CIRCULAR

GUIDING THE TAX REGIME APPLICABLE TO LAWYERS OFFICES AND LAW PARTNERSHIPS

Pursuant to Lawyers Ordinance No. 37/2001/PL-UBTVQH10 passed by the National Assembly Standing Committee on July 25, 2001;
Pursuant to the Government's Decree No. 94/2001/ND-CP of December 12, 2001 detailing the implementation of the Lawyers Ordinance;
Pursuant to the Government's Decree No. 86/2002/ND-CP of November 5, 2002 defining the functions, tasks, powers and organizational structures of the ministries and ministerial-level agencies;
Pursuant to the Government's Decree No. 178/CP of October 28, 1994 defining the tasks, powers and organizational structure of the Finance Ministry;
The Finance Ministry hereby guides the tax regime applicable to lawyers' offices, law partnerships and individuals practicing lawyers' profession as follows:

A. SUBJECTS OF APPLICATION

B. TAXES AND BUDGET REMITTANCES

I. VALUE ADDED TAX (VAT)

Legal consultancy activities, legal service and legal proceeding participation service shall be subject to VAT at the tax rate of 10%. Lawyers' offices and law partnerships shall pay VAT by the tax deduction method.

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Determination of payable VAT amount:

Payable VAT = Output VAT (1) - Deductible input VAT (2)

(1) Output VAT = Turnover (without VAT) earned from legal consultancy service, legal service and/or legal proceeding participation service x 10%

Turnover (without VAT) earned from legal consultancy, legal service and/or legal proceeding participation service is the total charge (without VAT) for the provision of services, including the surcharge in addition to the service charge rates, which the lawyers' offices or law partnerships are entitled to enjoy.

(2) Input VAT is equal to (=) the total VAT amount inscribed in value added invoices for purchase of goods or services (including fixed assets) used for legal consultancy activities, legal service and legal proceeding participation service.

The VAT declaration, payment, settlement and reimbursement shall comply with the provisions of the VAT Law and documents guiding the implementation thereof.

II. ENTERPRISE INCOME TAX

Lawyers' offices and law partnerships having taxable incomes shall have to pay enterprise income tax under the provisions of the Enterprise Income Tax Law. The enterprise income tax calculation method, declaration, payment and settlement shall comply with the provisions of the Enterprise Income Tax Law and documents guiding the implementation thereof.

Some points are specifically guided as follows:

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1. Taxable incomes:

Taxable incomes (calculated according to the calendar year or fiscal year) include taxable income from service activities conducted at home or abroad and other taxable incomes.

Taxable incomes are determined as follows:

Taxable income in the tax calculation period = Turnover for calculating taxable income in the tax calculation period (a) - Reasonable expenses in the tax calculation period (b) + Other taxable incomes in the tax calculation period (c)

(a) Turnover for calculating taxable income:

Turnover for calculating taxable income is the total charge for the provision of services, which the lawyers' offices or law partnerships are entitled to enjoy.

The time for determining turnover for calculating taxable income is the time when services are provided, regardless of whether the service charge is collected or not.

Services shall be regarded as already provided services when they satisfy one of the following conditions:

+ When they are completed.

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(b) Reasonable expenses to be subtracted for calculating taxable income:

Reasonable expenses related to taxable income in the tax calculation period to be subtracted for calculating taxable income include expense items specified by the Enterprise Income Tax Law and documents guiding the implementation thereof.

Lawyers' offices and law partnerships must not account into their reasonable expenses those irrelevant to their turnover and taxable income.

(c) Other taxable incomes:

- Income from dealing in goods and other services in Vietnam.

- Margin from the securities purchase and sale.

- Income from asset ownership and use right.

- Income from asset transfer or liquidation.

- Deposit interest, loan interest.

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- Year-end remainders of advance deductions not yet used up, bad debt reserve,

- Bad receivables already offset with reserves but now collected.

- Collected fines for economic contract breaches, after clearing against paid fines for contract breaches.

- Payable debts, of which creditors are unidentifiable.

- Incomes earned from service-providing activities of the preceding years, which had been omitted and have recently been discovered.

- Incomes earned from service-providing activities abroad.

2. Enterprise income tax rates:

Enterprise income tax rates shall comply with the provisions of the Enterprise Income Tax Law and documents guiding the implementation thereof.

III. Income tax on high income earners

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IV. License tax

Lawyers' offices and law partnerships shall pay license tax according to the provisions of the Government's Decree No. 75/2002/ND-CP of August 30, 2002 and its guiding documents. Lawyers' offices and law partnerships shall pay license tax on the basis of their registered capital inscribed in their operation registrations according to the regulations applicable to economic organizations.

V. Other State budget remittances

Lawyers' offices and law partnerships shall pay the land use levy, land rent and other taxes and remittances according to the current regulations.

C. TAX PREFERENCES, EXEMPTION AND REDUCTION

Lawyers' offices and law partnerships, if being engaged in the fields eligible for investment preferences under the Government's Decree No. 35/2002/ND-CP of March 29, 2002, and satisfying the conditions for enjoying exemption or reduction of enterprise income tax, land use levy and/or land rent (if any) according to the provisions of the Government's Decree No. 51/1999/ND-CP of July 8, 1999 and the Finance Ministry's circulars guiding the implementation thereof. In order to enjoy the tax preferences, lawyers' offices and law partnerships shall have to register with the managing tax agencies the conditions for enjoying tax preferences and tax preference levels. Annually, lawyers' offices and law partnerships shall determine by themselves tax amounts to be exempted, reduced,

D. PROCEDURES FOR TAX REGISTRATION

Within 10 days after being granted operation registration papers,

This Circular takes effect 15 days after its publication in the Official Gazette. Any problems arising in the course of implementation should be promptly reported by the concerned agencies, organizations and individuals to the Finance Ministry for study and additional guidance.

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FOR THE MINISTER OF FINANCE
VICE MINISTER




Truong Chi Trung