What are cases of non-refundable input VAT on damage goods in Vietnam?

What are cases of non-refundable input VAT on damage goods in Vietnam?

Based on Clause 1, Article 14 of Circular 219/2013/TT-BTC which stipulates the principles for deducting input VAT as follows:

Principles of deducting input VAT

1. The VAT input tax of goods and services used for the production and business activities of taxable goods and services is fully deductible, including the VAT input tax not compensated for the goods subject to VAT that have been lost.

Cases of loss not compensated and eligible for deducting input VAT include: natural disasters, fires, losses not compensated by insurance, goods that are of poor quality or expired and must be destroyed. The business establishment must have sufficient documentation and evidence to prove the cases of loss not compensated to deduct taxes.

In cases where goods suffer natural loss due to physical and chemical characteristics during transportation and pumping such as fuel, oil, etc., the VAT input tax of the actual quantity of goods naturally lost not exceeding the prescribed loss norm is deductible. The VAT input tax of the quantity of goods lost exceeding the norm is not deductible or refundable.

The VAT input tax of goods and services forming fixed assets like canteens, restrooms, locker rooms, parking lots, toilets, and water tanks serving employees in production and business areas, and housing and medical stations for workers in industrial zones, is fully deductible.

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Thus, the loss cases not compensated and eligible for deducting input VAT include:

- Natural disasters, fires

- Losses not compensated by insurance

- Goods that are of poor quality or expired and must be destroyed.

Note: Business establishments must have complete documentation and evidence to prove the cases of loss not compensated to deduct taxes.

What are cases of non-refundable input VAT on damage goods in Vietnam? (Image from Internet)

Is a receipt paid in cash over 20 million eligible for deducting input VAT in Vietnam?

Pursuant to Clause 2, Article 15 of Circular 219/2013/TT-BTC (amended by Clause 10, Article 1 of Circular 26/2015/TT-BTC) which stipulates the conditions for deducting input VAT as follows:

Conditions for deducting input VAT

1. There must be a legal VAT invoice for goods and services purchased or documents evidencing VAT payment at the importation stage or documents evidencing VAT payment on behalf of foreign entities according to the Ministry of Finance's guidelines applicable to foreign organizations without legal status in Vietnam and foreign individuals conducting business or having income in Vietnam.

2. There must be non-cash payment vouchers for goods and services purchased (including imported goods) with a value of 20 million VND or more, except for cases where the value of goods and services imported each time is less than 20 million VND, goods and services purchased each time according to invoices of less than 20 million VND inclusive of VAT, and where the business establishment imports goods as gifts from foreign organizations and individuals.

Non-cash payment documents include bank payment vouchers and other non-cash payment documents guided in Clauses 3 and 4 of this Article.

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Thus, to deduct VAT input tax, the purchaser must make payments for purchases of goods and services each time valued at 20 million VND or more via bank transfer.

Therefore, payments for purchases of goods and services with an invoice value over 20 million VND paid in cash are not eligible for VAT deduction.

Which business establishments are eligible for VAT deduction methods in Vietnam?

According to Clause 1, Article 12 of Circular 219/2013/TT-BTC, the deduction method is applied to business establishments that fully comply with accounting, invoices, and documentation policies as prescribed by accounting, invoice, and documentation laws, including:

- Business establishments actively operating with annual revenue from selling goods and providing services of one billion VND or more and complying entirely with accounting, invoice, and documentation policies as prescribed by law, except for households and individuals taxed directly.

- Business establishments registering voluntarily to apply the deduction method, except for households and individuals taxed directly.

- Foreign organizations and individuals providing goods and services for activities such as exploration, development, and exploitation of oil and gas, taxed by the deduction method declared and deducted by Vietnamese entities.