CIRCULAR No. 120/2003/TT-BTC OF DECEMBER 12, 2003 GUIDING THE IMPLEMENTATION OF THE GOVERNMENT’S DECREE No. 158/2003/ND-CP OF DECEMBER 10, 2003 DETAILING THE IMPLEMENTATION OF THE VALUE ADDED TAX LAW AND THE LAW AMENDING AND SUPPLEMENTING A NUMBER OF ARTICLES OF THE VALUE ADDED TAX LAW
Pursuant to Value Added Tax (VAT) Law No. 02/1997/QH9 of May 10, 1997;
Pursuant to Law No. 07/2003/QH11 of June 17, 2003 Amending and Supplementing a Number of Articles of VAT Law;
Pursuant to the Government’s Decree No. 158/2003/ND-CP of December 10, 2003 detailing the implementation of the VAT Law and the Law Amending and Supplementing a Number of Articles of the VAT Law;
Pursuant to the Government’s Decree No. 77/2003/ND-CP of July 1, 2003 defining the functions, tasks, powers and organizational structure of the Ministry of Finance;
The Ministry of Finance hereby guides the implementation as follows:
A. SCOPE OF APPLICATION OF VAT
I. OBJECTS SUBJECT TO VAT AND VAT PAYERS
1. Objects subject to VAT:
Objects subject to VAT are goods and services used for production, business and consumption in Vietnam (including goods and services purchased from organizations and individuals abroad), except for those not subject to the tax as mentioned in Section II, Part A of this Circular.
2. VAT payers:
All organizations and individuals engaged in producing and dealing in goods and/or services, which are subject to VAT, in Vietnam, regardless of business lines, forms and organization (called collectively the business establishments) and other organizations and individuals that import goods and/or procure services, which are subject to VAT, from abroad (called collectively the importers) shall have to pay VAT.
Organizations and individuals engaged in producing and dealing in goods and/or services include:
- Business organizations set up and registering business under the Law on Enterprises, the Law on State Enterprises and Law on Cooperatives;
- Economic organizations of political organizations, socio-political organizations, social organizations, socio-professional organizations, people’s armed force units, non-business organizations and other organizations;
- Foreign-invested enterprises and foreign parties to business cooperation contracts under the Law on Foreign Investment in Vietnam; foreign organizations and individuals conducting business activities in Vietnam, which do not belong to the investment forms under the Law on Foreign Investment in Vietnam;
- Individuals, households, independent groups of business people and other business subjects engaged in production, business and/or import activities.
II. OBJECTS NOT SUBJECT TO VAT:
The following goods and services shall not be subject to VAT:
1. Cultivation products (including products from planted forests), husbandry products, cultured and fished aquatic and marine products that have not yet been processed into other products or have just been commonly preliminarily processed then sold by producing or fishing organizations and individuals themselves.
Commonly preliminarily processed products stated at this Point are those which have just been sun-dried, heat-dried, frozen, cleaned or peeled but not yet processed at a higher degree or into other commodity products.
Example: Sun-dried, heat-dried, peeled or seeded agricultural products; iced, salted, sun-dried fishes, shrimps and other cultured or fished aquatic and marine products.
2. Products being animal breeds and plant varieties such as breeding eggs an animals, saplings, seeds, sperms, embryos, genetic materials at the stages of rearing, importation and trading. Products being animal breeds and plant varieties not subject to VAT are those imported and/or traded by the establishments which have been granted the animal breed and/or plant variety business registration certificates by State management bodies. For products being animal breeds and plant varieties subject to quality standards promulgated by the State, they must satisfy the State-prescribed conditions.
3. Salt products, including salt made from seawater, natural rock salt, refined salt, iodized salt.
4. The following imports shall not be subject to VAT:
- Equipment, machinery, special-use transport means forming part of technological chains, and construction supplies of those types which cannot be produced at home and need to be imported for the formation of the fixed assets of enterprises;
- Equipment, machinery, supplies and transport means of those types which cannot be produced at home and need to be imported for direct use in scientific research and technological development activities;
- Aircraft, derricks and ships of types which cannot be produced at home and need to be hired from foreign countries for use in production and business;
- Equipment, machinery, spare parts, special-use transport means and supplies for activities of prospecting and developing oil and gas fields; spare parts and equipment of aircraft, specific equipment used exclusively for aircraft (of those types which cannot be produced at home);
In cases where production and/or business establishments import chains of complete equipment and machinery not subject to VAT, which, however, include equipment and machinery of those types which can be produced at home, the whole chains of complete equipment and machinery shall not be subject to VAT.
Enterprises in this case include enterprises set up under the Law on State Enterprises, the Law on Enterprises or the Law on Cooperatives; foreign-invested enterprises and foreign parties to business cooperation under the Law on Foreign Investment in Vietnam; foreign organizations and individuals conducting business activities in Vietnam, which do not belong to any investment forms under the Law on Foreign Investment in Vietnam.
Example: Textile company A imports some weaving machines of a type which, though not yet being able to be produced at home, have some electric motors in complete units of a type which can be produced at home. These imported motors in complete units shall also not be subject to VAT.
In order to prove that their goods are not subject to VAT at the importation stage as prescribed at this Point, the importing establishments must produce to the customs offices the following documents:
+ Import contracts.
In case of consigned import, import consignment contracts shall be also required.
Where the establishments have succeeded in their bids to supply goods for the subjects for use for the purposes prescribed at this Point, the bid-winning notices and contracts for sale to enterprises in compliance with the bidding results shall be also required.
Where financial leasing companies import goods for financial leasing, the financial leasing contracts shall be also required.
In case of import of goods in service of scientific research and technological development, the competent bodies’ documents assigning the organizations to carry out scientific research and technological development programs, projects or subjects or the science and technology contracts between the ordering party and the party performing such science and technology contracts shall be required.
+ Certification by the enterprise directors or the heads of the scientific research institutions that the imported goods shall be used as fixed assets; used directly in scientific research and technological development activities, used in activities of exploring and developing oil and gas fields, or that they are of those types used exclusively for aircraft.
Particularly for aircraft, derricks or ships hired from abroad, which are of those types which cannot yet be produced at home and shall be used for production and business, they shall not be subject to VAT; the hiring establishments shall only be required to produce to the customs offices the hiring contracts signed with foreign parties.
The above-said import goods of those types which cannot be produced at home and need to be imported shall be determined on the basis of the list of machinery, equipment, special-use transport means, construction supplies, materials and spare parts of those types which can be produced at home, promulgated by the Ministry of Planning and Investment.
5. State-owned dwelling houses sold by the State to their current tenants under the provisions of the Government’s Decree No. 61/CP of July 5, 1994 on dwelling house purchase, sale and dealing.
6. Transfer of land use right.
7. Credit services and investment funds, including activities of lending capital, guaranteeing loans, discounting negotiable instruments and valuable papers such as currencies, selling loan security assets in order to retrieve debts, financial leasing of financial credit institutions in Vietnam; activities of transferring capital in accordance with law, and securities-trading activities.
Securities trading activities mentioned at this Point include such activities as brokerage, dealing, investment portfolio management, issuance underwriting and securities investment counseling.
8. Life insurance; school pupil insurance and such person insurance services as of sailor or crew member accident insurance, person accident insurance (including also insurance for accidents, life in combination with hospitalization), passenger accident insurance, tourist insurance, insurance of accidents for drivers and driver assistants and persons aboard vehicles, insurance for sterilized persons, insurance of allowance for surgical operations, insurance for individuals’ lives, insurance for electricity users and other kinds of insurance related to persons; insurance for domestic animals, plants, other agricultural insurance, and insurance of non-commercial types such as social insurance, medical insurance and labor insurance.
9. Medical examination, medical treatment and epidemic prevention services, birth control services, health convalescence and rehabilitation services for patients, and veterinary services.
10. Products and services in the following cultural, art, physical training and sport domains:
- Cultural, exhibition as well as physical training and sport activities, organization of exercises and competitions of mass movement nature, whether or not collecting money in the form of sale of admission tickets or exercise charges but not for commercial purposes. Other revenues such as proceeds from goods sale, lease of playgrounds, fair or exhibition stalls… shall be liable to VAT.
- Art performance activities such as classical dramas, folk operetta, reformed drama, singing, dancing, music, dramas, circus; other art show activities and art performance-organizing services.
- Production of assorted films (video-recorded) regardless of their themes and genres.
- Import of video-recorded films, distribution and
projection of motion pictures and video documentaries:
+ For motion pictures, regardless of their themes and genres.
+ For film recorded in video tapes or discs, they must be documentaries, reportage and science films.
The film genres and themes shall be determined according to the regulations of the Ministry of Culture and Information.
11. Teaching and vocational training, including general education, teaching of foreign languages, informatics, dancing, singing, painting, music, drama, circus, physical training, sports, child nursing, and other jobs in order to train, foster and raise the educational levels and professional knowledge for everyone.
