Does a Company Collecting Late Payment Interest Have to Pay Value-Added Tax?

Based on the provisions at Clause 1, Article 5 of Circular 219/2013/TT-BTC regarding cases not required to declare and pay value-added tax:

"Organizations and individuals receiving monetary compensation (including compensation for land and property on land when land is reclaimed according to decisions of competent State agencies), rewards, support funds, transfer of emission rights, and other financial receipts.

When a business establishment receives a compensation payment, reward, support fund received, transfer of emission rights, and other financial receipts, it shall issue receipts according to regulations. For business establishments disbursing funds, the expenditure shall be documented based on the purpose of the expenditure.

In the case of compensation in goods or services, the compensating establishment must issue invoices and declare, calculate, and pay VAT as for the sale of goods and services; the receiving establishment shall declare and deduct according to regulations.

In cases where a business establishment receives money from organizations or individuals to perform services for organizations or individuals, such as repair, warranty, promotion, advertising, it must declare and pay tax according to regulations."

In consideration of your case, in the amount of VND 453.2 million as provided, the company will proceed to declare and pay value-added tax for the contract payment amount of 3 months (VND 440 million). The late payment interest incurred (VND 13.2 million) is identified as compensation in the form of money according to the above regulation. Therefore, your company is not required to declare and pay value-added tax for the incurred interest.

Sincerely!