CIRCULAR No

CIRCULAR No. 168/1998/TT-BTC OF DECEMBER 21, 1998 GUIDING THE IMPLEMENTATION OF DECREE No. 84/1998/ND-CP OF OCTOBER 12, 1998 OF THE GOVERNMENT DETAILING THE IMPLEMENTATION OF THE SPECIAL CONSUMPTION TAX (SCT) LAW

Pursuant to Special Consumption Tax Law No. 05/1998/QH10 of May 20, 1998;

Pursuant to Decree No. 84/1998/ND-CP of October 12, 1998 of the Government detailing the implementation of the Special Consumption Tax Law;

The Ministry of Finance hereby provides the implementation guidances as follows:

A. SCOPE OF APPLICATION OF THE S.C.T. LAW

I. TAXABLE OBJECTS, SCT PAYERS

1. Taxable objects:

Objects liable to SCT prescribed in Article 1 of Decree No. 84/1998/ND-CP of the Government shall be the following goods and services, except for cases which are not liable to SCT defined in Section II, Part A, this Circular.

1.1. Goods:

a/ Cigarettes, cigars;

b/ Alcohol;

c/ Beer;

d/ Cars of under 24 seats;

e/ Petrol of various kinds, naphtha, reformade component and other components for mixture of petrol;

f/ Air-conditioners of 90,000 BTU or under;

g/ Playing cards;

h/ Votive paper, votive paper offerings.

1.2. Services:

a/ Business in dancing-hall, massage parlor, karaoke bar;

b/ Casino, jackpot;

c/ Business in horse race, car race betting tickets;

d/ Business in golf: selling membership cards, golf playing tickets.

2. SCT payers

SCT payers defined in Article 2, Decree No. 84/1998/ND-CP of the Government are organizations and individuals (collectively referred to as establishments) engaged in the production and/or import of goods and the provision of services, which are liable to SCT.

- Organizations engaged in the production and/or import of goods and/or service provision include:

+ State enterprises; economic units of political organizations; socio-economic organizations, social organizations, socio-professional organizations, people’s armed forces units and other non-business organizations and units; cooperatives;

+ Private enterprises, limited liability companies, joint-stock companies;

+ Foreign-invested enterprises and foreign parties to business cooperation under the Law on Foreign Investment in Vietnam; foreign companies and foreign organizations conducting production and/or business activities in Vietnam not under the Law on Foreign Investment in Vietnam;

- Individuals engaged in goods production and/or import as well as service provision include individual importers, independent producers and business people, households, individuals cooperating with one another in production and/or business without formulating business legal persons.

3.a/ Establishments producing goods liable to SCT shall have to pay SCT but not have to pay value added tax (VAT) on such goods at the production stage.

Example 1: Company A produces cigarettes. When selling the cigarettes it has produced, the company has to declare and pay SCT and shall not have to pay VAT on cigarette sale turnover already imposed with SCT.

b/ Establishments importing goods liable to SCT shall have to pay SCT on such goods at the importation stage, and shall not have to pay VAT on the imported goods already imposed with SCT.

Example 2: Company B imports liquors; when importing them, it shall have to declare and pay SCT and not have to pay VAT; when selling such liquors, the Company shall have to declare and pay VAT.

c/ Establishments dealing in services liable to SCT shall have to pay SCT on such services when they are provided and not have to pay VAT on turnover from services already declared for SCT payment.

II. CASES WHERE GOODS ARE NOT LIABLE TO SCT

According to the provisions of Article 3 of Decree No. 84/1998/ND-CP of the Government, goods defined in Point 1.1, Section I, Part A of this Circular shall not be liable to SCT in the following cases where:

1. Goods are exported directly by production and/or processing establishments, including goods sold or processed for export processing zones and goods brought overseas for trade fairs and/or expositions. The establishments shall have to produce to the tax authorities papers and dossiers evidencing that such goods are actually exported. Concretely:

+ Sale contracts or contracts on goods processing for foreign countries.

