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MINISTRY OF FINANCE
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SOCIALIST REPUBLIC OF VIETNAM
Independence - Freedom - Happiness
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No.
219/2013/TT-BTC
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Hanoi, December 31, 2013
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CIRCULAR
GUIDANCE
ON IMPLEMENTATION OF THE LAW ON VALUE-ADDED TAX AND THE GOVERNMENT'S DECREE NO.
209/2013/ND-CP DATED DECEMBER 18, 2013 PROVIDING GUIDANCE ON SOME ARTICLES OF
THE LAW ON VALUE-ADDED TAX.
Pursuant to the Law on Value-added tax No.
13/2008/QH12 dated June 03, 2008 and the Law No. 31/2013/QH13 dated June 19, 2013 on
amendments to some Articles of the Law on Value-added tax;
Pursuant to the Law on Tax administration No.
78/2006/QH11 dated November 29, 2006 and the Law No. 21/2012/QH13 dated November 20, 2012
on the amendments to the Law on Tax administration;
Pursuant to the Government's Decree No. 209/2013/ND-CP dated December 18, 2013
providing guidance on some Articles of the Law on Value-added tax;
Pursuant to the Government's Decree No.
118/2008/ND-CP dated November 27, 2008, defining the functions, tasks, powers
and organizational structure of the Ministry of Finance;
At the request of the Director of the General
Department of Taxation,
The Minister of Finance provides guidance on
implementation of the Law on Value-added tax:
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GENERAL PROVISIONS
Article 1. Scope of
regulation
This Circular provides guidance on the
commodities and services that are subject to tax and not subject to tax,
taxpayers, basis and methods for calculating, deducting, refunding tax, and the
places to pay value-added tax (VAT).
Article 2.Taxable goods
and services
Goods and services subject to VAT (hereinafter
referred to as taxable goods and services) are those used for production,
trading, and consumption in Vietnam (including those purchased from overseas
organizations and individuals), except for the goods and services in Article 4
of this Circular.
Article 3. Taxpayers
Payers of VAT are the organizations and
individuals that manufacture, trade in taxable goods and services in Vietnam
regardless of their lines and forms of business (hereinafter referred to as
business establishments), the organizations and individuals that import goods
or purchase services from abroad (hereinafter referred to as importers),
including:
1. The business organizations established and
registered under the Law on Enterprises, the Law on State enterprises (now the
Law on Enterprises), the Law on Cooperatives, and other business laws.
2. Business organizations of political
organizations, socio-political organizations, social organizations,
socio-professional organizations, the army, public service organizations, and
other organizations;
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4. Individuals, households, independent groups of
businesspeople, and other entities that engage in manufacturing, trading, or
importation;
5. Any business organization or businessperson in
Vietnam that purchases services (including services attached to goods) from a
foreign organization that does not have a permanent establishment in Vietnam,
or from a foreigner that is not a resident in Vietnam, the business
organization or businessperson that purchase services is the taxpayer, except
for the cases in which VAT is exempt in Clause 2 Article 5 of this Circular.
Regulations on permanent establishments and
residents are introduced in the laws on corporate income tax and personal
income tax.
6. Branches of the export processing companies that
are established to trade goods and do the tasks related to goods trading in
Vietnam in accordance with the laws on industrial parks, export-processing
zones, and economic zones.
Example 1: Sanko LLC. is an export processing
company. Apart from manufacturing for exportation, Sanko LLC. is also licensed
to import goods for sale or for exportation, and Sanko LLC. must establish a
branch to do this task. This branch shall independently keep accounting
records, declare and pay separate VAT on such task instead of including it in
the VAT on manufacturing for exportation.
When importing goods for distribution (sale),
the branch of Sanko LLC shall declare and pay VAT on the importation and on
each sale (including exportation). Sanko LLC. shall use invoices, declare and
pay VAT as prescribed.
Article 4. Goods and
services that are not subject to VAT
1. Products from farming (including
agroforestry products), breeding, and aquaculture that are produced, catched,
sold, or imported and are not processed into other products (hereinafter referred to
as unprocessed) or have only been preprocessed
Preprocessed products are those that
have only been cleaned, dried, husked, grinded, milled, threshed, split, cut,
salted, put in cold storage (cooled or frozen), preserved with sulfur dioxide,
sulphur solution, or other solutions, and other common means of preservation.
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When company B sells the pigs or have
them processed for sale, they are subject to VAT.
2. Breeds of livestock, plant varieties, including
eggs, breeds, seeds, stems, tubers, semen, embryos, genetic materials that are
raised, imported, and traded. The breeds of livestock and plant varieties that
are not subject to VAT are the products of the importers and traders that have
the certificates of registration of animal breed or plant variety trading
issued by regulatory bodies. The animal breeds and plant varieties that apply
quality standards of the state must satisfy the requirements imposed by the
state.
3. Irrigation services, plowing services, dredging
channels, dredging in-field trenches serving agricultural production;
harvesting services.
4. Salt derived from seawater, rock salt, pure
salt, refined salt, iodized salt composed primarily of sodium chloride (NaCl).
5. State-owned houses sold to tenants.
6. Transfer of right to use land (hereinafter
referred to as land tenure).
7. Life insurance, health insurance, learner’s
insurance, other insurance services related to humans; insurance for livestock,
plants and other agriculture insurance services; insurance for ships and
instruments for fishing; reinsurance.
8. The finance, banking, and securities services
below:
a) Credit extension includes:
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- Discounted transfer of negotiable instruments
and other valuable papers;
- Bank guarantee;
- Finance lease;
- Issuance of credit cards.
When a financial institution collects fees for
issuance of credit cards, the fees collected from the clients are classified as
revenues from credit extension, such as fee for early repayment, penalties for
late repayment, fee for debt restructuring, fee for loan management, and other
fees classified as revenues from credit extension are not subject to VAT.
The fees related to card transactions are not
classified as revenues from credit extension, such as fee for reissuance of
PINs, fee for copies of invoices, claiming fee, fee for card replacement, fee
for card destruction, fee for card conversion, and other fees are subject to
VAT.
- Domestic and international factoring for the
banks allow to process international payments;
- Revenue from liquidation of collateral by a
credit institution or law enforcement authority in accordance with the laws on
handling collateral.
If the owner of the collateral defaults on the
debt and has to transfer the collateral to a credit institution, both parties
must follow the prescribed procedure for transferring collateral.
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Where the credit institution takes the
collateral to clear debt, credit institution shall record an increase in the
value of business assets. When the credit institution sells the assets, VAT
must be declared and paid if it is subject to VAT.
Example 3: In March 2014, company A, which pays
VAT using credit-invoice method, pledges its machinery and equipment as
collateral to take a loan at bank B, which is due in one year (the deadline is
March 31, 2015). On March 31, 2015, company A defaults on the loan and has to
transfer the collateral to bank B. Company A must follow the prescribed
procedure for collateral transfer. When Bank B sells the collateral to recover
the debt, the sold collateral is not subject to VAT.
- Information provision services provided by the
units and organizations affiliated to the State bank for credit institutions to
use for credit extension in accordance with the Law on the State bank.
Example 4: X is a unit of the State bank and is
allowed by the State bank to provide credit information. In 2014, X signs
contracts to provide information for some commercial banks to serve their
credit extension and other activities. The revenue from provision of credit
information serving credit extension is not subject to VAT; the revenue from
provision of credit information serving other activities of the commercial
banks beyond the Law on the State bank is subject to 10% VAT;
- Other forms of credit extension prescribed by
law.
b) Separate loans that are not a business and
irregularly given by taxpayers that are not credit institutions.
Example 5: Joint-stock company C has idle money
and signs a contract to give a loan to company T, which is due after 06 months,
and receives an interest. Such interest is not subject to VAT.
c) Securities services include: brokerage,
proprietary trading, issuance guarantee, investment consultancy, depository,
securities investment fund management, securities company management, securities
investment portfolio management, market organization services of Stock
Exchanges or Securities trading centers, services related to the securities
registered and deposited at Vietnam Securities Depository, granting loans for
margin trading, advance payment for securities and other types of securities
trading prescribed by securities laws.
Information provision, auctions of shares of
issuers, technical support for online transactions of Stock Exchanges.
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Example 6: In April 2014, company A contributes
capital in the form of machinery and equipment to the creation of joint-stock
company B. The company A’s contribution is valued at 2.5 billion VND, which is
equal to 25% of company B’s total capital. In November 2014, company A sells
this capital contribution to ABB Foundation for 4 billion VND. This amount of 4
billion VND is revenue from capital transfer and not subject to VAT.
dd) Selling debts;
e) Foreign currency trading;
g) Derivative financial services include:
forward contracts, futures contracts, call option, put option, other derivative
financial services prescribed by law;
h) Selling collateral put up by the
organizations 100% charter capital of which is owned by the government to
settle bad debts of Vietnamese credit institutions.
9. Medical services, veterinary services, including
examination, treatment, and prevention of diseases for human and animals, birth
control services, convalescence and rehabilitation services for patients,
patient transport services, sickbed and sickroom rental services; testing,
radiography services; blood and blood products for patients.
If medicines are included in the service package
(according to regulations of the Ministry of Health), the revenue from
medicines in the package is also not subject to VAT.
10. Public postal and telecommunications services,
and public Internet services provided by the government, postal and telecommunications
services from abroad (inbound).
11. Maintenance of zoos, flower gardens, parks,
street greeneries, public lighting, funeral services. The services mentioned in
this Clause do not depend on the source of payment. In particular:
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b) Public lighting includes lighting on the
streets, in alleys, neighborhoods, flower gardens, and parks. Revenue from
public lighting is not taxable;
c) Funeral services provided by the business
establishments licensed to provide funeral services include funeral parlor and
car rental service, burial service, cremation service, grave move service, and
grave care service.
12. Maintenance, repairs, and construction funded by
the people (including contributions and sponsorships), humanitarian aid for
cultural and artistic works, public works, infrastructure, and housing for
beneficiaries of incentive policies.
When a source of funding other than people’s
contribution or humanitarian aid is used that does not exceed 50% of the total
investment in the work, the value of the whole work is not subject to tax.
When a source of funding other than
people’s contribution or humanitarian aid is used that exceeds 50% of the total
investment in the work, the value of the whole work is subject to VAT.
Beneficiaries of incentive policies include the
contributors, beneficiaries of social protection that receive benefits from
government budget; members of poor households, and other cases.
13. Education and vocational training as prescribed
by law, including foreign language training, artistic training, sports training,
nursing, children’s nursing, and training of other professions in order to
raise extend education, improve professional knowledge and skills.
The revenues from meal, student transport
collected by educational institutions from preschool to high school are not
subject to tax.
Revenues from boarding school services; revenues
from training (including the examinations and issuance of qualifications are
part of the training course) are not subject to VAT. If the training
institution only organizes the examinations and issues qualifications that are
part of the training course without running the course, the examinations and
issuance of qualifications are also not subject to tax. The examinations and issuance of
qualifications beyond the training course are subject to VAT.
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14. Audio and video broadcasting funded by
government budget.
15. Publishing, importing newspapers, magazines,
specialist newsletters, political books, textbooks, teaching materials, law
books, scientific books, books using languages of ethnic minorities,
propagation pictures, including those in the form of audio and video
discs/tapes, electronic data; money and money printing.
Specialist magazines, specialist newsletters.
Political books are the books that propagate the
political orientation of the Communist Party and the state to serve political
objectives and anniversaries; the books that encourage good deeds; the books
that contain speeches and researches of leaders of the Communist Party and the
state.
Textbooks are those used for teaching and
learning from preschool to high school (including books for reference that are
conformable with school programs)
Teaching materials are the books used for
teaching and learning in universities, colleges, junior colleges, and
vocational schools.
Law books are the books that contain legislative
documents.
Scientific books are those used for introducing
scientific and technological knowledge related to manufacturing and branches of
science.
The books using languages of ethnic minorities
include bilingual books.
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16. Public transport by bus and tram within a
province, a city or the routes adjacent to the city as prescribed by the
Ministry of Transport.
17. Goods that cannot be manufactured in Vietnam and
must be imported, including:
a) Imported machinery, equipment, parts, and
supplies serving scientific research and technological development;
b) Imported machinery, equipment, parts,
specialized vehicles and supplies serving petroleum exploration and extraction;
c) Airplanes (including engines), oil rigs, and
ships that cannot be manufactured in Vietnam and are imported as fixed assets
or leased from a foreign party to serve manufacturing, trading, or to sublease.
The importer must present the documents about
customs procedure, customs supervision and inspection, export tax, import tax,
and administration of tax on exported and imported goods prescribed by the
Ministry of Finance to the customs.
The Ministry of Planning and Investment shall
compile a list of machinery, equipment, parts, supplies serving scientific
research and technology development that can be manufactured in Vietnam, a list
of machinery, equipment, parts, and specialized vehicles serving petroleum
exploration and extraction that can be manufactured in Vietnam, and a list of airplanes, oil
rigs, and ships that can be manufactured in Vietnam as the basis for identifying those that cannot
be manufactured in Vietnam and need importing.
18. Weapons and specialized vehicles serving
national defense and security.
a) The weapons and specialized vehicles serving
national defense and security enumerated in the list compiled by the Ministry
of Finance in cooperation with the Ministry of National Defense and the
Ministry of Public Security.
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b) Imported weapons, and specialized vehicles
(including supplies, machinery, equipment, parts) serving national defense and
security that are exempt from import tax according to the Law on Export and
import tax, or imported within annual quota imposed by the Prime Minister.
The procedure and documentation for imported
weapons and vehicles are not subject to VAT during importation according to
regulations of the Ministry of Finance on customs procedure,
customs supervision and inspection, export tax, import tax, and administration
of tax on exported and imported goods.
19. Imported goods, goods/services sold to other
organizations and individuals as humanitarian aid or non-refundable aid in the
following cases:
a) Goods imported as humanitarian aid or non-refundable aid
must be
certified by the Ministry of Finance or Services of Finance;
b) Gifts for regulatory bodies, political
organizations, socio-political organizations, socio-political-professional
organizations, social organizations, socio-professional organizations, and the
army prescribed by the laws on gifts;
c) Gifts for individuals in Vietnam prescribed
by the laws on gifts;
d) Belongings of foreign entities provided with
diplomatic immunity prescribed by the laws on diplomatic immunity; belongings
brought to Vietnam by Vietnamese people residing abroad;
dd) Belongings in luggage within tax-free
allowance;
The limit on tax-free imported goods is
specified in the Law on Export and import tax and its guiding documents.
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Instructions on VAT refund for diplomatic
missions, consular offices, and representative offices of international
organizations in Vietnam are provided by the Ministry of Finance.
e) Goods and the goods/services sold to other
organizations and individuals as humanitarian aid or non-refundable aid for Vietnam.
In order to be exempt from VAT, the
international organization and or foreigner that buys goods/services in Vietnam
as humanitarian aid and non-refundable aid must send a note to the seller,
which specifies their name, the quantity or value of purchased goods, and bears
certification of the aid by the Ministry of Finance and Services of Finance.
When selling goods, the seller must issue an
invoice specifying that the goods are sold at VAT-exclusive prices to a foreign
entity as non-refundable aid or humanitarian aid, keep the aforesaid note as an
evidence when declaring tax. Any foreign entity or international organization
that purchases
goods/services in Vietnam as non-refundable aid or humanitarian aid at VAT-inclusive
prices may
claim a refund according to Clause 6 Article 18 of this Circular.
