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ACCA – F6TAX

Mai Thanh Tong, CPA

VALUE ADDED TAX

P

Learning ObjectivesOn completion of this course, you will be able to:

Explain the scope of Value Added Tax (VAT)

Describe the scope of VAT

State who is and who is not VAT taxpayer

Identify the taxable and non-taxable (exempt) objects

List the principal zero-rate and reduced 5% rate supplies

(To be continued)

Learning Objectives Bases and methods of tax calculation

Explain the principles that apply to the valuation of supplies and imports

Explain and apply the accepted methods of tax calculation: (1) tax credit. (2) directly on the basis of added value

Explain and apply the time of supply rules

Explain and apply the place of supply rules

(To be continued)

Learning ObjectivesBases and methods of tax calculation (continued)

Explain the relief that is available for bad debts

Explain the treatment of financial services, including credit, securities trading, capital transfers and derivatives

Explain the treatment of free goods and internally consumed goods

State the circumstances in which input VAT may be carried forward as a tax credit and/or refunded

Key Points

Scope of Valued Added Tax (VAT)

Who are VAT payers?

Taxable supplies and non-taxable supplies

Bases and methods of VAT calculation

Valuation used for VAT calculation

Credit method versus Direct method

When and how invoices must be issued?

Conditions to claim VAT input deduction and VAT refund

Tax administration: VAT registration and VAT filing

Overview of VAT System

INTRODUCTION

An indirect tax on consumers

Most common form of consumption tax - over 100 countries in world have VAT

Collected from businesses throughout the production and distribution


HOW DOES VAT WORK?

Sales

Suppliers charge VAT to their customers

VAT added to cost of goods/services = “ Output VAT ”

Output tax collected by suppliers on behalf of the State


HOW DOES VAT WORK?

Purchases

VAT charged by suppliers is the customer’s “ Input VAT ”

Input tax can be deducted from output tax payable to the State

If customer is not a taxable business, no input tax deduction

End-consumer therefore bears VAT burden


HOW DOES VAT WORK?

Imports

VAT is collected by customs when goods are imported into the country

VAT paid at the same time with import duties

Generally, VAT applies on duty paid value

If importer is a VAT registered business, can claim input deduction upon filing VAT return


ZERO-RATED SUPPLIES

On exported goods and services

Taxable supplies within VAT system

But rate is zero

No VAT charged, but do VAT filing

Input VAT can be recovered

Favourable position


EXEMPT SUPPLIES

Exempt supplies of goods/services: outside scope of VAT

No tax on sale, but no input tax deduction allowed for purchases

Financial impact depends on whether customers are VAT payers

Scope of VAT

VAT PAYERSOrganizations or

individuals engaged in production or

trade of VAT-able goods and services in

Vietnam +Other organizations, individuals who importVAT-able goods and services from overseas (importers)

Scope of VAT

VAT PAYERS

Specifically:

Business organisations established under the Law on Enterprises, the Law on Co-operatives

Economic organisations owned by political, social organisations, armed forces, not-for-profit organisations and others

Foreign invested enterprises (Law on Investment) and foreign organisations and individuals doing business in Vietnamwithout a Vietnamese legal status

Scope of VAT

VAT PAYERS

Specifically:

Individuals and family households engaged in production, trade and importation of goods

Organisations, individuals engaged in production and trade in Vietnam that buy services (including services attached to goods) from a foreign organisation that does not have apermanent establishment in Vietnam or from a foreign individual who is a non-resident of Vietnam

Scope of VAT

TAXABLE GOODS & SERVICES

Goods and services (including services provided from overseas) used for production ,

trade and consumption in Vietnam

Except those set out at Article 5 of the VAT Law

See next Slides for non-taxable goods and services

Scope of VAT

NON-TAXABLE GOODS & SERVICES

Transfer of land use rights

Life insurance (including health insurance and accident insurance included in a life insurance package), …

Financial services:

Services for providing credit

Securities trading

Capital transfer

Derivative financial services such as swaps in interest rates, forward contracts, future contracts, foreign currency options, …