+ Sale invoice of the volume of goods exported or returned to the processee.

+ Export goods declarations with customs authority’s certification that the goods have been actually exported.

If establishments producing goods liable to SCT temporarily export them for re-import under the temporary export-reimport permits during the period where import tax and/or export tax are not paid yet according to the prescribed regime, they, when re-importing such goods, shall not have to pay SCT which must, however, be paid when such goods are sold by the production establishments.

2. Production establishments which sell their goods for export or entrust their goods to exporting establishments for export under economic contracts must have the following papers:

+ The contract for entrusted export or the contract for sale of goods to the exporting establishment for export.

+ Invoice of goods sale or delivery in accordance with the signed economic contract.

Monthly or periodically, when making tax payment declaration, the production establishment having goods sold or entrusted for export shall have to make the declaration of the whole volume of goods sold or entrusted for export together with the name and address of the exporting establishment, to be submitted together with the SCT declaration to the tax authority that directly manages it. In cases where the entrusted-export goods have been actually exported, the entrusted-export contract liquidation and papers evidencing that the goods have been actually exported are required.

The tax authority that directly manages the production establishment shall have to examine the declaration of goods sold for export and notify the tax authority that manages the exporting establishment of the name of the unit buying goods for export, the volume and value of goods bought by the establishment for export, and at the same time check the dossiers and certify the volume of goods sold for export, which are not liable to SCT.

3. Goods imported in the following cases:

a/ Humanitarian aid and/or non-refundable aid goods.

b/ Presents given by foreign organizations and individuals to State bodies, political organizations, socio-political organizations, social organizations, socio-professional organizations and people’s armed forces units. The presents shall be fixed at the levels prescribed by the Government or the Ministry of Finance.

c/ Belongings of foreign organizations and individuals that enjoy diplomatic immunities prescribed by the Vietnamese Government in conformity with the international treaties which Vietnam has signed or acceded to.

d/ Personal effects within the duty-free luggage limits prescribed for Vietnamese and foreign individuals when they are on exit or entry through Vietnamese border-gates.

4. Goods transported across border-gates, on transit, or through Vietnam in the following forms:

- Goods transported directly from exporting countries to importing countries without passing through Vietnam border-gates;

- Goods transported from exporting countries to importing countries via Vietnamese border-gates but without filling procedures for import into and export from Vietnam;

- Goods transported from exporting countries to importing countries through Vietnamese border-gates and put into bonded warehouses, but without filling procedures for import into and export out of Vietnam;

- Goods on transit, transported through Vietnamese border-gates and/or borders on the basis of agreements signed between the two Governments, branches or localities under the Prime Minister’s permission.

5. Goods temporarily imported for re-export, which, if being actually exported during the period of non-payment of import tax according to the prescribed regime, shall not be subject to the payment of SCT corresponding to the volume of actually exported goods.

6. Goods temporarily imported for trade fairs and/or expositions, if they are actually re-exported during the import tax grace period according to the prescribed regime.

If after the trade fairs and/or expositions, organizations and individuals fail to re-export their temporarily imported goods, they shall have to declare and pay SCT; if any organizations and/or individuals are detected having failed to do so, they, besides having to pay SCT arrears, shall be fined according to the provisions of law.

7. Goods imported from abroad into export-processing zones and/or export-processing enterprises.

The procedures, dossiers, order and competence for non-collection of SCT in the cases defined in Points 3, 4, 5, 6 and 7 above shall comply with the regulations on procedures, dossiers, order and competence for non-collection or exemption of import tax for such cases according to the Law on Export Tax and Import Tax.

8. Goods imported for sale at duty-free shops in sea-ports and international airports to persons entitled to buy duty-free goods according to the Government’s stipulations.

The management of goods, the tax-exemption consideration and the SCT settlement in this case shall comply with regulations as prescribed for import tax exemption consideration.

