Recently, the Ministry of Finance promulgated Circular 09/2011/TT-BTC providing instructions related to the value added tax and the enterprise income tax applied to insurance businesses.
Under the circular, a tax rate of zero percent will be applied to insurance services for businesses that are based in non-tariff areas and overseas organizations and individuals. Those include insurance services, insurance brokerage services, and services of insurance agents dealing with procedures such as assessment, compensation consideration and reimbursement from the third side. A tax rate of 10 percent will be applied to insurance business activities that are not specified in Article 4 and Item 1 of Article 7 of this circular.
The value added tax is imposed on non-life insurance businesses, non-life insurance consultancy and brokerage service providers; insurance agents dealing with procedures such as assessment, compensation consideration, reimbursement from the third side; other kinds of goods and services which arise during the operation process of insurance companies, which are subject to the value added tax as specified by the Law on Value Added Tax.
The value added tax is not imposed on companies operating in fields such as life insurance, health insurance, accident insurance, student insurance, sailor insurance, passenger insurance, tourist insurance, sterilization insurance, patient insurance, individual life insurance, insurance for electricity users, worker compensation insurance, human healthcare insurance, insurance for livestock, plants and other kinds of agricultural insurance services, reinsurance, insurance agent training, insurance for construction works, oil and gas equipment, foreign oil tankers operational in marine areas of Vietnam's sovereignty or overlapping marine areas shared by Vietnam and other countries.
Value added tax payers include insurance companies, insurance brokerage companies and other insurance organizations trading in goods and services that are subject to the value added tax.
Circular 09/2011/TT-BTC provides detailed instructions related to the enterprise income tax. This kind of tax is applied in accordance with the Law on Enterprise Income Tax and the document guiding the implementation of this law.
Taxable income of an insurance company is calculated from the time its responsibility with insurance buyers arises, regardless whether the company already got a payment or not.
Taxable income of a reinsurance company is calculated from the time the payment of reinsurance charges is confirmed.
Circular 09/2011/TT-BTC will take effect on March 9, 2011 to replace Circular 111/2005/TT-BTC dated December 13, 2005 of the Ministry of Finance./.