Value-Added Tax Rate for Brokerage Activities Earning Commissions within Export Processing Zones or Foreign Companies
Which entities are exempt from VAT?
Based on Clause 20 Article 4 Circular 219/2013/TT-BTC which stipulates the entities exempt from VAT as follows:
Entities exempt from VAT
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20. Transshipped goods, goods in transit through the territory of Vietnam; temporarily imported goods for re-export; temporarily exported goods for re-import; imported raw materials and supplies for the production and processing of exported goods under production and processing contracts signed with foreign entities.
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Thus, transshipped goods, goods in transit through the territory of Vietnam; temporarily imported goods for re-export; temporarily exported goods for re-import; imported raw materials and supplies for the production and processing of exported goods under production and processing contracts signed with foreign entities are exempt from VAT according to regulations.
What is the VAT rate for brokerage services earning commission as stipulated? (Image from the Internet)
What are the entities and conditions for applying the 0% VAT rate?
According to Article 9 Circular 219/2013/TT-BTC which stipulates the 0% VAT rate as follows:
0% VAT rate
1. The 0% VAT rate applies to exported goods and services; construction and installation activities abroad and in non-tariff zones; international transportation; goods and services exempt from VAT when exported, except for cases where the 0% VAT rate is not applicable as guided in Clause 3 of this Article.
Exported goods and services are those sold and supplied to organizations and individuals abroad and consumed outside of Vietnam; sold and supplied to organizations and individuals in non-tariff zones; goods and services supplied to foreign customers as stipulated by law.
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b) Exported services include those provided directly to organizations and individuals abroad and consumed outside of Vietnam; provided directly to organizations and individuals in non-tariff zones and consumed within non-tariff zones.
Individuals abroad are foreigners not residing in Vietnam, overseas Vietnamese residing abroad during the provision of services. Organizations and individuals in non-tariff zones are those registered for business and other cases as stipulated by the Prime Minister of Vietnam.
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Business establishments providing services being VAT payers in Vietnam must have documents proving that the service is performed outside of Vietnam.
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2. Conditions for applying the 0% VAT rate:
b) For exported services:
- There is a contract for providing services with organizations and individuals abroad or in non-tariff zones;
- There are documents for payment of exported services through banks and other documents as stipulated by law;
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Thus, the entities and conditions for applying the 0% VAT rate are stipulated as above.
Based on Clause 2 Article 1 Circular 130/2016/TT-BTC (amending and supplementing Clause 3 Article 9 Circular 219/2013/TT-BTC) which stipulates cases where the 0% VAT rate does not apply as follows:
Amending and supplementing Clause 3 Article 9 as follows:
3. Cases where the 0% VAT rate does not apply include:
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- Services provided by business establishments to organizations and individuals in non-tariff zones include: leasing of houses, conference halls, offices, hotels, warehouses; transportation services for workers; dining services (except for providing industrial meals, dining services in non-tariff zones);
- Services provided in Vietnam to organizations and individuals abroad that do not apply the 0% VAT rate include:
+ Sports competitions, art performances, cultural and entertainment activities, conferences, hotels, training, advertising, travel services;
+ Online payment services;
+ Services provided associated with the sale, distribution, consumption of products, goods in Vietnam.
Thus, the cases stipulated as above do not apply the 0% VAT rate.
What goods and services apply the 10% VAT rate according to regulations?
At Article 11 Circular 219/2013/TT-BTC which stipulates the 10% VAT rate as follows:
10% VAT rate
The 10% VAT rate applies to goods and services not stipulated in Articles 4, 9, and 10 of this Circular.
Thus, according to the regulations, goods and services not stipulated in Articles 4, 9, and Article 10 Circular 219/2013/TT-BTC apply the 10% VAT rate.
What is the VAT rate for brokerage services earning commission in export processing zones or foreign companies?
Based on the regulations above, according to Official Dispatch 46742/CTHN-TTHT in 2022 on the VAT rate for brokerage services earning commission as follows:
- In the case of BRITESTONE VINA Co., Ltd. providing brokerage services in Vietnam to customers in export processing zones in Vietnam. The brokerage services are performed and consumed in the export processing zone (exported services), when providing these services the Company should issue VAT invoices with a VAT rate of 0% if meeting the conditions stipulated at Point b Clause 2 Article 9 Circular 219/2013/TT-BTC and not falling into the cases stipulated at Clause 2 Article 1 Circular 130/2016/TT-BTC. Export processing zones are determined according to the guidance at Clause 20 Article 4 Circular 219/2013/TT-BTC.
- The Company providing brokerage services to customers is local companies or foreign companies, services are performed and consumed in Vietnam, the Company should issue VAT invoices with a VAT rate of 10% according to the regulations at Article 11 Circular 219/2013/TT-BTC.
Above is the content of Official Dispatch 46742/CTHN-TTHT in 2022 issued by the Hanoi Tax Department.
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