When is a business establishment not eligible for VAT deduction in Vietnam from July 1, 2025?
When is a business establishment not eligible for VAT deduction in Vietnam from July 1, 2025?
Based on Clause 3, Article 14 of the Law on Value-Added Tax 2024 (effective from July 1, 2025), it stipulates that business establishments are not eligible for VAT deduction as follows:
Deduction of Input Value-Added Tax
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- Business establishments that do not meet the deduction requirements stipulated in Clauses 1 and 2 of this Article and issue invoices and documents stemming from prohibited acts stated in this Law shall not be allowed to deduct value-added tax.
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Additionally, as per Article 13 of the Law on Value-Added Tax 2024 (effective from July 1, 2025), it outlines the prohibited acts in tax deduction and refund as follows:
Prohibited Acts in Tax Deduction and Refund
- Buying, giving, selling, organizing advertisements, or brokering the purchase and sale of invoices.
- Creating fake transactions of buying and selling goods, providing services, or transactions not conformable with the law.
- Issuing invoices for the sale of goods and provision of services during temporary business suspension, except in cases where invoices are issued to fulfill contracts signed before the business suspension notification.
- Using invoices and documents illegally or misuse under the regulations of the Government of Vietnam.
- Failing to transfer e-invoice data to the tax authorities as required.
- Altering, misusing, illegally accessing, destroying the information system about invoices and documents.
- Offering, accepting, or brokering bribes, or engaging in other acts related to invoices and documents to obtain tax deduction or refund, embezzle tax funds, or evade value-added tax.
- Colluding, concealing; liaising among tax officials, tax authorities, business establishments, importers, between business establishments, importers in the use of illegal invoices and documents or misuse for tax deductions, refunds, embezzlement of tax funds, or avoidance of value-added tax.
Thus, from July 1, 2025, business establishments are not eligible for VAT deduction in the following cases:
- Failure to meet the tax deduction requirements in Clauses 1 and 2, Article 14 of the Law on Value-Added Tax 2024.
- Issuing invoices and documents resulting from the following acts:
+ Buying, giving, selling, organizing advertisements, or brokering the purchase and sale of invoices.
+ Creating fake transactions of buying and selling goods, providing services, or transactions not conformable with the law.
+ Issuing invoices for the sale of goods and provision of services during temporary business suspension, except in cases where invoices are issued to fulfill contracts signed before the business suspension notification.
+ Using invoices and documents illegally or misusing under the regulations of the Government of Vietnam.
+ Failing to transfer e-invoice data to the tax authorities as required.
+ Altering, misusing, illegally accessing, destroying the information system about invoices and documents.
+ Offering, accepting, or brokering bribes, or engaging in other acts related to invoices and documents to obtain tax deduction or refund, embezzle tax funds, or evade value-added tax.
+ Colluding, concealing; liaising among tax officials, tax authorities, business establishments, importers, between business establishments, importers in the use of illegal invoices and documents or misuse for tax deductions, refunds, embezzlement of tax funds, or avoidance of value-added tax.
When is a business establishment not eligible for VAT deduction in Vietnam from July 1, 2025? (Image from the Internet)
What are the requirements for input VAT deduction in Vietnam from July 1, 2025?
Based on Clause 2, Article 14 of the Law on Value-Added Tax 2024 (effective from July 1, 2025), the requirements for input VAT deduction are specified as follows:
- Must have a value-added tax invoice for purchases of goods and services or a tax payment certificate at the import stage or a tax payment certificate on behalf of a foreign party as stipulated in Clauses 3 and 4, Article 4 of the Law on Value-Added Tax 2024. The Ministry of Finance stipulates the tax payment documents on behalf of foreign parties;
- Must have a non-cash payment document for purchased goods and services, except for certain special cases as stipulated by the Government of Vietnam;
- For exported goods and services, in addition to the requirements stipulated in points a and b of clause 2, Article 14 of the Law on Value-Added Tax 2024, there must be: a contract signed with a foreign party for selling, processing goods, or providing services; sales invoices for goods and services; non-cash payment documents; customs declaration for exported goods; packing list, bill of lading, insurance documents (if available). The Government of Vietnam stipulates the requirements for tax deduction for exported goods via foreign e-commerce platforms and other special cases.
What are regulations on credit-invoice method in Vietnam from July 1, 2025?
Based on Clause 1, Article 11 of the Law on Value-Added Tax 2024 (effective from July 1, 2025), the credit-invoice method is defined as follows:
- The payable value-added tax according to the deduction method equals the output value-added tax minus the deductible input value-added tax;
- The output value-added tax is equal to the total value-added tax of goods and services sold as recorded on the value-added tax invoice.
The value-added tax of goods and services sold as recorded on the value-added tax invoice is calculated by multiplying the taxable price of the goods and services sold by the value-added tax rate applicable to those goods and services.
In cases where the invoice states the payment price as the price inclusive of value-added tax, the output value-added tax is determined by subtracting the taxable price from the payment price based on the regulations at point k, clause 1, Article 7 of the Law on Value-Added Tax 2024;
- The deductible input value-added tax is the total value-added tax recorded on the value-added tax invoices for purchases of goods, services, tax payment documents for imported goods, or tax documents for the purchase of services as stipulated in Clauses 3 and 4, Article 4 of the Law on Value-Added Tax 2024 and meeting the requirements stipulated in Article 14 of the Law on Value-Added Tax 2024.
