Which investment projects are not eligible for VAT refunds in Vietnam?

Which investment projects are not eligible for VAT refunds in Vietnam?

Based on point c, clause 3, Article 18 of Circular 219/2013/TT-BTC, as amended by clause 3, Article 1 of Circular 130/2016/TT-BTC, regulations on cases where investment projects are not eligible for VAT refunds are specified as follows:

The business entities are not eligible for VAT refunds but are allowed to carry forward the VAT that has not been deducted for the investment project to the subsequent period according to investment laws in the following cases:

(i) Investment projects of business entities that have not contributed sufficient charter capital as registered by the law. For documents requesting VAT refunds for investment projects submitted from July 1, 2016, if business entities have not contributed sufficient charter capital as registered by law by the date of submission, they are not eligible for the refund.

(ii) Investment projects of business entities in sectors with business conditions that do not yet satisfy the investment conditions stipulated by the Investment Law. This applies to projects where the business entity does not yet have a business license for the sector with investment conditions; has not received a certificate of eligibility to operate in such sectors; lacks authorization from the competent state authority; or does not meet the conditions to engage in conditional business sectors without needing a written approval as required by investment laws.

(iii) Investment projects of business entities in sectors with investment business conditions that fail to maintain those conditions during their operations. This applies when the business entity’s license is revoked; or the certificate of sufficient business conditions is taken away; or official documents from the competent state authorities regarding the investment in such sectors are rescinded.

Or, during operations, if the business entity does not meet the requisite conditions to continue the conditional investment business as per the investment law, the time from which VAT is not refundable is counted from when the business entity's documents mentioned above are revoked or when the competent authority inspects and discovers the discrepancy.

(iv) Investment projects for exploiting natural resources, minerals licensed from July 1, 2016, or projects producing goods where the total value of resources, minerals plus energy costs make up 51% or more of the production cost as per the project.

Which investment projects are not eligible for VAT refunds in Vietnam? (Image from the Internet)

What are cases of VAT refund for investment projects in Vietnam?

Based on points a and b, clause 3, Article 18 of Circular 219/2013/TT-BTC, as amended by clause 3, Article 1 of Circular 130/2016/TT-BTC, regulations on cases where investment projects are eligible for VAT refunds are specified as follows:

(i) Business entities actively paying VAT using the credit method with investment projects (except for cases guided at point c, clause 3, Article 18 of Circular 219/2013/TT-BTC, as amended by clause 3, Article 1 of Circular 130/2016/TT-BTC and excluding real estate projects for sale or lease without forming fixed assets) in the same province or city, during the investment phase, must declare separately for the investment project and offset the input VAT of the investment project with the taxable VAT of ongoing business operations.

The VAT amount carried forward of the investment project is maximized to the payable VAT amount of ongoing business activities.

If, after offsetting, the input VAT of the investment project that has not been fully deducted is 300 million VND or more, then a VAT refund is granted.

If, after offsetting, the undeducted input VAT of the investment project is less than 300 million VND, it will be carried over to the input VAT of the next declaration period.

(ii) In cases where business entities actively paying VAT using the credit method have new investment projects (except for cases guided at point c, clause 3, Article 18 of Circular 219/2013/TT-BTC, as amended by clause 3, Article 1 of Circular 130/2016/TT-BTC and excluding real estate projects for sale or lease without forming fixed assets) in provinces or centrally-governed cities different from the headquarters, during the investment phase, not yet operational, or without business registration or taxpayer registration, the business entity must file separate tax declarations for the investment project and offset the input VAT of the investment project with the VAT declarations of ongoing business operations.

The VAT amount carried forward of the investment project is maximized to the payable VAT amount of ongoing business activities.

If after offsetting, the undeducted input VAT of the new investment project is 300 million VND or more, then a VAT refund is granted.

If after offsetting, the undeducted input VAT of the new investment project is less than 300 million VND, it will be added to the input VAT of the next declaration period.

Where business entities have decisions to establish Project Management Boards or branches located in provinces or cities different from the headquarters to directly manage one or more investment projects in multiple locations; the Project Management Board or branches with a seal, maintained records and vouchers as per accounting laws, a bank account, and are taxpayer registered and issued a tax code, must submit separate tax declaration and refund files with the local tax authority where taxpayer registration is performed.

When an investment project for the establishment of an enterprise has completed and fulfilled business registration and tax registration procedures, the business entity being the project owner must consolidate the VAT amounts incurred, refunded, and pending refund for the project to transfer to the newly established enterprise for tax declaration and payment.

Vietnam: What does a VAT refund claim for an investment project include?

According to clause 1 and point a clause 2, Article 28 of Circular 80/2021/TT-BTC, as amended by Article 2 of Circular 13/2023/TT-BTC, a VAT refund claim for an investment project includes:

- A request for reimbursement from the state budget according to Form No. 01/HT issued together with Appendix I of Circular 80/2021/TT-BTC.

- A copy of the Investment Registration Certificate or Investment Certificate or Investment License for cases requiring investment certificate procedures;

- For projects with construction works: A copy of the Land Use Rights Certificate or land allotment decision or land lease contract issued by the competent authority; construction permit;

- A copy of documents evidencing charter capital contribution;

- For investment projects in sectors with investment business conditions, in the investment phase, meeting investment laws and sector-specific laws, already holding a license for the business sector with investment conditions under clause 3, Article 1 of Decree 49/2022/ND-CP: Copies of one of the forms of a license or certificate or official confirmation, approval for the business sector with investment conditions.

- List of invoices, vouchers for input goods and services according to Form No. 01-1/HT issued together with Appendix I of Circular 80/2021/TT-BTC, except where taxpayers have sent electronic invoices to the tax authority;

- Decision to establish a Project Management Board, Decision to assign management of an investment project by the project owner, Regulations on the organization and activities of the branch or Project Management Board (if the branch or Project Management Board applies for tax refunds).