VALUE ADDED TAX

LOGO
 CONTENT

1 OVERVIEW OF
VAT
2 MAIN CONTENT OF VAT
LAW
IN VIETNAM
 1. OVERVIEW

▪ Definition

▪ VAT levies on added values of goods and

services arising in the process from
production, circulation to consumption.
 1. OVERVIEW

▪ Characteristics

▪ Indirect tax
▪ Often regressive in comparison with
income
▪ Multi-stage consumption tax
▪ Highly economic neutrality
 Legal documents

▪ Vietnam Law 13-2008: Law on Value Added Tax

▪ Vietnam Law 31-2013: Amended Law on Value Added Tax
▪ Vietnam Decree 209-2013: Decree on Value Added Tax
▪ Vietnam Circular 219-2013: Circular on Value Added Tax
▪ Vietnam Law 71-2014: Amended Law on several tax laws
▪ Vietnam Decree 91-2014 – guidances on Law 71-2014
▪ Vietnam Circular 151-2014 – guidances on Decree 91-2014
▪ Vietnam Circular 119-2014
▪ Vietnam Circular 26-2015
▪ Vietnam Decree 12-2015: amendments on Circular
78-2014, 119-2014, 151-2014.
 Legal documents – cont.

▪ Vietnam Decree 12/2015/ND-CP

▪ Vietnam Circular 92/2015 – guidances on Decree
12/2015/ND-CP
▪ Vietnam Law 106/2016/QH13
▪ Vietnam Decree 100/2016/ND-CP – guidances on Law
106/2016
2. MAIN CONTENT OF VAT LAW IN VIETNAM

2.1. SCOPE OF APPLICATION

2.2. TAX CALCULATION BASES

2.3. TAX CALCULATION METHODS

2.4. INVOICES & DOCUMENTS

2.5. TAX DECLARATION, SUBMISSION AND REFUND

 2.1. SCOPE OF APPLICATION

▪ Taxable objects
▪ Non-taxable objects
▪ Taxpayers
 Taxable objects

▪ Goods and services used for production,

trading and consumption in Vietnam
(including those purchased from
overseas organizations and individuals),
except non-taxable objects
 Non-taxable objects

▪ goods and services that are

(1) Essential
(2) Used for social and philanthropical
purposes
(3) Of encouraged industries (e.g.
Cultivation or livestock industry)
(4) Difficult to determine the added values
(5) Imported goods which acctually are not
used for production, trading and
consumption in Vietnam.
 Non-taxable objects

▪ Circular 219-2013: 26 groups E.g.

Products from farming, breeding and aquaculture that
are produced, catched and sold by the producers or
imported; and are not processed into other products
(unprocessed) or have only been preprocessed.

- DN, HTX mua SP trồng trọt, chăn nuôi, thủy sản nuôi
trồng, đánh bắt chưa chế biến thành các sản phẩm khác
hoặc chỉ qua sơ chế thông thường bán cho DN, HTX
khác thì không phải kê khai, tính nộp thuế GTGT nhưng
được khấu trừ thuế GTGT đầu vào.
 Eg. Group 1

Taxable or Non-taxable?

1. Dried fish sold by the farmers

2. Dried fish sold in BigC
3. Dried fish imported by BigC
 Non-taxable objects

(7) Insurance services

(8) Finance, banking and securities
services
(16) Public transport by bus and tram within
a province, a city or routes adjecent to the
city as prescibed by the Ministry of
Transport.
 Non-taxable objects

(9) Medical services and Veterinary services

(13)Education and vacational traning as

prescribed by law
+ Preschool – High school: revenues from meal
and student transport
+ College & University: revenues from boarding
school services; revenues from training
(including examinations and issuance of
qualifications)
 Non-taxable objects

(17) Goods that cannot be manufactured in

Vietnam and must be imported, including:
▪ Imported machinery, equipment, parts
and supplies directly serving scientific
research and techonological development
▪ Imported machinery, equipment, parts
and specialized vehicles and supplies
serving petroleum exploration and
extraction
▪ Airplanes (including engines), oil rigs and
ships
 Eg. Group 17

