Which cases are exempted from VAT declaration and payment in Vietnam in 2024?

Which cases are exempted from VAT declaration and payment in Vietnam in 2024?

According to Article 5 of Circular 219/2013/TT-BTC (supplemented by Clause 1 Article 3 of Circular 119/2014/TT-BTC and Article 1 of Circular 193/2015/TT-BTC), the following cases are not required to declare and pay VAT (value-added tax):

(1) Organizations and individuals receiving monetary compensation (including compensation for land and assets on land upon land recovery as decided by competent State authorities), bonuses, support, transfer of emission rights, and other financial revenues.

- When receiving compensation, bonuses, support, emission rights transfer funds, and other financial revenues, business establishments must issue collection vouchers as required. As for businesses disbursing funds, payment vouchers shall be issued based on the purpose of expenditure.

- In case of compensation in goods or services, the compensating establishment must issue invoices and declare, calculate, and pay VAT as it does when selling goods or services; the receiving party shall declare and deduct according to regulations.

If a business receives funds from organizations or individuals to perform services for them such as repairs, warranty, promotion, or advertisement, they must declare and pay taxes as prescribed.

(2) Organizations and individuals in Vietnam purchasing services from foreign entities without a permanent establishment in Vietnam, and non-resident individuals abroad, in certain cases: repair of vehicles, machinery, equipment (including materials and spare parts), advertising, marketing, promotion of investment and commerce, brokerage for selling goods or providing overseas services, training, sharing of international postal and telecommunication service charges between Vietnam and abroad when such services are conducted outside Vietnam, leasing transnational channel services, and satellite bandwidth according to legal provisions.

(3) Organizations and individuals not engaging in business and not subject to VAT upon asset sale.

(4) Organizations and individuals transferring investment projects for the production, business of goods and services subject to VAT to enterprises, cooperatives.

(5) Enterprises and cooperatives applying the deduction method for VAT when selling unprocessed or ordinarily processed agricultural, livestock, aquatic, marine products to enterprises or cooperatives at the commercial stage are not required to declare and calculate VAT. On VAT invoices, the selling price is indicated as the price without VAT, and the tax rate and VAT line should be left blank and crossed out.

- If enterprises or cooperatives applying the deduction method sell raw or ordinarily processed agricultural, livestock, aquatic products to other entities such as households, business individuals, and other organizations, they must declare and calculate VAT at a rate of 5%.

- Households, business individuals, enterprises, cooperatives, and other economic entities applying the direct method on VAT must declare and pay VAT at a rate of 1% on revenue for sales at the commercial stage.

(6) Fixed assets in use which have been depreciated when transferred at book value between business establishments and their wholly owned subsidiaries, or among subsidiaries under a sole business establishment for production and business activities of taxable goods and services are not required to issue invoices and declare, pay VAT. The transferring business establishment must have a Decision or Transfer Order along with the originating asset dossier.

- If fixed assets are revalued or transferred to business establishments for VAT-exempt goods and services, VAT invoices must be issued and VAT declared, paid as prescribed.

(7) Other cases:

Business establishments are not required to declare, pay taxes in the following instances:

- Capital contribution by assets for enterprise establishment. Contributed assets must have: a record of business production capital contribution, joint venture or association contract; valuation record by the Capital Contribution Council (or valuation document by a licensed valuation organization under the law) appended with asset origin documents.

- Asset transfers between dependent accounting units within an enterprise; asset transfers during division, separation, consolidation, merger, or business type conversion within an enterprise. Transferred assets among member units under dependent accounting within a business must be accompanied by a transfer order and asset origin dossier and are not required to issue invoices.

If the asset transferred is among independent accounting units or among full legal status member units within the same enterprise, the transferring business must issue VAT invoices and declare, pay VAT.

- Recovery from a third party in insurance activities.

- Collected payments unrelated to the sale of goods and services at the business establishment.

- Commissions from agency sales where correct pricing according to the principal's specifications are applied, for services such as postal, telecommunications, lottery ticket sales, tickets for air, car, railway, maritime transport; international transport agencies; agencies of services in aviation, marine where a 0% VAT rate applies; insurance agency sales.