12. Radio and television broadcasting under programs funded with the State budget;
13. Publication, import and distribution of newspapers, journals, specialized bulletins, political books, textbooks (also in the form of audio or video tapes or discs, electronic data), course books, law books (books of legal documents, documents, resolutions and other regulatory documents); scientific-technical books, books printed in ethnic minority languages as well as propaganda drawings, photos and posters; printing of money and money-value certificates (checks, bonds, treasury bills, credit bills…); cash remitted from abroad into Vietnam.
Newspapers, journals and specialized bulletins also include the transmission of pages thereof.
Political books are books disseminating the political lines of the Party and the State in service of political tasks, under specific themes or topics, in service of anniversaries, traditional days of organizations, levels, branches and localities; statistical books, books propagating the good people and good deeds movement; books of speeches, research and theoretical papers of Party and State leaders.
Textbooks are books used for teaching and learning at all educational levels from preschool to senior high school (including reference books for use by teachers and pupils, suitable to the contents of education programs).
Course books are books used for teaching and learning in universities, colleges, intermediate professional and job training schools.
Law books are books of legal documents of the State.
Scientific and technical books are books used for introducing and guiding scientific and technical knowledge directly related to production an various scientific and technical branches.
Books printed in ethnic minority languages also include books printed bi-lingually in Vietnamese and an ethnic minority language.
Pictures, photos, posters, leaflets and brochures for the propaganda and mass mobilization purposes, slogans, leaders’ pictures, the Party’s flag, the national flag, the Youth Union’s flag, the Young Pioneers League’s flag.
Audio or video tapes and discs recorded with the contents of the above-said books.
14. Public services, such as sanitation, water drainage, maintenance of zoos, flower gardens, parks, street greenery, public lighting and funeral services, regardless of their payment funding sources.
Public services in street sanitation and water drainage include activities of gathering, cleaning, transporting and treating garbage and waste matters, draining water and treating waste water.
Maintenance of zoos and parks includes activities of managing, planting trees, tending and protecting birds, animals and trees in parks, zoos, public places and national gardens.
Funeral services include activities of leasing houses and cars in service of funerals by funeral service-providing organizations; burial and cremation.
For activities for which charges and fees are collected according to the State’s charge and fee regime, these revenues shall not be subject to VAT.
15. Maintenance, repair, restoration and construction of cultural, art and public-welfare works, infrastructures and gratitude houses with capital contributed by people and humanitarian aid capital, including cases where the State provides capital supports not exceeding 30% of total actual costs of these works.
16. Mass transit by bus and tramcar or bus and tramcar transport establishments set up and operating under the regulations of the Ministry of Communications and Transport in service of the travel demands of people in inner cities, urban centers, within industrial parks or between urban areas and nearby industrial parks along routes with stops, travel timetables and fares prescribed by competent authorities.
17. The State’s basic surveys funded with the State budget (including geological, mineral, water resource, metro-hydrological, environmental survey and exploration; surveying and mapping).
18. Irrigation and water drainage in service of agricultural production; clean water exploited by organizations or individuals themselves in rural, mountainous, island, deep-lying and remote areas in service of daily life in such areas.
19. Weaponry and military equipment for exclusive use in service of national defense and security.
- The list of weaponry and military equipment for exclusive use in service of national defense and security is prescribed in Appendix No. 3 promulgated together with this Circular.
These weaponry and military equipment also include finished products made in complete sets or parts, accessories and packages used exclusively for assembling and maintaining finished products.
Activities of repairing weaponry and military equipment used exclusively in service of national defense and security shall be carried out by enterprises of the Ministry of Defense or the Ministry of Public Security.
- Weaponry and military equipment (including supplies, machinery, equipment and spare parts) used exclusively in service of national defense and security shall, when imported, be exempt from import tax in accordance with the provisions of the Export Tax and Import Tax Law, or shall, when imported within annual quotas approved by the Prime Minister, not be subject to VAT.
The establishments which import the above-said VAT-free weaponry and military equipment for exclusive use in service of national defense and security must send to the customs offices the following dossiers:
+ The written certifications by the Ministry of Defense or the Ministry of Public Security that the goods are imported in service of national defense or security.
+ The list of import goods within the import quotas approved by the Prime Minister (granted by the Ministry of Trade or the General Department of Customs).
+ The import consignment contracts (in case of consigned import).
20. Goods imported in the following cases: humanitarian aid or non-refundable aid goods (including imported goods belonging to the source of non-refundable ODA capital); gifts for State agencies, political organizations, socio-political organizations, social organizations, socio-professional organizations and/or people’s armed force units; presents and gifts for individuals in Vietnam; belongings of foreign organizations and individuals within the diplomatic immunity limits; and personal effects in duty-free luggage limits; goods being belongings brought along by overseas Vietnamese upon their returns to the country.
The quantities of import goods falling into the categories not subject to VAT at the importation stage shall be equal to the import duty-free quantities prescribed in the Export Tax and Import Tax Law and documents guiding the implementation thereof.
Imported goods of organizations and individuals eligible for diplomatic immunities under the Ordinance on Diplomatic Immunities shall enjoy VAT privileges and immunities according to current regulations. In cases where such organizations or individuals purchase goods and services in Vietnam and pay VAT thereon, they shall be refunded such paid VAT amounts under the guidance at Point 8, Section I, Part D of this Circular. The subjects, goods and procedural dossiers for enjoying VAT privileges and immunities guided at this Point shall comply with the guidance in the Finance Ministry’s Circular No. 08/2003/TT-BTC of January 15, 2003 guiding the refund of VAT to diplomatic missions, consular offices and representative agencies of international organizations in Vietnam.
For imported goods being humanitarian or non-refundable aid goods, written certifications by the Ministry of Finance shall be required.
The General Department of Customs shall provide specific guidance on the dossiers and procedures for handling imported goods not subject to VAT at the importation stage in these cases.
21. Goods sold to international organizations and foreigners for use as humanitarian aid or non-refundable aid to Vietnam;
The procedures for international organizations or foreigners to purchase goods in Vietnam for use as humanitarian aid or non-refundable aid to Vietnam and enjoy VAT exemption: International organizations or foreigners must send to the selling units documents clearly stating the names of the international organizations or foreigners purchasing goods for use as humanitarian aid or non-refundable aid to Vietnam, the quantity or value of purchased goods; and written certification by the Ministry of Finance of such aid.
When selling goods, the establishments must make invoices strictly according to the provisions of Point 5.1, Section IV, Part B of this Circular. They must clearly write on such invoices that the goods are sold to foreign organizations or foreigners for use as non-refundable aid or humanitarian aid and not subject to VAT, and keep the above-said documents of the international organizations or Vietnamese representative agencies as a basis for tax declaration and settlement.
22. Goods transshipped, transited or transported by land through the Vietnamese territory; goods temporarily imported for re-export, goods temporarily exported for re-import, raw materials and materials imported for production or processing of goods for export under export production or processing contracts signed with foreign parties.
Goods not subject to VAT in this case shall be settled by the customs offices. The General Department of Customs shall guide the procedures for VAT determination and non-collection of VAT in these cases.
23. Goods and services supplied to the following subjects and in the following cases:
- Goods and services supplied directly for international transport such as supply of fuel, raw materials and materials, spare parts, water and assorted food and rations for passengers, services for sea-going ship, aircraft and international train sanitation and for loading and unloading of export goods.
- International cargo and passenger transportation.
International transportation includes transportation by foreign countries or domestic transportation business establishments engaged in cargo and passenger transportation from Vietnam to foreign countries or vice versa, cargo transportation between foreign seaports.
Where the transportation service-providing establishments sign contracts for transportation of cargo and/or passenger abroad, the revenues from transportation services, which are not subject to VAT, shall be the revenues actually collected from customers. Where such transportation services cover also domestic transportation and the revenues from domestic and international transportation are inseparable, the revenues not subject to VAT shall include also those from domestic transportation.
- Re-insurance services to foreign countries.
- Goods on sale at duty-free shops at international airports, sea ports, railway stations and border gates.
- National reserve goods sold by the national reserve agency.
- Goods and services exported by export-processing enterprises; goods and services purchased and sold among export-processing enterprises; goods and services supplied by foreign organizations and individuals to export-processing enterprises.
24. Technology transfer, computer software, excluding software for export.
Technology transfer shall be determined under the provisions in Chapter III “Technology Transfer” of the Civil Code of the Socialist Republic of Vietnam and documents guiding the implementation thereof. For contracts on technology transfer accompanied by machinery and equipment, tax shall not be imposed on the value of the transferred technology.
Computer software (excluding computer software for export) includes software products and software services as prescribed in the Prime Minister’s Decision No. 128/2000/QD-TTg of November 20, 2000 on a number of policies and measures to encourage investment in, and development of, the software industry.
25. Post, telecommunications and Internet services universalized under the Government’s programs.
26. Gold imported in the form of bar or ingot and gold not yet processed into fine-art articles, jewelry or other products.
Gold in the form of bar or ingot and unprocessed gold shall be determined in accordance with international regulations.
27. Export products being exploited mineral resources not yet processed into other products, specifically as follows:
- Crude oil.
- Stone slabs, sand, rare earth.
- Gems.
- Manganese, tin, iron, chromite, emenite and apatite ores.
28. Products being artificial parts used for substitution of diseased people’s organs; crutches, wheelchairs and other tools used exclusively for the disabled.
