Công văn 17557/BTC-TCT

Respectfully to: Taxation Departments of provinces and central-affiliated cities

On June 19, 2013, National Assembly approved the Law No. 31/2013/QH13 amending and supplementing a number of Articles of Law on value-added tax, which takes effect from January 01, 2014. On July 11, 2013, the Office of National Assembly issued document No. 05/VBHN-VPQH certifying the Law consolidating Laws on value-added tax. At present, the Ministry of Finance is expeditiously coordinating with concerned agencies in submitting to Government for promulgation of Decree detailing implementation of Law on value-added tax and promulgating Circular on guiding implementation. For provisions taking effect from January 01, 2014, pending competent state agencies to promulgate legal documents to guide implementation of the Law, the Ministry of Finance guides implementation of some contents which are applied from January 01, 2014 as follows:

At Clause 2 Article 10 of the consolidated Law on value-added tax prescribed:

“2. The tax credit method applies to business establishments which fully observe regulations on accounting, invoices and documents as prescribed by the law on accounting, invoices and documents, including:

a) Business establishments that earn annual revenue of at least 1 billion VND from goods sale and service provision, except for business households and individuals;

b) Business establishments that registered voluntarily for application of the tax credit method, except for business households and individuals.”

At Article 11 of the consolidated Law on value-added tax prescribed:

“Article 11. Method of tax calculation directly based on added value

1. The payable value-added tax amount according to the method of tax calculation directly based on added value is the added value multiplied by the value-added tax rate applicable to activities of the gold, silver and gem purchase and sale, and manufacture.

The added value of gold, silver or gem is the payment price of  gold, silver and gem already been sold minus the payment price of gold, silver or gem already been purchased respectively.

2. The payable value-added tax amount according to the method of tax calculation directly based on added value equal to the rate % multiplied with revenues is applied as follows:

a) Subjects of application:

- Enterprises and cooperatives of which the annual revenue is less than 1 billion VND, except for enterprises and cooperatives that registered for voluntary application of the tax credit method specified at Clause 2 Article 10 of this Law;

- Business households and individuals;

- The foreign organizations and individuals not have permanent establishments in Vietnam but earn revenues in Vietnam, not yet fully observed regulations on accounting, invoices and documents, except for foreign organizations and individuals that provide goods and services to conduct activities of search, exploration, development and exploitation of oil and gas and paid tax under the tax credit method in which the Vietnamese parties shall deducted and paid tax on behalf of them.

- Other economic organizations, except for the organizations that registered tax payment according to the tax credit method specified at Clause 2 Article 10 of this Law;

b) The percentage (%) for calculating VAT is specified as follows:

- Goods supply and distribution: 1%;

- Services, construction excluded supply of raw materials:  5%;

- Production, transport, and services associated with goods, construction included supply of raw materials:  3%;

- Other business activities: 2%.”

Based on the provisions above, the Ministry of Finance guides implementation as follows:

The revenue level of at least 1 billion VND that is revenue from sale of goods and provision of services subject to VAT in 2013 shall be basis for determining enterprises and cooperatives subject to payment of VAT under the tax credit method in 2014.

1. To determine the revenue in 2013

1.1. For enterprises and cooperatives which have had business operation prior to 2013, the revenue level in 2013 as basis for determining method of VAT payment in 2014 is total indexes "total revenue of goods and services sold subject to VAT"  on monthly VAT declarations from December 2012 to the end of November 2013.

1.2. For enterprises and cooperatives which have just been established in 2013, and operated production and business in 2013 for duration insufficient 12 months, the estimated revenue of year is determined as follows: Total indexes "total revenue of goods and services sold subject to VAT" on monthly VAT declarations of months of activities of production and business in 2013 divided by the number of months of activities of production and business and multiplied with 12 months.

2. VAT calculation method in 2014

If the revenue in 2013 (as determined according to guidance at point 1 above) is more than 1 billion, enterprises and cooperatives shall be subjects of VAT payment under the tax credit method in 2014.

If the revenue in 2013 (as determined according to guidance at point 1 above) is less than 1 billion, enterprises and cooperatives which have observed regulations on accounting, books, invoices and documents and sent a notification to tax agency involving registration for the application of tax credit method to calculate VAT (notification is made according to Form No. 06/GTGT promulgated together with Circular No. 156/2013/TT-BTC dated November 6, 2013 of the Ministry of Finance), such enterprises and cooperatives shall be subjects of VAT payment under the tax credit method in 2014.

If the revenue in 2013 (as determined according to guidance at point above) is less than 1 billion, and enterprises and cooperatives fail to register voluntarily for application of the tax credit method, the provincial/municipal Taxation Departments are requested to guide for enterprises to change for application of the direct tax calculation method and use of invoices of goods sale upon selling goods or providing services from January 01, 2014.

3. Requesting Taxation Departments and Taxation Sub-Departments to expeditiously guide enterprises and cooperatives in determining their revenues in 2013 according to guidance at point 1 above. Taxation Departments and Taxation Sub-Departments send Form No. 06/GTGT promulgated together with Circular No. 156/2013/TT-BTC dated November 06, 2013 of the Ministry of Finance to each enterprise, cooperative of which revenue is less than 1 billion (as determined according to the point 1 above) before December 22, 2013 and notify such enterprises and cooperatives for registering voluntarily so as to further apply the tax credit method, further use VAT invoices in 2014. If any enterprise or cooperative in case of changing for application of direct method fails to register for application of the tax credit method, it must use sale invoices from January 01, 2014, not be entitled to use VAT invoices.

Taxation Departments should propagate and provide clear explanations for enterprises and cooperatives to understand method of VAT application, and guide enterprises and cooperatives in having plans for placing orders to print sale invoices for use from January 01, 2014, for cases of change for application of the direct method and not use VAT invoices.

Notifications to send to taxation agencies for registration for application of the tax credit method for VAT calculation (made according to Form No. 06/GTGT promulgated together with the Circular No. 156/2013/TT-BTC dated November 06, 2013 of the Ministry of Finance) must be sent to taxation agencies before December 31, 2013. From January 01, 2014, taxation agencies must review enterprises that fail to register for application of the tax credit method, if detecting use of VAT invoices at variance with legislation, they must have measures to handle timely in accordance with legislation.

The Ministry of Finance requests taxation Departments to expeditiously organize implementation and direct for taxation Sub-Departments in carrying out timely. In the course of implementation, any arising problems should be reported to the Ministry of Finance for guidance on settlement in accordance with regulations.