Circular No. 129/2008/TT-BTC of December 26, 2008, guiding the implementation of a number of articles of the Value-Added Tax Law and guiding the implementation of the Government’s Decree No. 123/2008/ND-CP of December 8, 2008, detailing and guiding the implementation of a number of articles of the Value-Added Tax Law. đã được thay thế bởi Circular No. 06/2012/TT-BTC guiding the implementation of a number of articles và được áp dụng kể từ ngày 01/03/2012.
Nội dung toàn văn Circular No. 129/2008/TT-BTC of December 26, 2008, guiding the implementation of a number of articles of the Value-Added Tax Law and guiding the implementation of the Government’s Decree No. 123/2008/ND-CP of December 8, 2008, detailing and guiding the implementation of a number of articles of the Value-Added Tax Law.
THE MINISTRY OF FINANCE
SOCIALIST REPUBLIC OF VIET NAM
Hanoi, December 26, 2008
GUIDING THE IMPLEMENTATION OF A NUMBER OF ARTICLES OF THE VALUE-ADDED TAX LAW AND GUIDING THE IMPLEMENTATION OF THE GOVERNMENT’S DECREE NO. 123/2008/ND-CP OF DECEMBER 8, 2008, DETAILING AND GUIDING THE IMPLEMENTATION OF A NUMBER OF ARTICLES OF THE VALUE-ADDED TAX LAW
Pursuant to Value-Added Tax Law No. 13/2008/QH12 of June 3, 2008;
Pursuant to Tax Administration Law No. 78/2006/QH11 of November 29, 2006;
Pursuant to the Government’s Decree No. 123/2008/ND-CP of December 8, 2008, detailing and guiding the implementation of a number of articles of the Value-Added Tax Law;
Pursuant to the Government’s Decree No. 118/2008/ND-CP of November 27, 2008, defining the functions, tasks, powers and organizational structure of the Finance Ministry;
The Finance Ministry guides implementation of value-added tax (VAT) as follows:
A. SCOPE OF APPLICATION
I. TAXABLE OBJECTS AND TAXPAYERS
1. Taxable objects
Liable to VAT are goods and services used for production, business and consumption in Vietnam (including goods and services purchased from organizations and individuals abroad), except for those not liable to VAT specified in Section II, Part A of this Circular.
VAT payers are organizations and individuals producing and trading in VAT-liable goods and services in Vietnam, regardless of their business lines, forms and organization (below referred to as business establishments) and organizations and individuals that import goods or purchase services liable to VAT from abroad (below referred to as importers), including:
2.1. Business organizations established and registering business under the Law on Enterprises, the Law on State Enterprises (now the Law on Enterprises) or the Law on Cooperatives;
2.2. Economic organizations of political organizations, socio-political organizations, social organizations, socio-professional organizations, people’s armed forces units, non-business organizations and other organizations;
2.3. Foreign-invested enterprises and foreign parties to business cooperation contracts under the Law on Foreign Investment in Vietnam (now the Law on Investment); foreign organizations and individuals conducting business activities in Vietnam without establishing legal entities in Vietnam;
2.4. Individuals, households, independent groups of business people and other business entities conducting in production, business or import activities.
2.5. Organizations and individuals that conduct production or business in Vietnam and purchase services (including services associated with goods) from foreign organizations without permanent establishments in Vietnam or overseas individuals who do not reside in Vietnam.
II. NON-TAXABLE OBJECTS
1. Products of cultivation (including products from plantation forests) and husbandry, cultured and fished aquatic and marine products which have not yet been processed into other products or have just been preliminarily processed then sold by producing or fishing organizations or individuals themselves and at the stage of importation.
Products preliminarily processed by ordinary methods are those which have just been cleaned, sun-dried, heat-dried, peeled, pitted, sliced, salted, chilled or otherwise ordinarily preserved.
Example 1: Sun-drying, heat-drying, peeling, pitting or slicing of cultivation products; cleaning, sun-drying, heat-drying, salting or icing of cultured or fished aquatic and marine products.
2. Products being breeding animals and plant varieties, such as breeding eggs and animals, saplings, seeds, sperms, embryos, genetic materials at the stages of rearing, importation and trading. Products that are breeding animals and plant varieties not liable to VAT are those imported and traded by establishments which have been granted breeding animal or plant variety business registration certificates by state management agencies. Products that are breeding animals or plant varieties subject to quality standards promulgated by the State must satisfy the State-prescribed conditions.
3. Water irrigation and drainage; soil plowing and harrowing; intra-field canal and ditch dredging for agricultural production; services of harvesting farm produce.
4. Salt products made from seawater, natural rock salt, refined salt and iodized salt, the principal component of which has the chemical formula NaCI.
5. State-owned residential houses sold by the State to their current tenants.
6. Transfer of land use rights.
7. Life insurance covering human health insurance and accident insurance in a life insurance package; student insurance and such person insurance services as sailor or crew member accident insurance, person accident insurance (including also insurance for accidents, life and combined hospitalization), passenger accident insurance, tourist insurance, accident insurance for drivers and driver assistants and persons aboard vehicles, insurance for sterilized persons, insurance of allowance for surgical operations, insurance for individuals’ lives, insurance for electricity users and other kinds of insurance related to humans; insurance for livestock, plants, other agricultural insurance services; reinsurance.
8. Financial services:
a/ Credit provision services, covering provision of loans, discount and rediscount of negotiable instruments and other valuable papers; guarantee; financial leasing and other lawful forms of credit provision by Vietnam-based financial and credit institutions.
b/ Securities trading activities, including securities brokerage, securities dealing, securities issuance underwriting, securities investment counseling, securities depository, securities investment fund and portfolio management, market organization services provided by stock exchanges or securities trading centers, and other business activities specified by the securities law.
Market organization services provided by stock exchanges or securities trading centers include listing acceptance, listing management, trading management, trading member management, supply of information relating to listing management, trading management, and other relevant services.
c/ Capital transfer covers the transfer of part or the whole of the invested capital amount, including the sale of enterprises to other enterprises for production and business; securities transfer; and other forms of capital transfer under law.
d/ Derivative financial services, including interest rate swap, forward contracts, future contracts, foreign currency put and call options and other derivative financial services under law.
9. Healthcare and animal health services, including medical examination and treatment and preventive medicine services for humans and livestock, birth control services, health convalescence and functional rehabilitation services for patients. Healthcare services cover also transportation of patients, lease of patient rooms and beds of medical establishments; test, screening, radiograph, blood and blood preparations for patients.
10. Public-utility post and telecommunications services and Internet services universalized under the Government’s programs; post and telecommunications services provided from abroad to Vietnam (incoming services).
11. Public services, including sanitation and water drainage in streets and residential quarters; maintenance of zoos, flower gardens, parks and greeneries along streets and public lighting; and funeral services. Services mentioned at this Point are irrespective of their funding sources.
a/ Public services of sanitation and water drainage in streets and residential quarters cover activities of collecting and disposing of garbage and wastes; draining and treating wastewater. Sanitary and water drainage services, such as cleaning and sanitizing offices of organizations and individuals provided by business establishments are liable to VAT.
b/ Maintenance of zoos, flower gardens, parks and greeneries along streets covers activities of managing, planting, tending trees and protecting birds, animals in parks, zoos, public places and national parks.
c/ Public lighting means lighting of streets, lanes and alleys in residential areas, flower gardens and parks.
d/ Funeral services provided by establishments with the function of providing funeral services cover activities of leasing houses, hearses and cars in service of funeral, burial, cremation and disinterment.
12. Maintenance, repair and construction of cultural, art and public-utility works, infrastructures and gratitude houses for social policy beneficiaries funded with people’s contributions and humanitarian aid.
For maintenance, repair or construction of works, which is funded with capital other than people’s contributions (including contributed amounts and financial supports of organizations and individuals) and humanitarian aid, not exceeding 50% of the total capital used for those works, the whole value of the works is not liable to tax.
Social policy beneficiaries include people with meritorious services under the law on people with meritorious services; social relief beneficiaries who enjoy state budget allowances; members of households classified as poor or living just above the poverty line; and other cases provided for by law.
13. Teaching and vocational training specified by law, including also teaching of foreign languages, informatics, dancing, singing, painting, music, drama, circus, physical training, sports, child nursing, and other jobs in order to train, retrain and raise the educational levels and professional knowledge.
For education establishments from pre-schools to upper secondary schools that collect charges for meals of their pupils, these charges are not liable to VAT.
14. Radio and television broadcasting funded with the state budget.
15. Publication, import and distribution of newspapers, magazines and specialized bulletins, political books, textbooks, teaching course books, law books, scientific and technical books, books printed in ethnic minority languages, and pictures, photos and posters for propaganda and mass agitation purposes, including those recorded in audio-visual tapes and disks or encrypted into electronic data; printing of banknotes.
Newspapers, magazines and specialized bulletins, including also transmission of their pages.
Political books are books disseminating the political line of the Party and the State, serving political tasks under specific themes or topics, serving anniversaries or traditional days of organizations, levels, branches and localities; statistical books, books propagating the good people and good deeds movement; books of speeches, research and theoretical papers of Party and State leaders.
Textbooks (including those recorded in audio-visual tapes and disks or encrypted into electronic data) are books used for teaching and learning at the levels from preschool to upper secondary school (including reference books for teachers and pupils, relevant to the contents of education curricula).
Teaching course books are books used for teaching and learning in universities, colleges, professional secondary and vocational training schools.
Law books are books of legal documents of the State.
Scientific and technical books are books used for introducing and guiding scientific and technical knowledge directly related to production and various scientific and technical branches.
Books printed in ethnic minority languages also include books printed bilingual in Vietnamese and an ethnic minority language.
Propaganda and mass agitation pictures, photos and posters are pictures, photos, posters, leaflets and brochures used for propaganda and mass agitation purposes, slogans, leaders’ pictures, the Party’s flag, the national flag, the Youth Union’s flag, the Young Pioneers League’s flag.
Audio or video tapes and disks recorded with the contents of newspapers, magazines, specialized bulletins or books specified at this Point.
16. Mass transit by bus and tramcar means public transportation of passengers by bus or tramcar along specified routes within provinces, urban centers and in their vicinities under the Transport Ministry’s regulations.
17. Goods which cannot be produced at home and imported in the following cases:
a/ Machinery, equipment and supplies imported for direct use in scientific research and technological development activities;
b/ Machinery, equipment, spare parts, special-purpose means of transport and supplies which need to be imported to serve activities of prospecting, exploring and developing oil and gas fields;
c/ Aircraft (including aircraft engines), derricks and ships imported to form fixed assets of enterprises or hired from abroad for production, business or lease.
In order to identify goods not liable to VAT at the stage of importation specified at this Point, importers shall produce to customs offices documents under the Finance Ministry’s guidance on customs procedures; customs inspection and supervision; import and export duties and tax administration regarding imports and exports.
The Planning and Investment Ministry shall promulgate the list of machinery, equipment and supplies which can be produced at home, for use in distinguishing them from those which cannot be produced at home and need to be imported for direct use in scientific research and technological development; the list of machinery, equipment, spare parts, special-purpose means of transport and supplies which can be produced at home, for use in distinguishing them from those which cannot be produced at home and need to be imported for prospecting, exploring and developing oil and gas fields; and the list of aircraft, derricks and ships which can be produced at home, for use in distinguishing them from those which cannot be produced at home and need to be imported to form fixed assets of enterprises or hired from abroad for production, business or lease.
18. Weaponry and military equipment for exclusive use in defense and security.
a/ Non-taxable weaponry and military equipment for exclusive use in defense and security guided at this Point are those on the list of weaponry and military equipment for exclusive use in defense and security promulgated by the Finance Ministry after reaching agreement with the Defense Ministry and the Public Security Ministry.
