OFFICIAL LETTER

ON TAX POLICIES

To: The Tax Department of Nam Dinh province

In reply to Official Letter No. 936 CT/TT-HT of June 14, 2005, of the Tax Department of Nam Dinh province, inquiring about value added tax (VAT) and business income tax (BIT) policies, the General Department of Taxation gives the following opinions:

Point 1.2.d, Section III, Part B of the Finance Ministry's Circular No. 120/2003/TT-BTC of December 12, 2003, providing guidance on VAT, stipulates that when an exports trading enterprise receives payments for the goods, if the foreign party automatically subtracts from the payable amount the foreign bank charge for money transfer, the foreign customer's brokerage commission, the fine for low-quality goods, etc., which are specified in the export contract (or in the contract annex, if any), the enterprise shall have the input VAT refunded in proportion to the volume of exported goods. Where the foreign bank charge for money transfer, the foreign customer's brokerage commission and the fine for low-quality goods, which are not specified in the export contract (or in the contract attachment, if any), are automatically subtracted by the foreign party upon payment without documents as required, when making VAT refund dossiers, the enterprise shall exclude the input VAT amount in proportion to the amount automatically subtracted by the foreign party upon payment.

The expenses automatically subtracted by the foreign party from the payable amount without documents as required shall not be accounted as reasonable expenses for calculating BIT (under the provisions of Point 4, Section IV, Part B of the Finance Ministry's Circular No. 128/2003/TT-BTC of December 22, 2003, providing guidance on BIT).

The General Department of Taxation hereby notifies the Tax Department of Nam Dinh province thereof for compliance.

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FOR THE GENERAL DIRECTOR OF TAXATION
DEPUTY GENERAL DIRECTOR




Pham Duy Khuong

Công văn số 4529/TCT-PCCS của Tổng cục Thuế về chính sách thuế GTGT, thuế TNDN