29. Goods and services of business individuals with average monthly incomes lower than the minimum salary level prescribed by the State for State employees. Incomes shall be determined to be revenues from business activities minus (-) reasonable expenses for such business activities.
Business households with low incomes and not liable to pay VAT shall be examined, determined and listed by the Tax Sub-Departments in coordination with the tax advisory councils. Such business households shall be notified thereof in writing.
In the period when the business households are notified not to be liable to pay VAT, if their business situation changes so that their incomes are higher than the prescribed income level, the Tax Sub-Departments must notify the business households thereof and put them into the category liable to pay VAT as from the month the business households earn incomes higher than the prescribed level.
Business establishments shall not be entitled to deduct, and to be refunded with, input VAT on goods and services used for the production and trading of goods and services not subject to VAT prescribed in this Article but must include them in the original prices of fixed assets, the value of raw materials and materials or business costs.
B. TAX CALCULATION BASES AND TAX CALCULATION METHODS
The bases for calculating VAT are tax calculation prices and tax rates.
I. VAT CALCULATION PRICES:
The VAT calculation prices of goods or services shall be specifically determined as follows;
1. For goods and services sold or supplied by production and/or business establishments to other subjects, their VAT calculation prices are VAT-exclusive sale prices. For goods and services subject to special consumption tax, their VAT calculation prices shall be sale prices inclusive of special consumption tax but not VAT.
The tax calculation prices of goods and services cover also additional levies and surcharges collected in addition to the goods or service prices, which are enjoyed by the business establishments, excluding those which the business establishments must remit into the State budget. In cases where the business establishments apply discounted sale prices, the VAT calculation prices shall be the discounted sale prices inscribed in the invoices.
2. For imported goods, their VAT calculation prices shall be the import prices at the border gates plus (+) import tax (if any), plus (+) special consumption tax (if any). The import prices at the border gates serving as a VAT calculation base shall be determined according to the regulations on tax calculation prices of imported goods.
Example: An establishment imports 4-seat cars in complete units with the import tax calculation price of VND 300,000,000 each.
- The import tax rate is 100%, the special consumption tax rate is 80%, and the VAT rate is 10%.
- The payable import tax:
VND 300,000,000 x 100% = VND 300,000,000
- The payable special consumption tax:
(VND 300,000,000 + VND 300,000,000) x 80% = VND 480,000,000
- The VAT calculation price is:
(VND 300,000,000 + VND 300,000,000 + VND 480,000,000) = VND 1,080,000,000
- The payable VAT is:
VND 1,080,000 x 10% = VND 108,000,000
Where the imported goods are eligible for import tax exemption or reduction, the VAT calculation prices shall be the prices of the imported goods plus (+) import tax to be paid after the exemption or reduction.
3. For products, goods and/or services used for exchange, as presents, gifts or salary substitutes (except for products, goods and services used for sale promotion or advertisement under the provisions of the Government’s Decree No. 32/1999/ND-CP of May 5, 1999 on sale promotion, commercial advertisement, trade fairs and exhibitions not subject to VAT), their VAT calculation prices shall be determined as equal to the tax calculation prices of products, goods or services of the same or equivalent types at the time such activities are carried out.
Example: Establishment A manufactures electric fans. It exchanges 50 fans with establishment B for iron, steel at the sale price (exclusive of tax) of VND 400,000/fan. The VAT amount payable for these exchanged fans is:
VND 400,000/fan x 50 fans x 10% = VND 2,000,000
4. For products, goods or services delivered by business establishments for consumption not in service of production and/or business or for the production and trading of goods and services not subject to VAT, their output VAT must be assessed. Their tax calculation prices shall be equal to the sale prices of products, goods or services of the same or equivalent types at the time of consumption.
For goods internally transferred within a production and/or business establishment such as goods delivered into internal warehouses, supplies and semi-finished products delivered in order to continue the production process, they shall not be subject to VAT calculation and payment.
5. For services supplied by foreign parties to consumers in Vietnam, their VAT calculation prices shall be the service prices payable to the foreign parties.
Example: Company A in Vietnam hires a foreign company to repair sea-going ships. If the contractual price payable to such foreign company is VND 100 million, Company A must calculate and pay VAT of 10% of VND 100 million.
6. Services of leasing assets such as houses, offices, workshops, warehouses, wharves, yards, transport means, machinery, equipment, etc.
The VAT calculation prices shall be the tax-exclusive rent rates. In case of leasing with rent paid in installments or prepaid for a leasing term, VAT shall be calculated on each installment or the prepaid rent, including also amounts collected in other forms such as those for renovation, repair and upgrading of leased houses at the lessees’ requests.
The asset rent agreed upon by the involved parties shall be determined according to contracts. Where the rent bracket is prescribed by law, the rent shall be determined within the prescribed bracket.
7. For goods sold by mode of installment payment, their tax calculation prices shall be the lump-sum VAT-exclusive sale prices of such goods (excluding installment payment interests) and must not be calculated according to each installment.
Example: A motorbike trading company sells 100-cc Honda motorbikes. The lump-sum VAT-exclusive sale price is VND 25.5 million (including the installment interest of VND 0.5 million). The VAT calculation price shall be VND 25 million/motorbike.
8. For goods processing, the tax calculation prices shall be VAT-exclusive processing prices consisting of charges, costs of fuel, power, auxiliary materials and other processing expenses incurred by the processing parties.
9. For construction and installation
- For cases of construction and installation including the contracted supply of raw materials and materials, the tax calculation prices shall also include the VAT-exclusive value of raw materials and materials.
Example: Construction company A enters into a contract to build works, including the contracted supply of construction supplies. The total payment value exclusive of VAT is VND 1,500 million, of which the value of construction supplies is VND 1,100 million. The VAT calculation price shall be VND 1,500 million.
- For cases of construction and installation without the contracted supply of raw materials and materials, the tax calculation price shall be the construction and installation value exclusive of VAT and the value of raw materials and materials.
Example: Construction company X is contracted to build works with supplies to be provided by the work owner. If the construction value exclusive of VAT and construction supplies is VND 600 million, then the VAT calculation price in this case shall be VND 600 million.
- For cases of construction and installation with payments to be made on the basis of completed and handed-over construction items or the value of construction and installation volume, the tax calculation price shall be the VAT-exclusive value of the completed and handed-over construction items or work volume.
Example: Textile company X (called Party A) hires construction company Y (called Party B) to perform construction and installation to expand a production workshop.
The total VAT-exclusive value of the work is VND 200 billion, of which:
- The construction and installation value is VND 80 billion
- The value of equipment supplied and installed by Party B is VND 120 billion.
+ Party B shall additionally charge a 10% VAT of VND 20 billion
+ The total amount payable by Party A is VND 220 billion:
+ Party A shall receive the workshop, account it as an increase in the value of its fixed assets for depreciation calculation of VND 200 billion (the VAT-exclusive value)
- The VAT of VND 20 billion already paid shall be deducted into the output tax of the sold goods or refunded at requests according to regulations.
If Party A accepts to make payment to Party B for each construction item (presuming that the workshop construction is completed first and paid for first), when Party A calculates the amount of VND 80 billion to be paid for the workshop construction, it must add the 10% VAT for payment to Party B. The payable amount inclusive of VAT shall be VND 80 billion + VND 8 billion = VND 88 billion.
10. For business establishments which are assigned land by the State for building houses and technical infrastructures for sale, for transfer accompanied with the transfer of the land use right, the VAT calculation prices of sold or transferred houses or infrastructures shall be the sale prices or transfer prices without tax minus land use levies based on land prices prescribed at the time of land assignment.
Example: Housing Investment and Development Company X is assigned 10,000 m2 of land for building houses for sale, of which 3,000 m2 is used for building internal roads in the planned area and not liable to land use levy. Land use levy payable into the State budget is VND 200,000/m2. The company sells one house on a land area of 50 m2 at the sale price and land use right transfer levy without VAT of VND 300 million (of which the sale price is VND 200 million and the land use right transfer levy is VND 100 million).
The VAT calculation price of the above-said house is:
VND 300 million - (50 m2 x VND 200,000/m2) = VND 290 million
The output VAT is: VND 290 million x 10% = VND 29 million
- For business establishments leased land by the State for investment in infrastructures in industrial parks, high-tech parks or other economic zones as prescribed by the Government for sub-lease, the tax calculation prices shall be the VAT-exclusive rents minus the land rents to be remitted into the State budget.
Example: Industrial Park Infrastructure Investment and Dealing Company Y is leased by the State 500,000 m2 of land for a duration of 50 years for building technical infrastructures for lease. The land rent rate is VND 30,000/m2/year. After making investment in infrastructures thereon, company Y leases 5,000 m2 to company Z for 20 years for building a manufacturing plant with the land rent rate exclusive of VAT (not including public-facility charges) of VND 100,000/m2/year. Company Z pays the infrastructure rent once a year.
The VAT calculation price for annual revenues from the lease of infrastructures is:
(5,000 m2 x VND 100,000) - (5,000 m2 x VND 30,000) x 01 year = VND 350,000,000.
