Vietnam: If the service is completed in 2023 but invoiced from 2022, will the VAT rate of 8% be applied?
Who is the value-added tax payer?
According to the provisions of Clause 1, Article 2 of Decree 209/2013/ND-CP and Clause 2, Article 2 of Decree 209/2013/ND-CP on value-added tax payers as follows:
- Value-added tax payers include organizations and individuals producing or trading in goods or services subject to value-added tax (below referred to as business establishments) and organizations and individuals importing goods subject to value-added tax (below referred to as importers).
- Vietnam-based production and business organizations and individuals that purchase services (including services associated with goods) from foreign organizations without permanent establishments in Vietnam or overseas individuals not residing in Vietnam shall be value-added tax payers, unless they are not required to declare, calculate and pay value-added tax defined at point b Clause 3 of this Article.
Vietnam: If the service is completed in 2023 but invoiced from 2022, will the VAT rate of 8% be applied?
What is the value-added tax rate in 2023?
In 2022, the Government issued Decree 15/2022/ND-CP stipulating the reduction of value added tax (VAT) for a number of goods and services that are applying the value added tax rate of 10%.
This Decree is implemented in accordance with Resolution 43/2022/QH15 of the National Assembly on fiscal and monetary policies to support the program of socio-economic recovery and development after the COVID-19 pandemic.
According to that, a number of goods and services are entitled to value-added tax reduction according to the provisions of Clause 1, Article 1 of Decree 15/2022/ND-CP, specifically as follows:
VAT reduction in Vietnam
1. VAT on goods and services currently subject to 10% VAT shall be reduced, except the following goods and services:
a) 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.
b) Goods and services subject to excise tax. Further details are provided in Appendix II enclosed herewith.
c) Information technology as prescribed in the Law on information technology. Further details are provided in Appendix III enclosed herewith.
d) Reduction of VAT for each type of goods and services specified in Clause 1 of this Article shall be applied consistently in all stages, including import, production, processing and trading. Coal mined for sale (including coal mined and then washed, sieved and classified under a closed process) shall be eligible for VAT reduction. VAT on coal products in Appendix I enclosed herewith in stages other than the stage of mining and sale shall not be reduced.
In case goods and services in Appendixes I, II and III enclosed herewith are not subject to VAT or are subject to 5% VAT in accordance with the Law on value-added tax, regulations of the Law on value-added tax shall prevail and VAT on such goods and services shall not be reduced.
The VAT rate applied according to Clause 2, Article 1 of Decree 15/2022/ND-CP:
VAT reduction in Vietnam
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2. VAT reduction rates
a) Business establishments that pay VAT using the credit-invoice method shall pay 8% VAT on the goods and services specified in Clause 1 of this Article.
b) Business establishments (including household businesses and individual businesses) that pay VAT using the direct method (as a percentage (%) of revenue) shall be eligible for 20% reduction in the percentage (%) used as the basis for calculating VAT when issuing invoices for the goods and services eligible for VAT reduction in Vietnam specified in Clause 1 of this Article.
However, in Clause 1, Article 3 of Decree 15/2022/ND-CP, this 8% value-added tax rate shall only be applied until the end of December 31, 2022.
Effect and implementation
1. This Decree comes into force from February 01, 2022.
The provisions in Article 1 of this Decree shall take effect from February 01, 2022 to December 31, 2022 inclusively.
The provisions in Article 2 of this Decree shall apply from the tax period of 2022.
Thus, from January 1, 2023, the value-added tax rate is expected to return to normal until the Government makes a new decision on whether to extend the reduction of value-added tax or not. Accordingly, the expected value-added tax rate in 2023 includes:
- The tax rate of 0% applies to exported goods and services, international transport and goods and services not subject to value-added tax specified in Article 5 of the 2008 Law on Value-Added Tax upon export, except for the cases not applied in Clause 3, Article 1 of the 2013 Law on Value-Added Tax.
- The tax rate of 5% applies to goods and services specified in Clause 2, Article 8 of the 2008 Law on Value Added Tax (amended and supplemented by Clause 3, Article 1 of the 2013 Law on amendments to the Law on Value Added Tax), Clause 2, Article 3 of the 2014 Law on amendments to tax laws)
- The tax rate of 10% applies to goods and services that are not subject to the 0% tax rate and 5% tax rate.
If the service is completed in 2023 but invoiced from 2022, will the VAT rate of 8% be applied?
Pursuant to Resolution 43/2022/QH15 and Decree 15/2022/ND-CP, the reduction of VAT from 10% to 8% will only apply in 2022 and specifically until the end of December 31, 2022.
Regarding the issue of invoices issued at the time of VAT reduction but have not yet completed services, according to the provisions of Clause 2, Article 9 of Decree 123/2020/ND-CP on the invoicing time as follows:
Invoicing time
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2. Invoices for provision of services shall be issued upon completion of the provision of services, whether the payment of the invoiced amount is made or not. In case a service is provided with payments collected in advanced or during the provision of that service, an invoice shall be issued when each payment is collected (excluding payments of deposited amounts or advance payments which are made to ensure the execution of contracts for provision of accounting, audit, financial consulting or taxation services; valuation services; technical survey and design services; supervision consulting services; investment construction project formulation services).
At the same time, in Clause 2, Article 8 of Circular 219/2013/TT-BTC, the time of VAT determination is as follows:
Time for calculating VAT
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2. 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.
According to that, the time when service provision invoices are made before December 31, 2022 is still considered to have determined value added tax.
Thus, services subject to the VAT rate of 8% invoiced before December 31, 2022, but completed in 2023, will still be subject to the VAT rate of 8. %.
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