Value Added Tax - VAT Passcard

Summarize information

Stating VAT on Invoice

• Clearly stated: Before VAT - VAT - After VAT

• If not: VAT shall be calculated on payment price (double VAT)

VAT Input sources

• Vietnamese VAT Invoice

• VAT declares on customs declaration paid at import stage

• FCT declarations

• For certain special documents (stamp, sticker) only after-tax price is state, recalculation is needed

Creditable Input VAT Condition

• Relevance to taxable business activities

• Sufficient legitimate documents

• Business relevance

Non-creditable VAT Practices

• Recording on Balance Sheet if it is related Fixed Assets, Construction in Progress, Prepaid Expenses, …

• Recording directly on PL

VAT Direct Method

• Application: Trading/Fashioning gold/silver/gem activities

• Value Added: (Selling price - Buying price) * Rate

• Not subject: Imported gold in form of bullions, pieces, other forms not fashioned into jewelry or other items.

VAT Deemed Method

• Application: Household, Individual not fully adopting VAS, invoicing, document scheme

• Deemed Revenue: amount subject to VAT stated on invoice (excluding activities not subject)

VAT Direct/Deemed Method Rate Application

• Separation of revenue

• If not, highest VAT Rate applied to the lump sum amount

Stating Wrong Tax Rate

1. Higher Regulation

   1. Seller: Declares VAT on invoice

   2. Buyer: Declares on regulation (CF challenges) or on invoice (when Seller obtains confirmation from Tax Authorities)

2. Lower Regulation

   1. Seller: Declares VAT under regulation

   2. Buyer: Declares VAT on Invoices

Invoice Requirement - Contents

1. Seller, Buyer Information

2. Product, Service detail

3. Signature

4. Digital Signing Time

5. Tax authority Identification Code (TIC)

Invoice Requirement - Timing

1. Sale of goods: Transfer ownership

2. Services: completion of service provision

3. Prepayment for services: payment moment (except AA services, supervision consultants, construction formulation, …)

4. Multiple Deliveries or Handover: each transaction

5. Exportation: completion of customs procedures

Invoice Requirement - Tax authority Identification Code (TIC)

• With TIC: high risk company or household, individual

• Without TIC:

  • Transmit data to Tax Authorities (TA) by electronic devices

  • Have system which has accounting management system and E-Invoice generation

  • Solution for searching E-Invoice and simultaneously send invoice data to buyer and TA

  • Have Device store data securely

Handling invoice errors

• Has not sent

  • With TIC: notify tax authorities (TA), issue new invoice with new TIC

  • Without TIC: reject error invoices, issue new one

• Has sent

  • No impact on value, tax code: Notifies TA and buyers, no need issue new one

  • Impact on value: either adjust incorrect or issue new replacing one

E-Invoice other note

• E-Signature: only seller is required to sign

• E-invoice Storage: in electronic form

• Paper Converted Version: for accounting and bookkeeping purposes only, invalid for transaction/payments

Invoice issuance - Commercial discount

• Discount Combine with next purchase

• Issue separate invoice for decremental adjustment

Invoice issuance - Promotional Program Free Goods

• If registered: invoicing for quantity only, without value and VAT

• If not: invoicing like a normal selling

Invoice issuance - Free Goods for Gift, Internal consumption, Exchange/Loans

• Gifts: invoice as normal selling

• Internal consumption: issue an invoice, except internal circulation

• Exchange/Loans: issue an invoice

Invoice Requirement - Timing conflict

1. Mismatched digital signing and invoice date: Invoice date is superior

2. Data reconciliation: 7th day of following month or 7th day from agreed period’s end

3. Daily invoice for individual does not require invoice: Retail, F&B, Finance sector, medical sector with centralized system

4. Gasoline: each selling transaction

5. Taxi: trip end

Goods, services exempt from VAT

1. Agriculture raw, Fertilizer, Salt

2. State house. State building, place Maintenance

3. Transfer Land Use Right

4. Life, Health Insurance

5. Financial Instrument

6. Medical

7. Education, except examination and issuing certificate

8. Military, Humanitarian

9. Technology (not machine), Software

10. Import Gold, Export Natural Resources

11. Others: <100m, duty-free shop, national reserved goods, …

Cases not required VAT Output Declaration

1. Compensation: Finacial income, no obligations in return, documents

2. Some services by FC outside VN without PE183

3. Non-business organization, individual sell assets

4. Investment project produces VAT Product

5. Sale of Agricultural Products

6. Asset transfer

7. Capital Contribution in Kind

8. Agent Distribution

9. Returned Exported product

Cases not required VAT Output Declaration - Compensation

1. Interest from Bond

2. Contract Cancel Compensation

3. Late Payment Interest

4. Purchase Bonus

5. Promotional Program Support, except store, supermarket incentives

6. Compensation from Insurer, TPA

Cases not required VAT Output Declaration - Sale of Agricultural Products

• Credit Method:

  • Trading stage between 2 Organization: no require declaration

  • Buyer is Household, Individual: 5% VAT

• Household, Individual: Deemed 1% revenue

Cases not required VAT Output Declaration - Asset Transfer

• Not required declaration

  • Net book value

  • Interco

  • Serving output VAT-product

• Subject to VAT

  • Revaluated

  • No-Interco

  • Not Serving output VAT-product

Cases not required VAT Output Declaration - Agent Distribution

• Principal: Distribution already invoiced

• Commission:

  • VAT Product: Comm subject to VAT

  • Exempted VAT Product: Comm exempted from VAT

Goods, services subject to 0% VAT

1. Exportation

2. International Transportation

3. Aviation/Maritime Services to FC or via Agents

4. Exception

Goods, services subject to 0% VAT - Exportation

• Goods: transferring ownership outside VN, non-tariff zones

• Services: Provided and consumed outside above. If it cannot split, portion by expense

• Required documents:

  • Contract

  • Invoice

  • Non-cash payment

  • case when goods then custom declaration

  • Evidence on delivery, performed and consumed outside VN

Goods, services subject to 0% VAT - International Transportation

• Transportation of passenger, luggage, cargo

• Domestic is part of package also count as international

• Condition:

  • Contract

  • Invoice

  • Non-Cash Payment

Goods, services subject to 0% VAT - Aviation, Maritime Service

• Airport related activities

• Seaport related activities

• Condition:

  • Contract

  • Invoice

  • Non-cash Payment

Goods, services subject to 0% VAT - Exception

• Tobacco, Alcohol imported then exported. Exported VAT is not required calculated, but Imported VAT cannot be deducted

• Non-tariff zones:

  • Petrol purchases domestically

  • Automobiles sold to parties in zones

  • Services provided to parties in zones (excluding F&B in zones)

• Foreign buyers:

  • Sport competition, Conference, Art, …

  • Hotel, training, tourist, …

  • Payment service via internet

  • Services attached to product distribution in VN

Tax Deduction Method - Taxable Time

• Goods:

  • Domestic: Ownership

  • Abroad: Custom declarations

• Services:

  • VAT regulation: Earlier of completion or invoice issuance date

  • Invoice regulation: Earlier of completion or payment date

• Real Estate: Payment schedule on contract

• Construction: Completion and handed over

Tax Deduction Method - Taxable Price - Importation

• Including:

  • Special Consumption Tax - SCT

  • Environment Protection Tax - EPT

  • Import Duty Tax - IDT

• Excluding:

  • Discount

• Formula: CIF » IDT » SCT » EPT » VAT

  • CIF = FOB + I + F (incoterm

  • IDT = CIF * rate

  • SCT = (CIF+IDT) * rate

  • EPT = quantity * rate

  • VAT = (CIF + IDT + SCT + EPT) * rate

Tax Deduction Method - Taxable Price - Other Cases

1. Goods, services for exchange, payment

   • Taxable price: Market price.

   • Except: invitation to FoC event

2. Internal consumption

   • Taxable price: zero

   • Input VAT fully creditable

3. Promotion Program

   • Registered: price depends on promotion type

   • Not registered: market price

4. Instalments: lumpsum amount without interest

5. Construction: inclusive or exclusive material

TDM - Taxable Price - Real Estate Transfer - Allocated State Land

1. Allocated State Land for Infrastructure, house development for sale (Clearance Cost dismissed)

   1. Deduction = Obligation - Exemption - Clearance Cost

   2. Taxable Price = Clearance Cost - Deduction

   3. » Taxable Price = Obligation - Exemption

TDM - Taxable Price - Real Estate Transfer - Rent Land for Lease

Rent land for Infrastructure Development for lease, House building for sale

• Deduction = Rent Price / Rent Year * Lease Year

• Taxable Price = (+VAT) Per Year Lease Price - Deduction

TDM - Taxable Price - Real Estate Transfer - No further development Infra Ex/Inclusive

Trading LUR with No further development Infra Ex/Inclusive, i.e. building villa

1. Deduction = LUR Cost (+ Infra Cost if included infra cost to land sell price)

2. Taxable Price = Sell Price - Deduction

TDM - Taxable Price - Real Estate Transfer - BT arrangement by state land

• Deduction = BT Contract price

• Taxable price = Selling Price - Deduction

TDM - Taxable Price - Real Estate Transfer - Convert Agricultural Land to Residential land

• Deduction = LUR cost + PIT + Convert Cost

• Taxable price = Selling Price - Deduction

TDM - Taxable Price - Real Estate Transfer - Construction Apartment for sale

• Deduction = LUR cost / (Project Area - Shared Area) m²

• Taxable price = Selling Price/m² - Deduction

TDM - Taxable Price - Real Estate Transfer - Capital Contribution by LUR

• Deduction = LUR cost upon agreed

• Taxable price = Transfer Price - Deduction

TDM - Taxable Price - Gambling

• Collection: Inclusive VAT

• Taxable Price = (Collection - Paid Player)/(1+rate)