Weaponry and military equipment not liable to VAT as guided at this Point must be finished products in complete sets or parts, accessories and packages used exclusively for assembling and preserving finished products. When weaponry and military equipment used exclusively in defense and security need to be repaired, their repair services provided by enterprises of the Defense Ministry or the Public Security Ministry are not liable to VAT.
b/ Weaponry and military equipment (including supplies, machinery, equipment and spare parts) used exclusively in service of defense and security are, when imported, exempt from import duty under the Import Tax and Export Tax Law, or are, when imported within annual quotas approved by the Prime Minister, not liable to VAT.
Dossiers and procedures for the import of weaponry and military equipment which are not liable to VAT at the importation stage comply with the Finance Ministry’s guidance on customs procedures; customs inspection and supervision; import and export duties and tax administration regarding imports and exports.
19. Imported goods and goods and services sold to organizations and individuals for use as humanitarian or non-refundable aid in the following cases:
a/ Goods imported for use as humanitarian aid or non-refundable aid goods with the Finance Ministry’s certification;
b/ Gifts given under the law on gifts and presents for state agencies, political organizations, socio-political organizations, political-socio-professional organizations, social organizations, socio-professional organizations or people’s armed forces units;
c/ Presents and gifts given under the law on gifts and presents to individuals in Vietnam;
d/ Personal effects of foreign organizations and individuals within diplomatic immunity limits under the law on diplomatic immunities; and personal effects brought along by overseas Vietnamese upon their return to the country;
e/ Personal effects within duty-free luggage limits;
The quota quantities of imported goods not liable to VAT at the importation stage are equal to the import duty-free quantities prescribed in the Import Tax and Export Tax Law and guiding documents.
Goods imported by organizations and individuals entitled to diplomatic immunities under the Ordinance on Diplomatic Immunities are not liable to VAT. If these organizations or individuals purchase goods and services in Vietnam and pay VAT thereon, they will be refunded paid VAT amounts under the guidance at Point 7, Part C of this Circular. The subjects, goods and procedural dossiers for enjoying VAT exemption guided at this Point comply with the Finance Ministry’s guidance on the refund of VAT to diplomatic missions, consular offices and representative agencies of international organizations in Vietnam.
Dossiers and procedures for handling imported goods which are not liable to VAT at the importation stage comply with the Finance Ministry’s guidance on customs procedures; customs inspection and supervision; import and export duties and tax administration regarding imports and exports.
f/ Goods and services sold to foreign organizations or individuals or international organizations for use as humanitarian aid or non-refundable aid to Vietnam.
The procedure for international organizations or foreigners to purchase goods and services in Vietnam for use as humanitarian aid or non-refundable aid to Vietnam and enjoy VAT exemption: International organizations or foreigners shall send to the sellers documents clearly stating the names of the international organizations or foreigners purchasing goods for use as humanitarian aid or non-refundable aid to Vietnam, the quantity or value of the purchased goods; and written certification by the Finance Ministry of such aid.
When selling these goods, the business establishments shall issue invoices as guided in Section IV, Part B of this Circular, clearly indicating on these invoices that the goods are sold to foreign organizations or individuals or international organizations for use as non-refundable aid or humanitarian aid and not liable to VAT, and keep the above-said documents of international organizations or Vietnamese representative agencies for tax declaration.
20. Goods transported from/to border gate under customs supervision, transited through the Vietnamese territory; goods temporarily imported for re-export, goods temporarily exported for re-import; raw materials imported for production or processing of goods for export under export production or processing contracts signed with foreign parties.
Goods and services that are sold and purchased between foreign countries and non-tariff zones and among non-tariff zones.
Non-tariff zones include export processing zones, export processing enterprises, bonded zones, bonded warehouses, special commercial and economic zones, commercial and industrial zones and other economic zones established and enjoying tax incentives like non-tariff zones under the Prime Minister’s decisions. Goods purchase, sale and exchange relations between these zones and outside areas are import and export relations.
Dossiers and procedures for the determination and non-collection of VAT in these cases comply with the Finance Ministry’s guidance on customs procedures; customs inspection and supervision; import and export duties and tax administration regarding imports and exports.
21. Technology transfer under the Technology Transfer Law; assignment of intellectual property rights under the Intellectual Property Law. For contracts on technology transfer accompanied by machinery and equipment transfer, only the value of transferred technology or assigned intellectual property rights is not liable to VAT. If the value of transferred technology or assigned intellectual property rights cannot be separated, VAT will be imposed on both the value of transferred technology or assigned intellectual property rights and that of machinery and equipment.
Computer software includes software products and software services as specified by law.
22. Gold imported in the form of bar or ingot and gold not yet fashioned into fine-art articles, jewelry or other products.
Gold in the form of bar or ingot and unfashioned gold shall be determined under legal provisions on gold management and trading.
23. Export products that are unprocessed exploited natural resources and minerals.
Unprocessed exploited natural resources and minerals are those not yet processed into other products, including also minerals already screened, sorted or treated for higher concentrations or other natural resources already cut or split.
24. Artificial products used for substitution of diseased people’s organs, including also those being body parts for permanent implantation in human bodies; crutches, wheelchairs and other tools used exclusively for people with disabilities.
25. Goods and services of business individuals with average monthly incomes lower than the common minimum salary level applicable to domestic organizations and enterprises under the Government’s regulations on region-based minimum salary levels applicable to employees of companies, enterprises, cooperatives, cooperation groups, farms, households, individuals and other Vietnamese organizations.
26. The following goods and services:
a/ Goods for duty-free sale at duty-free shops under the Prime Minister’s regulations.
b/ National reserve goods sold by the National Reserves.
c/ Services for which charges or fees are collected by the State under the law on charges and fees.
d/ Sweeping of bombs, land mines and explosive objects performed by defense units at projects invested with state budget capital.
Any change in the use purposes of goods not liable to VAT at the importation stage must be declared for VAT payment at the importation stage under regulations to customs offices where customs declarations are registered. VAT will be calculated from the time of change of the use purposes. Organizations and individuals that sell goods on the domestic market shall declare and pay VAT to tax offices directly managing them under regulations.
B. TAX BASES AND TAX CALCULATION METHODS
The bases for calculating VAT are taxable price and tax rate.
I. TAXABLE PRICES
1. Taxable prices of goods or services are specified as follows:
1.1. For goods and services sold or provided by production and business establishments, their taxable prices are VAT-exclusive sale prices. For goods and services subject to excise tax. Their taxable prices are sale prices inclusive of excise tax but exclusive of VAT.
The taxable prices of goods or services cover also additional levies and surcharges collected in addition to the goods or service prices which are enjoyed by business establishments, excluding those which business establishments shall remit into the state budget. When business establishments apply reduced sale prices or commercial discounts for their customers (if any), taxable prices are reduced or commercially discounted sale prices for customers.
1.2. For imported goods, their taxable prices are import prices at border gates plus (+) import duty (if any) and plus (+) excise tax (if any). Import prices at border gates are determined according to regulations on dutiable prices of imported goods.
For imported goods eligible for import duty exemption or reduction, their taxable prices are import prices plus (+) import duty to be paid after the exemption or reduction.
1.3. For goods and services used for barter, internal consumption, presentation as gifts, donation or payment of salaries to laborers, their taxable prices are taxable prices of goods or services of the same or similar types at the time such activities are carried out.
Goods and services used for internal consumption are those manufactured or provided by business establishments for their internal consumption, excluding those for further use in their manufacture or business operations.
Goods for internal circulation, including those ex-warehoused for transfer from one warehouse to another, or supplies or semi-finished products ex-warehoused for further use in manufacture operations of a production or business establishment are not subject to VAT calculation and payment.
Example 2: Establishment A manufactures electric fans and installs 50 fans at its workshops, the sale price (exclusive of VAT) of this type of fans is VND 1,000,000/fan. The output VAT amount payable for these internally used fans is:
VND 1,000,000/fan x 50 fans x 10% = VND 5,000,000
Example 3: Establishment B produces garments and has a yarn workshop and a sewing workshop. If it transfers finished yarn from the yarn workshop to the sewing workshop for further use in the production process, it is not required to calculate and pay VAT for the yarn quantities ex-warehoused to the sewing workshop.
Example 4: Production establishment C is engaged in both manufacturing livestock feeds and raising cattle. VAT shall be imposed on the manufactured livestock feed quantity put for sale but establishment C is not required to calculate and pay VAT on its livestock feed quantity used for cattle raising which is not liable to VAT. The creditable input VAT amount on livestock feed manufacture operations shall be allocated according to the ratio of livestock feed sale turnover to the total of livestock feed sale turnover and livestock sale turnover.
1.4. For services of leasing such assets as houses, offices, workshops, warehouses, wharves, yards, means of transport, machinery, equipment, etc., their taxable prices are VAT-exclusive rents.
In case of leasing with rent paid in installments or prepaid for a leasing term, the taxable price is each VAT-exclusive rent installment or prepaid rent amount for that leasing term.
In case of lease of foreign machinery, equipment or means of transport which cannot be manufactured at home for sub-lease, the taxable price is exclusive of the rent payable to the foreign party.
Asset rent rates are those agreed upon by involved parties and stated in their contracts. When a rent rate bracket is prescribed by law, rent rates must be within that bracket.
1.5. For goods sold on installment or deferred payment, their taxable prices are lump-sum VAT-exclusive sale prices, excluding interests on installment or deferred payments.
Example 5: A motorbike trading company sells 100 cc Honda motorbikes. The VAT-exclusive installment sale price of these motorbikes is VND 25.5 million (including an installment payment interest of VND 0.5 million). The taxable price is VND 25 million.
16. For goods processing, taxable prices are VAT-exclusive processing prices under processing contracts, consisting of remunerations, costs of fuel, power, auxiliary materials and other expenses for the processing operation.
17. For construction and installation, the taxable price is the VAT-exclusive value of the completed and handed over work, work item or job.
1.7.1. For cases of construction and installation involving the contracted supply of materials, taxable prices are construction and installation prices inclusive of the VAT-exclusive value of materials.
Example 6: Construction company B enters into a work construction contract, covering also the value of construction materials. The VAT-exclusive total payment value is VND 1,500 million, of which the VAT-exclusive value of construction materials is VND 1,000 million. Then the taxable price is VND 1,500 million.
1.7.2. For cases of construction and installation without the contracted supply of materials, the taxable price is the construction and installation value exclusive of the VAT-exclusive value of materials.
Example 7: Construction company B enters into a work construction contract not covering the value of construction materials. If the total VAT-exclusive value of the work is VND 1,500 million and the VAT-exclusive value of construction materials supplied by investor A is VND 1,000 million, then the taxable price in this case is VND 500 million (VND 1,500 million - VND 1,000 million).
1.7.3. For cases of construction and installation with payments to be made for each completed and taken-over construction item or based on the value of the completed and taken-over construction and installation volume, the taxable price is the VAT-exclusive value of the completed and taken-over construction item or work volume.
Example 8: Textile company X (party A) hires construction company Y (party B) to perform construction and installation work to expand a workshop.
The total VAT-exclusive value of the work is VND 200 billion, including:
- The construction and installation value: VND 80 billion
- The value of equipment supplied and installed by party B: VND 120 billion.
- VAT amount 10%: (80 + 120) x 10% = VND 20 billion.
- Total amount payable by party A: VND 220 billion:
- Party A shall:
+ Receive the workshop handed over, account it as an increase of VND 200 billion (VAT-exclusive value) in the value of its fixed assets for depreciation purpose.
+ Declare and credit the VAT amount of VND 20 billion against the output VAT on sold goods or request tax refund under regulations.
If party A tests, takes over the work and accepts to make payment to party B per construction item (presuming that a VND 80-billion construction and installation volume is tested, taken over and paid for first) then the taxable price is VND 80 billion.
