Shall VAT be declared and deducted in the period during which it is incurred in Vietnam?

Shall VAT be declared and deducted in the period during which it is incurred in Vietnam?

Based on Article 14 of Circular 219/2013/TT-BTC, supplemented by point b, clause 9, Article 1 of Circular 26/2015/TT-BTC, the principles of deducting input value-added tax are specified as follows:

rules for deducting input VAT

1. The input VAT of goods and services used for producing and conducting taxable business activities is fully deductible, including the input VAT not compensated for VAT-taxable goods that were lost.

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8. The input VAT occurring in any period can be declared and deducted when determining the payable tax of that period, regardless of whether it has been used or remains in inventory.

In case businesses discover errors in the declared and deducted input VAT, they are allowed to supplement the declaration and deduction before the tax authority or competent agency announces tax inspection or audit decisions at the taxpayer’s premises.

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Thus, it is regulated that according to the principles of input value-added tax deduction, the VAT occurring in any period may be declared and deducted when determining the tax payable for that period, regardless of whether it has been used or is still in stock.

Where shall input VAT that is not deductible be aggregated with in Vietnam?

Based on clause 9, Article 14 of Circular 219/2013/TT-BTC, specifically:

rules for deducting input VAT

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9. For non-deductible input VAT, businesses can account it as an expense for calculating corporate income tax or include it in the initial cost of fixed assets, except for the VAT of purchased goods and services with each transaction valued at twenty million dong or more without non-cash payment vouchers.

10. Headquarters of general corporations, groups that do not directly engage in business activities, and affiliated administrative units such as: hospitals, clinics, rest centers, institutes, training schools, etc., which are not VAT payers, are not allowed to deduct or refund input VAT for purchased goods and services used for the activities of these units.

In cases where these units have business activities involving taxable goods and services, they must separately register, declare, and pay VAT for these activities.

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Thus, non-deductible input VAT should be accounted as expenses for corporate income tax calculations or included in the original cost of fixed assets.

Note: Except for the VAT of goods and services purchased in transactions valued at twenty million dong or more without non-cash payment vouchers.

Shall VAT be declared and deducted in the period during which it is incurred in Vietnam? (Image from the Internet)

What are cases of value-added tax refunds in Vietnam?

Based on Article 13 of the Value Added Tax Law 2008, 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, instances eligible for VAT refunds include:

- Business establishments paying VAT by the deduction method, if having input VAT not fully deducted within the month or quarter, are allowed to carry it forward to the subsequent period.

In the case of business establishments registered to pay VAT by the deduction method with new investment projects still under investment phase, if input VAT from purchased goods and services for the investment is not fully deducted and remains at three hundred million dong or more, they are eligible for VAT refunds.

Business establishments are not entitled to VAT refunds but may carry forward the undeducted tax of investment projects according to investment law to subsequent periods in cases such as:

+ Investment projects where the business does not contribute sufficient charter capital as registered; doing business in conditional investment sectors without fulfilling the conditions as stipulated by the Investment Law 2020 or fails to maintain sufficient business conditions throughout operations;

+ Investment projects extracting resources, granted licenses from July 1, 2016, or investment projects manufacturing products whose total value of resources plus energy costs accounts for 51% or more of product cost according to the investment project.

- Business establishments with goods and services exported during the month or quarter, if having input VAT not deducted from three hundred million dong or more, are eligible for VAT refunds on a monthly or quarterly basis, excluding goods imported for export, and goods exported not performed in the customs area according to the Customs Law 2014.

Refunds are processed first, with audits later for taxpayers producing export goods who have not violated tax or customs laws for two consecutive years; taxpayers not classified under high-risk categories according to the Tax Administration Law 2019.

- Business establishments using the deduction method are eligible for VAT refunds during ownership transfer, enterprise conversion, consolidation, merger, division, split, dissolution, bankruptcy, and ceasing operations where there is excess paid VAT or undeducted input VAT.

- Foreigners and overseas Vietnamese with passports or entry documents issued by competent foreign authorities are refunded taxes for goods purchased in Vietnam that they take with them upon departure.

- Regulations on VAT refunds for programs and projects using non-refundable official development assistance (ODA) or humanitarian aid funding are as follows:

+ The project owner or the primary contractor organization assigned by the foreign donor to manage the program or project using non-refundable ODA funds is refunded VAT paid on goods and services purchased domestically for the program or project;

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

- Entities enjoying diplomatic exemption privileges as stipulated by laws on diplomatic exemptions, who purchase goods and services domestically for use, are refunded the VAT stated on the VAT invoice or payment document reflecting the price inclusive of VAT.

- Business establishments with VAT refund decisions made by competent authorities according to law and cases for VAT refund under international treaties to which the Socialist Republic of Vietnam is a member.