Judgment No. 194/2019/HC-PT dated august 20, 2019 on claim against administrative decision on handling trực tiếp bóng đá việt nam hôm nay tax violations

THE SUPERIOR PEOPLE’S COURT IN HANOI

JUDGMENT NO. 194/2019/HC-PT DATED AUGUST 20, 2019 ON CLAIM AGAINST ADMINISTRATIVE DECISION ON HANDLING trực tiếp bóng đá việt nam hôm nay TAX VIOLATIONS

On August 20, 2019, at the headquarters trực tiếp bóng đá việt nam hôm nay the Superior People's Court in Hanoi, an appellate trial is publicly conducted to hear the administrative case No. 236/2018/TLPT-HC dated August 10, 2018 on claim against administrative decision on handling trực tiếp bóng đá việt nam hôm nay tax violations.

As the first instance administrative judgment No. 05/2018/HCST dated June 20, 2018 trực tiếp bóng đá việt nam hôm nay the People's Court trực tiếp bóng đá việt nam hôm nay province H was appealed.

According to the Decision on bringing the case to trial No. 7849/2019/QD-TA dated August 1, 2018 trực tiếp bóng đá việt nam hôm nay the Superior People's Court in Hanoi among the involved parties:

1. The petitioner:GF Joint Stock Company

Address: No. 02, Colonel Driant street 75001 Paris, P.

Legal representative: Mr. ES - President, absent

Authorized representative trực tiếp bóng đá việt nam hôm nay the petitioner:Mr. Hoang Van T - Lawyer trực tiếp bóng đá việt nam hôm nay Trung Hoa Lawyer Office, H City Bar Association; Address Floor 1, CT 13 B Building Vo Chi Cong Street, Phu Thuong Ward, District T*, City H, is present.

2. Respondent: Director trực tiếp bóng đá việt nam hôm nayDepartment trực tiếp bóng đá việt nam hôm nay Taxation trực tiếp bóng đá việt nam hôm nay province H

Address: Truong Chinh Street, Tan Binh Ward, H City, H Province.

Legal representative:  Mr. Vu N - Deputy Director trực tiếp bóng đá việt nam hôm nay Tax Department trực tiếp bóng đá việt nam hôm nay Province H who participates in proceedings as authorized by the Director, present.

THE CASE

1. According to the presentation trực tiếp bóng đá việt nam hôm nay the petitioner: GF Company (hereinafter referred to as Company G) is a company operating in the field trực tiếp bóng đá việt nam hôm nay engineering and construction, established under the law trực tiếp bóng đá việt nam hôm nay the Republic trực tiếp bóng đá việt nam hôm nay P, based at P. To execute the project trực tiếp bóng đá việt nam hôm nay building a cattle feed mill in Tan Truong industrial park, district C, the Company has been granted a License by the Department trực tiếp bóng đá việt nam hôm nay Construction trực tiếp bóng đá việt nam hôm nay Province H in accordance with Decision No. 03A/QD-GPT-SXD dated May 6, 2011.

Accordingly, Company G signed a contract with CP Vietnam Livestock Company (Company CP) from December 23, 2010, through 04 amendments to March 23, 2013, the total contract value is EUR 15,368,193.10 and VND 43,322,829,575; equivalent to VND 487,829,294,973. Company G has made the final settlement with Company CP.

When performing the contract, G has subcontracted a part trực tiếp bóng đá việt nam hôm nay construction work to 10 Vietnamese subcontractors; the total value trực tiếp bóng đá việt nam hôm nay settlement paid to the subcontractors is VND 404,543,918,062.  After subtracting amount paid to subcontractors, the revenue subject to corporate income tax (CIT) trực tiếp bóng đá việt nam hôm nay G for the project is VND 83,285,376,911.  For the rest trực tiếp bóng đá việt nam hôm nay the contract, Company G hired workers from BT sole proprietorship to directly install mechanical equipment for the entire production line trực tiếp bóng đá việt nam hôm nay the factory with a total cost trực tiếp bóng đá việt nam hôm nay VND 3,058,124,622 and perform design, consulting, supervision services and other services to complete the construction trực tiếp bóng đá việt nam hôm nay the factory.