Enterprise A which has a department for scientific

research and technology developement, imported a
technological equipment. Is the equipment subject
to VAT:

a/ The equipment can be manufactured in Vietnam

b/ The equipment cannot be manufactured in
Vietnam
 Non-taxable objects

(20) Goods forwarded through Vietnam’s teritory:

▪ Goods temporarily imported;
▪ Goods temporarily exported;
▪ Raw materials imported for manufacturing or
export processing under contracts with foreign
partners;
▪ Goods and services traded between a
foreign party and a free trade zone or
among free trade zones.
(23) Exported natural resources that are not
processed into other products.
 Taxpayers

Organizations,
Individuals

Manufacture Import
and trade VAT-taxable
VAT-taxabl goods and
e goods and services from
services in abroad
Vietnam
 2.2. TAX CALCULATION BASES

▪ Taxable prices

▪ Tax rates
 TAXABLE PRICES

Rule: Taxable prices are VAT-exclusive prices

a) Domestically produced goods and services

VAT-exc
Taxable
ulsive
prices
prices

▪ Including surcharges excluded from the selling

prices that are received by the business entity.
▪ If the seller offer a discount, the taxable price is
the discounted price – written on the invoice.
Taxable prices are VAT-exclusive prices

a) Domestically-produced goods &

services – particular cases
▪ Taxable prices of goods and services
subject to Excise tax and(or) Environmental
protection tax; are the prices inclusive of
Excise tax and (or) Environmental protection
tax, and exclusive of VAT.
Taxable prices are VAT-exclusive prices

a) Domestically-produced goods &

services – particular cases

▪ Taxable prices of goods and services used

as gifts or donations are the taxable prices
of the same kinds or equivalent goods and
services at the time of using as gifts or
donations.
 Eg. Gifts & donation

Enterprise B is a manufacturer of cars. The selling

price of one car is 500 mil VND; the production cost
is 300 mil VND. Calculate the VAT taxable price in
the following transactions:

a/ The enterprise use 2 of its cars as gifts to its

business partners.
b/ The enterprise use 2 of its cars to exchange for
100 TVs from company C.
Taxable prices are VAT-exclusive prices

a) Domestically-produced goods &

services – particular cases

▪ Goods internally circulated as supplies or

semi-finished products serving the operation
of a manufacturing or business
establishment are exempt from VAT.
 E.g. Goods for internal use

1. Unit A is a manufacturer of electric fans. Unit A

installs 50 of these fans in its workshops to server
its business operation.

2. Facility B has a weaving workshop and a

tailoring workshop. Facility B delivers finished
thread from the weaving workshop to the tailoring
workshop to proceed the manufacture.
Taxable prices are VAT-exclusive prices

a) Domestically-produced goods &

services – particular cases

▪ If a commodity is paid for by installments,

the taxable price is the original price
exclusive of VAT and interest.
Taxable prices are VAT-exclusive prices

a) Domestically-produced goods &

services – particular cases
▪ Taxable prices of goods and services used
for sales promotion in accordance with trade
laws are zero (0).
- Free gifts: Taxable prices = 0
- Reduced prices: Taxable prices = reduced
prices
- Vouchers: VAT is not levied on vouchers
Taxable prices are VAT-exclusive prices

a) Domestically-produced goods &

services – particular cases
▪ Taxable prices of goods and services using
special receipts on which the selling prices
are VAT-inclusive, such as stamps, bus
tickets, lottery tickets:

Selling
price
VAT
taxable
price
1 + tax
rate(%)
VD
 Taxable prices are VAT-exclusive prices

b) Imported goods

Special
Import
Taxable Import excise EPT(if
tax (if
price price tax (if any)
any)
any)

VD
 Eg. 1.

A 4-seat car is imported by ABC ltd. The

import price is VND 200 mil, import tax is 200
mil, Excise tax is 200 mil.
What is the VAT taxable price of this car?

Back
 VAT TAX RATES

▪ 0%: exported goods and services

▪ 5%: Essential goods and services directly

used for production and consumption.

