What are cases of exemption declaring and paying value-added tax in Vietnam?

What are cases of exemption declaring and paying value-added tax in Vietnam?

According to Article 5 of Circular 219/2013/TT-BTC supplemented by Clause 1, Article 3 of Circular 119/2014/TT-BTC, the cases exempt from declaring and calculating value-added tax (VAT) include the following:

(1) Organizations and individuals receiving monetary compensation (including compensation for land and assets on land upon expropriation per decision by a competent state authority), rewards, support, transfer of emission rights, and other financial receipts.

Business establishments receiving monetary compensation, rewards, support, transfer of emission rights, and other financial receipts must prepare receipts as prescribed. For business establishments disbursing funds, documents must be prepared based on the disbursement purpose.

In the case of compensation in goods or services, the compensating establishment must issue invoices and declare, calculate, and pay VAT as for selling goods or services; the compensated establishment declares and deducts according to regulations.

If a business establishment receives money from an organization or individual to provide services for such organization or individual like repairs, warranties, promotions, advertising, VAT must be declared and paid as prescribed.

(2) Organizations and individuals producing and doing business in Vietnam purchasing services from foreign organizations without a permanent establishment in Vietnam, non-resident individuals, including:

- Repair of transportation means, machinery, equipment (including materials and replacement parts); advertising and marketing;- Investment and trade promotion;- Brokerage for selling goods and supplying services abroad;- Training;- Sharing postage, international telecommunication services charges between Vietnam and abroad where such services are performed outside Vietnam, and hiring foreign transmission lines and satellite bandwidth according to legal regulations.

(3) Organizations and individuals not conducting business or not liable to VAT selling assets.

(4) Organizations and individuals transferring investment projects for manufacturing and trading taxable goods and services to enterprises, cooperatives.

(5) Enterprises, cooperatives applying the deduction method selling agricultural, livestock, aquatic, and seafood products in unprocessed form or those that have undergone normal preliminary processing to enterprises, cooperatives at the commercial stage are not required to declare, calculate, and pay VAT. On the VAT invoice, the selling price without VAT is recorded, and the tax rate and VAT are not recorded or crossed out.

Where enterprises and cooperatives applying the deduction method sell unprocessed agricultural, livestock, or aquatic products or those that have undergone normal preliminary processing to other entities such as households, individual businesses, and other organizations and individuals, VAT must be declared and calculated at a rate of 5% as guided in Clause 5, Article 10 of Circular 219/2013/TT-BTC.

Households, individual businesses, enterprises, cooperatives, and other economic organizations applying the direct method on VAT when selling unprocessed agricultural, livestock, or aquatic products or those that have undergone normal preliminary processing at the commercial stage must declare and calculate VAT at a rate of 1% on revenue.

If unprocessed agricultural, livestock, aquatic products, or those that have undergone normal preliminary processing are sold to enterprises or cooperatives that have issued invoices, declared, and calculated VAT, the seller and buyer must adjust the invoices to exempt from declaring, calculating, and paying VAT as guided in Clause 5, Article 5 of Circular 219/2013/TT-BTC.

(6) Fixed assets in use and depreciated when transferred at the book value between business establishments and units fully owned by one business establishment, or among units fully owned by one business establishment for the purpose of producing and trading taxable goods and services are not required to issue invoices and declare and pay VAT. The transferring business establishment must have a decision or order to transfer assets along with the origin file of the asset.

If the fixed asset value was re-evaluated or transferred to a business establishment not subject to VAT, VAT invoices must be issued, declared, and paid accordingly.

(7) Other cases

Business establishments are not required to declare and pay VAT in the following cases:

- Contributing capital using assets to establish enterprises. Contributed assets must have: a capital contribution record for business activities, a joint venture contract, contribution receipt minutes of the valuation council of the contributing parties (or valuation documents from a legally recognized valuation organization), along with the origin file of the assets.

- Transferring assets among dependent cost units within the enterprise; transferring assets when splitting, amalgamating, merging, or converting the type of enterprise. Transferred assets among dependent accounting units within the business; transferred assets when splitting, amalgamating, merging, or converting the type of enterprise, the transferring unit must have an asset transfer order along with the origin file of the assets and is not required to issue invoices.

If transferring assets among independent accounting units or among member units with full legal status within the same business establishment, the transferring business establishment must issue VAT invoices and declare and pay VAT as prescribed, except in cases guided in Clause 6, Article 5 of Circular 219/2013/TT-BTC.

- Collecting from third parties in insurance activities.

- Collecting on behalf of others not related to the sale of goods and services of a business establishment.

- Revenue from goods and services sold on consignee basis and commission revenue from consignment sales of postal and telecommunications services, lottery tickets, airline tickets, automobiles, train tickets, ship tickets, international transportation agency services; agencies of aviation, maritime services subject to 0% VAT; insurance sales agency.

- Revenue from goods and services and commission revenue from agencies selling goods and services exempt from VAT.

- Business establishments are not required to pay VAT on imports in the case of imported goods exported but returned. When business establishments sell these returned goods domestically, they must declare and pay VAT as prescribed.

What are bases for calculating value-added tax in Vietnam?

According to Article 6 of Circular 219/2013/TT-BTC, the basis for calculating value-added tax is stipulated as follows:

Basis for Tax Calculation

The basis for calculating value-added tax is the taxable value and tax rate.

Thus, the calculation of value-added tax is based on the taxable value and tax rate.

How many methods are there for calculating value-added tax in Vietnam?

According to Article 9 of the Law on value-added tax 2008, the methods for tax calculation are as follows:

Tax Calculation Methods

The methods for calculating value-added tax include the credit method and the direct method on value addition.

Thus, there are 2 methods for calculating value-added tax:

- The credit method;

- The direct method on value addition.