What is the tax credit method in Vietnam according to the Law on Value-Added Tax 2024?
What is the tax credit method in Vietnam according to the Law on Value-Added Tax 2024?
Based on Clauses 1 and 2, Article 11 of the Law on Value-Added Tax 2024, specific provisions regarding the tax credit method are as follows:
- The VAT payable according to the tax credit method is calculated as the output VAT minus the deductible input VAT;
- The output VAT is the total VAT of goods and services sold as recorded on the VAT invoice.
+ The VAT of goods and services sold, recorded on the VAT invoice, is calculated by multiplying the taxable price of goods and services sold by the VAT rate applicable to those goods and services.
+ If the invoice records the payment price inclusive of VAT, the output VAT is determined by subtracting the taxable price, as specified in point k, clause 1, Article 7 of the Law on Value-Added Tax 2024, from the payment price;
- The deductible input VAT is the total VAT recorded on the VAT invoice for purchasing goods and services, the tax payment document for imported goods, or the tax payment document for the purchase of services as outlined in Clauses 3 and 4, Article 4 of this Law and meeting conditions specified in Article 14 of the Law on Value-Added Tax 2024.
- The tax credit method applies to business establishments fulfilling all accounting policies, invoices, and documentary requirements as prescribed by accounting laws, invoices, and documents, including:
+ Business establishments with an annual revenue from the sale of goods and services from 1 billion VND or more, excluding households and individuals in production and business;
+ Business establishments voluntarily applying the tax credit method, excluding households and individuals in production and business;
+ Foreign organizations or individuals providing goods and services for oil and gas exploration, development, and exploitation activities must pay taxes according to the tax credit method, declared, deducted, and paid by the Vietnamese side.
What is the tax credit method in Vietnam according to the Law on Value-Added Tax 2024? (Image from the Internet)
What are regulations on the method of calculation of tax based directly on added value in Vietnam?
According to Article 12 of the Law on Value-Added Tax 2024, specific provisions on the method of calculation of tax based directly on added value are as follows:
- The VAT payable by directly calculating on the value-added is the value-added multiplied by the VAT rate applicable to the buying, selling, crafting of gold, silver, and precious stones activities.
+ The value-added of buying, selling, crafting of gold, silver, and precious stones is determined by subtracting the payment price of purchased gold, silver, and precious stones from the payment price of sold gold, silver, and precious stones.
+ If a business establishment engages in buying, selling, crafting of gold, silver, and precious stones, it must separately account for these activities to pay taxes according to the direct calculation method on the value-added.
- VAT payable via direct calculation on revenue is a percentage rate multiplied by revenue applicable as follows:
+ Applicable entities include:
++ Enterprises, cooperatives, federations of cooperatives with annual revenue below the 1 billion VND threshold, except in cases of voluntarily applying the tax credit method specified in Clause 2, Article 11 of the [Law on Value-Added Tax 2024](https://lawnet.vn/vb/Luat-Thue-gia-tri-gia-tang-2024-so-48-2024-QH15-87D66.html#dieu_11);
++ Households and individuals in production, business, except as specified in Clause 3, Article 12 of the [Law on Value-Added Tax 2024](https://lawnet.vn/vb/Luat-Thue-gia-tri-gia-tang-2024-so-48-2024-QH15-87D66.html#dieu_12);
++ Foreign organizations without a permanent establishment in Vietnam, non-resident foreign individuals with revenue generated in Vietnam not fully implementing accounting policies, invoices, and documentary requirements, excluding foreign suppliers as specified in Clause 4, Article 4 of the [Law on Value-Added Tax 2024](https://lawnet.vn/vb/Luat-Thue-gia-tri-gia-tang-2024-so-48-2024-QH15-87D66.html#dieu_4);
++ Other organizations, except in cases of paying taxes according to the tax credit method specified in Clause 2, Article 11 of the [Law on Value-Added Tax 2024](https://lawnet.vn/vb/Luat-Thue-gia-tri-gia-tang-2024-so-48-2024-QH15-87D66.html#dieu_11);
+ The percentage rate for calculating VAT is stipulated as follows:
++ Distribution, supply of goods: 1%;
++ Services, construction without packaging materials: 5%;
++ Production, transportation, services associated with goods, construction with packaging materials: 3%;
++ Other business activities: 2%;
+ Revenue for VAT calculation is the total monetary amount for selling goods, services recorded on sales invoices, including surcharges and additional fees that the business establishment earns.
- Households and individuals in production or business not fully implementing or implementing inadequately accounting policies, invoices, and documents as prescribed by law must pay VAT according to the fixed tax method specified in the Tax Management Law 2019.
When does the Law on Value-Added Tax 2024 come into force?
According to Article 18 of the Law on Value-Added Tax 2024, the specific provisions on effective date are as follows:
Effective Date
1. This Law takes effect from July 1, 2025, except as specified in Clause 2 of this Article.
- Provisions on revenue levels of households, individuals in production, business subject to non-taxation in Clause 25, Article 5 of this Law and Article 17 of this Law come into force from January 1, 2026.
- The Law on Value-Added Tax No. 13/2008/QH12, amended and supplemented by Laws No. 31/2013/QH13, No. 71/2014/QH13, and No. 106/2016/QH13, ceases to be effective from the date this Law takes effect.
Thus, as per the above provisions, the Law on Value-Added Tax 2024 takes effect from July 1, 2025.