▪ 10%: Ordinary goods and services

 0% tax rate

Applicable objects

▪ Exported goods and services

▪ Construction and installation overseas and in
free trade zones
▪ International transport
▪ Exported goods and services that are not
subject to VAT
 0% tax rate

Condition for application of 0% tax –

exported goods and services
1) A sale contract, export processing contract or
export entrustment contract.
2) A custom declaration.
3) Bank receipts for payment for exported goods
and services.
 0% tax rate

0% tax is not applied to:

▪ Oversea reinsurance; technology transfer; transfer of
intellectual property right to abroad; capital transfer,
securities investment overseas; outbbound postal and
telecom services.
▪ Exported natural resouces that are not processed into
other products.
▪ Goods and services provided for individuals that do
not register to do business in free trade zones.
▪ Imported Cigarettes, Alcohol and Beer when exported
 0% tax rate

0% tax is not applied to:

▪ Oil and gas purchased from domestic market and

sold to automobiles in the free trade zones
▪ Automobiles sold to the entities in free trade
zones
▪ Services provided for the entities in free trade
zones but the locations of consumption are
outside the free trade zones.
▪ Imported cigarrettes, alcohol and beer for
exporting later.
 5% tax rate

Particular cases:
▪ Clean water serving manufacture and everyday
life (except for bottled water)
▪ The farming, breeding, aquaculture products that
are unprocessed or preprocessed at trading
stage.
▪ Medical equipments
▪ Teaching aids
2.3. TAX CALCULATION METHODS

▪ Credit-invoice method
▪ Direct method basing on value
added
 CREDIT-INVOICE METHOD

Applied by
Taxpayers that adhere to the accounting and
invoicing practice according to accounting and
invoicing laws, including:
✔ Any taxpayer that earns at least 1bil VND in
annual revenue; except for business
individuals and households.
✔ Any taxpayer voluntarily applies
credit-invoice method; except for business
individuals and households.
 E.g

Who can apply the credit-invoice method to calculate

VAT payable?

1. Company A that has annual revenue of 10 billion VND.

2. Company B that has annual revenue of 500 million
VND.
3. An individual owns a clothes shop that has annual
revenue of 1 billion VND.
4. Three friends sharing ownership of an English center
that has annual revenue of 800 million VND.
 CREDIT-INVOICE METHOD

▪ Calculating formula

VAT Output Deductible

payable VAT input VAT
 CREDIT-INVOICE METHOD

Output VAT
▪ The total VAT on sold goods and services written
on the VAT invoices

Taxable
Output prices of VAT tax
VAT goods & rates
services

▪ VAT invoices: VAT-exclusive price, VAT, selling

price.

VD
 Eg. 2

ABC ltd. sold 10 computers at 100 mil VND

(VAT-exclusive price)
Calculate the output VAT, given the VAT tax
rate of 10%.

Back
 CREDIT-INVOICE METHOD

Output VAT
▪ If the VAT invoice only has the selling price (except
for special invoices) => the VAT shall be levied on
the selling price

Eg.
ABC ltd. sold 10 computers using VAT invoices; on
the VAT invoices, only the final selling price is written
which is 110 million VND.
- Calculate the output VAT, given the VAT tax rate of
10%
 CREDIT-INVOICE METHOD

Output VAT
▪ Special VAT invoices: the selling price is
VAT-inclusive

Selling
Output price/ Tax
VAT (1 +tax rate
rate)
 CREDIT-INVOICE METHOD

Output VAT
▪ Incorrect tax rates

+ Tax rate on the invoice > rate prescribed by VAT

laws => taxpayer must pay tax at the rate written on
the invoice.
+ Tax rate on the invoice < rate prescribed by VAT
laws => taxpayer must pay tax at the rate prescribed
by VAT laws
 CREDIT-INVOICE METHOD

Input VAT
is the total of:
▪ Total VAT on VAT invoices for purchase of goods
and services (including fixed assets) serving
manufacture or sale of taxable goods and services.