20. The goods forwarded through Vietnam’s territory;
goods temporarily imported or temporarily exported, raw materials imported for
manufacturing or export processing under contracts with foreign partners
The goods and services traded between a foreign
party and a free trade zone, or among free trade zones.
Free trade zones include: export-processing
zones, export processing companies, tax-suspension warehouses, bonded warehouses,
special economic zones, commercial - industrial zones, and other economic zones
established and provided with similar tax incentives as free trade zones
according to Decisions of the Prime Minister. The transactions between a free
trade zone and an external party are considered export/import.
The procedures and documents for considering VAT
exemption must comply with instructions of the Ministry of Finance on customs
procedure, customs supervision and inspection, export tax, and import tax.
21. Technology transfers according to the Law on
Technology transfers; intellectual property right transfers according to the
Law on Intellectual property. If a contract of technology transfer or
intellectual property right transfer is associated with a transfer of machinery/equipment,
only the value of transferred technology or intellectual property right is not
subject to VAT. If such value cannot be separated, VAT shall be imposed on the
total value of the transferred technology or intellectual property right and machinery/equipment.
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22. Imported gold in the form of bullions, pieces,
and other forms that are not fashioned into jewelry or other items.
Gold in the form of bullions, pieces, and
other forms of
unfashioned gold shall be identified in accordance with the laws on gold
trading.
23. Exported natural resources that are not
processed into other products.
The natural resources that are not processed
into other products include the minerals that have been filtered, grinded,
refined, or the resources that have been cut.
Example 8: Taxpayer A exports natural stones in
the form of blocks and slabs. The exported stones are not subject to VAT.
Example 9: Taxpayer B exports white limestone in the
form of grains and powder. The exported white limestone grains and powder are
not subject to VAT. If taxpayer B exports ultra-fine limestone powder
(according to standards of competent authorities), or ultra-fine limestone
powder coated with acid, they are considered processed into other products and
thus taxable when being exported.
24. Prosthetic body parts, including those
permanently implanted into the human body; crutches, wheelchairs, and other
special instruments serving the disabled.
25. Goods/services provided
by any business household or businessperson that earns an annual revenue of ≤
100 million VND.
The tax liability of the business household or
businessperson shall be determined in accordance with tax laws.
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a) Duty-free goods at duty-free shops prescribed
by the Prime Minister.
b) Goods in national reserve sold by national
reserve authorities.
c) Charged activities of the state according to
the laws on fees and charged.
d) Bomb and mine clearance carried out by the
army at the constructions funded by government budget.
If the purposes of the goods that are not
subject to VAT during importation are changed, VAT shall be declared and paid
to the customs authority where the customs declaration is registered. The
entities that sell goods to the domestic market must declare and pay VAT to
their supervisory tax authorities.
Article 5. Cases of
exemption declaring and paying VAT
1. An organization or individual receives a
monetary compensation (including compensation for land and property on land
that is withdrawn by a competent authority), bonus, allowance, or payment for
transfer of emission permit, or other revenues.
Any taxpayer that receives a monetary
compensation,
bonus, allowance, payment for transfer of emission permits, or other revenues must make a receipt for
such revenues. The taxpayer shall make receipts for spending according to the
spending purposes.
If compensation is provided in the form of
goods/services, the provider of compensation must issue an invoice, declare and
pay VAT as if such goods/services are sold; the recipient of compensation shall
declare and deduct tax as prescribed.
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Example 10: Company P&C earns an interest
from buying bonds and a dividend from buying shares of other companies. Company
P&C is not required to declare and pay VAT on the interest buying bonds and
the dividend.
Example 11: Company A receives a compensation of
50 million VND for contract termination from company B. Company A shall make a
receipt and is not required to declare and pay VAT on such amount.
Example 12. Company X buys goods from company Y.
Company X pays a deposit to company Y and is paid an interest on that deposit
by company Y. Company X is not required to declare and pay VAT on such
interest.
Example 13: Company X sells goods to company Z
for totally 440 million VND. According to the contract, company Z shall pay in
instalments for 03 months with an interest of 1% of the total payment per
month. After 03 months, company X receives from company Z an amount that
includes 440 million VND in price and 13.2 million VND in interest (440 million
VND x 1% x 3 months). Company X is not required to declare and pay VAT on that
13.2 million VND.
Example 14: Insurer A and company B signs an
insurance contract. When insurance is claimed, insurer A pays a compensation in
cash to company B. Company B is not required to declare and pay VAT on this
compensation.
Example 15: ABC is a milk company that pays its
distributors to do a sales promotion (in accordance with the laws on trade
promotion), marketing, and product display. When receiving the payment, the
distributors that use credit-invoice method shall issue VAT invoices and
calculate VAT at 10%, the distributors that use direct methods shall only use
sale invoices and pay direct VAT at the prescribed rate.
2. A business organization or businessperson in
Vietnam purchases services from a foreign organization that does not have a
permanent establishment in Vietnam, or from am overseas individual that is not
a resident in Vietnam. These services include: repair of vehicles, machinery,
equipment (including supplies and parts); advertising, marketing; trade
promotion; brokering sale of goods and services to abroad; training,
international postal and telecommunications services that are provided outside
Vietnam, lease on foreign satellite transmission lines and frequency bands.
3. The non-business organizations and individuals
shall not pay VAT on the sale of their assets.
Example 16: Mr. A, who is not a businessperson,
sells a 4 seater car to Mr. B for 600 million VND. Mr. A is not required to
declare and pay VAT on the payment for the car.
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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.
5. A company or cooperative that pays VAT
using credit-invoice method and sells unprocessed or preprocessed farming,
breeding, aquaculture products to another company or cooperative for commercial
purposes shall be exempt from declaring and paying VAT. The selling price on
the VAT invoice is VAT-exclusive price, the line of tax rate must be left blank
and crossed out.
A company or cooperative that pays VAT using
credit-invoice method and sells unprocessed or preprocessed farming, breeding,
aquacultural products to other entities such as business households,
businesspeople, other organizations or other individuals has to declare and pay
5% VAT according to Clause 5 Article 10 of this Circular.
A business household, businessperson, company,
cooperative, or business organization that pays VAT directly on value added
using direct method and sells unprocessed or preprocessed farming, breeding,
aquaculture products for commercial purposes shall declare and pay VAT at 1% of
the revenue.
Example 19: Company B, which pays VAT using
credit-invoice method, purchases rice directly from the farmers or farming
companies. This direct purchase of rice from the farmers or farming companies
is not subject to VAT.
When company B sells rice to exporter C, company
B is not required to declare and pay VAT on the rice sold to exporter C.
When company B sells rice to company D, which is
a noodle producer, company B is not required to declare and pay VAT on the rice
sold to
company D.
On the invoices issued to exporter C and company
D, company B must specify that the selling price is VAT-exclusive. The line of
tax rate must be left blank and crossed out.
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Example 20: Company A, which is a business
organization that pays tax using credit-invoice method, buys coffee beans from
farmers, then sells them to business household H. 5% VAT shall be levied on the
revenue from selling coffee beans to business household H.
Example 21: After purchasing tea leaves from a
farmer, Mr. X’s household sells them to Mr. Y’s household. Mr. X’s household
must calculate and pay direct VAT at 1% of the revenue from selling tea leaves
to Mr. Y’s household.
If VAT on the invoices for the unprocessed
products or preprocessed products that are sold to a company or cooperative has
been declared, the seller and the buyer must adjust the invoices to be exempt
from VAT.
6. When transferring depreciated in-use assets
between a business establishment and its wholly-owned subsidiaries or among the
these subsidiaries to serve the manufacturing or trade of goods/services
subject to VAT, invoices and VAT payment are not required. The taxpayer that
transfers their assets must make a Decision on asset transfer enclosed with the
documents about the asset origins.
When transferring a fixed asset, the value of
which has been reassessed, or when transferring an asset to another business
establishment that manufactures of trades in goods/services that are not
subject to VAT, VAT shall be paid and VAT invoices must be made.
7. Other cases:
Taxpayers are not required to declare and pay
tax in the following cases:
a) Assets are contributed to establish a new
company. Contributed assets must have: contribution record, partnership or
cooperation contract; asset valuation record (made by a valuation council or
the contributor or an organization licensed for valuation), and documents about
asset origins.
b) Assets are circulated among financially
dependent subsidiaries of a company (hereinafter referred to as dependent
units); assets are circulated when a company is divided, split, amalgamated,
merged, or converted. When assets are so circulated, the taxpayer that has the
circulated assets must make an asset circulation order enclosed with documents
about the asset origins and is not required to issue invoices.
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c) Compensation claimed
from a third party under an insurance contract.
d) The delegated payments that are not related
to the sale of goods/services of the taxpayer.
dd) The revenue from goods/services sold by
agents, commissions paid to agents, including: postal and telecommunications
services, lottery, air tickets, bus tickets, train tickets, ship tickets,
international transport agents; air and maritime service agents entitled to 0%
VAT; insurance agents.
e) Revenue and commissions on selling
goods/services that are not subject to VAT.
Chapter II
TAX BASIS AND TAX CALCULATION METHOD
Section 1. Tax basis
Article 6. Tax basis
Tax basis is taxable prices and tax rates.
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1. Taxable prices of goods and services sold
by taxpayer are VAT-exclusive price. Taxable prices of goods and
services subject
to special excise tax are the prices inclusive of special excise tax and
exclusive of VAT.
Taxable prices of goods and services subject to environmental protection
tax
are the prices inclusive of environmental protection tax and exclusive of VAT; taxable prices of goods
and services subject to both special excise tax and environmental protection tax are the prices
inclusive of special
excise tax and environmental protection tax but exclusive of VAT.
2. Taxable prices of imported goods are the
prices at the border checkpoint (hereinafter referred to as import price) plus
(+) import tax (if any) plus (+) special excise tax (if any) plus (+)
environmental protection tax (if any). Regulations on taxable prices of
imported goods shall be applied to calculation of import prices.
If the goods are eligible for exemption or
reduction of import duty, the taxable price is the import price plus (+) import
tax payable after reduction or exemption.
3. Taxable prices of the goods and services
(whether bought externally or not) used as gifts, donations, or substitute for
wages are the taxable prices of the same kinds or equivalent goods and services
at the same time.
Example 22: Unit A manufactures electric fans
and exchange 50 fans with company B for steel. The selling price
(tax-exclusive) is 400,000 VND/fan. Taxable price = 50 x 400,000 VND = 20,000,000 VND.
Taxable prices of the invitations (complimentary)
to art performances, fashion shows, beauty pageants, and sports competitions
permitted by competent authorities are zero (0). The organizer of the show or
competition is responsible for the quantity of invitations and recipients
before the show or competition takes places If the organizer charges these
invitations, the organizer shall incur penalties prescribed by tax laws.
Example 23. Company X is permitted by a
competent authority to hold a beauty pageant. Apart from the tickets that are
sold, company X also sends invitations to some VIPs. The list of recipients is
printed on these invitations. When declaring VAT, taxable price of the
invitation is zero (0). If tax authority finds that company X collect money on
these invitations, company X shall incur penalties prescribed by tax laws.
4. Taxable prices of goods and services for
internal use.
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The goods circulated internally such as goods
put into storage or semi-finished products during the manufacture process
within a business establishment are not subject to VAT.
If the taxpayer manufactures their own fixed
assets serving the manufacture or trading of taxable goods and services,
invoices are not required when such assets are completed and put into use.
Input VAT on the fixed assets may be declared and deducted as prescribed.
Taxable prices of the goods and services used for manufacturing
or trading of goods and services that are not subject to VAT are the selling
prices of the same kinds or equivalent goods and services at the same time.
Example 24: Unit A manufactures electric fans and install 50 fans in the its own workshops. The selling
price (VAT-exclusive) is 1,000,000 VND/fan. VAT rate is 10%.
Taxable price = 1,000,000 VND x 50 =
50,000,000 VND.
Unit A shall issue an internal invoice
specifying 50,000,000 VND in taxable price and 5,000,000 VND in VAT. Unit A may
deduct tax in this invoice.
Example 25. Company Y manufactures bottled
water. The VAT-exclusive price of a bottle on the market is 4,000 VND. When
company Y uses 300 bottles in a trip of the company, VAT on these 300 bottles,
which do not serve the manufacture or trading, shall be levied: 4,000 x 300 =
1,200,000 (VND).
Example 26: Apparel company B has a threading
workshop and a sewing workshop. When company B sends thread from the threading
workshop to the sewing workshop to continue the process, VAT shall not be
levied on such thread.
Example 27. Company AP purchases raw materials
to manufacture animal feeds, and has deducted input VAT on the purchased raw
materials. Part of the animal feeds manufactured is sold to the market, and the
rest is used for internal animal breeding in the company. Company AP must issue
a VAT invoice and pay VAT on the animal feeds used for animal breeding. VAT on
the animal feeds used for animal breeding must not be deducted.
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If a taxpayer uses goods/services for their
business such as transport, aviation, rail transport, or post and
telecommunications without calculating output VAT, the taxpayer must specify in
writing the cases and the limits on the amount of goods and services used
internally.
5. Taxable prices of goods
and services used for sales promotion in accordance with trade laws are zero
(0). In case they are not conformable with trade laws, tax shall be declared
and paid as if they are used internally, given, or donated.
Some forms of sales
promotion:
a) If goods or services are provided free of
charge as samples or gifts, taxable prices are zero (0).
Example 29: Company P is a manufacturer of
carbonated drinks. In 2014, company P does a sales promotion in the form of
“buy 10 get 01 free" in May and December. The sales promotion in May 2014
is conformable with trade laws, thus taxable price of every product given free
of charge in May 2014 is zero (0).
The sales promotion in December 2014 is not
conformable with trade laws, thus company P must declare and pay VAT on the
products given free of charge in December 2014.
b) If goods or services are provided at reduced
prices, the taxable prices are the reduced prices during the sales promotion
that has been registered or notified.
Example 30: N is a telecommunications company
that sells prepaid cards. Company N registers a sale promotion in the form of
price reduction from April 01, 2014 to the end of April 20, 2014, during which
a prepaid card is sold for 90,000 VND is stead of 100,000 VND.
The taxable price of a prepaid card during the
sales promotion = 90,000 VND : (1+10%)
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6. Taxable prices of asset rental such as housing,
offices, workshops, warehouses, yards, vehicles, machinery, equipment are the
VAT-exclusive rents.
If the rent is paid by instalments or prepaid
for a period of time, the taxable price is the instalment or the prepaid amount
exclusive of VAT.
The rent agreed by both parties is the rent
written in the contract. If a rent bracket is prescribed by law, the rent must
be charged within that bracket.
7. If a commodity is paid for by instalments, the
taxable price is the original price exclusive of VAT and interest.
Example 31: Company X sells allows its customer
to pay for a motorbike by instalments. The total price is 25.5 million VND,
including 25 million VND in selling price and 0.5 million VND in interest, thus
taxable price is 25 million VND.
8. Taxable prices for goods processing are the
prices under the processing contracts exclusive of VAT, inclusive of wages,
costs of fuel, machinery, raw materials, and other expenses serving the
processing.
9. Taxable prices of construction and installation
are the VAT-exclusive values of the completed constructions or works.
a) If the price is inclusive of building
materials, the taxable price is the VAT-exclusive price inclusive of building
materials.
Example 32: Company B is contracted to complete
a construction. The VAT-exclusive payment 1,500 million VND including 1,000
million VND in the value of building materials, then taxable price is 1,500 million VND.
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Example 33: Company B is contracted to complete a
construction.
