Shall invoices under 20 million VND paid in cash be eligible for input VAT deduction in Vietnam?

Shall invoices under 20 million VND paid in cash be eligible for input VAT deduction in Vietnam?

Based on point b, clause 2, Article 12 of the Law on Value-Added Tax 2008 (amended by clause 6, Article 1 of the Law on Value-Added Tax Amendment 2013), regulations regarding input VAT deduction are as follows:

Deducting input VAT

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2. Conditions for input VAT deduction are stipulated as follows:

a) There must be an invoice for purchased goods or services or a proof of VAT payment at the importation stage;

b) There must be non-cash payment documents for purchases of goods or services, except for one-time purchases of goods or services valued under twenty million VND;

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It can be seen from the current regulations that invoices for purchases under 20 million VND can be paid in cash or non-cash to be eligible for input VAT deduction.

However, according to point b, clause 2, Article 14 of the Law on Value-Added Tax 2024 (effective from July 1, 2025), the conditions for input VAT deduction are as follows:

Deducting input VAT

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2. Conditions for input VAT deduction are stipulated as follows:

a) There must be an invoice for purchased goods or services or a proof of VAT payment at the importation stage or a proof of VAT payment on behalf of foreign parties as stipulated in clauses 3 and 4 of this Law. The Minister of Finance prescribes the proof of VAT payment on behalf of foreign parties;

b) There must be non-cash payment documents for purchases of goods or services, except for certain special cases prescribed by the Government of Vietnam;

c) For exported goods or services, in addition to the conditions stipulated in point a and b of this clause, there must be: a contract signed with foreign parties on the sale, processing of goods, or provision of services; an invoice for selling goods or providing services; non-cash payment documents; customs declarations for exported goods; packing slips, bills of lading, and insurance documents for goods (if any). The Government of Vietnam prescribes conditions for deduction in the case of exporting goods through foreign e-commerce platforms and some other special cases.

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According to the above regulations, starting from July 1, 2025, all purchases of goods and services must use non-cash payment, except for certain special cases prescribed by the Government of Vietnam.

Therefore, invoices under 20 million VND paid in cash are still eligible for input VAT deduction until June 30, 2025. However, from July 1, 2025, all invoices under 20 million VND must have non-cash payment documents to deduct VAT.

Shall invoices under 20 million VND paid in cash be eligible for input VAT deduction in Vietnam? (Image from the Internet)

What are cases of VAT refund in Vietnam?

Pursuant to Article 13 of the Law on Value-Added Tax 2008, as amended by clause 7, Article 1 of the Law on Value-Added Tax Amendment 2013, and further amended by clause 3, Article 1 of the Law on Value-Added Tax, Special Consumption Tax, and Law on Tax Administration Amendment 2016, the cases eligible for VAT refund are as follows:

- Business establishments paying VAT by deduction method, if there is uncredited input VAT at the end of the month or quarter, are allowed to carry it forward to the next period.

In the case of business establishments registered to pay VAT by deduction method with new investment projects, if during the investment phase, input VAT on purchased goods or services for the investment is uncredited, and the remaining tax amount is 300 million VND or more, they are entitled to a VAT refund.

Businesses are not entitled to VAT refunds but can carry forward uncredited tax of investment projects according to investment law to the next period in the following cases:

+ Investment projects of business establishments that do not contribute enough charter capital as registered; engage in business sectors conditional on investment but do not meet business conditions as prescribed by the Law on Investment or do not maintain sufficient business conditions during operation;

+ Mining and mineral projects licensed from July 1, 2016, or product manufacturing investment projects where the total value of natural resources, minerals plus energy costs account for 51% or more of the product cost under the investment project.

- Business establishments with exported goods or services in the month or quarter, if uncredited input VAT is 300 million VND or more, are entitled to VAT refunds monthly or quarterly, except for goods imported for export or exported goods not executed at customs operations according to the Customs Law 2014.

Refunds are processed before auditing for taxpayers producing exported goods not violating tax and customs laws for two consecutive years; taxpayers not in high-risk groups as per the Law on Tax Administration 2019.

- Business establishments undergoing ownership transfer, enterprise conversion, merger, consolidation, division, separation, dissolution, bankruptcy, or termination with excess paid VAT or uncredited input VAT are entitled to a VAT refund.

- Foreign nationals, Vietnamese residing abroad bringing passports or entry documents issued by foreign authorities, are refunded VAT for goods purchased in Vietnam carried when exiting.

- VAT refunds for programs/projects using non-refundable Official Development Assistance (ODA) or non-refundable aid and humanitarian aid are stipulated as follows:

+ Program/project owners or principal contractors and organizations assigned by foreign donors to manage programs/projects using non-refundable ODA funds will be refunded VAT paid for goods/services purchased in Vietnam for the programs/projects;

+ Organizations in Vietnam using non-refundable aid and humanitarian aid funds from foreign organizations and individuals to purchase goods/services for non-refundable aid programs/projects in Vietnam are refunded VAT paid for those goods/services.

- Beneficiaries of diplomatic or consular privileges and immunities as per diplomatic immunity laws purchasing goods/services in Vietnam for use are refunded VAT shown on the VAT invoice or payment document indicating the payment amount includes VAT.

- Business establishments receiving VAT refunds decided by competent authorities according to law and VAT refund cases as per international treaties to which the Socialist Republic of Vietnam is a member.

Which entity is a VAT taxpayer in Vietnam under current regulations?

According to Article 4 of the Law on Value-Added Tax 2008, specific provisions on VAT taxpayers are as follows:

A VAT taxpayer is an organization or individual producing, trading in goods, or providing services liable to VAT (hereinafter referred to as business establishments) and an organization or individual importing goods liable to VAT (hereinafter referred to as importers).