CIRCULAR

GUIDING THE VALUE ADDED TAX FOR POSTAL AND TELEMUNICATIONS SERVICE ACTIVITIES

Pursuant to the Law on Value Added Tax No.02/1997QH of May 10, 1997;
Pursuant to Decree No.28/1998/ND-CP of May 11, 1998 of the Government detailing the implementation of the Law on Value Added Tax;
The Ministry of Finance has issued Circular No. 89/1998/TT-BTC of June 27, 1998 providing detailed guidance for the implementation of Decree No. 28/ND-CP of May 11, 1998 of the Government providing detailed guidance for the implementation of the Law on Value Added Tax;
In order to implement the Law on Value Added Tax in a way suited to the business service activities in post and telecommunications, the Ministry of Finance provides the following additional guidance on the Value Added Tax concerning this service:

I. SCOPE OF REGULATION OF THE LAW ON VALUE ADDED TAX

1. Subject to VAT:

Subjects to VAT in the post and telecommunications service are:

- Postal service: postage stamps; postal parcels; mail; flower telegram; other postal services;

- Telecommunications services including: telephone; telephone cards; telegraph; telex, facsimile; telephone installation; other telecommunications services;

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2. Not subject to VAT:

- International postal and telecommunications services the charges of which are paid by foreign postal and telecommunications companies to the Vietnam Post and Telecommunication Corporation according to international practices;

- International postal and telecommunications services provided from abroad into Vietnam;

- Newspapers distribution service and news page communication, and television broadcasting in the country.

3. Subject to VAT:

Subject to VAT are companies having postal and telecommunications activities, namely:

- Corporations with independent economic accounting, foreign parties having signed contracts for cooperation and joint venture according to provisions of the Law on Foreign Investment in Vietnam (independent accounting corporations for short).

- The Vietnam Post and Telecommunications Corporation, comprising:

+ The Office of the Corporation.

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+ Centers attached to the corporations and located in provinces other than the province where the Corporation is located.

+ Other organizations engaged in postal and telecommunication service activities.

II. METHOD OF TAX CALCULATION

Payable VAT of the Corporation, General Corporation and attached units shall be calculated according to the tax deduction method.

Payable VAT = Output VAT - Input VAT

Output VAT and Input VAT are determined as follows:

1. Output VAT:

- VAT of sold goods and services is equal to volume of sold goods and services multiplied (x) by selling price, multiplied (x) by VAT rate.

- Selling price is the pre-VAT price. For the selling price of postage stamps (including letter stamps, preprint stamps and telephone cards) is the post - VAT price. When calculating the output VAT of postage stamps and telephone cards, the pre-tax price shall be redetermined as basis for calculation.

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=

Selling price

1 + VAT rate (10%)

Example 1: In January 1999 the postal service of province A has a total turnover of VND11 million from the sales of postage stamps. Pre-turnover and output VAT of postal stamps sales in January 1999 is:

Non VAT turnover

=

VND 11 million

= VND 10 million

1 + 10%

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- For postal and telecommunications business service units which also collect service charges or surcharges for which the business unit is eligible, the price for tax calculation shall also include the charge or surcharge.

Example 2: Hotel A has a telephone service charge:

+ Charge (pre-tax price) VND 50,000

+ Surcharge (10%) VND 5,000

+ Tax calculating price (VAT) VND 55,000

+ Output VAT(10%) VND 5,500

- Output VAT in a number of cases is determined as follows:

For the units which have signed contracts on business cooperation in postal and telecommunications service with other units in the form of sharing turnover, each unit shall declare its payable VAT, and EIT (Enterprise In e Tax) separately before sharing the turnover, the parties to the contract shall have to divide the output VAT pared to the turnover as basis for the calculation of VAT to be paid by each unit.

