What are the conditions for enterprises to receive a VAT refund on investment projects in Vietnam?

What are the conditions for an enterprise to receive a VAT refund for investment projects in Vietnam?

Pursuant to Article 13 of the 2008 Law on Value-Added Tax, amended by Clause 7 Article 1 of the 2013 Amended Law on VAT, and further amended by Clause 3 Article 1 of Law No. 06/2016/QH13, the provisions are as follows:

Cases for Tax Refund

1. A business establishment paying value-added tax under the credit method can carry forward uncredited input VAT from month or quarter to the next period.

In cases where a business establishment registered for VAT payment under the credit method with a new investment project is in the investment stage and has input VAT on goods and services used for investment but has not been credited and has remaining tax from three hundred million VND or more, they are eligible for a VAT refund.

Business establishments are ineligible for a VAT refund but must carry forward uncredited input tax for the investment project to succeeding periods if:

a) The investment project of the business establishment has not contributed the required registered charter capital; operates in a conditional business sector without meeting business conditions as prescribed by the Investment Law or does not ensure fulfilling business conditions during operation;

b) The investment project for exploiting resources and minerals licensed from July 1, 2016, or the investment project for manufacturing goods with the total value of resources, minerals plus energy costs accounting for 51% or more of the product cost as per the investment project.

The Government of Vietnam shall provide detailed regulations on this clause.

2. Business establishments having goods, services exported in the month or quarter with input VAT not credited from three hundred million VND or more are eligible for VAT refunds monthly, quarterly, except in cases of goods imported for export, or goods exported without customs procedures compliance as per the Customs Law. Tax refunds are given prior, inspection later for taxpayers producing export goods not violating tax, customs laws for two consecutive years; taxpayers not classified as high risk under the Tax Management Law.

3. Business establishments submitting VAT under the credit method receive a VAT refund upon ownership transfer, company transformation, mergers, consolidations, divisions, split-offs, dissolutions, bankruptcies, or business cessation with overpaid VAT or uncredited input VAT.

4. Foreigners and Vietnamese residing abroad with foreign authority-issued passports or entry documents are refunded VAT on goods purchased in Vietnam to bring abroad upon departure.

5. VAT refunds for programs and projects using non-refundable official development assistance (ODA) or non-refundable aid, humanitarian aid are stipulated as follows:

a) Program or project owners, main contractors, or organizations designated by foreign donors to manage programs, projects using non-refundable ODA receive VAT refunds for VAT paid on goods, services purchased in Vietnam for the program, project;

b) Vietnamese organizations using non-refundable aid, humanitarian aid from foreign organizations, individuals to purchase goods, services for non-refundable aid, humanitarian aid projects in Vietnam receive VAT refunds for VAT paid on these goods, services.

6. Subjects entitled to diplomatic immunity and privileges as per legal provisions purchasing goods, services in Vietnam for use are refunded the VAT paid marked on value-added invoices or payment documents indicating prices inclusive of VAT.

7. Business establishments receiving competent authority decisions for VAT refunds per legal provisions and cases of VAT refunds according to international agreements which the Socialist Republic of Vietnam is a member.

Pursuant to Article 18 of Circular 219/2013/TT-BTC amended by Clause 3 Article 1 of Circular 130/2016/TT-BTC replaced by Clause 3 Article 1 Circular 13/2023/TT-BTC, amended by point a Clause 12 Article 1 Circular 26/2015/TT-BTC, stipulates:

Subjects and Cases Eligible for a VAT Refund

“1. Businesses paying VAT under the credit method with uncredited input VAT in the month (monthly declaration) or quarter (quarterly declaration) are carried forward to the next period.

For businesses with uncredited input VAT prior to the July 2016 tax period (monthly declaration) or before Q3 2016 tax period (quarterly declaration), meeting eligibility conditions for VAT refunds as guided in Clause 1, Article 18 of Circular 219/2013/TT-BTC, tax authorities handle refunds per legal provisions.

2. Newly established businesses from investment projects registered for business, registered for VAT payment under the credit method, or projects exploring, exploiting and developing oil fields in the investment stage not operational, with investment duration of over 1 year, are eligible for annual VAT refunds on goods, services for investment, except as directed at point c Clause 3 Article herein. If cumulative input VAT on goods, services for investment reaches 300 million VND or more, it is refunded.

3. VAT refunds on investment projects

a) Existing business establishments covered by VAT under the credit method with an investment project (except directions at point c Clause 3 Article herein and projects constructing properties for sale or lease without forming fixed assets) in the same province, city, in the investment phase, shall separately declare for the investment project and must set off input VAT of the project with VAT declarations of ongoing operation. Maximum transferable input VAT of the investment is capped by payable VAT of the business operation in the period.

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Thus, based on the provisions, newly established businesses from investment projects and operating businesses with investment projects (excluding projects constructing property for sale or lease without forming fixed assets) in the investment phase, if fulfilling new investment project regulations of the Investment Law with input VAT on goods, services for investment as per declarations and conditions with remaining tax from three hundred million VND or more, are eligible for a VAT refund as prescribed.

What are the conditions for enterprises to receive a VAT refund on investment projects in Vietnam? (Image from Internet)

What are the conditions and procedures for VAT refunds in Vietnam?

According to Article 19 of Circular 219/2013/TT-BTC stipulating conditions and procedures for VAT refunds as follows:

- Business establishments and organizations that are eligible for VAT refunds as guided at points 1, 2, 3, 4, 5 Article 18 of Circular 219/2013/TT-BTC must be business establishments paying tax by the credit method, having business registration certificates or investment licenses (practice licenses) or establishment decisions from competent authorities, possessing seals conforming to law, and maintaining and preserving accounting records, documents as per accounting laws; holding bank deposit accounts per tax number of the business establishment.

- Businesses having filed VAT refund requests on their VAT declarations may not carry forward the input tax requested for refund into the input tax deductible for the following month.

- VAT refund procedures comply with the regulations in the 2019 Law on Tax Administration and the guiding implementation documents.

What are regulations on the VAT deduction method in Vietnam?

Based on Article 10 of the 2008 Law on Value-Added Tax which provides for the VAT deduction method as follows:

- The payable VAT under the deduction method equals the output VAT minus the input VAT deductible.

- Output VAT equals the total VAT of sold goods, services recorded on the VAT invoice.

- Deductible input VAT equals the total VAT recorded on the VAT invoice for purchased goods, services, VAT payment certificates for imported goods meeting conditions stipulated in Article 12 of the 2008 VAT Law.

- The deduction method applies to business establishments adhering to complete accounting, invoice, document policies as per laws on accounting, invoices, documents, and registering for taxation under the deduction method.