VALUE ADDED TAX (VAT)

WHAT WE SHOULD KNOW

 Principles of VAT
 VAT exemption

 VAT rates

 Taxable price

 Method of VAT calculation

 Invoicing

 VAT refund

 Tax administration
GOVERNING LEGISLATION
 Law on Value Added Tax 13/2008/QH12 effective 1 Jan
2009
 Revised Law 31/2013/QH13 effective 1 Jan 2014

 Revised Law 71/2014/QH13 effective 1 Jan 2015 (Art 3)

 Decree 209/2013/ND-CP, guiding the VAT law

 Decree 91/2014/ND-CP, amending, effective 15 Nov 14

 Revised by Decree 12/2015/ND-CP, effective 1 Jan 2015

(Art 3)
GOVERNING LEGISLATION
 Consolidated Doc. No. 16/VBHN-BTC dated 17 Jun 15
 Circular 219/2013/TT-BTC, guiding the VAT Law and
Decrees (4 chapters, 22 articles), effective 1 Jan 2014
 Circular 119/2014/TT-BTC, amending, effective 1 Sept 14
(Art 3, Art 5)
 Cir 151/2014/TT-BTC, amending, effective 15 Nov 14 (chap
II)
 Cir 26/2015/TT-BTC (art 1), effective 1 Jan 15 (Revision for
Cir 119 and Cir 151)
 Consolidated doc. 17/VBHN-BTC 17 Jun 15
 Cir 39/2014/TT-BTC guiding on invoicing regime, effective
1 Jun 14 (Decree 51/2010/ND-CP, 04/2014/ND-CP),
amended by Cir 119/2014/TT-BTC, art 5
PRINCIPLES OF VAT
 Multi-stage indirect tax on supply chain/domestic
consumption. The tax is passed onto the final consumer.
 Transactional basis

 Collected at every stage of the production and

distribution chain
 Tax collected on behalf of Government, not revenue
TAXABLE GOODS & SERVICES
 Goods and services used for production, trading, and
consumption in Vietnam (including those purchased
from overseas organizations and individuals).

TAXPAYERS
 Organizations and individuals that produce, trade, import
taxable goods are liable to pay tax
VAT EXEMPT SUPPLIES
 Goods and services that are not subject to VAT
 Art 4 Cir 219/2013 : Unprocessed agricultural products and
agriculture breeds, Medical services, Training, Publishing,
Transfer of land use rights, Financial services, Life & health
insurance, Computer software, Imported machinery for oil &
gas exploration and for scientific research which cannot be
produced in Vietnam, Inbound postal and telecommunications
services, Goods imported for humanitarian aid, goods in
transit, etc.
 Cir 26/2015: Fertilizer, feed for livestock, poultry, seafood and
other animals, agricultural machine and equipment is VAT
exempt instead of subject to 5% Vat.
 Note: Input VAT is not creditable if purchased goods and
services used for production and trading of VAT exempt
goods and services (but deductible for CIT purposes)
OTHERS FROM CIR 26
 Borrower is not required to issue a VAT invoice for transferring
of collateralized asset to the bank for the loan settlement
 Land-use right used for capital contribution: lower of the price
of contribution agreement and the price of the land-use right
transferred.
 Cigarettes, spirits, and beer imported and subsequently
exported are VAT exempt. VAT input is not creditable.
 A single formula is applied to determine the refundable input
VAT for exported goods of both manufacturing and trading
companies.
 For enterprises undergoing dissolution, bankruptcy or
termination:
 Duringinvestment stage, no VAT output: No VAT refund
 Upon biz termination: VAT refund
VAT RATES
 0%, 5%, 10%

0% VAT (ART. 4 CIR 219)

 Applied to exported goods and services (including exempted
products and services which are exported, except for certain
cases), construction and installation of works overseas and
works of export processing enterprises (EPE)
 Conditions to be met:

 Have a sale contract, export processing contract or export

entrustment contract
 Bank receipts for payment for exported goods

 A customs declaration

 Invoice
0% VAT
 Goods exported to foreign countries
 Goods sold to EPE

 Goods processed for export

 Goods sold to duty free shops

 Services provided to EPE for use for their production or

business
 International transportation, aviation and marine services
5% (ART 10 CIR 219)
Consist mainly of essential products:
 Clean water for production and living

