What are the cases where credit-invoice method is applicable in Vietnam?

What are the cases where credit-invoice method is applicable in Vietnam?

Based on Clause 1, Article 10 of the Law on Value Added Tax 2008, amended by Clause 4, Article 1 of the Law on the Amendment to the 2013 Law on Value Added Tax regarding the VAT credit-invoice method as follows:

VAT credit-invoice method

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2. The VAT credit-invoice method applies to business establishments that fully comply with accounting, invoice, and document policies as prescribed by law on accounting, invoices, and documents, including:

a) Business establishments with annual revenue from the sale of goods and provision of services of one billion VND or more, excluding household and individual businesses;

b) Business establishments that voluntarily apply the VAT credit-invoice method, excluding household and individual businesses.

3. The Government of Vietnam will specify this Article in detail.

The VAT credit-invoice method applies to business establishments (excluding household and individual businesses) that fully comply with accounting, invoice, and document policies as prescribed by law on accounting, invoices, and documents, and have an annual revenue from the sale of goods and provision of services of one billion VND or more.

Based on the aforementioned provisions, revenue of one billion VND or more requires the company to apply the VAT credit-invoice method. If the estimated revenue according to the mentioned method is less than one billion VND, the company will apply the direct calculation method, unless the company voluntarily applies the VAT credit-invoice method.

What are the cases where credit-invoice method is applicable in Vietnam? (Image from Internet)

How to determine VAT payable under the credit-invoice method in Vietnam?

The method to determine VAT payable under the credit-invoice method is based on Clause 1, Article 10 of the Law on Value Added Tax 2008, amended by Clause 4, Article 1 of the Law on the Amendment to the 2013 Law on Value Added Tax as follows:

VAT credit-invoice method

1. The VAT credit-invoice method is stipulated as follows:

a) VAT payable under the credit-invoice method equals the output VAT minus the deductible input VAT;

b) Output VAT equals the total amount of VAT on sold goods and services stated on VAT invoices.

VAT on goods and services sold as stated on VAT invoices is calculated based on the taxable price of the goods and services sold multiplied by the VAT rate applied to those goods and services.

If documents recording the payment price already include VAT, the output VAT is determined by the payment price minus the taxable VAT price determined under Point k, Clause 1, Article 7 of this Law;

c) Deductible input VAT equals the total amount of VAT stated on VAT invoices for purchased goods and services, VAT payment documents for imported goods, and meets the conditions prescribed in Article 12 of this Law.

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The VAT payable under the credit-invoice method will be calculated by the formula:

VAT Payable = Output VAT - Deductible Input VAT

Where:

+ Output VAT equals the total amount of VAT on goods and services sold as stated on VAT invoices.

VAT on goods and services sold as stated on VAT invoices is calculated based on the taxable price of the goods and services sold multiplied by the VAT rate applied to those goods and services.

If documents recording the payment price already include VAT, the output VAT is determined by the payment price minus the taxable VAT price determined under Point k, Clause 1, Article 7 of the Law on Value Added Tax 2008:

k) For goods and services with payment documents recording the payment price already including VAT, the taxable price is determined by the following formula:

Price excluding VAT = Payment price / (1 + VAT rate of the goods or services (%))

+ Deductible Input VAT equals the total amount of VAT stated on VAT invoices for purchased goods and services, VAT payment documents for imported goods, and meets the conditions prescribed in Article 12 of the Law on Value Added Tax 2008, amended by Clause 6, Article 1 of the Law on the Amendment to the Law on Value Added Tax 2013.

What are the conditions for input VAT deduction in Vietnam?

The conditions for input VAT deduction are prescribed in Clause 2, Article 12 of the Law on Value Added Tax 2008, amended by Clause 6, Article 1 of the Law on the Amendment to the Law on Value Added Tax 2013 as follows:

(i) There must be a VAT invoice for the purchase of goods and services or documents for VAT payment at the stage of import;

(ii) There must be non-cash payment documents for purchased goods and services, except for goods and services bought individually with a value under twenty million VND;

(iii) For exported goods and services, in addition to the conditions specified in (ii), (iii), there must also be: a contract signed with a foreign party on the sale, processing, or provision of services; an invoice for goods and services sold; non-cash payment documents; and a customs declaration for exported goods.

The payment for exported goods and services in the form of clearing between exported goods and services with imported goods and services, or debt repayment on behalf of the State is considered as non-cash payment.