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Guidelines on VAT Law

14/01/2014 16:25:00
VGP – The Government on December 18, 2013 released Decree 209/2013/ND-CP detailing and guiding the implementation of some articles of the Law on Value Added Tax (VAT). 

Question: What are the regulations on the five cases for VAT exemption, subjects of 0-5% VAT collection, and VAT payment method as stipulated on the Decree 209/2013/ND-CP?

Answer:

Five cases for VAT exemption

Decree 209 stipulates five cases on VAT exemption including:

  • Organizations and Individuals collecting receivables of damages, bonuses, allowances, emission right transfers and other financial receivables;
  • Organizations and individuals that manufacture and trade in Viet Nam, buy services from either foreign organizations without any permanent establishment in Viet Nam, or foreign individuals as non-residents in Viet Nam with respect to such areas as vehicles repair, machinery, equipment (including materials and spare parts), advertising, marketing, commerce and investment promotion and brokers for the trade of goods and provision of services, training, cost sharing of postal services and international telecommunications between Viet Nam and foreign countries where the services are performed outside Viet Nam;
  • Organizations and individuals as non-traders are not subject to added value tax on asset disposition;
  • Organizations and individuals, that transfer any investment project for the production and trading of goods and services are subject to value added tax on behalf of enterprises or cooperatives; and
  • Aquatic produce, livestock and cultivation products that have not yet been processed into other products or have been only under a preliminary treatment and are sold to enterprises, cooperatives, unless otherwise specified by Article 5.1 of the Law on Value Added Tax.

Subjects of 0-5% VAT collection

The VAT includes three tax rates – 10%; 5% and 0%.

The Decree has added social housing beneficiaries as subjects entitled to the tax rate of 5%.

The 0% tax entitlements are applied to (1) abroad exports into non-tariff zones, overseas installation construction works in non-tariff zones, sale of goods to the place of their delivery and receipt outside Viet Nam, part materials, spare parts for repair and maintenance of vehicles, machinery and equipment for foreign parties and consumers outside Viet Nam, spot exports and other cases considered as exports as prescribed by law and (2) export services including the direct provision of services to organizations and individuals overseas or in non-tariff areas, consumers outside Viet Nam and consumers in non-tariff areas.

VAT payment method

Decree 209 defines two VAT payment measures including the one for tax deduction and another for the direct calculation of VAT.

Enterprises and cooperatives with their annual revenue of less than VND 1 billion can also apply the tax deduction method on a voluntary basis after having fully complied with the regulations on accounting regimes, accounts, invoices and supporting documents in accordance with the law on accounting, invoices and supporting documents.

Newly established enterprises and cooperatives or with annual sales of less than VND 1 billion are ineligible to register voluntary tax declarations according to the deduction method; households, individuals, foreign organizations and individuals doing business in Viet Nam beyond the Law on Investment and other organizations failing to comply with or inadequately complying with the regulations on accounting regimes, invoices, and supporting documents as prescribed by law, except for foreign organizations and individuals supplying goods and services to carry out search operations, exploration, development and exploitation of oil and gas, are all subject to the direct calculation method of VAT with respect to goods and services.

The Decree took effect on January 1, 2014/.

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