For import goods not liable to SCT as defined in Points 3, 4, 5, 6 and 7 above, if their import purposes change like: aid goods are used for purposes outside their programs and/or projects, or goods imported under privilege status for re-export but have not been re-exported, within 03 days after their import purposes alter from the prescribed ones, the import goods owners shall have to declare it with the import tax-collecting authority in localities where the procedures for the import of their goods lots were carried out so that the latter fill the procedures for the full collection of SCT. The collection of SCT in this case shall comply with regulations as prescribed for the collection of import tax.

B. BASES FOR TAX CALCULATION AND TAX RATES

The bases for SCT calculation as prescribed in Article 4, Decree No. 84/1998/ND-CP of the Government shall be the prices of goods and/or services liable to SCT and the SCT rates.

I. SCT CALCULATION PRICES

Under the provisions of Article 5, Decree No. 84/1998/ND-CP of the Government, the prices for calculation of SCT on goods and services are determined as follows:

1. For home-made goods: The SCT calculation price shall be the production establishments’ selling prices without SCT, which are concretely determined as follows:

Selling price

SCT calculation price = ——————

1 + tax rate

The production establishment’s selling price is the one written on its sale invoice.

Where a production establishment sells goods through its branches, stores and/or affiliates, the selling prices used as basis for SCT calculation shall be the selling prices applied by such branches, stores and/or affiliates; where a production establishment sells goods through agents which sell goods at the prices set by the former for commissions, the selling prices used as basis for SCT calculation shall be the agents’ selling prices with commissions.

Example: A brewery’s selling price is 3,000 dong/litre of draught-beer, the tax rate for draught-beer is 50%, so:

The price     3,000 dong            3,000 dong
for SCT    = ————— =   ————— = 2,000 dong/litre
calculation 1 + 50%                    1.5

The payable SCT = 2,000 dong/litre x 50% = 1,000 dong/litre

- For foreign-label cigarettes produced by Vietnamese factories and companies under the Vietnam Cigarette Coorporation and handed over to Vietnam-based branches of foreign cigarette firms: The selling prices that serve as basis for SCT calculation shall be the prices of cigarettes delivered by Vietnamese companies and factories to foreign cigarettes firms’ branches for sale in Vietnam, which, however, must not be 10% lower than the average selling prices of such foreign branches. In cases where the manufacturing factories and companies have failed to determine the reasonable tax calculation prices, the tax authority shall fix the tax calculation prices, based on the foreign branches’ selling prices minus (-) 10%.

- For home-made bottled liquors: The selling prices that serve as basis for determining SCT calculation price shall not cover the bottle. In cases where a production establishment sells liquors at prices written on sale invoices that cover the bottle, the establishment shall have to separate the liquor sales turnover from the cost of bottles, based on the sales turnover written on the sale invoice, for the calculation of payable SCT. The bottle value to be deducted from the selling prices when calculating the SCT shall be the purchase prices written in the receipts; for the bottles produced by the establishment itself, it is the cost of the production thereof, which is, however, equal to the purchase price of products of the same kind at the most.

- For home-made bottled beer: If a production establishment sells bottled beer by mode of bottle exchange and recovery, the selling price used as basis for SCT calculation shall be the beer selling prices which do not cover the bottle. When making sale invoices, the establishment shall have to note down the actual sale price. Where the establishment sells beer together with the bottle, the SCT shall be calculated according to the selling prices that cover the bottle.

Example: The selling price of a case of Hanoi beer by mode of bottle exchange and recovery is 120,000 dong/case, the SCT calculated according to the selling price of 120,000 dong/case shall be:

The payable SCT 120,000 dong
for a case of beer = —————— x 75% = 51,428 dong.

(24 bottles) 1 + 75%

If the establishment sells beer without exchanging and recovering the bottles at the price of 168,000 dong/case (24 bottles), the payable SCT shall be:

The payable 168,000 dong

SCT for a case = —————— x 75% = 72,000 dong.

of beer 1 + 75%
(24 bottles)

2. For import goods: The prices for calculation of SCT on import goods liable to SCT shall be determined as follows:

SCT calculation price = Import tax calculation price + import tax

The import tax calculation price is determined according to the regulations on the import tax calculation price. In cases where the import goods are entitled to import tax exemption or reduction, the import tax determined in the SCT calculation price shall be the remainder of the payable import tax amount.

