Pursuant to the Value Added Tax (VAT) Law No.02/1997/QH9 of May 10, 1997; Decree No.28/1998/ND-CP of May 11, 1998 of the Government detailing the implementation of the VAT Law; Decree No.102/1998/ND-CP of December 21, 1998 of the Government amending and supplementing a number of Articles of Decree No.28/1998/ND-CP of May 11, 1998 of the Government detailing the implementation of the VAT Law;

Pursuant to Decree No.36/CP of April 24, 1997 of the Government promulgating the Regulation on Industrial Parks, Export-Processing Zones and Hi-Tech Parks;

The Ministry of Finance provides the following detailed guidance on the implementation of the VAT Law for export-processing enterprises:

I. GENERAL PROVISIONS

1. Subject to this Circular are:

- Export-processing enterprises, which are established under the Regulation on Industrial Parks, Export-Processing Zones and Hi-Tech Parks, issued together with Decree No.36/CP of April 24, 1997 of the Government.

- Organizations and individuals on Vietnam�s domestic market that have goods and/or service exchange, buying and selling relations with export-processing enterprises.

2. Objects liable to VAT:

Objects liable to VAT within the scope of application of this Circular include:

- Goods supplied by organizations and/or individuals on the domestic market for export-processing enterprises (including goods processed under sub-contracts for export-processing enterprises), except for objects mentioned in Point 3, Section I of this Circular.

- Goods and services supplied by export-processing enterprises for organizations/or individuals on the domestic market.

3. Objects not liable to VAT include:

- Goods imported from overseas into export-processing enterprises.

- Services provided by foreign organizations and/or individuals for export-processing enterprises.

- Goods of export-processing enterprises exported to foreign countries.

- Goods and/or services exchanged between export-processing enterprises.

- Services provided by organizations and/or individuals on the domestic market for export-processing enterprises.

- Other goods and services prescribed in Article 4, Chapter I of the VAT Law as well as the legal documents guiding the implementation thereof.

4. VAT payers:

Organizations and/or individuals on the domestic market that exchange, buy and/or sell goods and/or services subject to VAT with export-processing enterprises shall have to pay VAT according to the guidance in this Circular.

II. SPECIFIC PROVISIONS ON VAT

1. For export-processing enterprises:

According to the stipulations of the VAT Law as well as the characteristics and objectives of export-processing enterprises� operation, the export-processing enterprises shall not be liable to VAT.

When exporting goods to foreign countries or importing goods from overseas into export-processing zones or export-processing enterprises, the export-processing enterprises shall have to fill customs procedures at the customs agency of the concerned industrial parks or at the export-processing enterprises according to the provisions of the Vietnamese Law on Export Tax and Import Tax as well as the customs legislation.

Goods and/or services exchanged between export-processing enterprises shall not be subject to VAT. Export-processing enterprises shall use the common sale invoices or specific invoices already approved by the Ministry of Finance according to the general stipulations.

2. For organizations and individuals on the domestic market:

Organizations and individuals on the domestic market that establish VAT liable goods and/or services exchange, buying and/or selling relationship with export-processing enterprises are VAT payers. The tax registration, declaration and payment shall comply with the stipulations of the VAT Law and the documents guiding the implementation thereof.

A number of VAT-liable goods are determined concretely as follows:

- Goods exported from the domestic market to export-processing enterprises, except for the objects mentioned at Point 3, Section I of this Circular, shall be considered export goods subject to VAT with the tax rate of 0%. The exporters must produce enough dossiers and documents proving that the goods have actually been exported according to the stipulations at Point 1, Section II, Part B of Circular No.89/1998/TT-BTC of June 27, 1998 of the Ministry of Finance.

As for products of particular nature such as electricity and water, all valid sale invoices and purchase/sale contracts are required. For goods exempt from the customs procedures as prescribed such as food, foodstuff, stationary� all related sale invoices, purchase/sale contracts and the retail goods inventory made according to form 05/GTGT issued together with Circular No.89/1998/TT-BTC are required.

- Goods supplied by export-processing enterprises into the domestic market shall be considered import goods subject to VAT. The importers shall have to declare and pay VAT on the import goods according to the provisions of Circular No. 89/1998/TT-BTC.

III. ORGANIZATION OF IMPLEMENTATION

1. This Circular takes effect 15 days after its signing. The other issues not guided in this Circular shall comply with the guidances in Circular No.89/1998/TT-BTC of June 27, 1998; Circular No.175/1998/TT-BTC of December 24, 1998 and Circular No.20/1999/TT-BTC of February 10, 1999 of the Ministry of Finance.

2. The General Department of Tax and the General Department of Customs shall have to organize the implementation of this Circular.

If difficulties or problems arise in the course of implementation, organizations and individuals are requested to report them to the Ministry of Finance for study and settlement.

For the Minister of Finance

Vice Minister