To: Provincial Departments of Taxation

Regarding value-added tax (VAT) on letter of credit (LC) services of credit institutions under the Law on Credit Institutions No. 47/2010/QH12 dated 16/6/2010 and the Law of VAT, below are opinions of General Department of Taxation:

A quotation from Clause 1 Article 1 of the Law No. 31/2013/QH13 dated 19/6/2013 on amendments to some Articles on VAT-free goods and services of the Law on VAT:

“8. The following finance, banking and securities trading services:

a) Credit extension services: loaning, discounting and rediscounting of negotiable instruments and other valuable papers; guarantee; finance lease; credit card issuance; domestic and international factoring; other forms of credit extension prescribed by law;”

Quotations from to the Law on Credit Institutions No. 47/2010/QH12:

- Clause 15 Article 4:

“15. Provision of payment services through account means provision of payment facilities; payment of cheques, payment orders, receipt order, bank cards, LCs and other payment services through a customer’s account”.

-Article 162:

“1. This Law comes into force from January 01, 2011.

2. The Law on Credit Institutions No. 02/1997/QH10 and the Law No. 20/2004/QH11 on amendments thereof are annulled from the effective date of this Law”.

Pursuant to the aforementioned regulations, from January 01, 2011 when the Law on Credit Institutions No. 47/2010/QH12 started to have effect, LCs are considered payment services and thus not subject to VAT.

General Department of Taxation hereby requests that Provincial Departments of Taxation instruct credit institutions in their provinces to declare and pay VAT as per regulations.

For your information and compliance./.

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