Conditions for application of 0% VAT in Vietnam

Conditions for application of 0% VAT in Vietnam (Internet image)

Regarding this issue, LawNet would like to answer as follows:

1. Conditions for application of 0% VAT in Vietnam

According to Clause 2, Article 9 of Circular 219/2013/TT-BTC, Conditions for application of 0% tax:

* For exported goods:

- A sale contract, export processing contract, or export entrustment contract;

- Bank receipts for payment for exported goods and other documents prescribed by law;

- A customs declaration prescribed in Clause 2 Article 16 of Circular 219/2013/TT-BTC.

If goods are delivered to a recipient outside Vietnam, the seller must provide documents proving the delivery of goods outside Vietnam such as:

+ A contract to buy goods signed with an overseas buyer,

+ A contract to sell goods signed with the buyer,

+ Documents proving that goods are received outside vietnam such as commercial invoices, bills of lading, packaging notes, certificates of origin, etc.;

+ Bank receipt for the payment to the overseas seller by the taxpayer,

+ Bank receipt for the payment to the taxpayer by the buyer.

Example 48. Company A and company B signs a contract to buy grease (both of them are Vietnamese companies).

Company A buys grease from several companies in Singapore, then sell it to company B at a port of Singapore. If company A has contracts to buy grease signed with the companies in Singapore, the contract to sell grease to company B, documents proving that goods have been delivered to company B at a port in Singapore, bank receipts for the payments to grease companies in Singapore, and a bank receipt for the payment to company A by company B, 0% tax may be applied to the revenue earned by company A from selling grease to company B.

* For exported services:

- A contract to provide services for an organization or individual in another country or in a free trade zone;

- Bank receipts for payment for exported services and other documents prescribed by law;

Apart from presenting the aforesaid documents, providers of repair services for foreign aircraft and sea vessels must follow the procedure for importing the aircraft or vessel to Vietnam, and follow the procedure for exporting them after they are repaired in order to be eligible for 0% tax.

* For international transport:

- A international passenger transport or freight transport contract between the service provider and the service buyer. For passenger transport, the contract may be substituted with tickets. Providers of international transport services must comply with transport laws.

- Documents proving that payment is made by bank transfer or another method considered bank transfers. Receipts for direct payment are compulsory for passenger transport.

* For aviation services and maritime services:

- 0% tax shall be applied to the services provided within the international airports and cargo terminals, provided the following documents are presented:

+ A service contract with an overseas organization or airline, or a written request for services by an overseas organization or airline;

+ Receitps for bank transfers or other payments considered bank transfer. If services are provided for an overseas organization or airline on an irregular, unscheduled basis without any contract, a receipt for direct payment made by the overseas organization or airline is compulsory.

The aforesaid documents are not compulsory for passenger service charges.

- 0% tax shall be applied to the maritime services provided within the port area, provided the following documents are presented:

+ A service contract with an overseas organization or a shipping agent, or a written request for services by an overseas organization or shipping agent;

+ Documents proving that the overseas organization or shipping agent makes payment to the service provider is made by bank transfer or another method considered bank transfer.

2. Cases not eligible for application of 0% VAT in Vietnam

According to Clause 3, Article 9 of Circular 219/2013/TT-BTC (amended in Circular 130/2016/TT-BTC), cases not eligible for application of 0% VAT in Vietnam include:

- Overseas reinsurance; technology transfer, overseas transfer of intellectual property; capital transfer, granting of credit, outward securities investment; financial derivatives services; outbound postal and telecommunications services (including those provided for the entities in free trade zones; provision of sale of prepaid phone cards abroad or in free trade zones);

exports that are or originate from natural resources and minerals as per Section 23, Article 4 of Circular 219/2013/TT-BTC; tobacco and alcoholic beverages imported then re-exported; goods and services provided for individuals who have not registered any business in free trade zones, except circumstances that the Prime Minister defines;

Tobacco and alcoholic beverages imported then re-exported shall not incur the output VAT upon re-exportation though on which input VAT must not be deducted.

- Petroleum supplied domestically to motor vehicles of the businesses that operate in free trade zones;

- Motor vehicles sold to the entities that operate in free trade zones;

- Services provided by business organizations provide for organizations and individuals in free trade zones, such as: leasing of houses, conference rooms, offices, hotels, warehouses; transportation of workers; food and beverage (except the industrial catering service and food and beverage service rendered in free trade zones);

- The tax rate of 0% is not applicable to the following services provided in Vietnam for overseas organizations and individuals:

+ Sports competition, art performances, cultural events, entertainment, conference, hotel, education, advertisement and tourism;

+ Online payment services;

+ Services in connection with the sale, distribution and consumption of goods in Vietnam.

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