spot exported goods, a VAT refund dossier comprises: a/ The documents stated at Point 1 of this Section. b/ A list of documents, signed and stamped by the establishment: b.1/ The serial number and date of the on-spot export contract signed with the foreign party. b.2/ The serial number and date of the on-spot export and import customs declaration. b.3/ The serial number, date and money amount of the voucher on via-bank payment for on-spot exported goods. 2.4. For transitionally processed goods, a VAT refund dossier comprises: a/ The documents stated at Point 1 of this Section. b/ A list of documents, signed and stamped by the establishment: b.1/ The serial number and date of the processing delivery contract; the serial number and date of the processing receipt contract. b.2/ The serial number and date of the transitionally processed goods declaration. b.3/ The serial number, date and money amount of the voucher on via-bank payment for on-spot exported goods. 2.5. For goods exported for the execution of offshore investment projects, a VAT refund dossier comprises: a/ The documents stated at Point 1 of this Section. b/ A list of documents, signed and stamped by the business establishment: b.1/ The serial number and date of the offshore investment certificate.

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b.2/ The serial number and date of the written approval of the investment project or a document of equivalent legal validity as prescribed by the law of the host country. b.3/ The list of goods exported for the execution of the offshore investment project, granted by the Ministry of Trade (clearly stating the categories, quantities and value of these goods). 3. For business establishments with overpaid VAT amounts upon their merger, division, splitting, dissolution, bankruptcy, a tax refund dossier comprises: 3.1. A written request for refund of the VAT amount overpaid into the state budget. 3.2. The decision on the merger, consolidation, division, splitting, dissolution, bankruptcy, ownership transformation; assignment, sale, contracting or lease, for state enterprises, issued by a competent body. 3.3. The VAT finalization statement by the time of merger, consolidation, division, splitting, dissolution, bankruptcy, ownership transformation; assignment, sale, contracting or lease, for state enterprises. 4. For the case mentioned at Point 6, Section I of this Part, a VAT refund dossier shall be compiled under separate guidance of the Ministry of Finance. 5. For the case mentioned at Point 7, Section I of this Part, a VAT refund dossier comprises: 5.1. The documents stated at Point 1 of this Section. Particularly for the consolidated declaration, it should only sum up the refundable input tax amounts; and the list of purchased goods and services should be made according to form No. 03/GTGT or form No. 05/GTGT (for purchased goods and services for which special-type invoices written with VAT-inclusive payment prices are issued) promulgated together with this Circular (not printed herein). 5.2. A copy of the decision approving the aid amounts, issued by a competent body (the Prime Minister, minister, Peoples Committee president, head of ministerial-level agency or government-attached agency, head of mass organization) as provided for in Article 5 of Decision No. 28/1999/QD-TTg of the Prime Minister (the copy must be certified by the establishment). 5.3. The written certification by the Finance Ministry, made according to form No. 02 promulgated together with the Finance Ministrys Circular No. 32/2005/TT-BTC of April 26, 2005, guiding the state financial management of non-refundable aid given by foreign countries to associations.

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III. RESPONSIBILITIES OF VAT REFUNDEES 1. To make tax refund dossiers as provided for in Section II of this Part and send them to tax offices. To make accurate and truthful declaration in tax refund dossiers and to take responsibility before law for the declared figures. 2. Where their dossiers are unclear or incomplete, to supply supplementary documents or give explanations as requested by tax offices. 3. To send tax refund dossiers as provided for in Section II of this Part to tax offices; to fully keep at the establishments other documents related to tax refund and tax credit; to fully supply invoices, vouchers and related documents used as a basis for the determination of the refunded VAT amounts when tax offices carry out tax refund inspections at the establishments. 4. If a business establishment has declared the VAT amount requested to be refunded in the VAT declaration sent to the tax office but, when compiling the VAT refund dossier, it requests refund of a VAT amount lower than the VAT amount requested to be refunded in the VAT declaration, it shall send to the tax office the VAT refund dossier together with an official letter explaining the difference and proposing a solution to the difference. When the VAT amount requested to be refunded stated the VAT refund dossier is different from that stated in the VAT declaration, if the establishment sends no official letter explaining the difference, its VAT refund dossier shall be regarded invalid. IV. COMPETENCE TO SETTLE VAT REFUND AND ORDER OF SETTLEMENT OF VAT REFUND 1. Competence to settle tax refund: 1.1. Directors of provincial-level Tax Departments shall consider and issue decisions on tax refund for VAT taxpayers prescribed in Section I of this Part. 1.2. The Finance Minister or the General Director of Taxation, as authorized by the Finance Minister, shall issue decisions on tax refund for other subjects and special cases. 2. Tax offices responsibilities in tax refund: 2.1. To receive tax refund dossiers of taxpayers. 2.2. To examine tax refund dossiers at the tax offices, classify the subjects eligible for tax refund so as to apply appropriate tax refund procedures and ensure strict management of tax refund.

