Conditions for Applying 0% VAT Rate on Exported Goods: Regulations and Requirements
Opinions of the Hanoi Department of Taxation on VAT rates for exported goods
According to Official Dispatch 42926/CTHN-TTHT in 2023, the Hanoi Department of Taxation provided opinions on VAT rates for exported goods as follows:
- In cases where the Company engages in the sale of goods to foreign organizations or individuals not present in Vietnam and is directed by the foreign merchant to deliver the goods to another enterprise in Vietnam, this falls under the category of on-spot export goods as stipulated in Clause 1, Article 86 of Circular 38/2015/TT-BTC by the Ministry of Finance.
- In cases where the Company exports goods in the form of on-spot export in accordance with the law, meeting the conditions specified in Clause 2, Article 9 of Circular 219/2013/TT-BTC by the Ministry of Finance and not falling under the cases stipulated in Clause 2, Article 1 of Circular 130/2016/TT-BTC by the Ministry of Finance, it shall apply the 0% VAT rate.
Conditions for applying a 0% VAT rate on exported goods
What do on-spot exported and imported goods include?
According to Clause 1, Article 86 of Circular 38/2015/TT-BTC, the regulation is as follows:
Customs procedures for on-spot exported and imported goods
1. On-spot exported and imported goods include:
a) Processed products; rented or borrowed machinery and equipment; excess raw materials and supplies; scrap and waste from processing contracts as stipulated in Clause 3, Article 32 of Decree No. 187/2013/ND-CP;
b) Goods traded between domestic enterprises and export processing enterprises, enterprises in non-tariff zones;
c) Goods traded between Vietnamese enterprises and foreign organizations or individuals not present in Vietnam and directed by foreign merchants for delivery and receipt with other enterprises in Vietnam.
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Thus, according to the above regulations, on-spot exported and imported goods include:
- Processed products; rented or borrowed machinery and equipment; excess raw materials and supplies; scrap and waste from processing contracts.
- Goods traded between domestic enterprises and export processing enterprises, enterprises in non-tariff zones.
- Goods traded between Vietnamese enterprises and foreign organizations or individuals not present in Vietnam and directed by foreign merchants for delivery and receipt with other enterprises in Vietnam.
What are the conditions for applying a 0% VAT rate on exported goods?
According to the provisions at Point a, Clause 2, Article 9 of Circular 219/2013/TT-BTC, the stipulation is as follows:
0% VAT rate
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2. Conditions for applying a 0% tax rate:
a) For exported goods:
- There must be a contract for selling or processing exported goods; an export entrustment contract;
- There must be documentation of payment for exported goods via bank and other documents as specified by law;
- There must be a customs declaration in accordance with the regulations in Clause 2, Article 16 of this Circular.
Specifically for cases where goods are sold and the delivery point is outside Vietnam, the business establishment (seller) must have documentation to prove the delivery and receipt of goods outside Vietnam such as: a purchase contract signed with the foreign seller; a sales contract signed with the buyer; documentation proving the goods were delivered and received outside Vietnam such as: international commercial invoices, bill of lading, packing list, certificate of origin ...; documentation of payment via bank includes: bank documents of the business establishment paying the foreign seller; bank documents of the buyer paying the business establishment.
Thus, according to the above regulations, the conditions for applying a 0% tax rate on exported goods include:
- There must be a contract for selling or processing exported goods; an export entrustment contract;
- There must be documentation of payment for exported goods via bank and other documents as specified by law;
- There must be a customs declaration according to the regulations.
Specifically for cases where goods are sold and the delivery point is outside Vietnam, the business establishment (seller) must have documentation to prove the delivery and receipt of goods outside Vietnam such as:
- A purchase contract signed with the foreign seller;
- A sales contract signed with the buyer;
- Documentation proving the goods were delivered and received outside Vietnam such as:
- International commercial invoices, bill of lading, packing list, certificate of origin...
Documentation of payment via bank includes:
- Bank documents of the business establishment paying the foreign seller;
- Bank documents of the buyer paying the business establishment.
What are the cases where the 0% tax rate does not apply?
According to the provisions of Clause 3, Article 9 of Circular 219/2013/TT-BTC, amended by Clause 2, Article 1 of Circular 130/2016/TT-BTC which regulates the cases where the 0% tax rate does not apply as follows:
Cases where the 0% tax rate does not apply include:
- Reinsurance abroad;
- Transfer of technology, transfer of intellectual property rights abroad;
- Transfer of capital, credit provision, overseas investment in securities; derivative financial services;
- Postal services, telecommunications services provided to foreign countries;
- Exported products are resources or minerals as guided in Clause 23, Article 4 of Circular 130/2016/TT-BTC;
- Tobacco, alcohol, beer imported and then exported;
- Goods and services provided to individuals who are not registered businesses in non-tariff zones, except for other cases as defined by the Prime Minister of the Government of Vietnam;
- Petrol, oil sold to automobiles of business establishments in non-tariff zones purchased domestically;
- Automobiles sold to organizations or individuals in non-tariff zones;
- Services provided by business establishments to organizations or individuals in non-tariff zones include: leasing houses, halls, offices, hotels, warehouses; transportation services for workers; catering services (except for industrial catering services, catering services in non-tariff zones);
- Services provided in Vietnam to organizations or individuals in foreign countries not subject to the 0% tax rate include:
+ Sports competitions, art performances, cultural and entertainment activities, conferencing, hotel, training, advertising, travel services;
+ Online payment services;
+ Services provided associated with the sale, distribution, or consumption of products and goods in Vietnam.”
*Note: Tobacco, alcohol, beer imported and then exported are not subject to output VAT when exported but input VAT is not deductible.
Thus, the cases where the 0% tax rate does not apply are as mentioned above.
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