What is the implementation of VAT refund in Vietnam?

What is the implementation of VAT refund in Vietnam? (Image from the Internet)

According to the provisions of Article 10 of Decree 209/2013/ND-CP, amended by Clause 6, Article 1 of Decree 100/2016/ND-CP and Clause 2, Article 1 of Decree 146/2017/ND-CP:

1. A business establishment that pays VAT according to credit-invoice method may offset input VAT that remains after deduction in a month/quarter against that in the next month/quarter.

2. Refund of VAT on an investment project:

a) A business establishment derived from an investment project which has been registered and pays VAT under credit-invoice method, a petroleum exploration and development project which has been invested for at least 01 year and has not been put into operation shall have VAT on goods/services purchased during investment stage refunded in each year, except for the case specified in Point c of this Clause. If accumulated VAT on goods/services during investment stage is VND 300 million or over, it shall be refunded.

If the project has been inspected or audited by a competent authority, the tax authority may decide the VAT refund according to the inspection or audit result and take responsibility for such decision.

b) In the cases where a business establishment which pays VAT under credit-invoice method has a new investment project (other than commercial housing project) in different a province from that where its headquarters is located and it has not been put into operation, registered, and applied for tax registration, VAT on the investment project shall be refunded if VAT on goods/services purchased during investment stage that remains after being offset against VAT payable on the headquarters’ business operation is at least VND 300 million, except for the case specified in Point c of this Clause. Tax on the investment project shall be separately declared and refund thereof shall be claimed separately.

c) VAT shall not be refunded and shall be offset against that of the next period in the following cases:

- The project of investment in a conditional area has not satisfied all conditions as prescribed in the Law on Investment and specified in Point a Clause 1 Article 13 of the Law on Value-added tax and the Law amendments to the Law on Value-added tax, the Law on special excise duty and the Law on Tax administration, which means the business establishment has not obtained a license for conditional business or has not obtained a certificate of eligibility for conditional business, or a competent authority has not issued a permission for conditional business, or any of the conditions for conditional business have not been satisfied if a written permission is not required by law.

The project of investment in a conditional area fails to maintain fulfillment of all conditions during its operation as specified in Point a Clause 1 Article 13 of the Law on Value-added tax and the Law amendments to the Law on Value-added tax, the Law on special excise duty and the Law on Tax administration, which means the business establishment has its license for conditional business or certificate of eligibility for conditional business or permission for conditional business issued by a competent authority revoked, or it fails to maintain fulfillment of conditions for the conditional business during its business operation. In this case, VAT incurred from the time of revocation of any of the said document or from the time of discovery of the failure to maintain fulfillment of conditions shall not be refunded.

- A natural resource or mineral extraction project licensed from July 01, 2016 or manufacturing project where total value of natural resources and/or minerals inclusive of energy cost makes up at least 51% of the product price.

Clause 11 Article 3 of this Decree shall apply to determination of values of natural resources and minerals and time for determination of values of natural resources and minerals and energy cost.

3. In a month (in case of monthly declaration) or quarter (in case of quarterly declaration), if the input VAT on exported goods/services (including goods that are imported and subsequently exported to non-tariff areas and the goods that are imported and subsequently exported to other countries) of a business entity remains at least VND 300 million after being offset against, it shall be refunded by month or quarter. If such input VAT is less than VND 300 million, it shall be offset against in the next month/quarter. In case a business establishment has both exported goods/services and goods/services sold domestically and input VAT on exported goods/services that remains at least VND 300 million after being offset against tax payable, it shall be refunded. Input VAT on purchases used for manufacturing of exported goods/services shall be separately recorded. Otherwise, input VAT shall be determined according to the ratio of revenue from exported goods/services to total revenue from goods/services accrued from the tax period succeeding the period in which tax is refunded to the current period in which tax refund is claimed.

VAT will not be refunded if the goods are imported and then exported outside a customs controlled area in accordance with regulations of law on customs or the goods for are exported outside the customs control areas in accordance with regulations of law on customs.

Tax authorities shall grant a refund before inspection if the taxpayer who is a manufacturer of exports has not incurred any penalty for smuggling, illegal cross-border transport of goods, tax evasion, tax fraud, trade fraud for two consecutive years or the taxpayer does not pose a high risk according to the Law on Tax administration and its instructional documents.

4. A business establishment paying VAT under credit-invoice method may claim refund of overpaid VAT or input VAT that remains after deduction upon its ownership transfer, conversion, merger, amalgamation, division, dissolution, bankruptcy or shutdown.

A business establishment that is dissolved or bankrupt or shut down before it is put into operation and thus has not incurred output VAT is not required to adjust the amount of VAT that was declared, deducted or refunded. In case of transfer of an investment project or sale of assets of an investment project or repurposing of an investment project, tax shall be declared in accordance with instructions of the Ministry of Finance.

5. Refund of VAT on programs and projects funded by grant ODA, grant aid or humanitarian aid:

a) Owner of the program/project or main contractor or an organization appointed by the foreign sponsor to manage the program/project funded by ODA shall have VAT on goods/services purchased in Vietnam to serve the program/project refunded.

b) A Vietnamese organization that uses grant aid or humanitarian aid provided by a foreign entity to purchase goods/services serving an aid program/project shall have VAT paid on such goods/services refunded.

6. An entity granted diplomatic immunity in accordance with regulations of law on diplomatic immunity shall have VAT on goods/services purchased in Vietnam for personal use refunded according to the VAT invoice or payment note on which the prices are inclusive of VAT.

7. A foreigner or Vietnamese national residing overseas who carries a passport or immigration document issued by a foreign competent authority shall have VAT on goods purchased in Vietnam refunded when they are carried in his/her luggage upon exit from Vietnam.

8. VAT shall be refunded when a business establishment has a decision on VAT refund issued by a competent authority and in cases in which VAT is refunded under international treaties to which Vietnam is a signatory.

Above is the content of regulations on VAT refund. For more information, you can refer to Decree 209/2013/ND-CP.

Best regards!