On September 27, 2010, the Ministry of Finance promulgated Circular 150/2010/TT-BTC guiding the application of value added tax (VAT) and the enterprise income tax to media organizations.
The circular provides guidelines related to the VAT and enterprise income tax applied to media organizations that are established and operate in accordance with the Press Law. These are public media organizations that make incomes from advertising activities, including newspapers that are able to self-support all or part of their regular activities.
VAT: Newspapers that are able to self-support all their activities can make out an account of incomes from advertising activities and pay the VAT according to the deduction method stipulated in the Value Added Tax Law and documents guiding the implementation of this law. These newspapers will be allowed to enjoy the deduction of the entire input VAT imposed on their fixed assets.
Enterprise income tax: Newspapers that are able to self-support all their activities by providing advertising services and other services, which are subject to the enterprise income tax, can make out an account of incomes and expenses so as to define the amount of taxable incomes according to stipulations of the Enterprise Income Tax Law and documents guiding the implementation of this law. In case the total amount of expenses is higher than the total amount of incomes, these newspapers will be allowed to use incomes from advertising activities to make up the difference before defining the amount of incomes that is subject to the enterprise income tax.
Media organizations will have to pay the enterprise income tax at the rate of 25 percent for the incomes they make from advertising activities as well as from the trade in goods and services.
The aforementioned circular also provides detailed instructions related to some types of expenses of media organizations. These include the salaries they pay their employees, the expenses on publications that are given for free (not more than 10 percent of the total deducted amount; for newly-established media organizations, these expenses should not exceed 15 percent of the total deducted amount for the first three years of their operations), not including the expenses on publications that are given for free to people who contributed significantly to the revolutionary cause, wounded/sick soldiers, people who work on islands, remote areas and places that are facing special difficulties as well as State management authorities. Other expenses will be dealt with according to stipulations of the Enterprise Income Tax Law.
Newspapers that are able to self-support part of their activities and make incomes from advertising activities can declare and pay the VAT in accordance with regulations that are applied to newspapers that are able to self-support all their activities.
The amount of VAT that media organizations have to pay is defined according to the following formula: Revenue x Ratio of added value to revenue (%) x VAT rate.
The salaries that are paid by media organizations are considered as reasonable expenses when defining the amount of incomes that is subject to the enterprise income tax.
Circular 150/2010/TT-BTC will take effect on November 12, 2010.