The total value of the construction is 1,500 million VND (VAT-exclusive); the
value of building materials provided by investor A is 1,000 million VND, then
taxable price is 1,500
million VND
- 1,000 million VND = 500 million VND.
c) Taxable prices of completed and transferred
works are their VAT-exclusive value.
Example 34: Company X (party A) hires company Y
(party B) to build a new workshop.
The total value (VAT-exclusive) of the
construction is 200 billion VND, including:
- Construction value: 80 billion VND
- Value of equipment provided by party B: 120 billion VND
- 10% VAT: (80 billion VND + 120 billion VND) x
10% = 20 billion VND
- Total amount payable: 220 billion VND
- Party A shall:
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+ 20 billion VND in VAT may be deducted from
output VAT on sold products or refunded.
If party A agrees to pay 80 billion VND to party
B for the completed and transferred works, the taxable prices is 80 billion
VND.
10. When transferring real estate, taxable
price is the transferring price minus (-) deductible land value.
a) Deductible land value is calculated as
follows:
a.1) If land is allocated by the state to build
houses for sale, the deductible land value include land levy and compensation
for land clearance as prescribed by law.
Example 35: In 2014, real estate company A is
allocated with land by the state to build houses for sale. Land levy is 30
billion VND (before deducting compensation for land clearance and land levy
reduction) Land levy is reduced by 20%. Compensation for land clearance is 15
billion VND.
Total deductible land value:
- 20% reduction in land levy: 30 billion VND x 20%
= 6 billion VND;
- Land levy payable after reduction: 30 billion
VND - 6 billion VND - 15 billion VND = 9 billion VND;
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a.2) When land tenure is put up for auction, the
deductible land value is the successful bid.
a.3) If land is leased to
invest in infrastructure for lease or to build houses for sale, the deductible
land value is the land rent payable to government budget (exclusive of land
rent reduction) and compensation for land clearance as prescribed by law. The
Law on Land 2013 shall apply to the pieces of land leased to build houses for
sale from July 01, 2014.
Example 36. VN-KR is a
joint-stock company specialized in infrastructure for industry and services.
VN-KR leases land from the state and pays a lump sum of land rent to build
infrastructure of an industrial park; the lease period is 50 years. The land
area is 300,000 m2, the rent is 82,000/m2.
Accordingly, the total land rent is 24.6 billion VND. VN-KR is not granted land
rent reduction or exemption. After infrastructure is finished, VN-KR leases out
16,500
m2 to an investor with a lease period of 30 years; the rent is 650,000 VND/m2,
inclusive of VAT.
Accordingly, the
VAT-inclusive rent for the infrastructure for 30 years:
16,500 VND m2 x [650,000 VND– (82,000 VND/m2 :
50 years x 30 years)] = 9,9132 billion VND.
VAT-exclusive rent = 9.9132 billion VND : (1
+ 10%) = 9.012 billion VND.
VAT = 9.012 billion VND x
10% = 0.9012 billion VND.
a.4) When a taxpayer receives
land tenure from another entity, deductible land value is the land price when
the transfer is made, inclusive of the value of infrastructure (if any); the
taxpayer must not deduct input VAT on infrastructure value that has been
included in the deductible land value.
If the deductible land
value is exclusive of infrastructure value, the taxpayer may deduct input VAT
on the infrastructure.
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Example 37: In August
2013, company A buys 200 m2 of land from Mr. B in Binh An
Residential Area in province X for 6 billion VND. Company A sign a land
transfer contract, which is notarized in accordance with land laws, and has a
receipt for the payment of 6 billion VND. Company does not build any thing on this
piece of land. In October 2014, company A sells this piece of land for 9
billion VND. Company A must issue a VAT invoice and pay VAT. The land value
deducted from the taxable price is 6 billion VND.
Example 38: In November
2013, company A buys 300 m2 of land and infrastructure thereon from
Mr. B for 10 billion VND without sufficient documents to determine the land
price at that time. In April 2014, company A sells this piece of land together
with the infrastructure thereon for 14 billion VND. Accordingly, the deductible
land value is the land price imposed by the People’s Committee of the province
when company A buys the piece of land (November 2013).
Example 39:
In September 2013, company B buys 2,000 m2
of land together with infrastructure thereon from real estate company A for
totally 62 billion VND (including 40 billion VND in VAT-exclusive land price,
meaning the unit price is 20 million VND/m2).
The invoice issued by company A indicates:
- VAT-exclusive selling price: 60 billion VND
- VAT-exclusive land price = 40 billion VND
- VAT on infrastructure: 2 billion VND
- Total amount payable: 62 billion VND
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VAT payable = output VAT - deductible input VAT
Assuming deductible input VAT is 1.5 billion
VND, then VAT payable = 2 billion VND - 1.5 billion VND = 0.5 billion VND.
Company B keeps developing the infrastructure
and 10 villas (200 m2/villa) for sale. Total input VAT on the villas
is 3 billion VND.
On April 01, 2015, company B signs a contract to
sell one villa to customer C for 10 billion VND. Deductible land value of the
villa is calculated as follows:
- Land value (exclusive of infrastructure value)
when the villa is sold by company A: 20 million VND x 200 m2 = 4
billion VND.
- Infrastructure value of a villa:
(20 billion VND : 2000 m2) x
200 m2 = 2 billion VND
- Deductible land value of the villa (including
infrastructure value) when it is sold by company A: 6 billion VND.
The invoice issued by company B indicates:
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- Deductible land value: 6 billion VND
- VAT = [(10 billion VND - 6 billion VND) x 10% =
0.4 billion VND.
- Total amount payable: 10.4 billion VND
Assuming that company B sells out all 10 villas
in the month. VAT payable by company B = output VAT - deductible input VAT = 0.4 billion VND x 10
villas - 3 billion VND = 1 billion VND.
2 billion VND in VAT on infrastructure written
on the invoice when company A sells these 10 villas shall not be deducted.
If company B does not include
infrastructure value in the land value, which is 4 billion VND, the invoice shall be
made as follows:
- Selling price of a villa: 10 billion
VND
- Deductible land value: 4 billion VND
- VAT = (10 billion VND - 4 billion VND)
x 10% = 0.6 billion VND.
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Assuming that company B sells out all 10
villas in the
April 2015. VAT payable by company B = output VAT - deductible input VAT (including the input VAT
on the construction of the villas and input VAT on the infrastructure) = 0.6 billion VND x 10 villas
- 3 billion VND - 2 billion VND (input VAT on infrastructure) = 1 billion VND.
a.5) If real estate under a
build-transfer (BT) contract is paid with land tenure, the deductible land
value is the land price when the BT contract is signed. If the land price is
unknown when the BT contract is signed, the deductible land value is the
payment for the whole construction decided by the People’s Committee of the
province.
Example 40: Joint-stock
company P signs a BT contract with the People’s Committee of province A to
build a bridge in exchange for land tenure. The amount payable by the People’s
Committee is 2,000 billion VND, and company P will be allocated with 500
hectares of land in district Y of the same province. When company P uses this
land to build houses for sale, the deductible land value is 2,000 billion VND.
a.6) When a real estate
company buys the right to use a piece of agricultural land from an individual
seller under a contract, then a competent authority permits the conversion of
that piece of land into residential land where houses or apartment buildings
are built for sale, the deductible land value is the price of the piece of land
paid to the seller and other expenses, including: land levy paid to government
budget for land conversion, personal income tax paid on behalf of the seller
(if agreed by both parties).
a.7) When a multistory
apartment building is built for sale, deductible land value of every m2
of housing equals (=) the deductible land value mentioned in Points a.1 to a.6
divided by (:) the area (m2) of floor area, exclusive of shared
areas such as corridors, stairways, basement, and underground constructions.
b) When infrastructural works or houses are
built for sale or for lease, taxable price equals (=) the amount of money collected
during the progress of the project minus (-) the deductible land value, which
is proportional to the ratio of collected money to the total value contract.
11. The VAT-exclusive remunerations or commissions
for running an agent or brokering the sale of goods/services, export and import
entrustment are taxable prices.
12. Taxable prices of the goods and services using
special receipts on which the selling prices are VAT-inclusive, such as stamps,
bus tickets, lottery tickets, etc.:
VAT-exclusive price =
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1 + tax rate (%)
13. Taxable prices of electricity generated by
hydroelectric power plants affiliated to Vietnam Electricity (EVN), including
electricity generated by the hydroelectric power plants affiliated to the
electricity general companies affiliated to EVN, are 60% of the average selling
price of commercial electricity in the previous year, exclusive of VAT. If the
average selling price of commercial electricity in the previous year is
unknown, the price provisionally imposed by EVN shall apply, provided such
price is not lower than the average selling price of commercial electricity in
the year preceding the previous year. When the average selling price of
commercial electricity in the previous year is found, an adjustment shall be
included in the declaration of the month in which the price is found. The
average selling price of commercial electricity in the previous year must be
found by March 31 of the next year.
14. Taxable prices of casino services and other
prize games are the amount of money collected from such services (inclusive of
VAT) minus special excise tax.
Taxable price is calculated as follows:
Taxable price =
Collected amount
1 + tax rate
Example 41: In a tax period, a casino presents
the following figures:
- Total amount collected from players at the
exchange counter: 43 billion VND.
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Actual revenue: 43 billion VND - 10 billion VND
= 33 billion VND
The revenue of 33 billion VND is inclusive of
VAT and special excise tax.
Taxable price is calculated as follows:
Taxable price =
33 billion VND
= 30 billion VND
1 + 10%
15. Taxable prices of transport and material
handling services are the VAT-exclusive charges, whether the materials are
handled by the taxpayer itself or by another service provider.
16. The price of an all-inclusive package of travel
services (inclusive of meals, accommodation, and travel) is considered
VAT-inclusive.
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Taxable price =
Price of the package
1 + tax rate
If the price is inclusive of the costs of return
flights, meals, accommodation, and other expenses overseas (if valid receipts
are presented), such costs may be deducted from the taxable price. Input VAT on
the goods and services serving the all-inclusive tour shall be deducted in
full.
Example 42: Tourism company H signs a contract
to provide an all-inclusive package tour in Vietnam for 50 Thai tourists for 05
days. The total payment for the tour is 32,000 USD. Company H must pay for the air
tickets, meals, accommodation, and sightseeing under the contract. The payment
for return air tickets is 10,000 USD (1 USD = 20,000 VND).
The taxable price is calculated as
follows:
+ Taxable revenue:
( 32,000 USD - 10,000 USD) x 20,000
VND = 440,000,000 VND
+ Taxable price:
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= 400,000,000 VND
1 + 10%
Company H may deduct the input VAT on the goods and
services serving the tour.
Example 43: Tourism company N signs a contract
to provide an all-inclusive tour in China for Vietnamese tourists for 05 days.
The price is 400 USD/tourist. Company N must pay 300 USD/person to tourism
company C in China. Accordingly, the taxable price is: 400 - 300 = 100
(USD/person).
17. The collectible from pawnbroking services,
including the interest and other revenues from the sale of pawned articles, is
VAT-inclusive.
Taxable price is calculated as follows:
Taxable price =
Collectible
1 + tax rate
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Taxable price is calculated as follows:
110 million VND
= 100 million VND
1 + 10%
18. The prices on the covers of the books subject to
VAT according to the Law on Publishing are VAT-inclusive prices and shall be
used to calculate VAT and revenues. If books are sold at prices other than the
prices on the cover, VAT shall be imposed on the actual selling price.
19. Taxable prices of printing is the payment for printing. If
the contractual price includes printing price and paper price, the taxable
price is also inclusive of paper price.
20. VAT-exclusive remunerations or commissions on
brokering assessment, brokering compensation examination, claiming compensation
from a third person (including the costs) earned by the insurer are taxable
prices.
21. In the case of service purchase in Clause 5
Article 3 of this Circular, taxable price is the VAT-exclusive price written in
the service contract.
22. Taxable price of the goods and services mentioned in Clauses
from 1 to 21 include the surcharges payable to the sellers.
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Taxable price is expressed as VND. If a taxpayer earns
revenue in a foreign currency, it must be converted into VND according to the
average exchange rate on inter-bank foreign exchange market announced by the
State bank during the time the revenue is earned.
Article 8. Time for
calculating VAT
1. For goods sale, VAT shall be calculated when the
ownership or the right to use goods is transferred to the buyer, whether the
payment is made or not.
2. For service provision, VAT shall be
calculated when service provision is completed or when the invoice for service
provision is made, whether the payment is made or not.
For telecommunications services, VAT shall be
calculated when comparing the data about telecommunications charge according to
the contracts between telecommunications service providers, but not later than
2 months from the month in which the charge is incurred.
3. For electricity and water supply, VAT shall be
calculated when the electricity or water consumption is recorded.
4. For real estate trading, construction of
infrastructural works, houses for sale or for lease, VAT shall be calculated
when money is collected according to the project schedule or the contract. The
taxpayer shall declare output VAT incurred in the tax period according to
collected amount.
5. For construction and installation, including
shipbuilding, VAT shall be calculated when the construction or a work is
completed and put into use, Whether the payment is made or not.
6. For imported goods, VAT shall be
calculated when the customs declaration is registered.
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1. 0% VAT is applied to exported goods and
services; construction and installation overseas and in free trade zones;
international transport; exported goods and services that are not subject to
VAT, except for the cases in Clause 3 of this Article, in which 0% VAT is not
applied.
Exported goods and services are those that are
sold to overseas organizations and individuals and are consumed outside
Vietnam, sold to the entities in free trade zones, or sold to foreign customers
as prescribed by law.
a) Exported goods include:
- The goods exported to other countries,
including those under entrustment contracts;
- The goods sold to free trade zones as
prescribed by the Prime Minister; the goods sold to duty-free shops;
- The goods that are delivered to the recipients
outside Vietnam;
- Parts and supplies for repairing, maintaining
vehicles, machinery, and equipment of foreign entities, and those that are used
outside Vietnam;
- Cases of deemed exportation:
+ Forwarded processed goods under trade laws on
international goods trade and export processing.
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+ The goods exported to be sold at overseas
fairs or exhibitions.
b) Exported services include the services directly provided
for overseas organizations and individuals and are consumed
overseas;
the services provided for the entities in free trade zones and consumed within the
free trade zones.
Overseas individuals are the foreigners that do
not reside in Vietnam, the Vietnamese people that reside overseas and are not
present in Vietnam when the services are provided. The entities in free trade
zones are the entities that have registered their business and other cases
prescribed by the Prime Minister.
If services are provided both in Vietnam and
overseas, but the service contract is signed between two taxpayers in Vietnam
or two taxpayer that have permanent establishments in Vietnam, 0% tax is only
applied to the services provided overseas, except for the case of insurance for
imported goods, in which 0% tax is applied to the whole contract value. If the
contract does not separate the services provided in Vietnam, taxable price
shall be determined according to the ratio of expense incurred in Vietnam to
the total expense.
The service provider
that is a taxpayer in Vietnam must provide documents proving that the services
are provided outside Vietnam.
Example 45: Company B signs a contract with
company C to provide some services including consultancy, survey, and design
for company C’s project of investment in Cambodia (both company B and company C
are Vietnamese companies). According to the contract, there are services that
provided in Vietnam and services provided in Cambodia. 0% tax shall apply to
the value of the services provided in Cambodia. Company B must pay VAT on the
revenue from the services provided in Vietnam.
