Is input VAT on fixed assets deductible in Vietnam?

Is input VAT on fixed assets deductible in Vietnam?

Based on clause 2, Article 14 of Circular 219/2013/TT-BTC stipulates as follows:

Principle of Deducting Value Added Tax on Input

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2. input VAT of goods and services (including fixed assets) used simultaneously for producing, trading taxable and non-taxable goods and services, is only deductible for the VAT portion on input of goods and services used for producing, trading goods, services liable to VAT. The business establishment must separately account for deductible and non-deductible input VAT; if unable to separately account, the deductible input VAT is calculated according to the percentage (%) of the revenue from VAT-taxable goods/services to the total revenue from goods/services sold.

Business establishments dealing in both taxable and non-taxable goods/services must temporarily allocate the deductible VAT on purchased goods/services/fixed assets monthly, and at year-end, calculate the deductible input VAT for the year to adjust the provisional monthly VAT deductions.

3. The input VAT related to fixed assets, machinery, and equipment, including input VAT for leasing such assets, machinery, and equipment, and related services such as warranty and repair is not deductible but instead added to the original cost of the fixed assets or allowed costs under the Corporate Income Tax Law and guiding documents in the following cases: fixed assets specifically used for producing weapons, defense equipment; fixed assets, machinery, equipment of credit institutions, reinsurance businesses, life insurance businesses, securities trading businesses, medical facilities, educational institutions; civilian aircraft, yachts not used for the commercial transport of goods/passengers, tourism, or hotel business.

For fixed assets such as passenger cars with up to 9 seats (except those used for commercial transport of goods/passengers, tourism, or hotel business) with a value exceeding 1.6 billion VND (value excluding VAT), the input VAT corresponding to the value exceeding 1.6 billion VND is not deductible.

The input VAT of fixed assets used simultaneously for producing, trading taxable and non-taxable goods and services, is only deductible for the VAT portion related to taxable goods/services. Businesses must separately account for deductible and non-deductible VAT; if unable to do so, the deductible input VAT is calculated as a ratio (%) of VAT-taxable revenue to the total revenue not separately accounted for.

Furthermore, businesses dealing with both taxable and non-taxable goods/services must allocate the deductible VAT on purchased goods/services/fixed assets monthly, and at year-end, they should recalculate the deductible VAT for adjustments.

In addition, input VAT on fixed assets (including VAT on leasing fixed assets) and other input VATs related to assets, machinery, equipment such as warranty, and repair is not deductible but should be included in the original cost or allowed costs according to the Corporate Income Tax Law and its guiding documents in the following situations:

- Fixed assets specifically serving the production of weapons, military equipment for defense and security;

- Fixed assets, machinery, equipment of credit institutions, reinsurance businesses, life insurance businesses, securities trading businesses, medical facilities, educational institutions;

- Civilian aircraft, yachts not used for commercial transport, tourism, or hotel purposes.

Moreover, for fixed assets being passenger cars with up to 9 seats (except those used for commercial transport of goods/passengers, tourism, or hotel business) with a value over 1.6 billion VND (ex-VAT value), the VAT on the value exceeding 1.6 billion VND is not deductible.

Is input VAT on fixed assets deductible in Vietnam? (Image from the Internet)

How is VAT calculated using the credit-invoice method in Vietnam?

According to Article 12 of Circular 219/2013/TT-BTC, the method of calculating value-added tax using the credit-invoice method is guided as follows:

VAT Payable = Output VAT - Input VAT

Where:

- Output VAT = Total VAT of goods and services listed on the VAT invoice

VAT on goods/services sold listed on the VAT invoice = Taxable value of goods/services sold x VAT rate on those goods/services.

- If using payment documents listed as prices inclusive of VAT, the output VAT is determined by subtracting (-) the taxable value:

For goods/services with payment documents showing price inclusive of VAT such as stamps, transport fare tickets, lottery tickets, etc., the price excluding VAT is calculated as follows:

Price excluding VAT = Payment Price / (1+ VAT rate on goods)

- Input VAT = Total input VAT on VAT invoices for purchased goods/services (including fixed assets) used for producing/trading in goods/services subject to VAT, included in the taxes paid on imported goods or VAT paid on behalf of foreign parties according to the Ministry of Finance guidelines for foreign organizations without legal status in Vietnam and foreign individuals having business or income arising in Vietnam.

What are the conditions for deducting input VAT in Vietnam?

According to clause 2, Article 12 of the Value Added Tax Law 2008, amended by clause 6, Article 1 of the Amended Value Added Tax Law 2013, the conditions for VAT deduction on input are prescribed as follows:

- Have a VAT invoice for purchased goods/services or proof of VAT payment at the importation stage;

- Have non-cash payment documentation for purchased goods/services, except for goods/services purchased individually under 20 million VND;

- For exported goods/services, besides the conditions specified at points a and b, clause 2, Article 12 of the Value Added Tax Law 2008 must also have: a contract with the foreign party for sale, processing of goods, provision of services; sale invoices for goods/services; non-cash payment documentation; customs declaration for exported goods.

Settlement by offsetting payments for exported goods/services with imported goods/services or paying debts on behalf of the state is considered non-cash payment.