Is transferring land use rights to non-family members subject to VAT in Vietnam?

Is transferring land use rights to non-family members subject to VAT in Vietnam?

Based on Clause 6, Article 4 of the Law on Value Added Tax 2008 (amended by the Law on Value Added Tax, Law on Special Consumption Tax, and Amended Tax Administration Law 2016):

Subjects not subject to VAT

1. Agricultural products, livestock, aquaculture products that have not been processed into other products or have only gone through ordinary preliminary processing by organizations, individuals, and are self-produced, fished, sold, and imported.

Enterprises, cooperatives purchasing unprocessed agricultural, livestock, aquaculture products for sale to other enterprises, cooperatives are not required to declare, calculate, or pay VAT but are allowed input VAT deduction.

2. Products are animal breeds, plant varieties, including breeding eggs, breed animals, plant varieties, seeds, cuttings, tubers, semen, embryos, genetic materials in cultivation, importation, and commercial trading. Animal breeds, plant varieties not subject to VAT are produced by businesses with business registration certificates issued by state agencies. For products, the state's quality standards must meet state regulations.

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4. Salt products are produced from seawater, natural mines, refined salt, iodized salt with NaCl as the main component.

5. State-owned housing sold by the State to current tenants.

6. Transfer of land use rights.

The transfer of land use rights is not subject to VAT, regardless of whether it is sold to family members or others (as this matter pertains to personal income tax rather than VAT policy).

Is transferring land use rights to non-family members subject to VAT in Vietnam? (Image from the Internet)

Does a household business that has its land revoked need to pay VAT on the compensation received in Vietnam?

Based on Clause 1, Article 5 of Circular 219/2013/TT-BTC, it is regulated as follows:

Cases not subject to VAT declaration and payment

1. Organizations and individuals receiving monetary compensations (including compensations for land and assets on land when land is revoked by state authority decisions), bonuses, support monies, emissions rights transfers, and other financial revenues.

For businesses receiving these compensation, support, or reward monies and others, they must issue receipts according to regulations. For businesses paying these amounts, they must issue payment receipts based on the purpose of the payment.

In cases where compensation is made with goods or services, the compensating entity must issue invoices and declare, calculate, and pay VAT as for selling goods and services; the receiving entity declares, deducts VAT according to regulations.

When receiving funds to provide services like repairs, warranty, promotions, advertisements for organizations or individuals, businesses must declare and pay taxes according to regulations.

2. Organizations and individuals producing and trading in Vietnam purchasing services from foreign organizations without a permanent establishment in Vietnam and non-resident individuals abroad, including: transport vehicle repairs, machinery, equipment (including materials, spare parts); advertising, marketing; investment and trade promotion; brokerage for selling goods, providing services abroad; training; sharing international postal and telecommunications service charges between Vietnam and abroad when these services are performed outside Vietnam; leasing foreign transmission lines and satellite bands as stipulated by law.

Currently, cases that are not required to declare or pay VAT include compensations (including those for land and assets on land when reclaimed by state authority decisions). Therefore, household businesses in this case do not need to pay tax.

What is the VAT base price for internally consumed products, goods, and services in Vietnam?

Based on Clause 2, Article 3 of Circular 119/2014/TT-BTC, VAT base price for internally consumed products, goods, and services is stipulated as follows:

- Internal circulation of goods such as goods exported for internal warehousing, materials, semi-finished products for continued production within a manufacturing facility, or goods and services provided by the business for its business activities does not require VAT calculation or payment.

- For businesses that self-produce or construct fixed assets (self-made fixed assets) to serve the production of VAT-liable goods and services, upon completion, testing, and delivery, the business does not need to issue invoices. Input VAT forming the self-made fixed asset is declared and deducted as per regulations.

- When exporting machinery, equipment, materials, goods on loan, lease, or return forms, if contracts and relevant transaction documents are in order, the business is not required to issue invoices, calculate, or pay VAT.

Example 24: Unit A, a fan manufacturing enterprise, uses 50 fans in production workshops to support its business activities. Unit A is not required to calculate or pay VAT on the use of these 50 fans.

Example 25: Production facility B in the garment industry has a yarn workshop and a sewing workshop. Facility B transfers finished yarn from the yarn workshop to the sewing workshop for further production and does not need to calculate or pay VAT on the yarn transferred for the sewing workshop.

Example 26: Joint-stock Company P constructs rest houses for workers in the production area on its own. Company P does not have divisions or teams conducting this construction activity. Upon completion and acceptance of the rest houses, Company P does not issue invoices. Input VAT that forms the rest houses is declared and deducted as per regulations.

Example 27: Company Y, a bottled water manufacturing business, has a VAT-exclusive price of 4,000 dong per bottle. When Company Y uses 300 bottles for company meetings, it does not need to declare or calculate VAT for these 300 bottles.

Example 28: Company Y, with the same bottled water production, must declare and calculate VAT on 300 bottles not used for production or business activities at the taxable price of 4,000 x 300 = 1,200,000 dong.

- For businesses utilizing goods and services for internal consumption or circulation internal to production and business activities such as transport, aviation, railways, postal, telecommunications which do not require calculation of output VAT, the business must have internal regulations detailing the objects and limits for internal consumption of goods and services.