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Consult on Issue

CIT, VAT, & material imports for export goods

Released at: 06:54, 24/07/2014 TAX CONSULT

Q: How is CIT applied to enterprises being relocated and cleared? A: Official Letter No 877/TCT-CS dated March 18, 2014 from the General Department of Taxation (GDT) provides guidance on the CIT applicable for enterprises being relocated and cleared. For enterprises without State-owned capital, the compensation for fixed assets and support after relocation, after deduction for relevant expenses, will be treated as other income for CIT purposes.

Q: How is CIT applied to enterprises being relocated and cleared?

A: Official Letter No 877/TCT-CS dated March 18, 2014 from the General Department of Taxation (GDT) provides guidance on the CIT applicable for enterprises being relocated and cleared. For enterprises without State-owned capital, the compensation for fixed assets and support after relocation, after deduction for relevant expenses, will be treated as other income for CIT purposes. 

Q: How is VAT applied for on-the-spot import and export?

A: According to Official Letter No 951/TCT-CS dated March 24, 2014 from the GDT, where the foreign contractor (FC) provides goods in the form of on-the-spot import and export and generates income in Vietnam from a contract signed between the FC and the on-the-spot-import enterprise, the VAT liabilities of the FC will be determined in accordance with the following principles:

  • If the VAT applicable to the goods was paid at the import stage, the FC is not required to pay VAT on the value of the goods.

  • If the value of the goods and services are separated in the contract, the VAT ratio will be applicable in accordance with each value. If the value of the goods and services are not separated in the contract, the VAT ratio will be applicable for the whole value of the contract.

 

Q: What about VAT for loan interest?

A: Official Letter No 798/TCT-CS dated March 13, 2014 from the GDT provides that loan interest from a loan contract between enterprises will generally not be subject to VAT. Upon receipt of the interest, the lender is required to issue a VAT invoice. Procedurally, the VAT rate and VAT payable lines should be left blank and crossed out.  

Q: What are the updates on the application of the 275-day deadline on raw materials imported for production of goods for export?

A: According to Official Letter No 5495/BCT-TCHQ dated April 26, 2014 from the Ministry of Finance (MoF), enterprises leasing workshops and warehouses of individuals or enterprises (including enterprises developing infrastructure at industrial zones, export processing zones, high-tech zones, economic zones and border gate economic zones) to manufacture products for export will be considered for the application of the deadline of 275 days with the condition that the land lease contracts must be in accordance with regulations and be valid longer than the term of such manufacturing contracts.

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