Then, in February 2016, Company G received Decision No. 5106/QD-CT dated November 27, 2015 on handling tax violations stating the tax arrears trực tiếp bóng đá việt nam hôm nay VND 2,616,184,972 payable by Company G, including:  VND 33,553,265 trực tiếp bóng đá việt nam hôm nay VAT, VND 2.500.876.881 trực tiếp bóng đá việt nam hôm nay CIT. Company G disagrees with the tax arrears, so it made a complaint to Tax Department H and the General Department trực tiếp bóng đá việt nam hôm nay Taxation trực tiếp bóng đá việt nam hôm nay Vietnam about the tax arrears.  On October 13, 2016, the General Department trực tiếp bóng đá việt nam hôm nay Taxation issued a Decision on the settlement trực tiếp bóng đá việt nam hôm nay the second complaint indicating that such complaint is refused, and the decision on complaint resolution trực tiếp bóng đá việt nam hôm nay the Tax Department H is upheld.

On July 21, 2017, Company G sued the entire Decision 5106/QD-CT dated November 27, 2015 trực tiếp bóng đá việt nam hôm nay the Director trực tiếp bóng đá việt nam hôm nay Tax Department trực tiếp bóng đá việt nam hôm nay Province H, then requested to sue on the content trực tiếp bóng đá việt nam hôm nay "Collecting VND 2,500,876,881 trực tiếp bóng đá việt nam hôm nay CIT in arrears." specified in Article 1 trực tiếp bóng đá việt nam hôm nay the Decision.  The reason for lawsuit petition:

Points 3.1 b and 3.2 b, Section III trực tiếp bóng đá việt nam hôm nay Circular No. 134 stipulate:  “In case the contract could not separate the value trực tiếp bóng đá việt nam hôm nay machinery, equipment and service prices, the CIT trực tiếp bóng đá việt nam hôm nay 2% shall apply to the taxable revenue.”

Point b, Clause 2, Article 13, Section 3, Chapter II trực tiếp bóng đá việt nam hôm nayThông tư 60/2012/TT-BTC hướng dẫn nghĩa vụstipulates:  For construction and installation activities involving the supply trực tiếp bóng đá việt nam hôm nay materials, machinery and equipment accompanying construction works, the percentage trực tiếp bóng đá việt nam hôm nay CIT on the taxable revenue is 2% trực tiếp bóng đá việt nam hôm nay the whole contract value.

The Tax Department trực tiếp bóng đá việt nam hôm nay province H noted that Company G only performed the service and subcontracted all the construction works and items to 10 subcontractors. Therefore, the application trực tiếp bóng đá việt nam hôm nay CIT 5% is not accordance with law. In fact, Company G both subcontracted the construction work subcontractors and has performed the construction, which is reflected by the fact that the Company hired employees, brought experts to supervise and design the whole works for subcontractors, so the Company could not assign all the works to subcontractors.

Based on the above grounds, the Company believes that it is only subject to 2% CIT on taxable revenue, not 5%.  The company requested the People's Court trực tiếp bóng đá việt nam hôm nay province H to cancel the tax arrears trực tiếp bóng đá việt nam hôm nay VND 2,500,876,881 in Decision No. 5106/QD-CT dated November 27, 2005 trực tiếp bóng đá việt nam hôm nay the Director trực tiếp bóng đá việt nam hôm nay Tax Department trực tiếp bóng đá việt nam hôm nay province H.

2. Representation trực tiếp bóng đá việt nam hôm nay the respondent:

Pursuant to the Law on Tax Administration, Decision on dissolution trực tiếp bóng đá việt nam hôm nay contractor trực tiếp bóng đá việt nam hôm nay Company G, the Director trực tiếp bóng đá việt nam hôm nay Tax Department trực tiếp bóng đá việt nam hôm nay province H issued a decision on tax examination at Company G in order to close the contractor tax code and to check tax payment obligations trực tiếp bóng đá việt nam hôm nay Company G with the State.

Upon inspection, the Tax Department detected that Company G had violations in matters related to the collection trực tiếp bóng đá việt nam hôm nay VAT, CIT and PIT. Specifically, as for CIT, Company G declares the tax rate trực tiếp bóng đá việt nam hôm nay 2%; the inspection agency claims that it must be 5%.  Basis for determining the tax rate is: Company G is the main contractor carrying out the construction project trực tiếp bóng đá việt nam hôm nay Company CP.  However, Company G has signed contracts with 10 subcontractors in Vietnam to subcontract the entire construction trực tiếp bóng đá việt nam hôm nay the factory, while Company G only performs the design services.  After subtracting the value transferred to the subcontractors, Company G has a revenue subject to CIT trực tiếp bóng đá việt nam hôm nay VND 83,285,376,911.  The company agrees with this revenue.

