Clarification on deduction and refund of input VAT on exported goods and services in Vietnam

Clarification on deduction and refund of input VAT on exported goods and services in Vietnam

The General Department of Taxation of Vietnam issued Official Dispatch 4768/TCT-KK on December 16, 2022, regarding value-added tax (VAT) refunds. The provisions on deduction and refund of input VAT on exported goods and services are as follows:

1. Clarification on deduction and refund of input VAT on exported goods and services in Vietnam

- Clause 20, Article 4 of Circular 219/2013/TT-BTC guiding the implementation of the Law on Value-Added Tax and Decree 209/2013/ND-CP prescribes non-taxable objects, including:

Trans-shipped goods, goods in transit through Vietnamese territory; ...

... Goods and services traded between foreign countries and non-tariff zones and between non-tariff zones.

*Non-tariff zones include: export processing zones, export processing enterprises, bonded warehouses, bonded areas, customs warehouses, special economic-trade zones, trade-industrial zones, and other economic zones established and granted tax incentives as non-tariff zones according to decisions of the Prime Minister of the Government of Vietnam. The trading relationship between these zones and external parties is one of export and import...’’

Clause 1, Article 9 of Circular 219/2013/TT-BTC guides the 0% tax rate as follows:

The 0% tax rate is applied to exported goods and services; construction and installation activities abroad and in non-tariff zones; international transportation; and goods and services not subject to VAT when exported, excluding cases where the 0% tax rate is not applicable as guided in Clause 3 of this Article.

*Exported goods and services are goods and services sold and supplied to organizations and individuals abroad for consumption outside Vietnam; sold and supplied to organizations and individuals in non-tariff zones; goods and services provided to overseas customers as prescribed by law.’’

Article 16 of Circular 219/2013/TT-BTC guides conditions for deduction and refund of input VAT on exported goods and services.

Article 18 of Circular 219/2013/TT-BTC, amended by Circular 130/2016/TT-BTC and Circular 25/2018/TT-BTC, stipulates VAT refunds for exported goods and services as follows:

Business establishments in a month (for monthly declarations) or quarter (for quarterly declarations) exporting goods and services, including cases where goods are imported and then exported to non-tariff zones;

Goods imported and then exported abroad, with an input VAT amount not yet deducted from 300 million VND or more, are entitled to VAT refunds on a monthly or quarterly basis;

In cases where the input VAT amount not yet deducted in a month or quarter is less than 300 million VND, the amount will be carried forward to the next month or quarter.”

2. Clarification on risk management regulations in tax administration in Vietnam

- Clause 1, Article 110 of the Law on Tax Administration 2019 provides for cases of tax audits at taxpayers' offices:

Tax audits at taxpayers’ offices are conducted in the following cases:

- In the case of audits before tax refunds; audits after tax refunds for cases where tax is refunded first;

- In cases stipulated at Point b, Clause 2, Article 109 of the Law on Tax Administration 2019;

- In cases of post-clearance audits at customs declarants' offices as prescribed by customs law;

- In cases of suspected violations of law;

- In cases selected according to plans or special topics;

- Following recommendations of the State Audit, Government Inspectorate, or other competent agencies;

*- In cases of division, separation, merger, consolidation, conversion of enterprise types, dissolution, cessation of activities, equitization, termination of the tax code, relocation of business operations, and other unexpected audits or audits directed by higher authorities, except cases of dissolution or cessation where tax authorities are not required to conduct final tax settlements as prescribed by law.’’

- Articles 4, 13, and 18 of Circular 31/2021/TT-BTC stipulate the application of risk management in tax administration, tax inspection and audit, and tax refunds as follows:

Article 4 of Circular 31/2021/TT-BTC stipulates the principles of risk management as follows:

- Applying risk management ensures the effectiveness and efficiency of tax administration; encourages and facilitates taxpayers’ voluntary compliance with tax laws and tax administration regulations while promptly detecting and addressing violations of tax laws and tax administration.

- Risk management information is collected from internal and external sources of the tax authority (including foreign sources) as prescribed by law; managed centrally at the General Department of Taxation of Vietnam through IT systems and processed, shared, and provided to tax authorities at all levels and other state management agencies to serve tax administration purposes as prescribed by law.

