Vietnam: Enterprises providing services to enterprises consuming in free trade zones may apply the VAT rate of 0%?
Do free trade zones include export processing enterprises?
According to the provisions of Clause 21, Article 2 of Decree 35/2022/ND-CP, explaining that export processing enterprise refers to an enterprise performing the export processing function in an export processing zone, industrial zone and economic zone.
Pursuant to Clause 20, Article 4 of Circular 219/2013/TT-BTC on free trade zones as follows:
- Free trade zones include: export-processing zones, export processing companies, tax-suspension warehouses, bonded warehouses, special economic zones, commercial - industrial zones, and other economic zones established and provided with similar tax incentives as free trade zones according to Decisions of the Prime Minister. The transactions between a free trade zone and an external party are considered export/import.
Thus, based on the above provisions, export processing enterprise refers to an enterprise performing the export processing function in an export processing zone, it must be separated from the outside area according to regulations applicable to free trade zones.
Vietnam: Enterprises providing services to enterprises consuming in free trade zones may apply the VAT rate of 0%?
What is the value added tax rate that applies to services in free trade zones in Vietnam?
Pursuant to the provisions at Point b, Clause 1, Article 9 of Circular 219/2013/TT-BTC on the tax rate of 0%, with the following contents:
Tax rate of 0%
1. 0% VAT is applied to exported goods and services; construction and installation overseas and in free trade zones; international transport; exported goods and services that are not subject to VAT, except for the cases in Clause 3 of this Article, in which 0% VAT is not applied.
Exported goods and services are those that are sold to overseas organizations and individuals and are consumed outside Vietnam, sold to the entities in free trade zones, or sold to foreign customers as prescribed by law.
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b) Exported services include the services directly provided for overseas organizations and individuals and are consumed overseas; the services provided for the entities in free trade zones and consumed within the free trade zones.
Overseas individuals are the foreigners that do not reside in Vietnam, the Vietnamese people that reside overseas and are not present in Vietnam when the services are provided. The entities in free trade zones are the entities that have registered their business and other cases prescribed by the Prime Minister.
Thus, for service provision activities in the free trade zone, the tax rate of 0% is applied according to the above regulations and must also satisfy the conditions specified at Point b, Clause 2, Article 9 of Circular 219/2013/TT-BTC:
- Having a contract to provide services for an organization or individual in another country or in a free trade zone;
- Having bank receipts for payment for exported services and other documents prescribed by law;
Apart from presenting the aforesaid documents, providers of repair services for foreign aircraft and sea vessels must follow the procedure for importing the aircraft or vessel to Vietnam, and follow the procedure for exporting them after they are repaired in order to be eligible for 0% tax.
Enterprises providing services to enterprises consuming in free trade zones may apply the VAT rate of 0%?
Pursuant to the provisions of Point b, Clause 1, Article 9 of Circular 219/2013/TT-BTC, enterprises providing services to organizations in free trade zones and consuming them in free trade zones concurrently satisfy the conditions at point b, clause 2, Article 9 of Circular 219/2013/TT-BTC, the value-added tax rate of 0% is applicable.
However, the following cases will not apply the 0% tax rate:
- Reinsurance to abroad; technology transfer, intellectual property right transfer to abroad;
- Capital transfer, credit extension, securities investment to abroad; derivative financial services;
- Postal / telecommunication services of outgoing to abroad (including postal /telecommunication services provided for organizations, individuals in the free trade zones; provision of mobile phone card contained number code, par value to abroad or into the free trade zones);
- Export products being natural resources, minerals that are exploited but unprocessed into other products; goods, services provided for individuals without business registration in free trade zones, except for other cases as prescribed by the Prime Minister;
- Tobacco, alcohol, beer imported and then exported, when exporting, the output VAT is not charged but input VAT is not deducted.
- Gasoline, oil sold to cars of business establishments in free trade zones and purchased domestically;
- Cars sold to organizations, individuals in free trade zones.
- Services provided by business establishments for organizations, individuals in free trade zones include: lease of houses, halls, offices, hotels, warehouses, yards; service of worker transport; catering service (except for provision of industry meals, catering services in free trade zones).
- The post-provision services performed in Vietnam provided for overseas organizations, individuals not applying 0% tax rate include:
+ Sport competition, art/cultural performance, entertainment, convention, hotel, training, advertising, travel services;
+ Online payment services.
+ Services provided in association with the sale, distribution and consumption of products and goods in Vietnam.
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