Is VAT applicable when a business establishment contributes assets as capital to establish an enterprise in Vietnam?

Which entities are VAT taxpayers in Vietnam?

Based on Article 3 of Circular 219/2013/TT-BTC, VAT taxpayers are defined as follows:

- Business organizations established and registered under the Law on Enterprises, Law on Cooperatives, and other specialized business laws.

- Economic organizations belonging to political organizations, socio-political organizations, social organizations, socio-professional organizations, armed forces units, non-business units, and other organizations.

- Foreign-invested enterprises and foreign parties engaging in business cooperation under the Law on Foreign Investment in Vietnam (now the Law on Investment); foreign organizations and individuals conducting business in Vietnam without establishing a legal entity in Vietnam.

- Individuals, households, independent business groups, and other entities engaged in production, business, and import activities.

- Organizations and individuals conducting business in Vietnam purchasing services (including cases of buying services connected to goods) from foreign organizations without a permanent establishment in Vietnam, and individuals abroad who are not residents in Vietnam shall be the taxpayers, except as exempted under Clause 2 Article 5 of Circular 219/2013/TT-BTC.

- Branches of export-processing enterprises established for trading goods and related activities within Vietnam as per the laws on industrial parks, export-processing zones, and economic zones.

Is VAT applicable when a business establishment contributes assets as capital to establish an enterprise in Vietnam?

Based on Point a Clause 7 Article 5 of Circular 219/2013/TT-BTC, the instances not requiring VAT declaration and payment are outlined as follows:

Instances not requiring VAT declaration and payment

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7. Other instances:

Business establishments do not need to declare or pay tax in the following cases:

a) Contributing capital with assets to establish an enterprise. The assets contributed to the enterprise must include: a capital contribution record, joint venture or association contract; asset valuation minutes by the capital contribution board (or a valuation document by a legally competent organization), accompanied by the asset origin dossier.

b) Transferring assets between dependent accounting units within an enterprise; transferring assets during division, separation, consolidation, merger, or conversion of the business type. The transferring unit must have an asset transfer order, accompanied by an asset origin dossier and is not required to issue an invoice.

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Thus, when a business establishment contributes capital with assets to form a company, VAT is not required, provided that the contributed assets are documented as follows:

- Capital contribution record for business production, joint venture, or association contract.

- Asset valuation minutes by the capital contribution board of the contributors (or valuation document by a legally competent organization).

- Asset origin dossier.

Is VAT applicable when a business establishment contributes assets as capital to establish an enterprise in Vietnam? (Image from the Internet)

Is issuing an invoice required when contributing assets as capital to establish an enterprise in Vietnam?

Based on Point e Clause 3 Article 13 of Decree 123/2020/ND-CP, regulations on asset contribution as capital by businesses and individuals are as follows:

Application of electronic invoices when selling goods, providing services

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3. Regulations on applying electronic invoices and delivery-cum-internal transport notes, dispatch notes for selling agent delivery for specific cases based on management requirements are as follows:

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e) When businesses and individuals contribute assets as capital in Vietnam to establish enterprises, invoices are not required. Instead, documentation such as capital contribution certification, asset handover minutes, and asset valuation minutes accompanied by an asset origin dossier should be used.

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Simultaneously, based on Clause 13 Article 14 of Circular 219/2013/TT-BTC, regulations for non-business individuals or organizations contributing assets are as follows:

Principles for deducting input VAT

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13. In cases where individuals or non-business organizations contribute assets into limited liability companies or joint-stock companies, the documentation for the contributed assets is a capital contribution certification, asset handover minutes. If the contributed assets are newly purchased, unused, and legally invoiced, as accepted by the capital contribution board, the contribution value is determined by the invoice value, inclusive of VAT; the recipient of the contribution claimable for VAT deduction as stated on the purchase invoice from the contributor.

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Therefore, whether for business or non-business organizations and individuals contributing assets as capital to form an enterprise, issuing an invoice is not required.