Scope of VAT


Public passenger transportation by bus

Goods that are not yet manufactured in Vietnam such as: Machinery & equipment, specialised materials imported for

direct use in scientific research and technological development activities

Machinery & equipment, replacement accessories imported to carry out prospecting, exploration and development of oil and gas fields

Aircraft, drilling platforms and watercraft imported to form fixed assets, or leased from foreign parties for use for business

Scope of VAT


Imported goods in the case of humanitarian aid or non-refundable aid

Gifts and donations to State bodies, political, social organisations, …

Personal effects of diplomatic missions

Hand-luggage within duty-free limit

Goods and services sold to foreign and international organisations for humanitarian aid or non-refundable aid

And many more – See Handout 1

Quick Check

1

2

Under Article 5 of the VAT Law, how many groups of goods and services that are not subject to VAT?

According to you, on the business’point of view, is it too many or too few?

Basis of Assessment

The basis for calculating VAT payable is taxable price and tax rates

VAT Output

= Taxable Price

* VAT Rate

Basis of Assessment

VAT Rates 3 RATES:

0% rate : Exported goods and services

5% rate : Essential goods and services

10% rate : A catch-all (goods and services that are not subject to 0% or 5%)

Note : Prior to 2004, a20% rate was applied to activities such as trading in gold, silver, foreign currency and brokerage services

Basis of Assessment

0% Rate

Exported goods:

Goods sold to foreign countries

Goods sold into non-tariff zones, to duty-free shops

Exported services: services provided directly to organisationsand individuals overseas or in non-tariff zones

“Organisations overseas” means foreign organisations that do not have a permanent establishment in VN and are not VAT payers

“Individuals overseas” means foreigners do not reside in VN or who are outside Vietnam during provision of the services

Basis of Assessment

0% Rate

Other exported services: International transportation Aircraft, sea-going vessel repair services provided to foreign

organisations or individualsZero-rated VAT will not apply to:

Automobiles sold to organisations and individuals in non-tariff zones

Gasoline and oil sold to automobiles of business establishments in non-tariff zones

Services provided to non-tariff zones, but the place of provision or consumption is outside of the zone (eg leasing of warehouses)

Basis of Assessment

0% Rate

Zero-rated VAT will not apply to: (continued) Re-insurance services with insurers overseas

Technology transfer to parties overseas Transfer of capital, provision of credit, investment in securities

overseas Derivatives financial services

Outgoing international postal or telecommunication services Products for export being exploited natural resources or minerals


Basis of Assessment

5% Rate

Clean water used for production and living consumption, …

Fertilizer, ore used for production of fertilizer, pesticides

Feed for cattle and poultry and other domestic animals

Fresh foodstuffs

Sugar and by-products

Specialised medical equipment and instruments


Quick Check

1

2

What are exported goods?

What are exported services?

Basis of Assessment

Taxable Price

GENERAL PRINCIPLES

Taxable price is the value on which VAT is levied

Under the VAT system, taxable price is the selling price before VAT

For goods and services subject to Special Sales Tax (SST): selling price + SST but exclusive of VAT

For imported goods : dutiable price at the border gate plus Import Tax and SST if any

In case of reduction in price : the selling price after reduction shown on the invoice

Basis of Assessment

Taxable Price

GENERAL PRINCIPLES

Goods and services used for exchange , internal consumption , donation , payment in lieu of salary : selling price of identical or similar goods at the transaction time

Goods and services used for internal movement : non-VAT-able

Internal movement : goods moved from one warehouse to another, or materials issued for production

Internal consumption : goods issued or services provided for the use of the company

Basis of Assessment

Taxable Price

GENERAL PRINCIPLES

The point in time when sales are recognised

For goods : when the ownership of goods is transferred, regardless of whether or not cash is collected

For services : when the service is completed or an invoice is issued , regardless of whether or not cash is collected

For real estate activity, building infra-structure, houses for sales, … : when cash is collected in accordance with a progress

Alert!

billing schedule

For imported goods : when customs declaration is registered

Basis of Assessment

Taxable Price

1. For property leasing : lease price

IN PARTICULAR

2.

3.

4.

