How to determine VAT applicable to ships sold to foreign organizations in Vietnam?

How to determine VAT applicable to ships sold to foreign organizations in Vietnam?

Based on the guidance in Official Dispatch 27084/CTHN-TTHT of 2023 regarding the VAT rate as follows:

"Based on the above regulations, in the case where the Vietnam Maritime Commercial Joint Stock Bank sells the ship named Cong Minh 18 (a ship authorized for international transport only, not domestic transport) to a foreign organization or individual and the consumption is outside Vietnam, a VAT rate of 0% may be applied if it meets the conditions in Point a, Clause 2, Article 9 of Circular 219/2013/TT-BTC dated December 31, 2013, of the Ministry of Finance."

"In the case where the Vietnam Maritime Commercial Joint Stock Bank sells the ship named Cong Minh 18 (a domestic ship) to a foreign organization or individual and the consumption occurs in Vietnam, a VAT rate of 10% is applied as regulated in Article 11 of Circular 219/2013/TT-BTC."

Furthermore, referring to Point a, Clause 2, Article 9 of Circular 219/2013/TT-BTC, which stipulates the conditions for applying a 0% tax rate for exported goods as follows:

0% Tax Rate

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2. Conditions for applying a 0% tax rate:

a) For exported goods:

- There must be a sales contract, a contract for exporting goods, and an export entrustment contract;

- There must be documents evidencing the payment for exported goods through a bank and other documents as prescribed by law;

- There must be a customs declaration as prescribed in Clause 2, Article 16 of this Circular.

In cases where goods are sold with the point of delivery outside Vietnam, the business entity (the seller) must provide documentation proving the delivery and receipt of goods outside Vietnam such as: a purchase contract with the overseas seller, a sales contract with the buyer, documents proving goods were delivered and received outside Vietnam such as international commercial invoices, bills of lading, packing slips, certificate of origin, etc.; payment documents through the bank, including the payment document of the business entity to the overseas seller; and the payment document of the buyer to the business entity.

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Based on the above regulations, the ship sold to a foreign organization and consumed outside Vietnam can apply a 0% VAT rate if the following conditions are met:

- There must be a sales contract, a contract for processing exported goods, or an export entrustment contract.

- There must be documents proving payment for exported goods through a bank and other documents as prescribed by law.

- In cases where the point of delivery is outside Vietnam, the seller must provide documents proving the delivery and receipt of goods outside Vietnam as prescribed by law.

How to determine VAT applicable to ships sold to foreign organizations in Vietnam? (Image from Internet)

How to determine the taxable price for ships sold to foreign organizations in Vietnam?

The VAT calculation price for ships sold to foreign organizations is determined according to Clause 1, Article 7 of Circular 219/2013/TT-BTC as follows:

- For goods produced and sold by a business establishment, the price is the selling price excluding VAT. For goods subject to special consumption tax, it is the selling price including special consumption tax, but not VAT.

- For goods subject to environmental protection tax, it is the selling price including environmental protection tax, but not VAT; for goods subject to both special consumption tax and environmental protection tax, it is the selling price including both taxes but excluding VAT.

Note: The VAT calculation price is determined in Vietnamese dong. If the taxpayer has revenue in foreign currency, it must be converted to Vietnamese dong according to the average transaction exchange rate in the interbank foreign currency market announced by the State Bank at the time of revenue generation to determine the tax calculation price.

When is the time to determine VAT for ships sold to foreign organizations in Vietnam?

The time to determine VAT for ships sold to foreign organizations is specified in Clause 1, Article 8 of Circular 219/2013/TT-BTC as follows:

Time to Determine VAT

1. For the sale of goods, it is the time of transfer of ownership or use rights to the buyer, irrespective of whether the money has been collected or not.

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Thus, the time to calculate VAT for ships sold to foreign organizations is the time of transfer of ownership or use rights to the buyer, irrespective of whether the money has been collected or not.