3. For processed goods, it is the tax calculation price of goods of the same or equivalent type at the time of goods delivery. In cases where such price is not available, the tax authority shall base itself on the selling price of such products on the market or the selling price set for such goods by the processee to determine the tax calculation price and inform the concerned establishment thereof for implementation.

4. For goods sold by mode of installment payment, it is the non-SCT selling price of such goods sold by mode of lump-sum cash payment, excluding interests on installments.

5. The tax calculation price for services liable to SCT is the service prices without SCT, which is determined as follows:

The SCT The service price

calculation = ———————

price 1 + The tax rate

Example: The dancing hall business turnover in the period is 12,000,000 dong.

The SCT 12 mil. dong 12 mil. dong

Calculation = ———— = ————— = 10 mil. dong
price 1 + 20% 1.2

The payable SCT = 10,000,000 dong x 20% = 2,000,000 dong.

The service price serving as basis for determining the prices for calculation of SCT on a number of services is stipulated as follows:

- For dancing hall business, it is the entrance ticket price. In cases where there is no admission ticket, it shall be calculated on the total turnover of the dancing hall activities; for massage parlor or karaoke bar business, it is the turnover of the massage or karaoke activities, excluding turnover of other goods and services.

- For golf business, it is the actual turnover of the sale of membership cards and golf playing tickets, which also includes the golf playing fees paid by members and deposit money (if any). In cases where a deposit sum is returned to the depositor, the establishment shall be refunded the already paid tax amount by deducting it from the payable tax amount of the next period; if not deducted, the tax shall be refunded according to regulations. Golf business establishments dealing in goods and/or other services which are not liable to SCT shall not have to pay SCT for such goods and services. For example: A golf business establishment deals in hotels, food catering, the sale of goods or various games, such goods and services shall not be subject to SCT.

- For casino service and jackpot games, it is the sale turnover minus prize money paid to winners, namely the sum collected from changes for players at the money change counters or playing tables, slot machines minus the changed sum returned to customers.

- For business in horse-race and car-race bet tickets, it is the ticket sales turnover minus the amount of prize money paid to bet winners. The horse-race and car-race ticket turnover is not liable to SCT but liable to value-added tax.

- The SCT calculation price for goods and services used for exchange, internal consumption, as gifts or presents shall be the SCT calculation price of goods and services of the same or equivalent type at the time when such activities occur.

The SCT calculation price for home-made goods and services liable to SCT shall include surcharges (if any) outside the selling prices of goods and services, which are enjoyed by establishments.

II. SCT RATES

Under the provisions of Article 6, Decree No. 84/1998/ND-CP of the Government, the applicable SCT rates are specified as follows:

Ordinal number Goods items Tax rate (%)

I Commodity

1. Smoking stuff

a. Filter cigarettes produced mainly from imported raw materials, cigars 65

b. Filter cigarettes produced mainly from domestic raw materials 45

c. Non-filter cigarettes 25

2. Alcohol

a. Alcohol of over 40⁰ 70

b. Alcohol of from 30⁰ to 40⁰ 55

c. Alcohol of from 20⁰ to under 30⁰ 25

d. Alcohol of under 20⁰, including fruit wine 20

e. Medicinal liquors 15

3. Beer

a. Bottled beer, fresh beer 75

b. Canned beer 65

c. Draught beer of various kinds 50

4. Automobiles

- of 5 seats or under 100

- of from 6 to 15 seats 60

- of from 16 to under 24 seats, passenger-cum-cargo vehicles, lambretta 30

5. Petrol of various kinds, naphtha, reformade component and other
components for mixture of petrol 15

6. Air-conditioners of 90,000 BTU or less 20

7. Playing cards 30

8. Votive paper, votive-payer objects 60

II Services