Are individuals receiving amounts involving compensation in Vietnam required to declare value-added tax?

Are individuals receiving amounts involving compensation in Vietnam required to declare value-added tax?

Under the provisions of Clause 3, Article 2 of Decree 209/2013/ND-CP, regulations on taxpayers are as follows:

Tax payers

1. Value-added tax payers include organizations and individuals producing or trading in goods or services subject to value-added tax (below referred to as business establishments) and organizations and individuals importing goods subject to value-added tax (below referred to as importers).

2. Vietnam-based production and business organizations and individuals that purchase services (including services associated with goods) from foreign organizations without permanent establishments in Vietnam or overseas individuals not residing in Vietnam shall be value-added tax payers, unless they are not required to declare, calculate and pay value-added tax defined at point b Clause 3 of this Article.

Permanent establishments and overseas individuals being non-residents at this Clause must comply with the laws on enterprise income tax and personal income tax.

3. Cases are not required to declare, calculate and pay value-added tax:

a) Organizations and individuals receive amounts involving compensation, awards, subsidies, money for transfer of emission right and other financial revenues.

b) Vietnam-based production and business organizations and individuals that purchase services from foreign organizations without permanent establishments in Vietnam or overseas individuals not residing in Vietnam including the following cases: repair of means of transport, machinery or equipment (including supplies and spare parts); advertisement and marketing; investment and trade promotion; goods sale and service provision brokerage: or training; or share with foreign partners charges for international post or telecommunications services provided outside Vietnam.

c) The non-business organizations and individuals are not value- added tax payer upon selling assets.

d) Organizations and individuals that transfer investment projects for production of and trading in goods or services subject to value-added tax to enterprises or cooperatives.

dd) Cultivation, husbandry and aquatic products which have not yet been processed into other products or have been just preliminarily processed and sold to enterprises or cooperatives, except for case defined at Clause 1 Article 5 of the Law on value-added tax.

The Ministry of Finance shall guide specifically provisions at Clauses 2 and 3 of this Article.

In addition, whether individuals receiving amounts involving compensation are required to declare value-added tax is guided by Clause 1, Article 5 of Circular 219/2013/TT-BTC as follows:

Cases of exemption declaring and paying VAT

1. An organization or individual receives a monetary compensation (including compensation for land and property on land that is withdrawn by a competent authority), bonus, allowance, or payment for transfer of emission permit, or other revenues.

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Thus, according to the law, individuals receiving amounts involving compensation are not required to declare value-added tax.

Additionally, monetary compensation (including compensation for land and property on land that is withdrawn by a competent authority), bonus, allowance, or payment for transfer of emission permit, or other revenues are not subject to exemption declaring VAT.

In cases of compensation in goods and services, the compensating establishment must issue an invoice and declare, calculate, and pay VAT as for the sale of goods and services; the compensated establishment declares and deducts according to regulations.

In cases where a business establishment receives money from organizations and individuals for providing services to organizations and individuals such as repair, warranty, promotion, and advertising, they must declare and pay tax according to regulations.

Are individuals receiving amounts involving compensation in Vietnam required to declare value-added tax? (Image from the Internet)

What are the methods of calculating value-added tax in Vietnam?

Under Article 9 of the Value-Added Tax Law 2008, the methods of tax calculation are as follows:

Tax calculation methods

Value-added tax calculation methods include value-added tax credit method and method of calculation of tax based directly on added value.

Thus, the methods of calculating value-added tax include:

[1] The credit method.

[2] The method of calculation of tax based directly on added value.

What are the regulations on value-added tax invoices in Vietnam?

Under Article 14 of the Value-Added Tax Law 2008, regulations on VAT Invoices and documents are as follows:

- Goods and service purchase and sale must be accompanied by invoices and documents according to law and the following regulations:

+ Business establishments which pay value-added tax according to the tax credit method shall use added-value invoices; such an invoice must be filled in fully and properly, displaying all surcharges and additional charges (if any). In case value-added tax-subject goods or services are sold with added-value invoices that do not indicate value-added tax amounts, the output value-added tax shall be determined to be the payment price indicated in the invoice multiplied by the value-added tax rate, except cases specified in Clause 2, Article 14 of the Value-Added Tax Law 2008;

+ Business establishments which pay tax according to the method of calculation of tax based directly on added value shall use sale invoices.

- For stamps and tickets which are payment documents pre-printed with payment prices, those prices are inclusive of value-added tax.