Is financial leasing service subject to value added tax in Vietnam?

Is financial leasing service subject to value added tax in Vietnam?

Pursuant to point a, clause 8, Article 4 of Circular 219/2013/TT-BTC, amended and supplemented by Article 1 of Circular 26/2015/TT-BTC, which prescribes the entities not subject to VAT as follows:

Entities not subject to VAT

...

8. The following financial, banking, and securities services:

...

a) Credit grant services, including forms such as:

- Lending;

- Discounting, rediscounting negotiable instruments and other valuable papers;

- Bank guarantees;

- Financial leasing;

- Issuing credit cards.

...

Accordingly, based on the above provisions, financial leasing services are not subject to value added tax.

Is financial leasing service subject to value added tax in Vietnam? (Image from the Internet)

When is the time of VAT determination in Vietnam?

Pursuant to Article 8 of Circular 219/2013/TT-BTC, specific regulations on the time of VAT determination are as follows:

[1] For goods sales, it is the time of transfer of ownership or right to use the goods to the purchaser, irrespective of whether payment has been received or not.

[2] For service provision, it is the time of completion of service provision or the time of invoice issuance for service provision, irrespective of whether payment has been received or not.

For telecommunications services, it is the time of completing data reconciliation on telecommunications service charges according to economic contracts between service providers, but no later than 2 months from the month of incurring telecommunications service charges.

[3] For electricity and clean water supply activities, it is the date of recording electricity or water consumption on meters for billing.

[4] For real estate business, infrastructure construction, and housing construction for sale, transfer, or lease, it is the time of receiving payment according to the progress of project implementation or payment schedule recorded in the contract. Based on the amount collected, the business entity declares the output VAT arising in the period.

[5] For construction and installation, including shipbuilding, it is the time of acceptance and handover of the completed works, work items, or completed construction and installation volumes, irrespective of whether payment has been received or not.

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

What are cases of VAT refund in Vietnam?

Pursuant to Article 13 of the Law on Value Added Tax 2008, amended by clause 7, Article 1 of the Law on Value Added Tax Amendments 2013 and further amended by clause 3, Article 1 of the Law on Value Added Tax, Special Consumption Tax, and Tax Administration Amendments 2016, specific provisions on cases eligible for value added tax refund are as follows:

[1] Business establishments paying VAT using the deduction method, if there is uncredited input VAT in a month or quarter, they are allowed to carry it forward to the next period.

- In case a business establishment has registered to pay VAT using the deduction method, with a new investment project that incurs VAT on purchased goods and services used for investment that has not been completely credited, and the remaining tax amount is from three hundred million VND or more, a VAT refund is granted.

- Business establishments are not granted VAT refunds but may carry forward uncredited tax amounts of the investment project according to the legal provisions on investment to the next period in cases such as:

+ The investment project does not contribute sufficient charter capital as registered; engages in conditional investment and business sectors when conditions are not yet met or fails to maintain sufficient business conditions during operation.

+ The investment project explores, mines resources, and minerals licensed from July 1, 2016, or produces goods with the total value of minerals and energy costs accounting for 51% of product costs or more according to the investment project.

[2] Business establishments during a month or quarter with exported goods and services, if the uncredited input VAT is from three hundred million VND or more, a VAT refund is granted monthly or quarterly, except for imported goods for export, or exported goods not exported at the customs area as prescribed by the Customs Law. A refund is conducted first, checked later for taxpayers producing exported goods who do not violate tax and customs laws for two consecutive years; taxpayers not classified as high risk according to regulations.

[3] Business establishments paying VAT using the deduction method are granted VAT refund upon ownership conversion, enterprise reorganization, merger, consolidation, division, separation, dissolution, bankruptcy, termination of operations with an overpaid VAT amount or uncredited input VAT.

[4] Foreigners, overseas Vietnamese holding passports or entry papers issued by competent foreign authorities are refunded VAT for goods purchased in Vietnam taken abroad upon exit.

[5] VAT refunds for programs, projects using non-refundable official development assistance (ODA) or non-refundable aid, humanitarian aid are regulated as follows:

- The program/project owner or prime contractor, organization appointed by foreign donors to manage programs, projects using non-refundable official development assistance (ODA) gets a refund for VAT paid on goods, services purchased in Vietnam for programs, projects.

- Organizations in Vietnam using non-refundable aid money, humanitarian aid from foreign organizations, individuals to purchase goods, services for non-refundable aid programs, humanitarian aid in Vietnam are refunded the VAT paid for those goods, services.

[6] Entities entitled to diplomatic immunity privileges under the law on diplomatic immunity purchasing goods, services in Vietnam for use, are refunded the VAT paid recorded on VAT invoices or payment documents indicating payment amounts including VAT.

[7] Business establishments having VAT refund decisions by competent authorities under the law and VAT refund cases according to international treaties to which the Socialist Republic of Vietnam is a signatory.