Example 46: Company D provides some services for company X,
including consultancy, survey, and feasibility study on a project in Laos. Company
D is paid 5 billion VND for this contract, inclusive of VAT on the services
provided in Vietnam. The contract does not separate the revenue earned in
Vietnam from the revenue earned in Laos. The expense incurred in Laos (cost of
survey) is 1.5 billion VND and the expense incurred in Vietnam (cost of
summarizing and reporting) is 2.5 billion VND.
The VAT-inclusive revenue from the services
provided in Vietnam is calculated as follows:
5 billion VND x
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2.5 billion VND + 1.5
billion VND
= 3.125 billion VND
If company D presents documents proving that
company D sent employees to Laos to carry out the survey, and the documents
proving that company D purchased goods serving the survey in Laos, 0% tax shall
be applied to the revenue from the services provided in Laos, which equals
1.875 billion VND (5 billion VND - 3.125 billion VND = 1.875 billion VND).
c) International transport includes passenger
transport and freight transport along international routes from to other
countries and vice versa, or from one foreign country to another, regardless of
the availability of vehicles. If the international contract includes a domestic
segment, the segment is also considered international transport.
Example 47: Company X in Vietnam uses their
ships to transport goods from Singapore to Korea. The revenue from this
transport is considered revenue from international transport.
d) Aviation services and maritime services directly
provided to overseas organizations or via agents, including:
0% tax shall be applied to the following
aviation services: catering, takeoff and landing, aircraft parking, aircraft
security; security scanning; luggage conveyance at terminals; terrestrial
technical services; aircraft protection; aircraft towing; aircraft guiding;
passenger boarding bridges; air controlling; flight crew and passenger
transport in the airport apron; freight handling and checking; passenger
services on international flights from Vietnamese airports.
0% tax shall be applied to the following
maritime services: ship towing; pilotage; sea rescue; wharves; freight
handling; moorings; hatch control; hull cleaning; freight checking;
registration,
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- Construction or installation overseas or in free
trade zones;
- The goods and services that are not subject to
VAT when being exported, except for the cases in Clause 3 of this Article, in
which 0% tax is not applied;
- Repairs to foreign aircraft and ship vessels.
2. Condition for application of 0% tax:
a) The documents below are compulsory for exported
goods:
- A sales contract, export processing contract, or
export entrustment contract;
- Bank receipts for payment for exported goods and
other documents prescribed by law;
- A customs declaration prescribed in Clause 2
Article 16 of this Circular.
If goods are delivered to a recipient outside
Vietnam, the seller must provide documents proving the delivery of goods
outside Vietnam such as: a contract to buy goods signed with an overseas buyer,
a contract to sell goods signed with the buyer, documents proving that goods
are received outside Vietnam such as commercial invoices, bills of lading,
packaging notes, Certificates of Origin, etc.; bank receipt for the payment to
the overseas seller by the taxpayer, bank receipt for the payment to the
taxpayer by the buyer.
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b) The documents below are compulsory for exported services:
- A contract to provide services for an
organization or individual in another country or in a free trade zone;
- Bank receipts for payment for exported
services and other
documents prescribed by law;
Apart from presenting the aforesaid documents,
providers of repair services for foreign aircraft and sea vessels must follow
the procedure for importing the aircraft or vessel to Vietnam, and follow the
procedure for exporting them after they are repaired in order to be eligible
for 0% tax.
c) The documents below are compulsory for
international transport:
- A international passenger transport or freight
transport contract between the service provider and the service buyer. For
passenger transport, the contract may be substituted with tickets. Providers of
international transport services must comply with transport laws.
- Documents proving that payment is made by bank
transfer or another method considered bank transfers. Receipts for direct
payment are compulsory for passenger transport.
d) For aviation services and maritime services:
d.1) 0% tax shall be applied to the services provided
within the international airports and cargo terminals, provided the following
documents are presented:
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- Receitps for bank transfers or other
payments considered bank transfer. If services are provided for an overseas
organization or airline on an irregular, unscheduled basis without any contract, a
receipt for direct payment made by the overseas organization or airline is
compulsory.
The aforesaid documents are not compulsory for
passenger service charges.
d.2) 0% tax shall be applied to the maritime services
provided within the port area, provided the following documents are presented:
- A service contract with an overseas organization
or a shipping agent, or a written
request for services by an overseas organization or shipping agent;
- Documents proving that the overseas organization
or shipping agent makes payment to the service provider is made by bank
transfer or another method considered bank transfer.
3. 0% tax is not applied to:
- Overseas reinsurance; technology transfer,
transfer of intellectual property right to abroad; capital transfer, credit
extension, overseas securities investment; derivative financial services;
outbound postal and telecommunications services (including those provided for
the entities in free trade zones; prepaid cards sold overseas or in free trade
zones); exported natural resources that are not processed into other products;
the goods and services provided for the individuals that do not register to do
business in free trade zones, except for the cases defined by the Prime
Minister;
- Oil and gas purchased from domestic market by a
taxpayer and sold to automobiles in the free trade zone;
- The automobiles sold to the entitles in free
trade zones;
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- 0% tax is not applied to the following services
that are provided in Vietnam for overseas entities:
+ Sports competitions, art performances,
entertainments, conventions, hotel, training, advertising, traveling and
tourism;
+ Online payment services;
+ Services attached to sale, distribution,
consumption of goods in Vietnam.
Article 10. Tax rate of
5%
10% tax shall be levied on the goods and
services below:
1. Clean water serving manufacture and everyday
life, except for bottled water and other soft drinks subject to 10% tax.
2. Fertilizers; ores used for fertilizer
manufacture; pesticides and Growth stimulants for plants and animals,
including:
a) Organic and inorganic fertilizers such as
phosphate fertilizers, nitrogenous fertilizer (urea), NPK fertilizer, mixed
urea, potash; biofertilizers and other fertilizers;
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c) Pesticides those in the List of pesticides
complied by the Ministry of Agriculture and Rural Development and other
pesticides;
d) Growth stimulants for plants and animals.
3. Feeds for livestock, poultry, and other animals
according to the laws on animal feeds, including processed and unprocessed
feeds such as bran, press cakes, fish meal, bone meal, shrimp meal, and other
feeds for livestock, poultry, and other animals.
4. Dredging channels, canals, ponds, and lakes
serving agriculture; plant cultivation; preprocessing and preservation of
agricultural products (except for dredging in-field trenches mentioned in
Clause 3 Article 4 of this Circular).
Preprocessing and preservation of agricultural
products include drying, husking, threshing, cutting, grinding, putting into
cold storage, salting, and other usual means of preservation mentioned in
Clause 1 Article 4 of this Circular.
5. The farming, breeding, aquaculture products that
are unprocessed or preprocessed (defined in Clause 1 Article 4 of this
Circular), except for the cases in Clause 5 Article 5 of this Circular.
The unprocessed farming products mentioned in
this Clause include unhusked rice, husked rice, corn, potatoes, cassava, and
wheat.
6. Latex and resin that have undergone
insufficient processing; fishing nets and fibers for making fishing nets
regardless of materials.
7. Fresh foods for business, unprocessed forestry
products for business, except for wood, bamboo sprouts, and the products
enumerated in Clause 1 Article 4 of this Circular.
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Unprocessed forestry products include the
products from natural forests such as rattan, bamboo, mushrooms, roots, leaves,
flowers, herbs, resin, and other forestry products.
Example 49: Company A produces seasoned
triggerfish under the following procedure: fresh triggerfish are caught and
filleted, then seasoned with sugar, salt, solpitol, then packaged and frozen.
The seasoned triggerfish is subject to 10% VAT.
8. Sugar; by-products during the sugar
manufacture process including molasses, bagasse.
9. Products made of jute, rattan, bamboo, leaves,
straws, coconut shells, hyacinth, and other handicrafts made of recycled
materials from agriculture; preprocessed cotton; newspaper printing paper.
10. Agricultural machinery and equipment including
tractors, transplanters, seeders, threshers, harvests, combined harvester, and
pesticide sprayers.
11. Medical equipment include radiographic
equipment, equipment and instruments for surgery and treatment; ambulances;
instruments for blood pressure measurement, cardiography, blood infusion,
syringes; birth control equipment, and other medical equipment certified by the
Ministry of Health.
Cotton wool, bandages, gauze pads, and medical
tampons; medicines including finished medicines and raw materials, except for
functional foods; vaccines; bioproducts, distilled water to mix with injectable
medicines or intravenous fluids; chemicals used for testing and sterilization;
caps, clothing, facemasks, gloves, boots, medical towels, breast implants and
skin fillers (not including cosmetics).
12. Teaching aids include models, pictures, boards,
chalks, rulers, compasses, other equipment and instruments for teaching,
research, and scientific experimentation.
13. Artistic activities, exhibitions, sports; art
performances; cinematography; importing, distributing, and showing films.
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b) Art performances and art performance
organization services must be licensed by competent authorities.
c) Cinematography; importing, distributing, and
showing films
14. Children’s toys; books other than those that are
not subject to VAT mentioned in Clause 15 Article 4 of this Circular.
15. Scientific and technological services, which
mean the activities that serve or assist in scientific research and technology
development; the activities related to intellectual property; transfer of
technologies, technical regulations and standards related to measurement,
product quality, goods, nuclear and radiation safety, and atomic energy;
consultancy, training, dissemination, and application of scientific and
technological achievements to socio-economic fields under contracts for
scientific and technological services defined in the Law on Science and technology,
not including online games and Internet-based entertainments.
16. Sale, lease, and lease-option of social housing
according to the Law on Housing. Social housing means the housing invested by
the state or the organizations and individuals from various economic sectors,
which satisfy the criteria for housing in terms of selling prices, rents, and
eligible buyers according to housing laws.
Article 11. Tax rate of
10%
10% tax shall be levied on the goods and
services that are not mentioned in Article 4, Article 9 and Article 10 of this
Circular.
The rates of VAT mentioned in Article 10 and
Article 11 shall be uniformly applied to the each type of goods and services,
whether they are imported, manufactured, processed, or traded.
Example 50: 10% tax is levied on apparel. That
means the tax rate is always 10% whether such apparel is imported manufactured,
processed, or traded.
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If a taxpayer sells various goods and services
that are subject to various rates of VAT, they must be sorted by VAT rates.
Otherwise, the highest rate of VAT among which shall apply.
If the rate of VAT in the preferential import
tariff schedule is found not conformable with this Circular, this Circular
shall apply. If different rates of VAT are applied to the same kind of goods
that are imported or manufactured in Vietnam, the local tax authority and
customs authority must send a report to the Ministry of Finance for guidance.
Section 2. TAX
CALCULATION
Article 12.
Credit-invoice method
1. Credit-invoice method is applied by the
taxpayers that adhere to the accounting and invoicing practice according to
accounting and invoicing laws, including:
a) Any taxpayer that earns at least 1 billion
VND in annual revenue from selling goods and services Credit-invoice, provided the taxpayer adheres to the accounting and
invoicing practice according to accounting and invoicing laws, except for business
households and businesspeople mentioned in Article 13 of this Circular;
b) Any taxpayer that voluntarily applies credit-invoice method,
except for the business households and individuals that pay tax using direct
method mentioned in Article 13 of this Circular;
c) Any foreign entity that provides goods and
services serving petroleum exploration and extraction and authorizes a
Vietnamese party to deduct tax.
2. The annual revenue mentioned in Point a Clause 1
of this Article is the revenue from selling taxable goods and services, which
is calculated as follows:
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Example 51: Company A is established in 2011 and
still operating in 2013. To determine the tax accounting method applied in
2104, company A shall calculate its annual revenue by aggregating the revenue
from selling goods and services subject to VAT on the monthly VAT declarations
from November 2012 to the end of October 2013.
If the annual revenue calculated is 1 billion
VND or above, company A may apply credit-invoice method for 02 years (2014 and
2015).
If the annual revenue calculated is below 1 billion VND,
company A must
apply
direct
method according to Article 13 of this Circular for 02 years (2014 and
2015),
unless company A voluntarily applies credit-invoice method according to Clause
3 of this Article.
b) If the company has not operated for 12
months, the annual revenue shall be estimated by aggregating the revenue from
selling goods and services subject to VAT on the monthly VAT declarations and
dividing (:) it by the operational months, and then multiplying (x) it by 12
months. If the estimated annual revenue is 1 billion VND or above, the company may apply
credit-invoice method. If the estimated annual revenue is below 1 billion VND, the company must
apply direct method for 02 years, unless it voluntarily applies credit-invoice method.
Example 52: Company B is established and
inaugurated from March 2013. To determine the tax accounting method applied in
2014 and 2015, company B estimates its annual revenue by aggregating the
revenue from selling goods and services subject to VAT on the monthly VAT
declarations of March, April, May, June, July, August, September, October, and
November, dividing (:) it by 9 months, and then multiplying (x) it by 12
months.
If the estimated annual revenue is 1 billion VND
or above, the company may apply credit-invoice method. If the estimated annual revenue is below
1 billion VND, company B must apply direct method for 02 years, unless it voluntarily
applies credit-invoice method.
c) If the company starts declaring tax quarterly
from July 2013, the annual revenue shall be calculated by aggregating the total
revenue from selling goods and services subject to VAT on the monthly VAT
declarations of October, November, and December in 2012, the first six months
of 2013, and the VAT declaration of Q3 2013. If the annual revenue calculated
is 1 billion VND or above, the company shall apply credit-invoice method. If
the annual revenue is below 1 billion VND, the company must apply direct method
for 02 years, unless it voluntarily applies credit-invoice method.
d) If the taxpayer suspends their business for
the whole year, the annual revenue is the revenue of the year preceding the
year over which the business is suspended.
d) If the taxpayer suspends their business for a certain period of time
in the year, the revenue earned during the operational months and quarters
according to Point b of this Clause shall be considered annual revenue.
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3. The taxpayers that voluntarily apply
credit-invoice method include:
a) Any company or cooperative that earn less than billion VND in annual revenue from
selling goods and services Credit-invoice, and adheres to the accounting and invoicing practice
according to accounting and invoicing laws.
b) Any new company derived from a project of
investment of a taxpayer that pays VAT using credit-invoice method.
c) Any new company or cooperative that invest at
least 1 billion VND in fixed assets, machinery, and equipment according to the
purchase invoices, including those purchased before the creation of such
company or cooperative (not including passenger cars with fewer than 9 seats of
the taxpayers that are not transport companies, tourism companies or hotels);
foreign entities doing business in Vietnam under contracts.
d) The business organizations other than
companies and cooperatives that are able to separate input VAT from output VAT.
The companies and cooperatives mentioned in
Point a of this Clause must send notifications of the application of
credit-invoice method to their supervisory tax authorities by December 20 every
year.
The taxpayers mentioned in Point b and Point c of this Clause
must send notifications of the applied tax accounting method to their supervisory tax
authorities together
with the applications for tax registration.
The taxpayers mentioned in Point d of this Clause must send
notifications of the applied tax accounting method to their
supervisory tax authorities by December 20 of the year preceding the year in which the
method is changed.
Within 05 working days from the day on which the
notification of the application of credit-invoice method, tax authority shall
notify the taxpayer of their approval for or disapproval of the application of
credit-invoice method.
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a) If the taxpayer engages in trading, fashioning
gold, silver and gemstones, the revenue from such activities must be separated
to directly calculate VAT on value added according to Article 13 of this
Circular.
b) The new companies and cooperatives that are
not fall into the cases in Clause 3 of this Article must apply direct method
according to Article 13 of this Circular.