▪ VAT on receipts for payment of tax on imported

goods and services or payment of VAT on behalf of
a foreign organization.
 Principles for input VAT deduction

▪ Deduction according to using purposes

▪ Principle of total deduction
▪ Principle of invoices
P.1: Deduction according to using purposes

Deductible input VAT is input VAT on

goods and services serving manufacture
or sale of goods and services subject to
VAT.
- Including non-refundable input VAT on
damaged goods.
 P.1: Deduction according to using purposes

Notes:

▪ The taxpayer must separate the deductible input

VAT from non-deductible one.
▪ Otherwise, input VAT shall be deducted according
to the ratio of taxable revenue to the total revenue
from selling goods and services.

(VAT Taxable
revenue +
Deductible revenue
Total revenue Input VAT
input VAT exempted for
declaring and
paying VAT)

VD
 Eg. 3

A tea producer incurs two activities

+ Grow & sell fresh tea leaves with the
revenue of 100 mil VND
+ Produce & sell tea boxes with the revenue
of 300 mil VND
The total input VAT is 20 mil VND.
Calculate the Deductible input VAT.

Back
 P.1: Deduction according to using purposes

Notes: (cont.)

▪ If the value of a fixed asset that is a car no bigger

than 9-seater cars (except for those that are
used for cargo transport, passenger transport,
tourism or hotel services) exceeds 1.6 bil VND
(VAT-exclusive), the VAT on the proportion
beyond 1.6 bil VND must not be deducted.
 Eg. 4

Calculate the deductible input VAT:

- A ltd. bought a 4-seaters Toyota Camry
worth 2.4 bil VND to use for company
directors.
- B corp. bought a 16-seaters Sprinter worth
2 bil VND to use for employee
transportation.
- A travel company bought a 9-seaters car
worth 1.8 bil VND to use for business.

Back
 P.1: Deduction according to using purposes

Notes: (cont.)

▪ Input VAT on goods and services forming fixed

assets such as canteen, recreation room, locker
room, parking lot, restroom, water tank serving
workers at the work place; housing and medical
facility for workers in industrial parks shall be
deducted in full.
 P.2: Principle of total deduction

▪ VAT shall be declared and deducted in the

period during which it is incurred, whether
the products are used or still in storage.
 Eg. 4

Enterprise A bought 10 computers to use for

business in June 2018. However, the 10
computers are not installed and used until
October 2018.

Which month the input VAT of 10 computers

is deducted?
 P.2: Principle of total deduction

Notes: Adjustment of deduction

If the taxpayer finds that the input VAT is incorrectly

declared, an adjustment may be made before the
tax authority or a competent authority announces
the decision on tax inspection at the taxpayer’s
premises.
 P.3: Principle of invoices

Only input VAT on legitimate VAT invoices or

receipts for payment of VAT on imported
goods is deductible.
 P.3: Principle of invoices

VAT invoices must not be deducted

▪ The VAT invoice is not legitimate, such as VAT is
not written (except for special invoices);
▪ The name, address or tax code of the buyer on the
invoice is incorrect.
▪ The VAT invoice or the receipt for VAT payment is
fake; the invoice is changed or fictitious (made
without actual sale)
▪ The invoice does not refect the actual value of
goods and services.
 P.3: Principle of invoices

Condition: Non-cash payments

The payments of inputs qualified for deductible

input VAT must be non-cash payment; except
for the purchases of goods and services that
cost below 20 mil VND inclusive of VAT.
 Some special cases

▪ Input VAT of goods (whether purchased externally

or produced by the taxpayer) used as gifts, used for
sale promotions or advertising serving the
manufacture or sale of taxable goods may be
deducted.
▪ Non-refundable input VAT on damaged goods is
deductible.
 Incorrect tax rates on input invoices

▪ Input VAT rate > rate prescribed by VAT

laws => VAT shall be deducted at the rate
prescribed by tax laws.
▪ Input VAT rate < rate prescribed by VAT
laws => VAT shall be deducted at the rate
written on the invoice.
 Eg. 5

Revenue of tea producer A (VAT-exclusive)

includes:

▪ Domestically produce and sell fresh tea leaves: 100

mil VND
▪ Export fresh tea leaves: 200 mil VND
▪ Domestic retail of tea boxes: 250 mil VND
▪ Export tea boxes: 450 mil VND
Input VAT gathered on legitimate invoices: 20 mil VND
VAT tax rate on tea boxes is 10%
Calculate the VAT payable of A.
DIRECT METHOD BASING ON VALUE ADDED

