DECREE

Amending and supplementing to a number of articles of Decree No. 28/1998/ND-CP
dated 11 May 1998 of the Government regulating in details the implementation
of the Law on Value Added Tax (VAT)
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THE GOVERNMENT

Pursuant to the Law on Government Organization dated 30 September 1992;

Pursuant to the Law on Value Added Tax No. 02/1997/QH9 ("VAT") dated 10 May 1997;

Pursuant to point 2, section IV of Resolution No. 18/1998/QH10 dated 25 November 1998 of the National Assembly on the State budget estimate for 1999;

-Following the proposal of the Ministry of Finance ,

DECREES:

Article 1. To amend, supplement to a number of articles of Decree No. 28/1998-ND/CP dated 11 May 1998 of the Government regulating in details the implementation of the Law on Value Added Tax as follows:

1. Add to the first part of paragraph 4, Article 4 regarding categories of VAT exemption as follows:

" Aircraft , oil rigs, ships leased from overseas for business purposes where Vietnam has not yet produced".

2. Amend paragraph 7, Article 4 as follows:

"Credit activities include all forms of loan (including loan with guarantee), financial lease of credit organizations, investment funds and capital assignment activities".

3. Amend, supplement to point d paragraph 1, Article 9 as follows:

"d) Input deduction percentages for the following cases:

Manufacturing and processing establishments which purchase unprocessed agricultural, forestry and marine products from the producers who do not issue VAT invoices, shall be allowed to claim for an input tax deduction based on a percentage (%) of the following purchases:

• 5% for agricultural products such as resin tree, oil tree, sugar cane, fresh tea, rice, corn, tapioca; livestock products such as cattle, poultry, fish, shrimp, and other marine products.
• 3% for agricultural and forestry products which are not specified in the group of 5% above.

In other cases taxpayers can claim for an input VAT based on a percentage (%) of the following purchases:

• 5% for metal scraps collected and used as material for steel production; marine products purchased from fishermen by processing establishments, indemnity payments of insurance companies;
• 3% for commodities purchased from manufacturers of commodities which are subject to SST by trading companies for resale.

Based on the situation of price and business activities of each line of industry the Ministry of Finance shall propose to the Government an adjustment of the list of products and percentage of input deduction as regulated in this Article.

The above-mentioned VAT input deduction or VAT refund shall not apply to the cases where these products are used as materials for production/processing for exports, or purchased for exports".

4. Amend paragraph 1, Article 15 as follows:

"1. Business establishments qualifying for a deduction method shall be considered for a VAT refund if the deductible input VAT of the 3 continuous months is in excess of the output VAT. Business establishments having a large seasonal or periodical export, shall be considered for a VAT refund on a periodical basis, if the input VAT on purchases for export is larger than the output VAT".

5. Amend, supplement to paragraph 1, 2, Article 20 as follows:

"1. Business establishments in the fields of manufacturing, construction, transportation, commerce, tourism, services, restaurants, which, during the initial years of VAT application, suffer losses due to a larger amount of VAT payment as compared with the previous Turnover Tax, shall be considered for a reduction of VAT payable. The amount of VAT reduction shall be determined on an industry-by-industry basis and in proportion with the losses resulting from the above causes, but shall not exceed the amount of VAT payable for the year of consideration.

2. Business establishments in the fields of manufacturing and trading of products, commodities, and services, which have difficulties shall be entitled to a 50% VAT reduction on the sales of the following goods and services:

• Coal;
• Ploughing machine, tractors, pumps, mother machines, power machines;
• Soda ash (NaOH), Soda Hypocloride (NaOCl), Calcium Hypocloride ((CaOCl)₂), Aluminium Hydroxide (Al(OH)₃), Clorhydric Acid (HCL), Liquid and Gas Chlor (Clo(Cl)₂), Soda Silicat (Na₂SiO₃);
• Commodities subject to SST in the trading stage of deduction method taxpayers;
• Hotels, tourism, restaurants".

6. Supplement to the end of Article 21 as follows:

"With regard to State-owned enterprises carrying on business in the fields of manufacturing, trading and services such as: national lottery, cement, post and telecommunication and other goods and services having high profits due to lower VAT payment as compared with the previous Turnover Tax (TOT), Business Income Tax (BIT) and additional BIT shall be imposed in accordance with the Law on BIT. In cases where the VAT payment is so low as compared with the previous TOT, the net income after tax shall be subject to at least 70% payment. The Ministry of Finance shall provide specific rates of additional payments for appropriate industries.

The Ministry of Finance is assigned by the Government to consider and resolve the VAT issue with regard to the inventory as of 31 December 1998 of a number of commodities as required by the Government such as: fertilizer, pesticide, if such stock effect the result of operation of enterprises".

Article 2. This Decree shall be in full force from 1 January 1999.

The Ministry of Finance shall be responsible for providing guidance on the implementation of this Decree.

Ministries, head of ministry-equivalent bodies, bodies under the Government, Chairmen of municipal and provincial People's Committees under the central are responsible for the implementation of this Decree.

DEPUTY PRIME MINISTER

(Signed and sealed)

Nguyen Tan Dung