Công văn 6789/BTC-TCT

Recently, the Ministry of Finance has received reflect of State Treasuries, Tax Departments of central-affiliated cities and provinces on accounting revenues of the State budget when deducting VAT 2% for the capital construction facilities in localities according to the official dispatch No. 17848/BTC-TCT dated December 29, 2011 of the Ministry of Finance on deducting VAT in accordance with the Circular No. 28/2011/TT-BTC

- According to Article 10 of the Circular No. 28/2011/TT-BTC dated 28/02/2011 of the Ministry of Finance guiding implementation of a number of articles of the Law on Tax administration, guiding implementation of the Decree No. 85/2007/ND-CP dated 25/5/2007 and the Decree No. 106/2010/ND-CP dated 28/10/2010 of the Government:

+ At clause 1(e) provided: “In case a taxpayer conducts business operations of construction, installation or goods sale without establishing subsidiaries in provinces or cities other than the locality in which it is headquartered (below referred to as extra-provincial mobile construction, installation or goods sale operations), the Taxpayer shall submit tax declaration dossiers to district-level Tax Departments of the localities in which construction, installation or goods sale operations are carried out.”

+ At clause 1(g) provided: “For extra-provincial construction and installation works, which are carried out in many localities, such as roads, power transmission lines, water, oil or gas pipelines, etc., thus making it impossible to determine the turnover in each district-level locality, taxpayers shall declare VAT on extra-provincial construction and installation turnover in VAT declaration dossiers at their head offices”

+ At clause 6(d) provided: “When declaring tax with their managing tax agencies, taxpayers shall summarize the whole amount of turnover earned from extra-provincial mobile construction, installation or goods sale business operations and VAT amounts paid for such turnover in tax declaration dossiers submitted at their head offices. The tax amount (according to tax receipts) paid for turnover from extra-provincial mobile construction, installation or goods sale shall be cleared against the payable VAT amount according to taxpayers' VAT declaration submitted at their head offices”.

- According to clause 3, Article 24 of the Circular No. 28/2011/TT-BTC dated 28/02/2011 of the Ministry of Finance guiding implementation of a number of articles of the Law on Tax administration, guiding implementation of the Decree No. 85/2007/ND-CP dated 25/5/2007 and the Decree No. 106/2010/ND-CP dated 28/10/2010 of the Government provided: “Local state treasuries shall deduct the VAT amount for remittance into the state budget which equals 2% of the amount paid for the volume of capital construction works or work items in localities by capital sources from the State budget and VAT-liable ODA projects”.

- According to the Official Dispatch No. 17848/BTC-TCT dated 29/12/2011 on deducting VAT in accordance with the Circular No. 28/2011/TT-BTC of the Ministry of Finance:

+ At point 2.2 guided: “ In principles, the deducted VAT will be account into the revenues of locality where the capital construction facilities arises. For the inter-province (or inter-district) construction facilities, if turnovers of construction facilities are defined in details according to each province (or each district), the State Treasuries will account the deducted VAT into the budget revenues of each province (or each district) corresponding to the arising turnover of facilities. For the inter-province (or inter-district) construction facilities, that fail to define exactly turnovers of construction facilities in details according to each province (or each district), the investors will define the turnover rate of facilities in each locality and send it to State Treasuries for deducting VAT.

In principles, State Treasuries will account the deducted VAT into the budget revenues of locality where the capital construction facilities arises. For the inter-province (or inter-district) construction facilities, if turnovers of construction facilities are defined in details according to each province (or each district), the State Treasuries will account the deducted VAT into the budget revenues of each province (or each district) corresponding to the arising turnover of facilities.”

+ At point 3.2 guided: " For State Treasuries where investor open their accounts: The revenues of the State budget are accounted in accordance with the set rate (in case where the deducted VAT is accounted immediately into the budget revenue of localities where State Treasuries doing procedures for deduction) or notify credit timely to State Treasuries where local budgets are enjoyed revenue source of the deducted VAT (State Treasuries at the same level with the collecting agencies, where the contractors do procedures for tax declaration and finalization)”.

Based on the provisions mentioned above, for the unified implementation, the Ministry of Finance specifies additionally the scope of deducting VAT, declaration and accounting the revenues of the State budget as follows:

1. Scope of deducting VAT:

- Tax payers who have the capital construction activities and being paid for volume of capital construction works and works items by capital sources of the State budget by the investors, being paid by the State budget for the capital construction works of projects using ODA fund (the domestic reciprocal capital paid at State Treasuries for capital construction works of ODA projects), irrespective of tax payers' head offices placed in or not placed in area of provinces, cities or districts where have activities of building works, are subjects of being deducted VAT by the State Treasuries for remittance into the State budget.

- The deducted VAT is defined by 2% of value of volume of finished works and works items of capital construction that have been accepted by State Treasuries in each time when the investors request for payment and been calculated by the investors, included the value of supervision advisory, design survey, making project plan, etc, inscribed in the same contract of works and capital construction works items.

- VAT shall not be deducted for contracts of advisory, survey, design, making project, audit and insurance.

2. In case where tax payers have the extra-provincial mobile construction and installation works related to many localities but fail to define turnover of works in each district, taxpayers shall declare VAT on extra-provincial construction and installation turnover in VAT declaration dossiers at their head offices as prescribed in clause 1(g) Article 10 of the Circular No. 28/2011/TT-BTC mentioned above, when receive vouchers of deduction that are transferred by State Treasuries, the taxation agencies where have construction and installation works shall not make accounting the paid VAT of tax payers but only make accounting the irregular revenues in order to sum up for report on domestic revenues in their localities. Tax payers may deduct the tax amounts deducted by State Treasuries in the index No. 39 “tax amounts paid for extra-provincial mobile activities” on the VAT declaration according to the form No. 01/GTGT at their head offices, enclosed with vouchers of deduction for proof.

3. In case where tax payers have construction and installation works in the same area of province/ centrally-run city where located their head offices but not in the same district (inner-provincial contractor): State Treasuries where local budget enjoyed the revenue of the deducted VAT must transfer the voucher of deduction (remittance bills into the State budget) to the taxation agencies at the same level so that the taxation agencies do not make accounting the paid amounts of tax payers but only make accounting the irregular revenue for summing up in report on domestic revenues in their localities; concurrently, the taxation agencies at the same level with State Treasuries where enjoy revenue of the deducted VAT, after receiving the voucher of VAT deduction on construction and installation works in provinces that are transferred by State Treasuries, must transfer vouchers to the taxation agencies where manage tax payers for accounting the paid amounts of tax payers and not summing up in report on domestic revenues in their localities.

Other contents not stated in this official dispatch are continued complying with guidance in the official dispatch No. 17848/BTC-TCT dated 29/12/2011 of the Ministry of Finance on deducting VAT in accordance with the Circular No. 28/2011/TT-BTC

To request Directors of State Treasuries and Directors of Taxation Departments of central-affiliated cities and provinces to implement according to guides in this official dispatch. In the course of implementation, any arising problems should be reported timely to the Ministry of Finance for consideration and settlement.