At the end of the first calendar year from the
establishment, if the company or cooperative earns at least 1 billion VND
in annual revenue and adheres to the
accounting and invoicing practice according to accounting and invoicing laws, credit-invoice method
may be applied. The tax accounting method shall be changed in accordance with
tax laws.
If the company or cooperatives fails to earn at
least 1 billion VND in revenue at the end of the first calendar year, the
direct method is still applied.
Example 53: Company X is established and
inaugurated from April 2014. Company X applies direct method in the tax periods
in 2014. At the end of November 2014, company X estimates its annual revenue in the year
by aggregating the revenue on the VAT declarations from April to November,
dividing it by 8 months, and then multiplying it by 12 months.
If the estimated revenue is 1 billion VND or
above, company X shall switch over to credit-invoice method from January 01,
2015 and throughout 2015 and 2016. If the estimated revenue is below 1 billion
VND, company X must keep applying direct method throughout 2015 and 2016. The
tax accounting method applied by company X in 2017 and 2018 depends on its
performance in 2016.
5. VAT payable:
VAT payable
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-
Deductible output VAT
Where:
a) Output VAT equals the total VAT on sold goods
and services written on the VAT invoices.
The VAT written on a VAT invoice equals (=)
taxable prices of goods and services multiplied by (x) corresponding tax rates.
If the selling price is VAT-inclusive, output
VAT equals (=) selling price minus (-) taxable price according to Clause 12
Article 7 of this Circular.
The taxpayer that is eligible to use credit-invoice
method must calculate and pay VAT on goods and services when they are sold.
When issuing a sale invoice, the taxpayer must clearly write the VAT-exclusive
prices, VAT, and total amount payable by the buyer. If the invoice only has the
selling price (where special invoices are allowed) without specifying the
VAT-exclusive price and VAT, the VAT shall be levied on the selling price.
Example 54: A company sells F6 steels at
VAT-exclusive price 11,000,000 VND/tonne; 10% VAT = 1,100,000 VND/tonne. However, the
selling price written on some invoices is 12,100,000 VND/tonne. In this case,
VAT will be 1,210,000 VND/tonne (12,100,000 VND/tonne x 10%) instead of
1,100,000 VND/tonne.
Taxpayers must adhere to accounting and
invoicing practice in accordance with the laws on accounting and invoicing. In
case the tax authority finds an incorrect VAT rate on an invoice for the sale
of goods and services:
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b) Input VAT equals (=) total VAT on invoice VAT
for purchase of goods and services (including fixed assets) serving the
manufacture or sale of taxable goods and services, VAT on receipts for payment
of tax on imported goods or payment of VAT on behalf of a foreign organization,
which does not have a legal status in Vietnam, or a foreigner doing business in
Vietnam or earning income in Vietnam.
If special receipts, on which selling prices are
VAT-inclusive, are permitted, the taxpayer may calculate VAT-exclusive prices
and input VAT according to the VAT-inclusive prices and the instructions in
Clause 12 Article 7 of this Circular.
Deductible input VAT shall be calculated in
accordance with Article 14, Article 15, Article 16, and Article 17 of this
Circular.
Example 55: In a tax period, company A pays 110
million VND inclusive of VAT for deductible input services that are subject to
10% tax (special receipts bearing VAT-inclusive prices are used for the
services), then deductible input VAT is calculated as follows:
110 million
VND
x 10% = 10 million VND
1 + 10%
VAT-exclusive price is 100 million VND; VAT is 10
million VND.
In case the tax authority finds an incorrect VAT rate on an
invoice issued
by the goods buyer:
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In case the tax authority finds an incorrect VAT rate on an
invoice issued
by the goods seller:
If VAT has been paid by the seller when goods
are imported, and the VAT rate on the VAT invoice issued to consumer is equal
to the VAT rate declared when goods are imported and when goods are sold, but
this rate is lower than that prescribed by VAT laws and the taxpayer is not
able to collect additional payment from the consumer, then the payment
collected from the consumer under the VAT invoice is considered inclusive of
VAT at the rate prescribed by VAT laws, which is used to calculate VAT payable
and revenue subject to corporate income tax.
Example 56: In March 2014, taxpayer A, who is
eligible to apply credit-invoice method), imports products named “CHAIR MM”,
and has paid 5% VAT during importation. In May 2014, taxpayer A sells 01 “CHAIR
MM” to buyer B for 100 million VND exclusive of VAT. Because 5% VAT has been paid
during importation, the VAT invoice issued by taxpayer A to buyer B indicates
100 million VND in taxable price, 5% VAT, 5 million VND in VAT, and 105 million
VND in total amount. This amount has been paid off by buyer B.
In 2015, tax authority finds that the VAT rate
applied by taxpayer A is incorrect (the correct rate is 10%). Because the
transaction between taxpayer A and buyer B has finished, company A cannot
collect any additional payment from buyer B (buyer B refuses to pay any
additional tax). The VAT payable by taxpayer A and the taxable revenue are
determined by the tax authority as follows:
The total payment made by buyer B, which is 105
million VND, is considered inclusive of 10% VAT. The correct VAT payable is:
105 million
VND
x 10% = 9.545 million VND
1 + 10%
Additional VAT payable by taxpayer A:
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Taxable revenue from selling the “CHAIR MM” to
buyer B:
105 million VND - 9.545 million VND = 95.455 million VND.
Article 13. Direct
method
1. The direct method is applied to trading,
fashioning of gold, silver, and gemstones, according to which VAT equals (=)
value added multiplied by (x) 10%.
Value added of gold, silver, and gemstones
equals (=) their selling price minus (-) their cost price.
Selling prices of gold, silver, or gemstones are
the actual selling prices written on the sale invoices, inclusive of fashioning
price, VAT, and other surcharges to which the seller is entitled.
Cost prices of gold, silver, or gemstones are their VAT-inclusive
values when they are purchased or imported for trading or fashioning.
If the value added of gold, silver, and
gemstones in the tax period is negative (< 0), it may be offset against the
positive value added (> 0). In case there is no positive value added or the
positive value added is not sufficient to cancel out the negative value added,
the negative value added shall be transferred to the next tax period of the
year. At the end of the calendar year, any negative value added that remains
must not be transferred to the next year.
2. Cases in which VAT is calculated by
directly multiplying a rate (%) by the revenue (hereinafter referred to as
direct VAT):
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- The operational companies and cooperatives that
earn less than 1 billion VND in annual revenues, except for those that
voluntarily apply credit-invoice method prescribed in Clause 3 Article 12 of
this Circular;
- The new companies and cooperatives, except for
those that voluntarily apply credit-invoice method prescribed in Clause 3
Article 12 of this Circular;
- Business households and businesspeople;
- The foreign entities doing business in Vietnam
without following the Law on Investment; the organizations that fail to adhere
to accounting and invoicing practice, except for those that provide goods and
services serving petroleum exploration and extraction.
- The business organizations other than companies
and cooperatives, except for those that voluntarily apply credit-invoice
method.
b) Direct VAT rates applied to various business
lines:
- From goods distribution or goods supply: 1%;
- From services or construction exclusive of
building materials: 5%;
- Manufacturing, transport, services associated
with goods, construction inclusive of building materials: 3%;
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c) The taxable revenue is the total revenue from
selling goods and services, which is written on the sale invoice for taxable
goods and services, inclusive of the surcharges to which the seller is
entitled.
The rates above are not applied to the revenue
from selling the goods and services that are not subject to VAT and revenue
from exported goods and services.
Example 57: Company A is a company that declares
and pays VAT using direct method. Company A earns revenue from selling computer
software and consultancy on company establishment. Company A shall not pay
direct VAT from selling computer software, which is not subject to VAT), and
must pay direct VAT at 5% of the revenue from consultancy on company establishment.
If the taxpayer engages in various lines of
business to which different rates are applied, they must be sorted by VAT rate.
Otherwise, the highest rate among which shall apply.
3. The direct VAT payable by a business household
or businessperson that pays VAT at a flat rate depends on the declaration made
by the taxpayer, the data of the tax authority, the result of the investigation
into the taxpayer’s actual revenue, and opinions of the local Tax Advisory
Council.
If the taxpayer that pays tax at a flat rate
engages in multiple lines of business, the rate on the primary business line
shall be applied.
4. The list of direct VAT rates mentioned in Clause
2 and Clause 3 is enclosed herewith.
Chapter III
TAX DEDUCTION AND TAX REFUND
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Article 14. Rules for
deducting input VAT
1. Input VAT on goods and services serving
the manufacture or sale of goods/services subject to VAT shall be deducted in
full, including non-refundable input VAT on damaged goods.
Non-refundable input VAT on damage goods may be
deducted in an event of natural disaster, blaze, damage that is not covered by
insurance, degraded or expired goods that must be destroyed. The taxpayer must
present sufficient documents to prove the damage not covered by insurance.
If goods diminish naturally during transport or
pumping (such as oil, gasoline, etc.), input VAT on the lost amount of goods
within the tolerance may be deducted. Input VAT on the lost amount beyond the
tolerance must not be deducted
Input VAT on goods and services forming fixed
assets such as canteen, recreation room, locker room, parking lot, restroom,
water tank serving workers at the workplace, housing and medical facility for
workers in industrial parks shall be deducted in full.
VAT on the rents for the houses for workers in
the industrial park paid by the taxpayer may be deducted if the houses are
conformable with laws on houses for workers in industrial parks in terms of
design standards and rents. If the taxpayer builds or purchases houses outside
the industrial parks serving workers in the industrial park, VAT on these
housed may be deducted in full if they are conformable with the design
standards applied to houses for workers in industrial parks.
When a taxpayer pays foreign experts for their
works in Vietnam or holding managerial positions in Vietnam under labor
contracts signed, the rent for houses for such foreign experts must not be
deducted.
If the foreign experts are still employees of an
overseas company, receive wages and benefits from the overseas company over the
period of work in Vietnam, and the overseas company and the taxpayer in Vietnam
is signs a contract specifying that the taxpayer in Vietnam must cover the
costs of accommodation for the foreign experts while they are working in Vietnam,
then the VAT on the accommodation costs paid by the taxpayer shall be deducted.
2. When goods and
services (including
fixed assets) are purchased to serve the manufacture or sale of both the goods/services that are subject to VAT and goods/services that
are not subject to VAT, only VAT on the goods and services serving the manufacture or
sale of the
goods/services
subject to VAT shall be deducted. The taxpayer must separate the deductible
input VAT from non-deductible one. Otherwise, input VAT shall be deducted
according to the ratio of taxable revenue to the total revenue from selling
goods and services.
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3. In the following cases, input VAT on fixed
assets, machinery, equipment, including input VAT on the lease on such fixed
assets, machinery, equipment, and input VAT on related services such as
warranty or repairs shall be aggregated with cost prices of fixed assets or
deductible expenses (according to the Law on Corporate income tax and its
guiding documents) instead of being deducted: fixed assets serving the
manufacture of weapons and vehicles serving national defense and security;
fixed assets, machinery and equipment of credit institutions, reinsurers, life
insurers, securities companies, medical facilities, training institutions,
commercial aircraft, and cruisers that are not used for cargo transport,
passenger transport, tourism or hotel services.
If the value of a fixed asset that is a car
smaller than 9-seater cars (except for those that are used for cargo transport,
passenger transport, tourism or hotel services) exceeds 1.6 billion VND
(VAT-exclusive), the VAT on the proportion beyond 1.6 billion VND must not be
deducted.
4. Some cases of VAT deduction:
a) If the taxpayer has a closed production line
where the products not subject to VAT are used for producing goods subject to
VAT, input VAT shall be deducted in full.
Example 58: Company X invests in raw materials
and a factory to fillet fish and produce frozen shrimps. Company X has a closed
production line, including the breeding line, ponds, fences, irrigation system,
boats, and other raw materials such as feeds, veterinary medicines, and the
processing line. Company X may deduct input VAT on fixed assets and purchases
that are not fixed assets during the manufacture and processing.
Example 59: Company Y invest in raw materials and a factory
to produce
dairy (sterilized milk, yogurt, cheese, etc.) Company Y has a closed production
line, including the breeding line, farms, stables, fences, milking devices,
sanitation system, raw materials such as feeds and veterinary medicine, and the
processing line. Company Y may deduct input VAT on fixed assets and purchases that are not
fixed assets during the manufacture and processing.
b) If the taxpayer has a project of investment
that is divided into multiple stages, has a closed production line, and uses
non-taxable products to manufacture taxable goods, but non-taxable goods and
services are provided during infrastructural development stage, the input VAT
incurred during the infrastructural development stage in fixed assets may be
deducted in full. The taxpayer must separate the VAT on the assets other than
those serving manufacture and trading of non-taxable goods and services to
deduct tax according to the ratio of taxable revenue to total revenue from
selling goods and services.
If the taxpayer makes a commitment to keep
producing taxable products, VAT may be deducted during infrastructural
development stage. If the input VAT incurred during the infrastructural
development stage has been declared, deducted, and refund, but then found to be
not eligible for deduction or refund, the taxpayer must make an adjustment and
pay tax that has been deducted or refunded. If the taxpayer fails to make the
adjustment, tax authority shall collect the tax arrears and impose penalties.
The taxpayer is totally responsible for the report and explanation for the tax
deduction and tax refund, which are submitted to tax authority.
If the taxpayer sells unprocessed or
preprocessed agricultural, forestry, and aquaculture products that are not
subject to VAT, the VAT on purchases may also be deducted according to the
ratio of revenue from selling taxable goods and services to the total revenue.
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If company X sells all of the rubber latex,
which is not subject to VAT, input tax shall not be deducted.
If company X uses part of the rubber latex for
manufacturing taxable products, and sell the rest, input VAT shall be deducted
as follows:
- Input VAT on fixed assets (rubber tree
plantation, processing factory, etc.) may be deducted in full (including VAT
incurred during infrastructural development stage).
- Input VAT on goods and services shall be
deducted according to the ratio of revenue from selling taxable goods and
services to the total revenue.
c) The taxpayers (including the new business
establishments) that provide both goods and services subject to VAT and goods
and services that are not subject to VAT may provisionally deduct input VAT
on fixed
assets incurred during infrastructural development stage according to the ratio
of revenue from selling goods and services subject to VAT to the total revenue. The provisionally
deducted VAT shall be adjusted to the ratio of revenue from selling goods and
services subject
to VAT to the total revenue over three years from the first year in which
revenue is earned.
Example 61: Z is a new company derived from a
project of investment in transport. According to the business plan, company Z is
supposed to earn revenue from public passenger transport, advertising, vehicle
maintenance and repair. The revenue from passenger transport by bus accounts
for 30% of the total revenue. The infrastructural development stage lasts for
02 years (from June 2014 to May 2016), including buying vehicles, building bus
stops and infrastructure. During this period, 70% of the input VAT on fixed
assets and purchases serving the creation of the company is provisionally
deducted and refunded (VAT on the vehicles used as public buses is not
deducted). Company Z is inaugurated and starts earning revenue from June 2016.
Three years later, at the end of May 2019, the revenue from public passenger
transport by bus makes up 35% of total revenue from goods and services. Company
Z shall reduces the deductible VAT by 5% (= 70% - 65%) and aggregate the
arrears with the VAT payable in May 2019. Company shall not incur any fine or
late payment interest.
5. Input VAT on the goods
(whether purchased externally or produced by the taxpayer) used as gifts, used
for sale promotions or advertising serving the manufacture of sale of taxable
goods may be deducted.
6. The VAT paid under a decision on tax imposition
made by a customs authority shall be deducted in full, unless penalties for tax
avoidance are imposed by the customs authority.
