Are weapons and equipment used for national defense and security subject to VAT in Vietnam?

Are weapons and equipment used for national defense and security subject to VAT in Vietnam?

Based on Clause 18, Article 5 of the Law on Value Added Tax 2008, supplemented by Clause 1, Article 3 of the Law Amending and Supplementing a Number of Articles of Laws on Taxes 2014, and amended by Clause 1, Article 1 of the Amended Law on Value Added Tax 2013, which specifies regulations on weapons and equipment used specifically for national defense and security as follows:

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17. Machinery, equipment, spare parts, and materials of a kind not yet produced domestically and required to be imported for direct use in scientific research and technological development; machinery, equipment, spare parts, specialized means of transportation, and materials of a kind not yet produced domestically and required to be imported for the exploration, exploitation, and development of oil and gas fields; aircraft, drilling rigs, and ships of a kind not yet produced domestically and required to be imported for creating fixed assets of enterprises or rented from abroad for use in production, business, leasing, and sub-leasing.

18. Weapons and specialized equipment used for national defense and security.

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Thus, according to the above regulation, weapons and equipment used for national defense and security are not subject to VAT.

Are weapons and equipment used for national defense and security subject to VAT in Vietnam? (Image from the Internet)

Which entity is the taxpayer for VAT in Vietnam?

According to Article 4 of the Law on Value Added Tax 2008, the regulation on taxpayers is specified as follows:

The taxpayer for value added tax is an organization or individual that produces, trades goods, or provides services subject to value added tax (hereinafter referred to as a business establishment) and an organization or individual that imports goods subject to value added tax (hereinafter referred to as an importer).

How is the taxable value determined in Vietnam?

According to Article 7 of the Law on Value Added Tax 2008, amended by Clause 2, Article 1 of the Amended Law on Value Added Tax 2013 and the regulation on exchange rates when determining taxable values repealed by Point c, Clause 2, Article 6 of the Law Amending and Supplementing a Number of Articles of Laws on Taxes 2014 specifies the determination of taxable values as follows:

- For goods and services sold out by a production or business establishment, the sales price excluding VAT; for goods and services subject to special consumption tax, the sales price includes special consumption tax but excludes VAT; for goods subject to environmental protection tax, the sales price includes environmental protection tax but excludes VAT; for goods subject to both special consumption tax and environmental protection tax, the sales price includes both taxes, but excludes VAT;

- For imported goods, it is the import price at the port plus import tax (if any), plus special consumption tax (if any), and plus environmental protection tax (if any). The import price at the port is determined according to the regulations on taxable prices for imported goods;

- For goods and services used for exchange, internal consumption, and gifts, the taxable value for VAT is the value of similar or equivalent goods and services at the time these activities arise;

- For asset leasing activities, it is the rental price excluding VAT.

- In the case of renting in the form of periodic rental payment or prepayment for the rental term, the taxable value is the rental amount paid for each period or prepayment for the rental term excluding VAT;

- In the case of renting machinery, equipment, and means of transportation from abroad of a kind not yet produced domestically for re-lease, the taxable value is deducted from the rental paid to the foreign party.

- For goods sold under installment or deferred payment, it is determined by the one-time payment sales price excluding VAT, excluding interest on installment or deferred payment;

- For processing goods, it is the processing price excluding VAT;

- For construction and installation activities, it is the value of the project, project item, or part delivered excluding VAT. In the case of construction and installation without raw materials, machinery, and equipment, the taxable value does not include the value of these raw materials and machinery, and equipment;

- For real estate business activities, it is the real estate sale price excluding VAT, minus the land use right transfer price or land rent payable to the state budget;

- For brokerage and agency buying and selling goods and services earning commissions, it is the commission earned from these activities excluding VAT;

- For goods and services using payment invoices indicating payment prices as including VAT, the taxable value is determined by the following formula:

VAT-exclusive price = Payment price / (1 + VAT rate of goods and services (%))

- The taxable value for goods and services specified in Clause 1, Article 7 includes surcharges and additional fees received by the business establishment.