The VAT is: VND 350,000,000 x 10% = VND 35,000,000.
11. For real estate dealing activities, the VAT calculation prices for houses or infrastructures affixed to land shall be allowed to exclude the land prices calculated according to the rates prescribed by the provincial/municipal People’s Committees at the time of sale of real estates.
12. For ocean shipping agency services, brokerage services, export and import consignment as well as other services enjoying remuneration or commissions, their tax calculation prices shall be the enjoyed remuneration or commissions exclusive of VAT.
13. For transportation, loading and unloading, the tax calculation prices shall be the freights or loading and unloading charges exclusive of VAT, regardless of whether the establishments directly undertake the transportation, loading and unloading or hire such services.
14. For goods and services of specific nature for which such vouchers as postal stamps, freight tickets, construction lottery tickets… are used and recorded with the payment prices inclusive of VAT, their VAT-exclusive prices shall be determined as follows:
The VAT- The payment price (proceeds
from the sale of tickets, stamps…)
exclusive = ——————————————————————————— price
1 + the tax rate (%) applicable to such goods or service
Example: A provincial post office sells 10,000 stamps at the price of VND 400 each. The tax-exclusive price and VAT of this quantity of stamps shall be calculated as follows:
+ The price inscribed on stamps (tax-inclusive sale price) = 10,000 x VND 400 = VND 4,000,000
+ The VND 4,000,000
VAT-exclusive = —————————
price 1 + 10%
= VND 3,636,363
+ The payable 10% VAT = VND 3,636,363 x 10% = VND 363,636
- For tourist services in the form of tours under contracts signed with tourists at package prices (inclusive of meal, accommodation, travel), such package prices shall be regarded as tax-inclusive prices for calculating VAT and revenues of the business establishments. Where the package prices cover such items not subject to VAT as air tickets for tourists coming from abroad into Vietnam and from Vietnam abroad, expenses for meals, lodgings and sight-seeing abroad (if accompanied by valid vouchers), such expenses shall be allowed to be excluded from the VAT calculation prices (revenues).
Example 1: Ho Chi Minh City Tourist Company performs a package tour contract with Thailand for 50 tourists for 05 days in Vietnam with the total payment of USD 32,000. The Vietnamese side has to pay all expenses for airfares, meals, accommodation, and sight-seeing tours under the agreed program, of which the airfares from Thailand to Vietnam and vice versa cost USD 10,000. The output VAT under this contract is determined as follows:
+ Turnover subject to VAT is:
USD 32,000 - USD 10,000 = USD 22,000
+ The output VAT is:
USD 22,000
—————— x 10% = USD 2,000
1 + 10%
+ The establishment’s turnover used for calculation of its business result is:
USD 32,000 - USD 2,000 = USD 30,000
+ The deductible input VAT shall be determined according to regulations for calculating the payable VAT amount.
Example 2: Hanoi Tourist Company performs a contract for taking tourists from Vietnam to China on a five-day tour at the package price of USD 400/person. If it has to pay a Chinese tourist company USD 300/person, its taxable turnover shall be USD 100/person (USD 400 - USD 300).
15. For pawning services, the tax calculation price is the amount to be collected from this service, including interests receivable from pawn loans and differences earned from the sale of pawned articles {(auction turnover minus (-) the amounts (if any) payable to customers minus (-) loans)}.
Revenues from this service shall be determined as the VAT-inclusive prices.
Example:
A pawning company generates in the tax calculation period a pawning turnover of VND 110 million.
+ The output VAT is determined as follows:
VND 110 million
———————— x 10% = VND 10 million
1 + 10%
+ The company’s pawning turnover determined for calculation of its business results is:
VND 110 million - VND 10 million = VND 100 million
16. For books, newspapers and journals sold at their distribution prices (cover prices) under the provisions of the Publication Law, such sale prices are determined as VAT-inclusive prices for calculation of VAT and the establishments’ turnover (for VAT-liable ones). For cases where books, newspapers and journals are not sold at their cover prices, VAT shall be calculated on the basis of sale prices.
Publication is a process of turning out publications from the drafting stage to the stage of distributing such publications to customers.
Example: The Literature Publisher sells literary books to a book-distributing company:
The cover price (VAT-inclusive price) is VND 6,300/book. The distribution charge (25%) is VND 1,575/book
The VAT calculation price is determined as follows:
+ Where the Publisher distributes its publication through the distributing establishments, the tax calculation price of the publication is determined as follows:
The tax The
cover price - The distribution charge
calculation price at the = ——————————————————
publishing stage 1 + The
tax rate
The VAT calculation price at the publication stage (the Literature Publisher) is:
VND 6,300 - VND 1,575
——————————— = VND 4,500/book
1 + 5%
The output VAT at the publishing stage is:
VND 4,500/book x 5% = VND 225/book.
The total payment amount is:
VND 4,500/book + VND 225/book = VND 4,725/book
The tax calculation price at the distributing stage (at the book-distributing company) is:
VND 6,300
—————— = VND 6,000/book
1 + 5%
The output VAT is: VND 6,000/book x 5% = VND 300/book
The VAT payable at the book-distributing stage is:
VND 300/book - VND 225/book = VND 75/book
(Presuming that there is no other input VAT).
+ Where the Publisher directly distributes its publication to users, the VAT calculation price of the publishing activity is determined as follows:
The tax calculation The cover
price
price at the = —————————
publishing stage 1 + The tax rate
Where the Publisher consigns the sale of its publication at the fixed (agent’s) price, the use of invoices and documents, the tax declaration and payment by the Publisher and the consignee shall be the same as in the case where the goods are sold at their fixed prices through commission agents.
The sale prices printed on the book covers minus the distribution expenses must not be lower than the standard-page cost. Where the sale price printed on the book cover minus the distribution expense is lower than the standard-page cost and the publisher has the input VAT larger than the output VAT, it shall not be entitled to tax refund.
17. For printing activities, the tax calculation price shall be the printing cost.
Where a printing establishment performs printing contracts with the payment price covering the printing cost and the paper cost, the tax calculation price shall also include the paper cost.
18. For the services of expertise agency, agency for indemnity consideration, and agency for claim against the third parties, of the insurance business service, the tax calculation price shall be the earned remuneration or commission, including the expenses collected by the insurance business units.
II. VAT RATES:
The VAT rates for goods and services shall apply as follows:
1. The 0% tax rate shall be applicable to export goods and services. Export goods and services include also goods processed for export, export goods and services not subject to VAT (excluding the service of travel tours abroad, the service of reinsurance abroad; the service of credit, financial investment and securities investment abroad, and goods and services prescribed at Point 23, Point 27, Section II, Part A of this Circular).
- Export goods include goods exported abroad, sold to enterprises in export processing zones and other cases regarded as export prescribed by the Government, such as:
+ Intermediate processed goods for export, as prescribed in Article 17 of the Government’s Decree No. 57/1998/ND-CP of July 31, 1998 detailing the implementation of the Commercial Law regarding the activities of goods export, import, processing, purchase and sale agency with foreign countries. This case shall apply to goods processed for export directly by the establishments under the processing contracts signed between such establishments and foreign parties (called the consignors), but the processed goods are not yet exported but delivered to other domestic units (called the consignees) designated by the foreign parties for further processing into finished products under the processing contracts already signed with the foreign parties, and the processing remuneration shall be paid directly by the foreign parties.
+ Goods consigned for export processing. In this case an establishment signs a processing contract directly with the foreign party but then sign another contract to assign the processing to another contract. The establishment signing the contract directly with the foreign party shall only enjoy a commission from the processing charge.
+ Goods turned out by enterprises in Vietnam and sold to foreign countries but delivered to other enterprises in Vietnam under the foreign parties’ designation (called goods exported on spot for short) for use as raw materials for production or processing of export goods.
+ Goods exported for sale at overseas fairs and exhibitions.
- Export services are services which have been provided directly to organizations or individuals abroad and consumed outside the Vietnamese territory.
Assorted goods and services sold to export- processing enterprises and into export-processing zones: insurance; banking; post and telecommuni-cations; consultancy;audit, accounting; transportation; loading and unloading; lease of houses, offices, storehouses and yards; goods and services provided for consumption demands of individual laborers; petrol and oil sold for transport means shall not be regarded as being exported so as to enjoy the 0% tax rate, but they shall be subject to VAT at the rates prescribed for goods consumed in Vietnam.
2. The tax rate of 5% shall be applicable to the following goods and services:
2.1. Clean water in service of production and daily life, exploited by water production and business establishments from natural water sources and supplied to water users (excluding clean water exploited by establishments themselves in rural and mountainous areas, islands, remote and deep-lying areas in service of production and daily life in such areas, which is not subject to tax, and assorted beverages falling under the 10% tax rate group).
2.2. Fertilizers, ores used for fertilizer production; insecticides, pesticides and growth stimulants for domestic animals and cultivation plants.
- Fertilizers include organic and inorganic fertilizers such as phosphorous fertilizers, nitrogenous fertilizers (urea), NPK fertilizer, mixed nitrogenous fertilizer, phosphorous fertilizer, potassium, micro-biological fertilizer, etc.
