Are imports eligible for VAT deduction in Vietnam?

Are imports eligible for VAT deduction in Vietnam?

According to Clause 1, Article 14 of Circular 219/2013/TT-BTC which prescribes the principles of input VAT deduction as follows:

Principles for Input VAT Deduction

1. The input VAT of goods and services used for the production and business of goods and services subject to VAT is fully deductible, including the input VAT not compensated for goods subject to VAT that have been damaged.

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Simultaneously, based on Clause 1, Clause 2, and Clause 3, Article 15 of Circular 219/2013/TT-BTC as amended by Clause 10, Article 1 of Circular 26/2015/TT-BTC, Article 1 of Circular 173/2016/TT-BTC which stipulate the conditions for input VAT deduction as follows:

Conditions for Input VAT Deduction

1. Have a legal VAT invoice for purchased goods or services, or proof of VAT payment at the import stage, or proof of VAT payment on behalf of the foreign party as guided by the Ministry of Finance applicable to foreign organizations without legal entity status in Vietnam and foreign individuals conducting business or having income arising in Vietnam.

2. Have non-cash payment documents for purchased goods or services (including imports) from VND 20 million or more, except for cases where the value of imports or services for each occasion is less than VND 20 million, goods and services purchased each occasion according to invoices amounting to less than VND 20 million according to the price inclusive of VAT, and cases where the business establishment imports goods as gifts or presents from foreign organizations or individuals.

Non-cash payment documents include payment documents via banks and other non-cash payment documents as guided in Clause 3 and Clause 4 of this Article.

3. Bank payment documents are understood as having documents proving the transfer of money from the buyer's account to the seller's account at organizations providing payment services according to payment methods in accordance with current legal regulations such as checks, payment orders, debit orders, collection orders, bank cards, credit cards, phone SIMs (e-wallets), and other payment methods as prescribed (including the case where the buyer pays from their account to the seller's account bearing the name of the private enterprise owner or the buyer pays from their account bearing the name of the private enterprise owner to the seller's account).

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Thus, imports can be eligible for VAT deduction if the following conditions are met:

- The imports are used for the production or business of goods and services subject to VAT, wherein the VAT of the imports will be considered as input VAT.

- Have a legal VAT invoice for purchased goods or services or proof of VAT payment at the import stage, or proof of VAT payment on behalf of the foreign party applicable to foreign organizations without legal entity status in Vietnam and foreign individuals conducting business or having income arising in Vietnam.

- Have non-cash payment documents for purchased goods or services (including imports) from VND 20 million or more, except for cases where the value of imports or services for each occasion is less than VND 20 million, goods and services purchased each occasion according to invoices amounting to less than VND 20 million according to the price inclusive of VAT, and cases where the business establishment imports goods as gifts or presents from foreign organizations or individuals.

Are imports eligible for VAT deduction in Vietnam? (Image from Internet)

When is the time to determine VAT for imports in Vietnam?

Pursuant to Clause 6, Article 8 of Circular 219/2013/TT-BTC which prescribes that the time to determine VAT for imports is from the time of customs declaration registration.

What are cases of VAT exemption for imports in Vietnam?

According to Article 4 of Circular 219/2013/TT-BTC as amended and supplemented by Clause 1, Clause 2, Clause 3, Article 1 of Circular 26/2015/TT-BTC, and further amended by Point a, Point b, Clause 1, Article 1 of Circular 130/2016/TT-BTC, Article 1 of Circular 25/2018/TT-BTC which stipulate cases where imports are not subject to VAT as follows:

- Products of livestock, crop species that are not subject to VAT imported by commercial enterprises with business registration for livestock and crop species granted by state management agencies.

- Newspapers, journals, specialized newsletters, political books, textbooks, curriculum, legal documents, science-technical books, books printed in minority languages, and posters, pictures, propaganda brochures, including those in the form of recorded tapes or discs, audio recordings, visual recordings, electronic data; money, printed currency.

- imports of a type not yet domestically manufactured:

+ Machinery, equipment, spare parts, materials imported for direct use in scientific research and technology development activities;

+ Machinery, equipment, replacement parts, specialized transport vehicles, and materials needed for import for oil and gas exploration and mining activities;

+ Aircraft (including aircraft engines), rigs, ships of a type not yet produced domestically imported to create fixed assets of enterprises or leased from abroad for production, business, leasing, or sub-leasing.

- Weapons, ammunition (including materials, machinery, equipment, spare parts) specifically used for national defense and security imported under the scope of import duty exemptions according to the provisions of the Law on Export and Import Duties or imported according to annual quotas approved by the Prime Minister the Government of Vietnam.

- Goods imported as humanitarian aid, non-refundable aid, and must be certified by the Ministry of Finance or the Department of Finance.

- Goods imported as gifts to government agencies, political organizations, socio-political organizations, socio-professional-political organizations, social organizations, socio-professional organizations, people's armed forces units in accordance with the law on gifts and presents.

- Goods imported as gifts to individuals in Vietnam in accordance with the law on gifts and presents.

- Goods imported as personal belongings of foreign organizations and individuals according to the diplomatic immunity standards prescribed by the law on diplomatic immunity privileges.

- Goods imported as personal belongings of Vietnamese people residing abroad when returning to the country.

- Goods imported as hand-carried items within the duty-free luggage allowance;

- Goods imported as goods sold to foreign organizations, international organizations for humanitarian aid, non-refundable aid to Vietnam.

- Goods temporarily imported for re-export; goods temporarily exported for re-import; raw materials and supplies imported for the production and processing of export goods according to production and processing contracts signed with foreign counterparts.

- Raw materials and supplies imported for the production and processing of export goods according to production and processing contracts signed with foreign counterparts.

- Imported gold in the form of bars, ingots not yet crafted into fine art products, jewelry, or other products.