For goods sold in installment and on account : up front payment (total price less interest charge)

For processing goods for export : processing fee (labour + indirect materials + other costs)

For construction and installation : value of work performed and handed over exclusive of VAT (which may or may not include the cost of materials – depending on case by case)

Basis of Assessment

Taxable Price

IN PARTICULAR

5. For real estate business activities: assignment price (-) minus actual price of land (or land rent) at the date of transfer or standard price of People’s Committee in case of improper declaration – See Example 1

a. In case of construction of infra-structure and houses for sales with payments in accordance with a progress billing schedule: the basis for allocation of deductible land price willbe the actual price of the first payment – See Example 2

b. In case of construction on leased land for sub-lease : leaseprice exclusive of VAT (-) minus Land rent payable to the State – See Example 3

Example 1

Investment and Development Company A is allocated 10.000 metres of land to construct houses for sales.In 2009, the Company sells one house of 100 metres at VND2 billion, of which, the price of the house and infra-structure is VND1.2 billion, and the price of land is VND8 million/ m, compared to the standard price of the People Committee at the time of sale is VND6 million/ mCalculation of VAT output:1. Taxable price of the house:

VND2 billion – (VND6 million x 100 m)2. VAT output:

VND1,40 billion x 10%

=

=

1,40 billion

0,140 billion

Example 2

In 2009 Investment and Development Company C sells a house at VND8 billion, of which, the price of the house is VND5 billion, and the price of land is VND3 billion.According to the progress billing schedule, the Company receives the 1 stpayment of VND2,4 billion (30%), the 2nd payment of VND4 billion (50%), and balance (the 3rd payment) of VND1.6 billion.Taxable price of each payment is calculated as follows:Payment 1:

VND2,4 billion – (VND3 billion x 30%)Payment 2:

VND4,0 billion – (VND3 billion x 50%)Payment 3:

VND1,6 billion – (VND3 billion x 20%)

=

=

=

VND1,5 bil

VND2,5 bil

VND1,0 bil

Example 3

Investment and infra-structures Company Y leases 500,000 metres of land from the State in 50 years at VND0.3 million/m/per year, to build infra-structured for sub-lease.In 2009 the Company sub-leases 5,000 metres to an enterprise in a period of 20 years, at VND0.8 million/ m/ per year, payable each year.Taxable price for VAT calculation is as follows:

1. Sale revenue from sub-lease of 5,000 metres:

VND0,8 million x 5.000 metres

2. Taxable price for VAT calculation:

VND4 bil – (VND0,3 mil. x 5.000 metres)

=

=

VND4 billion

VND2.50 bil

Basis of Assessment

Taxable Price

IN PARTICULAR

6.

7.

8.

For sales agents , brokerage services , import/export agents :fee or commission before VAT

For goods and services that are allowed to use customisedtickets such as freight tickets, lottery tickets, etc .: payment price (-) minus VAT (divided by 1 + VAT rate)

For services such as: casinos , games with prizes ,entertainment with betting : total receipts (inclusive of Special Sales Tax) – (minus) prize payments

Basis of Assessment

Taxable Price

9. For transportation services : Freight

IN PARTICULAR

10. For tourist tours (du l ịch l ữ hành): package price inclusive of VAT (-) minus air-tickets, accommodation and sight seeing expenses incurred overseas and others

11. For pawn shop (ti ệ m c ầ m đồ ): amount receivable including interest receivable and other receipts from sales of pawned objects

12. For books , magazines , publications : cover price (VAT inclusive) or actual selling price

Basis of Assessment

Taxable Price

IN PARTICULAR

13. For printing services : printing fee (with or without the cost of paper)

In cases where the payment price includes the cost of paper, taxable price is the total payment price

14. For services of an assessment agency (đạ i lý giámđị nh ),agency of assessment for compensation (đạ i lý xét b ồ ith ườ ng ), agency for third party claims (đạ i lý đ òi ng ườ i th ứ3 b ồ i hoàn ): the fee , the commission received by the insurance company

VAT Calculations Methods

DS

1

CREDIT

ETHO2 M 2

DIRECT METHOD METHOD

Credit Method

DETERMINATION OF VAT PAYABLE

VAT OUTPUT INPUT PAYABLE

OUTPUT VAT

=

=

VAT

TAXABLE PRICE

-

1

*

2

VAT

% VAT RATE

Credit Method

WHO ARE CREDIT METHOD TAXPAYERS?