- Ores used as raw materials for fertilizer production like apatite ore used for production of phosphorous fertilizer, muddy soil for production of micro-biological fertilizer.
- All kinds of insecticides, cockroach killers, rodenticides, termiticides, pesticides, fungicides, herbicides, growth inhibitors or stimulants for domestic animals and cultivation plants, etc.
2.3. Specialized medical equipment, machinery and instruments, such as scanners, projectors, cameras of various kinds for use in medical examination and treatment, devices and instruments used exclusively in surgery, wound treatment, ambulances, blood-pressure, cardiac and vascular meters, syringes and needles, blood transfusion instruments, contraceptive devices and other specialized medical equipment; medical cotton, bandages, gauzes, medical hygienic bandages, women sanitary napkins.
2.4. Curative and preventive medicines for human and animal use (including vaccines, immuno-biologicals, distilled water for preparation of injections); pharmaco-chemical products, pharmaceutical materials used for production of curative and preventive medicines on the lists of goods included in Appendices 1 and 2 issued together with this Circular.
2.5. Teaching and learning aids, including models, drawings, rulers, writing boards, chalks, compasses used for teaching and learning purposes, and specialized teaching, learning, research and laboratory equipment and instruments.
2.6. Printing of products not subject to VAT prescribed at Point 13, Section II, Part A of this Circular (except printing of money and money-value certificates)
2.7. Children’s toys.
2.8. Assorted books (excluding those not subject to VAT specified at Point 13, Section II, Part A of this Circular).
2.9. Tapes and discs, recorded or not.
2.10. Cultivation and husbandry products, cultured and fished aquatic and marine products that have not yet been processed or have undergone only preliminary processing such as cleaning, freezing, drying at the commercial business stage (except for the objects specified at Point 2, Section II, Part A of this Circular).
2.11. Fresh and raw foodstuffs, foods; forest products (except timber and bamboo shoots), not yet processed at the commercial business stage.
Foods include paddy, rice, maize, potatoes, manioc, wheat; rice, maize, potato, manioc and wheat flour.
Fresh and raw foodstuffs are foodstuffs that have not yet been processed but have undergone only preliminary processing such as cleaning, freezing, drying and remain fresh and raw, such as cattle and poultry meat, shrimps, crabs, fish, and other aquatic and marine products
Unprocessed forestry products are forestry products exploited from natural forests, of the groups of bamboo, rattan of various kinds, mushrooms, Jew’s ear fungus; roots, leaves, flowers, medicinal plants, plant resins, and other forestry products.
2.12. Sugar, by-products in sugar production, including molasses, bagasse, dregs.
2.13. Products made of jute, rush, bamboo, rattan and/or leaves are those made or processed from jute, rush, bamboo, rattan and/or leaves as main raw materials, such as jute carpets, jute yarns, jute bags, coconut fiber carpets, mats made of jute or rush, ropes and strings made of bamboo, coconut fiber; curtains and blinds made of bamboo of various kinds, bamboo brooms, conical hats, etc.
2.14. Cotton preliminarily processed from home-grown cotton, which is shelled, seeded and classified cotton (imported cotton which has been preliminarily processed or sorted does not fall into this group).
2.15. Feeds for cattle, poultry and for other domestic animals, including those kinds unprocessed or mixed such as bran, groundnut cakes, fish powder, bone powder, etc.
2.16. Scientific and technological services including the following scientific and technical application and guidance activities:
- Data processing, calculation and analysis in service of scientific research and technological development;
- Elaboration of feasibility and pre-feasibility study reports, environmental impact assessment reports;
- Guidance on, and organization of, experiments in order to create new technologies and new products.
2.17. Services in direct service of agricultural production, including activities of plowing and harrowing agricultural land; digging, embanking and dredging canals, ditches, ponds and lakes for agricultural production; farming, cultivating, tending plants, preventing and combating pests and diseases; gathering, harvesting, preliminarily processing and preserving agricultural products.
2.18. Coal, coal dust, coke, peat, briquette, caked coal.
2.19. Earth, rock, sand, gravel (excluding products made of earth, rock, sand or gravel like sawn rocks, tiling stones, granite stones).
2.20. Base chemicals, including chemicals on the list in Appendix 1 issued together with this Circular.
2.21. Mechanical products (excluding those used as consumer goods), including:
- Machinery and equipment such as: generators, mills, lathes, planers, rolling and extruding mills, punchers; equipment in complete sets and equipment in separate units; electricity- measuring devices, stabilizers of over 50 KVA, water-measuring devices, girder structures, warehouse frames and metal structures; assorted automobiles (except for automobiles subject to special consumption tax), ships and boats of various kinds and other kinds of transport means; assorted metal accessories and semi-finished products of the above-named products (including spare parts, semi-finished products of automobiles subject to special consumption tax).
- Production tools of all kinds such as borers, small farm machines, sawing machines of all kinds, planers, rice threshers, water pumps with a capacity of over 10 m3/h; soil preparing and harvesting machinery and tools.
- Products being small production tools such as pincers, hammers, saws, chisels, shovels, hoes, sickles and scythes, kits being mechanical products, nails.
- Fence nets of steel of from B27 to B41, barbed wires, metal roofing sheets, stress metal cables, metal conveyors.
2.22. Molds of all kinds, including those used as tools for production of commodity products shaped by molds, such as molds of machine details, molds for production of assorted tubes.
2.23. Explosive materials, including explosives, delay fuses, detonators and those processed into special-use explosive products without changing the properties of explosive materials.
2.24. Grindstone.
2.25. Newsprint.
2.26. Insecticide sprayers.
2.27. Preliminarily processed rubber latex, such as crepe latex, rubber sheet, crumb rubber and coagulated latex.
2.28. Preliminarily processed pine resin.
2.29. Artificial pressed boards made from raw materials like bamboo, wood pulp, chips and fibers, sawdust, bagasse, rice husk… pressed into boards, excluding plywood products.
2.30. Industrial concrete products, including bridge beams, house beams and frames, piles, electric poles, circular sewers and box culverts of all kinds, non-standard prefabricated panels and structures of reinforced concrete (except concrete bricks), commercial concrete (concrete mortar).
2.31. Tires and sets of tires and inner tubes, of a size 900-20 or larger.
2.32. Neutral glass tubes (tubes and ampoule-shaped tubes used to contain injections, test tubes).
2.33. Nets, ropes and fibers for knitting fishing nets, including assorted fishing nets, fibers, ropes of a special kind used for knitting fishing nets, regardless of their production materials.
2.34. Products from metallurgy, rolling or extrusion of ferrous, non-ferrous and precious metals, except imported gold specified at Point 26, Section II, Part A of this Circular.
Products from the metallurgy, rolling or extrusion of ferrous, non-ferrous and precious metals include direct products of the metallurgical, rolling and extrusion industries in the form of raw materials or products, such as metal products in the form of bar, rod, sheet or coil.
For metallurgical, laminated and extruded products which have been manufactured and processed into other products, their tax rates shall be determined according to the goods items.
2.35. Automatic data processors, part and accessories thereof (including assorted computers and their parts and accessories, printers used exclusively for computers), except electricity-storing parts.
2.36. Maintenance, repair and restoration of historical and cultural relics, museums, except activities specified at Point 15, Section II, Part A of this Circular.
2.37. Transportation, loading and unloading, including cargo, luggage and passenger transportation and cargo and luggage loading and unloading, regardless of whether establishments directly perform or hire others to perform such jobs, except for brokerage and agency activities for commissions.
2.38. Dredging of canals, navigation channels, river ports and sea ports; salvage and rescue activities.
2.39. Distribution and projection of video films.
3. The 10% tax rate shall apply to the following goods and services:
3.1. Petroleum oil, gas, ores and other mineral products.
3.2. Commercial electricity sold by electricity generation and trading establishments.
3.3. Electronic products.
3.4. Mechanical products for use as consumer goods.
3.5. Consumer electric articles.
3.6. Chemical products (other than base chemicals as guided at Point 2.20, Section II, Part B of this Circular), cosmetics.
3.7. Electric wires, telephone wires, other conducting wires (except types of wires being products which have just undergone the rolling and drawing stage prescribed at Point 2.34, Section II, Part B of this Circular).
3.8 Welding rods.
3.9. Yarn, fabrics, garments and embroidery articles; baby nappy; sanitary napkins.
3.10. Paper (excluding newsprint guided at Point 2.25, Section II, Part B of this Circular) and paper products.
3.11. Leather and leatherette products.
3.12. Sugar, milk, confectionery, beverage and other processed foodstuffs, except those foodstuffs subject to the tax rate of 5%.
3.13. Ceramic, pottery, glass, rubber and plastic products, wood and wood products; cement, bricks, tiles and other construction materials (except for products in the 5% tax rate group).
3.14. Construction and installation.
3.15. Houses, infrastructures of establishments assigned land by the State for investment therein and construction thereof for sale or transfer.
3.16 Technical infrastructure leasing by establishments assigned land or leased land by the State for investment in technical infrastructures for lease in industrial parks, high-tech parks and other economic zones according to the Government’s regulations.
