What is the guidance on determining 8% VAT rate for construction in Vietnam?

Guidance on determining 8% VAT rate for construction in Vietnam

The Lang Son Tax Department has released Official Dispatch 1237/CT-TTHT in 2024 download to guide the determination of VAT for construction eligible for the 8% VAT rate. The tax authority replies as follows:

Based on Clause 1, Point a, Clause 2, Article 1 of Decree 72/2024/ND-CP, which provides for the reduction of value-added tax for categories of goods and services currently subject to a 10% VAT rate from July 1, 2024, to December 31, 2024, as follows:

Reduction of Value-Added Tax

1. Reduce value-added tax for categories of goods and services currently applying the 10% rate, except for the following groups:

a) Telecommunications, finance, banking, securities, insurance, real estate, metals and fabricated metal products, mining products (excluding coal mining), coke, refined petroleum, and chemical products. Details in Annex I attached to this Decree.

b) Goods and services subject to special consumption tax. Details in Annex II attached to this Decree.

c) Information technology according to IT law. Details in Annex III attached to this Decree.

d) The reduction in value-added tax for each type of goods and services specified in Clause 1 of this Article applies uniformly across import, production, processing, and commercial trade stages. For coal mining products sold (including mining coal undergoing selection and classification in a closed process before sale), VAT reduction is applicable. Other than in mining stages, goods listed in Annex I do not apply to VAT reductions.

Enterprises and economic groups implementing a closed process before selling are also subject to VAT reduction for mining coal products.

For goods and services outlined in Annexes I, II, and III attached to this Decree that are not subject to VAT or subject to a 5% VAT as per the Law on Value-Added Tax, compliance with the Law on Value-Added Tax is required without applying VAT reductions.

2. Rate of Value-Added Tax Reduction

a) Businesses calculating VAT by the credit method can apply an 8% VAT rate on goods and services stipulated in Clause 1 of this Article.

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Simultaneously, Clause 1, Article 2 of Decree 72/2024/ND-CP stipulates the effectiveness and implementation as follows:

Effectiveness and Implementation

1. This Decree is effective from July 1, 2024, to December 31, 2024.

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construction fall under the categories of goods and services eligible for a VAT reduction from 10% to 8% from July 1, 2024, to December 31, 2024.

- If the volume of construction work as per the contract signed with the investor is completed, handed over, and invoiced between January 1, 2024, and December 31, 2024, the 8% VAT rate applies.

- For construction work volumes invoiced and handed over from January 1, 2025, onwards, the applicable VAT rate is 10%.

Guidance on determining 8% VAT rate for construction in Vietnam (Image from Internet)

Timing of VAT determination for construction in Vietnam

Based on Clause 5, Article 8 of Circular 219/2013/TT-BTC, the timing of VAT determination is stipulated as follows:

Timing of VAT Determination

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5. For construction, installation, including shipbuilding, the timing is upon acceptance and handover of works, categories, or completed construction and installation volumes, regardless of whether payment has been received.

6. For imported goods, it is the time of customs declaration registration.

The timing of value-added tax determination for construction is upon acceptance and handover of construction works, categories, or completed construction and installation volumes, regardless of whether payment has been received.

Timing of invoice issuance for construction in Vietnam

According to regulations in Clause 3, Point c, Clause 4, Article 9 of Decree 123/2020/ND-CP, the timing of invoice issuance is stipulated as follows:

Timing of Invoice Issuance

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3. In cases of multiple deliveries or separate handovers of individual categories or stages, an invoice must be issued for each partial delivery or handover according to the delivered quantity and value.

4. Specific cases for invoice issuance timing:

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c) For construction and installation activities, the timing of invoice issuance is upon acceptance and handover of works, components, or completed construction and installation volumes, regardless of payment receipt status.

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Therefore, the timing of invoice issuance is upon acceptance and handover of construction works, categories, or completed construction and installation volumes, regardless of payment status.

In cases of multiple handovers or separate category handovers, each handover requires invoicing for the corresponding quantity and value of goods or services delivered.

Prohibited acts in tax administration in Vietnam

As stipulated in Article 6 of the Law on Tax administration 2019, prohibited acts in tax administration includes:

Prohibited acts in tax administration

1. Collusion, link-ups, concealing between taxpayers and tax administration officials, tax authorities to shift profits, and evade taxes.

2. Causing harassment and difficulties for taxpayers.

3. Misappropriating or illegally using tax money.

4. Intentionally failing to declare or accurately, promptly, completely declaring taxable income.

5. Obstructing tax administration officials from performing duties.

6. Using another taxpayer's tax identification number to perform illegal activities or allowing others to use one's tax identification number in violation of the law.

7. Selling goods, providing services without issuing invoices as prescribed by law, using illegal invoices, and illegally using invoices.

8. Altering, misusing, unauthorized accessing, or destroying taxpayer information systems.

The following actions are prohibited in tax administration:

- Collusion, link-ups, concealing between taxpayers and tax administration officials or tax authorities to shift pricing and evade taxes.

- Causing harassment and difficulties for taxpayers.

- Misappropriating or illegally using tax funds.

- Intentionally not declaring or declaring tax inaccurately, untimely, or insufficiently.

- Obstructing tax administration officials in their duties.

- Prohibiting the use of another taxpayer's tax identification number for illegal acts or allowing others to use one's tax identification number contrary to legal provisions.

- Selling goods, providing services without issuing legally required invoices or using illegal invoices.

- Altering, misusing, unauthorized accessing, and destroying taxpayer information systems.