Applied by
▪ Trading, fashioning of gold, silver and gemstones
▪ The operational companies and cooperatives that earn
less than 1 bil VND in annual revenue; except for those
that voluntarily apply credit-invoice method.
▪ Business household and business people.
▪ The foreign entity doing business in Vietnam without
following the Law on Investment; the organizations that
fail to adhere to accounting and invoicing practice.
▪ The business organizations other than companies and
cooperatives, except for those that voluntarily apply
credit-invoice method.
DIRECT METHOD BASING ON VALUE ADDED

Calculating VAT payable

▪ Trading, fashioning of gold, silver and
gemstones

VAT tax
VAT Value
rate
payable added
(10%)
DIRECT METHOD BASING ON VALUE ADDED

Calculating VAT payable

▪ Other cases

VAT
Rate (%) Revenue
payable
 Direct VAT rates

Business lines Rate

From goods distribution or goods supply 1%

From service or construction exclusive of building materials 5%

Manufacturing, transport, services associated with goods, 3%

construction inclusive of building materials
Other lines of business 2%
 2.4. INVOICES & DOCUMENTS

▪ VAT invoices – used by taxpayers that declare

value-added tax by the credit method in the
following cases:

- Selling goods and providing services in Vietnam;

- Providing international transportation services;

- Exporting goods to the free trade zones and other

cases considered export;
 2.4. INVOICES & DOCUMENTS

▪ Sales invoices are used by:

▪ Entities that declare and calculate VAT using direct

method when selling goods and providing services
in Vietnam or exporting them to free trade zones,
and other cases considered exports.

▪ Entities in free trade zones when selling goods and

providing servicesin Vietnam and selling goods and
providing services for other entities in the free trade
zone
 2.4. INVOICES & DOCUMENTS

▪ Other invoices: stamps; tickets; cards; receipts fro

insurance premium, etc.

▪ Air freight receipts; receipts for international

transport charges, receipts for banking service
charges.

▪ Invoices are not required for goods or services with

a total payment of under VND 200,000, unless the
buyer so requests. At the end of the day, the
business establishment shall make a general
invoice.
 E.g. Invoices

Which types of invoices that taxpayers have to use

in the following cases:
1. Company A, who declare VAT using credit-invoice
method, selling goods in Vietnam and exporting goods
to other countries.
2. Company B, who declare VAT using credit-invoice
method, selling goods to both domestic entities and
entities in free trade zone.
3. Company C, who declares VAT using direct method,
selling goods to both domestic entities and entities in
free trade zone.
2.5. TAX DECLARATION, SUBMISSION AND REFUND

▪ Tax declaration

The business entities make and send to the tax

office
- Tax declaration form
- Other prescribed documents

* VAT declaration is monthly; except for taxpayers with

total annual revenue of no more than 20 bil VND, the
tax declaration is quarterly.
 Tax declaration form submission deadline

▪ Monthly VAT declaration: the 20th day of the

next month.
▪ Quarterly VAT declaration: the 30th day of the
next quarter.
2.5. TAX DECLARATION, SUBMISSION AND REFUND

▪ Tax submission: via bank transfer or in

cash.
 TAX REFUND

▪ If input VAT is not completely deducted in the

current month (or quarter), the taxpayer that pays
VAT using credit-invoice method may deduct it from
the tax incurred in the next period.

▪ If input VAT is not completely deducted after 12

months or 4 quarters from the first month or quarter
input VAT is incurred, the taxpayer shall receive a
refund.
Tax refund on exported goods & services

▪ In the month (quarter), if input VAT on

exported goods and services that remains
after deduction is 300 mil VND or above,
VAT shall be refund.
▪ If the input VAT is below 300 mil VND, it
shall be aggregated with that in the next
month (quarter).
www.themegallery.com

LOGO
 Time for determining VAT

Goods Services Import

goods

• When the • When the When the customs

ownership service declaration is
• or provision is registered
• The right to use completed
goods is • Or
transferred to • When the
the buyer invoice is made

Whether the payment is made or not