What VAT rate shall apply to construction provided outside Vietnam?
What VAT rate shall apply to construction provided outside Vietnam?
Based on the provisions in Clause 20, Article 4 of Circular 219/2013/TT-BTC concerning objects not subject to VAT as follows:
Objects not subject to VAT
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20. Transshipped goods, goods in transit through Vietnamese territory; temporary import and re-export goods; temporary export and re-import goods; imported raw materials and supplies for the production and processing of exported goods under production and processing contracts signed with foreign parties.
Goods and services traded between foreign countries and non-tariff zones, and between non-tariff zones.
Non-tariff zones include: export processing zones, export-processing enterprises, bonded warehouses, tax-suspension warehouses, bonded zones, special economic-commercial zones, commercial-industrial zones, and other economic areas established and benefiting from tax incentives like non-tariff zones according to the Decision of the Prime Minister. The trade relations between these zones and outside parties are export and import relations.
The dossiers and procedures for identifying and handling circumstances where VAT is not collected are implemented following the Ministry of Finance's guidelines on customs procedures; customs inspection and supervision; export and import taxes, and tax management for exported and imported goods.
However, according to Clause 1, Article 9 of Circular 219/2013/TT-BTC:
0% VAT Rate
1. 0% VAT rate: applicable to exported goods and services; construction, installation overseas and in non-tariff zones; international transportation; goods and services not subject to VAT when exported, except for cases in which the 0% tax rate is not applied as guided in Clause 3 of this Article.
Exported goods and services are those sold and provided to organizations and individuals overseas and consumed outside Vietnam; sold or provided to organizations and individuals in non-tariff zones; goods and services provided to foreign clients in accordance with the law.
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d) Other goods and services:
- Construction, installation overseas or in non-tariff zones;
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Additionally, according to the guidelines in Official Dispatch 42268/CTHN-TTHT 2024 issued by the Hanoi Tax Department regarding the tax rate for exported goods:
"In cases where the company engages in construction and installation overseas, the company applies a 0% VAT rate if it meets the conditions specified in Clause 2, Article 9 of Circular 219/2013/TT-BTC."
Thus, if a business entity in Vietnam engages in construction overseas, it is considered an export activity and is eligible for a 0% VAT rate if it meets the conditions specified at Point b, Clause 2, Article 9 of Circular 219/2013/TT-BTC.
What documents are required to prove that the services are provided outside Vietnam for 0% VAT in Vietnam?
construction overseas that apply a 0% VAT rate must have sufficient documentation as stipulated at Point b, Clause 2, Article 9 of Circular 219/2013/TT-BTC:
- A service supply contract signed with organizations, individuals overseas;
- Payment documents for exported services via banks and other documents as prescribed by law.
What VAT rate shall apply to construction provided outside Vietnam? (Image from the Internet)
When is the time of determining VAT for construction provided outside Vietnam?
Based on Clause 2, Article 8 of Circular 219/2013/TT-BTC as follows:
Time of determining VAT
1. For the sale of goods, it is the time of transfer of ownership or right to use goods to the buyer, irrespective of whether payment has been received.
2. For the provision of services, it is the time of service completion or issuance of the service invoice, irrespective of whether payment has been received.
For telecom services, it is the time of data reconciliation on service charges in accordance with the economic contract between telecommunications businesses, but no more than 2 months after the month in which the service charges arise.
3. For the supply of electricity and clean water, it is the date of recording electricity and water consumption on meters to be recorded on the payment invoice.
4. For real estate business activities, infrastructure construction, building houses for sale, transfer, or lease, it is the time of payment according to project implementation progress or progress in the contract. Based on the received payment, the business entity declares the output VAT arising in the period.
5. For construction and installation, including shipbuilding, it is the time of acceptance, handover of the work, work section, or completed construction and installation volume, irrespective of whether payment has been received.
6. For imported goods, it is the time of customs declaration registration.
Thus, the time for determining VAT for construction overseas is the time of service completion or the issuance of the service invoice, irrespective of whether payment has been received.
