Vietnam: How should a business establishment handle if the input VAT was declared or deducted incorrectly?
Vietnam: How should a business establishment handle if the input VAT was declared or deducted incorrectly?
Based on point dd, clause 1, Article 14 of the Law on Value-Added Tax 2024 (effective from July 1, 2025), the deduction of input value added tax is regulated as follows:
Deduction of input value added tax
- Business establishments paying value added tax by the deduction method are allowed to deduct input value added tax as follows:
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đ) The input value added tax arising in a particular month or quarter shall be declared and deducted when determining the tax payable for that month or quarter. The input value added tax that has not been fully deducted within a month or quarter shall be carried forward to deduct in the following month or quarter.
In cases where a business establishment discovers discrepancies in the declaration or deduction of input value added tax, it is permitted to amend the tax declaration before the tax authority or the competent authority announces the decision on tax inspection or audit as follows:
Taxpayers shall make supplementary declarations in the month or quarter when the incorrect input value added tax arises, if the incorrect declaration results in an increase in the payable tax amount or a decrease in the refundable tax amount; taxpayers must pay the additional tax due or refund any excess tax and pay late payment fees to the state budget (if applicable).
Taxpayers shall declare during the month or quarter when the discrepancy is discovered, if the incorrect declaration of input value added tax results in a decrease in the payable tax amount or only affects the increase or decrease of the deductible input tax carried forward to the subsequent month or quarter;
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Thus, if a business establishment discovers errors in the declaration or deduction of input VAT, it may amend the tax declaration before the tax authority or competent authority announces the tax inspection or audit decision, handled as follows:
- Taxpayers shall make supplementary declarations in the month or quarter where the incorrect input value added tax arises if the incorrect declaration results in an increase in the payable tax amount or a decrease in the refundable tax amount; taxpayers must pay the additional tax due or refund any excess tax and pay late payment fees to the state budget (if applicable).
- Taxpayers shall declare during the month or quarter when the discrepancy is discovered if the incorrect declaration of input value added tax results in a decrease in the payable tax amount or only affects the increase or decrease of the deductible input tax carried forward to the subsequent month or quarter;
Vietnam: How should a business establishment handle if the input VAT was declared or deducted incorrectly? (Image from the Internet)
What are the conditions for input VAT deduction in Vietnam?
Based on clause 2, Article 14 of the Law on Value-Added Tax 2024, the conditions for input VAT deduction are specified as follows:
(1) Have a value added tax invoice for purchases of goods and services or a document of paid value added tax at the importation stage or a document of paid value added tax on behalf of a foreign entity as stipulated in clause 3 and clause 4, Article 4 of the Law on Value-Added Tax 2024. The Minister of Finance prescribes the documents for VAT paid on behalf of foreign parties;
(2) Have non-cash payment vouchers for purchases of goods and services, except for specific cases as prescribed by the Government of Vietnam;
For exported goods and services, in addition to the conditions stated in (1) and (2), the following are also required:
- A contract with a foreign party for the sale, processing of goods, or provision of services;
- Invoice of sale of goods or provision of services;
- Non-cash payment voucher;
- Customs declaration for exported goods;
- Packing list, bill of lading, insurance documents for goods (if applicable).
Note: The Government of Vietnam stipulates the deduction conditions for goods exported via e-commerce platforms abroad and other special cases.
What are prohibited acts in the deduction of VAT in Vietnam?
Based on Article 13 of the Law on Value-Added Tax 2024, the prohibited actions in VAT deduction are as follows:
(1) Buying, giving, selling, organizing advertising, or brokering the buying and selling of invoices.
(2) Engaging in non-existent or illegitimate transactions for goods and services.
(3) Issuing sales invoices for goods or services during a business suspension period, except for issuing invoices to customers for contracts signed before the business suspension notification date.
(4) Using illegal invoices, documents, or using invoices, documents illegally according to the regulations of the Government of Vietnam.
(5) Failing to transmit electronic invoice data to the tax authority as prescribed.
(6) Tampering with, misusing, unauthorized access, or destroying information systems regarding invoices and documents.
(7) Giving, receiving, brokering bribes, or performing other acts related to invoices and documents to deduct, refund, or embezzle taxes, or to evade value added tax.
(8) Colluding, covering up, or conspiring between tax officials, tax authorities, businesses, importers, or among businesses or importers in using illegal invoices and documents to deduct, refund, or embezzle taxes, or to evade value added tax.