7. Input VAT on goods and services serving the
manufacture or sale of taxable goods and services mentioned in Article 4 of
this Circular must not be deducted, except for the following cases:
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b) Input VAT on goods and services serving
petroleum exploration shall be deducted in full until the first day of
extraction.
8. VAT shall be declared and deducted in the period
during which it is incurred, whether the products are used or still in storage.
If the taxpayer finds that the input VAT is
incorrectly declared, an adjustment may be made before the tax authority or a
competent authority announces the decision on tax inspection at the taxpayer’s
premises.
9. Input VAT that is not deductible shall be
aggregated with costs to calculate corporate income tax, or aggregated with
costs of fixed assets, except for the VAT on any purchase that costs 20 million
VND or more without receipts for non-cash payments
10. The headquarters that do not directly run the
business, the administrative units affiliated to hospitals, medical stations,
sanitariums, institutes, schools, etc. that are not taxpayers must not deduct
or claim refund of input VAT on the purchases serving their operation.
If such units sell taxable goods and services,
VAT on these goods and services shall be separately declared and paid.
Example 62: Though the headquarter of company A
does not directly run the business and is funded by its affiliates, it leases
out part of its office building. In this case, the headquarter must separately
declare and pay tax on the office lease. Input VAT on goods and services
serving the operation of the headquarter shall not be deducted or refunded.
11. Input VAT of goods and services
serving provision
of goods
and services that
are not subject to VAT mentioned in Article 5 of this Circular (except for Clause 2 and Clause 3 of
Article 5) may be deducted in full.
12. When the taxpayer authorizes another entity to
make a purchase, the invoice for which bears the name of the authorized buyer, input
VAT on such purchase may be deducted in the following cases:
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b) Before a company is established, its founders
authorizes another entity in writing to pay on their behalf some amounts
related to the establishment of the company and purchase some goods, the
company may deduct input VAT according to the invoices bearing the name of the
authorized entity. The invoices of which the value is 20 million VND or more
must be paid by bank transfer.
13. When a non-business entity contributes
assets to a limited liability company or a joint-stock company, the receipt for
this contribution is the certificate of capital contribution and the asset
transfer note. If the contributed assets are brand new, have legitimate
invoices, and are accepted by the capital transfer council, the value of this
contribution is the VAT-inclusive value written on the invoice. The recipient
of the contribution may deduct the VAT on the invoice for the purchase of such
assets from the contributor.
14. The taxpayer that switches over from direct
method to credit-invoice method may start deducting VAT on purchases from the
first tax period in which credit-invoice method is applied.
The taxpayer that switches over from
credit-invoice method to direct method may aggregate the VAT on purchases that
is not completely deducted before switching with deductible expenses when
calculating the income subject to corporate income tax, except for the
refundable VAT on the purchases that were made before switching according to
Article 18 of this Circular and the legislative documents that were effective
before this Circular comes into force.
Example 63: Company A is applying credit-invoice
method in 2014 and 2015. From January 01, 2016, company A is no longer eligible
to apply credit-invoice method. Company A sent a claim for tax refund the tax
authority from November 2014 to the end of October 2015 (when revenue is calculated
to decide the tax accounting method in 2016 and 2017). The claimed refund is
350 million VND and the input VAT that remains is 50 million VND according to
the VAT declaration of November 2015. Company A shall receive the full refund
of 350 million VND. The remaining input VAT of 50 million VND shall be
transferred to the tax period of December 2015. If input VAT on the VAT
declaration of December 2016 is not completely deducted, company A may
aggregate it with deductible expenses when calculating the income subject to
corporate income tax.
15. Input VAT must not be deducted in the
following cases:
- The VAT invoice is not legitimate, such
as VAT is not written (except for special invoices on which selling prices are
VAT-inclusive);
- The invoice does not contain or does
not contain the correct name, address or TIN of the seller, thus rendering the
seller unidentifiable;
- The name, address, or tax code of the
buyer on the invoice is incorrect (except for the case in Clause 12 of this
Article);
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- The invoice does not reflect the actual
value of goods and services.
16. Other cases prescribed by the Ministry of
Finance.
Article 15. Compulsory
documents for input VAT deduction
1. Legitimate VAT invoices for purchases or
receipts for payment of VAT on imported goods, or receipts for payment of VAT
on behalf of foreign organizations that do not have Vietnamese legal status and
the organizations and individuals, and the foreigners that do business or earn
income in Vietnam.
2. Receipts for non-cash payments for the purchases
(including imported goods) that cost 20 million VND or more inclusive of VAT,
except for the purchases that cost below 20 million VND inclusive of VAT.
Receipts for non-cash payments include bank
transfer receipts and other receipts for non-cash payments prescribed in Clause
3 and Clause 4 of this Article.
3. Bank transfer receipts are the documents proving
the transfer of money from the buyer’s account to the seller’s account (theses
accounts must be registered or notified to tax authorities)opened at providers
of payment services in legitimate forms such as checks, payment order,
collection order, banking card, credit card, SIM card (digital wallet), and
other methods of payment (even when the buyer transfer money from the buyer’s
account to the seller’s account held by an owner of a private company, or when
the buyer transfer money from the buyer’s account held by an owner of a private
company to the seller’s account if such account has been registered with the
tax authority).
a) Receipts for cash payment to the seller’s
account or the payment receipts that are not conformable with current law are
not sufficient for refund or deduction of VAT on the purchases that cost 20
million VND or more shall not be deducted or refund if the.
b) VAT on any purchase that costs 20 million VND
or more (VAT-inclusive) shall not be deducted if no bank transfer receipt is
presented. The taxpayer shall classify these invoices as non-deductible in the
list of invoices and receipts for purchases.
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Input VAT must not be deducted if bank transfer
receipts are not available when the payment is due according to the contract
(or by December 31 if the payment deadline is sooner than December 31); the
deduction of VAT on the goods without bank transfer receipts must be undone. If
bank transfer receipts are obtained after the deduction is undone, the taxpayer
may make an adjustment.
If the taxpayer does not make the reduction by
the deadline for settling deferred payment or by December 31, and is able to
present the bank transfer receipt before the tax authority or a competent
authority announces the decision to carry out an inspection at the taxpayer's
premises, the taxpayer shall face penalties for violations against tax law if
the failure to make the reduction does not lead to an understatement of tax
payable or overstatement of refundable tax. If the failure to make the
reduction leads to an understatement of tax payable or overstatement of
refundable tax, the taxpayer must pay the arrears and face penalties according
to the Law on Tax administration.
In case the taxpayer obtains the bank transfer
receipts after the tax authority announces the decision to carry out an
inspection and makes a decision to refuse the deduction of tax on the invoices
without bank transfer receipts:
- If reduction has been made before the tax
authority carries out the inspection, the taxpayer may declare additional VAT.
- If reduction is not made before the
tax authority carries out the inspection, the taxpayer may declare additional VAT.
Example 64:
In 2014, company ANB receives the following
invoices for purchased goods under a deferred payment contracts:
- VAT invoice of March 2014, which is due on September
20, 2014.
- VAT invoice of April 2014, which is
due on October
20,
2014.
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- VAT invoice of June 2014, which is
due on December
20,
2014.
Company ANB has deducted VAT when such VAT invoices
are received. If company ANB has not obtained bank transfer receipts when the
payments are due under the contracts, it may choose between making reduction in
each invoice. If company ANB fails to obtain bank transfer receipts by December
31, 2014, it must make reduction in those four invoices in the tax period of
December 2014 in accordance with tax laws.
Example 65:
In February and March 2014, company Super
received VAT invoices that are due on October 31, 2014 under a deferred payment
contract. Pursuant to the VAT invoices provided by the seller, company Super
deducted VAT on the tax declarations of February and March 2014. Company Super
fails to settle the payment when it is due (October 31, 2014) because of
financial difficulties. In October 2014, company Super reduces the amount of
deducted VAT and increases the costs accordingly.
In April 2015, tax authority makes a decision to
carry out an inspection at company Super. The inspectorate recognizes a
reduction in deductible tax, which is made by company Super, on the VAT
invoices of February and March 2014 that are due on October 31, 2014.
In March 2015, tax authority makes a decision to
collect tax arrears, which does not mention the VAT on the VAT invoices of
February and March 2014 because the reduction has been recognized by the inspectorate.
In December 2015, company Super obtains bank
transfer receipts for the VAT invoices of February and March 2014, which are
due on October 31, 2014). In this case company Super may declares additional
input VAT and reduce the corresponding costs.
Example 66:
In March and April 2014, company YKK receives VAT
invoices that
are due
on September
30, 2014. According to the
VAT invoices provided by the seller, company YKK deducted VAT on the tax declarations of
March and 2014. Company YKK fails to settle
the payment when it is due (September 30, 2014) because of fianncial difficulty. On December 31, 2014,
company YKK fails to reduce the amount of deducted VAT without bank transfer
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In May 2015, tax authority makes a decision collect tax arrears from
company YKK.
In October 2015, company YKK obtains bank
transfer receipts for the VAT invoices of March 2014, which are due in
September 2014, company YKK may declares additional VAT because bank transfer
receipts are obtained within 06 months from the day on which the tax authority
makes the decision to collect tax arrears.
In December 2015, company YKK obtains bank transfer
receipts for the VAT invoices of April 2014, which are due in September 30, 2014, company
YKK may not
declares
additional VAT because the bank transfer receipts are obtained after 06 months from the day on
which the tax authority makes the decision to collect tax arrears.
Example 67:
In September 2014, Department of Taxation
of province B issues a decision to collect 460 million VND in refunded VAT, which
was the VAT on the purchases that exceed 20 million VND that was deducted,
because no bank transfer receipts for corresponding invoices are presented by
the payment deadline according to the contract. Company PNG has paid this 46
million VND in full.
In October 2014, company PNG obtains bank
transfer receipts for the 460 million VND that has been recollected by tax
authority, then it may makes an adjustment in October 2014.
4. Other cases in which non-cash payments are used
for deducting input VAT:
a) If goods and services are purchased by
offsetting their value against the value of sold goods and services, or by
lending goods under contracts, a certification of this kind of transaction and
data comparison record made by both parties is compulsory. If the payment is
offset against third party’s debt, a debt offsetting record made by all three
parties is compulsory.
b) If the contract allows goods and services to
be purchased on credit in the forms of loans or debt offsetting via a third
party, it is required to have the loan contract and the receipts for transfer
of money from the creditor’s account to the debtor’s account, even when the
value of purchased goods and services is offset against the amount paid by the
buyer on behalf of the seller or the amount provided for the buyer by the
seller.
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After the payment is made this way, if the
remaining value that is paid in cash is 20 million VND or more, tax shall only
be deducted if bank transfer receipts are provided. When declaring input VAT
invoices, the taxpayer must specify the method of payment stipulated in the
contract on the list of invoices and receipts for purchases.
d) Payment for purchases is wired to a third
party’s account at a State Treasury, which is opened to enforce money
collection, input VAT may be deducted.
Example 68:
Company A buys goods of company B and still owes
money to company B. However, company B still owes tax to government budget.
According to the Law on Tax administration, when the tax authority collects
company B’s money and assets that is held by company A to enforce tax decision,
the money transferred by company A to the account at the State Treasury is
considered bank transfer, and the corresponding VAT on purchased goods may be
deducted.
Example 69:
Company C signs a business contract to provide
goods with company D, and company D still owes company C for the goods.
A competent authority decides to collect the
money owed to company C by company D and transfer it to an account at a State
Treasury to resolve disputes over sales contracts between company C and its
partners.
When company D transfers money the account at
the State Treasury (this transfer is not stipulated in the contract between
company C and company D), the transfer is also considered bank transfer and the
corresponding VAT on purchased goods may be deducted.
5. When the total value of multiple purchases, each
of which costs below 20 million VND, that are made in the same day is 20
million VND or more, tax shall only be deducted if bank transfer receipts are
presented. The supplier is a taxpayer that has TIN and pay VAT directly.
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VAT on exported goods and services (except for
the cases in Article 17 of this Circular) shall only be deducted and refunded when
the documents mentioned in Clause 2 Article 9 and Clause 1 Article 15 of this
Circular are presented. In particular:
1. The contract to sell, process goods, or provide
services for a foreign entity. If the exported is entrusted, the compulsory
documents are the entrustment contract and the note of entrustment contract
finalization or a debt comparison note between the entrusting party and the
entrusted party, specifying the quantity, categories, value of exported goods,
the export contract number; the date and amount of money on the bank transfer
receipt for the payment between the foreign party and the entrusted party, the
date and amount of money on the receipt for payment to the entrusting party
by the entrusted party, number and date of the customs declaration of
exported goods made by the entrusted party.
2. If customs procedure has been completed in
accordance with instructions of the Ministry of Finance: the customs
declaration.
If the taxpayer exports software programs in the
form of physical packages, the customs declaration must be made similarly to
ordinary goods in order to deduct input VAT.
The customs declaration is not needed in the
following cases:
- The software and export exported via electronic
means. The taxpayer must follow the procedure for certifying that the buyer has
received the exported services or software via electronic means in accordance
with the laws on electronic commerce.
- The construction or installation executed
overseas or in free trade zones.
- Supply of electricity, water, stationery, and
goods serving every day life of export processing company, including food and
consumables (including personal protective equipment).
3. Payment for exported goods and services must be
made by bank transfer.
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b) The cases below are also considered bank
transfer:
b.1) When the payment for exported goods and services
is offset against a debt to a foreign entity, the following documents are
compulsory:
- A loan contract (if the loan is due within 01
year); or certification of loan issued by the State bank of Vietnam (if the
loan is due after 01 year).
- Receipt of bank transfer from abroad to Vietnam.
The export contract must allow the payment to be offset against the debt to a
foreign entity.
- A certification of the debt offsetting made by
the foreign entity.
- After offsetting, the remaining amount must be
paid by bank transfer. The bank transfer receipts must be conformable with this
Point.
b.2) When the payment for exported goods
and services is offset against a debt to a foreign entity, the following
documents are
compulsory:
- Capital contribution contract.
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- If the capital contribution is smaller than the
revenue from exported goods, the difference must be paid by bank transfer in
accordance with this Point.
b.3) If the foreign party authorizes a third party,
which is a foreign entity, to makes the payment, such authorization must be
agreed in the export contract (or the contract appendix or amendment).
b.4) It is considered a bank transfer if the foreign
party requests a third party that is an organization in Vietnam to offset the
payment against a debt to the foreign party by paying the amount payable to the
exporter by bank transfer (provided the offsetting is agreed in the export
contract, contract appendix or amendment); the bank of the exporter issues a
credit note to certify the amount transferred from the third party’s account;
and the exporter presents a debt comparison certified by the foreign party and
the third party.
b.5) If the foreign party (importer) authorizes an
overseas entity (third party) to make the payment, then the third party
requests an organization in Vietnam (fourth party) to offset the debt to the
third party by paying the amount payable to the Vietnamese exporter by bank
transfer, the following documents are compulsory:
- The export contract (contract appendix or
amendment) that contains the agreement on debt offsetting.
- The credit note issued by the bank, which acts
as a payment receipt for the amount received by the Vietnamese exporter from
the fourth party’s account.
