(VEN) – The General Department of Taxation recently dispatched Document 2850/TCT-CS replying Official Letter 2194/CT-TTHT dated November 9, 2012 of the Hai Phong Department of Taxation, which asked for guiding the Value Added Tax and the Enterprise Income Tax on shipbuilding.
Shipbuilding businesses apply value added tax, which is similar to that on state construction projects, following Point 1 in Item I, Part B, Finance Ministry Circular 32/2007/TT-BTC dated April 9, 2007; Point 2 in Item II, Part B, Finance Ministry Circular 129/2008/T-BTC dated December 26, 2008; and Provisions 1 and 5 in Article 8, Finance Ministry Circular 06/2012/TT-BTC dated January 11, 2012, which regulates the AT fixing time.
Regarding shipbuilding contracts with domestic businesses, the shipbuilding business is required to make a VAT invoice and declare output VAT based on the amount of work completed.
In cases where the cost of shipbuilding increases against the estimation, the shipbuilding business and the ship owner must make an amended VAT invoice, which provides a basis for the parties to identify output and input VAT on each party.
Regarding shipbuilding contracts with foreign businesses, which have finalized the cost of each and every part of the shipbuilding project, the shipbuilding business does not have sufficient procedures for applying the zero percent VAT.
Regarding Enterprise Income Tax, the shipbuilding business must calculate enterprise-income-taxable revenue per year based on the invoice given to the customer and the amount of reasonable expenses, in cases where the shipbuilding contract takes effect for years. The regulation follows Point 2, Item III, Part C, Finance Ministry Circular 130/2008/TT-BTC dated December 26, 2008, which specifies time to calculate revenue and taxable income. After the contract is completed, the business must finalize the amount of enterprise income tax based on the previous invoices./.