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2.3. To notify in writing and send back the dossiers to the business establishments not eligible for tax refund; for a business establishment eligible for tax refund, if its dossier is incomplete or improper, within 7 days (after receiving the dossier) to request in writing the business establishment to supplement or re-compile its dossier. 2.4. To check the figures and determine the refundable tax amounts of taxpayers eligible for tax refund: 2.5. To issue decisions to refund tax to taxpayers eligible for tax refund, made according to Form No. 12/GTGT enlosed with this Circular (not printed herein). 2.6. To examine and inspect the tax refund at the establishments when detecting doubtful signs in the dossiers or taxpayers violations of the tax law. 3. Time limit for settlement of tax refund: 3.1. The time limit for settlement of tax refund for the subjects eligible for tax refund prior to examination is 15 days (3 days for the tax refund cases prescribed at Point 6, Section I, Part D of this Circular) from the date of receipt of complete dossiers as prescribed. 3.2. The time limit for settlement of tax refund for the subjects liable to examination and inspection prior to tax refund is 60 days from the date of receipt of complete dossiers as prescribed. 4. Responsibilities of State Treasuries: State treasuries of provinces and centrally run cities shall refund VAT to various subjects within three days after receiving the tax refund decisions of tax offices; in case of tax refund under Point 1.b, Section IV of this Part, basing itself on the tax refund decisions of the Finance Minister or the payment orders proxies of the General Director of Taxation, the Central State Treasury shall effect the tax refund. 5. VAT refund money comes from the VAT Refund Fund. The management and use of the VAT Refund Fund are subject to separate regulations of the Ministry of Finance. 6. The number of days for considering and settling tax refund in the above cases is counted in working days. E. TASKS, POWERS AND RESPONSIBILITY OF TAX OFFICES 1. To guide business establishments that have made business registration to make VAT registration, declaration and payment in accordance with the VAT Law. To issue notices to remind business establishments that fail to comply with regulations on tax registration, declaration and payment; to impose tax-related administrative

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sanctions on establishments that, though having been reminded, fail to comply with those regulations. 2. To issue notices to business establishments to explain, adjust, supplement or make redeclaration in cases their VAT declarations fail to state fully and correctly the payable tax amounts. Such notices must be sent to taxpayers three days before the tax payment deadline. Tax payment notices sent to business organizations and individuals (households) that pay tax by direct calculation method on the payable tax amounts and the tax payment deadline shall be made according to form No. 08A/GTGT or 08B/GTGT promulgated together with this Circular (not printed herein). Tax payment notices must be sent to taxpayers three days before the tax payment deadline stated therein. 3. To issue late tax payment notices stating the tax amounts and fine amounts of late payment under the provisions of Clause 2, Article 19 of the VAT Law to business establishments which fail to pay tax on schedule. The time from which a fine on late monthly tax payment shall be imposed is as follows: 3.1. From the 21st of the subsequent month for taxpayers that pay tax by the tax credit method and taxpayers that pay tax by the direct calculation method and make declarations. 3.2. From the 1st of the subsequent month for taxpayers that pay tax in stable presumptive amounts. 3.3. From the date following the tax payment date as provided for by the Export Tax and Import Tax Law for imported goods. 4. To apply measures to handle tax-related administrative violations or propose competent bodies to apply measures specified in Clause 4, Article 19 of the VAT Law, for taxpayers failing to pay taxes and fines according to tax offices notices. If the business establishments still fail to pay taxes and fines despite the application of the said measures, the tax offices shall transfer the dossiers to competent bodies for handling according to law. 5. To examine and inspect the tax declaration, payment and settlement by business establishments in accordance with law. 6. To settle tax-related complaints in accordance with law. 7. To request taxpayers to supply accounting records, invoices, vouchers and other dossiers as well as documents related to tax calculation and payment; to request credit

