Do enterprises receiving sponsorship need to pay value-added tax in Vietnam? What entities are not subject to value-added tax in Vietnam?

Do enterprises receiving sponsorship need to pay value-added tax in Vietnam?

According to Clause 1, Article 5 of Circular 219/2013/TT-BTC which stipulates cases not subject to VAT declaration and payment as follows:

Cases not subject to VAT declaration and payment

1. Organizations and individuals receiving monetary compensation (including compensation for land and assets on land when land is recovered by decision of a competent State authority), bonuses, assistance, transfer of emission rights, and other financial receipts.

When a business establishment receives monetary compensation, bonuses, or assistance, or transfers emission rights and other financial receipts, it must issue receipts in accordance with regulations. For business establishments disbursing money, based on the purpose of expenditure, they must issue payment documents.

In cases where compensation is paid in the form of goods or services, the compensating entity must issue invoices and declare, calculate, and pay VAT as for the sale of goods or services; the compensating recipient declares and deducts as prescribed.

If a business establishment receives money from organizations or individuals to perform services for such organizations or individuals such as repair, warranty, promotion, or advertising, they must declare and pay tax as per regulations.

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Thus, if organizations or individuals receive sponsorship, they are not required to pay VAT. However, when enterprises receive sponsorship money, they must issue receipts according to regulations.

In cases where enterprises receive sponsorship from organizations or individuals to perform services for such organizations or individuals, like repair, warranty, promotion, or advertising, they must declare and pay VAT.

Do enterprises receiving sponsorship need to pay value-added tax in Vietnam? (Image from the Internet)

What entities are not subject to value-added tax in Vietnam?

Based on Article 5 of the Law on Value-Added Tax 2008 (amended by Clause 1, Article 1 of the 2013 Amended Value-Added Tax Law, Clause 1, Article 1 of Law No. 106/2016/QH13, and supplemented by Clause 1, Article 3 of the 2014 Amended Laws on Taxation), the following entities are specified as not subject to VAT:

- Agricultural, livestock, aquaculture products that are not yet processed into other products or are only normally pre-processed produced or caught by organizations and individuals sold and at the import stage.

Enterprises, cooperatives purchasing agricultural, livestock, aquaculture products that have not been processed into other products or only normally pre-processed sold to other enterprises or cooperatives do not need to declare, calculate, and pay VAT but can deduct input VAT.

- Products being breeds of animals, plants including breeding eggs, breeds, seedlings, seeds, semen, embryos, and genetic materials.

- Irrigation, drainage; plowing, harrowing; dredging canals, internal fields serving agricultural production; harvesting services for agricultural products.

- Fertilizers; specialized machinery and equipment serving agricultural production; offshore fishing vessels; livestock and poultry feed and feed for other animals.

- Salt products produced from seawater, natural rock salt, refined salt, iodized salt with the main component of sodium chloride (NaCl).

- State-owned housing sold by the State to current tenants.

- Land use rights transfer.

- Life insurance, health insurance, student insurance, and other related human insurance services; livestock insurance, plant insurance, other agricultural insurance services; insurance for ships, boats, equipment, and other necessary tools directly serving fishing; reinsurance.

- The following financial, banking, and securities trading services:

+ Credit granting services include lending; discounting, rediscounting negotiable instruments and other valuable papers; guarantees; financial leasing; issuing credit cards; domestic factoring; international factoring; other forms of credit granting according to law;

+ Lending services by taxpayers who are not credit institutions;

+ Securities trading includes securities brokerage; proprietary trading; securities underwriting; investment advisory; securities custody; fund management and securities portfolio management; market organizing services of stock exchange or securities transaction center; other securities trading activities according to securities laws;

+ Capital transfer includes partial or full transfer of invested capital, including selling enterprises to other enterprises for production, business, securities transfer; other forms of capital transfer according to law;

+ Debt sale;

+ Foreign exchange trading;

+ Derivative financial services include interest rate swaps; forward contracts; futures contracts; currency options; and other derivative financial services according to law;

+ Sale of collateralized assets of debts by organizations wholly owned by the Government of Vietnam established to deal with bad debts of Vietnam's credit institutions.

- Medical, veterinary services, including examinations, treatment, and prevention for humans and animals; elder care, disability services.

- Public postal services, telecommunications, and universal Internet services under programs by the Government of Vietnam.

- Maintenance services for zoos, parks, flower gardens, street trees, public lighting; funeral services.

- Maintenance, repair, and construction funded by contributions from the people, humanitarian aid for cultural, artistic works, public service builds, infrastructure, and housing for social policy beneficiaries.

- Education, vocational training according to the law.

- Broadcasting radio and television funded by state budget.

- Publishing, importing, and distributing newspapers, journals, newsletters, political books, textbooks, curriculum books, legal documents, science-technical books, books printed in ethnic minority scripts, and propaganda posters, including audio, video, and electronic data; currency, printing money.

- Passenger transport by public bus and electric vehicle.

- Machinery, equipment, spare parts, materials that are not locally produced and need to be imported for direct use in scientific research, technology development; machinery, equipment, spare parts, special-use means of transport, and materials that are not locally produced and need to be imported to conduct exploration, development of oil and gas fields, aircraft, drilling rigs, ships that are not locally produced and need to be imported to create fixed assets of enterprises or leased from abroad for production, business, lease, or sublease.

- Specialized weapons and equipment for national defense and security.

- Imported goods in cases of humanitarian aid, non-refundable aid; gifts to state agencies, political organizations, socio-political organizations, socio-political-professional organizations, social organizations, socio-professional organizations, people's armed forces; gifts for individuals in Vietnam according to Government regulations; diplomatic exemption items; personal belongings in duty-free standard luggage.

Goods and services sold to foreign organizations, individuals, international organizations for humanitarian aid, non-refundable aid for Vietnam.

- Trans-shipment, transit goods through Vietnamese territory; temporary import and re-export goods; temporary export and re-import goods; imported materials for the production and processing of exported goods according to production and processing contracts signed with foreign parties; goods, services traded between foreign countries and non-tariff areas and between non-tariff areas.

- Technology transfer according to the Law on Technology Transfer; intellectual property rights transfer according to the Law on Intellectual Property; computer software.

- Imported gold in bar, sheet form not yet processed into fine arts or jewelry products or other products.

- Export products that are resources, minerals that have not been processed into other products; export products made from resources, minerals with total cost of resources, minerals plus energy costs accounting for 51% or more of product cost.

- Artificial products used to replace parts of sick people's bodies; crutches, wheelchairs, and other specialized tools for the disabled.

- Goods, services of households, individual businesses with an annual turnover of one hundred million VND or less.

When is the time to determine VAT in Vietnam?

According to Article 5 of Decree 209/2013/ND-CP, stipulates the time to determine value-added tax as follows:

- The time to determine VAT for goods is the time of transferring ownership or use rights of goods to the buyer, regardless of whether money has been collected or not.

- The time to determine VAT for services is the time of completing the provision of services or the time of preparing the service provision invoice, regardless of whether money has been collected or not.