Why is VAT not applied to export processing enterprises in Vietnam?
Why is VAT not applied to export processing enterprises in Vietnam?
Pursuant to Article 9 of Circular 219/2013/TT-BTC stipulating a 0% tax rate
0% Tax Rate
1. The 0% tax rate is applied to exported goods and services; construction and installation activities abroad and in non-tariff zones; international transportation; goods and services not subject to VAT when exported, except for cases where the 0% tax rate is not applied as guided in Clause 3 of this Article.
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b) Export services include services provided directly to organizations and individuals abroad and consumed outside Vietnam; provided directly to organizations and individuals in non-tariff zones and consumed in non-tariff zones.
Individuals abroad are foreigners not residing in Vietnam, Vietnamese residing abroad and outside Vietnam during the service delivery. Organizations and individuals in non-tariff zones are those registered for business and other cases as prescribed by the Prime Minister of the Government of Vietnam.
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And Pursuant to Clause 20, Article 4 of Circular 219/2013/TT-BTC stipulating goods not subject to VAT as follows:
Objects not subject to VAT
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20. Goods in transit through Vietnamese territory; goods temporarily imported for re-export; goods temporarily exported for re-import; raw materials, supplies imported for production, processing for export according to production, processing contracts signed with foreign parties.
Goods and services traded between foreign countries and non-tariff zones and between non-tariff zones.
Non-tariff zones include: export processing zones, export processing enterprises, bonded warehouses, tax suspension zones, customs warehouses, special economic and trade zones, trade-industrial zones, and other economic areas established and enjoying tax incentives as non-tariff zones under the Decision of the Prime Minister of the Government of Vietnam. Trade relations between these zones and external parties are export-import relations.
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Therefore, according to the above regulations, services provided directly to organizations, individuals in non-tariff zones apply a 0% VAT rate. Non-tariff zones include export processing enterprises.
Thus, according to the above regulations, VAT applies a 0% tax rate to export processing enterprises. Therefore, VAT is not applied to export processing enterprises.
Why is VAT not applied to export processing enterprises in Vietnam? What is the VAT deduction methods? (Image from the Internet)
What is the VAT deduction method in Vietnam?
Pursuant to Article 10 of the 2008 VAT Law, amended by Clause 4, Article 1 of the 2013 VAT Law, regulations are provided as follows:
Tax Deduction Method
1. The VAT deduction method is prescribed as follows:
a) VAT payable by the deduction method equals output VAT minus deductible input VAT;
b) Output VAT equals the total VAT of goods and services sold as recorded on VAT invoices;
c) Deductible input VAT equals the total VAT recorded on VAT invoices of purchased goods, services, vouchers of tax paid for imported goods, and meets the conditions stated in Article 12 of this Law.
2. The deduction method applies to businesses fully implementing accounting policies, invoices, and documentation according to accounting and invoicing laws and registering for tax payment using the deduction method.
Thus, the VAT deduction method is outlined as follows:
- VAT payable by the deduction method equals output VAT minus deductible input VAT.
- Output VAT equals the total VAT of goods and services sold as recorded on VAT invoices.
- Deductible input VAT equals the total VAT recorded on VAT invoices of purchased goods, services, vouchers of tax paid for imported goods, and meets the specified conditions.
What goods and services are subject to VAT in Vietnam?
Pursuant to Article 2 of Circular 219/2013/TT-BTC, the subjects liable to tax are specified as follows:
Subjects liable to VAT are goods and services used for production, business, and consumption in Vietnam (including goods and services purchased from foreign organizations and individuals), except for those not subject to VAT as guided in Article 4 of this Circular.