- Revenue from goods, services, and agency commissions from sales not subject to VAT.

- Business entities are not required to pay import VAT on returns of exported goods if returned by foreign parties. When reselling these returned goods domestically, VAT must be declared and paid as prescribed.

- Organizations and enterprises receiving remuneration from the state agency due to acting as agents in collection or payment activities for state agencies.

- The commissions received from collecting or paying on behalf of state agencies not required to declare, calculate VAT at this point include commissions from activities: voluntary social insurance collection, voluntary health insurance for the Social Insurance agency; disbursement of preferential allowances for meritorious persons, other allowances for the Ministry of Labor, Invalids and Social Affairs; tax collection from individuals for the tax department and other collections and payments for state agencies.

Which cases are exempted from VAT declaration and payment in Vietnam in 2024? What is the penalty for late VAT submission in 2024? (Image from the Internet)

What is the penalty for late VAT submission in Vietnam in 2024?

According to Article 13 of Decree 125/2020/ND-CP, the penalties for violations of tax filing deadlines are as follows:

(1) A warning is issued for tax filing between 1 and 5 days late with mitigating circumstances.

(2) A fine of VND 2,000,000 to VND 5,000,000 is imposed for tax filing between 1 and 30 days late, except as specified in Clause 1 of this Article.

(3) A fine of VND 5,000,000 to VND 8,000,000 is imposed for tax filing between 31 and 60 days late.

(4) A fine of VND 8,000,000 to VND 15,000,000 is imposed for the following instances:

- Tax filing between 61 and 90 days late.- Tax filing over 91 days late without tax dues.- Not filing a tax return without resulting tax dues.- Not filing tax-related appendices for managing linked transactions when finalizing corporate income tax.

(5) A fine of VND 15,000,000 to VND 25,000,000 is imposed for late tax filing over 90 days with outstanding dues, if the taxpayer has already settled the due tax and late payment fees prior to the tax authority's tax inspection or audit announcement or before a report on late filing is drafted by the tax authority.

In cases where the penalty determined under this clause exceeds the tax amount on the tax declaration, the maximum fine is constrained to the tax payable but not less than the average fine range stipulated.

(6) Remedial measures:

- Compel payment of taxes delayed due to late tax filing conforming to Clauses 1, 2, 3, 4, and 5 of Article 13 of Decree 125/2020/ND-CP.

- Require tax filing along with necessary appendices for violations in Point c, d Clause 4 Article 13 of Decree 125/2020/ND-CP.

Which entities are VAT payers in Vietnam?

According to Article 3 of Circular 219/2013/TT-BTC, VAT taxpayers are organizations and individuals engaged in producing and trading goods and services subject to VAT in Vietnam, irrespective of industry, form, or business organization (hereinafter referred to as business establishments), and organizations and individuals importing goods or purchasing services from abroad subject to VAT (hereinafter referred to as importers), including:

- Business organizations established and registered under the Law on Enterprises, State-Owned Enterprises (now Law on Enterprises), Law on Cooperatives, and other specialized business laws.

- Economic organizations of political organizations, socio-political organizations, social organizations, professional associations, armed forces units, public career units, and other organizations.

- Enterprises with foreign investment and foreign parties involved in business cooperation under the Law on Foreign Investment in Vietnam (now Law on Investment); foreign organizations and individuals conducting business activities in Vietnam without establishing a legal entity in Vietnam.

- Individuals, households, independent business groups, and other entities involved in production, business, or import activities.

- Organizations and individuals producing and conducting business in Vietnam purchasing services (including those linked to goods) from foreign organizations without a permanent establishment in Vietnam, and non-resident individuals abroad. In these cases, the purchaser of the service is the taxpayer, except in cases not required to declare and pay VAT as guided in Clause 2 Article 5 of Circular 219/2013/TT-BTC.

Regulations concerning permanent establishments and non-residents are executed under the legal provisions on corporate and personal income tax.

- Export-processing enterprise branches established to trade goods and conduct activities directly related to buying and selling goods in Vietnam according to regulations on industrial zones, export processing zones, and economic zones.