What is proposal for household businesses and individuals with a turnover of less than 150 million VND per year not to pay VAT in Vietnam?

What is proposal for household businesses and individuals with a turnover of less than 150 million VND per year not to pay VAT in Vietnam?

In Clause 25, Article 5 of the 2008 Value Added Tax Law, amended by Clause 1, Article 1 of the 2013 Amended Value Added Tax Law, there are regulations on non-taxable objects as follows:

Non-taxable objects

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25. Goods and services provided by business households and individuals that earn annual revenue of less than 100 million VND.

The business establishments that sell the goods and services that are not subject to VAT in this Article shall not deduct input VAT or receive input VAT refund, except for the cases to which the tax rate of 0% applies that are defined in Clause 1 Article 8 of this Law.

In Clause 25, Article 5 of the Draft Law on Value Added Tax (amended), there is a proposal for the level of sales revenue not subject to value added tax as follows:

Non-taxable objects

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25. Goods and services of household businesses and individuals with annual revenue of one hundred fifty million VND or less; Assets sold by non-business organizations and individuals who are not value-added taxpayers; national reserve goods sold by the national reserve agency; activities and services collecting fees and charges according to the law on fees and charges.

Thus, it is expected that if household businesses and individuals have annual sales revenue of 150 million VND or less, they will not have to pay VAT instead of 100 million VND as currently in Vietnam.

What is proposal for household businesses and individuals with a turnover of less than 150 million VND per year not to pay VAT in Vietnam? (Image from the Internet)

When is the VAT invoice issued in Vietnam?

In Article 9 of Decree 123/2020/ND-CP, there are regulations on invoicing time as follows:

Invoicing time

1. Invoices for sale of goods (including the sale of state-owned property, property confiscated and put into state fund, and the sale of national reserve goods) shall be issued when the right to own or use goods is transferred to buyers, whether the payment of the invoiced amount is made or not.

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).

3. In case where multiple deliveries are required, or each goods item or service phase is accepted, it shall be mandatory to issue an invoice showing quantity, value of goods or service for each respective delivery or acceptance.

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Thus, VAT invoices in Vietnam are issued at the following time:

- For goods sales activities:

VAT invoices are issued when the right to own or use goods is transferred to buyers, whether the payment of the invoiced amount is made or not.

- For service provision activities:

VAT invoices are issued upon completion of the provision of services, whether the payment of the invoiced amount is made or not.

If money is collected before or while providing services, the time of invoice issuance is the time of collection, except in the case of collecting deposits or advances to ensure the performance of contracts to provide services: accounting, audit, financial consulting or taxation services,...

- For multiple deliveries or handover of individual items and translation stages:

VAT invoices are issued upon each delivery or stage handover.

How much is penalty for not issuing an invoice when selling goods in Vietnam?

According to Article 24 of Decree 125/2020/ND-CP regulating penalties for violations against regulations on issuance of invoices upon sale of goods or provision of services, specifically:

Penalties for violations against regulations on issuance of invoices upon sale of goods or provision of services

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2. Fines ranging from VND 500,000 to VND 1,500,000 shall be imposed for one of the following violations:

a) Failing to issue general invoices in accordance with laws on invoices for sale of goods or provision of services;

b) Failing to invoice promotional, advertising or sample goods or services; goods and services used as gifts, donations, presents, swaps or employee’s payment-in-kind wages, except for internally circulated or consumed goods for further production purposes.

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5. Fine from 10,000,000 VND to 20,000,000 VND for acts of not issuing invoices when selling goods or providing services to buyers according to regulations, except for the acts specified in Point b, Clause 2 of this Article. 

Clause 5, Article 5 of Decree 125/2020/ND-CP stipulates principles of sanctioning administrative violations of taxes and invoices as follows:

Sanctioning principles

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5. For a tax or invoice-related administrative violation, if an entity commits such violation, they must be fined two times as much as the amount of penalty imposed on persons, except the amounts of penalty for the acts prescribed in Article 16, 17 and 18 herein.

At Point a, Clause 4, Article 7, Decree 125/2020/ND-CP stipulates the principles for applying fines as follows:

Sanctioning forms, remedies and principles of imposition of fines for tax or invoice-related administrative violations

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4. Principles of determination of fine amounts

a) The fine amounts specified in Article 10, 11, 12, 13, 14 and 15; clause 1 and 2 of Article 19; and Chapter III herein, shall be those applied to violating entities.

Taxpayers that are family households or sole proprietorship households shall be fined the same as violating persons.

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Thus, failure to issue invoices when selling goods will result in a fine in Vietnam as follows:

- Fine from 500,000 to 1,500,000 VND for organizations and from 250,000 to 750,000 VND for individuals, households, and household businesses for the following acts:

+ Do not create consolidated invoices.

+ Do not issue invoices for goods used for promotion, advertising, or sample products; goods used to give away, give away, donate, exchange, or pay instead of wages to workers, goods circulated internally, consumed internally to continue the production process

- Fine from 10,000,000 to 20,000,000 VND for organizations and from 5,000,000 to 10,000,000 VND for individuals, households, and household businesses for the act of not issuing invoices when selling goods, provide services to other buyers.

In addition, failure to issue invoices is considered tax evasion and will be sanctioned and remedial measures will be taken according to Article 17 of Decree 125/2020/ND-CP.

Note: The fine for this behavior is the fine level of the organization. For individuals who commit the same behavior, the penalty will be half the amount of the organization in Vietnam.

Best regards!