Example 3: The postal service of province A signs a contract for business cooperation with Corporation B in the form of turnover sharing at the rate: Postal Service of province A = 60 per cent, Corporation A = 40 per cent. In January 1999 the Postal Service of province A achieves a total pre-tax turnover of VND 100 million an output VAT of VND 10 million, the VAT and turnover of each party shall be determined as follows:

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Output VAT corresponding to the turnover of the postal Service of province A = VND 10 million x 60% = VND 6 million, Corporation B = VND 10 million x 40% = VND 4 million.

Corporation B has to issue receipt of VAT to the Postal Service of province A so that the latter can have the ground to subtract the turnover and output VAT.

In case of transfer of turnover among dependent units and the payment of in e tax is concentrated at the main office, only the pre-VAT turnover shall be transferred. The units where output VAT and input VAT arise shall have to declare and pay the tax for themselves.

2. Input VAT:

Taxpayers as defined in Point 3, Clause I of this Circular shall have to declare and determine their output VAT on the principle: the input of goods and services purchased for use in production and business in goods and services subject to VAT arising in a month shall be added up and declared for calculation of subtraction right in that month. In case during the month of declaration for tax payment the input VAT eligible for subtraction is bigger than the output VAT subtraction shall continue in the following month of tax declaration.

For units which have turnover from goods and services which are both liable and non - liable to VAT, they shall have to account separately the input VAT of the goods and services used for production and business, and those goods and service liable and non- liable to VAT in order to determine the substractable and non - substractable input tax as well as the VAT to be paid. In case the unit cannot account them separately, the method of proportional distribution of the VAT liable turnover pared with the total turnover in order to determine the substractable input VAT shall apply.

Example: The newspapers distribution corporation in the month of VAT declaration has a total turnover of goods and services of VND 200 million of which the turnover from non-VAT newspapers distribution is VND 150 million, taxable turnover is VND 50 million, output VAT is VND 5 million, total input VAT in the month (not accountable separately) is VND 8 million. Substractable input VAT proportional to turnover is:

VND 8 million

x

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=

VND 2 million

VND 200 million (total turnover)

VAT to be paid = VND 5 million = VND 5 million - VND 2 million = VND 3 million.

For establishments with a small untaxable operating turnover accounting for less than 2 per cent of the total turnover, in order to reduce the procedures of distributing the input tax monthly, the input tax may be integrated and distributed to the non - taxable tax when making the general VAT accounting yearly.

Example: By May 1999 the Postal Service of province A has an average monthly non taxable tax of 2% of the total turnover, up to May it shall not have to declare for distribution of input tax. However, if by August it has a monthly non - taxable turnover of 5% it shall have to declare for input tax distribution for eight months.

III. DECLARATION AND PAYMENT OF VAT

1. For corporations with independent economic accounting

Units with independent economic accounting shall have to declare and pay VAT in the locality where they conduct production and business. If the corporation and these units have been branches and shops... with dependent accounting which conduct business in the locality where the Corporation and units are located, the VAT shall be declared and paid collectively by the Corporation and units on behalf of the branches and dependent shops. If the dependent units and shops conduct their business in other localities, these branches and shops must declare and pay the VAT in the localities where they conduct their business (localities referred to in this Circular are province and cities)

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a/ For the Postal Services in the provinces and cities directly under the Central Government (called provincial Postal Service)

The Provincial Postal Service is a payer of VAT at the Provincial Tax Department for all its business and service activities in post and telecommunications and other services. The Postal Service shall of districts and communes under the Provincial Postal Service not have to declare and pay VAT, but each month it has to make a declaration of all its turnover from postal and telecommunications and other services, declare the VAT vouchers and receipts of its purchased goods and services, declare its output and input VAT arising in the establishments and sent the list to the Provincial Postal Service so that the latter can pay the tax into the State budget (the form and time of the declaration of sending the lists shall be stipulated concretely by the Vietnam General Post and Telecommunications Corporation after the Ministry of Finance has approval them in writing).

