Are sugar-sweetened beverages subject to VAT in Vietnam?

Are sugar-sweetened beverages subject to VAT in Vietnam?

Pursuant to Article 3 of the Law on Value Added Tax 2008, which provides for goods and services subject to VAT as follows:

Taxable Objects

Goods and services used for production, business, and consumption in Vietnam are subject to value-added tax, except for those specified in Article 5 of this Law.

Based on Clause 1, Article 10 of Circular 219/2013/TT-BTC as amended by Clause 6, Article 1 of Circular 26/2015/TT-BTC regarding the VAT rate for soft drinks as follows:

5% Tax Rate

1. Clean water used for production and daily activities, excluding bottled drinking water and other beverages subject to a 10% tax rate.

2. Ores for fertilizer production; pesticides and growth stimulants for plants and animals, including:

a) Ores for fertilizer production are raw materials for fertilizer production such as Apatite ore for phosphorus fertilizers, peat for bio-fertilizer;

b) Pesticides included in the list of plant protection drugs issued by the Ministry of Agriculture and Rural Development and other pesticides;

c) Growth stimulants for plants and animals.

...

From the above provisions, it can be seen that sugar-sweetened beverages are subject to VAT, and the applicable VAT rate for sugar-sweetened beverages is 10%.

Are sugar-sweetened beverages subject to VAT in Vietnam? (Image from the Internet)

When is the time for calculating VAT for the sale of sugar-sweetened beverages in Vietnam?

According to Article 8 of Circular 219/2013/TT-BTC which provides for the time of determining VAT as follows:

Time of Determining VAT

1. For the sale of goods, it is the time of transfer of ownership or right to use the goods to the buyer, irrespective of whether the money has been collected or not.

2. For service supply, it is the time of completion of service provision or the time of issuing a service provision invoice, irrespective of whether the money has been collected or not.

For telecommunications services, it is the time of data reconciliation for telecommunications connection charges according to the economic contract between telecommunications service businesses, but no later than two months from the month of incurring telecommunications connection charges.

3. For electricity and clean water supply, it is the date of recording electricity and water consumption on meters to be recorded on billing invoices.

4. For real estate business activities, infrastructure construction, house construction for sale, transfer, or lease, it is the time of money collection according to the project implementation progress or the money collecting schedule specified in the contract. Based on the amount collected, the business entity shall carry out VAT declaration of arisen output in the period.

5. For construction, installation, including shipbuilding, it is the time of acceptance and handover of the completed work, item, or construction volume, irrespective of whether the money has been collected or not.

6. For imported goods, it is the time of customs declaration registration.

Thus, the time for determining value-added tax for the sale of sugar-sweetened beverages is the time of transfer of ownership or right to use the goods to the buyer, irrespective of whether the money has been collected or not.

Where is VAT paid for the sale of sugar-sweetened beverages in Vietnam?

According to the provisions of Article 20 of Circular 219/2013/TT-BTC, which provides for the determination of the place of tax payment:

Place of Tax Payment

1. Taxpayers declare and pay VAT in the locality where they produce and conduct business.

2. Taxpayers declaring and paying VAT under the deduction method with a dependent accounting production base located in a province or centrally-run city other than the province or city where the head office is located must pay VAT in the locality where the production base and the head office are located.

3. In the case of enterprises and cooperatives applying the direct method with a production base in a province, or city different from where the head office is located or having out-of-province sales activities, enterprises and cooperatives declare and pay VAT as a percentage of the revenue generated out-of-province at the locality where the production base or itinerant sales take place. Enterprises and cooperatives do not have to pay VAT as a percentage of revenue at the head office for revenues generated out-of-province that have already been declared and paid.

4. In the case of businesses with telecommunications services engaging in postpaid telecommunications services in a province or centrally-run city different from where the head office is located and establishing a dependent accounting branch paying VAT under the deduction method also participating in postpaid telecommunications services in that locality, the telecommunications service business declares and pays VAT for postpaid telecommunications services as follows:

- Declare VAT for revenue from postpaid telecommunications services of the entire business with the tax authority managing the head office.

- Pay VAT in the locality where the head office and the branch with dependent accounting are located.

The VAT to be paid in the locality where the branch with dependent accounting is located is determined as 2% (for postpaid telecommunications services subject to VAT with a 10% rate) of revenue (excluding VAT) from postpaid telecommunications services at the locality where the branch with dependent accounting is located.

5. The declaration and payment of VAT is carried out in accordance with the provisions of the Law on Tax Administration and its guiding documents.

Thus, for goods being sugar-sweetened beverages, taxpayers declare and pay VAT at the locality where they produce and conduct business.

In the case of taxpayers declaring and paying VAT under the deduction method with a dependent accounting production base located in a province or city different from where the head office is located, they must pay VAT at the locality where the production base and the head office are located.

In the case of enterprises, cooperatives applying the direct method with a production base in a province, or city other than where the head office is located or engaging in out-of-province sales activities, enterprises and cooperatives declare and pay VAT as a percentage of revenue generated out-of-province at the locality where the production base or itinerant sales take place. Enterprises, cooperatives do not have to pay VAT as a percentage of revenue at the head office for revenues generated out-of-province that have already been declared and paid.