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organizations, banks and other concerned organizations and individuals to supply documents related to tax calculation and payment. 8. To keep and use data and materials supplied by business establishments and other subjects according to regulations. 9. Tax offices may assess VAT amounts payable by taxpayers in the following cases: 9.1. Business establishments fail to observe or improperly observe regulations on accounting, invoices and vouchers. For business households paying VAT calculated directly on the added value and business establishments trading in goods lots which maintain no or insufficient invoices or vouchers on the purchase and sale of goods and services, tax offices shall base themselves on their business situation to determine the added value and payable tax amounts by the method of tax calculation directly based on added value under Point 2.3, Section III, Part B of this Circular. For business individuals and medium- and small-sized business households (referred collectively to as business households) paying assessed tax amounts every month which are suitable to the business households, these tax levels shall be used a basis for stable tax collection for 6 or 12 months. Tax offices shall publicly announce turnover levels and tax amounts assessed for these subjects. For medium- and small-sized business households that pay tax at stable levels for each period, if having any changes in their business lines or scope during that period, they shall declare these changes to tax offices for consideration and adjustment of the assessed tax levels. For business households that fail to declare or declare untruthfully such changes, tax offices are entitled to assess payable tax amounts suitable to the business situation. Households that cease to conduct business for 15 days or more in a month may be considered for a 50% reduction of the payable tax amount of the month; if they cease to do business for the whole month, they are exempt from tax payment for that month. For medium- and small-sized business households that pay tax at stable levels, if they do not conduct business in a number of days eligible for tax reduction or exemption, they shall make written requests (according to a form set and guided by the tax office), specifying the number of days when they did not conduct business and the reason therefor, then send them to the district-level tax offices. The tax offices shall examine whether it is true; if true, they shall permit tax exemption or reduction according to regulations. Determination of medium-sized and small-sized business households shall be carried out by provincial-level Tax Departments on the basis of their business lines or trades in

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a way suitable to the practical situation of each locality for the purpose of application of proper tax administration and collection methods. 9.2. Business establishments fail to make declaration or past the deadline for submission of declarations and though having been reminded thereof they still fail to do it, or they have submitted tax declarations which contain incorrect bases for determination of VAT amounts; For business establishments that fail to submit tax declarations or have declared incomplete and incorrect bases for determination of payable VAT amounts such as output VAT (sale prices or tax rates) or creditable input VAT amounts, tax offices are entitled to base themselves on the business situation of the establishments and investigation data to set the sale prices, turnovers and payable VAT amounts, and notify the establishments thereof for compliance. If the business establishments disagree with the tax amounts assessed by the tax offices, they may lodge complaints with superior tax offices or competent bodies but, pending the settlement, they shall still pay the tax amounts assessed by the tax offices. 9.3. They refuse to produce accounting records, invoices, vouchers and necessary documents related to VAT calculation. 9.4. They are detected through examinations to have conducted business activities without business registration or without tax registration, declaration and payment. Tax offices shall base themselves on documents on the investigation of the situation on business activities of the establishments or on the payable tax amounts of establishments engaged in the same business lines with similar business scopes to assess the payable tax amount for each business establishment in the cases mentioned above. E. HANDLING OF VIOLATIONS I. HANDLING OF TAX-RELATED VIOLATIONS Taxpayers that violate the VAT Law shall be handled as follows: 1. If failing to strictly comply with regulations on business registration procedures, tax registration, declaration, payment and finalization, declaration and compilation of accounting records and preservation of vouchers and invoices related to tax calculation and payment, they shall be cautioned or fined, depending on the severity of their violations. 2. If delaying the payment of tax or fines stated in the tax notices, tax collection orders or sanctioning decisions, they shall, apart from fully paying the tax or fine amounts as prescribed by law, pay a fine equal to 0.1% (one thousandth) of the late paid amount per late day.

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3. If falsely declaring or evading tax or committing frauds in tax refund, apart from fully paying the tax amounts as prescribed by the VAT Law, they shall, depending on the nature and severity of their violations, pay a fine from one to five times the falsely declared tax amount; if evading tax or committing tax frauds involving large tax amounts or having been sanctioned for tax-related administrative violations but continuing to commit serious violations, they shall be examined for penal liability in accordance with law. Business establishments which commit fraudulent acts in making declarations for tax credit or tax refund are not entitled to credit or refund of the falsely declared tax amounts; the tax offices that have refunded tax amounts to them shall retrieve the falsely declared tax amounts, which have been refunded. For the VAT amounts stated in the tax refund dossiers, the business establishments shall, after deducting the falsely declared tax amounts therefrom, carry them forward to the subsequent tax declaration and payment period to clear against the payable VAT amounts. 4. Failing to pay tax or fines, taxpayers shall be handled as follows: 4.1. Deduction of the taxpayers money deposited at banks, treasuries or credit institutions for payment of tax or fines. Banks, treasuries and credit institutions have the responsibility to deduct money from the deposit accounts of the taxpayers to pay tax or fines into the state budget according to tax-related handling decisions of tax offices or competent bodies before recovering debts; 4.2. Retention of goods and exhibits to ensure the full collection of tax or fines; 4.3. Distraint of property according to the provisions of law in order to ensure the full collection of outstanding tax and fine amounts. The above VAT-related violations shall be handled according to the procedures and order prescribed in legal documents on handling of tax-related violations. II. COMPETENCE TO HANDLE TAX-RELATED VIOLATIONS Tax offices at all levels, upon detecting violations of the VAT Law committed by business establishments, shall examine and clearly determine the acts of violation, the severity and causes of the violations; responsibilities of organizations and individuals for such acts, and compile dossiers as prescribed. Basing themselves on the regulations on and levels of sanction against administrative violations in the field of tax, tax offices shall, within the scope of their respective sanctioning powers, issue sanctioning decisions or propose their superior tax offices or law enforcement bodies to handle the violations in accordance with law.