TDM - Taxable Price - Tourism Package

• Package Price: Inclusive VAT

• Deduction = Oversea Airfare 2way, other oversea expenses

• Taxable Price = (Package Price - Deduction)/(1+rate)

Creditable Input VAT - Non-cash evidence

• Scope: Same supplier over 20m per day (same tax code but has Store Number… is considered as separate supplier)

• Type:

  • Bank receipt

  • Offsetting

  • Pay on behalf, creditable to entity not payer

  • Wired to State Bank Account

Creditable Input VAT - Separate Declaration

• If cannot separate, revenue rate:

  • Quarterly, Monthly: Estimation

  • Year end: adjust to actual

• Initial tax declaration to occurrence period

• Adjusting to detecting period (Output adjust to occurrence period) and invoice date must be before tax audit

Non-Creditable Input VAT - Industries

Record to BS or PL:

• Credit institution

• Re-insurance, Life-insurance

• Securities Companies

• Hospital

• School

• Civil Aircraft/yacht not used for business

Creditable Input VAT - Damaged Goods

• Natural factors: disaster, useful life, …

• Excluding VAT compensation from insurer

• Documents:

  • Inventory Minutes

  • Other (from insurers, TPA, …)

Creditable Input VAT - Fixed Assets for Employee

• Buildings for employee is creditable

• Expatriate housing:

  • Non-creditable if local hire

  • Creditable if oversea hire and VN parties agreed bear housing cost

Creditable Input VAT - Cars

• Under 9 seats over 1.6bn:

  • With “tourism” license: Creditable

  • No license: Creditable 160m

• Over 9 seats: Creditable

Creditable Input VAT - Promotion

• Free gift used for promotion for promotion program is creditable

  • If registered MOIT: creditable against business output

  • If not registered MOIT: treat as normal selling, dismissed all creditable input

Creditable Input VAT - Custom collection

• Input VAT related to Tax collection decision by Customs (not involving Tax Authorities) is creditable

Creditable Input VAT - Authorization cases

• Claim invoice bear name policy holder but insurer can declare creditable

• Before company establishment and tax code is issued, its founder authorizes other entity to make payment

Creditable Input VAT - Capital Contribution in kinds

• Non-business entities contribute assets to limited company or join-stock is creditable

• Despite invoice bear name of non-business entities, but VAT input has not yet credited.

Creditable Input VAT - Closed Production Process

• Result non-VAT product serves as only material for further processing, input VAT is fully creditable

• Result non-VAT product serves as material and sale domestically, input credit proportional

Creditable Input VAT - Investment Project using non-tax product for producing tax product

• Commit only sell tax product » fully creditable

• Sell non-tax product » non-creditable

• Sell portion » Fixed Assets fully creditable, others portion

Creditable Input VAT - Investment Project in Both Tax and non-Tax Goods/Services

• Temporarily credited at revenue portion of business plan

• After 3 years, adjusting by actual revenue

VAT Refund - Investment Project

Before operation:

• Exceeding 1 year: refund each year

• OR reach 300m

• Must declares by form 02/GTGT, if in 01/GTGT » no refund

Operating company with new investment projects:

• Separate VAT declaration

• Must offset with VAT payable of current operating company, then if remain over 300m is refundable at tax authorities of other provinces

Non-refundable if:

• Charter capital is not fully contributed

• Lacking or withdrawing of certification, licenses under prevailing regulation

VAT Refund - Exportation

• Condition:

  • Remain above 300m per month/quarter

  • If mix revenue, proportion

  • Does not exceed 10% revenue

• Special Cases:

  • Entrustment,on-spot export: Product owner

  • Processing: company signing processing contract

  • Export materials for construction: company sign construction contract

• Non-refundable:

  • import the re-export outside custom-controlled area

  • investment project relating natural resources extraction or >51% natural resource product

• Refund first, inspect later if:

  • No penalty, no fraud for 2 years

  • Not classified as high-risk

VAT Refund - Business restructuring

1. Merger

2. Consolidation

3. Division

4. Dissolution

5. Bankruptcy

6. Termination

7. Conversion of ownership

VAT under-declaration

• Late Payment interest: 0.03%/day

• Deadline payment is 20th day following month

VAT filling requirement

• Monthly revenue >50bn must filling declaration monthly

• Monthly Revenue <=50bn, optional quarterly or monthly

• Keep stable for 3 years

VAT Invoice issuance under 200k

It is not required to issue invoice for transaction under 200 thousand VND, unless customer requires.

E-invoice must be issued on every transaction, noted if customer information is missing