- The assessment and classification of tax law compliance and taxpayer risk levels are performed automatically and periodically, using one or a combination of methods prescribed in Circular 31/2021/TT-BTC based on legal regulations, tax administration procedures, tax administration measures, taxpayer segmentation, criteria stipulated in this Circular, and taxpayer databases.

- Based on the results of tax law compliance assessment, taxpayer risk classification, information on tax administration systems, and signs of violations or other risk indicators provided at the time of decision-making, the tax authority shall:

+ Decide on inspections, audits, supervision, and appropriate professional measures.

+ Develop comprehensive compliance enhancement plans suitable to the tax authority’s resources based on analysis of behavior nature, causes, and scales of each level of tax law compliance and taxpayer risk.

- If legal regulations, this Circular, and risk management guidelines are properly followed, tax officers are exempt from personal liability as prescribed by law.

- If risk management applications encounter issues or do not meet risk management requirements as stipulated in this Circular, risk management may be applied manually through approved proposals or signed documents from authorized personnel in accordance with the Law on Tax Administration and guiding documents.

- If there are changes in information leading to changes in tax law compliance assessment results and taxpayer risk classification, and risk management applications do not automatically adjust compliance levels and risk levels, manual adjustments shall be made by officers, after authorization approval.

- Results of applying professional measures corresponding to risk rankings must be fully and accurately updated into tax authority support applications or risk management applications for specific cases, serving to complete and conduct taxpayer compliance assessments and taxpayer risk classification in subsequent periods.

Article 13 of Circular 31/2021/TT-BTC stipulates the application of risk management in tax administration as follows:

- The tax authority, based on tax law compliance assessment results in Article 10, taxpayer risk classification results in Articles 11 and 12 of this Circular, and professional information at the time of decision-making, shall determine the list of taxpayers classified by risk levels in each period and conduct:

+ Tax law compliance management;

+ Taxpayer registration risk management;

+ Risk management in tax file audits at tax authority offices;

+ Risk management in tax refunds;

+ Risk management in inspections and audits at taxpayers' offices;

+ Risk management in tax debt and administrative decision enforcement;

+ Risk management in invoice and document management;

+ Risk management for taxpayers subject to key control and monitoring;

+ Risk management for individual taxpayers;

+ Applying risk management in other tax administration operations.

- The list of taxpayers at risk as per Clause 1 of this Article is updated on risk management tax administration apps. Tax authorities at all levels are responsible for compiling, updating, and managing taxpayer risk information to serve tax administration within the tax sector.

- The General Department of Taxation of Vietnam stipulates detailed, periodic evaluations and preparation of taxpayer risk lists per Clause 1, Article 13 of Circular 31/2021/TT-BTC to identify priorities in tax administration in each period.

- If there is suspicious information or signs of tax law violations through inspections, audits, complaints, information from state management agencies, or investigative agencies, the tax authority's head may decide to change inspection forms, audit levels, and apply other tax administration measures within their authority and be responsible for their decisions.

Pursuant to Article 14 of Circular 31/2021/TT-BTC, based on tax law compliance evaluation results as stipulated in Article 10 of this Circular, the tax authority shall analyze the nature of behaviors, scale of tax law compliance levels of taxpayers, and develop plans to improve tax law compliance with appropriate measures for each compliance issue as follows:

- For high compliance cases: Include in the list for consideration, selection, and commendation of taxpayers who comply with tax laws.

- For cases needing enhanced compliance:

+ Collaborate with relevant agencies and organizations and tax agents to deploy measures supporting taxpayers in fulfilling tax procedures; organize programs to engage with taxpayers, dialogue conferences, workshops, training to help taxpayers fully and correctly perform tax obligations;

+ Study policy amendments, simplify administrative procedures, implement support measures, apply information technology to make tax declaration and payment convenient, time-saving, and cost-effective for taxpayers;

+ Be classified by risk and apply tax administration measures for each taxpayer risk level as stipulated in Articles 15, 16, 17, 18, 19, 20, 21, 22 of Circular 31/2021/TT-BTC.

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