1.8. For real estate business activities, taxable prices are real estate transfer prices minus (-) actual land prices (or land rent rates) at the time of land transfer. In case land prices at the time of transfer declared by taxpayers are not reliable for determining reasonable taxable prices under law, land prices to be subtracted (or land rent rates) are those set by provincial/municipal People’s Committees at the time of real estate transfer. Land prices to be subtracted for determining taxable prices must not exceed sums of money collected from land customers.
For establishments building and trading in infrastructure works or building houses for sale or transfer and collecting sums of money from customers according to the project implementation or payment collection schedules indicated in contracts, land prices to be subtracted are actual land prices at the time of first collection according to schedule. Land prices to be subtracted shall be calculated according to the ratio (%) of sums of money collected according to project implementation or payment collection schedules indicated in the contracts to actual land prices at the time of transfer (the time of first collection according to the project implementation or payment collection schedule).
Example 9: Housing Investment and Development Company A is allocated by the State 10,000 m2 of land for building houses for sale. The company sells one house on a land area of 100 m2 at a total of VND 2 billion, exclusive of VAT, including the house sale price and land use rights transfer price (of which the price of the house with infrastructure works is VND 1.2 billion and the land use rights transfer price declared by the Company is VND 8 million per m2).
The managing tax office holds that the price declared by the Company is insufficient for determining a reasonable taxable price under law.
At the time of transfer, the land price set by the local People’s Committee is VND 6 million per m2, then the taxable price of the above house is:
VND 2 billion - (VND 6 million x 100/m2) = VND 1.4 billion.
The output VAT is: VND 1.4 billion x 10% = VND 140 million
Example 10: Real Estate Business Company C sells a villa at the price of VND 8 billion as stated in the transfer contract, including the villa sale price of VND 5 billion and the land price of VND 3 billion. Company C collects the payment according to the project implementation schedule. The customer makes the payment in three installments. The first installment is 30% of the contract value (VND 2.4 billion), the second installment is 50% of the contract value (VND 4 billion) and the third installment is the remaining 20% (VND 1.6 billion), the taxable price for each installment is as follows:
The taxable price for the first installment:
VND 2.4 billion - 30% x VND 3 billion = VND 1.5 billion
The taxable price for the second installment:
VND4 billion - 50% x VND 3 billion = VND 2.5 billion
The taxable price for the third installment:
VND 1.6 billion - 20% x VND 3 billion = VND 1 billion
- For business establishments leased land by the State for building infrastructure works for lease, taxable prices are VAT-exclusive infrastructure lease rates minus (-) land rents to be remitted into the state budget.
Example 11: Industrial Park Infrastructure Investment and Dealing Company Y is leased by the State 500,000 m2 of land for 50 years for building technical infrastructure works for lease. The land rent rate is VND 300,000/m2/year. After building infrastructure works, company Y leases 5,000 m2 to company Z for 20 years for building a factory at a VAT-exclusive land rent rate (excluding public-facility charges) of VND 800,000/m2/year. Company Z pays the infrastructure rent once a year.
The taxable price for an annual rent from the lease of the infrastructure is:
(5,000 m2 x VND 800,000) - (5,000 m2 x VND 300,000) x 1 year = VND 2,500,000,000.
The VAT amount is: VND 2,500,000,000 x 10% = VND 250,000,000.
1.9. For goods and service sale and purchase agency and brokerage activities, remunerated or commissioned import or export consignment activities, taxable prices are VAT-exclusive remunerations or commissions earned from these activities.
1.10. For goods and services with payment documents showing VAT-inclusive payment prices, such as stamps, freight or fare tickets or construction lottery tickets, their VAT-exclusive prices shall be determined as follows:
VAT- exclusive price
Payment price (ticket or stamp price)
1 + VAT rate of the goods or service (%)
1.11. For electricity supplied by hydropower plants being dependent-accounting units of the Vietnam Electricity Group, the taxable price for determining payable VAT amounts in a locality where such a plant is located is equal to 60% of the VAT-exclusive average commercial electricity sale price in the previous year. In case the average commercial electricity sale price in the previous year cannot be determined, a price for temporary VAT calculation announced by the Group may apply but must not be lower than the price of the preceding year. If the average commercial electricity sale price in the previous year can be determined, declarations for difference adjustment shall be made in the declaration period of the month when the official price is available. The determination of the average commercial electricity sale price in a year must be made before March 31 of the following year.
1.12. For casino, prized video game or betting game services, taxable prices are excise tax-inclusive sums of money earned from these activities minus prizes paid to customers.
The taxable price shall be calculated according to the following formula:
Earned sum of money
1 + tax rate
Example 12: In a tax period, a casino service establishment records the following Figures:
- Cash amount collected from customers for token exchange at counters before playing games: VND 43 billion.
- Cash amount paid to customers for tokens returned after playing games: VND 10 billion.
Cash amount actually collected by the establishment: VND 43 billion - VND 10 billion = VND 33 billion.
The cash amount of VND 33 billion is the establishment’s turnover inclusive of VAT and excise tax.
The taxable price is calculated as follows:
VND 33 billion
VND 30 billion
1 + 10%
1.13. For transportation, loading and unloading, taxable prices are VAT-exclusive freight or loading and unloading charge rates, regardless of whether establishments directly undertake the transportation, loading and unloading or hire such service.
1.14. For tourist services in the form of tours under contracts signed with tourists at package prices (inclusive of meal, accommodation and travel), these package prices are regarded as VAT-inclusive prices.
In case the package price covers also air fares for tourists coming from abroad into Vietnam and from Vietnam to abroad, expenses for meals, lodgings and sight-seeing and some other expenses incurred abroad (if with lawful receipts), sums of money collected from tourists to cover these expenses may be subtracted from taxable prices (turnover).
Example 13: The Ho Chi Minh City Tourist Company performs a package tour contract with Thailand for 50 tourists for five days in Vietnam with a total payment of USD 32,000. The Vietnamese side has to pay for airfares, meals, accommodation, and sight-seeing tours under the agreed program, of which the airfares from Thailand to Vietnam and vice versa cost USD 10,000. The applicable USD/VND exchange rate is 1/17,000.
The taxable price under this contract is determined as follows:
+ Turnover liable to VAT is:
(USD 32,000 - USD 10,000) x VND 17,000 = VND 374,000,000
+ The taxable price is:
1 + 10%
Example 14: Hanoi Tourist Company performs a contract for taking tourists from Vietnam to China on a five-day tour at the package price of USD 400/person. If it has to pay a Chinese tourist company USD 300/person, its taxable turnover is USD 100/person (USD 400 - USD 300).
1.15. For pawning service, taxable prices are amounts to be collected from this service, including interests receivable from pawn loans and other proceeds from the sale of pawned articles (if any).
Revenues from this service, which are determined as above, are VAT-inclusive prices.
Example 15: A pawning company generates in the tax period a pawning turnover of VND 110 million.
+ The taxable price is determined as follows:
VND 110 million
VND 100 million
1 + 10%
1.16. For VAT-liable books sold at their distribution prices (cover prices) under the Publication Law, these sale prices shall be determined as VAT-inclusive prices for calculating selling establishments’ VAT and turnover. For books which are sold at prices other than their cover prices, VAT shall be calculated on the basis of actual sale prices.
1.17. For printing activities, taxable prices are printing costs. If a printing establishment performs printing contracts with payment prices covering also printing and paper costs, the taxable price also includes the paper cost.
1.18. For services of assessment agency, agency for indemnity consideration, agency for claim for compensations by third parties and agency for handling of wholly compensated goods for remunerations or commissions, taxable prices are earned VAT-exclusive remuneration or commission amounts (not yet subtracted with any expenses) collected by the insurance enterprises.
Taxable prices shall be calculated in Vietnam dong. If taxpayers have foreign-currency turnover, they shall convert it into Vietnam dong at the average inter-bank exchange rate announced by the State Bank of Vietnam at the time of turnover generation, for determining taxable prices.
2. The time of determining VAT is as follows:
- For sale of goods, it is the time of transfer of the right to own or use goods to purchasers, regardless of whether sellers have collected the money.
- For provision of services, it is the lime of completing service provision or the time of billing the service provision, regardless of whether providers have collected the money.
- For supply of electricity and clean water, it is the date of recording water or electricity meter readings for writing on water or electricity bills.
- For activities of dealing in real estate, building infrastructure or houses for sale, transfer or lease, it is the time of collection of money according to project implementation or payment collection schedules stated in contracts. Based on collected sums of money, business establishments shall declare output VAT amounts arising in the period.
- For construction and installation, it is the time of takeover test and handover of completed works, work items, construction or installation volumes, regardless of whether contractors have collected the money.
- For imported goods, it is the time of registration of customs declarations.
II. VAT RATES
VAT rates for goods and services are applied as follows:
1. The tax rate of 0% is applicable to exported goods and services; construction and installation of works of export processing enterprises; goods sold to duty-free shops; international transportation; exported goods and services not liable to VAT (except for cases not subject to the tax rate of 0% specified at Point 1.3 of this Section.
1.1. Exported goods and services:
a/ Exported goods include:
- Goods exported abroad, including those exported under consignment;
- Goods sold into non-tariff zones under the Prime Minister’s regulations; goods sold to duty-free shops;
- Goods treated as exports under the commercial law:
+ Intermediary processed goods under the commercial law regarding activities of international goods purchase and sale and activities of goods purchase, sale and processing agency with foreign parties.
+ Processed goods for on-spot export under the commercial law regarding activities of international goods purchase and sale and activities of goods purchase, sale and processing agency with foreign parties.
+ Goods exported for sale at overseas fairs and exhibitions.
b/ Exported services include services provided directly to overseas organizations and individuals or those in non-tariff zones.
Overseas organizations are foreign organizations without permanent establishments in Vietnam and being non-VAT payers in Vietnam;
Overseas individuals are foreigners not residing in Vietnam and overseas Vietnamese not present in Vietnam during the provision of services;
Organizations and individuals with business registrations in non-tariff zones, and other cases specified by the Prime Minister.
c/ Other goods and services:
- Construction and installation of works of export processing enterprises.
- International transportation means transportation of passengers, luggage and cargoes along international routes from Vietnam to abroad or from abroad to Vietnam. In case an international transportation contract covers also a domestic stage, international transportation covers also transportation along domestic routes;
- Goods and services not liable to VAT upon their exportation, except for cases not subject to the tax rate of 0% specified at Point 1.3 of this Section;
- Aircraft and seagoing ship repair services provided to foreign organizations and individuals.
1.2. Exported goods or services eligible for the tax rate of 0% must meet the following conditions:
- Having a contract on sale or processing of export goods; contract on entrusted export or entrusted processing of export goods; contract on service provision with overseas organizations and individuals or those in non-tariff zones;
- Having documents of via-bank payment for exported goods or services and other documents under law;
- Having customs declarations for export goods.
Particularly for aircraft and seagoing ship repair services provided to foreign organizations and individuals, to be eligible for the tax rate of 0%, aircraft and seagoing ships must, apart from meeting the above conditions, go through import procedures upon their entry into Vietnam and export procedures upon completion of repair.
1.3. Cases ineligible for the tax rate of 0% include:
- Offshore re-insurance; offshore transfer of technologies or intellectual property rights; offshore capital transfer, credit provision or securities investment; derivative financial services; international post and telecommunications services; exported products being exploited natural resources or minerals not yet processed into other products; goods and services provided to individuals without business registration in non-tariff zones, except for other cases specified by the Prime Minister;
- Petrol and oil which are purchased at home and sold to automobiles of business establishments in non-tariff zones;
- Automobiles sold to organizations and individuals in non-tariff zones.
- Services provided by domestic business establishments to organizations and individuals in non-tariff zones but performed and used outside these zones, such as lease of houses, meeting halls, offices, hotels, warehouses and storing yards; transportation of workers to and from workplaces.
