How to calculate value added tax for goods exempted from import duty and then repurposed in Vietnam?

How to calculate value added tax for goods exempted from import duty and then repurposed in Vietnam?

Based on Official Dispatch 1570/TCHQ-TXNK in 2024 from the General Department of Customs guiding the value added tax (VAT) on goods that were exempt from import duty and then repurposed, the following contents are included:

Firstly, pursuant to point b, clause 1, Article 7 of the Law on Value Added Tax 2008 as amended by clause 2, Article 1 of the Law on Value Added Tax Amendment 2013, regulations on taxable value of imports are as follows:

Taxable Value

1. Taxable value is specified as follows:

...

b) For imports, it is the value at the port of entry plus import duty (if any), special consumption tax (if any), and environmental protection tax (if any). The value at the port of entry is determined according to regulations on the taxable value of imports;

...

Secondly, pursuant to clause 2, Article 7 of Circular 219/2013/TT-BTC, the determination of VAT taxable value for imports is as follows:

Taxable Value

...

2. For imports, it is the value at the port of entry plus (+) import duty (if any), plus (+) special consumption tax (if any), plus (+) environmental protection tax (if any). The value at the port of entry is determined according to regulations on the taxable value of imports.

In cases where imports are exempt from, or subject to a reduction in import duty, then VAT taxable value is the import value plus (+) the import duty determined at the rate of tax payable after exemption or reduction.

...

Thus, based on the above legal grounds and Official Dispatch 1570/TCHQ-TXNK of 2024, in cases where enterprises have paid VAT on the "value at the port of entry" but have not paid VAT on the "import duty" due to import duty exemption when imported, and now due to a change in usage purpose that incurs "import duty," VAT must be paid on the amount of "import duty" conformable under the Law on Value Added Tax and guiding documents.

VAT for goods exempted from import duty and then repurposed is calculated using the following formula:

In which:

- VAT Taxable Value for imports = Value at the port of entry + import duty + special consumption tax (if any) + environmental protection tax (if any).

- Tax Rate is determined according to the provisions in Article 8 of the Law on Value Added Tax 2008.

How to calculate value added tax for goods exempted from import duty and then repurposed in Vietnam? (Image from Internet)

When is the time for determination for VAT on imports in Vietnam?

According to clause 6, Article 8 of Circular 219/2013/TT-BTC, the point of determination for VAT on imports is from the time of customs declaration registration.

Where is VAT for imports paid?

According to Article 20 of Circular 219/2013/TT-BTC concerning the place of payment for VAT:

Place of Payment

1. Taxpayers declare and pay VAT at the locality where production and business occur.

2. Taxpayers declaring and paying VAT by the deduction method who have dependent accounting production facilities located in a province or centrally-run city different from the province or city where the headquarters is located must pay VAT at the locality where the production facility is situated and the location of the headquarters.

3. In cases where enterprises or cooperatives applying the direct method have production facilities in provinces or cities different from where the headquarters is located or have intermittent sales activities in other provinces, enterprises or cooperatives must declare and pay VAT at a percentage against the revenue arising in the other provinces at the locality where production facilities and intermittent sales occur. Enterprises or cooperatives are not required to pay VAT by percentage against the revenue at the headquarters for the revenue arising in another province that has been declared and paid.

4. For telecommunications service businesses that offer postpaid telecommunications services in provinces or centrally-run cities different from where the headquarters is located and establish dependent accounting branches that pay VAT by deduction method participating in the provision of postpaid telecommunications services in such locality, the telecommunications service businesses will declare and pay VAT on postpaid telecommunications services as follows:

- Declare VAT on the revenue of postpaid telecommunications services of the entire business with the tax authority directly managing the headquarters.

- Pay VAT at the locality where the headquarters is located and at the locality where dependent accounting branches are situated.

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

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

Therefore, VAT for imports can be paid at:

- The locality where production and business occur.

- The locality where there is a production facility and the locality where the headquarters is located if taxpayers pay VAT by the deduction method with a dependent accounting production facility located in a different province or centrally-run city from where the headquarters is located.

- The locality where there is a production facility or where intermittent sales occur if the enterprise or cooperative applies the direct method with production facilities in a province or city different from where the headquarters is located or has intermittent sales activities in other provinces.

- The locality where the headquarters is located and the locality where a dependent accounting branch is situated if a telecommunications service business operates postpaid telecommunications services in a province or centrally-run city different from where the headquarters is located and establishes dependent accounting branches that pay VAT by the deduction method and engage in postpaid telecommunications service provision in that locality.