When declaring its VAT monthly, the Provincial Postal Service shall have to declare in detail the receipts and vouchers of purchases and sold goods and services , the output and input VAT arising at the provincial postal services; for the vouchers and receipts arising at the district postal service and dependent units, they shall not have to be declared according to each voucher but only the integrated figures according of the lists sent by the dependent units (each unit shall declare on a line in the list). The form of the list shall conform with the prescribed form attached to Circular No. 89/1998/TT-BTC of the Ministry of Finance of June 27, 1998.

For the units which conduct business in goods and supply of postal and communications services with each sale of goods or revenue of service lower than the level where the issue of receipts is obligatory (less than VND 100,000) such as postal service (telephone calls, sale of envelopes) unless the customer demand receipt, the unit shall be allowed to draw up the list of goods and service of retail sale, sum up the retail sale in the day or in a number of days in order to draw up the list of retail sale goods and services. In case of the supply of services of a special character, in order to issue special receipts according to the business license, the Corporation must register with the General Taxation Department.

Each month, the Provincial Postal Services shall base themselves on the VAT to be paid already determined on the tax declaration and shall pay at provincial taxation agency 60% of the tax to be paid and transfer 40% to the Office of the General Corporation as regulating fund for supply to the Provincial Postal Services with negative (-) difference between the output tax minus (-) the input tax. In any case, the Provincial Postal Services with positive difference (having tax to be paid) or negative difference (having tax to be recuperated) shall all have to declare and pay the VAT to the direct tax managing agency.

b/ For the corporations attached to the Corporations (called attached corporations).

Attached corporations are tax payers that have to declare VAT to the taxation agency where the corporations is located. In case the Corporation has centers located in other provinces, each center shall have to declare and pay VAT at the provincial taxation agency according to the prescribed regime. The centers located in the same province as the Corporation shall not have to declare and pay VAT but each month it has to draw up the VAT inventory as prescribed for the district postal services and sent the inventory to the Corporation so that the latter can integrate it into the common declaration to pay the tax into the State budget.

Monthly the attached corporation shall draw up the list of declarations and pay VAT as prescribed for the Provincial Postal Services and pay 60% of the tax to be paid at the provincial taxation agency and transfer 40% to the Office of the General Corporation.

c/ For the Office of the Post and Telecommunications Corporation

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1. Total output VAT

2. Total input VAT

3. VAT to be paid (1-2)

4. VAT already paid at the corporations

5. VAT supplied to the corporations

6. VAT still to be paid (3-4-5)

2. Recuperation of VAT:

Should the corporations and units dealing in VAT - liable goods and services that are subject to declaration for VAT payment incur input tax to be subtracted which is bigger than the output tax within the category enjoying VAT recuperation, the corporations and units shall have to make a dossier to apply for tax recuperation according to the prescribed regime and send it to the taxation agency for consideration and settlement of the tax recuperation to the Corporation or unit.

IV. ORGANIZATION OF IMPLEMENTATION

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2. Concerning receipts and vouchers: Receipts of collection of postal and telecommunications charges must be implemented according to the regime of receipts and vouchers, in case the General Corporation and the Provincial Postal Services need to use self-printed receipts, they shall have to register with the taxation agency as prescribed. For the telephone charge turnover arising in December 1998, if they are issued in 1998, the turnover tax shall apply. For receipts issued after January 1st, 1999 the VAT shall apply.

3. This Circular takes effect from January 1st, 1999. The other contents not stipulated in this Circular shall continue to be implemented as stipulated in Circular No. 89/1998/TT-BTC of the Ministry of Finance on June 27, 1998.

In the process of implementation if some obstacles arise, the units are required to report them to the Ministry of Finance for consideration and settlement.

FOR THE MINISTRY OF FINANCE
VICE MINISTER




Pham Van Trong

Thông tư 164/1998/TT-BTC hướng dẫn thuế giá trị gia tăng (GTGT) đối với hoạt động dịch vụ bưu chính viễn thông do Bộ Tài chính ban hành