Do preschools in Vietnam have to pay VAT when collecting students’ meal fees in the form of collection on behalf?

Do preschools in Vietnam have to pay VAT when collecting students’ meal fees in the form of collection on behalf?

Based on Clause 13, Article 4 of Circular 219/2013/TT-BTC, it provides guidance on subjects exempt from VAT as follows:

Subjects not subject to VAT

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13. Education, including vocational training in accordance with the law, covers language and informatics teaching; teaching dance, singing, painting, music, drama, circus, physical education, sports; child-rearing, and other vocational training aimed at enhancing cultural, professional, and educational expertise.

In cases where educational institutions from preschool to high school levels collect meal fees, transportation fees for student pick-ups, and other fees in the form of collection and payment on behalf, these meal and transportation fees and other fees collected and paid on behalf also fall under the category of being VAT exempt.

Fees related to boarding students and trainees; and training activities (including organizing examinations and issuing certifications in the training process) provided by the training institutions are not subject to VAT. If a training institution does not directly organize training but only conducts examinations and issues certifications in the training process, these examination activities and certification issuances are also not subject to VAT. Services for exams and certifications not part of the training process are subject to VAT.

Example 7: Training Center X authorized to train and issue professional certifications for insurance agents delegates training duties to Unit Y, while Training Center X organizes examinations and issues insurance agent certifications. These examination and certification activities of Training Center X are exempt from VAT.

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In the case where preschool to high school institutions collect meal fees, transportation fees for student pick-up and drop-off, and other types of fees in the form of collection and payment on behalf, these meals, transportation, and other fees collected and paid on behalf are also not subject to VAT.

Therefore, preschools do not have to pay VAT when collecting meal fees from students in the form of collection on behalf.

Do preschools in Vietnam have to pay VAT when collecting students’ meal fees in the form of collection on behalf? (Image from Internet)

What are the regulations on where to pay VAT in Vietnam?

According to Article 20 of Circular 219/2013/TT-BTC, the regulations on where to pay VAT are as follows:

- Taxpayers declare and pay VAT at the locality where production and business activities are conducted.

- Taxpayers who declare and pay VAT under the deduction method with dependent production establishments in a province or city under central authority different from where the head office is located must pay VAT in both the locality where the production establishment is located and where the head office is located.

- Enterprises and cooperatives applying the direct method with production establishments in provinces or cities different from where the head office is located or having transient sales activities outside the province must declare and pay VAT based on a percentage of revenue for the revenue generated out-of-province at the location where the production establishment or transient sales occur. Enterprises and cooperatives are not required to pay VAT on a percentage of revenue at the head office for revenue already declared and paid tax out-of-province.

- In the case where a telecommunications service business provides postpaid telecommunication services in a province or city under central authority different from where the head office is located and establishes branches with dependent accounting to pay VAT using the deduction method and also participates in providing postpaid telecommunications services in that locality, the telecommunications service business shall declare and pay VAT on postpaid telecommunication services as follows:

+ Declare VAT for the entire business's postpaid telecommunications service revenue with the tax authority directly managing the head office.

+ Pay VAT at the locality where the head office is located and at the locality where there is a dependent accounting branch.

The VAT payable at the locality where there is a dependent accounting branch is determined at a rate of 2% (for postpaid telecommunications services subject to VAT at a rate of 10%) on the revenue (excluding VAT) from postpaid telecommunications services at the locality where the dependent accounting branch is situated.

- VAT declaration and payment are performed according to the provisions of the Law on Tax Administration and related guiding documentation.

What is the time of VAT determination in Vietnam?

According to Article 8 of Circular 219/2013/TT-BTC, the time of VAT determination is stipulated as follows:

- For the sale of goods, it is the point in time the ownership or use rights of the goods is transferred to the buyer, regardless of whether payment has been made.

- For service provision, it is the completion time of the service provision or the time of issuing the service provision invoice, regardless of whether payment has been collected.

For telecommunication services, it is the time of completing the verification of connection service charges according to the economic contract between telecommunications service businesses, but not exceeding 2 months from the month when the connection service charges incur.

- For electricity and clean water supply, it's the date of recording electricity and water consumption on meters to show on invoices.

- For real estate business, infrastructure construction, house construction for sale, transfer, or lease, it is the time of payment according to the project's progress or the payment schedule outlined in the contract. Based on the received amount, the business performs the declaration of arising VAT.

- For construction, installation, including shipbuilding, it is the time the project, project items, construction, and installation volume are reviewed and handed over, irrespective of payment status.

- For imported goods, it is the time of registering the customs declaration.