2. The tax rate of 5% is applicable to the following goods and services:
2.1. Clean water for production and daily life, excluding bottled or canned drinking water of all kinds and assorted beverages subject to the tax rate of 10%.
2.2. Fertilizers; ores used for fertilizer production; insecticides, pesticides and growth stimulants for livestock and plants.
a/ Fertilizers include organic and inorganic fertilizers, such as phosphorous fertilizers, nitrogenous fertilizers (urea), NPK fertilizer, mixed nitrogenous fertilizer, phosphate fertilizer, potassium fertilizer, micro-biological fertilizer and other fertilizers.
b/ Ores used as raw materials for fertilizer production like apatite ore used for the production of phosphorous fertilizer, muddy soil for the production of micro-biological fertilizer.
c/ Pesticides and growth stimulants for livestock and plants.
2.3. Feeds for cattle, poultry and for other livestock, including those kinds processed or unprocessed such as bran, oil cakes of all kinds, fish powder, bone powder and other types of feed for cattle, poultry and other livestock.
2.4. Services of digging, embanking and dredging canals, ditches, ponds and lakes for agricultural production; cultivating, tending and preventing and eliminating pests for plants; preliminarily processing and preserving agricultural products (except for dredging intra- field canals and ditches specified at Point 3, Section II, Part A of this Circular).
Services of preliminary processing and preservation of agricultural products include sun-drying, heat-drying, peeling, pitting, slicing, grinding, freezing, salting or other ordinary methods of preservation.
2.5. Cultivation, husbandry, aquatic and marine products which are unprocessed or have been preliminarily processed by cleaning, sun- drying, heat-drying, peeling, pitting, slicing, grinding, freezing, salting or other ordinary methods of preservation at the trading stage.
Unprocessed cultivation products guided at this Point include also paddy, rice, maize, potatoes, cassava and wheat.
2.6. Preliminarily processed rubber latex in the forms of crepe, sheets, strips or granules; preliminarily processed pine resin; nets, net ropes and yarns for plaiting fish nets, including fishing nets, assorted yarns and ropes for exclusive use in plaiting fishing nets, regardless of their production materials.
2.7. Fresh and raw foods; forest products, except for timber, bamboo shoots and products specified at Point 1, Section II, Part A of this Circular, not yet processed, at the trading stage.
Fresh and raw foods are foods that have been neither cooked nor processed into other products but have only been preliminarily processed by cleaning, peeling, slicing, freezing or sun-drying, and still remain fresh and raw, such as cattle and poultry meat, shrimps, crabs, fishes, and other aquatic and marine products
Unprocessed forest products are forest products exploited from natural forests and of the groups of bamboo, rattan of various kinds, mushrooms, Jew’s ear fungus; roots, leaves, flowers, medicinal plants, plant resins, and other forest products.
2.8. Sugar and by-products in sugar production, including molasses, bagasse, dregs.
2.9. Products made of jute, rush, bamboo, rattan, leaves, straw, coir, water hyacinth, and other handicraft products made of raw materials from agricultural production are those made of or processed from jute, rush, bamboo, rattan and leaves as main raw materials, such as jute carpets, jute yarns, jute bags, coir carpets, mats made of jute or rush, ropes and strings made of bamboo or coir; curtains and blinds made of bamboo of various kinds, bamboo brooms, conical hats; preliminarily processed cotton; newsprint paper.
2.10. Specialized machinery and equipment for agricultural production, including plowing, harrowing, seedling-transplanting and seed-sowing machines, rice threshers, harvesters, combined harvester-threshers, farm produce harvesters, pesticide sprayers or spraying machines.
2.11. Medical equipment and instruments, including specialized machinery and instruments for medical use, such as scanners and radiographs of all kinds for medical examination and treatment; devices and instruments used exclusively in surgery and wound treatment; ambulances; blood-pressure, cardiac and vascular meters; blood transfusion instruments; syringes and needles; contraceptive devices and other specialized medical equipment;
Medical cotton, bandages, gauzes and medical hygienic bandages; preventive and curative medicines, including finished medicines, materials for manufacture of medicines other than functional foods; vaccines, medical biologicals, distilled water for preparation of injections and transfusion fluids; chemical supplies for diagnosis and germicides for medical use.
2.12. Teaching and learning aids, including models, drawings, rulers, writing boards, chalks, rulers and compasses used for teaching and learning purposes, and specialized teaching, learning, scientific research and laboratory equipment and instruments.
2.13. Cultural, exhibition, physical training and sport activities; art performances; film production; film importation, distribution and screening.
a/ Cultural, exhibition, physical training and sport activities, except for turnover from sale of goods, rent of grounds and fields or booths at trade fairs or exhibitions.
b/ Art performance activities, such as tuong (classical drama), cheo (traditional operetta), cai luong (reformed drama), singing, dancing, music, drama, circus; other art performances and services of organizing art performances of theatres or tuong, cheo, cai luong, singing, dancing, music, drama or circus troupes with performance licenses granted by competent state agencies.
c/ Film production; film importation, distribution and screening, except for products specified at Point 15, Section II, Part A of this Circular.
2.14. Children’s toys; books of various kinds, excluding those not liable to VAT specified at Point 15, Section II, Part A of this Circular.
2.15.Scientific and technological services are activities serving scientific research and technological development; activities related to intellectual property; services on information or consultancy on, training, retraining, popularization and application of scientific and technological knowledge and practical experience, excluding games online and entertainment services on the Internet.
3. The tax rate of 10% is applicable to goods and services not specified in Section II. Part A; Points 1 and 2, Section II, Part B of this Circular.
The above VAT rates are applicable uniformly to each type of goods or services at the stages of importation, manufacture, processing and trading.
Example 16: If garments are subject to the tax rate of 10%, then these goods items are subject to the tax rate of 10% at all the stages of importation, production, processing and trading.
An establishment that trades in many kinds of goods or provides many kinds of services subject to different VAT rates shall declare VAT at the VAT rate prescribed for each good or service. If this establishment cannot identify different tax rates for its goods or services, it shall calculate and pay tax at the highest tax rate applicable to goods or services it manufactures, trades in or provides.
In the course of implementation, if there arises any case involving the application of a VAT rate according to the Preferential Import Tariff which is against the guidance provided in this Circular, the guidance of this Circular shall be complied with. For cases involving the application of different VAT rates to the same type of imported and home-made goods, local tax offices and customs offices shall report these cases to the Finance Ministry for guidance to ensure timely and uniform application.
III. VAT CALCULATION METHODS
Business establishments shall pay VAT by either of the two methods: the tax credit method and the method of tax calculation directly based on added value.
The subjects of application and the determination of payable VAT amounts by each method are as follows:
1. The tax credit method:
1.1. The tax credit method applies to business establishments that fully observe the accounting, invoice and document regime under the law on accounting and keeping of invoices and documents and register to pay tax by the tax credit method, except those applying the method of tax calculation directly based on added value specified at Point 2 of this Section.
1.2. Determination of payable VAT amounts:
Payable VAT amount = Output VAT amount - Credited input VAT amount
a/ The output VAT amount is equal to the total VAT amount of goods sold or services provided indicated on value added invoices.
The VAT amount indicated on a value added invoice is equal to the taxable price of a taxable good sold or service provided multiplied by (x) the VAT rate of such good or service.
In case of using vouchers stating a VAT-inclusive payment price, the output VAT amount shall be determined to be equal to this payment price minus (-) the taxable price specified at Point 1.10, Section II of this Part.
Business establishments paying VAT calculated by the tax credit method shall, when selling goods or providing services, calculate and collect VAT on the goods sold or services provided. On invoices issued for sold goods or provided services, business establishments shall write VAT-exclusive sale prices, VAT amounts and total amounts payable by purchasers. If on an invoice only the payment price is indicated (except for cases in which special-type documents may be used) but not the VAT-exclusive price and VAT amount, the VAT amount on the goods sold or the service provided shall be calculated based on the payment price indicated on the invoice or document.
Example 17: An enterprise sells iron and steel at a VAT-exclusive sale price of VND 11,000,000/ton of Φ6 iron rods; the 10% VAT amount is VND 1,100,000/ton, but if on some of its sale invoices only the sale price of VND 12,100,000/ton is indicated, the VAT amount calculated on the basis of sale turnover shall be determined as follows: VND 12,100,000/ton x 10% = VND 1,210,000/ton, instead of calculation based on the VAT-exclusive price of VND 11,000,000/ton.
Business establishments shall observe the accounting, invoice and document regime under the law on accounting and keeping of invoices and documents and the guidance in Section IV. Part B of this Circular. For wrong VAT rates stated on invoices which are not yet adjusted by business establishments themselves but are detected through inspection by tax offices, they shall be handled as follows:
For business establishments selling goods or providing services: If the VAT rate indicated on invoices is higher than that prescribed in legal documents on VAT, VAT shall be declared and paid at the VAT rate indicated on invoices. If the VAT rate indicated on invoices is lower than that prescribed in legal documents on VAT, VAT shall be declared and paid at the VAT rate prescribed in legal documents on VAT.
b/ The input VAT amount is equal to (=) total VAT amount indicated on value added invoices for purchased goods or services (including also fixed assets) used for the production of and trading in VAT-liable goods and services or to the VAT amount indicated on vouchers on duty payment for imported goods or VAT payment made on behalf of foreign parties under the Finance Ministry’s guidance for application to Vietnam-based foreign organizations without the legal entity status and foreigners doing business or earning incomes in Vietnam.
If purchased goods and services are of the kinds for which special-type documents indicating VAT-inclusive payment prices are used, business establishments may base themselves on these VAT-inclusive prices and the calculation method specified at Point 1.10, Section I, Part B of this Circular, to determine the VAT-exclusive price and input VAT amount.
Example 18: In a tax period, company A made payment for input services of a special type eligible for tax credit:
The total payment price is VND 110 million (inclusive of VAT). This service is subject to the tax rate of 10%. The creditable input VAT amount shall be calculated as follows:
VND 110 million
VND 10 million
1 + 10%
The VAT-exclusive price is VND 100 million and the VAT amount is VND 10 million.
For wrong VAT rates indicated on invoices which are not yet adjusted by business establishments themselves but are detected through inspection by tax offices, they shall be handled as follows:
For business establishments purchasing goods or services: If the VAT rate indicated on invoices is higher than that prescribed in legal documents on VAT, the input VAT shall be credited at the VAT rate prescribed in these legal documents. If the seller is determined as having declared and paid tax at the tax rate indicated on invoices, the input VAT may be credited at the VAT rate indicated on invoices but certification of the tax office directly managing the seller is required. If the VAT rate indicated on invoices is lower than that prescribed in legal documents on VAT, the input VAT may be credited at the VAT rate indicated on invoices.
c/ Determination of creditable input VAT:
c. 1/ Input VAT on goods or services used for the production of and trading in VAT-liable goods and services may be wholly credited.
c.2/ For goods or services used for the production of and trading in both goods or services liable and not liable to VAT, only the input VAT amount on goods or services used for the production of and trading in VAT-liable goods or services is creditable. Business establishments shall separately account creditable and non-creditable VAT amounts. If it is impossible to separately account these amounts, input VAT will be credited according to the ratio (%) of VAT-liable turnover to total turnover of sold goods or provided services.
c.3/ Input VAT on fixed assets used for the production of and trading in both goods and services liable and not liable to VAT may be wholly credited.
Input VAT on fixed assets in the following cases will not be credited but shall be included in the historical costs of these fixed assets: fixed assets exclusively used for the manufacture of weaponry and military equipment used in defense and security; houses used as office buildings and equipment exclusively used for credit operations of credit institutions and reinsurance, life insurance or securities trading enterprises, hospitals and schools; civil aircraft and yachts not used for commercial cargo and passenger transportation, tourist or hotel business.
