What are methods for personal income tax deduction in Vietnam? Which subjects are subject to tax rate of 10% in Vietnam?

What are methods for personal income tax deduction in Vietnam?

Pursuant to Clause 1 Article 10 of the Law on Value-Added Tax in 2008 (amended by Clause 4 Article 1 of the Law on amendments to the Law on Value-Added Tax in 2013) stipulating tax deduction method:

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

- 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 the Law on Value-Added Tax in 2008;

- 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 the Law on Value-Added Tax in 2008.

What are methods for personal income tax deduction in Vietnam? Which subjects are subject to tax rate of 10% in Vietnam? - image from internet

What are conditions for deduction of input value-added tax in Vietnam?

Pursuant to Clause 2 Article 12 of the Law on Value-Added Tax in 2008 stipulating input value-added tax deduction:

Input value-added tax deduction

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2. Conditions on a business establishment to be entitled to input value-added tax deduction are specified as follows:

a/ Having an added-value invoice on goods or service purchase or a document proving the payment of value-added tax at the stage of importation;

b/ Having proof of payment by bank transfer for the purchased goods or services, except goods or services valued at under twenty million Vietnam dong upon each time of purchase;

c/ For exported goods and services, apart from the conditions specified at Points a and b of this Clause, the business establishment must also have a contract signed with a foreign party on goods sale or processing or service provision, a goods or service sale invoice, a proof of payment by bank transfer and a customs declaration.

Payment for exported goods or services by clearing between exported goods or services and imported goods or services or paying debts on behalf of the State is considered payment by bank transfer.

As regulations above, conditions for deduction of input value-added tax in Vietnam are as follows:

- Having an added-value invoice on goods or service purchase or a document proving the payment of value-added tax at the stage of importation;

- Having proof of payment by bank transfer for the purchased goods or services, except goods or services valued at under twenty million Vietnam dong upon each time of purchase;

- For exported goods and services, apart from the conditions specified at Points a and b of this Clause, the business establishment must also have a contract signed with a foreign party on goods sale or processing or service provision, a goods or service sale invoice, a proof of payment by bank transfer and a customs declaration.

Note: Payment for exported goods or services by clearing between exported goods or services and imported goods or services or paying debts on behalf of the State is considered payment by bank transfer.

Which subjects are subject to tax rate of 10% in Vietnam?

Pursuant to Article 11 of the Circular 219/2013/TT-BTC stipulating goods and services subject to tax rate of 10%:

Tax rate of 10%

10% tax shall be levied on the goods and services that are not mentioned in Article 4, Article 9 and Article 10 of this Circular.

The rates of VAT mentioned in Article 10 and Article 11 shall be uniformly applied to the each type of goods and services, whether they are imported, manufactured, processed, or traded.

Example 50: 10% tax is levied on apparel. That means the tax rate is always 10% whether such apparel is imported manufactured, processed, or traded.

VAT on the products made of recycled wastes and scrap is the same as VAT on the wastes and scrap when they are sold.

If a taxpayer sells various goods and services that are subject to various rates of VAT, they must be sorted by VAT rates. Otherwise, the highest rate of VAT among which shall apply.

If the rate of VAT in the preferential import tariff schedule is found not conformable with this Circular, this Circular shall apply. If different rates of VAT are applied to the same kind of goods that are imported or manufactured in Vietnam, the local tax authority and customs authority must send a report to the Ministry of Finance for guidance.

As above regulations, 10% tax shall be levied on the goods and services that are not subject to value-added tax, tax rate of 0% and tax rate of 5%.

Best regards!