3.17. Postal, mail, telecommunications and Internet services (except postal, mail, telecommunications and Internet services universalized under the Government’s program guided at Point 25, Section II, Part A of this Circular).
3.18. Lease of houses, offices, warehouses, ports, storage yards, factories, workshops, machinery, equipment and transport means.
3.19. Legal consultancy and other consultancy services.
3.20. Auditing, accounting, survey and designing services, insurance, including insurance brokerage (except types of insurance not subject to VAT specified at Point 8, Section II, Part A of this Circular.
3.21. Photographing, film printing and development, cassette tapes recording, dubbing and renting; duplicating; videoing.
3.22. Hotel, tourist and food and drink catering services
3.23. Goods and services subject to special consumption tax.
3.24. Gold, silver, gems (except imported gold prescribed at Point 26, Section II, Part A of this Circular).
3.25. Ocean shipping agency.
3.26. Brokerage services.
3.27. Other kinds of goods and services not specified in Section II, Part B of this Circular.
The VAT rates prescribed above shall apply uniformly to each type of goods or service at the importation, production, processing or commercial business stage. Goods not prescribed in Section II, Part A; Points 1 and 2, Section II, Part B of this Circular shall all be subject to the tax rate of 10%.
Example: If garments are subject to the tax rate of 10%, then this goods item shall all be subject to the tax rate of 10% at the importation, production, processing or commercial operation stage.
Repair and warranty services shall be subject to the 10% VAT rate. Particularly, repair of machinery, equipment or transport means being mechanical products shall be subject to the tax rate of 5%.
Example: Repair of sea-going ships shall be subject to the tax rate of 5%, as applicable to sea-going ships.
Wasted materials and faulty products, which are collected for re-cycling or re-use, shall, when being sold, be subject to the VAT rate applicable to such goods items.
Example: Iron and steel scraps collected by establishments shall, when being sold, be subject to the tax rate of 5%; recovered plastic wastes shall, when being sold, be subject to the VAT rate of 10%, as applicable to plastic products.
III. VALUE-ADDED TAX CALCULATION METHODS
VAT payable by business establishments shall be calculated according to either method: the tax deduction method and the method of direct calculation on added value. Where business establishments subject to tax payment by the tax deduction method also trade in gold, silver, gems and/or foreign currencies, they must separately account this business activity for direct calculation of tax on added value.
The subjects of application and the determination of payable tax amounts according to each method are as follows:
1. The tax deduction method:
1.1. The subjects of application are business establishments and organizations, enterprises established under the State Enterprise Law, the Enterprise Law or the Cooperative Law, foreign-invested enterprises and other business establishments and organizations, except those subjects of application of the method of direct calculation on added value mentioned at Point 2 of this Section.
1.2. Determination of payable VAT amounts:
The payable The output The
deducted
VAT = VAT - input VAT
amount amount amount
In which:
a/ The output VAT amount is equal to (=) the tax calculation price of the taxable goods sold or service provided multiplied by (x) the VAT rate of such goods or service.
Business establishments subject to tax calculation by the tax deduction method must, when selling goods or providing services, calculate and collect VAT on the goods sold or services provided. When making invoices for sold goods or provided services, business establishments must explicitly inscribe the tax-exclusive sale price, the VAT amount and the total amount payable by the purchasers. Where in an invoice only the payment amount is inscribed but not the tax-exclusive price and the VAT amount, the amount of VAT on the goods sold or services provided must be calculated on the payment amount inscribed therein.
Example: An enterprise sells iron and steel. The VAT-exclusive sale price of f6 iron rods is VND 4,600,000/ton; the 5% VAT amount is VND 230,000/ton; but if in some of its sale invoices only the sale price of VND 4,800,000/ton is inscribed, the VAT amount calculated on the sale turnover is determined as: VND 4,800,000/ton x 5% = VND 240,000/ton, instead of being calculated on the sans-tax price of VND 4,600,000/ton and the turnover is thus re-determined as VND 4,560,000 (= VND 4,800,000 - VND 240,000). The enterprises that buy steel shall not be allowed to deduct the input VAT amount with respect to invoices in which the VAT amount is not inscribed.
b/ The input VAT amount is equal to (=) the total VAT amount inscribed in the added value invoices for purchased goods or services (including also fixed assets) used for production of and business in goods and services subject to VAT, the VAT amount inscribed in vouchers on tax payment for imported goods or VAT payment made on behalf of foreign parties under the guidance of the Ministry of Finance for application to foreign organizations and individuals conducting business activities in Vietnam not in the investment forms under the Law on Foreign Investment in Vietnam.
Where purchased goods and services are of the kinds for which special-type invoices inscribed with payment prices being VAT-inclusive ones may be used, the establishments may base themselves on the tax-inclusive prices and the calculation method mentioned at Point 14, Section I, Part B of this Circular to determine the tax-exclusive prices and the input VAT amount to be deducted.
Example: In the period, Company A made payment for input services of special type eligible for tax deduction:
The total payment price is VND 110 million (price inclusive of VAT). This service is subject to the 10% tax rate. The deductible input VAT amount is calculated as follows:
VND 110 million
———————— x 10% = VND 10 million
1 + 10%
As a result, the tax-exclusive price is VND 100 million and the VAT amount is VND 10 million.
c/ Determination of deductible input VAT:
- The deductible input VAT is the VAT on goods and services used for production of, and trading in, goods and services subject to VAT.
- Where purchased goods or services are used for production of, and trading in, both goods and services subject and not subject to VAT, only the amount of input VAT on goods or services used for production of, and trading in, goods and services subject to VAT is deductible; the input VAT amount not allowed to be deducted may be included in the costs of goods and services not subject to VAT.
For fixed assets purchased for exclusive use in the production of, and trading in, goods and services not subject to VAT, the VAT on such fixed assets may be included in the original prices of such fixed assets.
The business establishments must separately account the input taxes on goods and services used for the production of, and trading in, goods and services subject and not subject to VAT. Where goods or services are used for production of and trading in goods and services subject and not subject to VAT but the establishments cannot account separately the deductible input taxes, they may calculate the deductible tax amounts as a percentage (%) between the turnover of goods or services subject to VAT and the total turnover of goods or services sold.
Example 1: Enterprise A used 5,000 KWh of electricity in the month, of which 4,000 KWh for cement production and 1,000 KWh for the lodging quarter of its workers and employees (the company can separately account the electricity volume used by its workers and employees). It may calculate and deduct the input VAT amount only for the electricity volume used for cement production, specifically as follows:
The deductible input VAT amount for electricity in the month is:
4,000 KWh x VND 700/KWh x 10% = VND 280,000
If the purchased goods and services are not used in service of production and/or business, the input VAT shall be included in the costs of such activities.
Example 2: In the tax calculation period, an enterprise that makes bullets for national defense (not subject to VAT) and fireworks (subject to VAT) purchased several kinds of materials, raw materials and fuel for the production of these two kinds of product and could not account separately how much had been used for the production of each of these two products, the deductible amount of input VAT on these supplies is calculated as follows:
The total value of purchased supplies is VND 2,500 million (VAT-exclusive price).
The input VAT amount summed up according to input added value invoices is VND 250 million, in which the commonly used supplies which could not be separately accounted are worth VND 500 million (exclusive of VAT) and the VAT amount is VND 50 million.
The VAT-exclusive sale turnover of goods subject to VAT is VND 800 million.
The sale turnover of goods not subject to VAT is VND 3,200 million.
The deductible input VAT amount of the commonly used supplies is calculated as follows:
The percentage between the turnover of goods subject to VAT and the total turnover of goods sold is determined as follows:
VND 800 million/VND 4,000 million = 20%
The deductible input tax amount corresponding to this percentage (%) is:
VND 50 million x 20% = VND 10 million
- For establishments engaged in agricultural production, forestry and/or fishery, if they export products reared, cultivated, caught or exploited by themselves, they may deduct only the input taxes on goods and services directly used for the exploitation stage following the capital construction stage; they shall not be allowed to calculate and deduct the input taxes on goods and services used for the capital construction stage but must include them into the original prices. Where the establishments concurrently sell at home and export their products, they must allocate input taxes according to the above provisions.
- For purchased goods which are damaged due to natural calamities, fires, or lost, and it is determined that compensation therefor must be paid by organizations and individuals, the input VAT on the volume of such goods shall be included in the value of damaged goods to be compensated but not in the deductible input VAT amount when the declaration of payable VAT amount is made.
- The deductible amount of input tax on goods and services arising in a month may be declared for deduction immediately when the tax amount payable in that month is declared, regardless of whether they have been delivered for use or still remain in stock. Where added value invoices or input VAT payment vouchers of purchased goods and services are made but not yet declared in the month, they may be declared for deduction in the subsequent months; the maximum time limit is 3 months, counting from the declaration time of the month when such invoices are made.
For corporation offices that are not directly engaged in business operations and affiliate administrative and non-business units such as hospitals, clinics, sanatoriums, institutes, training schools, etc, not liable to pay VAT, they shall not enjoy input VAT deduction or refund for goods and services purchased in service of their activities.
Where these units also deal in goods and services subject to VAT, they must separately register, declare and pay VAT for these activities.
