To supplement a provision on special consumption tax refund for bio-fuels

	Requesting inspection of 20-25% of total tax refund dossiers before conducting post inspection
	Change the procedures and methods of exemption and refund on the import and export taxes
	Petrol strongly affects Customs revenue collection

Illustrated photo. Source: internet

Lack of provision

Earlier, in order to encourage the use of biofuels to contribute to protecting the environment, at the 8th Meeting session of National Assembly XIII, the Law on SCT No. 70/2014 / QH13 was adopted, which stipulates the tax rates on petroleum products as follows: petrol 10%; bio-fuel E5 8%; bio-fuel E10 7%.

Since the effective date of the Law on SCT (1st January 2016), enterprises producing and blending bio-ethanol have always raised a deductible SCT amount (due to the SCT on petrol is 10% while on bio-fuel is 8% or 7%). However, Decree 108 has not regulated the SCT refund for the deductible SCT amount, the enterprises engaging in business of this item are not entitled preferences.

At the same time, the Decree does not specify the dossiers and procedures for SCT refund for imported raw materials for export production and goods temporarily imported for re-export. This leads to difficulties for the enterprises.

Therefore, the Ministry of Finance said that it is necessary to supplement a provision on SCT refund for biofuel production facilities to remove difficulties for enterprises and comply with the National Assembly and the Government’s guideline which is encouraging the use of bio-fuels.

Use central budget for tax refund

Recently, the Ministry of Finance has received many proposals from petroleum business association on guidance for SCT refund for raw material petrol RON92 used to mix bio-fuel E5 RON92.

According to the explanation of these units, from 1st January 2015 to 31st December 2017, there have not been problems because the petroleum enterprises mainly sold petrol RON92 and RON95. Bio-fuel E5 RON92 only accounted for a very small percentage, after deducting with the amount of SCT payable, the petroleum enterprises still have SCT payable.

However, since 1st January 2018, under the direction of the Prime Minister, the enterprises are only permitted to sell petrol RON95 and bio-fuel E5 RON92, after offsetting with the amount of SCT payable, they always raise SCT amount which has not been deducted for raw materials for production of bio-fuel E5 RON92.

Specifically, the Vietnam Petroleum Group estimated that the total deductible SCT amount arising in 2018 would be about VND 200 billion (about VND 16.6 billion per month). Long Hung Trading & Services Co. Ltd., estimated that its deductible SCT by the end of 2018 fell by about VND 22 billion (about VND 1.8 billion per month on average).

According to the Ministry of Finance, if enterprises are not guided on SCT refund it will affect the finance, production and business activities of enterprises, and affect the consumption and selling price of bio-fuel E5 RON92.

For biofuel E5, although it has a different name, raw materials for E5 bio-fuel production include 95% petrol RON92 and 5% ethanol, thereby input SCT amount has not been fully deducted on petrol RON92 after offsetting with the SCT payable of bio-fuel E5. This case determined that the SCT payable is larger than the paid tax amount and is subject to tax refund according to Decree 108

In order to encourage the use of bio-fuel through selling prices and facilitate enterprises trading in this item, the Ministry of Finance shall propose to supplement a provision on SCT refund for the SCT amount which has not been fully deducted fully of raw material petrol used for production of bio-fuel after offsetting with SCT payable of other goods or services or after offsetting among taxes.

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According to the provisions of the Law on Tax Administration, SCT shall be declared on a monthly basis. According to the provisions of the Law on Value Added Tax (VAT), the input VAT of investment and export projects of VND 300 million or more shall be entitled to tax refund. Therefore, in order to ensure consistency between the Law on Tax Administration and the Law on Value Added Tax, the Ministry of Finance requests that the SCT amount which has not been fully deducted in a month with VND 300 million VND or more shall be refunded (in accordance with provisions on VAT for investment and export projects).

SCT amount is estimated at VND 300 billion VND in 2018 and VND 450 billion in 2019. The central budget shall be allocated to refund tax for enterprises.