 Fertilizers and pesticides (tax exempt according to Cir 26/2015)

 Feeds for livestock, poultry and other animal (tax exempt

according to Cir 26/2015)
 Dredging channels, canals, ponds and lakes serving agriculture

 Unprocessed or preprocessed agricultural products in trading

 Sugar

 Agricultural machineries and equipments (tax exempt according

to Cir 26/2015)
 Medical equipments

 Teaching aids

 Children’s toy, books

 Scientific and Technological services

 etc
10% VAT
 Applied to goods and services that are not subject to 0%
and 5%
TIME FOR CALCULATING VAT (ART 8 CIR
219)
 Goods sale: when the ownership or the right to use goods
is transferred.
 Services: when services provision is completed or when the
invoice for service provision is made.
 Real estate trading, construction of infrastructural works,
houses for sale or for lease: when money is collected
according to the project’s schedule or the contract
 For construction and installation: time of takeover test and
handover of the completed work.
 Imported goods: when the customs declaration is registered

Note: Compare with Cir 39 about time for invoice

issuance
TAXABLE PRICES (ART 7 CIR 219)
 Generally, taxable price is the selling price excluding VAT
 If there is a trade discount, price for calculating of taxable price will be
discounted selling price recorded in the invoice.
 Including all additional charges
 For imported goods, taxable prices are prices at the border checkpoint +
import tax (if any) + special consumption tax (SCT) (if any) +
environmental protection tax (if any)
 Goods and services used as gifts, donations, or substitute for wages: taxable
prices of the same kinds or equivalent goods and services. Note: For gifts
and donations: VAT is applied but revenue is not taxed according to CIT law.
 Goods and services serving business (internal use) are not subject to VAT
(Cir 119/2014)
 Goods and services used for sales promotion in accordance with trade laws:
taxable price is zero (0), but VAT invoice is required and VAT line left blank.
TAXABLE PRICES
 Goods sold by installment: original prices exclusive of
VAT and interest.
 For goods or services of special nature where the price is
stated as VAT inclusive, the pre-VAT price shall be
determined by: selling price/(1+ VAT rate)
 The price of an all-inclusive package of travel services
is considered VAT inclusive. For VAT computation,
oversea costs and air ticket costs to and from overseas
are deductible
TAXABLE PRICES
 Sub-lease of machinery, equipment, transportation means
which are leased from overseas and cannot be produced in VN
=> taxable price less the lease payment to overseas
 Construction: the value of construction work completed and
handovered
 Trading of property: the transferred price less land use rights,
land rental fee and site clearance expense
 Receipt of funding => VAT not applicable but have to be
supported with collection receipt (but treated as other income
for CIT)
 Service provided both onshore and offshore and no separation
of that revenue, the VAT taxable value of each is allocated on
expenses incurred
METHOD OF VAT CALCULATION (ART 12
CIR 219)
 VAT deduction method (VAT credit method, credit
invoice method)
 VAT direct method
VAT DEDUCTION METHOD (ART 12 CIR
219)
 This method is applied by the taxpayers that adhere to
the accounting and invoicing practice and law in
Vietnam, including:
 Any taxpayer that earns at least 1 billion VND in annual
revenue from selling goods and services credit invoices
 Any taxpayer that voluntarily applies deduction method
 Any foreign entity that provides goods and services serving
petroleum exploration and extraction and authorizes a
Vietnamese party to deduct tax.
 Note: the chosen method is applied for 2 years
VAT DEDUCTION METHOD
 In general, all the enterprises are required to pay VAT
under the VAT deduction method
 VAT payable = output VAT – deductible input VAT
 Output > input: collected VAT is eventually remitted to
Government
 Input > output: incurred VAT may be claimable/creditable
 Output VAT = taxable price of goods/services * VAT rate
 Note: Where the invoice only states the total payable amount,
output VAT will be calculated on the amount stated in the
invoice or source document. Purchaser is not allowed to claim
input VAT of such invoices. (kiểm tra lại nội dung này: Nếu
lập hóa đơn sai => điều chỉnh hóa đơn, còn nếu ko claim được
từ khách hàng => giá trên hóa đơn là giá include thuế)
VAT DEDUCTION METHOD -
ALLOCATION
 Revenue basis

 VAT input for fixed asset => allocation for both taxable
and non-taxable activities

 Monthly/quarterly declaration: According to Art 15 Cir

151/2014/TT-BTC, quarterly declaration is applied to
enterprises that have previous year’s revenue equal or
less than 50 bil and new established enterprises.