Example: The office of Corporation A is not directly engaged in production and business activities and operates with the budget contributed by affiliate units. If it leases the unused space of the house (office building), it must separately account, declare and pay tax for the office-leasing operation. The input VAT of goods and services in service of the operation of the Corporation’s office shall neither be deducted nor refunded. The Corporation’s office must pay such input VAT with its budget to be remitted to its superior.
d/ To be entitled to input VAT deduction or refund, export goods and services must meet all the following conditions and procedures:
d.1/ Contracts on sale of goods, processing of goods (for cases of goods processing), provision of services for foreign organizations or individuals. For cases of export consignment, export consignment contracts and reports on liquidation of export consignment contracts (for cases where contracts have been terminated) or reports on periodical comparison of debts between the export consignor and the export consignee, clearly stating the quantity and category of products, the value of the goods already exported under consignment; the serial number and date of the export contract signed between the export consignee and the foreign party; the serial number and date of, and amount of money inscribed on, the voucher on the via-bank payment made by the export consignee to the foreign party; the serial number, date of, and amount of money inscribed on, the voucher on the payment made by the export consignor to the export consignee; the serial number and date of the export consignee’s customs declaration on the export goods.
d.2/ Export goods customs declarations, with the certification by the customs offices that the goods have been exported.
In case of export consignment, the reports on liquidation of export consignment contracts or the reports on periodical comparison of debts between the export consignor and the export consignee as mentioned at Point d.1 above shall be required.
d.3/ Payment for export goods and services shall comply with the following provisions:
- Payment for export goods and services must be made via bank.
Via-bank payment means the transfer of money from the importer’s bank to the exporter’s bank in order to pay for goods or services to the exporter in the payment form as agreed upon in the contract and required by the bank. Payment vouchers shall be credit notes of the exporter’s bank of the amount of money already received from the importer’s bank accounts. In case of deferred payment, the agreement thereon must be included in the export contracts, and when payment is due, the business establishments must have via-bank payment vouchers. In case of export consignment, the export consignees must make vi-bank payment to the foreign parties.
- The following cases of payment shall also be regarded as via-bank payment:
+ For cases where payment for export goods or services is deducted from foreign loans, business establishments must satisfy all the following conditions, procedures and dossiers:
* Borrowing contracts (for financial loans with a term of under one year); or loan registration certification papers of the State Bank of Vietnam (for loans with a term of over one year).
* Vouchers on the transfer of money via bank by the foreign party into Vietnam.
The mode of payment for export goods or services to be deducted from foreign loans must be provided for in the export contracts.
* Written certifications by the foreign parties of the loan deduction.
* For cases where there is any difference between the value of export goods or services and the foreign loans, such difference must be paid via bank. Vouchers on such via-bank payment shall be as guided at this Point.
+ For cases where the goods -or service-exporting establishments make via-bank payment for export goods or services but the foreign parties authorize the third parties being foreign organizations or individuals to make payment, the authorized payment must be provided for in the export contracts (or annexes thereto, if any).
+ For cases where the foreign parties make payment from their current accounts in Vietnam, they must effect such payment via bank. Payment vouchers shall be credit notes of the exporter’s bank of the money received from the foreign purchaser’s current account.
- Other cases of payment prescribed by the Government:
+ For cases of labor export where cash is collected directly from laborers, vouchers of collection of money from laborers shall be required;
+ For cases where business establishments export goods for sale at overseas fairs or exhibitions, if they collect and transfer home in cash the currencies of the countries where such trade fairs or exhibitions are organized, they must produce to the customs offices vouchers declaring the foreign currencies collected from the goods sale and transferred home and vouchers on remittance of such money amounts into banks in Vietnam.
+ For cases of exporting goods or services to repay the Government’s foreign loans. the commercial banks’ certifications that the export goods lots have been accepted by the foreign countries for debt repayment or that the document sets have been forwarded to the foreign countries for debt repayment shall be required; payment vouchers in this case shall comply with a separate guidance of the Ministry of Finance;
+ The case where export goods or services are paid with goods means the one where goods (including the export goods processing) or services are exported to foreign organizations or individuals (called foreign parties for short) but the payment between Vietnamese enterprises and foreign parties is made in the form of clearing between the value of export goods or services or export goods-processing charges and the value of goods or services purchased from foreign parties.
Export goods or services paid with goods must satisfy an additional dossier procedure as follows:
* The mode of payment with goods for export goods must be provided for in the export contract.
* The foreign party’s goods or service purchase contract;
* The customs declaration on import goods paid for export goods or services.
* The foreign party’s written certification of the clearing payment between the export goods or services and the import goods or services purchased from the foreign party.
* Where there is difference after the clearing between the value of export goods or services and the value of import goods or services, such difference must be made via bank. Vouchers on such via-bank payment shall comply with the guidance at this Point.
+ Other payment forms as prescribed by the Government.
d.4/ Added value invoices on the sale of goods or services or export of processed goods to foreign parties or export-processing enterprises.
e/ Conditions, procedures and dossiers for deduction of input VAT in a number of cases where goods are regarded as being exported:
e.1/ Processed intermediary goods for export as prescribed in Article 17 of the Government’s Decree No. 57/1998/ND-CP of July 31, 1998 detailing the implementation of the Commercial Law regarding the activities of goods export, import, processing, and sale and purchase agency with foreign countries:
- Export processing contracts and annexes thereof (if any) signed with foreign parties, clearly stating the goods-receiving establishments in Vietnam.
- Added value invoices, clearly stating the processing charges and quantities of processed goods returned to the foreign parties (on the basis of the charges provided for in the contracts signed with the foreign parties) and the names of the goods-receiving establishments designated by the foreign parties;
- Bills on delivery of processed intermediary products (called the delivery bills for short), with full certifications by the deliverers and the receivers of processed intermediary products as well as certification by the customs offices managing the processing contracts of the deliverers and receivers.
- Payment for goods processed for foreign countries must be made via bank under the guidance at Point d.3 of this Section.
The procedures for delivery and receipt of processed intermediary goods and delivery bills shall comply with the guidance of the General Department of Customs.
Example: Company A signs with a foreign party a contract to process 200,000 pairs of shoe soles for export. The processing charge is VND 800 million. The contract clearly states that the shoe soles will be delivered to Company B in Vietnam for production of finished shoes.
In this case, Company A falls into the subject of processing intermediary products for export. In making vouchers to deliver shoe soles to Company B, Company A should write clearly the quantity, category and specifications of products delivered as well as the whole turnover of VND 800 million from the processing of shoe soles so as to enjoy the VAT rate of 0%.
e.2/ Goods consigned for export processing:
- Contracts on processing goods for export, signed with the establishments which have directly signed contracts for processing goods for export with foreign parties. The establishments which directly sign processing contracts with foreign parties shall enjoy only the export processing consignment commissions.
- Reports on liquidation of the export processing consignment contracts (for cases where the contracts have been terminated) or reports on periodical comparison of debts between the establishments which directly sign the processing contracts with foreign parties and the establishments which directly process the goods for export, clearly stating the serial number and date of the processing contract signed with the foreign party; the quantity and category of products processed for export; the processing charge amounts to be paid and already paid; the serial number and date of the customs declarations of the processed goods already exported; the serial number and date of, and amount of money inscribed on, the voucher on the via-bank payment made by the foreign party to the establishment which directly signs the processing contract with the foreign party; the serial number and date of, and amount of money inscribed on, the voucher on the payment by the establishment, which directly signs the processing contract with the foreign party, to the establishment which directly processes goods for export.
- Payment for goods processed for foreign countries must be made via bank under the guidance at Point d.3 of this Section.
- Added value invoices made by the establishments which directly process goods for export for goods processed for export.
Example: Company X performs a contract to process garments for a foreign party, under which it makes 100,000 clothes for a remuneration of VND 200 million. However, Export - Import Company Y has signed this contract directly with the foreign party, enjoying a commission equal to 5% of the said remuneration.
In this case, Company X falls into the subject consigning the processing of goods for export. In making invoices for delivering goods to Company Y, Company X will be allowed to write the tax rate of 0%; the whole turnover of VND 200 million from the processing of goods for export will be subject to the VAT rate of 0%. Company X’s export commission shall be subject to VAT as prescribed.
e.3/ Goods made by enterprises in Vietnam for sale to foreign parties, which have been actually delivered to other enterprises in Vietnam under the designation by the foreign parties (called on-spot export goods for short) for use as raw materials for production or processing of goods for export.
- Contracts on goods sale, signed with foreign parties, clearly stating the goods items, quantities, value, names and addresses of the goods-receiving enterprises in Vietnam.
- Customs declarations on the on-spot export-import goods, with the certification by the customs offices that the goods have been delivered to the enterprises in Vietnam under the foreign parties’ designation.
- Payment for goods sold to foreign traders but delivered in Vietnam must be made via bank in freely convertible foreign currencies. Via-bank payment vouchers shall comply with the guidance at Point d.3 of this Section.
- Added value invoices of on-spot export goods, clearly stating the names of the foreign purchasers, the goods-receiving enterprises and the goods delivery places in Vietnam.