Applicable to business enterprises that keep proper accountingbooks and records, and registered as credit method taxpayers

However, business enterprises trading in gold, silver, precious stones, foreign currencies must file VAT as a direct method taxpayers spite of their registration as a credit method taxpayer

Business enterprises may apply for changing the method of VAT calculation by using Form No. 07-GTGT of Circular 60

Credit Method

CLAIMING INPUT VAT

1. Being a credit method taxpayers

GENERAL CONDITIONS

2.

3.

Keeping adequate accounting books and records :

VAT invoices when buying goods or services

Payment slip to State Treasury when importing goods

VAT payment receipt when paying FCT

Customised documents (ferry toll)

Selling VAT-able supplies of goods and services

Credit Method

CLAIMING INPUT VATGENERAL

CONDITIONS

4.

5.

6.

Purchase payments must be made through banks if the purchase invoice is from VND20 million and above (inclusive of VAT)

Note for credit sales

Note for collection of debt by compensation

Input VAT of any month must be claimed in the same month

Late claiming: Not later than 6 months from the month of purchases

Alert!

Credit Method

CLAIMING INPUT VAT

Purchase invoice dated

14/2/09

GENERAL CONDITIONS

1/09 2/09

First month

3/09

Second month

4/09

Third month

5/09

Fourth month

6/09

Fifth month

7/09

Sixth month

8/09

Deadline for claiming 20/8/09

Credit Method

CLAIMING INPUT VATSPECIAL CASES

1.

2.

3.

4.

VAT input of supply used for manufacture and/or sales ofVATable and non-VATable goods and services: apportioned on sales basis if no separate records are kept

VAT input of goods purchased or manufactured used forpromotion and advertising : creditable

VAT input of goods purchased by foreign organisations/ individuals, international organisations for humanitarian aid , non-refundable aid : creditable

VAT input of supply for prospecting, exploration and development of oil and gas fields: creditable

Credit Method


5.

6.

7.

VAT input of fixed assets purchased for use for production of VATable and non-VATable supplies: creditable

VAT input of fixed assets to serve workers such as: canteen, rest house, free housing, changing room, parking lots, rest room, water tank, medical stations: creditable

VAT input of exported goods , including processing for export, and in-country export, …: creditable, if required additional documents are available such as: sales contract (processing contract), VAT invoice, customs declaration, etc.

Credit Method


8.

9.

VAT input of goods, fixed assets purchased that are lost , damaged due to natural calamity, fire or unexpected accident: not creditable

VAT input of fixed assets purchased for the following activities are not creditable

a. For production of arms and weaponry

b. For credit activities, insurance activities, securities activities, hospitals and schools,

c. Aircrafts and yachts not for business purposes

Credit Method


10. The corresponding VAT input of a 9-seat or below vehiclewhose value exceeding 1.6 billion dong, that is purchased not for transportation, tourism and hotel business: not creditable

11. VAT input of office General Companies , Groups , not-for-profit organisations such as hospital, schools, training institutes, etc.: not creditable

In cases where these above-mentioned organisations have business activities, they must register for business with the tax authority, keep separate books and records and pay VAT without deduction of VAT input or claiming VAT refund

Direct Method

WHO ARE DIRECT METHOD TAXPAYERS?

Small businesses maintaining no accounting books and records and not qualifying for deduction method

Foreign contractors doing business in Vietnam not adopting the Vietnamese accounting system

Businesses trading in gold, silver, gems and foreign currencyalready registered as a credit method taxpayer

Direct Method

DETERMINATION OF VAT PAYABLE

VAT VALUE % VAT PAYABLE

VALUE ADDED

=

=

ADDED

Payment Price of

Goods Sold

*

1

-

2

RATE

Payment Price of

Goods Bought

Direct Method

DETERMINATION OF “VAT ADDED”

1 Business enterprises that are able to keep provide sale invoices and purchase invoices

Value Added = Sales

Revenue - Cost of Goods Sold

Cost of goods sold can be determined as follows:

Cost of Beg. Pur-Ending

Goods Sold = Stock + chases - Stock

Direct Method


For production and trade activities : value added is the difference between sales revenue and cost of goods sold

For construction and installation activities : value added is the difference between receipts and cost of materials plus other costs

For transportation activities : value added is the difference between receipts and cost of gasoline plus other costs

For catering activities: value added is the difference between receipts and cost of materials plus other costs

Direct Method


Business enterprises that are able to keep full sale 2 invoices , but unable to providepurchase invoices

Value Added = Sales

Revenue *% Deemed

Value Added

Trading (distribution, provision of goods):

Services, Construction without materials:

Production, Transportation, Construction with materials:

10%

50%

30%

Direct Method


For enterprises trading in gold, silver, precious stones and foreign currency : value added is the difference between sales revenue and cost of goods sold

For other business activities : value added is the difference between the total receipts and cost of goods sold (corresponding cost of purchases of goods and services)

Direct Method


Business enterprises keeping inadequate accounting 3 books and records (unable to determine the value

added) often called “lump sum” tax payment (khoán)

Value Added = Deemed

Sales * % Deemed Value Added

Under Decision No. 16333/CT-QÑ dated 30/12/08:

Office for lease:Catering:

38%33%

Quick Check

QUESTION Business establishment XYZ is a direct method taxpayer.

The business has a number of VAT invoices when it purchases goods and services from credit method taxpayers. Is it entitled to claim VAT input deduction based on these VAT invoices? Why?

ANSWER No, it is not entitled to claim VAT input deduction because

as a direct method taxpayer it does not have output VAT, and therefore, it cannot use the input VAT to deduct from the output VAT

Invoicing Requirements

Goods-Issued Note cum TN

Non-VAT Invoice

Self printed Invoice

Internal Mov. Order

Goods-Issued Note to SA

VAT Invoice

CustomisedTicket

Retail Sale Ticket


WHAT ARE LEGITIMATE INVOICES/DOCUMENTS

Standard Invoices printed and sold to business enterprises by the General Department of Taxation

VAT invoice

Non-VAT invoice

Self-printed invoices by business enterprises after having approval from the tax authorities

Customised tickets (postal stamps, airlines tickets)

Ñôn vò baùn haøng:

HOAÙ ÑÔN (GTGT)

Lieân giao cho khaùch haøng

Ngaøy thaùng naêm

Maãu: 01/GTGT-3LL

Kyù hieäu soá: AA 2004

Soá: 0000081

Ñòa chæ: Soá taøi khoaûn:

Ñieän thoaïi: MS:

Hoï teân ngöôøi mua:


Hình thöùc thanh toaùn: MS:

Soá Haøng hoùa, dòch vuï Ñôn vòTT tính

Soá löôïng Ñôn giaù Thaønh tieàn

A B C 1 2 3 = 1 x 2

VAT Invoice differs from Non-VAT Invoice at 3 lines :

Coäng tieàn haøng:

Thueá suaát GTGT: ……………… % Tieàn thueá GTGT:

Toång coäng tieàn thanh toaùn:

Soá tieàn vieát baèng chöõ: ……………………………………………………………………………………………………………………..

Ñôn vò baùn haøng:

HOAÙ ÑÔN BAÙN HAØNG

THOÂNG THÖÔØNG

Lieân giao cho khaùch haøng

Ngaøy thaùng naêm

Maãu: 02/GTGT-3LL

Kyù hieäu soá: XY 2004

Soá: 0000871


Ñieän thoaïi: MS:

Hoï teân ngöôøi mua:


Hình thöùc thanh toaùn: MS:

Soá Haøng hoùa, dòch vuï Ñôn vòTT tính

Soá löôïng Ñôn giaù Thaønh tieàn

A B

Non-VAT Invoice has only 1 line

C 1 2 3 = 1 x 2

Coäng tieàn baùn haøng hoùa, dòch vuï:

Soá tieàn vieát baèng chöõ: ………………………………………………………………………………………………………………………………..……………


