What are the conditions for input VAT deduction in Vietnam under the 2024 Law on Value Added Tax?

What are the conditions for input VAT deduction in Vietnam under the 2024 Law on Value Added Tax?

Based on Clause 2, Article 14 of the 2024 Law on Value Added Tax...Download (effective from July 1, 2025), the conditions for input VAT deduction are stipulated as follows:

- Possess an invoice for the value-added tax purchase of goods, services or documents of payment of value-added tax at the import stage or documents paying value-added tax on behalf of foreign parties as stipulated in Clauses 3 and 4, Article 4 of the 2024 Law on Value Added Tax. The Minister of Finance shall regulate documents for paying value-added tax on behalf of foreign parties;

- Have non-cash payment documents for the purchase of goods, services, except for certain special cases as regulated by the Government of Vietnam;

- For exported goods, services, in addition to the conditions prescribed at points a and b of this clause, there must also be: a signed contract with foreign parties regarding the sale, processing of goods, provision of services; invoices for sales of goods, provision of services; non-cash payment documents; customs declaration for exported goods; packing slip, bill of lading, insurance documents for goods (if any). The Government of Vietnam regulates the deduction conditions for the case of exporting goods through foreign e-commerce platforms and other special cases.

What are the conditions for input VAT deduction in Vietnam under the 2024 Law on Value Added Tax? (Image from the Internet)

What are regulations on input VAT deduction in Vietnam?

Based on Clause 1, Article 14 of the 2024 Law on Value Added Tax...Download, it is stipulated that business establishments paying value-added tax under the tax deduction method shall deduct the input value-added tax as follows:

(1) The input VAT of goods, services used for the production, business of goods, services subject to value-added tax is fully deductible, including the input VAT not compensated for goods, services subject to value-added tax damaged or naturally reduced due to the physicochemical properties during transportation;

(2) The input VAT of goods, services used concurrently for the production, business of goods, services subject to tax and non-taxable, is only deductible for the input VAT of goods, services used for the production, business of goods, services subject to value-added tax.

Business establishments must separately account for deductible and non-deductible input VAT; if separate accounting is not possible, the deductible input VAT is calculated based on the percentage ratio of revenue of goods, services subject to value-added tax compared to the total revenue of goods, services sold;

(3) The input VAT of goods, services sold to organizations, individuals using humanitarian aid funds, non-refundable aid is fully deductible;

(4) The input VAT of goods, services used for activities of searching, exploring, developing oil and gas fields is fully deductible;

(5) The input VAT arising in any month, quarter shall be declared, deducted when determining the payable tax for that month, quarter. The input VAT not yet deducted in a month, quarter shall be deducted in the following month, quarter.

If a business establishment discovers errors or omissions in the input VAT during the tax declaration, deduction, they shall declare the tax before the tax authority, competent authority announces the decision to inspect, audit the tax as follows:

The taxpayer makes additional declarations in the month, quarter in which the erroneous input VAT arises if the tax declaration in the month, quarter where the input VAT errors occurred leads to an increase in payable tax or a decrease in refundable tax; the taxpayer must pay the increased additional tax amount or return the refunded tax amount and pay the late payment interest into the state budget (if any).

The taxpayer declares in the month, quarter detecting errors or omissions if the tax declaration in the month, quarter where the input VAT errors occurred leads to a decrease in payable tax or only results in an increase or decrease in the input VAT to be carried forward to the next month, quarter;

(6) For non-deductible input VAT, business establishments may include it in expenses for calculating corporate income tax or add to the original cost of fixed assets in accordance with the law on corporate income tax, except for input VAT of goods, services purchased without non-cash payment documents as stipulated by the Government of Vietnam;

(7) The Government of Vietnam provides detailed regulations on the deduction of input VAT for: goods, services forming fixed assets serving workers; cases of capital contribution by assets; goods, services purchased under authorization to other organizations, individuals where invoices are in the name of the authorized organization, individual; fixed assets are passenger cars with up to 09 seats; manufacturing establishments organizing closed production, centralized accounting.

What are prohibited acts in VAT deduction in Vietnam?

Based on Article 13 of the 2024 Law on Value Added Tax...Download, the prohibited acts in VAT deduction are stipulated:

(1) Buy, give, sell, organize advertising, brokerage for buying, selling invoices.

(2) Create transactions for purchasing, selling goods, providing services that are not real or transactions not conformable to the law.

(3) Issue invoices for selling goods, providing services during the suspension of business activities, except for issuing invoices to customers for fulfilling contracts signed before the notice of business suspension.

(4) Use illegal invoices, documents, or unauthorized use of invoices, documents as stipulated by the Government of Vietnam.

(5) Fail to transfer electronic invoice data to the tax authority as prescribed.

(6) Falsify, misuse, access illegally, destroy information systems about invoices, documents.

(7) Give, receive, broker bribes or perform other acts related to invoices, documents to deduct tax, reclaim tax, misappropriate tax money, evade value-added tax.

(8) Collude, cover up, connive between tax management officials, tax management agencies, business establishments, importers, among business establishments, importers in using illegal invoices, documents or illegally using invoices, documents to deduct tax, reclaim tax, misappropriate tax money, evade value-added tax.