Input VAT on goods and services which form fixed assets of enterprises, such as canteens providing shift meals, mid-shift accommodations, free houses, locker rooms, parking lots, toilets and water tanks for laborers working in production or business places, and houses and healthcare stations for laborers working in industrial parks, may be wholly credited.
For fixed assets being passenger automobiles of 9 seats or less (excluding automobiles used for commercial cargo or passenger transportation, tourist or hotel business) and valued at more than VND 1.6 billion, input VAT on the value in excess of VND 1.6 billion is not creditable.
c.4/ Establishments engaged in agricultural production, forestry, rearing or fishing aquatic or marine products and organizing closed production processes, accounting their production and business results in a centralized manner, and using products at the stage of agricultural production, forestry; rearing and fishing aquatic or marine products as raw materials for further production and processing into VAT-liable products (including unprocessed agricultural, forest or aquatic products for export or processed products liable to VAT) may declare and credit input VAT on goods and services purchased for production and business at all stages of capital construction investment, production and processing. If they sell goods that are unprocessed or preliminarily processed agricultural, forest, aquatic or marine products not liable to VAT, the VAT amount on these purchased goods and services may be credited according to the ratio (%) of turnover from VAT-liable goods or services to total turnover from sold goods or provided services.
c.5/ Input VAT on purchased goods or fixed assets which are lost or damaged due to natural disasters, fires or unexpected incidents is not creditable.
c.6/ Input VAT on goods (including also goods purchased from outside or goods manufactured by enterprises themselves) used by enterprises for sales promotion or advertisement in various forms to serve the production of and trading in VAT-liable goods and services is creditable.
c.7/ Input VAT on goods and services used for the production of or trading in goods and services not liable to VAT specified in Section II, Part A of this Circular may be included in the historical costs of fixed assets, the value of raw materials or business costs, except for the following cases:
- VAT on goods and services purchased by business establishments for use in the production of or trading in goods and provision of services to foreign organizations and individuals or international organizations for provision of humanitarian aid or non-refundable aid specified at Point 19.e, Section II, Part A of this Circular, may be wholly credited;
- Input VAT on goods and services used in prospecting, exploring and developing oil and gas fields may be wholly credited.
c.8/ Input VAT arising in a month may be declared for credit immediately when the tax amount payable in that month is determined, regardless of whether relevant goods or services have been delivered for use or still remain in stock. If business establishments detect some invoices or VAT payment vouchers not yet declared for input VAT credit, they may make additional declaration and credit. The time limit for additional declaration and credit is 6 (six) months from the month when missing invoices and vouchers are detected.
Example 19: Business establishment A has one value added purchase invoice issued on February 10, 2009. If in the tax declaration period of February 2009, its accountants failed to declare this invoice, it may make an additional declaration and credit no later than July 2009.
c.9/ Business establishments may either account non-creditable input VAT amounts as expenses for enterprise income tax calculation or include them in the historical costs of fixed assets under law.
c.10/ Corporations’ or groups’ offices that are not directly engaged in business operations and subsidiary administrative and non-business units such as hospitals, clinics, sanatoriums, institutes, training schools, etc., which are not liable to pay VAT, will not be entitled to input VAT credit or refund for goods and services purchased for their operations.
When these units also deal in VAT-liable goods and services, they shall separately register, declare and pay VAT for these operations.
Example 20: The office of Corporation A is not directly engaged in production and business activities and operates with the budget contributed by subsidiary units. If it leases the unused space of its house (office building), it shall separately account, declare and pay VAT for the office lease. The input VAT on goods and services used for the operation of the Corporation’s office will be neither credited nor refunded. The Corporation’s office shall pay such input VAT with its budget contributed by its subsidiary units.
1.3. Conditions for input VAT credit are specified as follows:
a/ Having lawful value added invoices of purchased goods or services or vouchers of VAT payment at the importation stage or vouchers of VAT payment on foreign parties’ behalf under the Finance Ministry’s guidance applicable to foreign organizations without the Vietnamese legal entity status and foreigners conducting business or earning incomes in Vietnam.
b/ Having vouchers of via-bank payment for purchased goods and services, except for cases in which the total invoiced value of purchased goods or services at a time is less than VND 20 million calculated at a VAT-inclusive price.
Without via-bank payment vouchers, input VAT on purchased goods or services with an invoiced value of more than VND 20 million calculated at a VAT-inclusive price at a time will not be credited. These invoices shall be declared by business establishments in a separate section in the list of invoices and vouchers of purchased goods and services.
For goods or services valued at more than VND 20 million purchased on deferred payment or installment payment, business establishments shall declare and credit input VAT based on goods or service purchase contracts, value added invoices and via-bank payment vouchers of these goods or services, and at the same time write the payment time limit in the note section of the list of invoices and vouchers of purchased goods and services. If via-bank payment vouchers are unavailable for the reason that the payment under contracts is not due, business establishments may still declare and credit input VAT. If via-bank payment vouchers are unavailable when the payment under contracts is due, they may not credit input VAT and shall declare and reduce input VAT amounts already credited for the value of goods without via-bank payment vouchers.
Example 21: In January 2009, Company A purchases a goods lot from Company B for its production and business. The total value of the purchase contract is VND 330 million (inclusive VAT at the rate of 10%). As agreed upon in the contract, Company A shall pay for the goods lot to Company B in May 2009.
In this case, Company A may temporarily declare an input VAT amount of VND 30 million in the declaration period of January 2009. When the payment is due in May 2009, Company A shall supply a voucher of via-bank payment of VND 330 million. If Company A fails to supply such via-bank payment voucher, its temporarily credited VAT amount (VND 30 million) of January 2009 must be declared as a reduction of the creditable VAT amount of the declaration period of May 2009.
When the payment is due in May 2009, if Company A can supply a via-bank payment voucher but the sum of money indicated on this voucher is only VND 275 million, it will be allowed to credit only a VAT amount of VND 25 million, and at the same time shall reduce the creditable VAT amount of the declaration period of May 2009 by VND 5 million.
For goods and services purchased by clearing the value of these goods and services against that of sold goods; clearing debts; and authorizing a third party to make via-bank payment, all these payments will be treated as via-bank payments if they are specifically provided in purchase contracts. If, after such payments have been made, the remaining value paid in cash is VND 20 million or more, VAT on this amount will be credited only if a via-bank payment voucher is available. When declaring input VAT invoices, business establishments shall clearly state the methods of payment specifically provided in contracts in the note section of the list of invoices and vouchers of purchased goods and services.
In case a good or service valued at less than VND 20 million is purchased from a supplier several times a day with a total purchase value of more than VND 20 million, VAT will be credited only when via-bank payment vouchers are available.
c/ To be eligible for input VAT credit and refund, exported goods and services (except for cases guided at Point Id and Point le of this Section) must satisfy the conditions and procedures specified at Items a and b of this Point, and Point 1.2, Section II, Part B of this Circular, specifically:
c.1/ Contracts on sale of goods, processing of goods (for cases of goods processing), provision of services to foreign organizations or individuals. For cases of export consignment, export consignment contracts and written records of the liquidation of export consignment contracts (if contracts have been terminated) or written records of periodical comparison of liabilities between the export consignor and the export consignee, clearly stating the quantity and category of products, the value of the goods already exported under consignment; the serial number and date of the export contract signed between the export consignee and the foreign party; the serial number and date of, and the sum of money indicated on, the voucher on the via-bank payment made by the export consignee to the foreign party; the serial number and date of, and the sum of money indicated on, the voucher on the payment made by the export consignor to the export consignee; the serial number and date of the export consignee’s customs declaration for the exported goods.
c.2/ Customs declaration of exported goods, with certification by the customs office that the goods have been exported.
For business establishments exporting software products in the forms of documents, files or packaged databases, to enjoy input VAT credit and refund, they shall fill in customs declarations procedures applicable to ordinary goods.
Particularly for the following cases, customs declarations are not required:
- Business establishments that export services or software via electronic means. However, these business establishments shall comply with all regulations on procedures of certification that the purchaser has received services or software exported via electronic means in accordance with the law on e-commerce.
- Construction and installation of works of export processing enterprises.
- Business establishments that supply electricity, water, stationery and goods for daily operations of export processing enterprises.
c.3/ Via-bank payment for exported goods and services must comply with the following guidance:
Via-bank payment means the transfer of money from the importer’s account into the exporter’s account opened at a bank in the manner as agreed upon in the contract and required by the bank. Payment vouchers are credit notes of the exporter’s bank of the sum of money already received from the importer’s bank account. In case of deferred payment, the agreement thereon must be expressed in the export contract, and when payment is due, the business establishment must have via-bank payment vouchers. In case of export consignment, the export consignee shall make via-bank payment to the foreign party.
- The following cases of payment shall also be regarded as via-bank payment:
+ When payments for exported goods or services are cleared against foreign loans, and business establishments satisfy all the following conditions, procedures and dossiers:
(1) Borrowing contract (for financial loans of under one year); or loan registration certification paper of the State Bank of Vietnam (for loans of over one year).
(2) Voucher on transfer of money via bank by the foreign party into Vietnam.
The method of payment for exported goods or services by clearing against foreign loans must be stated in the export contract.
(3) Written certification by the foreign party of the loan clearing.
(4) Any difference between the value of exported goods or services and the foreign loan must be paid via bank. Vouchers on such via-bank payment are as guided at this Point.
+ When the exporting business establishment uses payments for exported goods or services as capital contributions to an overseas importing establishment, and this business establishment satisfies all the following procedure and dossier requirements:
(1) It has a capital contribution contract.
(2) The use of payments for exported goods or services as capital contributions to an overseas importing establishment must be stated in the export contract.
(3) In case the contributed capital amount is smaller than the turnover from exported goods, the difference must be paid via bank under this Point’s guidance.
+ When the goods or service-exporting establishment applies via-bank payment for exported goods or services but the foreign party authorizes a third party that is a foreign-based organization or individual to make payment, and the authorized payment is stated in the export contract (or an annex or modification note, if any).
+ When the foreign party authorizes its Vietnam-based representative office to make payment into the exporter’s account, and the authorized payment is stated in the export contract (or an annex or modification note, if any).
+ When the foreign party requests a third party being a Vietnam-based organization to make liability-clearing payment to the foreign party by paying via bank the sum of money payable by the foreign party to the exporter, and this request for liability-clearing payment is stated in the export contract (or an annex or modification note, if any) and there is a payment voucher being the credit note of the exporter’s bank of the sum of money already received from the third party’s account, at the same time, the exporter shall produce the written record of comparison of liabilities, containing the certifications of the foreign party and the third party.
+ When the foreign party makes payment from its current deposit account opened at a credit institution in Vietnam and this payment is stated in the export contract (or an annex or modification note, if any). Payment vouchers are credit notes of the exporter’s bank of the money received from the current account of the foreign purchaser that has signed the contract.
- Other cases of payment for exported goods and services as prescribed by the Government:
+ For business establishments sending guest laborers abroad which collect money directly from guest laborers, receipts of cash amounts paid by these laborers are required.
+ For business establishments exporting goods for sale at overseas fairs or exhibitions which collect and transfer home currencies of countries where these trade fairs or exhibitions are organized, they shall produce to customs offices documents declaring foreign-currency amounts collected from the goods sale and transferred home and vouchers on remittance of these amounts into banks in Vietnam.
+ In case of exporting goods or services to pay the Government’s foreign debts, the commercial bank’s certification that the exported goods lot has been accepted by the foreign country for debt payment or that the document set has been forwarded to the foreign country for debt payment is required. Payment vouchers in this case must comply with specific guidance of the Finance Ministry.
+ Payment for exported goods or services with goods means the case in which goods (including goods processed for export) or services are exported to a foreign organization or individual (referred to as foreign party for short) but the payment between the Vietnamese enterprise and foreign party is made by clearing the value of exported goods or services or exported goods-processing charges against that of goods or services purchased from foreign parties.
