Will the Law on Value-Added Tax 2024 supplement conditions for input VAT credit documents in Vietnam?

Will the Law on Value-Added Tax 2024 supplement conditions for input VAT credit documents in Vietnam?

According to the Value Added Tax Law 2008 (current), Article 12 of the Value Added Tax Law 2008, as amended by Clause 6, Article 1 of the 2013 Amended Value Added Tax Law is as follows:

Input VAT credit

1. Business establishments that pay value added tax by the deduction method are entitled to deduct input VAT as follows:

a) Input VAT on goods and services used for the production and business of goods and services subject to VAT is fully deductible, including input VAT that is not compensated on goods and services subject to VAT that suffered damage;

b) Input VAT on goods and services used concurrently for the production and business of goods and services both taxable and non-taxable only allows deduction of input VAT on goods and services used for the taxable ones. The business must separately account for the deductible and non-deductible input VAT; if it fails to do so, the deductible input VAT is calculated according to the percentage of turnover of VAT-taxed goods and services against the total turnover of goods and services sold;

c) Input VAT on goods and services sold to organizations and individuals using humanitarian aid or non-refundable aid funds is fully deductible;

d) Input VAT on goods and services used for oil and gas exploration, development activities is fully deductible;

đ) Input VAT arising in any month is declared and deductible when determining the tax payable for that month. If the business discovers errors in input VAT during declaration or deduction, they can adjust it before the tax authority announces a tax audit or inspection decision at the taxpayer's headquarters.

2. Conditions for input VAT credit are as follows:

a) Having a VAT invoice for the purchase of goods and services or a document on VAT payment at the import stage;

b) Having non-cash payment documents for purchased goods and services, except for goods and services procured occasionally valued under twenty million dong;

c) For exported goods and services, in addition to the conditions stipulated in points a and b of this clause, there must be: a contract signed with the foreign party on the sale, processing of goods, provision of services; sales invoice; non-cash payment documents; customs declaration for exported goods.

Payment for exported goods and services through offsetting between exported and imported goods, debt settlement on behalf of the government, is considered non-cash payment.

Furthermore, according to point c, clause 2, Article 14 of the Law on Value-Added Tax 2024 Download as follows:

Input VAT credit

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2. Conditions for input VAT credit are regulated as follows:

a) Having a VAT invoice for the purchase of goods and services or documents on VAT payment at the import stage or documents on VAT payment on behalf of the foreign party stipulated in clauses 3 and 4, Article 4 of this Law. The Minister of Finance regulates documents on VAT payment on behalf of the foreign party;

b) Having non-cash payment documents for purchased goods and services, except for certain special cases as prescribed by the Government of Vietnam;

c) For exported goods and services, in addition to the conditions stipulated in points a and b of this clause, there must be: a contract signed with the foreign party on the sale, processing of goods, provision of services; sales invoice; non-cash payment documents; customs declaration for exported goods; packing list, bill of lading, goods insurance documents (if any). The Government of Vietnam regulates the conditions for deduction in cases of exporting goods through foreign e-commerce platforms and other special cases.

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Thus, comparing current regulations and the upcoming new regulations, the Law on Value-Added Tax 2024 will supplement conditions for input VAT credit documents regarding exported goods and services, including packing lists, bills of lading, and goods insurance documents (if any); except for certain special cases as prescribed by the Government of Vietnam, input VAT can be deducted.

Note: The Law on Value-Added Tax 2024 takes effect from July 1, 2025; however, except for the regulations in clause 2, Article 18 of the Law on Value-Added Tax 2024 Download.

- Regulations on the revenue level of households and individuals engaged in production and business activities not subject to tax in clause 25, Article 5 of this Law and Article 17 of this Law come into force from January 1, 2026.

- The Value Added Tax Law No. 13/2008/QH12 as amended and supplemented by Laws No. 31/2013/QH13, No. 71/2014/QH13, and No. 106/2016/QH13 will be nullified from the date the Law on Value-Added Tax 2024 takes effect.

Will the Law on Value-Added Tax 2024 supplement conditions for input VAT credit documents in Vietnam? (Image from Internet)

Is uncompensated input VAT eligible for input VAT credit in Vietnam?

Based on Article 14 of Circular 219/2013/TT-BTC, supplemented by point b, clause 9, Article 1 of Circular 26/2015/TT-BTC, the principles of input VAT credit are as follows:

Principles of Input VAT credit

1. Input VAT on goods and services used for the production and business of goods and services subject to VAT is fully deductible, including input VAT that is not compensated on VAT-subject goods that suffered damage.

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8. Input VAT arising in any period is declared, deducted when determining the tax payable for that period, regardless of whether it has been used or is still in storage.

In cases where a business discovers errors in input VAT during declaration or deduction, they can adjust it before the tax authority or competent authority announces a decision on tax audit or inspection at the taxpayer's headquarters.

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Thus, according to the above regulations, uncompensated input VAT is still eligible for input VAT credit.

Is the VAT credit method applicable to individual businesses in Vietnam?

Based on clause 2, Article 10 of the Value Added Tax Law 2008, as amended by clause 4, Article 1 of the 2013 Amended Value Added Tax Law, the deduction method applies to business establishments that fully comply with accounting policies, invoices, and documents according to laws on accounting, invoices, and documents including:

- Business establishments with annual revenue from goods sales and service provision of one billion dong or more, excluding households and individual businesses;

- Business establishments voluntarily registering to apply the deduction method, excluding households and individual businesses.

Thus, the VAT credit method is not applicable to individual businesses.