- A debt comparison certified by relevant parties
(between the exporter and importer, between the third party and the fourth
party).
b.6) If the foreign party authorizes its representative office in Vietnam to
transfer the payment to the exporter’s account, such authorization is agreed in
the export contract, contract appendix, or admendments (if any).
b.7) If the foreign party (not applied to
individuals) transfers the payment from a deposit account opened by the foreign
party at a credit institution in Vietnam, this method of payment must be agreed
in the export contract, the contract appendix or its amendment. The payment receipt is
the credit
note issued
by the exporter’s bank about the amount received from the foreign buyer’s account who
signs the contract.
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When checking the deduction and refund of tax on
exported goods that are paid for via the bank account, the tax authority must
cooperate with the credit institution where the account is opened to ensure
that the payment and transfer is made properly and in accordance with law.
b.8) In case the foreign party makes the payment by
bank transfer but the amount on the receipt does not match the amount payable
under the contract:
- If the amount on the bank transfer receipt is
smaller than the amount payable under the contract, the taxpayer must provide
explanation such as transferring fee, price reduction due to insufficient
quality or quantity (a written agreement between the buyer and the seller must
be made in this case), etc.;
- If the amount on the bank transfer
receipt is larger than the amount
payable under the contract, the taxpayer must provide explanation such as payment for multiple
contracts, advance payment, etc.
The taxpayer is responsible for the explanation
provided and the amendments (if any).
b.9) In case the foreign party makes the payment by
bank transfer but name of the bank on the bank transfer receipt does not match that
in the contract, it shall be considered legitimate if its contents indicate the
names of the payer, the recipient, the number of the export contract, the
amount payable that are consist with the concluded export contract.
b.10) The taxpayer exports goods and services to a
foreign party (second party), imports goods and services from another foreign
party or buys goods from an entity in Vietnam (third party). If the taxpayer
reaches an agreement with the second party and third party that the second
party will pay the third party by bank transfer the amount the taxpayer is
supposed to pay to the third party , this agreement must be specified in the
export contract, import contract, or sales contract (or its appendix or
amendment). The taxpayer must present the debt comparison certified by relevant
parties (between the taxpayer and the second party, between the taxpayer and
the third party).
b.11) In case the foreign party refuses the exported
goods for legitimate reasons, and the taxpayer finds another buyer in the same
country, the application for tax refund consists of every export document
related to the export contract with the initial buyer (contract, customs
declaration, invoices), a written explanation for the difference in the buyer’s
name, and every export document related to the new buyer (contract, invoices,
bank transfer receipt, and other necessary documents).
c) Other cases of payment for exported goods and
services prescribed by the government:
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c.2) When goods are exported to be sold at a fair or
exhibition overseas, and the revenue is remitted to Vietnam in foreign
currency, the taxpayer must declares the revenue in foreign currency collected
from selling goods overseas and the receipts for remittance to a bank in
Vietnam.
c.3) When goods or services are exported to repay
government debt, it is required to have a certification by Vietcombank that the
exported goods has been accepted by the foreign party as repayment, or that the
dossier has been sent to the foreign party. Payment receipts must comply with
instructions of the Ministry of Finance.
c.4) Exported goods/services shall be paid in kind
when the export is paid by offsetting the value of exported goods/services or
payment for processing against the value of goods/services purchased from the
foreign party.
In this case, the following documents are
compulsory:
- A export contract that contains the agreement on
payment in kind.
- A contract to buy goods/services from the
foreign party.
- A customs declaration of imported goods being
offset against exported goods/services.
- A certification of the value of exported
goods/services being offset against the value of imported goods/services.
- After offsetting, the difference must be paid by
bank transfer. Bank transfer receipts must comply with this Clause.
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c.6) Some cases of goods and services using other
methods of payments prescribed by relevant laws.
d) In the following cases, tax shall be deducted
and refunded without bank transfer receipts:
d.1) If the foreign party defaults on the payment,
the exporter must make a written explanation and use one of the following
documents as a substitute for the bank transfer receipt:
- A customs declaration of goods imported from
Vietnam, which have been registered with the customs authority of the importing
country (01 copy); or
- A petition sent to a court or competent
authority of the buyer’s home country enclosed with a notification or
certification of the receipt of this petition by the court or the competent
authority (01 copy); or
- A court’s ruling that the taxpayer wins the case
(01 copy); or
- Papers of foreign competent authorities
certifying or notifying that the foreign party has gone bankrupt or insolvent
(01 copy).
d.2) If exported goods must be destroyed due to their
inferior quality, the exporter must submit a written explanation and may use the
destruction record (or a paper certifying the destruction) issued by the agency
in charge of the destruction (01 copy) enclosed with a bank transfer receipt
for the destruction cost payable by the exporter, or enclosed with the paper
proving that the destruction cost is covered by the buyer or a third party (01
copy).
If the importer is follows the procedure for
goods destruction overseas, the destruction record (or a paper certifying the
destruction) shall bear the importer's name.
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- A certification by a competent authority that
the damage is incurred beyond Vietnam’s boundary (01 copy); or
- A record certifying that goods is damage in
transit beyond Vietnam’s boundary (01 copy).
If the exporter has received a compensation for
the damaged goods, a bank transfer receipt for the compensation must be
enclosed (01 copy).
Copies of the papers mentioned in Points d.1, d.2 and d.3 of this Clause must be
authenticated by the exporter. 01 notarized English translation must be
enclosed if the language of the substitute for the bank transfer receipt is not
English. The electronic documents must be printed.
The exporter is responsible for the accuracy of
the
substitutes for the wire
transfer receipt mentioned above.
4. VAT invoices or export invoices or
invoices for processing payment.
Article 17. Conditions
for deduction and refund of input VAT in some cases of deemed export
1. Compulsory documents for forwarded processed
goods defined by the laws on international trade and export processing:
a) Export processing contract and its appendices
(if any), specifying the recipient of goods in Vietnam.
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c) A forwarding note certified by the sender,
the recipient, and the customs authority that monitors the processing contract.
d) Payment for processed goods must be made by
bank transfer in accordance with Article 16 of this Circular.
The procedure for forwarding processed products
and forwarding note must comply with instructions of the General Department of
Customs.
Example 70: Company A signs a contract to
process 200,000 pairs of soles. The payment for processing is 800 million VND.
The contract specifies that soles will be sent to company B in Vietnam to
produce complete shoes.
When sending the soles to company B, company A
must specify the quantity, category, and specifications of the products. The
800 million VND in revenue from processing the soles is eligible for 0% VAT.
2. Compulsory documents for in-country exports:
a) A sales contract or a processing contract
requiring goods to be delivered to a recipient in Vietnam;
b) A customs declaration of in-country exports for
which customs procedure has been completed;
c) A VAT invoice or export invoice specifying
the foreign buyer’s name, the recipient’s name, and delivery address in Vietnam.
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dd) The in-country exports of a foreign-invested
company must be conformable with the investment license.
3. When goods and supplies are exported by a
Vietnamese company to execute a construction overseas, the Vietnamese company
must provide the following documents to deduct or receive VAT refund:
a) The customs declaration in accordance with
Clause 2 Article 16 of this Circular.
b) The exported goods must be consistent with
the manifest of exported goods serving the execution of overseas construction,
which is approved by the Director of the Vietnamese company.
c) An export entrustment contract (if the export
is entrusted).
4. When goods and supplies are sold by one Vietnamese
company to another to execute a construction overseas and are received
overseas, the Vietnamese company must provide the following documents to
deduct or receive refund of VAT on exported goods:
a) The customs declaration in accordance
with Clause 2 Article 16 of this Circular.
b) The exported goods must be consistent
with the manifest of exported goods serving the execution of overseas
construction, which is approved by the Director of the Vietnamese company.
c) A sales contract between two Vietnamese
companies specifying the delivery terms, the quantity, category and value of
goods.
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dd) Bank transfer receipts.
e) VAT invoices for the goods.
If the holder of exported goods or goods deemed
exports according to Article 16 and Article 17 of this Circular has obtained a
certification from the customs authority but does not have one of the other
documents, output VAT shall not be incurred but input VAT shall not be
deducted. If any of the compulsory documents for forwarded processed goods and in-country
exports is missing, VAT shall be paid as if they are sold domestically. If the
regulations on bank transfer are not complied with or the payments are not
considered bank transfer, the taxpayer shall not be eligible for 0% VAT, shall
not incur output VAT, but must not deduct input VAT.
Section 2. TAX REFUND
Article 18. Cases of VAT
refund
1. If input VAT is not completely deducted in the
month (if tax is declared monthly) or in the quarter (if tax is declared
quarterly), the taxpayer that pays VAT using credit-invoice method may deduct
it from the tax incurred in the next period. If input VAT is not completely
deducted after 12 months or 4 quarters from the first month or quarter input
VAT is incurred, the taxpayer shall receive a refund.
Example 71: Company A declares VAT monthly as
follows:
Unit: million VND
Tax period
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Deductible VAT in the
period
Output VAT on goods
and services sold in the period
VAT incurred in the
period
VAT payable or
transferred to the next period
(1)
(2)
(3)
(4)
(5)=(4)-(3)
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April 2014
0
350
360
10
10
May 2014
0
500
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-400
- 400
June 2014
400
300
350
50
- 350
July 2014
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250
260
10
- 340
August 2014
340
310
300
-10
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September 2014
350
300
350
50
-300
October 2014
300
250
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80
-220
November 2014
220
300
350
50
-170
December 2014
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290
350
60
-110
January 2015
110
360
350
-10
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February 2015
120
350
310
-40
-160
March 2015
160
270
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50
-110
April 2015
110
400
320
-80
-190
Accordingly, company A has not completely deduct
input VAT after 12 months (from May 2014 to April 2015) Company A shall receive
up to 190 million VND in VAT refund.
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Unit: million
VND
Tax period (1)
Remaining
input VAT transferred from previous period (2)
Deductible VAT
in the period (3)
Output VAT on
goods and services sold in the period (4)
VAT incurred
in the period (5)
(5) = (4) -
(3)
VAT payable or
transferred to the next period (6)
(6) = (5) -
(2)
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0
300
280
-20
-20
February 2014
20
320
310
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-30
March 2014
30
280
260
-20
-50
April 2014
50
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410
60
10
May 2014
0
500
100
-400
- 400
...
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400
300
350
50
- 350
July 2014
350
250
260
...
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- 340
August 2014
340
310
300
-10
- 350
September 2014
350
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350
50
-300
October 2014
300
250
330
80
-220
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220
300
350
50
-170
December 2014
170
290
350
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-110
January 2015
110
360
350
-10
-120
February 2015
120
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310
-40
-160
March 2015
160
270
320
50
-110
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110
390
320
-70
-180
Accordingly, input VAT is not completely
deducted in January 2014, February 2014, and March 2014. The remaining VAT
shall be transferred to April 2014. In April 2014, Company B incurs 10 million VND
in tax payable. VAT is not completely deducted in May 2015. Input VAT incurred
by company B is not completely After 12 months from May 2014 to April 2015,
thus company B shall receive up to 180 million VND in VAT refund.
Example 73: Company C declares VAT quarterly as follows:
Unit: million
VND
Tax period (1)
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Deductible VAT
in the period (3)
Output VAT on
goods and services sold in the period (4)
VAT incurred
in the period (5)
(5) = (4) -
(3)
VAT payable or
transferred to the next period (6)
(6) = (5) -
(2)
Q1 2014
0
70
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2
2
Q2 2014
0
100
20
-80
- 80
Q3 2014
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60
70
10
- 70
Q4 2014
70
50
52
2
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Q1 2015
68
62
60
-2
- 70
Accordingly, company C has not completely
deduct input VAT after 04 quarters from the first quarter VAT is incurred (from Q2 2014 to Q1 2015). Company C shall receive up to 70
million VND in VAT refund.
2. The new business establishment that is derived
from a registered project of investment and pays VAT using credit-invoice
method, or a petroleum exploration project has not been in operation, VAT on
goods and services used as investment shall be refunded year by year if the
investment period is 01 year (12 months) or longer.
VAT shall be refunded if the accrued VAT on
goods and services purchased as investment is 300 million VND or more.
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a) When a taxpayer using credit-invoice method
has a new project (except for housing for sale) in the same province, which has
not been in operation, the taxpayer shall declare tax on this project
separately and offset the input VAT on the project against the VAT on the
taxpayer’s current business. The maximum VAT on the project that may be offset
is equal to the VAT payable on the taxpayer’s current business in the same
current period.
If the remaining input VAT of the new project
after deduction is 300 million VND or more, it shall be refunded.
After deduction, if the remaining VAT on the project is below 300 million VND,
it shall be aggregated
with the input VAT on the project in the next period.
During the period, if input VAT on the
taxpayer’s business is not completely deducted and the taxpayer incurs input
VAT on the new project, the taxpayer shall receive a refund in accordance with
Clause 1 and Clause 3 of this Article.
Example 74: Company A has a headquarter in
Hanoi. In March 2014, company A has a new project in Hanoi which has not been
in operation. Thus, company A must declare input VAT on this project
separately. In April 2014, input VAT on the project of investment is 500
million VND; VAT on company A’s current business is 900 million VND. Company A
shall deduct 500 million VND in input VAT on the project of investment from the VAT on company
A’s current business (900 million VND). Thus, the remaining VAT payable by company A in April 2014 is 400
million VND.
Example 74: Company B has a headquarter in Hai Phong. In March 2014.
company B
has
a new project in Hai Phong, which has not been in operation. Thus, company B must declare input VAT
on this project separately. In April 2014, input VAT on the project of
investment is 500 million VND; VAT on company B’s current business is 200 million VND.
Company B shall deduct 200 million VND
in input VAT on the
project of investment from the VAT on company B’s current business (200 million VND). Accordingly, 300 million
VND in input VAT on the new project still remains in April 2014 after
deduction. Company B may claim a refund of this amount.
Example 76: Company C has a headquarter in Ho Chi Minh City. In March 2014.
company C
has
a new project in Ho Chi Minh City, which has not been in operation. Thus, company C must declare input VAT
on this project separately. In April 2014, input VAT on the project of
investment is 500 million VND; VAT on company C’s current business is 300 million VND.
Company C shall deduct 300 million VND
in input VAT on the project of investment from the VAT on company B’s current business (300
million VND). Accordingly, 200 million VND in input VAT on the new project still remains in April 2014 after deduction. In this case, this
amount of VAT shall not be refund. Instead, company C shall aggregate 200
million VND with the input VAT on the project in May 2014.
Example 77: Company D has a headquarter in Da Nang City. In March
2014. company C has a new project in Da Nang City, which has not been in operation. Thus, company D must declare input VAT
on this project separately. In April 2014, input VAT on the project is 500
million VND; 100
million VND in input VAT on the company D’s current business still remains
after deduction. Thus, in April 2014, input VAT on the project (500 million VND) may be refunded. The
input VAT on the company D’s current business that still remains
after deduction
(100
million VND)
may be refunded in accordance with Clause 1 of this Article.
b) When a taxpayer using credit-invoice method has a new project (except
for housing for sale) in another province that has not been in operation. This project has not been
inaugurated and registered. The taxpayer shall make a separate
declaration of tax on the project, and deduct input VAT on the project from the
VAT on the taxpayer’s current business. The maximum VAT on the project that may
be deducted is equal to the VAT payable on the taxpayer’s current business in
the same current period.
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After deduction, if the remaining VAT on the project is
below 300 million VND, it shall be aggregated with the input VAT on the
project in the next period.
During the period, if input VAT on the
taxpayer’s business is not completely deducted and the taxpayer incurs input
VAT on the new project, the taxpayer shall receive a refund in accordance with
Clause 1 and Clause 3 of this Article.
