To:

Polysius AG. Company (Address: Ernst & Young Company Dacha Business Center, 360 Kim Ma street, Hanoi)

In response to Document No. 700HA/HGM dated March 31, 2006, of Polysius AG Company, inquiring about the applicable contractor tax policy in case of import of machinery and equipment, the General Department of Taxation gives the following opinions:

In principle, according to the provisions of Point 1, Section I, Part A of the Finance Ministry's Circular No. 05/2005/TT-BTC of January 11, 2005, "...the supply of goods accompanied with services provided in Vietnam, such as installation, test operation, warranty, maintenance, replacement, training and other services, whether or not included in the value of the goods supply contract shall be liable to tax under the guidance in this Circular."

According to the aforesaid provisions, if Polysius AG Company signs a contract for supply of machinery and equipment to a Vietnamese company, which also covers the provision of installation/installation supervision and warranty services in Vietnam, the whole value of this contract will be liable to tax under the guidance in the Finance Ministry's Circular No. 05/2005/TT-BTC of January 11, 2005.

- If Polysius AG Company (a foreign contractor) does not register to practice the Vietnamese accounting regime, the registration, declaration and payment of its tax shall be carried out by the Vietnamese party (the investor) (on behalf of the foreign contractor) according to the provisions of Section II, Part C of the Finance Ministry's Circular No. 05/2005/TT-BTC of January 11, 2005. If the contractual price is tax-exclusive and the Vietnamese party is required to pay the tax, the Vietnamese party will be responsible for calculating the tax amount payable by the foreign contractor, declaring and paying it according to regulations.

- Regarding import duty on machinery and equipment: The Vietnamese party that directly imports machinery and equipment is obliged to declare and pay import duty on imported machinery and equipment.

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Above is the General Department of Taxation's reply to Polysius AG Company's inquiry, for the latter's knowledge and compliance.

FOR THE GENERAL DIRECTOR OF TAXATION
DEPUTY GENERAL DIRECTOR




Pham Van Huyen

Công văn số 1491/TCT-ĐTNN của Tổng Cục thuế về chính sách thuế nhà thầu đối với trường hợp nhập khẩu máy móc, thiết bị