When Is Issuing Invoices for Collecting Electricity and Water Fees Subject to a 0% Tax Rate?

June 12, 2024, Bac Giang Provincial Tax Department issued Official Dispatch 4175/CTBGI-TTHT providing guidance on invoicing for electricity and water collection on behalf.

1. Under what circumstances can the collection of electricity and water be subjected to 0% VAT?

According to Clause 1, Article 9 of Circular 219/2013/TT-BTC, goods and services eligible for 0% VAT include both export goods and export services:

(1) Export goods:

+ Goods exported abroad, including consignment export;

+ Goods sold to non-tariff zones as defined by the Prime Minister; goods sold to duty-free shops;

+ Goods sold where the delivery, receipt points are outside Vietnam;

+ Spare parts and supplies for the repair and maintenance of vehicles, machinery, and equipment for foreign entities and used outside Vietnam.

(2) Export services:

+ Services provided directly to organizations and individuals abroad and used outside Vietnam;

+ Provided directly to organizations and individuals in non-tariff zones and used in non-tariff zones.

In cases where the provision of services occurs both in Vietnam and abroad but the service contract is signed between two taxpayers in Vietnam or with a permanent establishment in Vietnam:

++ The 0% VAT rate only applies to the value of services performed outside Vietnam, except for insurance services for imported goods which is subject to a 0% VAT rate on the entire contract value;

++ If the contract does not specify the portion of the service value performed in Vietnam, the taxable price is determined by the ratio (%) of costs incurred in Vietnam to total costs.

Additionally, Clause 2, Article 9 of Circular 219/2013/TT-BTC provides the conditions for applying the 0% VAT rate to export goods and services as follows:

For export goods:

- There must be a sales contract, processing contract for export goods, or consignment export contract;

- There must be proof of payment for exported goods via bank, and other documents as required by law;

- There must be a customs declaration as stipulated in Clause 2, Article 16 of this Circular.

For export services:

- There must be a service provision contract with the organization, individual abroad or in the non-tariff zone;

- There must be proof of payment for export services via bank and other documents as required by law.

Furthermore, Article 10 of Circular 219/2013/TT-BTC stipulates that clean water for production and domestic use is subject to the 5% tax rate:

Article 10. Tax rate of 5%

1. Clean water for production and domestic use, excluding bottled, canned drinking water, and other beverages, is subject to the 10% tax rate.

…

Based on the above regulations, the collection of electricity and water on behalf of enterprises without the function of providing clean water, wastewater treatment, and electricity can only apply the 0% VAT rate if the entity collecting the water and electricity has a contract to purchase clean water, wastewater treatment, and electricity directly from the supplier for direct provision to organizations, individuals abroad and used outside Vietnam.

2. Contents of invoices for electricity and water collection on behalf

According to Article 10 of Decree 123/2020/ND-CP, the following contents must be included on the invoice:

- Invoice name, invoice symbol, invoice template number symbol;

- Invoice serial number for invoices printed by the tax authority according to the Ministry of Finance guidelines;

- Invoice number;

- Seller’s name, address, tax code;

- Buyer’s name, address, tax code;

- Name, unit of measurement, quantity, unit price of goods, services; amount not including VAT, VAT rate, total VAT amount by tax rate, total VAT amount, total payment including VAT;

- Signature of the seller, signature of the buyer;

- Invoice issuance time;

- E-invoice signing time;

- Tax authority’s code for e-invoices;

- Fees, charges falling under the state budget, commercial discount, promotion (if any);

- Name, tax code of the organization that prints invoices for the tax authority;

- The language, numbers, and currency used on the invoice.

However, e-invoices do not necessarily require all the above contents if they fall within the scope of Clause 14, Article 10 of Decree 123/2020/ND-CP.

Thus, when an enterprise collects the reimbursement of electricity and water expenses, the company must issue an invoice with the above contents.

For more details on Official Dispatch 4175/CTBGI-TTHT, please refer to: https://cdn.thuvienphapluat.vn/uploads/DanLuat-BanAn/cong-van-4175-CTBGI-TTHT.doc

Please Login to be able to download