When is the time to determine VAT for telecommunication services in Vietnam?

What is the VAT rate applicable to telecommunication services in Vietnam?

Pursuant to Article 2 of Circular 219/2013/TT-BTC which stipulates the subjects subject to VAT as follows:

Subjects Subject to Tax

Subjects subject to VAT (VAT) are goods and services used for production, business, and consumption in Vietnam (including goods and services purchased from organizations and individuals abroad), except for those not subject to VAT as guided in Article 4 of this Circular.

Simultaneously, pursuant to point a, clause 1, Article 1 of Decree 72/2024/ND-CP which stipulates the reduction of VAT as follows:

Reduction of VAT

1. The reduction of VAT for groups of goods and services currently applying the tax rate of 10%, except for the following groups of goods and services:

a) Telecommunications, financial activities, banking, securities, insurance, real estate business, metals, and products from pre-fabricated metals, mining products (except coal mining), coke, refined petroleum, chemical products. Details in Annex I issued with this Decree.

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Thus, telecommunication services are subject to VAT and currently apply a tax rate of 10%.

When is the time to determine VAT for telecommunication services in Vietnam?

According to Article 8 of Circular 219/2013/TT-BTC which stipulates the time of determining VAT as follows:

Time to Determine VAT

1. For the sale of goods, it is the time when the ownership or right to use the goods is transferred to the buyer, regardless of whether payment has been collected or not.

2. For service provision, it is the time when the service provision is completed or the invoice for service provision is issued, regardless of whether payment has been collected or not.

For telecommunication services, it is the time when data reconciliation for telecommunication connection service charges is completed according to economic contracts between telecommunication service business entities but no later than 2 months from the month the telecommunication connection service charges arise.

3. For the supply of electricity and clean water, it is the day the consumption indices are recorded on the meter to be noted on the invoice for payment.

4. For real estate business, infrastructure construction, house building for sale, transfer, or lease is the time of money collection according to the project implementation schedule or the schedule of money collection stated in the contract. Based on the collected amount, the business entity declares the output VAT arising in the period.

5. For construction, installation, including shipbuilding, it is the time when the construction work, part of the work, or volume of construction and installation is accepted and handed over, regardless of whether payment has been collected or not.

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

Thus, the time to determine VAT for telecommunication services will be based on the time of completion of data reconciliation for telecommunication connection service charges according to economic contracts between telecommunication service business entities but no later than 2 months from the month the connection service charges arise.

When is the time to determine VAT for telecommunication services in Vietnam? (Image from the Internet)

Where is the place to pay VAT in Vietnam?

According to Article 20 of Circular 219/2013/TT-BTC which stipulates the place of payment of VAT as follows:

Place to Pay Tax

1. Taxpayers declare and pay VAT in the locality where production and business are conducted.

2. Taxpayers declaring and paying VAT by the deduction method, with dependent accounting production establishments located in provinces or centrally-run cities different from the province or city where the head office is located, must pay VAT in the locality where the production facility is located and the locality where the head office is located.

3. In cases where enterprises or cooperatives applying the direct method have production facilities located in provinces or cities other than where the head office is located or have itinerant selling activities outside the province, such enterprises or cooperatives shall declare and pay VAT based on a percentage of the revenue for revenue arising outside the province at the locality where the production facility or itinerant selling occurs. The enterprise or cooperative is not required to pay VAT based on a percentage of the revenue at the head office for revenue arising outside the province that has been declared and paid.

4. In cases where telecommunication service business entities engage in postpaid telecommunication services in provincial or centrally-run cities different from the province or city where the head office is located and establish dependent accounting branches paying VAT by deduction method while participating in postpaid telecommunication services in that locality, the telecommunication service business entity shall declare and pay VAT for postpaid telecommunication services as follows:

- Declare VAT for postpaid telecommunication service revenue of the entire business entity with the tax authority directly managing the head office.

- Pay VAT at the locality where the head office is located and at the locality where the dependent accounting branch is located.

The VAT to be paid in the locality where the dependent accounting branch is located is determined by a rate of 2% (for postpaid telecommunication services subject to VAT at a rate of 10%) on the revenue (excluding VAT) of postpaid telecommunication services at the locality where the dependent accounting branch is located.

5. The declaration and payment of VAT are carried out according to the provisions of the Law on Tax Administration and the documents guiding the implementation of the Law on Tax Administration.

Thus, the place to pay VAT is regulated as follows:

- The locality where production and business are conducted.

- The locality where the production facility and the locality where the head office is located if the taxpayer declares and pays VAT by the deduction method, with dependent accounting production establishments located in provinces or centrally-run cities different from where the head office is located.

- The locality where the production facility or itinerant selling activities occur if enterprises or cooperatives applying the direct method have production facilities in provinces or cities other than where the head office is located or have itinerant selling activities outside the province.

- The locality where the head office is located and the locality where the dependent accounting branch is located if the telecommunication service business entity engages in postpaid telecommunication services in provincial or centrally-run cities different from where the head office is located and establish dependent accounting branches paying VAT by deduction method while participating in postpaid telecommunication services in that locality.