Exported goods or services paid with goods must satisfy additional dossier requirements as follows:
(1) The method of payment for exported goods with goods is stated in the export contract.
(2) The foreign party’s goods or service purchase contract;
(3) The customs declaration of imported goods paid for exported goods or services.
(4) The foreign party’s written certification of the clearing payment between the exported goods or services and the imported goods or services purchased from the foreign party.
(5) When there is a difference after the clearing of the value of exported goods or services against that of imported goods or services, such difference must be paid via bank. Vouchers on such via-bank payment are as guided at this Point.
+ When goods are exported to a bordering country under the Prime Minister’s regulations on management of border trade with bordering countries, the guidance of the Finance Ministry and the State Bank must be followed.
+ Some cases involving other methods of payment for exported goods and services under relevant provisions of law.
c.4/ Value added invoices on sale of goods or services or invoices of processing charges for processed goods.
d/ Conditions, procedures and dossiers for input VAT credit in some cases when goods are regarded as exported goods:
d.l/ Intermediary processed goods as prescribed in the commercial law regarding activities of international goods purchase and sale and activities of goods purchase, sale and processing agency with foreign countries:
- Export processing contract and annexes thereof (if any) signed with the foreign party, clearly stating the goods-receiving establishment in Vietnam.
- Value added invoice clearly stating the processing charge and the quantity of processed goods returned to the foreign party (on the basis of the charge indicated in the contract signed with the foreign party) and the name of the goods-receiving establishment designated by the foreign party;
- Bill on delivery of intermediary processed products (referred to as the delivery bill for short), with certifications of the deliverer and the recipient of intermediary processed products and certification of the customs office managing the processing contract of the deliverer and recipient.
- Payment for goods processed for foreign countries must be made via bank under the guidance at Item c.3 of this Point.
The procedures for delivery and receipt of intermediary processed goods and delivery bills are as guided by the General Department of Customs.
Example 22: Company A signs with a foreign party a contract to process 200,000 pairs of shoe soles for export. The processing charge is VND 800 million. The contract clearly states that the shoe soles will be delivered to company B in Vietnam for production of finished shoes.
In this case, company A is regarded as undertaking the intermediary processing of products for export. On the voucher to deliver shoe soles to company B, company A should write clearly the quantity, category and specifications of products delivered. The whole turnover of VND 800 million from the processing of shoe soles is subject to the VAT rate of 0%.
d.2/ Processed goods for on-spot export under the commercial law regarding activities of international goods purchase and sale and activities of goods purchase, sale and processing agency with foreign countries:
- Contract on goods sale, signed with the foreign party, clearly stating the goods items, quantity, value, name and address of the goods-receiving enterprise in Vietnam.
- Customs declaration of on-spot exports and imports, with the certification of the customs office that the goods have been delivered to the enterprise in Vietnam designated by the foreign party.
- Payment for goods sold to a foreign trader but delivered in Vietnam must be made via bank in a freely convertible foreign currency. Via-bank payment vouchers are as guided at Point 1.2.c.3 of this Section.
- Value added invoice of on-spot exported goods, clearly stating the name of the foreign purchaser, the goods-receiving enterprise and the goods delivery place in Vietnam.
- On-spot exported goods of foreign-invested enterprises must comply with the provisions of their investment licenses.
d.3/ For goods and supplies exported by Vietnamese enterprises for the execution of overseas construction projects, procedures and dossiers for Vietnamese enterprises executing these overseas construction projects to enjoy input VAT credit or refund must satisfy the following requirements:
- There is a customs declaration of exports.
- Exported goods and supplies must be consistent with the list of goods exported for the execution of an overseas construction project approved by the director of the Vietnamese enterprise executing that project.
- There is an export consignment contract (for export consignment).
d.4/ For goods and supplies sold by domestic business establishments to Vietnamese enterprises for the execution of overseas construction projects and delivered overseas under signed contracts, procedures and dossiers for selling domestic business establishments to enjoy input VAT credit or refund for exported goods must satisfy the following requirements:
- There is a customs declaration of exports with the customs office’s certification of actual exportation;
- Exported goods and supplies must be consistent with the list of goods exported for the execution of an overseas construction project approved by the director of the Vietnamese enterprise executing that project.
- There is a sale and purchase contract signed between the domestic business establishment and the Vietnamese enterprise executing an overseas construction project, clearly stating conditions on goods delivery, goods quantity, category and value;
- There is a consignment contract (in case of export consignment);
- There is a via-bank payment voucher;
- There is a value added invoice on goods sale.
For business establishments with exported goods or goods regarded as exported goods mentioned at Point d above, if they have the customs office’s certification (for exported goods) but lack other procedures and documents as required for each particular case, they are not required to calculate output VAT but are not entitled to input VAT credit. Particularly for cases involving intermediary processed goods and on-spot exported goods, if the business establishments lack one of the documents as required, they shall calculate and pay VAT as for domestically consumed goods. For business establishments providing export services, if they do not satisfy the condition on via-bank payment or the condition for being regarded as via-bank payment, they will be neither entitled to the VAT rate of 0% and input VAT credit nor required to calculate output VAT.
e/ For business households paying VAT directly calculated on the basis of value added which have been permitted to pay VAT by the credit method, they may credit VAT on goods and services purchased from the month they are permitted to pay tax by the credit method. For goods and services purchased before that month, they are not entitled to input VAT credit.
1.3. Business establishments may not calculate and credit input VAT in the following cases: Value added invoices are issued at variance with law provisions, i.e., they are not written with VAT (except for special cases in which value added invoices may be written with VAT-inclusive payment prices); the seller’s name, address or tax identification number is not written or written incorrectly, making the seller unidentifiable; VAT payment invoices and vouchers are fake; invoices are erased or improperly modified, sham invoices (invoiced goods or services are not actually sold); invoices are written with a value not true to the real value of goods or services purchased, sold or exchanged.
2. Method of calculation of VAT directly on the basis of added value
2.1. The method of tax calculation directly on the basis of added value applies to the following entities:
a/ Business individuals and households that fail to observe or inadequately observe the accounting, invoice and document regime prescribed by law.
b/ Foreign organizations and individuals that conduct business in Vietnam not under the Investment Law and fail to observe or inadequately observe the accounting, invoice and document regime prescribed by law.
c/ Entities trading in gold, silver, gems and foreign currencies.
In case business establishments that pay VAT by the tax credit method are engaged in trading in and fashioning gold, silver and gems, they shall separately account gold, silver and gem trading activities subject to the method of tax calculation directly on the basis of added value.
2.2. Determination of payable VAT amounts:
The payable VAT amount by the method of tax calculation directly on the basis of value added is equal to the added value of the taxable goods or service multiplied by (x) the VAT rate applicable to that goods or service.
a/ The added value of a goods or service is equal to the payment price of the goods sold or the service provided minus (-) the payment price of the corresponding goods or service purchased.
Payment price of a goods sold or service provided is the actual sale price stated in the goods or service sale invoice, which is inclusive of VAT and surcharges enjoyable by the seller, regardless of whether the money has been collected.
Payment price of a goods or service purchased is equal to the VAT-inclusive value of the purchased or imported goods or service used for the production of or trading in the corresponding VAT-liable goods or service sold.
For some business lines, the added value is determined as follows:
- For production and business activities, it is the difference between sale turnover and turnover of purchased supplies, goods and services used in production and business. When business establishments cannot account turnover of purchased supplies, goods and services corresponding to turnover of sold goods, the added value shall be determined as follows:
The cost of goods sold is equal to (=) the turnover left at the beginning of the period plus (+) the purchase turnover in the period minus (-) the turnover left at the end of the period.
Example 23: Establishment A produces wood articles. In a month, it sells 150 products and earns a total sale turnover of VND 25 million.
The value of supplies and materials purchased from outside for the production of these 150 products is VND 19 million, of which:
+ Principal raw material (timber): VND 14 million.
+ Other materials and services purchased from outside: VND 5 million.
The applicable VAT rate is 10%. The VAT amount payable by establishment A shall be calculated as follows:
+ The added value of the sold products:
VND 25 million - VND 19 million = VND 6 million.
+ The payable VAT amount:
VND 6 million x 10% = VND 0.6 million.
- For construction and installation, it is the difference between amounts earned from the construction and installation of works or work items minus (-) the cost of materials and supplies, cost of power, transportation, services purchased from outside, and other expenses for the construction and installation of works or work items.
- For transport activities, it is the difference between collected freight, loading and unloading charges minus (-) the cost of petrol and oil, spare parts and other expenses for transportation activities.
- For food and drink catering activities, it is the difference between amounts earned from the sale of foods and drinks, service charges and other revenues minus (-) prime costs of goods and services purchased for the food and drink catering.
- For trading in gold, silver, gems and foreign currencies, the value added is the difference between turnover from the sale of gold, silver, gems or foreign currencies minus (-) prime costs of sold gold, silver, gems or foreign currencies.
- For business establishments paying VAT calculated by the tax credit method and trading in gold, silver, gems or foreign currencies subject to application of the method of tax calculation directly based on value added, they shall separately account input VAT amounts for declaration of VAT amounts payable for different goods and services subject to different tax calculation methods.
If they cannot separately account input VAT, the creditable input VAT amount shall be determined according to the proportion of the turnover of goods and services subject to VAT calculated by the tax credit method to the total turnover of goods sold in the period.
- For other business activities, it is the difference between amounts earned from business activities minus (-) prime costs of goods and services purchased for the performance of such business activities.
- Business establishments paying VAT calculated directly on the basis of added value may not include the value of assets purchased from outside, invested or constructed for use as fixed assets in the turnover from purchased goods or services for the purpose of added value calculation.
b/ For business establishments that sell goods or provide services and have sufficient invoices for all sales under regulations or satisfy all conditions for determining exact turnover from the sale of goods or services under contracts and payment vouchers but have insufficient invoices on purchase of input goods or services, the value added shall be determined to be equal to the turnover multiplied by (x) the ratio (%) of the value added to the turnover.
The ratio (%) of the added value to turnover to serve as a basis for determining the value added is specified as follows:
- Commercial activities (goods distribution and supply): 10%.
- Services and construction (except for construction with the contracted supply of materials): 50%.
- Production, transportation, services associated with the supply of goods, construction with the contracted supply of materials: 30%.
c/ For business activities, individuals and households that fail to observe or inadequately observe the accounting, invoice or voucher regime prescribed by law, VAT shall be paid according to a percentage (%) prescribed by the Finance Ministry.
IV. GOODS AND SERVICE PURCHASE AND SALE INVOICES AND VOUCHERS
Business establishments, when purchasing or selling goods and services, shall abide by the regime on invoices and vouchers as prescribed by law.
1. Business establishments paying VAT by the tax credit method, when selling goods or providing services shall use value added invoices. When making invoices, business establishments shall fully and correctly fill in all items on the invoices. A value added invoice must indicate the VAT-exclusive sale price, charge and surcharge collected in addition to the sale price (if any), VAT and VAT-inclusive total payment price. If the VAT-exclusive sale price is not indicated separately from VAT and only the payment price is indicated, output VAT must be calculated on the basis of the payment price, except for cases in which special vouchers are used.
Business establishments paying tax calculated directly on the basis of value added, when selling goods or providing services, shall use sale invoices.
2. The use and writing of invoices and vouchers in some cases is specified as follows:
2.1. Production and business establishments paying VAT by the tax credit method, when selling goods or services not liable to VAT selling goods and services to VAT-exempt entities; and selling gold, silver, gems or foreign currencies, shall use value added invoices. On these value added invoices only the line for writing the sale price is written with the VAT-exclusive price while the lines for writing the tax rate and VAT amount are left blank and crossed out. In case of selling goods or services not liable to VAT or to VAT-exempt entities, invoices must clearly state that goods are not liable to VAT or are sold to a VAT-exempt entity.