If the project is of national importance, the
investment policies and standards of which are decided by the National
Assembly, the taxpayer must follow instructions of the Ministry of Finance
instead of transferring to the next period.
If the taxpayer decides to establish project
management boards or branches in the other provinces to manage the projects on
behalf of the taxpayer, the project management boards or branches must submit
separate tax declarations and applications for tax refund to their local tax
authority, provided they have their own seals, keep their own records according
to accounting laws, and have open accounts at banks, have applied for tax
registration and obtained TINs. When the project, from which the new company
derives, is completed and the procedure for business registration and tax
registration is completed, the taxpayer who is the investor must aggregate the
VAT incurred, the VAT refunded and not refunded, then request the new company
to declare tax, pay tax, and claim refund with its supervisory tax authority.
The project to which VAT is refunded according
to Clause 2 and Clause 3 of this Article is a project approved by a competent
authority in accordance with investment laws. If the project is not
approved according to investment laws, it is required to have an investment
plan approved by a competent person.
Example 78: Company A has a headquarter in
Hanoi. In March 2014, company A has a new project in Hung Yen, which has not
been in operation and registered. Company A declares input VAT on this project
in Hanoi using the VAT declaration form for projects of investment. In April 2014,
input VAT on the project is 500 million VND; VAT payable on company A’s current business is
900 million VND. Company A shall deduct 500 million VND in VAT on the project from the VAT on
company A’s current business (900 million VND). Thus, the remaining VAT payable
by company A in April 2014 is 400 million VND.
Example 79: Company B has a headquarter in Hanoi. In March
2014, company B has a new project in Thai Binh, which has not been in operation and
registered. Company B declares input VAT on this project in Hai Phong using the VAT
declaration form for projects of investment. In April 2014, input VAT on the
project is 500 million VND; VAT payable on company B’s current business is
200 million VND. Company B shall deduct 200 million VND in input VAT on the project from the VAT payable on the current business
(200 million VND). Accordingly, in April 2014, 300 million VND in input
VAT on the new project still remains after deduction. Company B may claim a refund of this
amount.
Example 80: Company C has a headquarter in Ho Chi Minh City. In March 2014,
company C
has
a new project in Dong Nai, which has not been in operation and registered. Company C declares input VAT on
this project in Ho Chi Minh City using the VAT declaration form for projects of
investment. In April 2014, input VAT on the project is 500 million VND; VAT
payable on company C’s current business is 300 million VND. Company C shall deduct 300 million VND
in input VAT on the project from the VAT on the current business (300 million VND). Accordingly, in April 2014, 200 million VND
in input VAT on the new project still remains after deduction. In this case,
this amount of VAT shall not be refund. Instead, company C shall aggregate this 200 million VND with the input VAT on
the project in May 2014.
Example 81: Company D has a headquarter in Da Nang City. In March
2014, company D has a new project in Quang Nam, which has not been in operation and
registered. Company D declares input VAT on this project in Da Nang City using the
VAT declaration form for projects of investment. In April 2014, input VAT on
the project is 500 million VND; 100 million VND in VAT on the company D’s
current business still remains after deduction. Thus, in April 2014, input VAT on the
project (500 million VND) may be refunded. The input VAT on the company D’s
current business that still remains after deduction (100 million VND) may be refunded in
accordance with Clause 1 of this Article.
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In the month or quarter, the taxpayer may
receive a refund of VAT on exported goods/services if the input VAT that
remains after being offset against VAT on goods/services sold domestically is
300 million VND or above.
Refundable VAT is calculated as follows:
Input VAT that remains
after deduction in the tax period
=
Output VAT on
goods and services sold domestically
_
Total input VAT
deducted in the tax period (including input VAT incurred in the tax period
and the input VAT transferred from the previous tax period.
Input VAT on exported
goods/services
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Input VAT that
remains after
deduction in the tax period
x
Total revenue from
export in the tax period
x 100%
Total revenue
from selling
goods/services in the period (including revenue from export)
If the taxpayer purchases goods to export,
refundable input VAT on exported goods is calculated as follows:
Input VAT on
exported goods/services
=
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-
Input VAT on unsold goods in the tax period
x
Total revenue
from export in the tax period
x 100%
Total revenue
from selling goods/services in the period (including revenue from export)
If input VAT on exported goods/services that
remains after deduction is below 300 million VND, the taxpayer must transfer it
to the next tax period instead of claiming a refund. If input VAT on exported
goods/services that remains after deduction is 300 million VND or above, the
taxpayer may claim a refund.
Example 82:
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- VAT transferred from the previous period: 0.15
billion VND.
- Input VAT (on goods and services
serving export and domestic business) incurred in the month: 4.8 billion VND.
- Total revenue is 21.6 billion VND, including
13.2 billion VND in revenue from export, and 8.4 billion VND in revenue from
domestic sale.
Ratio of revenue from export to total revenue =
13.2/21.6 x 100% = 61%
- Output VAT on goods and services sold
domestically
IS 0.84 billion VND.
Refundable VAT on exported goods is calculated as
follows:
Input VAT that
remains after
deduction in the tax period
=
0.84 billion VND - (0.15 + 4.8 ) billion VND
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=
- 4.11 billion VND.
Thus, input VAT that remains in the month after deduction is 4.11 billion VND.
- Input VAT on exported goods:
Input VAT on
exported goods
=
4.11 billion VND x 61%
=
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Input VAT on exported goods that remains after
deduction is 2.507 billion VND, which is larger than 300 million VND. Thus, the
taxpayer may claim 2.507 billion VND in refund of VAT. 1.603 billion VND in
input VAT on goods and services sold domestically (4.11 billion VND - 2.507
billion VND) shall be transferred to the next period instead of being refunded.
Example 83:
In March 2014, company X declares it VAT as follows::
- VAT transferred from the previous
period: 200
million VND.
- Input VAT (on goods and services
serving export and domestic business) incurred in the month: 4.8 billion VND.
- The total revenue is 21.6 billion VND, including
13.2 billion VND in revenue from export, and 8.4 billion VND in revenue from
domestic sale.
Ratio of revenue from export to total
revenue = 13.2/21.6 x 100% = 61%
- Output VAT on goods and services sold
domestically
is 840 million VND.
- The value of unsold goods subject to VAT in
March 2014 is 10 billion VND; the corresponding input VAT deducted is 1 billion
VND (10% VAT)
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Input VAT that remains after deduction
in the month
=
840 million VND - (200 million VND + 4,800 million VND)
= - 4,160 million VND
Deductible input VAT after removing input VAT
on
unsold goods:
4,160 million VND – 1,000 million VND = 3,160 million VND
- Input VAT on exported goods:
Input VAT on exported goods
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3,160 million VND x 61%
=
1,927.6 million VND
Input VAT on exported goods that remains
after deduction is 1,927.6 million VND, which is larger than 300 million VND. Thus,
the taxpayer may claim 2.507 billion VND in refund of VAT. 2,232.4 million VND in input VAT on goods
and services sold domestically and unsold goods (4,160 million VND - 1,927.6 million VND) shall be
transferred to the next period instead of being refunded.
The recipient of refund in some cases: If the
export is entrusted, the business establishment having the goods exported under
entrustment is the recipient of refund; If processed goods is forwarded, the
business establishment that signs the export processing contract with the
foreign party is the recipient of refund; If goods are export to execute an
overseas construction, the exporter is the recipient of refund; The
establishment that has the in-country exports is the recipient of refund.
5. When a company is transferred, converted,
merged, amalgamated, divided, split, dissolved, bankrupt, or shut down, it will
receive a refund of paid VAT or input VAT remains after deduction.
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6. Refund of VAT for projects funded by
non-refundable ODA, non-refundable aid, or humanitarian aid:
a) If the project is funded by non-refundable
ODA: the project owner, main contractor, or an organization appointed by the
foreign sponsor to manage the project shall receive the refund of paid VAT on
goods and services purchased in Vietnam to serve the project.
b) When an organization in Vietnam uses
humanitarian money from a foreign entity to buy goods and services serving a
project funded by non-refundable aid or humanitarian aid in Vietnam, it shall
receive a refund of VAT on such goods and services.
Example 84: Vietnam Red Cross is given 200
million VND by an international organization to provide humanitarian aid for
the people suffering from natural disasters. Tax-exclusive value of the aid is
200 million VND, VAT is 20 million VND. Vietnam Red Cross shall receive 20 million
VND in tax refund.
VAT for programs/projects funded by non-fefundable
ODA shall
be refunded in accordance with instructions of the Ministry of Finance.
7. When a person provided with diplomatic immunity
purchases goods and services in Vietnam for personal use will receive a refund
of the VAT written on the VAT invoice or the receipt on which the amount
payable is inclusive of VAT.
8. Foreigners and Vietnamese people residing abroad
shall be refunded the tax on goods purchased in Vietnam and brought along upon
departure if they present their passports or entry documents. VAT shall be
refunded in accordance with instructions of the Ministry of Finance on
refunding VAT on goods brought along upon departure by foreigners and
Vietnamese people residing abroad
9. VAT shall be refunded when the taxpayer receives
a decision on tax refund issued by a competent authority, and in other cases of
VAT refund according to the International Agreements to which the Socialist
Republic of Vietnam is a signatory
Article 19. Conditions
and procedure for VAT refund
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2. Input VAT that has been claimed on the VAT
declaration must not be aggregated with the deductible tax of the next month.
3. VAT shall be refunded in accordance with the
procedures in the Law on Tax administration and its guiding documents.
Article 20. Places to
pay tax
1. Taxpayer shall declare and pay VAT in the locality
where the business is situated.
2. If the taxpayer that pays VAT using
credit-invoice method has a financially dependent manufacturing facility in a
province other than the province where the headquarter is situated, VAT shall
be paid in both provinces.
3. If a company or cooperative that uses direct
method has a manufacturing facility in a province other than that where the
headquarter is situated, or engages in extraprovincial sale, the company or
cooperative shall pay direct VAT on the revenue earned from extraprovincial
sale in the province where the sale is made. The company or cooperative is not
required to pay direct VAT on such revenue, which has been declared at paid, at
the headquarter
4. When a provider of telecommunications services
provides postpaid telecommunications services in a province other than the
province where their headquarter is situated, and establish a financially
dependent branch that pays VAT using credit-invoice method and also provides
postpaid telecommunications services in that same province, the provider of
telecommunications services shall declare and pay VAT on postpaid
telecommunications services as follows:
- VAT on the total revenue from provision of
postpaid telecommunications services of the provide shall be declared at the
supervisory tax authority of the headquarter.
- VAT shall be paid in the provinces where the
headquarter and the branch are situated.
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5. VAT shall be declared and paid in accordance
with the Law on Tax administration and its guiding documents.
Chapter IV
IMPLEMENTATION
Article 21. Effect
1. This Circular takes effect on January 01, 2014
and supersedes the Circular No. 06/2012/TT-BTC dated January 11, 2012 and the Circular
No. 65/2013/TT-BTC
dated May
17, 2013 of the Ministry of Finance.
2. Any taxpayer that declares VAT quarterly from
July 01, 2013 shall receive VAT refund before the tax period of January 2014
(if tax is declared monthly) or before the first quarter of 2014 (if tax is
declared quarterly) if input VAT is not completely deducted after 03
consecutive tax periods.
Example 85: Company A declares tax monthly in
May and June 2013, and starts declaring tax quarterly from Q3 2013. If input
VAT incurred in May 2013, June 2013, and Q3 2013 is not completely deducted,
company A will receive a refund of VAT at the end of Q3 2013.
Example 86: Company B declares tax monthly in June 2013 and
starts declaring tax quarterly from Q3 2013. If input VAT incurred in June
2013, and Q3 2013 and Q4 2013 is not completely deducted, company B will receive a refund
of VAT at the end of Q4 2013.
3. Before January 2014 (if tax is declared monthly)
or before Q1 2014 (if tax is declared quarterly), any taxpayer that is eligible for tax
refund according to the Circular No. 06/2012/TT-BTC dated January 11, 2012
and the Circular No. 65/2013/TT-BTC dated May 2013 of the Ministry of Finance shall
receive a VAT refund.
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Example 87: VAT incurred by company A is not completely
deducted in October, November and December 2013. Thus, company A shall receive
a VAT refund according to Clause 1 Article 18 of the Circular No. 06/2012/TT-BTC dated January 11, 2012
of the Ministry of Finance.
Example 88: Company B incurs VAT in October
2013. Input VAT is not completely deducted in only November 2013 and December
2013. At the end of December 2013, company B is not eligible for tax refund
according to the Circular No. 06/2012/TT-BTC. This remaining input VAT shall be
transferred to 2014, during which tax refund will be considered, according to
Clause 1 Article 18 of this Circular.
Article 89: Company C incurs VAT in Q3 2013. The
input VAT that is not completely deducted in Q4 2013 shall be transferred to
2014, during which tax refund will be considered, according to Clause 1 Article
18 of this Circular.
4. Every taxpayer shall deduct input VAT on fixed
assets incurred before January 01, 2014 in accordance with the Circular No. 06/2012/TT-BTC dated January 11, 2012
and the Circular No. 65/2013/TT-BTC dated May 17, 2013 of the Ministry of Finance;
the input VAT on fixed assets incurred from January 01, 2014 onwards shall be
deducted in accordance with this Circular.
5. The input VAT on unprocessed or preprocessed
farming, breeding, fishery products incurred before January 01, 2014 must be
enumerated in the manifest of purchases on the VAT declaration of December 2013
or Q4 2013.
Article 22. VAT
collection
1. Tax authorities shall organize the collection of
VAT and refund of VAT incurred by business establishments.
2. Customs authorities shall organize the collection
of VAT on
imported goods.
The difficulties that arise during the
implementation of this Circular should be reported to the Ministry of Finance
for timely settlement./.
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PP THE MINISTER
DEPUTY
MINISTER
Do
Hoang Anh Tuan
APPENDIX
RATES OF DIRECT VAT APPLIED TO VARIOUS BUSINESS LINES
(Promulgated together with the Circular No. 219/2013/TT-BTC dated December 31, 2013
of the Ministry of Finance)
1) Goods supply and distribution: 1%
- Wholesaling and retailing goods (except for
goods sold by agents that earn commissions).
2) Services, construction exclusive of building
materials: 5%
- Accommodation, hotel, motel services;
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- Leases on yards, machinery, vehicles; material
handling, and other services related to transport such as parking, ticket
selling;
- Postal services and mailing;
- Commissions for running agents, auction and
brokerage services;
- Legal counseling, audit, accounting, and
financial counseling; tax brokerage and customs brokerage;
- Data processing services, lease on
information portals, IT and telecommunications equipment;
- Office assistance services and other
business assistance services;
- Steambath, massage, karaoke, nightclub,
billards, Internet, and video game services;
- Tailoring, laundry services;
hairdressing services;
- Other repair services including:
computer repairs and domestic appliance repairs;
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- Other services;
- Construction and installation exclusive of
building materials (including installation of industrial machinery and equipment).
3) Manufacturing, transport, services
attached to goods, construction inclusive of building
materials: 3%
- Manufacturing, processing goods;
- Mineral extraction and processing;
- Cargo and passenger transport;
- Services attached to goods such as training,
maintenance, technology transfers attached to goods sale;
- Food and drink services;
- Repairs and maintenance of machinery, equipment,
means of transport, other motor vehicles;
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4) Other lines of business: 2%
- Production of products subject to 5% VAT under
credit-invoice method;
- Provision of services subject to 5% VAT under credit-invoice
method;
- Other lines of business not mentioned above.