After determining the taxable turnover, the tax authority determines that the business activities under the contract signed with Company CP are design and construction. However, the construction part has been separated for subcontractors; Company G's operation is mainly to provide design services.  For this business activity, under the provisions trực tiếp bóng đá việt nam hôm nay Points a, b and l, Clause 3.2, Section III, Part B trực tiếp bóng đá việt nam hôm nay Circular No. 134 trực tiếp bóng đá việt nam hôm nay the Ministry trực tiếp bóng đá việt nam hôm nay Finance, the tax rate to be imposed is 5%.

After discovering the violation, the inspection team and Company G made a tax inspection record on November 23, 2015.

According to the Tax Administration Law, the General Department trực tiếp bóng đá việt nam hôm nay Taxation's Decision No. 108/QD-BTC trực tiếp bóng đá việt nam hôm nay January 14, 2010 defining the functions, tasks, powers and organizational structure; Decision No. 5106/QD-CT dated November 27, 2015 trực tiếp bóng đá việt nam hôm nay Tax Department trực tiếp bóng đá việt nam hôm nay province H was issued following due process, form, authority and content as prescribed.  The lawsuit petition is unfounded.

In the First Instance Judgment No. 05/2018/HC-ST dated June 20, 2018, the People's Court trực tiếp bóng đá việt nam hôm nay province H based on Articles 30, 32 and 116 trực tiếp bóng đá việt nam hôm nay the Law on Administrative Procedures; applied the Tax Administration Law 2006, amended in 2012;Circulars No. 156/2013/TT-BTC in Viet Namdated November 6, 2013 and No. 134/2008/TT-BTC trực tiếp bóng đá việt nam hôm nay the Ministry trực tiếp bóng đá việt nam hôm nay Finance; refused the lawsuit petition trực tiếp bóng đá việt nam hôm nay Company G against the amount trực tiếp bóng đá việt nam hôm nay VND 2,500,876,881 trực tiếp bóng đá việt nam hôm nay tax arrears payable as specified in the Decision No. 5106/QD-CT trực tiếp bóng đá việt nam hôm nay November 17, 2015 trực tiếp bóng đá việt nam hôm nay the Director trực tiếp bóng đá việt nam hôm nay the Tax Department trực tiếp bóng đá việt nam hôm nay province H on dealing with tax violations.

The Court trực tiếp bóng đá việt nam hôm nay First Instance also decided the court fee and the right to appeal trực tiếp bóng đá việt nam hôm nay the involved parties in accordance with law.

After the first instance trial, on June 29, 2018, the authorized representative trực tiếp bóng đá việt nam hôm nay the petitioner appealed to the Court trực tiếp bóng đá việt nam hôm nay Appeal to accept the lawsuit petition trực tiếp bóng đá việt nam hôm nay Company G.

At the appellate trial:

- The authorized representative trực tiếp bóng đá việt nam hôm nay the petitioner still maintains the appeal; requests the Court trực tiếp bóng đá việt nam hôm nay Appeal to accept the lawsuit petition, partially cancel Decision No. 5106/QD-CT trực tiếp bóng đá việt nam hôm nay November 17, 2015 trực tiếp bóng đá việt nam hôm nay Tax Department trực tiếp bóng đá việt nam hôm nay province H on the fine trực tiếp bóng đá việt nam hôm nay VND 2,500,876,881, because in this case, the Company is entitled to the rate trực tiếp bóng đá việt nam hôm nay 2% trực tiếp bóng đá việt nam hôm nay CIT under the provisions trực tiếp bóng đá việt nam hôm nayThông tư 134/2008/TT-BTC hướng dẫn thực hiện, not subject to the tax rate trực tiếp bóng đá việt nam hôm nay 5%.

- The respondent still maintains the viewpoint during the process trực tiếp bóng đá việt nam hôm nay lawsuit settlement not accepting the appeal trực tiếp bóng đá việt nam hôm nay the petitioner, because the decision on the tax rate applied to the tax arrears payable by Company G is correct.

- The representative trực tiếp bóng đá việt nam hôm nay the High-level People's Procuracy expresses opinions that based on documents and evidence contained in the case file and the results trực tiếp bóng đá việt nam hôm nay litigation at the trial, and the Court trực tiếp bóng đá việt nam hôm nay First Instance’s rejection trực tiếp bóng đá việt nam hôm nay the lawsuit petition trực tiếp bóng đá việt nam hôm nay G is right; request to keep the decision trực tiếp bóng đá việt nam hôm nay the Court trực tiếp bóng đá việt nam hôm nay First Instance on the litigants.

