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CIRCULAR

GUIDING THE DECLARATION AND PAYMENT OF VALUE-ADDED TAX ON GOODS OF BUSINESS ESTABLISHMENTS, WHICH ARE DELIVERED TO AND SOLD AT THEIR DEPENDENT COST-ACCOUNTING UNITS IN OTHER PROVINCES AND CITIES AND WHICH ARE DELIVERED TO AND SOLD BY COMMISSION AGENTS AT FIXED PRICES

Pursuant to the VAT Law and the Government’s Decree No. 28/1998/ND-CP of May 11, 1998 detailing the implementation of the VAT Law;
In order to guide the VAT declaration and payment to be suitable to the business organization of business establishments and compatible with Circular No. 140/1999/TT-BTC of December 2, 1999 guiding the supplements and amendments to a number of points in Circular No. 73-TC/TCT of October 20, 1997 and Circular No. 17/1999/TT-BTC of February 5, 1999 of the Finance Ministry guiding the regime of invoices and vouchers for goods circulated on the market; the declaration and payment of VAT on goods of business establishments, which are delivered to and sold at their dependent cost-accounting units in other provinces and cities, and which are delivered to and sold by commission agents at the fixed prices, are prescribed as follows:

I. FOR GOODS OF BUSINESS ESTABLISHMENTS, WHICH ARE DELIVERED TO AND SOLD AT THEIR DEPENDENT COST-ACCOUNTING UNITS IN PROVINCES AND CITIES OTHER THAN THE LOCALITIES WHERE THE PRODUCTION AND BUSINESS ESTABLISHMENTS ARE HEADQUARTERED.

1. Making and transferring invoices and vouchers for goods delivered from stock and internally consumed:

a/ When a production and business establishment delivers goods to its attached dependent cost-accounting units such as branches, shops’ based in provinces and cities other than the locality where it is headquartered, it must make a delivery cum internal transport bill enclosed with an internal transfer order.

b/ The attached dependent cost-accounting units, including branches and shops’, must, when selling goods, make added value invoices for sold goods according to regulations.

If the sold goods are goods transferred or consigned by the parent company or higher-level units for sale, the attached units shall base themselves on the quantities and selling prices of the already sold goods to make a list of invoices for sold goods and send it to the parent company or higher-level units so that the latter can make invoices for these goods as prescribed at Point 1c of this Section. The list of invoices for internally-transferred goods sold in the month shall be made according to form No. 02/GTGT (issued together with the Finance Ministry’s Circular No. 89/1998/TT-BTC of June 27, 1998) in two copies, one copy kept at the unit and the other sent to the immediate superior unit (if any) or the head office of the production and business establishment. The list of invoices for sold goods shall be made every month. If the quantity and turnover of the sold goods are large, the units may make such list every five or ten days, to be determined by the business establishment, so as to ensure the timely tax declaration and payment.

c/ Basing itself on the quantity of goods sold by its attached units, the business establishment shall make added value invoices reflecting the internally-consumed goods for its attached units. The selling prices inscribed on the invoices are the internal ones or the selling prices offered to purchasers, which are decided by the units. The basis for making such invoices is the lists of sold goods invoices drawn up and sent to the business establishment by the attached units as stipulated at Point 1b of this Section. For each list one general invoice shall be made, except for those lists of products or product groups with different tax rates. Each added value invoice shall be made in three copies: the first copy kept at the parent establishment; the second copy given to the goods-consuming attached unit; and the third copy used as a voucher for cost accounting. The invoice, under column B (name of goods or service) must be clearly inscribed with "Internally-transferred goods sold". This invoice must not be used as a substitute for the voucher for the goods circulated on the market.

2. Tax declaration and payment:

a/ For head offices of the business establishments:

The head office of a business establishment shall declare and pay VAT every month in the locality where it is based, according to current regulations. The turnover to be declared for tax payment consists of the sale turnover recorded in the added value invoice, which is earned from the sale of goods directly by the head office of the business establishment and the turnovers earned from the goods delivered and sold at its attached units, recorded in the added value invoices issued for these units as stipulated at Point 1c of this Section (enclosed with the lists of invoices for internally-transferred goods already sold, made by the attached units - copies certified and sealed by the business establishment). Where the establishment has not yet fully and timely summed up the quantities of goods internally-transferred to the attached units and already sold in the month for making the added value invoice and tax declaration and payment, the goods sold in the month for which an invoice has yet been made shall be carried forward to the subsequent month for invoice making as well as tax declaration and payment.

b/ For attached dependent cost-accounting units:

Every month, the attached dependent cost-accounting units, such as branches, shops’, must declare and pay the VAT in the localities where they are registered, declare and pay taxes, as prescribed in Section II, Part C, Circular No. 89/1998/TT-BTC (for both internally-transferred goods and other goods directly bought and sold by them), enclosed with the lists of sale invoices for internally-transferred goods already sold as reported by attached units (if any).

