What is the VAT rate for electricity in Vietnam?

What is the value-added tax (VAT) rate for electricity in Vietnam?

Pursuant to Article 8 of the Law on Value-Added Tax 2008 (amended by Clause 3, Article 1 of the Amended Law on Value-Added Tax 2013, further amended by Clause 2, Article 1 of Law No. 106/2016/QH13, further amended by Clause 2, Article 3, and abolished by Clause 3, Article Amended Law on Tax Laws 2014), the regulations on VAT rates are as follows:

Tax Rates

1. The 0% tax rate applies to exported goods, international transportation, and goods and services not subject to VAT as stipulated in Article 5 of this Law when exported, except for the following cases:

a) Transfer of technology, transfer of intellectual property rights abroad;

b) Reinsurance services provided abroad;

c) Credit services;

d) Capital transfer;

đ) Derivative financial services;

e) Postal and telecommunications services;

g) Exported products stipulated in Clause 23, Article 5 of this Law.

Exported goods and services are goods and services consumed outside Vietnam, in non-tax areas; goods and services provided to foreign customers as regulated by the Government of Vietnam.

2. The 5% tax rate applies to the following goods and services:

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3. The 10% tax rate applies to goods and services not specified in Clauses 1 and 2 of this Article.

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According to the provisions of the Law on Value-Added Tax, electricity, whether for domestic use or business, is not subject to the 0%, 5% VAT rates, or VAT exemption.

Thus, electricity is subject to a VAT rate of 10%.

What is the VAT rate for electricity in Vietnam? (Image from the Internet)

How many VAT rates are there in Vietnam?

Pursuant to Articles 9, 10, 11 of Circular 219/2013/TT-BTC, there are 03 VAT rates: 0%, 5%, and 10%.

- The 0% tax rate applies to exported goods and services (according to international practices).

- The 5% tax rate applies to essential goods and services for life and goods and services serving as inputs for agricultural production.

- The 10% tax rate applies to other ordinary goods and services.

What are regulations on VAT credit method in Vietnam?

Pursuant to Article 10 of the 2008 Law on Value-Added Tax, as amended by Clause 4, Article 1 of the 2013 Amended VAT Law, the VAT credit method is regulated as follows:

VAT credit Method

1. The VAT credit method is regulated as follows:

a) The VAT payable under the credit method equals the output VAT minus the deductible input VAT;

b) The output VAT equals the sum of the output VAT of sold goods and services as recorded on VAT invoices.

The VAT of goods and services sold as recorded on VAT invoices equals the taxable price of the goods and services sold multiplied by the VAT rate of those goods and services.

In cases where the payment voucher records the payment price including VAT, the output VAT is determined by subtracting the taxable price from the payment amount according to the provisions at point k, Clause 1, Article 7 of this Law;

c) The deductible input VAT equals the sum of the VAT recorded on VAT invoices for purchased goods and services, VAT payment vouchers of imported goods, and meeting the conditions stipulated in Article 12 of this Law.

2. The credit method applies to business establishments that fully implement accounting, invoices, and documents in accordance with the laws on accounting, invoices, and documents, including:

a) Business establishments with annual revenue from selling goods or supplying services of one billion VND or more, excluding households and individuals engaged in business operations;

b) Business establishments voluntarily register to apply the credit method, excluding households and individuals engaged in business operations.

3. the Government of Vietnam shall specify the details of this Article.

Thus, pursuant to the above-stated regulations, the VAT credit method is performed as follows:

- The VAT payable under the credit method equals the output VAT minus the deductible input VAT.

- The output VAT equals the sum of the output VAT of sold goods and services as recorded on VAT invoices.

- The VAT of goods and services sold as recorded on VAT invoices equals the taxable price of the goods and services sold multiplied by the VAT rate of those goods and services.

- In cases where the payment voucher records the payment price including VAT, the output VAT is determined by subtracting the taxable price from the payment amount as provided.

- The deductible input VAT equals the sum of the VAT recorded on VAT invoices for purchased goods and services, VAT payment vouchers of imported goods, provided that the conditions are met.

What cases are eligible for VAT refunds in Vietnam?

Pursuant to Article 13 of the 2008 Law on Value-Added Tax, as amended by Clause 7, Article 1 of the 2013 Amended VAT Law, and further amended by Clause 3, Article 1 of Law No. 106/2016/QH13, the cases eligible for VAT refunds are as follows:

- Business establishments paying VAT under the credit method, if the input VAT has not been fully deducted during the month or quarter, shall be deducted in the next period.

- In cases where business establishments registered to pay VAT under the credit method have new investment projects during the investment period, if the VAT of purchased goods and services used for investment has not been deducted and there remains an amount from three hundred million VND or more, they shall be eligible for VAT refunds.

- Business establishments not eligible for VAT refunds shall have the non-deductible VAT of investment projects carried forward according to the investment law provisions to the next period in the following cases:

+ The investment project of the business establishment has not fully contributed the registered charter capital; engages in conditional business investment industries or trades without meeting legal conditions under the Investment Law or fails to maintain sufficient business conditions during operations;

+ Investment projects exploiting natural resources and minerals licensed on or after July 1, 2016, or production projects where total resource and mineral costs, plus energy costs, constitute 51% or more of the product cost according to the investment project.

+ the Government of Vietnam shall specify the details for this clause.

- Business establishments, within a month or quarter, if having exports with input VAT from three hundred million VND or more, shall be eligible for monthly or quarterly VAT refunds, except in cases of imported goods for export, goods not directly exported at customs zones under the Customs Law. VAT refunds are conducted first and verified later for tax-paying manufacturers of exported goods not violating tax and customs laws for two consecutive years; tax payers not identified under high-risk objects.

- Business establishments paying VAT under the credit method shall be eligible for VAT refunds upon ownership transformation, enterprise conversion, merger, consolidation, division, separation, dissolution or bankruptcy, if there is an over-paid VAT amount or the input VAT has not been fully deducted.

- Foreigners or overseas Vietnamese holding passports or entry papers issued by foreign competent agencies shall be eligible for VAT refunds on goods purchased in Vietnam when carried abroad.

- VAT refund on ODA-funded programs and projects in the form of non-refundable aid, humanitarian aid is regulated as follows:

+ Program or project owners or principal contractors, organizations designated by foreign donors using ODA funds in the form of non-refundable aid shall be refunded the VAT paid for goods and services purchased in Vietnam to serve the program, project;

+ Organizations in Vietnam using non-refundable aid, humanitarian aid from foreign organizations and individuals to purchase goods and services for non-refundable aid projects, humanitarian aid in Vietnam shall be refunded the paid VAT on such goods and services.

- Entities eligible for diplomatic immunity according to the law on diplomatic immunity, when purchasing goods and services in Vietnam for use, shall be refunded the VAT amount recorded on VAT invoices or payment vouchers showing the payment price inclusive of VAT.

- Business establishments with VAT refund decisions issued by competent agencies in accordance with the law and cases of VAT refunds under international treaties where the Socialist Republic of Vietnam is a member.