What are 7 cases exempted from value-added tax declaration and payment in Vietnam?

What are 7 cases exempted from value-added tax declaration and payment in Vietnam?

Based on Article 5 of Circular 219/2013/TT-BTC (amended by Circular 119/2014/TT-BTC and Circular 193/2015/TT-BTC), the 7 cases exempted from VAT (value-added tax) declaration and payment are as follows:

Case 1: Organizations and individuals receiving monetary compensation (including land and on-land asset compensation when land is recovered by a decision of a competent State authority), bonuses, support money, emission right transfers, and other financial collections.

When a business entity receives compensation money, bonuses, support money, emission right transfers, and other financial collections, it must prepare a receipt as per regulations. For entities disbursing the money, receipts are issued based on the purpose of the disbursement.

If compensation is in the form of goods or services, the compensating entity must issue an invoice and declare, calculate, and pay VAT as with the sale of goods or services; the compensated entity declares and deducts as per regulations.

When a business entity receives money from organizations or individuals to perform services for them, such as repairs, warranty, promotions, advertising, it must declare and pay tax per regulations.

Case 2: Organizations or individuals manufacturing or trading in Vietnam buying services from foreign organizations without a permanent establishment in Vietnam, non-resident individuals in Vietnam, including:

- Repair of transportation means, machinery, equipment (including materials, spare parts); advertising, marketing;

- Investment and trade promotion;

- Brokerage for the sale of goods, provision of overseas services;

- Training;

- Sharing international postal and telecommunication service charges between Vietnam and abroad where these services are performed outside Vietnam, leasing transmission lines, and international satellite bandwidth according to legal regulations.

Case 3: Organizations or individuals that are not businesses and are not VAT taxpayers selling assets.

Case 4: Organizations or individuals transferring investment projects to produce goods and services subject to VAT to enterprises or cooperatives.

Case 5: Enterprises or cooperatives paying VAT under the credit method selling unprocessed agricultural, livestock, aquaculture, and seafood products or only through basic processing to commercial enterprises or cooperatives are not required to declare, calculate, or pay VAT. On the VAT invoice, the selling price is recorded as the price excluding VAT, and the tax rate and VAT are not recorded and are crossed out.

If enterprises or cooperatives paying VAT under the credit method sell unprocessed agricultural, livestock, aquaculture products or only through basic processing to other subjects such as households, individual businesses, and other organizations or individuals, they must:

Declare, calculate, and pay VAT at a rate of 5% as guided in Clause 5 Article 10 Circular 219/2013/TT-BTC.

Households, individual businesses, enterprises, cooperatives, and other economic organizations paying VAT by direct calculation on VAT when selling agricultural, livestock, aquaculture products that are unprocessed or only through basic processing in trade must declare and pay VAT at a rate of 1% on revenue.

Case 6: Fixed assets in use that have been depreciated when re-assigned at book value between a business entity and member units wholly owned by the business, or between member units wholly owned by one business to serve production, trading goods, and services subject to VAT:

No invoice issuance or VAT declaration and payment is required. The business with the fixed asset transfer must have a Decision or Transfer Order of the asset attached with documentation of the asset's origin.

If fixed assets are re-assigned and have undergone revaluation or are transferred to business establishments producing goods exempted from VAT, a VAT invoice must be issued, and VAT must be declared and paid as per regulations.

Case 7: Other cases:

Businesses do not need to declare and pay VAT in the following cases:

- Capital contribution using assets to establish an enterprise. The assets contributed to the enterprise must have:

+ A capital contribution record for business operations, joint venture agreement;

+ A valuation record of assets from the Council for Capital Contribution of the parties (or a valuation document from a legally authorized valuation organization) accompanied by documentation of the asset's origin.

- Asset transfers between dependent accounting units within an enterprise; asset transfers during division, separation, consolidation, merger, or transformation of enterprise types.

Asset transfers between dependent accounting units within a business; asset transfers during division, separation, consolidation, merger, enterprise type change, then the business with the transferring asset must have a transfer order, attached with documentation of the asset's origin and does not need to issue an invoice.

When assets are transferred between independently accounting units or full legal person status member units within the same business, a VAT invoice must be issued, and VAT declared and paid according to the regulations, except for guidance in Clause 6 Article 5 of Circular 219/2013/TT-BTC.

- Demanding compensation from third parties in insurance activities.

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

- Revenue earned from consignment and agency for selling goods at fixed prices set by the commissioning principal, enjoying commission from services:

Postal, telecommunications, lottery tickets, airline, automobile, railway, maritime tickets; international transport agency; aviation and marine service agency subject to 0% VAT; insurance agency.

+ Revenue from goods, services, and commission from the agency activities for selling goods and services exempted from VAT.

+ Businesses do not have to pay VAT on imports involving commodities previously exported but returned by foreign counterparts. When businesses sell returned goods domestically, they must declare and pay VAT as per regulations.

- Organizations or enterprises receiving agency fees from state agencies due to performing collections or disbursements for state agencies.

Compensation for collections or disbursements for state agencies must not be declared or VAT calculated, and includes compensation received for activities such as:

+ Collecting voluntary social insurance, voluntary health insurance for the Social Insurance agency;

+ Paying pension allowances to meritorious individuals and other allowances for the Ministry of Labor and Invalids and Social Affairs;

+ Collecting taxes from individual households for the tax agency and other collections or disbursements for state agencies.

What are 7 cases exempted from value-added tax declaration and payment in Vietnam? (Image from Internet)

What are methods of calculating value-added tax in Vietnam?

Based on Article 9 of the Law on value-added tax 2008, there are two methods of calculating value-added tax:

- The credit method of value-added tax;

- The direct calculation method on value added.

Which entity is the credit method of value-added tax applied to in Vietnam?

Based on Clause 2, Article 10 of the Law on value-added tax 2008 as amended by Clause 4, Article 1 of the Amendment of Law on value-added tax 2013, the credit method is applied to business entities that fully comply with accounting policies, invoices, and vouchers as prescribed by the law on accounting, invoices, and vouchers including:

- Business entities with annual revenue from the sales of goods and provision of services of one billion VND or more, except household and individual businesses;

- Business entities voluntarily applying the credit method, not including household and individual businesses.