GENERAL REQUIREMENTS

Invoices must be issued when goods are sold or services are provided

Credit method taxpayers: VAT invoice

Direct method taxpayers: Non-VAT invoices

All details on invoices must be fully filled in

If goods/ services sold/ provided subject to different VAT rates, different copies of VAT invoice must be issued (except self-printed invoices)


GENERAL REQUIREMENTS

Information to be filled in:

Selling price before VAT (exclusive of VAT)

VAT rate and VAT amount

Payment price (Total invoice price including VAT)

VAT Invoice


SPECIFIC CASES (1/17)

VAT invoice to be issued, but NO VAT rate and VAT amount to be shown in the following special circumstances:

Sales of non-VATable supply

Sales to exempt VAT payers

Sales of gold , silver , gemsand foreign currencies

A statement such as “ sale of non-taxable supply or sale to VAT exempt taxpayers ” must be written on invoice



For goods and services used for advertising , promotionandsampling (given away) for the purposes of production and trade, in accordance with Decree 37/06: A VAT invoice must be issued, and a statement such as “goods used for advertising, promotion, or sampling – free of charge”

For goods or services used for exchange , donation , gift , payment of salaries in lieu and internal consumption : VAT invoice to be issued like sales


SPECIFIC CASES (3/17) Exceptio

nFor goods and services used for internal consumption NOT for the purposes of production and trade in some particular industries such as: transportation , airlines , rail road , telecommunication : No VAT rate and VAT amount to be shown on the VAT invoice

Business enterprises are required to have internal regulationsclearly stating which employees are entitled to “internal consumption” and the level (amount) of goods or services to use

The internal regulations must be approved by the higher authority of the business



For goods and services sold/ provided at a price reduction :

Reduction % and reduction amount must be stated on the VAT invoice (taxable price is reduced price)

Reduction amount is deducted from the final invoice in cases where the buyer meets the volume or the amount of sales as agreed in a sales contract

If the amount of the final invoice is smaller than the amount of reduction, a payment voucher can be issued for the reduction



VAT invoice must show:

Percentage (%) of discount or

Discount amount

TRADE DISCOUNTS

Selling price after discount, exclusive of VAT

VAT payable

Total payment amount, inclusive of VAT



VAT invoice must show:

SALES REBATE

Rebate amount usually deducted from the final invoice

Or deducted from the invoice of a future purchase contract

VAT charged on invoice amount after rebate

No negative invoice allowed

Cash payment accepted in cases where the amount of the final invoice is smaller then the rebate amount



I cannot accept this defective shipment

SALES ALLOWANCE

An agreement (report) must be set up by both parties

Old VAT invoice to be returned to the seller

A new VAT invoice to be issued by the seller with a new selling price as agreed by both parties


SPECIFIC CASES (5/17)SALES

RETURN

VAT invoice issuance in case of sales returns :

If goods are ALREADY received by the buyer: The buyer will issue a VAT invoice to return the defective goods

If goods are NOT YET received by the buyer:

− The buyer will return the seller’s invoice + an agreement relating to the return of defective goods

− The seller will issue a new invoice with a new quantity

In cases where the buyer is not a tax registered : the buyer will return the invoice + an agreement


SPECIFIC CASES (6/17)PRICE

ADJUSTMENT

VAT invoice issuance in case of price adjustments :

An agreement must be set up between the buyer and the seller regarding the adjusted price for defective goods

The seller issue a new VAT invoice at adjusted price

Both the seller and the buyer will use the agreement to adjust their output VAT and input VAT when filing

Negative invoice is not allowed

No adjustment is allowed if customers are not identified


SPECIFIC CASES (7/17)INTERNAL

MOVEMENT

VAT invoice issuance in case of internal movements :

Either first issue Goods-issued Note cum Transportation Note + Director’s Order, later on, followed by VAT invoices

VAT invoices can be issued at an interval of 5-10 days, for different VAT rates

Or issue VAT invoices

Internal movement includes the following circumstances:

Shipping goods to branches of different provinces or vice versa

Shipping goods to sales agents for commission


SPECIFIC CASES (8/17)SALES TO AGENTS

VAT invoice issuance in case of sales to agents :

Step 1: issue Goods-issued Note to Sales Agent (Phiế u xu ấ tkho hàng g ử i bán đạ i lý) + Director’s Order