 Annual re-allocation
VAT DEDUCTION METHOD – INPUT VAT
 Input VAT = the aggregate amount of VAT as recorded
in:
 The VAT invoices for the purchase of goods and services
(including fixed assets)
 The receipts for payment of tax on imported goods; and

 The receipts for payment of VAT on behalf of foreign

contractors
DEDUCTIBLE INPUT VAT (ART 14 CIR 219)
 General rule
 Incurred for business purpose
 Supported with documents
 Specifically:
 Input VAT on goods and services serving the manufacture or
sales of goods/services subject to VAT shall be deducted in
full, including non-refundable input VAT on damaged goods.
 Input VAT incurred for the production or trading of taxable
goods and services and of exempt goods and services must be
separately accounted. Otherwise, the deductable input VAT
will be calculated base on revenue basis.
DEDUCTIBLE INPUT VAT
 For fixed assets
 In the following cases, Input VAT on fixed assets, machinery,
equipments and related services shall be aggregated with cost
prices and are not deductible: fixed assets serving the
manufacture of weapons and vehicles serving national defense
and security; serving 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.
 VAT for fixed assets: canteen, mid-shift restroom, locker room,
parking lots, healthcare station, etc. fully creditable
 For cars have less than 9 seats (except for those that are used for
cargo transport, passenger transport, etc) but high value of more
than 1.6 billions VND, the VAT on the proportion beyond 1.6
billion VND must not be deductible.
DEDUCTIBLE INPUT VAT
 Housing for foreign experts:
 Foreign experts sign a labor contract, work and receive salary
from Vietnam based business. VAT on house rental for the experts
paid by Vietnam based business is non-deductible
 Foreign experts do not sign a labor contract, receive salary from
oversea business. VAT on house rental for the experts paid by
Vietnam based business is deductible
 Not limit the maximum time of VAT invoice declaration (Art
14 Cir 219)
 For goods and services with values equal to 20 million VND
or more (including VAT), input VAT is deductible if it is
supported by bank transfer payment.
 If payment in cash, what happens?
 Rules 31 Dec
DEDUCTIBLE INPUT VAT
 Deferred payment/credit purchase:
 Before 2013: only declaration of VAT input when making
payments, very complicated procedures are required.
 2014 (Cir 219/2013): Allowed for VAT input but required
adjustment with rule of 31 Dec.
 2015 (Cir 26/2015): Simplified allowed for VAT input
deductible when purchasing, payment is a must before
official tax inspection notification.
DEDUCTIBLE INPUT VAT
 Export:
 Exported goods and services which are entitled to a credit or
refund of input VAT must satisfy all of the stipulated
conditions and procedures: sales contract, invoice, customs
declaration, bank payment.
 Note: 0% supply is considered as taxable supply (generally
can claim input VAT), while exempt supply is not taxable
supply (generally cannot claim input VAT)
VAT DIRECT METHOD
 Apply to:
 Manufacturing and business individuals being
Vietnamese (From 1 Jan 16, fixed method is applied)
 Foreign contractors doing business in Vietnam and not
maintaining adequate books of account, invoices and
source documents
 Gold, silver, gemstones
 Enterprises and cooperatives that are operating with
annual turnover less than 1 billion VND, except for case
of voluntary registration for credit method
VAT DIRECT METHOD – GOLD, SILVER,
GERMSTONES (ART 13 CIR 219/2014)

