Is coffee subject to VAT in Vietnam? When is the time of determining VAT for the sale of goods in Vietnam?

Is coffee subject to Value-Added Tax (VAT) in Vietnam?

Based on Clause 1, Article 4 of Circular No. 219/2013/TT-BTC, amended by Clause 1, Article 1 of Circular 26/2015/TT-BTC, which specifies non-taxable subjects as follows:

Non-taxable VAT subjects

1. Agricultural products (including plantation forests), livestock, aquaculture, captured fisheries not yet processed into other products or only through preliminary processing by organizations or individuals who produce, capture, and sell them, as well as at the import stage.

Products that have only undergone preliminary processing are products that are merely cleaned, sun-dried, mechanically dried, shelled, milled, hulled, split, peeled, salted, cold-preserved (refrigerated, frozen), preserved with sulfur gas, preserved using chemical preservatives to avoid spoilage, immersed in sulfur solutions, or in other conventional preservation methods.

...

However, based on Clause 5, Article 10 of Circular 219/2013/TT-BTC, which specifies a 5% tax rate as follows:

5% Tax Rate

...

5. Unprocessed or merely preliminarily processed agricultural, livestock, aquaculture, fisheries products preserved (preliminary processing, preservation forms as guided in Clause 1, Article 4 of this Circular) at the commercial stage, excluding cases guided in Clause 5, Article 5 of this Circular.

Products including rice, paddy, maize, potatoes, cassava, and wheat mentioned in this clause.

Based on Clause 5, Article 5 of Circular 219/2013/TT-BTC

Cases not required to declare, calculate VAT

5. Enterprises and cooperatives that pay VAT by the credit method selling unprocessed or merely preliminarily processed agricultural, livestock, aquaculture, and fisheries products to enterprises and cooperatives at the commercial stage are not required to declare or calculate VAT. On VAT invoices, the selling price is noted as the price without VAT, the tax rate and VAT are not noted, but are struck out.

Enterprises and cooperatives paying VAT by the credit method selling unprocessed or merely preliminarily processed agricultural, livestock, aquaculture, and fisheries products to other subjects such as households, individual businesses, and other organizations, and individuals must declare and pay VAT at a rate of 5% as guided in Clause 5, Article 10 of this Circular.

Finally, based on Article 11 of Circular 219/2013/TT-BTC which specifies a 10% tax rate as follows:

10% Tax Rate

A 10% tax rate applies to goods and services not specified in Articles 4, 9, and 10 of this Circular.

The VAT rates specified in Articles 10 and 11 apply uniformly to each type of goods and services at the stages of importation, production, processing, or commercial business.

....

Thus, whether coffee is subject to VAT depends on the specific case. To be specific:

- Coffee is not subject to VAT in the following cases:

+ Coffee not processed into other products or only undergone preliminary processing by organizations or individuals who produce it, with the preliminary processing including cleaning, drying, peeling, milling, hulling, splitting, and other conventional preservation methods.

+ Coffee not processed into other products or only undergone preliminary processing sold to enterprises, cooperatives in commercial stage without declaration or VAT payment.

- Coffee is subject to a 5% tax rate in the following cases:

+ Coffee unprocessed or only preliminarily processed and preserved at the commercial stage.

+ Enterprises, cooperatives paying VAT by the credit method selling unprocessed or merely preliminarily processed coffee to other subjects such as households, individual businesses, and other organizations, and individuals.

- Coffee is subject to a 10% tax rate in all other cases at the stages of import, production, processing, or commercial business.

Is coffee subject to VAT in Vietnam? (Image from the Internet)

When is the time of determining VAT for the sale of goods in Vietnam?

Based on Article 8 of Circular 219/2013/TT-BTC which specifies the time of determining VAT for goods as follows:

Time of Determining VAT

1. For the sale of goods, it is the time of transfer of ownership or right to use goods to the purchaser, irrespective of whether payment has been received.

2. For service provision, it is the time of service completion or the time of issuing the service provision invoice, irrespective of whether payment has been received.

For telecommunications services, it is the point of data reconciliation for service charges stemming from economic contracts between telecommunications service providers but not exceeding 2 months from the month when the telecommunication service charge arises.

3. For electricity and clean water supply, it is the date of recording the consumption index on the meter to record on the billing invoice.

4. For real estate business, infrastructure construction, construction of houses for sale, transfer, or lease, it is the time of collecting money according to the project implementation progress or the money collection progress recorded in the contract. Based on the money collected, the business facility calculates the output VAT arising in the period.

5. For construction, installation, including shipbuilding, it is the time of acceptance of the completed construction, handover of the project, completed construction items, and volume, irrespective of whether money has been received.

6. For imported goods, it is the time of customs declaration registration.

Thus, based on the above regulation, the time of determining VAT for the sale of goods is the time of transfer of ownership or the right to use the goods to the buyer, whether or not payment has been received.

Which entities are the VAT payers in Vietnam?

Based on Article 3 of Circular 219/2013/TT-BTC which specifies VAT payers as follows:

VAT payers are organizations or individuals producing, trading goods or services subject to VAT in Vietnam, irrespective of occupation, form, or organization of business (hereinafter referred to as business establishments) and organizations, individuals importing goods, purchasing services from abroad subject to VAT (hereinafter referred to as importers), including:

- Business organizations established and operating under the Law on Enterprises, the Law on State Enterprises (now the Law on Enterprises), the Law on Cooperatives, and other specialized business laws.

- Economic organizations of political organizations, socio-political organizations, social organizations, socio-professional organizations, people's armed units, career units, and other organizations.

- Foreign invested enterprises and foreign parties involved in business cooperation under the Law on Foreign Investment in Vietnam (now the Law on Investment); foreign organizations and individuals conducting business activities in Vietnam but not establishing a legal entity in Vietnam.

- Individuals, households, independent business groups, and other subjects engaged in production, business, importation.

- Organizations or individuals in Vietnam buying services (including cases of purchasing services associated with goods) from foreign organizations without a permanent establishment in Vietnam, or foreign individuals as non-resident subjects in Vietnam, shall be the VAT payers, except for cases not required to declare, calculate VAT as guided in Clause 2, Article 5 of this Circular.

The regulations on permanent establishments and non-resident subjects shall be implemented according to the law on corporate income tax and personal income tax.

- Branches of export-processing enterprises established for the operations of goods trading and activities directly related to goods trading in Vietnam in accordance with the laws on industrial zones, export processing zones, and economic zones.