Example: Cement Company A is headquartered in Hai Phong. It has Branch B being a dependent cost-accounting unit based in Hanoi and Shop C being a dependent cost-accounting unit attached to Branch B and based in Ha Tay. In the month, Company A delivers to Branch B 1,000 tons of cement as internally-transferred goods. In this month Branch B directly sells 500 tons and delivers to Shop C 300 tons as internally-transferred goods. In the same month, Shop C sells 150 tons. The making of invoices and vouchers and tax declaration and payment by these units shall be as follows:

- When Company A and Branch B deliver internally-transferred goods to their units, they use the delivery cum internal transport bill.

- Shop C, when selling cement, must supply invoices to customers, declare and pay the VAT in Ha Tay for sold goods, including the cement transferred by Branch B already sold (150 tons) and at the same time make a list of invoices for the quantity of cement already sold, then send it to Branch B so that the latter can use it as basis for making the added value invoice for the quantity of cement transferred to Shop C and sold in Ha Tay (150 tons). Basing itself on the added value invoice made by Branch B, Shop C shall declare the input VAT for the quantity of cement sold.

- Branch B in Hanoi must declare and pay VAT in Hanoi for the goods sold in the month, which includes the quantity of cement transferred by Company A and already sold (650 tons, including 500 tons sold in Hanoi and 150 tons sold by the shop in Ha Tay). At the same time, Branch B makes a list of invoices for the quantity of cement transferred by the company and already sold, i.e. 650 tons, then sends it to Company A in Hai Phong so that the latter can make the added value invoice for 650 tons of cement already sold. The added value invoice made by Company A shall be used as basis for Branch B to declare the input VAT for the quantity of cement already sold (650 tons)

- Cement Company A in Hai Phong declares and pays VAT in Hai Phong for the quantity of cement directly sold by itself and the quantity of cement transferred to Branch B and already sold (650 tons).

II. FOR GOODS SOLD BY UNITS THROUGH COMMISSION AGENTS

1. Production and business establishments (the goods owners), when delivering goods to commission agents for sale at the fixed prices (the commission agents), as provided for in the Commercial Law, must make a delivery bill for the goods consigned to agents for sale as prescribed in the Finance Ministry’s Circular No. 140/1999/TT-BTC of December 2, 1999, which is enclosed with the commission agency contract.

Basing itself on the goods actually consumed through commission agents, the goods owners shall make the added value invoices reflecting the sold goods and supply them to the commission agents.

The basis for making such an invoice is the list of sale invoices for the goods sold through the agent in the month, which is made and sent by the commission agent as prescribed at Point 2 of this Section. One invoice shall be made for one list; if the sold products or product groups are subject to different tax rates, separate lists shall be made for each type of products subject to the same tax rate. Each invoice shall be made in three copies, one copy filed at the goods owner, one copy given to the agent, and one used as voucher for cost-accounting.

This invoice, under column B (name of product or service) must be clearly inscribed with: "Goods sold by commission agents." This invoice must not be used as a substitute for the voucher for goods circulated on the market.

Every month, the goods owner declares and pays tax for goods sold in the month, including goods sold through commission agents according to current regulations, enclosed with the copies of the lists of sale invoices for goods sold through its commission agents, which are made by such agents, certified and sealed by the goods owner. Where the time for tax declaration and payment is due but the goods owners have not yet received such lists so that they cannot make and supply the added value invoices to the commission agents for declaring the output VAT, such added value invoices and the tax declaration and payment for the quantity of goods sold through agents in the month can be made in the subsequent month.

2. The commission agents must make invoices for goods sold by them. The use of invoices for goods sold through commission agents shall be as follows:

a/ When selling goods under agency contracts, the commission agents where the VAT calculation by method of tax deduction applies shall use agents’ added value invoices. The inscription of these invoices shall comply with the regulations applicable to those that have goods delivered to agents for sale with the same pre-VAT selling prices, the tax rate and the VAT amount.