Step 2: issue VAT invoice after receiving sales report

Sales agents for commission are required to:

Issue VAT invoice to the buyers

Prepare Schedule of Goods Sold (B ả ng kê hàng hóa bán ra)


SPECIFIC CASES (9/17)MOBILE SALES

VAT invoice issuance in case of mobile sales :

When goods are shipped on trucks: issue Goods-issued Note cum Transportation Note + Director’s Order

When goods are actually sold : issue VAT invoice

In case of retail of low valued goods:

No invoice to be issued, except when requested by the buyers

Schedule of retail must be prepared to be used as a basis for issuing one single VAT invoice at the end of the day


SPECIFIC CASES (10/17) EXPORT SALES

VAT invoice issuance in case of export : Step 1 (when transporting goods): Goods-Issued Note cum

Transportion Note + Director’s Order

Step 2 (after completing export procedure): VAT invoice

VAT invoice issued in case of export agents : Step 1 (actual quantity not yet known): Goods-Issued Note cum

Transportion Note + Director’s Order Step 2 (after completing export procedure): VAT invoice (copy to

customer retained)

Enterprises are required to keep customers’ copy of invoice



1

Goods-Issued Note

2

EXPORT AGENTS

- VAT invoice- After verificat -

Goods Owner

VAT invoice

3

VAT invoice for commission

Export Agent

tion of customs officer

- Actual amount


SPECIFIC CASES (11/17) IMPORT AGENTS

VAT invoice issuance in case of import agents :

In case where VAT already paid: VAT invoice showing:

Import price (CIF) + Import tax + Special Sales Tax

VAT rate and VAT amount

Total payment amount

In case where VAT not yet paid: Price adjustment, if any, to be implemented like adjustment of sales of goods

Another VAT invoice to be issued for commission (fee)



1Import VAT invoice for goods

Agent2

VAT invoice for commissionPay VAT

Goods Owner

IMPORT AGENTS

- Invoice price

- VAT amount per tax payment

- Total


SPECIFIC CASES (12/17)Construction & Installation

VAT invoice issuance in case of construction and installationservices:

VAT invoice issued when volume work completed and settled (either on a progress billing basis or on tasks of work completed basis)

Amount shown on invoice is exclusive of VAT and VAT amount

In case of price adjustment, to be implemented like adjustment of sales of goods


SPECIFIC CASES (13/17)Sale/ Lease of houses

VAT invoice issuance in case of selling/ leasing houses, infra-structures on land allocated by/ leased from the State:

Issue VAT invoice showing selling/ leasing price of houses or infra-structure

Separate the value of houses/infra-structure from the cost of land (allocated or leased)

VAT amount is calculated on the selling price or the leasing price minus (-) the cost of land at the time of transaction


SPECIFIC CASES (14/17)Transport services

VAT invoice issuance in case of transportation services, tourist services

For transportation services : VAT invoice must be issued, showing the total amount of transportation revenue after deducting all international freight charge , if any

For tourist services (package tour): VAT invoice must be issued, showing the total amount of revenue after deducting all costs incurred overseas, including international air fares


SPECIFIC CASES (15/17)FINANCIAL

LEASE

VAT invoice issuance in case of financial leasing, property leasing :

For property subject to VAT : VAT invoice must be issued, showing the output VAT equal to the input VAT when property was purchased or imported

For property NOT subject to VAT : VAT invoice must be issued, showing no output VAT

The property file (dossier) will be handed over to the lessee by the lessor after all input VAT is transferred


SPECIFIC CASES (16/17)Trading foreign

currencies

VAT invoice issuance in case of trading foreign currencies

If foreign currencies are bought and sold overseas : A detailed list of buying and selling foreign currencies must be prepared

If foreign currencies are traded in Vietnam : VAT invoice must be issued

VAT invoice issuance in case of trading gold, silver, precious stones:

Prepare Schedule of purchases (B ả ng kê hàng hoá mua vào) when buying from non-registered individuals


SPECIFIC CASES (17/17)CASH

SUPPORT

VAT invoice issuance in case of cash support :

