Responses to problems regarding VAT refund for medical equipment assembly materials in Vietnam

Responses to problems regarding VAT refund for medical equipment assembly materials in Vietnam (Internet image)

Decision 48/QD-TTg dated February 3, 2023 on the Work Program for 2023 of the Government and the Prime Minister of Vietnam.

Specifically, there are responses to problems regarding VAT refunds and import tax incentives for medical equipment assembly materials.

1. Responses to problems regarding VAT refund for medical equipment assembly materials in Vietnam

In Clause 2, Article 8 of the 2008 Law on Value Added Tax, it is stipulated that:

Medical equipment and instruments; cotton, medical tampons; preventive and curative drugs; pharmaceutical chemical products, medicinal materials being raw materials for the production of curative and preventive drugs" are subject to VAT at the rate of 5%.

In Article 12 of the Law on Value-Added Tax 2008, amended in 2016, cases of tax refund are as follows:

A business establishment that pays value-added tax by the tax credit method shall deduct the input value-added tax amount that has not yet been fully deducted in the month or quarter in the next period.

In case a business establishment that has registered to pay value-added tax by the deduction method has a new investment project, is in the investment stage, and has a value-added tax amount on goods and services purchased and used for investment that has not been deducted and has the remaining tax amount of three hundred million dong or more, the value added tax will be refunded.

Business establishments are not entitled to a refund of value-added tax, but are entitled to carry over the tax amount that has not yet been deducted from the investment project according to the provisions of the law on investment to the next period in the following cases:

+ The investment project of the business establishment does not contribute the full amount of charter capital as registered; conducting business in conditional business lines when the business conditions are not fully met as prescribed by the Law on Investment or the business conditions are not maintained in the course of operation;

+ Investment projects on the exploitation of natural resources and minerals licensed from July 1, 2016 or investment projects on the production of goods and services for which the total value of natural resources and minerals plus energy costs accounts for at least 51% of the product cost, according to investment projects.

Based on the above regulations, enterprises manufacturing medical equipment and instruments shall pay VAT by the tax credit method if there is an input VAT amount that has not yet been fully deducted on goods, raw materials, and production activities of medical equipment and devices that are subject to VAT at the rate of 5%, then:

No tax refund, but transfer to deduction in the next period (unless that enterprise has a new investment project, has VAT on goods and services purchased and used for investment but has not been deducted, and has the remaining tax amount of three hundred million dong or more).

Currently, implementing Decision 2114/QD-TTg in 2021 promulgating the Action Plan of Conclusion No. 19-KL/TW in 2021
and the Orientation Project of the Legislative Development Program for the 15th National Assembly term, the Ministry of Finance is conducting research, reviewing, and overall assessing tax laws; including the Law on VAT, in order to report to the Government and the National Assembly for consideration and amendment, to ensure that it is suitable to Vietnam's socio-economic conditions as well as international practices and the uniformity of the tax policy system.

Thus, regarding the VAT refund policy, it is recommended that businesses comply with the current provisions of the law on VAT. The Ministry of Finance takes note of the recommendations of medical equipment and device manufacturers to study and submit to competent authorities for consideration and decision when amending and supplementing the VAT Law in the coming period.

2. Responses to problems regarding import tax incentives for raw materials for medical equipment production in Vietnam

Regarding import tax incentives for raw materials, supplies and components for domestic production of medical equipment:

According to the provisions of the current Preferential Import Tariff, the preferential import tax rates of goods, including raw materials, supplies, and components for the production of medical equipment, are based on the following rule:

Ensuring compliance with commitments to reduce tariffs upon joining the World Trade Organization (WTO);

Complying with the principles of promulgating tax schedules and tax rates specified in the Law on Import and Export Tax;

Restricting imports of domestically produced goods.

Thus, for raw materials, supplies, and components for the production of medical equipment that have not been basically produced domestically, a low preferential import tax rate has been applied;

As for goods that can be produced domestically, the appropriate tax rate shall be applied to support domestic production, ensuring the harmony of interests between the State, enterprises, and consumers.

Materials, components, and medical equipment originating from countries and territories that have signed free trade agreements with Vietnam are eligible for special preferential import tax rates if the specified conditions are met.

In addition, in order to promote the domestic production of medical equipment, Clause 14, Article 16 of the 2016 Law on Import and Export Tax stipulates:

Raw materials, supplies, and components imported into the country that cannot be produced in the country of investment projects for the production and assembly of medical equipment prioritized for research and manufacture are exempt from import tax for a period of 5 years, since the beginning of production is subject to tax exemption.

The list of medical equipment products prioritized for research and manufacture is specified in Appendix VI of Decree 134/2016/ND-CP guiding the Law on Import and Export Tax.

Thus, the import tax law has specific provisions on the application of import tax policy to raw materials, supplies and components imported for the production and assembly of medical equipment. Request the Vietnam Medical Equipment Association to comply with the current import tax laws.

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