For goods sold through agents and not subject to VAT or goods sold through agents and subject to VAT and their owners are subject to tax calculation by the direct method, added value invoices shall also be used. On such invoices, only the line of the selling price is written with the price determined by the goods owners; the lines of the tax rate and VAT amount are left unwritten and crossed with a slash. Where the goods sold through agents are subject to the special consumption tax, the commission agents must register with the tax agency for use of sale invoices.

b/ The commission agents where the tax calculation by the direct method applies shall use sale invoices (for goods subject and not subject to VAT). The selling prices written on such invoices are the prices determined by the goods owners. If the goods sold through agents are subject to VAT, the selling prices written on the invoices are the price including VAT.

3. When settling the commission payment, the commission agents must supply invoices to the goods owners. If the commission agents are subject to VAT calculation by the tax deduction method, they shall use added value invoices. On such an invoice the line of the selling price is written with the commission money, the line of the VAT amount is left unwritten and crossed with a slash; if the commission agents are subject to tax calculation by the direct method, they shall use sale invoices (ordinary invoices).

4. At the month’s end, the commission agents shall make lists of sale invoices for goods sold by themselves in the month according to form No. 02/GTGT issued together with Circular No. 89/1998/TT-BTC and send them to the goods owners, which shall serve as basis for the latter to make added value invoices for the goods consumed in the month by the commission agents.

A list of sale invoices for the goods sold by the agent in the month shall be made in three copies, one copy filed at the agent, one copy sent to the goods owner and one copy sent together with the agent’s tax payment declaration to the tax agency directly in charge of tax collection. If the quantity of sold goods is large, the goods owner may require that such list should be made for every five or ten days to ensure the timely tax declaration and payment.

5. The commission agents shall not have to declare, calculate and pay VAT for the goods consigned to them for sale and their commission earnings but for every month, within the first ten days of the subsequent month at the latest, they must make a list of sale invoices for consigned goods already sold by them in the month as prescribed at Point 4 of this Section as well as a list of invoices and vouchers for bought-in goods according to form No. 03/GTGT for goods consigned to commission agents, which is issued together with the Finance Ministry’s Circular No. 89/1998/TT-BTC of June 27, 1998, then send them to the tax agency directly managing the agents.

- To be exempt from calculation and payment of VAT on goods sold by agents and on their commission earnings, the commission agents prescribed by the Commercial Law must fully meet the following conditions:

+ Having a sale agency contract which clearly specifies the commission and the selling price set by the goods owner.

+ The invoices for goods sold by the agents are made under the provisions of this Circular.

+ The payment of goods sales and agency commission is made in installments after a given amount of goods is sold.

- The commission agents that fail to fully meet the above-mentioned conditions must declare, calculate and pay VAT on the goods sold by themselves as in cases of definitive sale and purchase. The commission earnings shall be accounted as other incomes and subject to enterprise income tax.

In cases where an agent sells the goods at a price different from the price set by the goods owner, it must declare and pay VAT for such goods. If the input VAT is higher than the output VAT because the selling price is lower than the price set by the goods owner, the agent is still not eligible for VAT reimbursement.

III. IMPLEMENTATION EFFECT

This Circular takes effect 15 days after its signing and applies to the VAT declaration and payment from January 1st, 2000.

For those establishments which, for management and cost-accounting conditions and requirements, do not want to use the delivery bill cum internal transport card or the delivery bill for goods consigned to agents, they can use added value invoices right when delivering goods to their dependent cost-accounting units in other provinces or to commission agents. The head offices of the establishments and their dependent cost-accounting units based in different localities shall base themselves on the added value invoices to declare and pay VAT in the localities where they are based as prescribed at Point 1, Section II, Part C of the Finance Ministry’s Circular No. 89/1998/TT-BTC of June 27, 1998. They must register with the tax agencies which directly manage them for the vouchers to be used. They must use only either the added value invoice or the delivery bill cum internal transport card or the delivery bill for goods consigned to agents for sale when delivering goods to attached units in other localities or to commission agents.

This Circular’s provisions on the use of invoices (sale invoices), the delivery bill cum internal transport card or the delivery bill for goods consigned to agents for sale shall also apply to the units that produce goods subject to special consumption tax when delivering such goods to their attached dependent cost-accounting units or to commission agents for sale.

The provisions which are contrary to those in this Circular are now annulled. The use of invoices, tax codes, and registration of tax payment applicable to production/business establishments and their attached dependent cost-accounting units in other provinces and/or cities, and commission agents shall still comply with the provisions in Circular No. 89/1998/TT-BTC of June 27, 1998, Circular No. 175/1998/TT-BTC of December 24, 1998 of the Ministry of Finance and other relevant guiding documents.

In the course of implementation, if any problems arise, agencies and enterprises are requested to report them to the Ministry of Finance for settlement.

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