The Saigon Real Estate Joint Stock Company (inHCMC)  signs a cooperation agreement on the transfer of real estate projects with company A (partner). Because company A has no longer financial capacity to implement the project and wants to transfer this project to the Saigon Real Estate Joint Stock Company.

In order to the project is quickly built, the two sides agreed to proceed with legal procedures so that at the time of eligibility for transfer, the project transfer contract will be signed. Company A will continue to carry out the legal works for the project to be granted a Construction Permit. Transfer price of land use right of the project + goodwill + land use fee when converting land purpose to residential land + registration fee is VND 100 billion. The Saigon Real Estate Joint Stock Company will spend money to invest in the construction of work items on the land and bear the costs of signing with contractors and other consultants to implement the project.

However, since the Saigon Real Estate Joint Stock Company has not yet been the investor of the project, it is not possible to sign construction and consulting contracts. Therefore, the parties agree that Saigon Real Estate Joint Stock Company will transfer money to Company A for company A to pay for the construction and consultant contractors, under which the contractor and consultant will issue an invoice for company A.

-At the time of obtaining approval to transfer the project from a competent agency, the Saigon Real Estate Joint Stock Company will conduct an audit of the construction investment cost of the project. The transfer price of the project includes: VND 100 billion + the cost of construction and implementation of the project (the amount transferred by the Saigon Real Estate Joint Stock Company to Company A for payment to the audited contractor or consultant at the time of transfer). Party A will then issue the project transfer invoice according to the above formula.

In addition, company A will sign a construction, consulting contract and the Saigon Real Estate Joint Stock Company will be the payer directly to the contractor and consultant. The invoice will still be issued to Party A and when transferring the project, the construction value and the project's consultancy will be audited. The transfer price of the project includes: VND 100 billion + cost of construction investment and project implementation (audited at the time of transfer), In addition, company A will sign a construction, consulting contract and Saigon Real Estate Joint Stock Company will be the payer directly to the contractor and consultant. The invoice will still be issued to Party A and when transferring the project, the construction value will be audited and the project's consultancy. The transfer price of the project includes: 100 billion VND + cost of construction investment and project implementation (audited at the time of transfer), the two parties will clear the amount of the Saigon Real Estate JSC account and the value of construction investment costs to implement the project (audited at the time of transfer) in the transfer price of the project.

Through the receiving and responding system of businesses, the Saigon Real Estate Joint Stock Company would like to request a competent authority to guide the company to make the cost accounting in accordance with the law.

Regarding this issue, The General Department of Taxation - The Ministry of Finance gives the following opinions:

At Point d, Clause 3, Article 2 of Decree No. 209/2013 / ND-CP dated December 18, 2013 of the Government stipulating cases that are not required to declare, calculate and pay value-added tax:

“d) Organizations and individuals that transfer investment projects for production of and trading in goods or services subject to value-added tax to enterprises or cooperatives.”.

In Clause 4, Article 5 of Circular No. 219/2013 / TT-BTC dated December 31, 2013 of the Ministry of Finance stipulating cases in which VAT is not required:

“Article 5. Exemptionfordeclaring and payingVAT

… 4. The entities that transfer project of investment in manufacturing or trade of goods/services subject to VAT to other companies or cooperatives.

Example 18: Company P executes a project of investment in an industrial alcohol factory. In March 2014, 90% of the project is completed according to the design, and the investment is 26 billion VND. Due to a financial difficulty, company P transfers the incomplete project to company X for 28 billion VND. Company X receives and keeps executing this project. Company P is not required to declare and pay VAT on the value of the transferred project”.

In Article 4 of Circular No. 96/2015 / TT-BTC dated June 22, 2015 of the Ministry of Finance amending and supplementing Article 6 of Circular No. 78/2014 / TT-BTC stipulates:

“Article 6: Deductible and non-deductible expenses when calculating taxable income

1. Except for the non-deductible expenses prescribed in Clause 2 of this Article, every expense is deductible if all of these following conditions are satisfied:

a) The actual expense incurred is related to the enterprise’s business operation.

b) There are sufficient and valid invoices and proof for the expense under the regulations of the law.

c) There is proof of non-cash payment for each invoice for purchase of goods/ services of VND 20 million or over (including VAT).

The proof of non-cash payment must comply with regulations of law on VAT…”.

The Company is requested to base on the above regulations and instructions and contact the tax agency directly managing them for instructions to comply with the regulations.