Is VAT invoice required for input VAT credit in case of purchases of goods in Vietnam?

Is VAT invoice required for input VAT credit in case of purchases of goods in Vietnam?

Based on Clause 2, Article 12 of the Law on Value Added Tax 2008, amended by Clause 6, Article 1 of the Law Amending the Value Added Tax 2013, the conditions for input Value Added Tax (VAT) credit are stipulated as follows:

Condition 1: There must be a VAT invoice for the purchase of goods and services or a document for paying VAT at the import stage;

Condition 2: There must be non-cash payment documentation for purchased goods and services, except for goods and services bought in each instance with a value under twenty million dong;

Condition 3: For exported goods and services, in addition to the conditions stipulated in points a and b of Clause 2, Article 12 of the Law on Value Added Tax 2008, it is also required to have: a contract signed with a foreign entity regarding the sale, processing of goods, or provision of services; an invoice for sales of goods and services; non-cash payment documentation; and a customs declaration for exported goods.

Payments for exported goods and services in the form of offsetting the payment between exported goods and imported goods, paying debts on behalf of the state, will be considered as non-cash payment.

One of the conditions for input VAT credit is that there must be a VAT invoice for the purchase of goods and services or a document for paying VAT at the import stage.

Therefore, an input VAT credit must be accompanied by a VAT invoice for the purchase of goods.

Is VAT invoice required for input VAT credit in case of purchases of goods in Vietnam? (Image from the Internet)

Which business establishments apply the input VAT credit method in Vietnam?

Based on Clause 2, Article 10 of the Law on Value Added Tax 2008, amended by Clause 4, Article 1 of the Law Amending the Value Added Tax 2013, the input VAT credit method applies to business establishments that fully implement accounting, invoice, and documentation policies according to the law on accounting, invoice, and documentation, including:

- Business establishments with annual revenue from the sale of goods and the provision of services from one billion dong or more, excluding households and individuals conducting business;

- Business establishments voluntarily registered to apply the input VAT credit method, excluding households and individuals conducting business.

What are cases of VAT refund in Vietnam?

Based on Article 13 of the Law on Value Added Tax 2008, amended by Clause 7, Article 1 of the Law Amending the Value Added Tax 2013, and further amended by Clause 3, Article 1 of the Law Amending the Law on Value Added Tax, the Law on Excise Tax, and the Law on Tax Administration 2016, the cases eligible for VAT refund are as follows:

- Business establishments paying VAT by the credit method, if there is any input VAT that has not been fully deducted by the end of the month or quarter, could carry it over to the next period.

If a business establishment registered to pay VAT by the credit method has a new investment project, is still in the investment phase, and has input VAT on goods and services purchased for the purpose of investment but not yet deducted, and the remaining VAT amount is three hundred million dong or more, they are entitled to a VAT refund.

Business establishments are not refunded VAT and must carry over the undeducted VAT of the investment project to the next period following the law on investment in the following cases:

+ The investment project's business establishment has not contributed the full charter capital as registered; or engaging in industries and businesses subject to conditional business lines without meeting the legal business conditions under the Law on Investment 2020 or failing to maintain sufficient business conditions during operation;

+ Investment projects exploiting natural resources and minerals authorized after July 1, 2016, or investment projects producing goods where the total ratio of natural resources and minerals and energy costs makes up at least 51% of the product's cost according to the investment project.

- If in a month or quarter a business establishment has goods and services exported, and there is input VAT remaining from three hundred million dong or more, they qualify for VAT refund monthly or quarterly, except for imported goods for export or exported goods not carried out in the customs-controlled area as per the Customs Law 2014.

Advance VAT refunds are applicable post-inspection for taxpayers who produce exported goods without legal violations in tax and customs for two consecutive years; taxpayers not classified under high-risk categories as defined by the Tax Administration Law 2019.

- Business establishments using the input VAT credit method are eligible for a VAT refund when undergoing ownership changes, business restructuring, mergers, consolidations, separations, dissolutions, bankruptcies, or business cessation, having either an overpaid VAT or unapplied input VAT remaining.

- Foreigners or Vietnamese nationals residing overseas holding passports or entry documents issued by competent foreign authorities are refunded VAT for goods purchased in Vietnam taken with them upon exit.

- VAT refunds for programs, projects using non-refundable official development aid (ODA) or non-refundable aid and humanitarian aid are governed as follows:

+ Program or project owners or the main contractors, organizations appointed by foreign donors to manage programs or projects using non-refundable ODA sources, are refunded the VAT paid on goods and services purchased in Vietnam for serving the program or project;

+ Organizations in Vietnam using non-refundable aid funds or humanitarian aid funds from foreign organizations and individuals to purchase goods and services for non-refundable aid or human aid projects in Vietnam are refunded the VAT already paid for said goods and services.

- Entities entitled to preferential diplomatic immunity under legal regulations on diplomatic immunity purchase goods and services in Vietnam for use, refunded the VAT paid as recorded on VAT invoices or payment documentation showing prices inclusive of VAT.

- Business establishments with VAT refund decisions from competent authorities as stipulated by law and circumstances for VAT refunds under international treaties of which the Socialist Republic of Vietnam is a member.