For the receiving company : No VAT invoice but Receipt Voucher must be issued, and “other income” will be recognised

For the giving company : Payment Voucher must be issued based on agreement, and charge to “expense”

VAT Refund

GENERAL PRINCIPLES

To be a credit method taxpayer

When input VAT is larger than output VAT in 3 consecutive months

Month declared12/200801/200902/2009

VAT input 200 mil300 mil300 mil

VAT output100 mil350 mil200 mil

Net VAT payable- 100 mil+ 50 mil- 100 mil

VAT refunded

100 mil50 mil

150 mil

VAT Refund


For a newly-established enterprise from a new investment project

VAT input of fixed assets purchased will be refunded on anannual basis, if already registered for tax and being a credit method taxpayer or being an enterprise operating in oil and gas

Immediate refund if VAT input is from 200 million dong

For an existing enterprise having a new investment project VAT input of fixed assets will be net off from VAT output from

operations, and refunded if the balance is from 200 million dong Separate applications if projects are carried out in other provinces

VAT Refund


For enterprises exporting goods and services

VAT input will be refunded on a monthly basis, if the net VAT input is from 200 million dong

Net VAT input means the total VAT output of goods and services sold overseas + those sold locally

Exported goods and services means exports through export agents, processing for exports, materials exported for constructions and installation works in foreign countries, ….

VAT Refund


For division, demerger, dissolution, bankruptcy, conversion of ownership, transfer, sale, contractual management, lease of State-owned enterprises

After tax finalisation, the net VAT input and/ or the over-payment of VAT will be refunded

For diplomatic missions

VAT input shown on VAT invoices from purchases of goods and services and VAT input included in customised tickets from purchases of goods or services

VAT Refund


For non-refundable ODA-funded projects (Official Development Assistance)

Project owners and contractors implementing the projects are entitled to claim VAT input on purchases for carrying out the projects

For humanitarian aid organisations or non-refundable aidorganisations from overseas

Vietnamese organisations using aid to buy goods and services are entitled to claim VAT input on goods and services purchased

VAT Administration

REGISTRATION (1/2)

No later than 10 days after obtaining business registration certificate or investment license

Or 5 days after any changes (merger, dissolution, etc)

Branch offices (including warehouses, distribution centres, stores, outlets …) located at localities different from head office’s must register separately with the local tax office

Construction companies having construction sites located at localities different from head office’s must register with the local tax office where the construction sites are located

VAT Administration

REGISTRATION (2/2)

When registration, using standard Form No 01/DK-TCT attached to Circular 60/2007

A tax code and a certificate of registration will be issued by the local tax office to the business that has completed the registration

Businesses are allowed to change their method of VAT calculation from direct to credit method if proper accounting books and records are kept, by using From No 07/GTGTattached to Circular 60/2007

VAT Administration

DEADLINE FOR MONTHLY FILING

For credit method taxpayers, no later than the 20th day of the following month – if the amount of VAT payable is from 200 million dong , VAT payment can be made at an interval of5- 10days

For imported goods , the deadline is stated on the notice of import duty payment

In case of change of form of business, or of ownership, or termination of operation, the deadline is 45 days after changes

For direct method taxpayers , the deadline is stated on the tax notice

VAT Administration

DEADLINE FOR MONTHLY FILING

After submission of VAT declaration, if an error is identifiedbefore the deadline of filing, a new declaration can be lodged to replace the old one

If error is identified after the deadline of filing, an adjusted declaration must be submitted in the following month by using Form No 01/KHBS attached to Circular 60/2007

Manufacturing enterprises having branches in localities different from their head office pay VAT as follows:

in full if the branches keep proper accounting books

1% or 2% provisionally on the branch’s turnover

Value Added Tax

LEGAL DOCUMENTS

Law on VAT No. 13/08/QH12 dated 3 June 2008, effective from 1 January 2009

Government Decree No. 123/08 dated 8/12/2008 regulating in detail the implementation of the VAT Law

MOF Circular 129/08 dated 26/12/2008 providing guidance on the implementation of the Government Decree on VAT

Law on Tax Administration No. 78/06/QH11 dated 29/11/2006, effective from 1 July 2007

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