Do the Basic Chemical Business and Chemical Products Get a Reduction in Value-Added Tax? How Much is the Basic Chemical Value-Added Tax Rate Reduced?
Is trading basic chemicals eligible for VAT reduction?
Recently, Official Dispatch 4475/TCHQ-TXNK in 2022 addressed issues concerning the application of VAT rates on basic chemicals and chemical products as follows:
The General Department of Customs issued Official Dispatch 2837/TCHQ-TXNK in 2022 guiding provincial and municipal Customs Departments and some enterprises on the policy of VAT reduction for chemicals and chemical products, as per Decree 15/2022/ND-CP, which came into effect on February 1, 2022. Accordingly, enterprises importing, manufacturing, and trading in "Basic Chemicals" currently applying the 10% VAT rate are eligible for VAT reduction as per Decree 15/2022/ND-CP.
Previously, Official Dispatch 2837/TCHQ-TXNK in 2022 provided guidelines on the application of VAT rates for basic chemicals and chemical products as follows:
Basic chemicals not excluded from the goods list are eligible for VAT reduction as per the provisions of Article 1, Clause 1 of Decree 15/2022/ND-CP. Simultaneously, Article 1, Clause 1 of Decree 15/2022/ND-CP also specifies that goods and services with a 10% VAT rate are eligible for VAT reduction.
Therefore, enterprises importing, manufacturing, and trading basic chemicals applying the 10% VAT rate are eligible for VAT reduction.
Is trading basic chemicals and chemical products eligible for VAT reduction? How much VAT reduction is available for basic chemicals?
Are chemical products eligible for VAT reduction?
In Official Dispatch 4475/TCHQ-XNK in 2022, guidance was provided on the application of VAT rates for chemical products as follows:
Enterprises must follow Official Dispatch 2837/TCHQ-TXNK in 2022 regarding the policy of VAT reduction for chemicals and chemical products as per Decree 15/2022/ND-CP. Enterprises importing, manufacturing, and trading in chemical products are not eligible for VAT reduction as specified in Article 1, Clause 1 of Decree 15/2022/ND-CP.
Specifically, Article 1, Clause 1 of Decree 15/2022/ND-CP stipulates the subjects eligible for VAT reduction as follows:
VAT Reduction
1. VAT reduction for groups of goods and services with a 10% VAT rate, excluding the following groups of goods and services:
a) Telecommunications, financial activities, banking, securities, insurance, real estate business, metals and metal products, mining products (except for coal mining), coke, refined petroleum products, and chemical products. Details are specified in Appendix I attached to this Decree.
b) Products and services subject to special consumption tax. Details are specified in Appendix II attached to this Decree.
c) Information technology as per the information technology law. Details are specified in Appendix III attached to this Decree.
d) The VAT reduction for each type of goods and services specified in Clause 1 of this Article applies uniformly at all stages of importation, production, processing, and commercial business. For coal products sold after mining (including cases where coal is screened and classified in a closed process before sale) are eligible for VAT reduction. Coal products specified in Appendix I attached to this Decree at stages other than the mining sale are not eligible for VAT reduction.
For goods and services mentioned in Appendices I, II, and III attached to this Decree that are not subject to VAT or are subject to a 5% VAT rate as per the VAT Law, the VAT Law provisions apply, and no VAT reduction is provided.
Chemical products do not qualify for VAT reduction.
How much is the VAT reduction for basic chemicals?
According to the provisions in Article 1, Clause 2 of Decree 15/2022/ND-CP, the VAT rate reduction for enterprises importing basic chemicals is as follows:
VAT Reduction
...
2. VAT reduction rate
a) Businesses calculating VAT by the credit method apply an 8% VAT rate for goods and services specified in Clause 1 of this Article.
b) Businesses (including business households and individuals) calculating VAT by the percentage ratio on revenue are reduced by 20% of the percentage rate to calculate VAT when issuing invoices for goods and services eligible for VAT reduction as specified in Clause 1 of this Article.
Thus, based on the above provisions, enterprises importing, manufacturing, and trading basic chemicals are subject to a VAT rate reduction from 10% to 8%.
This rate is effective from February 1, 2022, until December 31, 2022, according to the provisions in Article 3, Clause 1 of Decree 15/2022/ND-CP.
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