What Is the distribution of tax obligations? What are cases of distribution of VAT obligations in Vietnam?

What is the distribution of tax obligations?

Based on Clause 4, Article 3 of Circular 80/2021/TT-BTC, the distribution of tax obligations refers to the taxpayer's declaration of taxes at the tax authority that directly manages the taxpayer or the tax authority managing the state budget revenue. This involves determining the amount of tax payable to each province benefiting from the state budget revenue (receiving province) as stipulated by law.

What Is the distribution of tax obligations? What are cases of distribution of VAT obligations in Vietnam? (Image from the Internet)

Cases of the distribution of tax obligations in Vietnam

Pursuant to Clause 1, Article 13 of Circular 80/2021/TT-BTC, the scenarios for the distribution of VAT obligations include:

- Business activities in electronic lotteries;- Real estate transfer activities, except as stipulated in Point b, Clause 1, Article 11 of Decree 126/2020/ND-CP;- Construction activities as stipulated by national economic industry system laws and sector-specific laws;- Dependent units or business locations that are manufacturing facilities (including processing and assembly facilities), except as stipulated in Point c, Clause 1, Article 11 of Decree 126/2020/ND-CP;- Hydropower plants located across multiple provinces.

Methods for distributing VAT obligations in Vietnam

According to Clause 2, Article 13 of Circular 80/2021/TT-BTC, the methods for distributing VAT obligations are as follows:

- distribution of value-added tax payable for electronic lottery business activities

The value-added tax payable for each province where electronic lottery business activities occur is calculated by multiplying the total value-added tax payable on electronic lottery business activities by the percentage (%) of actual ticket sales revenue from electronic lottery business activities in each province over the total actual ticket sales revenue of the taxpayer.

Actual ticket sales revenue from electronic lottery business activities is determined as follows:

In the case of distributing electronic lottery tickets through terminal devices: Revenue is generated from electronic lottery business activities from terminal devices registered to sell electronic lottery tickets within the administrative boundaries of each province as per the signed lottery agency contracts with the electronic lottery company or from stores and sales points established by the taxpayer in the area.

In the case of distributing electronic lottery tickets via telephone and internet: Revenue is determined in each province where the customer registers to participate in the prize drawing upon opening a prize drawing account in accordance with laws on electronic lottery business.

- distribution of value-added tax payable for real estate transfer activities

The value-added tax payable for each province with real estate transfer activities is calculated by multiplying the revenue exclusive of value-added tax from real estate transfer activities in each province by 1%.

- distribution of value-added tax payable for construction activities

The value-added tax payable for each province with construction activities is calculated by multiplying the revenue exclusive of value-added tax from construction activities in each province by 1%.

Revenue exclusive of value-added tax is determined based on contracts for construction projects and project sections.

In cases where construction projects or project sections involve multiple provinces and cannot determine the revenue for the project in each province, after determining the 1% rate on the total revenue from the construction project, the taxpayer shall allocate the value-added tax payable to each province based on the percentage (%) investment value of the project in each province over the total investment value of the project.

- distribution of value-added tax payable for provinces where dependent units, business locations are manufacturing facilities

+ The value-added tax payable to a province where the manufacturing facility is located is calculated by multiplying the revenue excluding value-added tax by 2% (for goods subject to a 10% value-added tax rate) or by 1% (for goods subject to a 5% value-added tax rate), with the condition that the total amount of value-added tax payable to the provinces where the manufacturing facilities are located does not exceed the total amount of value-added tax payable by the taxpayer at the head office.

If the manufacturing facility transfers finished or semi-finished products internally for sale, the revenue of the manufactured products is determined based on the production cost of the products.

+ If the taxpayer calculates and declares tax according to the percentages specified in paragraph d.1, Clause 2, Article 13 of Circular 80/2021/TT-BTC and the total value-added tax payable to the provinces where the manufacturing facilities are located exceeds the total value-added tax payable by the taxpayer at the head office, the taxpayer shall allocate the tax payable to the provinces where the manufacturing facilities are based on the following formula:

The value-added tax payable to each province where the manufacturing facility is located is calculated by multiplying the total value-added tax payable by the taxpayer at the head office by the percentage (%) of revenue excluding value-added tax of the products manufactured in each province over the total revenue excluding value-added tax of the taxpayer's manufactured products.

+ Revenue used to determine the distribution percentage as per points d.1 and d.2, Clause 2, Article 13 of Circular 80/2021/TT-BTC is the actual revenue generated during the tax period.

In cases where supplemental declarations change the actual revenue generated, the taxpayer must determine and reallocate the tax payable for each erroneous tax period that has been supplemented to identify the unallocated or over-allocated value-added tax amount for each locality.

- distribution of value-added tax payable for each province where the hydropower plant is located across multiple provinces

The value-added tax payable in each province where the hydropower plant is located is calculated by multiplying the total value-added tax payable by the hydropower plant by the percentage (%) of the investment value of the part of the hydropower plant located in the administrative boundary of each province over the total investment value of the hydropower plant.