Construction Projects Executed Under Contracts in 2022, Applying an 8% VAT Rate, But Completed in 2023: What VAT Rate Should Be Applied?
When is the time for issuing invoices for construction projects?
Pursuant to Clause 2, Article 9 of Decree 123/2020/ND-CP which stipulates the time for issuing invoices for construction projects as follows:
Time for issuing invoices
4. The time for issuing invoices for specific cases is as follows:
...
c) For construction and installation activities, the time for issuing invoices is the time of acceptance and handover of the work, work items, and completed construction and installation volumes, regardless of whether the payment has been received or not.
Thus, the time for issuing invoices for construction projects is the time of acceptance and handover of the work, work items, and completed construction and installation volumes, regardless of whether the payment has been received or not.
Construction work under a 2022 contract, applying 8% VAT, but the project was accepted in 2023, what tax rate is applied?
When is the time for determining VAT for construction projects?
Based on Clause 5, Article 8 of Circular 219/2013/TT-BTC which stipulates the time for determining VAT as follows:
Time for determining VAT
...
4. For real estate business activities, infrastructure construction, and house construction for sale, transfer, or lease, the time is when the money is collected according to the project implementation schedule or the payment schedule stated in the contract. Based on the amount collected, the business establishment conducts the declaration of output VAT arising during the period.
5. For construction, installation activities, including shipbuilding, it is the time of acceptance and handover of the work, work items, and completed construction and installation volumes, regardless of whether the payment has been received or not.
Thus, the time for determining VAT for construction projects is the time of acceptance and handover of the work, work items, and completed construction and installation volumes, regardless of whether the payment has been received or not.
Construction work under a 2022 contract, applying 8% VAT but the project was accepted in 2023, what tax rate is applied?
According to the regulations in Article 9 of Decree 123/2020/ND-CP and Article 8 of Circular 219/2013/TT-BTC, the time for determining VAT for construction projects is the time for issuing invoices, which is also the time of acceptance of the construction project.
Based on Article 1 of Decree 15/2022/ND-CP and Article 3 of Decree 15/2022/ND-CP regarding VAT reduction as follows:
VAT Reduction
1. VAT reduction for groups of goods and services currently subjected to a 10% tax rate, except for the following goods and services:
a) Telecommunications, financial activities, banking, securities, insurance, real estate business, metals and pre-fabricated metal products, mineral products (excluding coal mining), coke, refined petroleum, chemical products. Details are in Appendix I issued with this Decree.
b) Products and services subject to special consumption tax. Details are in Appendix II issued with this Decree.
c) Information technology as per the law on information technology. Details are in Appendix III issued with this Decree.
d) The VAT reduction for each type of goods and services stipulated in Clause 1 of this Article is uniformly applied at importation, production, processing, and commercial business stages. For coal mining sold out (including coal mined then sorted and classified through a closed process sold out) which falls under the scope of VAT reduction. Coal products in Appendix I issued with this Decree, at stages other than mining sale, are not subjected to VAT reduction.
...
2. VAT Reduction Amount
a) Business establishments calculating VAT by the deduction method are applied the 8% VAT rate for goods and services stipulated in Clause 1 of this Article.
...
Validity and implementation
1. This Decree takes effect from February 1, 2022.
Article 1 of this Decree is applied from February 1, 2022, to the end of December 31, 2022.
...
Therefore, this regulation means that for projects accepted in 2023, the construction work does not fall within the scope of VAT reduction regulations.
Hence, even if the contract was signed and the construction was carried out in 2022, but the acceptance is in 2023, the VAT rate for construction projects accepted in 2023 is 10%.
LawNet