2.2. For export and import business establishments paying VAT by the tax credit method which import goods under other establishments’ consignment, when delivering the goods, they shall make vouchers as follows:
If the import consignee, when delivering goods imported under consignment, has paid VAT at the importation stage, it shall make a value added invoice for use by the import consignor as a basis for declaration and credit of input VAT on goods imported under consignment. When the import consignee does not pay VAT at the importation stage, when delivering imported goods, it shall fill in an ex-warehousing-cum-internal transport bill enclosed with an internal transfer order under regulations for use as a voucher for circulation of the goods on the market. Only after paying VAT at the importation stage for goods imported under consignment can the establishment make an invoice according to this provision.
A value added invoice on delivery of goods imported under consignment must indicate:
a/ The VAT-exclusive sale price covering the value of goods actually imported at CIF price, import duty, excise tax and other amounts payable according to regulations at the importation stage (if any).
b/ The VAT rate and VAT amount according to the VAT amount already paid at the importation stage.
c/ The total payment amount (= a + b).
The import consignee shall issue a separate value added invoice for the commission paid for the consigned import.
2.3. Production and business establishments (including export processing ones) which pay VAT by the tax credit method and export VAT liable goods, when exporting goods, shall use value added invoices.
When delivering goods for transport to border gates or places where export procedures are carried out, if having no ground to issue a value added invoice, the establishment shall use an ex-warehousing-cum-internal transport together with an internal transfer order for use as a voucher for circulation of the goods on the market. After completing the procedures for exporting goods, the establishment shall issue a value added invoice for exported goods.
In case of export of goods under consignment (including export of processed goods under other establishments’ consignment), when delivering goods to the export consignee, the consignor shall use an ex-warehousing-cum-internal transport bill. After the goods are actually exported as certified by the customs office, basing itself on the export consignee’ voucher for comparison and certification of the quantity and value of the actually exported goods, the export consignor shall issue a value added invoice for VAT payment and refund declaration. In this case, the export business establishment shall keep the second original. If the export business establishment has registered with the tax office for printing and circulating by itself invoices which will be used for exported goods and issued to foreign customers, it shall use those invoices for tax declaration, payment and refund.
2.4. Use of invoices and vouchers for goods and services used for sales promotion or advertisement, samples goods, or donated, presented as gifts or internally consumed:
a/ For goods and services used for sales promotion or advertisement, samples goods for goods production and trading or service provision (products, goods and services used for sales promotion, advertisement or sample goods are specified by the commercial law on trade promotion activities), business establishments shall issue value added invoices clearly indicating the names and quantities of goods and that these goods are used free of charge for sales promotion, advertisement or sample goods, leaving the VAT rate line blank and crossed out.
b/ For goods and services used for donation or presentation as gifts, barter or wage payment to laborers or for internal consumption, business establishments shall issue to customers value added invoices (or sale invoices) with all items filled in, including the calculated VAT amount, like sale invoices.
Establishments using goods and services for internal consumption rather than for their production or business, such as transportation, aviation, railway, post and telecommunications, on which output VAT is not required to be calculated, must issue specific regulations on eligible beneficiaries and limit quantities of goods or services for internal consumption, which are approved in writing by competent authorities.
2.5. For goods and services sold at reduced prices which are stated on their invoices, these invoices must clearly state the reduced prices, VAT and VAT-inclusive total payment price.
If the price reduction is based on the quantity or sales turnover of the actually purchased goods or service, which must reach a certain level, the reduced sum of money for the sold goods shall be adjusted on the sale invoice of goods or service of the last purchase or those in the next period. This invoice must show its serial number and the reduced sum of money.
2.6. For production and business establishments which deliver and transfer goods to their dependent cost-accounting affiliates such as branches and shops in other localities (provinces or centrally run cities) for sale or transfer among branches and affiliates; or which deliver goods to commission agents for sale at fixed prices, basing themselves on the mode of business organization and cost-accounting, they may opt for either of the following two ways of using invoices and vouchers:
a/ Using value added invoices as a basis for VAT declaration and payment in each unit and at each independent stage;
b/ Using ex-warehousing-cum-internal transport bills together with the internal transfer orders for goods internally transferred; using the delivery bills for goods consigned to sale agents under regulations, together with the internal transfer orders.
Dependent cost-accounting affiliates, branches, shops and establishments acting as sale agents, when selling goods, shall issue invoices as prescribed to purchasers, and at the same time make a list of goods sold and send it to establishments which have transferred or delivered the goods or consigned goods for agency sale (commonly referred to as goods-delivering establishments) so that these establishments can issue value added invoices for actually sold goods, then hand them to dependent cost-accounting affiliates, branches, shops and establishments acting as sale agents.
For establishments with a large sale volume and turnover, such a list may be made every 5 or 10 days. When goods sold are subject to different VAT rates, different lists must be made for sold goods subject to each VAT rate.
Dependent cost-accounting affiliates, branches, shops and establishments acting as sale agents shall make VAT declaration and payment for goods volumes delivered for sale to purchasers and may make input VAT declaration and credit according to value added invoices of goods-delivering establishments.
2.7. Business establishments acting as goods collection and purchase agents in various forms, when delivering goods to the collection and purchase-consigning establishments, shall issue invoices for goods they collect and purchase and for commissions they enjoy (if any).
2.8. When business establishments purchase goods for which sellers have issued invoices and which the business establishments have received, if the business establishments return part or the whole of these goods after detecting that they are of wrong specifications or poor quality, before returning such goods to the sellers, they shall issue invoices clearly stating that the goods are returned to the sellers due to wrong specifications or poor quality, and the VAT amount. These invoices serve as a basis for the seller to adjust the sales turnover and output VAT amount and the purchaser to adjust the purchase value and input VAT amount.
When the purchaser has no invoices, upon the return of goods, the purchaser and seller shall make a written record or written agreement clearly stating the type, quantity and value of the returned goods calculated according to the VAT-exclusive price and VAT amount written on the sale invoice (serial number and date of the invoice), the reason for the return of goods together with the invoice to the seller. This written record shall be kept together with the sale invoice for use as a basis to adjust the seller’s declared sale turnover and VAT amounts.
When the seller has delivered goods and issued an invoice while the purchaser has not yet received the goods but, after detecting that goods are of wrong specifications or poor quality, the purchaser returns part or the whole of the goods, upon return of the goods, the purchaser and the seller shall make a written record clearly stating the type, quantity, the VAT-exclusive value and VAT amount of the returned goods as stated on the sale invoice (serial number, sign and date of the invoice). The goods shall be returned to the seller together with the invoice so that the latter can re-issue a value added invoice for the received goods and use it as a basis for the seller to adjust the sales turnover and output VAT amount.
2.9. When a business establishment has sold or supplied goods or services and issued an invoice but then has adjusted the sale price (up or down) because its goods or services are of poor quality or wrong specifications, the seller and purchaser shall make a written record thereof or a written agreement clearly stating the quantity and specifications of the goods, the level of price increase (decrease) as indicated on the sale invoice (serial number and date of the invoice and time), the reason for price increase (decrease), and at the same time the seller shall issue an invoice with an adjusted price. That invoice must indicate the adjusted (increased or decreased) sale price (without any negative (-) figures), VAT amount for goods or services on invoice No....sign.... Basing themselves on the invoice with the adjusted price, the seller and purchaser shall declare their adjusted purchase and sale turnovers, output and input VAT amounts. In case the tax rate indicated on the sale invoice is higher than the prescribed tax rate, if the purchaser is unidentifiable, no invoice with an adjusted VAT amount will be issued.
2.10. Business establishments which deliver goods for mobile sale shall use ex-warehousing-cum-internal transport bills together with internal transfer orders under regulations and, when selling goods, issue invoices as prescribed.
2.11. Business establishments which directly retail goods or provide services of a value below the prescribed level are not required to issue invoices; if a purchaser requests an invoice, they shall issue an invoice as prescribed. When they do not issue any invoices, they shall make retail lists. At the end of a day, they shall base themselves on retail lists to issue invoices for use as a tax calculation basis.
2.12. For construction establishments having construction and installation projects which are executed for a long time and for which payment is made according to the implementation progress or completed and taken-over work volume, they shall issue invoices of payment for the completed and taken-over construction volume. Value added invoices must indicate the VAT-exclusive turnover and VAT amount. When construction works have been completed and invoices of payment for the work value have been issued but the payable value of the construction volume is reduced in the process of approving the settlement of the value of capital construction works, invoices and vouchers for the adjusted payable construction value shall be issued.
2.13. For business establishments which are allocated or leased land by the State for building houses for sale or lease or infrastructure for sale or lease, for transportation services with turnover from international transportation; and international tour services, invoices shall be issued with the following details:
a/ The line for the sale price shall be written with the VAT-exclusive sale price of the house or infrastructure (the house sale price and the land price or rent rate or infrastructure rent rate are written separately), transportation or package tour service turnover.
b/ The line for the taxable price being the price determined under Point 1.8, Section I, Part B of this Circular; transportation or tourist service turnover minus expenses arising overseas such as those for meals, accommodation and travel.
c/ The lines for the VAT rate and amount and the payment price shall be written as prescribed.
If a business establishment dealing in real estate, building infrastructure or houses for sale or transfer collects money from purchasers according to project implementation or money collection schedules stated in contracts, upon collecting money, it shall issue value added invoices. Such an invoice must indicate the collected sum of money, land price to be subtracted from VAT calculation turnover, VAT rate and VAT amount. To-be-subtracted land price shall be calculated according to the ratio (%) of the sum of money collected according to the project implementation or money collection schedule stated in the contract, to that to be subtracted at the time of transfer (the time of first money collection according to progress or schedule).
2.14. Financial leasing establishments which lease VAT-liable assets shall issue invoices as prescribed.
Financial leasing establishments, when leasing assets liable to VAT, shall issue value added invoices (for assets purchased at home) or vouchers of VAT payment at the importation stage (for imported assets). Total VAT amounts written on financial leasing service invoices must match VAT amounts written on value added invoices (or vouchers of VAT payment at the importation stage).
For cases in which assets purchased for financial leasing are not liable to VAT and value added invoices or vouchers of VAT payment at the importation stage are not available. VAT must not be written on invoices.
When VAT on financial leasing assets has been fully credited and the asset ownership right has been transferred to the lessees, the lessor shall transfer to the lessees the whole dossiers on the origin of assets under law.
Financial leasing service establishments are not required to declare and pay VAT for financial leasing services. They shall only make tax declaration and calculation for VAT-liable assets financially leased to other establishments according to invoices issued as prescribed above.
Financial leasing service establishments are not required to submit VAT returns for financial leasing services but shall submit only lists of invoices of goods or services sold and lists of invoices of goods and services purchased, filling in the section for VAT for purchased goods and services only the VAT amounts of leased assets according to value added invoices issued for turnover from financial leasing services in the declaration period. Taxpayers shall submit tax declaration dossiers for assets financially leased to other establishments.
In case the lessee fails to perform the contract and thus the lessor has to recover the assets, the lessor shall notify the lessee thereof and clearly determine the VAT amounts already paid and not yet paid. When the lessor continues to lease these assets to another establishment, it shall calculate the VAT amount not fully collected for continued collection under the new contract.
In case assets are leased for a period of time before the lessor sells them to the lessee or another establishment, the lessor shall calculate VAT for the sold assets, issue value added invoices and may only credit input VAT on the assets not yet fully collected.
In case the lessor and the lessee jointly pool capital lor the purchase of the assets and the lessor only collects the rent (principal and interest) corresponding to its contributed capital amount, the invoice on the purchase of the assets for lease shall be managed by the lessor until the asset ownership is transferred to the lessee. The VAT amount corresponding to the capital amount contributed by the lessor shall be included in the first-time receipt.
In case a financial leasing contract has been completed, the VAT amount has been fully paid by the lessee and the two parties agree to continue the lease, the invoice issued for the subsequent turnover will be VAT-exclusive.
