Shall an enterprise required declare and pay VAT on compensation for land in Vietnam?

Shall an enterprise required declare and pay VAT on compensation for land in Vietnam?

Pursuant to Article 5 of Circular 219/2013/TT-BTC, supplemented by Clause 1, Article 3 of Circular 119/2014/TT-BTC, businesses and household businesses are not required to declare and pay VAT in the following cases:

[1] Businesses and household businesses receiving monetary compensation (including compensation for land and assets on the land when land is repossessed as per decisions of competent State authorities), bonuses, support payments, emissions right transfers, and other financial receipts.

Upon receiving money for compensation, bonuses, support, emissions right transfers, and other financial receipts, the business establishment must issue receipts according to regulations. For business establishments disbursing money, they should issue payment vouchers based on the purpose of the expenditure.

Example 1: Business A receives compensation of 50 million VND for contractual damages from Business B. Business A will issue a receipt and not have to declare or pay VAT on the received amount.

Note:

- In cases where compensation is in goods or services, the compensating establishment must issue an invoice and declare, calculate, and pay VAT as though selling goods or services; the receiving establishment must declare and deduct VAT as prescribed.

- Businesses receiving payment from organizations or individuals to perform services for those organizations or individuals, such as repair, warranty, promotion, and advertisement, must declare and pay taxes as required.

[2] Businesses and household businesses producing and doing business in Vietnam that purchase services from foreign organizations without a permanent establishment in Vietnam, and individuals overseas who are non-residents in Vietnam, including repair of vehicles, machinery, equipment (including materials and spare parts); advertising, marketing; investment and trade promotion; brokerage for selling goods or providing services abroad; training; sharing international postal and telecommunication service charges between Vietnam and other countries where such services are provided outside of Vietnam, services renting foreign transmission lines and satellite bandwidth as prescribed by law.

[3] Businesses and household businesses transferring investment projects for the production and business of goods and services subject to VAT to enterprises and cooperatives.

Example 2: Joint Stock Company P carries out an investment project to construct an industrial alcohol production plant. By March 2014, the project was 90% complete per the design proposal with an investment value of 26 billion VND. Facing financial difficulty, Joint Stock Company P decided to transfer the entire ongoing investment project to Joint Stock Company X for a transfer price of 28 billion VND. Joint Stock Company X receives the project to continue industrial alcohol production. Joint Stock Company P does not need to declare or pay VAT on the transferred project value to Joint Stock Company X.

[4] VAT-paying enterprises under the credit method selling crop, livestock, aquatic, and seafood products that are unprocessed or only through ordinary processing to businesses and cooperatives in the commercial business phase do not need to declare or pay VAT (on the VAT invoice, the sales price must be stated as exclusive of VAT, the VAT rate and VAT column should not be filled in, instead, crossed out).

*Note:

- In cases where VAT-paying enterprises under the credit method sell crop, livestock, aquatic products that are unprocessed or only through ordinary processing to other entities like households, business individuals, and other organizations, individuals must declare and pay VAT at a rate of 5%.

- household businesses and enterprises paying VAT under the direct method on GTGT when selling crop, livestock, aquaculture products that are unprocessed or only through ordinary processing in the commercial business phase must declare, calculate, and pay VAT at a rate of 1% of revenue.

[5] Fixed assets in use, which have been depreciated and are transferred at book value between business establishments and member units with 100% capital ownership from one business establishment or between member units with 100% equity capital under one business establishment for the purpose of producing, trading goods, or services subject to VAT do not need to issue invoices and declare or pay VAT. The business establishment transferring fixed assets must have a Decision or Transfer Order attached to the asset origin dossier.

In cases where fixed assets are revalued or transferred to enterprises producing goods and services not subject to VAT, a VAT invoice must be issued, and VAT must be declared and paid according to regulations.

[6] Other cases:

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

- Contributing capital by assets to establish an enterprise. The capital-contributed assets must include: a capital contribution record for production and business, a joint venture or linking contract; an asset valuation record by the Capital Contribution Receiving Board of the contributing parties (or a valuation document by a legally competent valuation organization according to legal regulations), accompanied by the asset origin dossier.

- Asset transfer between dependent accounting units within an enterprise; asset transfer during division, separation, consolidation, merger, or conversion of business type. Asset transfers between member units dependent on accounting within an enterprise establishment; asset transfers during division, separation, consolidation, merger, or conversion of business type must have a transfer order, accompanied by the asset origin dossier, and do not need to issue an invoice.

In the case of asset transfer between independent accounting units or between member units with full legal status within the same business establishment, the establishment with the asset transfer must issue a VAT invoice and declare and pay VAT according to regulations, except for the case mentioned in (v) above.

- The recovery of third-party claims in insurance activities.

- Collections on behalf of others not related to the sale of goods or services of the business establishment.

- Revenue from goods and services received for consignment sale at fixed prices, and commission revenue earned from consignment selling operating according to the consignor's set prices, including postal, telecommunications services, lottery tickets, airline tickets, automobiles, trains, boats, international transportation agency; aviation and maritime service agency that applies the 0% VAT rate; insurance consignment sales.

- Revenue from goods and services and commission revenue earned from consignment selling goods and services exempt from VAT.