 VAT payable = Added value of taxable goods/services x

10%
 Added value of taxable goods or services = Turnover of
goods/services sold – Cost of goods/services sold
VAT DIRECT METHOD – DEEMED RATE
 VAT payable = Turnover x Tax rate (deemed rate)
 Goods distribution or provision: 1%
 Services or construction exclusive of building materials):
5%
 Manufacturing, transport, services associated with
goods, construction inclusive of building materials: 3%
 Other business activities: 2%
INVOICE REGULATIONS (CIR 39/2014)
 Taxpayer must implement the regime of invoices and
receipts as stipulated by law upon sales and purchases of
goods and services
 VAT deduction method taxpayer must use VAT invoices
for local sales
 VAT direct method taxpayer must use sales invoice

 Invoice must reflect fully and correctly all the required

items
 VAT invoices must specify the name, address and VAT
code of seller and buyer, invoice number, description of
goods and services, sales price excluding VAT, any
additional charges and fees (if any), the VAT amount and
the total payment price including VAT.
INVOICE REGULATIONS
 Forms of legal invoices and receipts:
 VAT invoice: local sales, international freight, sales to custom
free zone (CFZ)
 Sales invoice (direct invoice): VAT direct method & CFZ
 Export invoice – can use commercial invoice (from 1 Sept
2014 as per Cir 119)
 Others, e.g. Insurance premium collection voucher, tickets
INVOICE REGULATIONS
 How invoice can be issued?
 Self-printed invoices which are printed by the taxpayer’s own
system
 Customized invoices which are printed by printing house
 Electronic invoices
 Invoices purchased from Tax department
INVOICE REGULATIONS
 Invoice not required to be issued by seller for sale of goods or
services that have the value of less than 200,000 VND and
purchaser does not require invoice.
 VAT deduction method tax payer must use VAT invoice when
selling exempt goods or services; selling to VAT exempt
entities.
 Invoice must be issued by buyers upon return of the goods to
the sellers due to improper specification or bad quality
 In case of improper specification (where the buyer cannot issue
invoice) or when the goods are not received or loss of invoice
when delivering the invoice to the buyer or price reduction,
seller and buyer must sign a minute of cancellation of invoice
and the seller issues revised invoice. No concept of credit note
(negative invoice) used in Vietnam
 Internal transfer of goods: internal transfer notes
VAT REFUND
 VAT refund cases
 If input VAT has not yet been fully credited for at least 12 months
(cir 219/2013), the excess entitled to be refunded.
 New project in the same province/city can be declared together
with current business
 Export business with excess input VAT of VND 300 mil or more:
refund of VAT monthly/quarterly. The refunded VAT amount
include input VAT on domestic sale not fully credited less output
VAT on domestic sales. Revenue base is applied for mixing.
 Entities in the period of investment of 1 year or more and has not
commenced operations, refund of input tax on an annual basis. If
the amount of input VAT on invested assets is VND 300 mil or
more, VAT refund can be made irrespective of period.
 Taxpayers having VAT refund position upon merger, dissolution,
etc.
VAT REFUND
 In general, VAT refund is not automatically granted
 The taxpayer must submit the application for VAT refund to
the tax authority for consideration and approval.
 A tax audit is usually undertaken to verify the VAT refund
amount
 To be eligible for VAT refund, the applicant must satisfy all
required documents and procedures
 What is the difference between VAT input/VAT deductible
and VAT refund?
TAX ADMINISTRATION
 Tax registration is required upon incorporation
 VAT is declared and paid upon declaration on:

 A monthly basis: Previous year’s revenue > VND 50 bil

& registered cases, latest by the 20th of the following
month.
 A quarterly basis: Revenue <= VND 50 bil, latest by the
30th day after the end of the quarter
 In general, VAT will be declared with the tax office at the
locality where the business establishments are located
TAX ADMINISTRATION (CIR 26/2015)
 Construction, installation, sales in extra province (bán
hàng vãng lai ngoại tỉnh): Cap VND 1 billion (included
VAT), required to pay VAT for local tax department (2%
& 1% VAT for 10% and 5% supplies, respectively). (Art
2 Cir 26/2015)
 Exchange rate: actual buying rate for selling, actual
selling rate for buying
 Interest on late payment: 0.05% per day after 1 Jan 15
(from 1 Jul 2013 to 1 Jan 15: 0.07% per day for first 90
days and 0.05% from 91st day)
 Tax payment voucher is no longer required in tax refund
dossier under Double Tax Agreement