2.15. For foreign currency trading establishments conducting foreign currency- purchasing and -selling activities abroad, they shall make detailed lists of trading turnovers for each kind of foreign currency. They shall keep all vouchers on transactions with overseas purchasers or sellers under the accounting law. For foreign currency-purchasing and –selling activities conducted at home, invoices must be issued under regulations.
2.16. For establishments purchasing and selling gold, silver and gems, if they purchase them from non-business individuals who have no invoices, they shall make lists of purchased goods.
2.17. Export processing enterprises, when selling goods or services, shall use sale invoices (or invoices issued by themselves) according to the Finance Ministry’s regulations.
2.18. Invoices and vouchers for contributed and transferred assets are as follows:
a/ Asset-contributing parties are non-business individuals or organizations:
a.1/ When non-business individuals or organizations contribute their assets as capital to limited liability or joint-stock companies, vouchers for these assets are written certifications of capital contributions and written records of delivery and receipt of assets. If contributed assets are brand-new and unused and accompanied by lawful invoices accepted by the capital delivery and receipt council, the value of these contributed assets is the VAT-inclusive value indicated on the invoices. The contributed capital-receiving party may make declaration for credit of the VAT amount indicated on the asset purchase invoice of the capital-contributing party.
a.2/ When an individual uses his/her own property or the value of land use rights for setting up a private enterprise or law firm, he/she is not required to carry out procedures for the transfer of property ownership or land use rights to the private enterprise. If he/she has no lawful voucher evidencing the cost of his/her property, a document on the value of the property made by a valuation organization defined by law is required as a basis for accounting the value of fixed assets.
b/ Asset-contributing or -transferring parties are business establishments:
b.1/ For assets contributed as capital to enterprises, the following documents are required: written record of the contribution as capital for production and business, joint-venture or affiliation contract: written record of the valuation of the asset by the council for delivery and receipt of contributed capital amounts of the capital-contributing parties (or written valuation of a specialized valuation organization as defined by law), enclosed with a dossier set on the origin of the asset.
b.2/ For assets transferred between dependent cost-accounting member units of the same business establishment; assets transferred upon division, splitting, consolidation, merger or transformation of enterprises, business establishments with transferred assets must have asset transfer orders enclosed with the dossier sets on the origin of transferred assets, and are not required to issue invoices.
For assets transferred between independent cost-accounting units or member units with the full legal entity status in the same business establishment, business establishments with transferred assets shall issue added value invoices, declare and pay VAT according to regulations.
Business establishments are not required to make VAT declaration and payment for the following:
- Sums of money received as compensation for land, supports for land and resettlement due to land recovery;
- Assets contributed as capital for founding an enterprise;
- Assets transferred among dependent cost-accounting units in the same enterprise;
- Assets transferred upon division, splitting, consolidation, merger or transformation of enterprises;
- Payments claimed from third parties in insurance activities;
- Amounts collected on others’ behalf not related to the sale of goods and services of business establishments.
2.19. Business establishments receiving monetary supports from other business establishments shall, upon receipt of these supports, issue receipts and account these supports as other incomes for enterprise income tax declaration and payment under regulations.
Business establishments providing monetary supports shall issue spending vouchers according to support purposes stated in support contracts.
2.20. Business establishments delivering goods in the form of lending, borrowing or return of goods shall issue value added invoices under regulations applicable to the case of ordinary goods purchase and sale.
C. VAT REFUND
Taxpayers entitled to and cases of VAT refund are specified as follows:
1. Business establishments that pay tax by the tax credit method may be considered for tax refund if they have input tax amounts not fully credited for three or more consecutive months.
The refundable tax amount is the input tax amount not yet fully credited by the time of request for tax refund.
Example 24: Enterprise A declares input and output VAT amounts as follows:
(Unit of calculation: VND million)
Tax declaration month
Input tax creditable in the month
Output tax arising in the month
Accumulative input tax amount not yet credited
In the above example, enterprise A has an accumulative input tax amount for three consecutive months larger than the output VAT amount. Enterprise A is entitled to a VAT refund of VND 150 million.
2. For business establishments that have been newly founded under investment projects and made business registration and registered to pay VAT by the tax credit method, or under oil and gas field exploration and development projects which are still at the investment stage and have not yet started operating, if the investment duration has lasted for one year or more, they may be entitled to VAT for goods and services used for investment in every year. If the accumulated VAT amount on purchased goods and services used for investment is VND 200 million or more, the establishments will be entitled to VAT refund.
3. For operating business establishments that pay VAT by the tax credit method, if they have new investment projects which are still at the investment stage, they shall make declarations for clearing VAT amounts on purchased goods and services used for new investment projects against VAT amounts on production and business activities they are conducting. After clearing, any uncredited VAT amount of VND 200 million or more on purchased goods and services used for investment will be refunded for investment projects.
For operating business establishments (except for enterprises applying accounting within the whole system) that pay VAT by the tax credit method, if they have investment projects on new production facilities in provinces or centrally run cities other than those in which they are headquartered, which are still at the investment stage, have neither commenced operation nor made business or tax registration, and have VAT amounts of VND 200 million or more on purchased goods and services used for investment, these VAT amounts will be refunded for investment projects. In these cases, business establishments shall make separate tax declarations and refund dossiers.
4. If in a month, a business establishment exports goods or services and has an uncredited input VAT amount of VND 200 million or more on exported goods in that month, the business establishment will be considered for VAT refund on a monthly basis. If in a month, a business establishment both exports and domestically sells goods or services and has an uncredited input VAT amount of VND 200 million or more on exported goods or services in that month, even after being cleared against the output VAT on domestically sold goods or services, the business establishment will be considered for VAT refund on a monthly basis. If after being cleared against the output VAT on domestically sold goods or services, its uncredited input VAT amount is less than VND 200 million, it will not be considered for VAT refund.
Entities entitled to VAT refund in some cases of export include establishments consigning their goods for export, in case of export consignment; establishments undertaking to process export goods and entering into contracts directly with foreign parties, in case of entrusted export processing; establishments entering into export processing contracts with foreign parties, in case of intermediary processing; and enterprises having their goods and supplies exported for overseas construction works, in case of goods exported for overseas construction works.
5. Business establishments shall finalize tax upon their division, splitting, dissolution, bankruptcy, ownership transformation; or assignment, sale, contracting or lease, for State enterprises, when they have input VAT amounts not yet fully credited or any overpaid VAT amounts.
6. Refund of paid VAT amounts for programs and projects funded with non-refundable official development assistance (ODA) or non-refundable or humanitarian aid:
6.1. For projects funded with non-refundable ODA: Program or project owners or principal contractors or organizations designated by foreign parties to manage programs or projects will be entitled to refund of VAT amounts paid for goods and services purchased in Vietnam for use for these programs and projects.
6.2. Vietnamese organizations that use humanitarian aid money of foreign organizations or individuals to purchase goods and services for programs or projects funded with non- refundable or humanitarian aid in Vietnam will be entitled to refund of VAT amounts paid for these goods and services.
Example 25: The Red Cross Society is provided with VND 200 million as aid from international organizations to purchase humanitarian aid goods for inhabitants in the provinces hit by natural disasters. The VAT-exclusive value of purchased goods is VND 200 million and the VAT amount is VND 20 million. The Red Cross Society will be refunded a tax amount of VND 20 million.
The refund of paid VAT amounts for non-refundable ODA-funded programs and projects complies with the Finance Ministry’s guidance.
7. Persons entitled to diplomatic privileges and immunities under the Ordinance on Diplomatic Privileges and Immunities who purchase goods or services in Vietnam for use will be refunded paid VAT amounts indicated on value added invoices or payment vouchers indicating VAT-inclusive payment prices.
8. Business establishments having tax refund decisions of competent authorities under law.
Business establishments and organizations eligible for VAT refund as guided at Points 1, 2, 3, 4, 5, 6 and 8 of this Part must be those paying VAT by the credit method, possessing business registration certificates or investment licenses (practice licenses), having seals required by law, keeping accounting books and documents under the accounting law; and having deposit bank accounts with their tax identification numbers.
In case business establishments have made tax refund application dossiers, input VAT amounts requested to be refunded must not be cleared against creditable VAT amounts of the month following the month of making refund dossiers.
D. PLACES OF TAX PAYMENT
Taxpayers shall make VAT declaration and payment in localities where they conduct production or business. The VAT declaration and payment comply with the Tax Administration Law and guiding documents.
In some specific cases, the VAT declaration and payment and procedures for transfer of vouchers are guided as follows:
1. Taxpayers that declare and pay VAT by the credit method and have dependant accounting production establishments (including also processing and assembling establishments) located in provinces or centrally run cities other than those where they are headquartered shall pay VAT both in localities where their production establishments are located and localities where they are headquartered.
Dependent accounting production establishments that conduct cost-accounting activities shall register for tax payment by the credit method in localities where they conduct production activities and use value added invoices as a basis for tax declaration and payment in these localities when delivering their semi-finished or finished products to other establishments, including their headquarters.
In case dependant production establishments fail to conduct cost-accounting activities, taxpayers at headquarters shall pay VAT equal to 2% (for goods subject to the VAT rate of 10%) or 1 % (for goods subject to the VAT rate of 5%) of VAT-exclusive turnover of products they produce or products of the same category in localities where they are located. VAT amounts already paid by taxpayers for their dependent accounting production establishments will be cleared against their payable VAT amounts in localities where they are headquartered.
Example 26: Enterprise A is headquartered in Ho Chi Minh City and has a dependent accounting production establishment in Ba Ria - Vung Tau producing products subject to the VAT rate of 10%. These products are sold by Enterprise A. As a result, Enterprise A shall make declare and pay on behalf of its dependent accounting establishment a monthly VAT amount equal to 2% of the turnover calculated at the VAT-exclusive sale price of goods produced by its dependent accounting production establishment in Ba Ria - Vung Tau. VAT amounts paid for the dependent accounting establishment may be cleared against Enterprise A’s payable amounts.
2. Procedures for transfer of vouchers between the State Treasury and tax offices
Taxpayers shall pay VAT amounts arising in localities where they are headquartered to the State Treasury offices of the same level with tax offices to which they have made tax registration and declaration, and concurrently pay VAT according to prescribed percentages (%) for their affiliated production establishments located in provinces or centrally run cities other than those where they are headquartered. Tax payment vouchers shall be made for each State Treasury office, clearly indicating state budget revenue accounts of localities in which budget revenues arise.
In case taxpayers pay tax in cash at State Treasury offices in localities where they are headquartered, these State Treasury offices shall transfer money and state budget revenue vouchers to concerned State Treasury offices for accounting tax amounts of dependent accounting production establishments as state budget revenues.
E. ORGANIZATION OF IMPLEMENTATION
I. ORGANIZATION OF VAT COLLECTION
1. Tax offices shall organize the management of VAT collection and refund for business establishments.
2. Customs offices shall organize the management of the collection of VAT on imports.
II. IMPLEMENTATION EFFECT
1. This Circular takes effect 15 days after its publication in “CONG BAO” and applies from January 1, 2009. It replaces the Finance Ministry’s Circulars No. 32/2007/TT-BTC of April 9, 2007, and No. 30/2008/TT-BTC of April 16, 2008.
2. Shipbuilding establishments that enter into contracts with customers before the effective date of this Circular to build ships at prices inclusive of VAT at the rate of 5% but cannot complete the building of ships for takeover test and handover by December 31, 2008, will continue enjoying the tax rate of 5% for these contracts. Before March 31, 2009, they shall notify in writing their managing tax offices of lists of uncompleted shipbuilding contracts to be carried forward to 2009, enclosed with copies of these contracts.
Any problems arising in the course of implementation should be promptly reported by business units and establishments to the Finance Ministry for timely solution.
FOR THE FINANCE MINISTER