Shall non-deductible input value-added tax be accounted as business expenses in Vietnam?

Shall non-deductible input value-added tax be accounted as business expenses in Vietnam?

Based on Clause 9, Article 14 of Circular 219/2013/TT-BTC, the regulation is as follows:

Principles of Input Value-Added Tax Deduction

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9. The non-deductible input VAT may be recorded into costs for calculating corporate income tax or added to the original cost of fixed assets, except for the VAT on goods and services purchased each time valued at twenty million dong or above without non-cash payment documents.

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Furthermore, according to Article 4 of Circular 96/2015/TT-BTC, expenses not meeting the following conditions will not be deductible when determining taxable corporate income:

Deductible and Non-Deductible Expenses in Determining Taxable Income

1. Except for non-deductible expenses stipulated in Clause 2 of this Article, enterprises are entitled to deduct all expenses if they meet the following conditions:

a) Actual expenses incurred related to the business and production activities of the enterprise.

b) Expenses with sufficient legal invoices and documents as prescribed by law.

c) Expenses with an invoice for goods and services each time having a value of 20 million dong or more (including VAT) must have non-cash payment vouchers.

Non-cash payment documents follow the regulations in the legal documents on value-added tax.

For the purchase of goods and services each time valued at twenty million dong or more recorded on the invoice, if the enterprise has not made payment by the time of recording expenses, they can be included in deductible expenses when determining taxable income. If upon payment, the enterprise lacks non-cash payment documents, the enterprise must report and adjust to reduce expenses concerning the value of goods and services lacking non-cash payment documents during the tax period in which the cash payment arises (including cases where tax authorities and functional bodies have issued inspection or audit decisions for the tax period in which these expenses arise).

For invoices for goods and services paid in cash that arose before the effective date of Circular 78/2014/TT-BTC, no adjustments are required as per this Clause.

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The non-deductible input VAT may be accounted into costs for calculating corporate income tax or added to the original cost of fixed assets, except for the VAT on goods and services purchased each time valued at twenty million dong or above without non-cash payment documents.

Simultaneously, deductible and non-deductible expenses when determining taxable income include:

[1] Actual expenses incurred related to the production and business activities of the enterprise.

[2] Expenses with sufficient legal invoices and documents as prescribed by law.

[3] Expenses with an invoice for goods and services each time valued at 20 million dong or more (including VAT) when making payment must have non-cash payment documents.

Thus, according to the above regulations, non-deductible input value-added tax will be included in business expenses.

In cases where invoices valued at 20 million dong or more lack non-cash payment documents: VAT is not deductible and cannot be included in reasonable expenses when calculating corporate income tax.

Shall non-deductible input value-added tax be accounted as business expenses in Vietnam? (Image from the Internet)

Does input value-added tax deduction require a value-added invoice in Vietnam?

According to Clause 1, Article 15 of Circular 219/2013/TT-BTC, amended by Clause 10, Article 1 of Circular 26/2015/TT-BTC, the conditions are as follows:

Input Value-Added Tax Deduction Conditions

1. A legal value-added invoice for goods and services purchased or a document for VAT payment at the import stage or VAT paid on behalf of a foreign entity as guided by the Ministry of Finance applicable to foreign organizations without Vietnamese legal status and foreign individuals doing business or having income generated in Vietnam.

2. Non-cash payment documents for goods and services purchased (including imported goods) valued at twenty million dong or more per transaction, except cases where the import value of goods and services per transaction is under twenty million dong, the purchase of goods and services each time according to the invoice under twenty million dong including VAT, and cases where the business receives goods as gifts from foreign individuals and organizations.

Non-cash payment documents include bank transfers and other non-cash payment methods guided in Clause 3 and Clause 4 of this Article.

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Therefore, the condition for input VAT deduction requires a legal value-added invoice or VAT payment document at the import stage, or VAT payment document on behalf of a foreign entity.

What are the 7 cases of value-added tax refund in Vietnam?

Under Article 13 of the Value-Added Tax Law 2008, as amended by Clause 7, Article 1 of the Amended Value-Added Tax Law 2013, further amended by Clause 3, Article 1 of the Amended Value-Added Tax, Special Consumption Tax, and Tax Management Law 2016, the cases eligible for VAT refund are:

- Business establishments paying VAT via the deduction method with un-deducted input VAT for the month or quarter may carry it over to the next period.

In cases where a business establishment has registered to pay VAT via the deduction method has a new investment project, during the investment stage, with un-deducted input VAT on purchased goods and services for the investment equal to or more than three hundred million dong, they are eligible for a VAT refund.

Business establishments not eligible for VAT refunds but allowed to carry forward un-deducted tax for investment projects as per investment laws to the next period in cases:

+ The business's investment project does not fully meet registered charter capital; operates in conditional business sectors without satisfying business conditions as per the Investment Law 2020 or fails to maintain sufficient business conditions during operation;

+ Investment projects exploiting natural resources and minerals licensed from July 1, 2016, or projects producing goods where the total value of resources and minerals plus energy costs account for 51% or more of the product's cost according to the investment project.

- Business establishments in a month or quarter exporting goods and services with un-deducted input VAT of three hundred million dong or more are eligible for VAT refunds for the month or quarter, except for goods imported for export, goods exported not under customs area regulations as per the Customs Law 2014.

VAT refunds are made prior, audit afterward for exporters not violating tax and customs laws continuously for two years; taxpayers not classified as high-risk as per the Tax Management Law 2019.

- Business establishments shifting ownership, restructuring, merging, amalgamating, dividing, separating, dissolving, bankrupting, or ceasing operations with excess paid VAT or un-deducted input VAT are eligible for VAT refunds.

- Foreigners and overseas Vietnamese with passports or entry documents granted by foreign authorities are eligible for VAT refunds for goods purchased in Vietnam taken when leaving the country.

- VAT refunds for projects using Official Development Assistance (ODA) funds, non-refundable aids, or humanitarian aids are as follows:

+ Program owners, main contractors, or organizations designated by foreign donors managing ODA funds are eligible for VAT refunds for VAT paid on goods and services purchased in Vietnam for the program;

+ Organizations in Vietnam using non-refundable aid money or humanitarian aid from foreign organizations or individuals to purchase goods and services for the aid program are eligible for VAT refunds for those goods and services.

- Entities enjoying diplomatic immunity under diplomatic law purchasing goods and services in Vietnam eligible for VAT refunds indicated on value-added invoices or payment documents showing payment amounts including VAT.

- Business establishments with VAT refund decisions from competent authorities as per law and cases of VAT refunds as per international agreements to which the Socialist Republic of Vietnam is a member.