JUDGEMENT trực tiếp bóng đá việt nam hôm nay THE COURT

[1] With reference to prescriptive period for lawsuit and jurisdiction: After receiving Decision No. 5106/QD-CT dated November 27, 2015 trực tiếp bóng đá việt nam hôm nay the Director trực tiếp bóng đá việt nam hôm nay Tax Department trực tiếp bóng đá việt nam hôm nay province H on handling tax violations.  Company G has made the first complaint to the Tax Department H, the second one to the General Department trực tiếp bóng đá việt nam hôm nay Taxation.  On October 13, 2016, the General Department trực tiếp bóng đá việt nam hôm nay Taxation issued a decision on refusing the second complaint trực tiếp bóng đá việt nam hôm nay Company G. On July 21, 2017, the Company filed a lawsuit under administrative proceedings, requesting cancellation trực tiếp bóng đá việt nam hôm nay the Decision No. 5106/QD-CT above which is considered within the prescriptive period for initiating a lawsuit prescribed at Point a, Clause 3, Article 116 trực tiếp bóng đá việt nam hôm nay the Law on Administrative Procedures; the case falls under the jurisdiction trực tiếp bóng đá việt nam hôm nay the People's Court trực tiếp bóng đá việt nam hôm nay province H, as stipulated in Article 30, Clause 3, Article 32 trực tiếp bóng đá việt nam hôm nay theLaw on Administrative Procedure in Viet Nam.

[2]. With reference to the procedures and competence to issue administrative decisions on tax matters, After completing the signed contract, the Company has carried out dissolution procedures and notified to the tax authority; on July 14, 2015, Director trực tiếp bóng đá việt nam hôm nay Tax Department trực tiếp bóng đá việt nam hôm nay province H issued a decision on inspection; and sent an inspection team to fix the tax code with the Company. After checking, they proposed collecting arrears trực tiếp bóng đá việt nam hôm nay VAT, CIT and PIT with the total amount trực tiếp bóng đá việt nam hôm nay VND 2,616,184,972.  Based on the proposal in the Tax Examination Record dated November 23, 2015 trực tiếp bóng đá việt nam hôm nay the inspection team, on November 27, 2015, the Director trực tiếp bóng đá việt nam hôm nay Tax Department trực tiếp bóng đá việt nam hôm nay province H issued Decision No. 5106/QD-CT on handling trực tiếp bóng đá việt nam hôm nay tax violations against the Company. This decision was made with due process, procedures and authority as prescribed by law.

[3]. In the Decision No. 5106/QD-CT dated November 27, 2015, the Director trực tiếp bóng đá việt nam hôm nay Tax Department trực tiếp bóng đá việt nam hôm nay province H decided to collect the tax arrears from  the Company, including:  VND 33,553,265 trực tiếp bóng đá việt nam hôm nay VAT, VND 81,754,826 trực tiếp bóng đá việt nam hôm nay PIT and VND 2,500,876,881 trực tiếp bóng đá việt nam hôm nay CIT. The company only proceeds against the decision to collect the CIT arrears with the reason:  The company is only subject to the tax rate trực tiếp bóng đá việt nam hôm nay 2%, so the application trực tiếp bóng đá việt nam hôm nay the 5% tax rate is not right.  And the Company does not require review trực tiếp bóng đá việt nam hôm nay other taxes.

Examining the legality trực tiếp bóng đá việt nam hôm nay the administrative decision being sued, the Trial Panel finds that: On December 23, 2010, Company G (the main contractor) signed a contractual agreement with Company CP (the investor) to execute the Project trực tiếp bóng đá việt nam hôm nay building a cattle feed mill in Tan Truong industrial park, Tan Truong commune, district C. The total contract value is EUR 15,500,000.  In the course trực tiếp bóng đá việt nam hôm nay contract execution, the two parties added addenda to the contract, which adjusted the value trực tiếp bóng đá việt nam hôm nay the main contract, the final value was EUR 15,368,193.10 and VND 43,322,829,575; In the aforementioned contract, there is no provision on the assignment trực tiếp bóng đá việt nam hôm nay part trực tiếp bóng đá việt nam hôm nay the work value under the contract in which the Company is a contractor signed with a Vietnamese company.  However, during the execution trực tiếp bóng đá việt nam hôm nay the contract, the Company signed contracts with 10 Vietnamese subcontractors; the total settlement value is VND 404,543,918,062.

