Vietnam: What are the regulations on VAT rate applied to electronic components inspection and classification services provided for export processing enterprises?
What are the regulations on VAT rate applied to electronic components inspection and classification services provided for export processing enterprises in Vietnam?
Pursuant to Official Dispatch 55897/CTHN-TTHT in 2022 as follows:
Pursuant to Circular No. 219/2013/TT-BTC dated December 31, 2013 of the Ministry of Finance guiding the execution of the VAT Law and Decree No. 209/2013/ND-CP dated December 18, 2013 of the Government detailing and guiding the execution of a number of articles of the VAT Law as follows:
+ Article 2 provides for taxable goods and services:
“Goods and services subject to VAT (hereinafter referred to as taxable goods and services) are those used for production, trading, and consumption in Vietnam (including those purchased from overseas organizations and individuals), except for the goods and services in Article 4 of this Circular.
+ In Article 4, regulations on goods and services that are not subject to VAT are:
“...
20. The goods forwarded through Vietnam’s territory; goods temporarily imported or temporarily exported, raw materials imported for manufacturing or export processing under contracts with foreign partners
...
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...."
+ In Article 9, the regulations on the 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.
...
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.
...
2. Condition for application of 0% tax:
b) The documents below are compulsory for exported services:
- A contract to provide services for an organization or individual in another country or in a free trade zone;
- 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..."
Pursuant to Clause 2 Article 1 of Circular No. 130/2016 / TT-BTC dated August 12, 2016 of the Ministry of Finance amending and supplementing Clause 3 Article 9 of Circular No. 219/2013 / TT-BTC dated December 31, 2013 of the Ministry of Finance as follows:
"3. The tax rate of 0% is not applicable to:
- Overseas reinsurance; technology transfer, overseas transfer of intellectual property; capital transfer, granting of credit, outward securities investment; financial derivatives services; outbound postal and telecommunications services (including those provided for the entities in free trade zones; provision of sale of prepaid phone cards abroad or in free trade zones); exports that are or originate from natural resources and minerals as per Section 23, Article 4 of the Circular; tobacco and alcoholic beverages imported then re-exported; goods and services provided for individuals who have not registered any business in free trade zones, except circumstances that the Prime Minister defines;
Tobacco and alcoholic beverages imported then re-exported shall not incur the output VAT upon re-exportation though on which input VAT must not be deducted.
- Petroleum supplied domestically to motor vehicles of the businesses that operate in free trade zones;
- Motor vehicles sold to the entities that operate in free trade zones;
- Services provided by business organizations provide for organizations and individuals in free trade zones, such as: leasing of houses, conference rooms, offices, hotels, warehouses; transportation of workers; food and beverage (except the industrial catering service and food and beverage service rendered in free trade zones);
- The tax rate of 0% is not applicable to the following services provided in Vietnam for overseas organizations and individuals:
+ Sports competition, art performances, cultural events, entertainment, conference, hotel, education, advertisement and tourism;
+ Online payment services;
+ Services in connection with the sale, distribution and consumption of goods in Vietnam.“
Thus, according to the above provisions, in case the Company signs a contract with an export processing enterprise to provide inspection and classification services for electronic components specified at Point b, Clause 1, Article 9 of Circular 219/2013 / TT-BTC, the VAT rate of 0% shall be applied if it satisfies the conditions in Clause 2, Article 9 of this Circular and does not fall into the cases in Clause 2, Article 1 of this Circular.
What are the regulations on the time for determining VAT in Vietnam?
Pursuant to Clause 1, Article 5 of Decree 209/2013/ND-CP stipulating as follows:
Time for determining value-added tax
1. The time for determining value-added tax on goods is the time of transferring goods ownership or use right to purchasers, regardless of whether money has been collected or not.
2. The time for determining value-added tax on services is the time of completing the provision of services or the time of making service provision invoices, regardless of whether money has been collected or not.
3. The Ministry of Finance shall specify the time for determining value-added tax in other special cases.
Thus, according to the above regulations, the time of determining VAT on goods is the time of transferring goods ownership or use right to purchasers, regardless of whether money has been collected or not.
Where will VAT in Vietnam be paid?
Pursuant to Article 11 of Decree 209/2013/ND-CP on places for tax payment as follows:
- Taxpayers shall declare and pay value-added tax in localities where they carry out production and business activities.
- Taxpayers that declare and pay value-added tax according to the tax credit method and have dependent cost-accounting production establishments based in provinces or centrally run cities other than those where they are headquartered shall pay value-added tax both in localities where their production establishments are based and localities where they are headquartered.
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