How to calculate value-added tax by the credit method in Vietnam?

How to calculate value-added tax by the credit method in Vietnam?

Based on the provisions of Article 12 Circular 219/2013/TT-BTC guiding the calculation of value-added tax by the credit method as follows:

VAT Payable = Output VAT - Input VAT

Where:

- Output VAT = Total VAT of goods and services recorded on VAT invoices

VAT of Goods and Services Sold Recorded on VAT Invoice = Taxable Price of Goods and Services Sold x VAT Rate of those Goods and Services.

- If using payment documents that show the payment price including VAT, the output VAT is determined by the payment price minus (-) the taxable price:

For goods and services using payment documents that show the payment price including VAT, such as stamps, transportation tickets, lottery tickets, etc., the price excluding VAT is determined as follows:

Price Excluding VAT = Payment Price / (1+ VAT Rate of Goods)

- Input VAT = total VAT recorded on VAT invoices for the purchase of goods and services (including fixed assets) used for the production and business of VAT-liable goods and services, VAT recorded on tax payment documents for imported goods or VAT payment documents on behalf of foreign counterparts as guided by the Ministry of Finance applicable to foreign organizations without Vietnamese legal personality and foreign individuals doing business or earning income arising in Vietnam.

How to calculate value-added tax by the credit method in Vietnam? (Image from the Internet)

What are regulations on value-added tax credit method?

Based on Clause 1, Article 10 of the Law on Value-Added Tax 2008, amended by Clause 4, Article 1 of the Law on Amendments to the Law on Value-Added Tax 2013, the value-added tax credit method is regulated as follows:

- The VAT payable according to the credit method is the output VAT minus the deductible input VAT;

- The output VAT is the total VAT of goods and services sold recorded on the VAT invoice.

The VAT of goods and services sold recorded on the VAT invoice is the taxable price of the goods and services sold multiplied by the VAT rate of those goods and services.

In cases where payment documents show the payment price including VAT, the output VAT is determined by the payment price minus the taxable price determined according to the provisions at point k, Clause 1, Article 7 of the Law on Value-Added Tax 2008;

- Deductible input VAT is the total VAT recorded on the VAT invoices for the purchase of goods and services, tax payment documents for imported goods, and meeting the conditions specified in Article 12 of the Law on Value-Added Tax 2008, amended by Clause 6, Article 1 of the Law on Amendments to the Law on Value-Added Tax 2013.

Additionally, the tax credit method applies to business establishments that fully comply with accounting, invoicing, and documentation regulations per the law on accounting, invoices, and documentation, including:

- Business establishments with annual revenue from selling goods and providing services of one billion dong or more, excluding household businesses and individual businesses;

- Business establishments voluntarily registering to apply the credit method, excluding households and individual businesses.

What are the conditions for deducting input value-added tax in Vietnam?

Based on Clause 2, Article 12 of the Law on Value-Added Tax 2008, amended by Clause 6, Article 1 of the Law on Amendments to the Law on Value-Added Tax 2013, the conditions for deducting input VAT are regulated as follows:

- Having VAT invoices for the purchase of goods and services or tax payment documents in the importation stage;

- Having non-cash payment documents for purchasing goods and services, except for goods and services purchased in single transactions valued at less than twenty million dong;

- For exported goods and services, in addition to the conditions specified in points a and b, Clause 2, Article 12 of the Law on Value-Added Tax 2008, there must also be: contracts signed with foreign parties for selling, processing goods, providing services; invoices for selling goods and services; non-cash payment documents; customs declarations for exported goods.

Payment for exported goods and services in the form of offsetting payments between exported goods and services and imported goods and services, replacing government debt, is considered non-cash payment.