What is calculation and payment in case production and trading of different products but not clear whether 8% or 10% VAT will be applied in Vietnam?

What is calculation and payment in case production and trading of different products but not clear whether 8% or 10% VAT will be applied in Vietnam?

In Official Dispatch 5435/TCT-CS 2023, instructions on VAT payment are as follows:

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In case Kim Thanh Vietnam Co., Ltd. declares VAT using deduction method for selling goods and services to buyers, Kim Thanh Vietnam Co., Ltd. is requested to compare the goods and services that the Company produces and does business with groups of goods and services specified in Appendix I, II, III issued under Decree No. 44/2023/ND-CP, specifically:

- In case Kim Thanh Vietnam Co., Ltd. carries out construction and installation activities, there is a time for acceptance and handover of the project, project items, completed construction and installation volume, regardless of acceptance. If money is received or has not been collected, determined from July 1, 2023 to December 31, 2023, it is eligible for VAT reduction according to the provisions of Decree No. 44/2023/ND-CP;

- In case Kim Thanh Vietnam Co., Ltd. produces and sells goods and services, the 10% VAT rate is applied and is not on the List of goods and services not eligible for VAT reduction specified in Appendix I, II, III issued together with Decree No. 44/2023/ND-CP dated June 30, 2023 of the Government are subject to VAT reduction according to the provisions of Decree No. 44/2023/ND-CP from July 1, 2023 to December 31, 2023;

- In case Kim Thanh Vietnam Co., Ltd. produces and sells goods and services on the List of goods and services not eligible for VAT reduction specified in Appendix I, II, III issued under the Decree No. 44/2023/ND-CP, VAT will not be reduced.

In case Kim Thanh Vietnam Co., Ltd. produces and sells many types of goods and services with different VAT rates, it must declare VAT according to each tax rate prescribed for each type of goods and services; If the Company cannot determine the tax rate, it must calculate and pay tax at the highest tax rate of the goods and services that the Company produces and trades.

Thus, businesses are entitled to an 8% VAT reduction if they meet the following conditions in Vietnam:

- Declare VAT using the deduction method for selling goods and services to buyers.

- The production and trading of goods and services of enterprises that are applying the 10% VAT rate and are not on the List of goods and services not eligible for VAT reduction are subject to VAT reduction. On the contrary, if this factor is not guaranteed, businesses will not be entitled to tax reduction

If an enterprise produces and sells different products that cannot be determined to apply 8% or 10% VAT, it must calculate and pay VAT at the highest tax rate of the goods and services that the enterprise produces.

What is calculation and payment in case production and trading of different products but not clear whether 8% or 10% VAT will be applied in Vietnam? (Image from the Internet)

When will the 8% VAT in 2024 apply in Vietnam?

Article 2 of Decree 94/2023/ND-CP stipulates implementation effect as follows:

Enforcement effectiveness and implementation organization

1. This Decree takes effect from January 1, 2024 to June 30, 2024.

2. Ministries according to their functions and tasks and the People's Committees of provinces and centrally-run cities direct relevant agencies to deploy propaganda, guidance, inspection and supervision so that consumers understand and receive benefit from the reduction of value-added tax specified in Article 1 of this Decree, which focuses on solutions to stabilize supply and demand of goods and services subject to value-added tax reduction to maintain stability of market price level (price without value added tax) from January 1, 2024 to June 30, 2024.

3. During the implementation process, if any problems arise, the Ministry of Finance shall guide and resolve them.

4. Ministers, Heads of ministerial-level agencies, Heads of Government agencies, Chairmen of People's Committees of provinces and centrally-run cities and relevant businesses, organizations and individuals are responsible responsible for implementing this Decree.

Thus, the reduction of VAT to 8% according to Decree 94/2023/ND-CP applies from January 1, 2024 to June 30, 2024 for groups of goods and services currently applying tax rates of 10%, except for goods and services specifically specified in Decree 94/2023/ND-CP.

Which goods and services are not subject to 8% VAT according to Decree 94 in Vietnam?

In Article 1 of Decree 94/2023/ND-CP, goods and services that are not subject to 8% VAT include:

- Telecommunications, financial activities, banking, securities, insurance, real estate business, metals and prefabricated metal products, mining products (excluding coal mining), coke, refined petroleum, chemical products.

- Products and services subject to special consumption tax

- Information technology according to the law on information technology.

- Value added tax reduction for each type of goods and services is applied uniformly at all stages of import, production, processing, and commercial business. For sold coal products (including cases where coal is then screened and classified according to a closed process before being sold) are subject to value added tax reduction. Coal products listed in Appendix 1 issued with Decree 94/2023/ND-CP, at stages other than the exploitation and sale stage, are not subject to value added tax reduction.

Corporations and economic groups that carry out a closed process to sell are also subject to value added tax reduction on sold coal products.

In cases where goods and services are listed in Appendices I, II and III issued with Decree 94/2023/ND-CP, they are not subject to value-added tax or are subject to value-added tax of 5% according to the provisions of the Law on Value Added Tax shall comply with the provisions of the Law on Value Added Tax and no reduction in value added tax is allowed.

Best regards!