What is transfer of goods through border-gates? Is value-added tax applicable to goods transferred through border-gates in Vietnam?

What is transfer of goods through border-gates in Vietnam?

Based on Article 30 of the Law on Commercial 2005, the regulations on transfer of goods through border-gates are as follows:

transfer of goods through border-gates is the act of purchasing goods from one country or territory to sell to another country or territory outside the territory of Vietnam without completing import procedures into Vietnam and export procedures out of Vietnam.

transfer of goods through border-gates is carried out in the following forms:

- Goods are transported directly from the exporting country to the importing country without passing through Vietnamese customs;

- Goods are transported from the exporting country to the importing country via Vietnamese customs but do not complete import procedures into Vietnam and export procedures out of Vietnam;

- Goods are transported from the exporting country to the importing country via Vietnamese customs and are brought into bonded warehouses, goods transshipment areas at Vietnamese ports, without completing import procedures into Vietnam and export procedures out of Vietnam.

What is transfer of goods through border-gates in Vietnam? Is VAT applicable to goods transferred through border-gates? (Image from Internet)

Is value-added tax applicable to goods transferred through border-gates in Vietnam?

Based on clause 20 of Article 5 of the Value-Added Tax Law 2008, the subjects not subject to value-added tax are as follows:

Subjects not subject to tax

...

20. goods transferred through border-gates, goods transited through Vietnamese territory; temporary imported goods for re-export; temporary exported goods for re-import; imported raw materials for export production, processing under export production contracts; export processing signed with foreign parties; goods, services traded between foreign countries and non-tariff zones and between non-tariff zones.

...

Thus, goods transferred through border-gates are not subject to value-added tax, therefore no VAT will be applied to goods transferred through border-gates.

What are cases of refunding value-added tax in Vietnam?

Based on Article 13 of the Value-Added Tax Law 2008, as amended by clause 7 Article 1 of the Amended Value-Added Tax Law 2013, further amended by clause 3 Article 1 of the Amended Value-Added Tax Law, Special Consumption Tax Law, and Tax Administration Law 2016, the cases eligible for a VAT refund are as follows:

- Business establishments paying VAT using the credit method, if the input VAT has not been fully credited in the month or quarter, are allowed to carry it over to the next period.

In case a business establishment has registered to pay VAT using the credit method with a new investment project, during the investment phase, if the input VAT on goods and services purchased for investment has not been credited, and if the remaining tax amount is VND 300 million or more, they are eligible for VAT refund.

Business establishments are not eligible for VAT refund but can carry forward uncredited VAT on investment projects to the next period as per investment laws in the following cases:

+ The investment project of the business establishment has not contributed the full registered charter capital; engages in businesses requiring conditional investment when it does not meet business conditions as stipulated in the Investment Law or fails to maintain sufficient business conditions during operations;

+ Investment projects for the exploitation of natural resources and minerals licensed from July 1, 2016, or projects for producing products whose aggregate value of natural resources and minerals plus energy costs account for 51% or more of the product cost as per the investment project.

- Business establishments in the month or quarter having goods or services exported, if the input VAT is VND 300 million or more, are eligible for VAT refund by month or quarter, except for imported goods for export or goods exported without completing export procedures at customs areas as per the Customs Law 2014.

Carry out refund first, check later for taxpayers producing export goods without violating tax or customs laws in the past two consecutive years; taxpayers who are not classified as high-risk according to the Tax Administration Law 2019.

- Business establishments paying VAT using the credit method are eligible for VAT refund when changing ownership, transforming enterprises, merging, consolidating, dividing, separating, dissolving, bankrupting, or ceasing operations with an overpaid VAT amount or uncredited input VAT amount.

- Foreigners and overseas Vietnamese with passports or entry documents issued by foreign authorities are eligible for VAT refund for goods purchased in Vietnam and brought along when they exit.

- VAT refund for programs and projects using non-refundable official development assistance (ODA) or non-refundable aid, humanitarian aid is regulated as follows:

+ Program or project owners or main contractors or organizations designated by foreign donors managing programs or projects using non-refundable ODA are eligible for a refund of VAT paid for goods and services purchased in Vietnam serving the program or project;

+ Organizations in Vietnam using non-refundable aid, humanitarian aid funds from foreign organizations or individuals to purchase goods and services serving non-refundable aid, humanitarian aid programs or projects in Vietnam are eligible for a refund of VAT paid for those goods and services.

- Subjects enjoying diplomatic immunity privileges purchasing goods and services in Vietnam for use are eligible for a refund of VAT stated on VAT invoices or proof of payment showing that the payment amount includes VAT.

- Business establishments with a VAT refund decision from a competent authority in accordance with the law and VAT refund in accordance with international treaties to which the Socialist Republic of Vietnam is a member.