[7] Additionally, pursuant to Clause 3, Article 7 of Decree 126/2020/ND-CP (supplemented by Clause 2, Article 1 of Decree 91/2022/ND-CP), businesses and household businesses are not required to submit VAT tax declaration dossiers in the following cases:

- Businesses and household businesses engaged exclusively in activities or businesses not subject to VAT (More details can be found in công việc Đối tượng chịu thuế giá trị gia tăng).

Example 3: Goods and services of an enterprise household with an annual turnover of 100 million VND or less do not belong to the VAT subject. Therefore, if the household only has revenue from production and business activities of such goods and services (100 million VND or less), they are exempted from submitting VAT declaration dossiers and VAT payments.

- Export processing enterprises that only have export activities.

- Businesses and household businesses temporarily suspending operations or businesses.

Enterprises and household businesses must notify the temporary suspension of business activities to the Business Registration Office (under the Department of Planning and Investment) or notify their direct tax authority, except in cases where the suspension is per notification or requirements by competent State authorities.

During this period, businesses and household businesses do not need to submit VAT tax declaration dossiers, except if the suspension is not for a complete month or quarter, where monthly, quarterly declarations must still be submitted. household businesses paying tax by the fixed tax method upon temporarily suspending business activities will have their tax obligation re-determined by the tax authority according to the regulations of the Ministry of Finance.

Businesses and household businesses receiving monetary compensation, including compensation for land and assets on the land if repossessed according to competent State authority decisions, as illustrated above, must be declared and taxed under VAT regulations.

Shall an enterprise required declare and pay VAT on compensation for land in Vietnam? (Image from the Internet)

Shall an organization that manufactures and trades in services in Vietnam declare and pay VAT?

Pursuant to Article 3 of Circular 219/2013/TT-BTC, regulations are as follows:

VAT taxpayers are organizations and individuals producing and doing business in goods and services subject to VAT in Vietnam, regardless of industry, form, or business organization (hereinafter referred to as business establishments) and organizations and individuals importing goods or purchasing services from abroad subject to VAT (hereinafter referred to as importers), including:

- Business organizations established and registered under the Enterprise Law, State Enterprise Law (now the Enterprise Law), Cooperative Law, and other specialized business laws;

- Economic organizations of political organizations, socio-political organizations, social organizations, socio-professional organizations, people's armed forces units, career organizations, and other organizations;

- Foreign-invested enterprises and foreign parties participating in business cooperation under the Foreign Investment Law in Vietnam (now the Investment Law); foreign organizations and individuals doing business in Vietnam but not establishing a legal entity in Vietnam;

- Individuals, households, independent business groups, and other entities with production, business activities, and imports;

- Organizations and individuals that manufacture, trade in services in Vietnam purchasing services (including those associated with goods) from foreign organizations without a permanent establishment in Vietnam, and individuals abroad who are non-residents in Vietnam must pay VAT unless otherwise specified in Clause 2, Article 5 of Circular 219/2013/TT-BTC as follows:

"Organizations and individuals that manufacture, trade in services in Vietnam purchasing services from foreign organizations without a permanent establishment in Vietnam, and individuals abroad who are non-residents in Vietnam, including repair of vehicles, machinery, equipment (including materials and spare parts); advertising, marketing; investment and trade promotion; brokerage for selling goods, providing services abroad; training; sharing international postal and telecommunication service charges between Vietnam and other countries where such services are provided outside of Vietnam, and services renting foreign transmission lines and satellite bandwidth as per legal regulations."

The regulations on permanent establishments and non-resident subjects follow the laws on corporate income tax and personal income tax.

Therefore, organizations that manufacture, trade in services in Vietnam that purchase services are liable to declare and pay VAT, except for the cases outlined in Clause 2, Article 5 of Circular 219/2013/TT-BTC.

When is the deadline for submitting VAT declaration dossiers in Vietnam?

According to Article 44 of the Tax Administration Law 2019, regulations on the deadline for submitting tax declaration dossiers are as follows:

- The deadline for submitting tax declaration dossiers for taxes declared on a monthly or quarterly basis is stipulated as follows:

+ No later than the 20th day of the following month for monthly declarations and payments.

+ No later than the last day of the first month of the following quarter for quarterly declarations and payments.

- The deadline for submitting tax declaration dossiers for taxes with an annual calculation period is stipulated as follows:

+ No later than the last day of the third month after the end of the calendar or fiscal year for annual tax finalization dossiers; no later than the last day of the first month of the calendar or fiscal year for annual tax declaration dossiers.

+ No later than the last day of the fourth month following the end of the calendar year for personal income tax finalization dossiers of individuals directly finalizing tax.

+ No later than December 15 of the preceding year for block tax declarations by household businesses or individuals, in the case of new business operations, the deadline is no later than 10 days from the start of business.

- The deadline for submitting tax declaration dossiers for taxes declared and paid on each arising tax obligation is no later than the 10th day from the date of the tax obligation.

- The deadline for submitting tax declaration dossiers for cases of termination of operations, contract termination, or business restructuring is no later than the 45th day from the date of the event.

- If a taxpayer declares taxes electronically and experiences failures in the tax authority's electronic portal on the last day of the tax declaration deadline, they must submit tax declaration dossiers and electronic tax documents on the following day when the tax authority's electronic portal resumes operations.

Based on these regulations, the deadline for submitting monthly VAT declaration dossiers is no later than the 20th day of the month following the month in which tax obligations arise.

The deadline for quarterly VAT declaration submissions is no later than the last day of the first month of the following quarter.