How to determine the VAT taxable price for goods and services used for promotions in Vietnam?
How to determine the VAT taxable price for goods and services used for promotions in Vietnam?
Pursuant to Clause 2, Article 4 of Decree 209/2013/ND-CP, the regulation on VAT taxable price is as follows:
Taxable Price
The taxable price is carried out according to the provisions of Article 7 of the Law on Value-added Tax and Clause 2, Article 1 of the Law amending and supplementing certain articles of the Law on Value-added Tax.
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- For goods and services used for exchange, internal consumption, donation, or gifting, the VAT taxable price is the price of similar or equivalent goods and services at the time of exchange, internal consumption, donation, or gifting. In particular, the taxable price is zero (0) for giving invitation cards (without charge) to performances, fashion shows, beauty contests, and sports competitions that are permitted by competent state authorities in accordance with the law.
For goods and services used for promotions in accordance with commercial law, the taxable price is determined to be zero (0); in cases where goods and services are used for promotions but not executed in accordance with commercial law, they must be declared and taxed as goods and services used for internal consumption, donation, or gifting.
The goods and services for internal consumption as stipulated in this Clause are those produced or supplied by the business entity for consumption, excluding goods and services used to continue the production and business process of the entity.
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According to the above regulation, the VAT taxable price for goods and services used for promotions in accordance with commercial law is determined to be zero (0).
What are the conditions for input VAT deduction in Vietnam?
According to Clause 2, Article 13 of the 2008 Law on Value-added Tax, amended by Clause 6, Article 1 of the 2013 Law Amending the Law on Value-added Tax, the conditions for input value-added tax deduction are:
- Have a value-added tax invoice for purchased goods or services or proof of payment of value-added tax at the importation stage;
- Have non-cash payment documents for purchased goods and services, except for goods and services purchased on a per-time basis with a value of less than twenty million VND;
- For exported goods and services, in addition to the above conditions, there must be: a signed contract with the foreign party for the sale, processing of goods, or provision of services; sales invoice for goods and services; non-cash payment documents; customs declaration for exported goods.
Payment for exported goods and services in form of offsetting between exported goods and services and imported goods and services, or debt repayment on behalf of the State, is considered as non-cash payment.
What are regulations on VAT deduction method in Vietnam?
Pursuant to Article 7 of Decree 209/2013/ND-CP, the VAT deduction method is regulated as follows:
- The payable value-added tax is calculated by the deduction method, which is the output value-added tax minus (-) the deductible input value-added tax.
- The output value-added tax is the total value-added tax amount of goods and services sold as recorded on the value-added tax invoice.
+ The value-added tax recorded on the value-added tax invoice equals the taxable price of the goods and services sold multiplied (x) by the value-added tax rate of those goods and services.
+ In cases where payment documents indicating a price including value-added tax are used, the output value-added tax is determined by taking the payment price minus (-) the taxable price determined according to Point k, Clause 1, Article 7 of the 2008 Law on Value-added Tax.
- The deductible input value-added tax is determined based on:
+ The value-added tax as recorded on the value-added tax invoice for purchased goods and services; payment proof of value-added tax for imported goods or tax payment for purchased services as stipulated in Clause 2, Article 2 of Decree 209/2013/ND-CP.
In cases where purchased goods and services use payment documents indicating prices including value-added tax, the deductible input value-added tax is determined by taking the payment price minus (-) the taxable price stipulated at Point k, Clause 1, Article 7 of the 2008 Law on Value-added Tax.
- The conditions for input value-added tax deduction are performed in accordance with Clause 2, Article 9 of Decree 209/2013/ND-CP.
- The deduction method is applied to:
+ Business entities that are operating with annual revenue from the sale of goods and provision of services reaching one billion VND or more and that comply fully with the policies on accounting, invoices, and documents as per the provisions of the law on accounting, invoices, and documents, except for households and individuals paying tax directly as stipulated in Article 8 of Decree 209/2013/ND-CP.
+ The stable application period for the tax calculation method is two consecutive years.
+ The Ministry of Finance guides the calculation of revenue to determine the business entities that pay value-added tax by the deduction method and the stable application period for the tax calculation method.
- Business entities registered voluntarily to apply the deduction method include:
+ Enterprises and cooperatives that are active with annual revenue from the sale of goods and provision of services less than one billion VND, which have fulfilled the policies on accounting, bookkeeping, invoices, and documents as per the provisions of the law on accounting, invoices, and documents;
+ Enterprises newly established from investment projects of business entities currently subject to the value-added tax deduction method;
+ Newly established enterprises and cooperatives investing in or purchasing fixed assets, machinery, equipment, and foreign organizations and individuals conducting business in Vietnam under contractor agreements and sub-contractor agreements as guided by the Ministry of Finance;
+ Other economic organizations that can account for the input and output value-added tax.
- Foreign entities and individuals providing goods and services to carry out oil and gas exploration, exploitation, and development operations submit tax via the deduction method, as declared by the Vietnamese side on their behalf.
In cases where business entities have gold, silver, and gemstone purchase, sale, and processing activities, they must account for these activities separately to submit tax by the direct pricing method on increased values as stipulated in Clause 1, Article 8 of Decree 209/2013/ND-CP.
