What are the conditions for input VAT deduction in Vietnam?

What are the conditions for input VAT deduction in Vietnam?

Under Clause 2, Article 12 of the Law on VAT 2008 amended by Clause 6, Article 1 of the Law on Amending Law on VAT 2013, the conditions for input VAT deduction are as follows:

- Having VAT invoices for purchasing goods and services or documents of VAT payment at the import stage;

- Having non-cash payment documents for purchasing goods and services, except for one-time purchases of goods and services valued at under twenty million dong;

- For export goods and services, in addition to the conditions stipulated in points a and b, Clause 2, Article 12 of the Law on VAT 2008, the following are also required: a contract signed with a foreign party regarding the sale, processing of goods, or provision of services; sales invoices for goods and services; non-cash payment documents; customs declarations for exported goods.

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

What are the conditions for input VAT deduction in Vietnam? (Image from Internet)

What business establishments apply the VAT deduction method in Vietnam?

Under Clause 2, Article 10 of the Law on VAT 2008 amended by Clause 4, Article 1 of the Law on Amending Law on VAT 2013, the VAT deduction method applies to business establishments that fully comply with the policies on accounting, invoices, and documents prescribed by law on accounting, invoices, and documents, including:

- Business establishments with annual revenue from the sale of goods and services of one billion dong or more, except for households and individuals conducting business;

- Business establishments that voluntarily register to apply the VAT deduction method, except for households and individuals conducting business.

What are the cases of refund of VAT in Vietnam?

Under Article 13 of the Law on VAT 2008 amended by Clause 7, Article 1 of the Law on Amending Law on VAT 2013 as amended by Clause 3, Article 1 of the Law on Amendments to Law on Value Added Tax, Law on Special Consumption Tax and Law on Tax Administration 2016, the cases eligible for VAT refund are as follows:

- Business establishments that pay VAT by the deduction method, if having input VAT that has not yet been fully deducted in the month or quarter, shall be entitled to a deduction in the next period.

In cases where business establishments that have registered to pay VAT by the deduction method have new investment projects, and in the investment stage have incurred input VAT amounting to three hundred million dong or more, they shall be entitled to VAT refund.

Business establishments are not entitled to a VAT refund but shall carry forward the undeducted input VAT of the investment project according to the law on investment to the next period in the following cases:

+ Investment projects of business establishments that have not contributed the registered charter capital; engage in businesses subject to investment conditions without fulfilling business conditions according to the 2020 Law on Investment or fail to maintain sufficient business conditions during the operation;

+ Investment projects for the exploitation of natural resources or minerals licensed from July 1, 2016, or investment projects for the production of goods having a total value of natural resources and minerals plus energy costs accounting for 51% or more of the product cost according to the investment project.

- Business establishments in the month or quarter have export goods and services if the input VAT amount not yet deducted reaches three hundred million dong or more, shall be entitled to VAT refund on a monthly or quarterly basis, except for imported goods for export, exported goods not executed at the customs-controlled area as prescribed by the 2014 Law on Customs.

VAT refund is executed before inspection after tax for entities producing export goods without tax or customs law violations in the last two consecutive years; taxpayers not classified under high-risk category as prescribed by the 2019 Law on Tax Administration.

- Business establishments paying VAT by the deduction method shall be entitled to VAT refund when there is an ownership change, enterprise transformation, merger, consolidation, division, separation, dissolution, bankruptcy, or termination of operations having excess VAT paid or undeducted input VAT.

- Foreigners and overseas Vietnamese holding passports or entry documents issued by competent foreign authorities shall be entitled to a VAT refund on goods purchased in Vietnam brought along upon exit.

- VAT refund for programs and projects using non-refundable official development assistance (ODA) or non-refundable aid, humanitarian aid is regulated as follows:

+ Program or project owners or main contractors, organizations designated by foreign donors to manage programs or projects using non-refundable ODA, shall be refunded the VAT paid for goods and services purchased in Vietnam to serve the programs or projects;

+ Organizations in Vietnam using non-refundable aid funds, humanitarian aid funds from foreign organizations or individuals to purchase goods and services serving the non-refundable aid programs or humanitarian aid in Vietnam shall be refunded the VAT paid for such goods and services.

- Diplomatic immunities and privileges entitlement subjects under the law on diplomatic immunities and privileges purchasing goods and services in Vietnam for use shall be refunded the VAT paid as recorded on VAT invoices or payment documents with prices inclusive of VAT.

- Business establishments having VAT refund decisions from competent authorities as per the law and cases of VAT refund according to international treaties of which the Socialist Republic of Vietnam is a member.