What are conditions for input VAT deduction in Vietnam? Which invoice error does not allow input VAT to be deducted in Vietnam?

What are conditions for input VAT deduction in Vietnam? 

In Article 12 of the 2008 Value Added Tax Law, amended by Clause 6, Article 1 of the 2013 revised Value Added Tax Law, it is stipulated that in order to be deducted from input VAT, the following conditions must be met:

1. Business establishments that employ the deduction method shall deduct the input VAT as follows:

a) Input VAT on goods and services used for the production and sale of goods and services subject to VAT is completely deductible, including input VAT that is not compensated of damaged goods and services subject to VAT;

b) For goods and services used for the production and sale of both taxable and non taxable goods and services, only input VAT on the goods and services used for the production and sale of taxable goods and services is deductible. Deductible input VAT must be separated from non-deductible VAT; if they are not separated, the deductible input VAT shall be calculated by the percentage of revenue from goods and services subject to VAT to the total revenue from sold goods and services;

c) Input VAT on goods and services sold to organizations and individuals that use humanitarian aid or non-refundable aid is completely deductible;

d) Input VAT on goods and services used for petroleum exploration and extraction is completely deductible;

dd) Input VAT that arises in a month shall be declared and deducted when calculating the tax payable in that month. When business finds that the input VAT is declared or deducted incorrectly, it may be rectified before the tax authority issues a decision on tax inspection at the premises.

2. Required papers for input VAT deduction:

a) Sale invoices or receipts of tax payment at the importation stage;

b) There are receipts of non-cash payments for purchased goods and services, except for the purchases below 20 million VND;

c) Required papers for exported goods and services apart from the papers in Point a and Point b of this Clause: a contract sign with a foreign partner to sell, process goods or provide services; sale invoices; receipts of non-cash payments; customs declarations of exported goods.

The payment for exported goods and services by offsetting the exported goods and services against the imported goods and services and repayment of debts on behalf of the State is considered non-cash payments.

What are conditions for input VAT deduction in Vietnam? Which invoice error does not allow input VAT to be deducted in Vietnam? (Image from the Internet)

Which invoice error does not allow input VAT to be deducted in Vietnam? 

In Clause 15, Article 14, Circular 219/2013/TT-BTC stipulates that invoice errors that are not eligible for input VAT deduction include:

15. Input VAT must not be deducted in the following cases:

- The VAT invoice is not legitimate, such as VAT is not written (except for special invoices on which selling prices are VAT-inclusive);

- The invoice does not contain or does not contain the correct name, address or TIN of the seller, thus rendering the seller unidentifiable;

- The name, address, or tax code of the buyer on the invoice is incorrect (except for the case in Clause 12 of this Article);

- The VAT invoice or the receipt for VAT payment is fake; the invoice is changed or fictitious (made without actual sale);

- The invoice does not reflect the actual value of goods and services.

What are regulations on tax deduction method in Vietnam?

In Clause 1, Article 10 of the 2008 Value Added Tax Law, amended by Clause 4, Article 1 of the 2013 revised Value Added Tax Law, stipulates the following VAT deduction methods:

Tax deduction method

1. VAT shall be deducted as follows:

a) The amount of VAT payable by deduction method is equal to the amount of output VAT minus the deductible input VAT;

b) The amount of output VAT is equal to the total VAT on sold goods and services, which is written on the VAT invoice.

VAT on sold goods and services written on the VAT invoice is equal to the taxable prices of goods and services multiplied by the rate of VAT on such goods and services.

If the paid price written on the invoice is inclusive of VAT, the output VAT shall equal the paid price minus VAT defined in Point k Clause 1 Article 7 of this Law;

c) The amount of deductible input VAT is equal to the total amount of VAT written on the VAT invoice, the VAT bill of imported goods, and must satisfy the conditions in Article 12 of this Law.

2. The deduction method is applicable to the business establishments that comply with the regime for accounting and invoicing according to the laws on accounting and invoicing, including:

a) Business establishments that earn annual revenue of at least 1 billion VND from goods sale, except for business households and individuals;

b) Business establishments that voluntarily employ the deduction method, except for business households and individuals.

3. The Government shall elaborate this Article.

Thus, the VAT deduction method in Vietnam is prescribed as follows:

- The amount of value-added tax payable according to the tax deduction method = the amount of output value-added tax - the amount of input value-added tax to be deducted;

- Output value-added tax amount = total value-added tax amount of sold goods and services recorded on the value-added invoice.

Value-added tax of sold goods and services recorded on the value-added invoice = taxable price of taxable goods and services sold x value-added tax rate of those goods and services.

In case a document recording the payment price is the price that includes value-added tax, the output value-added tax is determined = payment price - value-added tax calculation price determined according to the provisions at point k Clause 1, Article 7 of the Value Added Tax Law 2008;

- Deductible input value-added tax amount = total value-added tax amount recorded on value-added invoices for purchases of goods and services, value-added tax payment documents for imported goods and compliance meet the prescribed conditions.

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