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1. Heads of tax offices directly managing tax collection work are competent to handle violations committed by taxpayers prescribed at Point 1, Point 2, and to sanction taxrelated administrative violations prescribed at Point 3, Section I, Part F of this Circular. 2. Directors of provincial-level Tax Departments and heads of district-level Tax Departments which directly manage tax collection work may apply the handling measures defined at Point 4, Section I, Part E of this Circular in accordance with law and transfer the dossiers to competent bodies for handling in accordance with law, for cases of violation prescribed at Point 3, Section I, Part F of this Circular. 3. For VAT refund dossiers in violation, tax offices shall make written records of violations and shall, depending on the severity of violations of business establishments, impose appropriate sections according to regulations. If violations committed by business establishments are subject to administrative sanctions, tax office shall carry out procedures to refund the VAT amounts stated in the VAT refund dossiers, after subtracting the VAT amounts in violation, according to the examination conclusions of tax offices, without requesting the business establishments to re-compile VAT refund dossiers. F. COMPLAINTS AND STATUTE OF LIMITATIONS FOR IMPLEMENTATION 1. Taxpayers rights and responsibilities in making tax-related complaints: Under Article 23 of the VAT Law, organizations and individuals have the right to lodge complaints about wrong application of the VAT Law by tax officers or tax offices to their establishments. Within 30 days from the date of receiving the tax collection orders or the handling decisions, written complaints must be sent to tax offices that have issued these tax notices, tax collection orders or the handling decisions. Pending the settlement, the complaining organizations or individuals shall still pay the notified tax or fine amounts fully and on time. If they disagree with the decisions of the tax offices on the settlement of their complaints, or past the time limit of 30 days from the date of sending their complaints they still receive no opinion on the settlement, the complaining organizations or individuals may further lodge their complaints to the superior tax offices or initiate lawsuits at a court in accordance with law. The procedures and order for lodging complaints or initiating lawsuits and the consideration and settlement thereof comply current provisions of law. 2. Responsibilities and powers of tax offices in settling tax-related complaints Under Article 24 of the VAT Law, tax offices at all levels, upon receiving written taxrelated complaints from taxpayers, shall consider and settle them within 15 days after receiving the written complaints. For complicated cases requiring time for inspection

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and verification, they should inform the complainants thereof but the time limit for settlement must not exceed 30 days after the receipt of written complaints; if the cases fall beyond their competence, they shall transfer the case dossiers or report them to competent bodies for settlement and notify the complainants thereof within 10 days from the date of receipt of their written complaints. Tax offices that inspect, detect and conclude on tax frauds, tax evasions or tax-related mistakes and impose fines shall retrospectively collect or refund the tax amounts or fine amounts wrongly calculated within the last five years from the date of inspection and detection of tax frauds, tax evasions or tax-related mistakes. For business establishments that do not make tax registration, declaration and payment, the time limit for collection of tax and fine arrears is counted from the date the business establishments commence their operation. G. ORGANIZATION OF IMPLEMENTATION I. ORGANIZATION OF VAT COLLECTION 1. Tax offices shall organize the VAT collection and refund for business establishments. 2. Customs offices shall organize the collection of VAT on imported goods. II. IMPLEMENTATION EFFECT This Circular takes effect 15 days after its publication in CONG BAO. This Circular replaces the Finance Ministrys Circular No. 120/2003/TT-BTC of December 12, 2003, Circular No. 84/2004/TT-BTC of August 18, 2004, Circular No. 127/2004/TT-BTC of December 27, 2004, and Circular No. 115/2005/TT-BTC of December 16, 2005. To annul all VAT guidelines promulgated by the Ministry of Finance before the effective date of this Circular which are inconsistent with the guidance in this Circular. Difficulties or problems arising in the course of implementation should be promptly reported by units and business establishments to the Finance Ministry for study and additional guidance. For the Finance Minister Vice Minister TRUONG CHI TRUNG

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