Is pepper subject to VAT in Vietnam?
Is pepper subject to VAT in Vietnam?
According to the current regulations on Value Added Tax (VAT) in Vietnam, determining whether pepper is subject to VAT depends on the level of processing and the business stage of the product:
(1) Unprocessed Pepper or Pepper Undergoing Basic Processing:
- Clause 1, Article 1 of Circular 219/2013/TT-BTC (amended by Clause 1, Article 1 of Circular 26/2015/TT-BTC) stipulates that products only undergoing basic processing are those merely cleaned, sun-dried, air-dried, peeled, ground, winnowed, hulled, de-husked, seeded, stemmed, cut, salted, or preserved by refrigeration (chilling, freezing), sulfur dioxide gas, chemical preservation to avoid decay, soaked in sulfur solution or other preservation solutions, and other ordinary preservation methods.
- According to Clause 1, Article 5 of the Law on Value-Added Tax 2008 (amended by Clause 1, Article 1 of the Amended Law on Value-Added Tax, Special Consumption Tax, and Tax Administration 2016) states as follows:
Non-Taxable Objects
- Agricultural products, livestock, aquaculture products, caught fishery products that are not yet processed into other products or only undergo ordinary processing by organizations or individuals who produce, catch, and sell in stores and at import stages.
Enterprises and cooperatives that purchase agricultural, livestock, aquaculture products, caught fishery products not yet processed into other products or only through ordinary processing sold to other enterprises, cooperatives are not required to declare, calculate, and pay VAT but may deduct input VAT.
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Thus, if enterprises or cooperatives paying tax by the credit method buy pepper to sell to other enterprises, cooperatives at the commercial business stage, they do not have to declare, calculate, and pay VAT.
However, if they sell pepper to other entities (such as individuals, business households), a VAT rate of 5% applies.
Example: Company X, a business establishment paying VAT by the credit method, purchases pepper from individuals or organizations that directly grow and sell it; at the purchasing stage, the product is pepper not subject to VAT, thus:
- After purchasing, if Company X sells the pepper to Company B, Company X is not obligated to declare and remit VAT for the pepper sold to Company B;
- If Company X sells pepper directly to consumers, they must declare and remit VAT at a rate of 5%.
(2) Processed Pepper:
Products that are pepper undergoing processing stages such as roasting, grinding, seasoning, special packaging, or other processing forms that alter the basic properties of the product will be subject to VAT at a rate of 10%, according to Article 11 of Circular 219/2013/TT-BTC.
Thus, whether pepper is subject to VAT depends on the level of processing and the transaction stage in specific business dealings.
Is pepper subject to VAT in Vietnam? (Image from the Internet)
What are the conditions for input VAT deduction in Vietnam?
According to Clause 2, Article 12 of the Law on Value-Added Tax 2008 (amended by Clause 6, Article 1 of the Amended Law on Value-Added Tax 2013), the conditions for input VAT deduction are:
- Holding VAT invoices for purchasing goods, services, or documents proving VAT payment at the importation stage;
- Having non-cash payment documentation for goods and services purchased, except for purchases made each time valued below twenty million dong;
- For exported goods, services, in addition to the above conditions, it is required to have: a contract signed with a foreign partner for the sale, processing or provision of goods and services; commercial invoices; non-cash payment documentation; customs declarations for exported goods.
Payment for exported goods and services through barter between exported goods, services and imported goods, services, payment on behalf of the State is considered non-cash payment.
What are regulations on the credit method for VAT in Vietnam?
Pursuant to Article 7 of Decree 209/2013/ND-CP, the credit method for VAT is regulated as follows:
- The payable VAT amount calculated by the credit method equals the output VAT minus (-) the deductible input VAT.
- The output VAT equals the total VAT on sold goods and services recorded on the VAT invoice.
+ VAT recorded on the VAT invoice equals the taxable price of goods and services applied for tax sale multiplied (x) by the VAT rate of such goods and services.
+ In case the documentation records payment prices inclusive of VAT, the output VAT is determined by the payment price minus (-) the taxable price as per the provisions at Point k, Clause 1, Article 7 of the Law on Value-Added Tax 2008.
- Deductible input VAT is determined based on:
+ VAT stated on the VAT invoice for purchasing goods and services; documentation of VAT payment for imported goods or tax payment for service purchase as specified in Clause 2, Article 2 of Decree 209/2013/ND-CP.
If purchases use documentation recording payment prices inclusive of VAT, the deductible input VAT is determined by the payment price minus (-) the taxable price stipulated at Point k, Clause 1, Article 7 of the Law on Value-Added Tax 2008.
- Conditions for input VAT deduction are implemented as regulated in Clause 2, Article 9 of Decree 209/2013/ND-CP.
- The credit method applies to:
+ Business establishments currently operating with an annual revenue of one billion dong or more from sales of goods and services and fully implementing policies on accounting, invoices, and documents in accordance with the law on accounting, invoices, and documents, excluding households, individuals paying tax by direct calculation as specified in Article 8 of Decree 209/2013/ND-CP.
+ The continuous period applying the stable tax calculation method is two years.
+ The Ministry of Finance guides the calculation of revenue as a basis to determine business establishments paying VAT by the credit method and the period applying the stable tax calculation method.
- Enterprises, cooperatives voluntarily registering to apply the credit method include:
+ Enterprises, cooperatives currently operating with annual revenue from sales of goods and services below one billion dong having fully implemented policies on accounting, books, invoices, documents as provided by law;
+ Newly established enterprises from investment projects of operating business establishments paying VAT by the credit method;
+ Newly established enterprises, cooperatives making investments, purchasing fixed assets, machinery, equipment, foreign organizations, and individuals doing business in Vietnam under contractor agreements, subcontractor agreements following the Ministry of Finance's guidance;
+ Other economic organizations capable of accounting for input and output VAT.
- Foreign organizations and individuals supplying goods, services for the activities of exploration, development, and extraction of oil and gas pay tax by the credit method claimed by Vietnamese parties.
In cases business establishments engage in trading, crafting gold, silver, precious stones, they must separately account for this activity to pay tax by the direct calculation method on the value added as prescribed in Clause 1, Article 8 of Decree 209/2013/ND-CP.