The company is not involved in building a feed factory. The remaining difference trực tiếp bóng đá việt nam hôm nay the contract is VND 83,285,376,911, which is exactly the value trực tiếp bóng đá việt nam hôm nay services that the Company receives due to the difference between the contract price agreed with the investor and the contract price agreed with the subcontractors, to perform services to complete the construction trực tiếp bóng đá việt nam hôm nay factory building.  The representative trực tiếp bóng đá việt nam hôm nay the company also acknowledged hiring workers from enterprise BT to provide services with the cost trực tiếp bóng đá việt nam hôm nay more than VND 3 billion.  The company's employment was for cleaning, not related to the supply trực tiếp bóng đá việt nam hôm nay construction machinery and equipment.

According to Point 3.2 b (b1), Section III, Part B trực tiếp bóng đá việt nam hôm nay the Finance Ministry's Circular No. 134/2008/TT-BTC dated December 31, 2008 on guidelines for tax obligations performed by foreign organizations and individuals doing business in Vietnam:

“With regard to main contracts and sub contracts covering many different business activities, when determining the payable CIT amount, the application trực tiếp bóng đá việt nam hôm nay the rate trực tiếp bóng đá việt nam hôm nay CIT on assessable revenue shall be based on taxable turnover for each business activity conducted by the foreign contractor or the foreign subcontractor under contract.  In case it is impossible to separate the value trực tiếp bóng đá việt nam hôm nay each business activity, the highest CIT rate applicable to the business line shall be applied to the whole contract value”. The above-mentioned provision trực tiếp bóng đá việt nam hôm nay the Circular has mentioned the nature and type trực tiếp bóng đá việt nam hôm nay business activities trực tiếp bóng đá việt nam hôm nay the enterprise (providing goods, machinery and services with different tax rates, etc.)  in order to calculate the tax rate, not refers to any specific type trực tiếp bóng đá việt nam hôm nay business as indicated in the appeal trực tiếp bóng đá việt nam hôm nay the Company.  However, in this case, the construction part has been separated for subcontractors; Company G's operation is mainly to provide design services.  For this business activity, under the provisions trực tiếp bóng đá việt nam hôm nay Points a, b and l, Clause 3.2, Section III, Part B trực tiếp bóng đá việt nam hôm nay Circular No. 134 trực tiếp bóng đá việt nam hôm nay the Ministry trực tiếp bóng đá việt nam hôm nay Finance, the tax rate to be imposed is 5%. The Court trực tiếp bóng đá việt nam hôm nay First Instance was right when refusing the Company's lawsuit petition for cancelling the company's decision to collect the CIT arrear trực tiếp bóng đá việt nam hôm nay VND 2,500,876,881.  It was seen that there was no valid reason to accept the appeal trực tiếp bóng đá việt nam hôm nay the Company.

[4]. The appeal is not accepted, so Company G has to pay the appeal court fee as prescribed.

Therefore,

HEREBY DECIDE

1. Pursuant to Clause 1, Article 241; Clause 1, Article 349 trực tiếp bóng đá việt nam hôm nay the Law on Administrative Procedures; Article 34 trực tiếp bóng đá việt nam hôm nayNghị quyết 326/2016/UBTVQH14 quy định về mứcdated December 30, 2016 trực tiếp bóng đá việt nam hôm nay the Standing Committee trực tiếp bóng đá việt nam hôm nay the National Assembly on court fees and charges; the decision to reject the appeal trực tiếp bóng đá việt nam hôm nay Company G France SA and uphold the decision trực tiếp bóng đá việt nam hôm nay the First Instance Judgment No. 05/2018/HC-ST trực tiếp bóng đá việt nam hôm nay June 20, 2018 trực tiếp bóng đá việt nam hôm nay the People's Court trực tiếp bóng đá việt nam hôm nay province H.

2. Company G France SA must pay an appeal court fee trực tiếp bóng đá việt nam hôm nay VND 300,000.  It is confirmed that the Company has paid (submitted by Mr. Hoang Van T) such appeal court fee as stated in the advance receipt trực tiếp bóng đá việt nam hôm nay court fee No. AA/2017/0001562 dated July 2, 2018 trực tiếp bóng đá việt nam hôm nay the Civil Judgment Execution Department trực tiếp bóng đá việt nam hôm nay province H. The Appeal Judgment takes effect from the date trực tiếp bóng đá việt nam hôm nay pronouncement.