Which goods and services are not eligible for VAT reduction in Vietnam in 2023 according to Decree 44/2023/ND-CP? What are the principles for determining goods eligible for VAT reduction?
Which goods and services are not eligible for VAT reduction in Vietnam in 2023 according to Decree 44/2023/ND-CP?
Pursuant to Article 1 of Decree 44/2023/ND-CP stipulating VAT reduction to 8% for groups of goods and services currently applying the 10% tax rate.
VAT on goods and services that are currently subject to 10% VAT shall be reduced, except the following goods and services:
- Telecommunication, financial activities, banking activities, securities, insurance, trading of real estate, metal and precast metal products, mining products (excluding coal mining), coke mining, refined oil, chemical products. Further details are provided in Appendix I enclosed herewith.
- Goods and services subject to excise tax. Further details are provided in Appendix II enclosed herewith.
- Information technology products and services as prescribed in the Law on information technology. Further details are provided in Appendix III of Decree 44/2023/ND-CP.
- VAT on goods and services of a specific type prescribed in Clause 1 of Article 1 of Decree 44/2023/ND-CP shall be reduced consistently at all stages, including import, production, processing and trading. Coal products mined for sale (including coal products mined and then washed, sieved and classified under a closed process before they are sold) are eligible for VAT reduction. Coal products in Appendix I of Decree 44/2023/ND-CP are not eligible for VAT reduction at any stages other than the mining stage.
Coal products produced under a closed process of economic corporations or groups shall be also eligible for VAT reduction.
In case any of the goods and services in Appendixes I, II and III enclosed herewith is not subject to VAT or is subject to 5% VAT in accordance with the Law on value-added tax, VAT on that good or service shall be paid in accordance with the Law on value-added tax and shall not be reduced.
Which goods and services are not eligible for VAT reduction in Vietnam in 2023 according to Decree 44/2023/ND-CP? What are the principles for determining goods eligible for VAT reduction?
What are the principles for determining goods eligible for VAT reduction in Vietnam?
Pursuant to the provisions of Decree 44/2023/ND-CP, determining subjects eligible for VAT reduction in 2023 from 10% to 8% will be based on a number of regulations as follows:
- The tax reduction applies to groups of goods and services currently subject to a tax rate of 10%, except for the groups of goods and services listed in Appendixes I, II, III issued with Decree 44/2023/ND-CP
- Business establishments base on the product industry code and the list of HS codes (applicable to goods at the import stage) to look up and compare with Appendix I, II, III issued with the Decree 44/2023/ND-CP to determine whether goods and services are eligible for tax reduction or not.
- Goods and services that are not subject to VAT or are subject to 0% or 5% VAT will not be eligible for VAT reduction.
- Value added tax reduction is applied uniformly at all stages of import, production, processing, and commercial business.
As for coal products, it only applies to the mining and selling stages (including coal that is mined and then screened and classified according to a closed process before being sold), other stages are not eligible for tax reduction.
The time to apply the 8% VAT reduction policy for goods and services is reduced according to the provisions of Decree 44/2023/ND-CP from July 1, 2023 to December 31, 2023.
When is the time for calculating VAT in Vietnam?
Based on Article 8 of Circular 219/2013/TT-BTC, the time for calculating VAT is:
- For goods sale, VAT shall be calculated when the ownership or the right to use goods is transferred to the buyer, whether the payment is made or not.
- For service provision, VAT shall be calculated when service provision is completed or when the invoice for service provision is made, whether the payment is made or not.
For telecommunications services, VAT shall be calculated when comparing the data about telecommunications charge according to the contracts between telecommunications service providers, but not later than 2 months from the month in which the charge is incurred.
- For electricity and water supply, VAT shall be calculated when the electricity or water consumption is recorded.
- For real estate trading, construction of infrastructural works, houses for sale or for lease, VAT shall be calculated when money is collected according to the project schedule or the contract. The taxpayer shall declare output VAT incurred in the tax period according to collected amount.
- For construction and installation, including shipbuilding, VAT shall be calculated when the construction or a work is completed and put into use, Whether the payment is made or not.
- For imported goods, VAT shall be calculated when the customs declaration is registered.
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