What is cremation service? Is the cremation service exempt from VAT in Vietnam?

What is cremation service?

Pursuant to the provisions in Clause 19, Article 2 of Decree 23/2016/ND-CP, cremation service includes organizing funerals, cremating bodies or remains, and preserving, storing ashes.

Is cremation service exempt from VAT in Vietnam?

According to Clause 11, Article 4 of Circular 219/2013/TT-BTC regarding entities not subject to VAT:

Entities not subject to VAT

...

11. Services for maintaining zoos, gardens, parks, street green space, public lighting; funeral services. The services mentioned in this clause are regardless of the funding source. Specifically:

a) Services for maintaining zoos, gardens, parks, street green space, forest protection by the State, including managing activities, planting, caring for plants, protecting birds, animals in parks, zoos, public areas, national forests, national parks;

b) Public lighting including street, alley lighting in residential areas, gardens, parks. Revenue not subject to tax is the revenue from public lighting activities;

c) Funeral services of entities with the function of providing funeral services including activities for renting out funeral homes, hearses, funeral services, cremation, relocation, moving graves, caring for graves.*

...

Furthermore, based on guidance in Official Dispatch 134/TCT-PCCS in 2006 on VAT guidance for certain funeral services as follows:

"Based on the above guidance, funeral services are services for funeral ceremonies, burial, cremation (services for renting hearses, cars for relatives; digging, filling burial pits; carrying hearses; renting umbrellas, tables, chairs...) and relocation services conducted after burial, cremation (supervising, caring for graves from burial to relocation; cleaning, processing materials after relocation; long-term supervision of graves after relocation; constructing relocation graves; moving graves for projects from the grave site to the cemetery...), not subject to VAT."

Hence, cremation services are not subject to VAT.

Cremation service in Vietnam (Image from the Internet)

How to determine expenses for provision of cremation services in Vietnam?

According to the provisions of Article 26, Decree 23/2016/ND-CP regarding the basis for pricing cremation services:

Article 26. Management of cemetery service expenses, cremation service expenses

1. Cemetery service expenses, cremation service expenses are the basis for pricing cemetery services, cremation services.

2. The cemetery service expenses, cremation service expenses include:

a) Funeral organization services;

b) cremation services, storing urns, remains after cremation;

c) Transportation services for remains, ashes, and storing urns, remains after cremation (if available);

d) Burial services and grave construction (including underground and aboveground parts);

đ) Maintenance, preservation, maintenance, environmental sanitation services;

e) Other legitimate expenses, taxes as prescribed by law.

3. For cemeteries, cremation facilities invested from the state budget, revenue management shall follow legal provisions.

Thus, the expense of cremation services is the basis for pricing cremation services.

Pricing of cremation services must ensure the principles in Article 3 of Circular 14/2018/TT-BXD as follows:

- Pricing of cremation services must be appropriate to the service implementation process; environmental standards, regulations; technical construction standards; technical economic norms issued or announced by competent authorities; service quality; policies, regulations of the State; socio-economic conditions, and customs of each locality.

- cremation service prices are determined on the basis of correctly and fully calculating all reasonable, legitimate expenses of executing cremation services with reasonable profits, appropriate to market price levels.

- cremation service prices must ensure encouragement and attraction of economic sectors to invest, provide services, and be compatible with the paying ability of service users.

- cremation service prices can be determined individually for each type of service, for a number of types of services, or for all services depending on the service usage demand and organization conditions for providing cremation services.

- cremation service prices determined according to the guidance in Circular 14/2018/TT-BXD are approved as a basis for signing contracts, payment, and settlement of cremation service contracts.

- cremation service prices determined pursuant to Circular 14/2018/TT-BXD are adjusted when the components forming the service price change.