- On-spot export goods of foreign-invested enterprises must comply with the provisions of their investment licenses.
For the cases involving export goods or goods regarded as being exported prescribed at this Point, if the customs offices’ certification is available (for export goods) but the other procedures and dossiers stated above are insufficient, the business establishments shall not have to calculate the output VAT and must not deduct the input VAT but include it in their expenses. For export services, if they fail to satisfy one of the above-said procedures, the business establishments shall not have to calculate the output VAT and must not deduct input VAT. Particularly for the cases prescribed at Points e.1 and e.3, if they fail to satisfy one of the procedures and dossiers prescribed at these points, the establishments must calculate and pay VAT as for domestically consumed goods.
f/ For business households paying VAT by the method of direct calculation on added value which have been permitted to pay the tax by the tax deduction method, they shall be allowed to deduct the VAT on the goods and services purchased from the month they are permitted to pay the tax by the tax deduction method; for goods and services purchased before that month, they shall not be entitled to input VAT deduction.
1.3. The bases for determining the deductible tax amounts prescribed above include the VAT amounts inscribed in the added value invoices of purchased goods or services; vouchers on the VAT payment at the importation stage; vouchers on the VAT payment on behalf of the foreign parties under the guidance of the Ministry of Finance, applicable to foreign organizations and individuals conducting business activities in Vietnam not in the investment forms under the Law on Foreign Investment in Vietnam.
Business establishments must not calculate and deduct the input VAT in the following cases: Added value invoices are used at variance with law provisions, such as they are not inscribed with the VAT (except for special cases where added value invoices may be inscribed with the VAT-inclusive prices); the sellers’ names, addresses and/or taxation codes are not inscribed or inscribed incorrectly so that the sellers are unidentifiable; VAT payment invoices and vouchers are fake; invoices are erased or deleted, false invoices (goods or services are not actually sold); invoices are inscribed with a value higher than the real value of goods or services.
2. The method of direct calculation of VAT on added value
2.1. Subjects of application of the method of direct calculation on added value include:
- Vietnamese individuals engaged in production and business;
- Foreign organizations and individuals that conduct business in Vietnam not in the investment forms under the Law on Foreign Investment in Vietnam and do not meet all the conditions for accounting, invoices and vouchers serving as a basis for tax calculation by the tax deduction method;
- Establishments trading in gold, silver, gems and foreign currencies.
2.2. Determination of payable VAT amounts:
The payable The added value
The VAT rate
VAT = of taxable x for such goods
amount goods or service or service
The added value of goods or service = The turnover of goods sold or service provided - The cost price of the goods sold or service provided
For a number of business lines, the added value is determined as follows:
- For production and business activities, it is the difference between the sale turnover and the turnover of purchased goods and/or services used in production and/or business. Where business establishments cannot account the turnover of purchased supplies, goods and/or services corresponding to the turnover of sold goods, the added value is determined as follows:
The cost of goods sold is equal to (=) The turnover left at the beginning of the period plus (+) the purchase turnover in the period minus (-) the turnover left at the end of the period.
Example: Establishment A makes wood articles. In the month, it sells 150 products and earns a total sale turnover of VND 25 million.
- The value of supplies and materials purchased for production of such 150 products is VND 19 million, of which:
+ Principal raw material (timber): VND 14 million.
+ Other materials and services purchased from outside: VND 5 million.
The VAT rate is 10%. The VAT amount payable by Establishment A is calculated as follows:
+ The added value of the sold products:
VND 25 million - VND 19 million = VND 6 million.
+ The payable VAT amount:
VND 6 million x 10% = VND 0.6 million.
- For construction and installation, it is the difference between the amounts earned from the construction and installation of works or work items minus (-) the cost of materials and supplies, the cost of power, transportation, services purchased from outside and other expenses for the construction and installation of works or work items.
- For transport activities, it is the difference between the collected transport freight, loading and unloading charges minus (-) the cost of petrol and oil, spare parts and other expenses for transportation activities.
- For food and drink catering activities, it is the difference between the amounts earned from the sale of foods and drinks, the service charges and other revenues minus (-) the cost prices of goods and services purchased for the food and drink catering.
- For the trading in gold, silver, gems and foreign currencies, the added value is the difference between the turnover from the sale of gold, silver, gems and/or foreign currencies minus (-) the cost prices of the sold gold, silver, gems and/or foreign currencies.
- For business establishments subject to VAT calculation by the tax deduction method and engaged in the trading in gold, silver, gems and/or foreign currencies subject to application of the method of direct calculation on added value, they must separately account the input VAT amounts for declaration of the VAT payable for goods and services of different business activities and different tax calculation methods.
Where they cannot make separate accounting, the deductible input VAT tax amounts shall be determined corresponding to the percentage between the turnover of goods and services subject to VAT calculated by the tax deduction method and the total turnover of goods sold in the period.
- For other business activities, it is the difference between the amounts earned from business activities minus (-) the cost prices of goods and services purchased for performance of such business activities.
The above-prescribed turnover of goods and services sold includes also surcharges and charges collected outside the sale price and enjoyed by business establishments, regardless of whether or not they have been collected.
The above-prescribed turnover of purchased goods and services includes also various taxes and charges already paid and included in the payment prices of goods and services purchased.
- Business establishments subject to VAT payment by the method of direct calculation on added value must not account the value of purchased assets, invested and constructed fixed assets into the turnover of purchased goods and services for calculation of added value.
2.3. For each business establishment, the method of determination of added value serving as a basis for calculation of payable VAT is as follows:
- For business establishments that have fully effected the sale and purchase of goods and services accompanied with sufficient invoices, vouchers, and book-keeping entries, the added value is determined on the basis of the sale and purchase prices inscribed on vouchers.
- For business establishments that have enough invoices and vouchers for the sale of goods and/or the provision of services, are able to determine the correct turnover from the sale of goods and/or the provision of services according to goods sale and/or service provision invoices but do not have sufficient goods and service purchase invoices, the added value is determined as the turnover multiplied by (x) the percentage (%) of added value calculated on the turnover.
- For business individuals (households) that do not have enough goods sale and/or service provision invoices, the tax offices shall base themselves on the business situation of each household to fix the turnover for tax calculation; the added value is determined as the fixed turnover multiplied by (x) the added value percentage (%) calculated on the turnover.
Invoices used as a basis for VAT calculation by this method are those used in accordance with law provisions. Invoices which are not used in accordance with law provisions as guided at Point 1.3, Section III, Part B of this Circular shall not be used as a basis for VAT calculation.
The General Department of Tax shall guide the provincial/municipal Tax Departments in determining the added value percentage (%) calculated on turnover to serve as a basis for VAT calculation, which is suitable to each business line and reasonable for different localities.
IV. GOODS AND SERVICE PURCHASE/SALE INVOICES AND VOUCHERS
Business establishments, when purchasing or selling goods and/or services, shall have to abide by the regime on invoices and vouchers as prescribed by law.
1. Business establishments liable to pay VAT by method of tax deduction, when selling goods and/or services subject to VAT, must use the added value invoices, including the cases where they sell goods and services subject to special consumption tax (except where they are permitted to use special-type invoices, vouchers which are inscribed with the payment prices being VAT-inclusive prices).
2. Business establishments liable to pay tax by method of direct calculation on added value, when selling goods and/or services, must use goods sale invoices.
3. When making invoices, the business establishments must fully and correctly inscribe all details prescribed on the invoices. For added value invoices, they must be clearly inscribed with the VAT-exclusive sale prices, surcharges and charges calculated outside the sale prices (if any), the VAT, the total payment prices inclusive of tax; if the VAT-exclusive sale prices and the VAT are not inscribed separately and only the payment prices are inscribed, the output VAT must be calculated on such payment prices.
4. Lawful invoices and vouchers are:
- Invoices issued by the Finance Ministry (the General Department of Tax) and provided by tax offices for business establishments.
- Invoices printed according to set forms by business establishments for their own use, which has already been approved by the General Department of Tax.
- Special-type invoices and vouchers of other kinds, permitted for use.
5. Guidance on the use and inscription of invoices in a number of specific cases is as follows:
5.1. Production and/or business establishments liable to pay tax by method of tax deduction, which sell goods and/or services not subject to VAT; sell goods and services to VAT-exempt subjects; sell gold, silver, gems, foreign currencies, shall have to use added value invoices; on such value added invoices only lines for the sale prices are inscribed with the VAT-exclusive prices while the lines for tax rates and VAT amounts are not inscribed and crossed out. In case of selling goods or services not subject to VAT or to VAT-exempt subjects, the invoices must clearly state that the goods are not subject to VAT or goods sold to the VAT-exempt subjects.
5.2. Where exporting and/or importing business establishments liable to pay VAT by method of tax deduction undertake the consigned import of goods for other establishments, when handing over the goods, they shall make the invoices as follows:
If the import consignees, when returning goods imported by consignment, have already paid VAT at the importation stage, they shall make the added value invoices for use by the import consignors as basis for declaration and deduction of input VAT on goods imported by consignment. Where the import consignees have not yet paid VAT at the importation stage, when handing over the imported goods, they shall fill in the delivery-cum-internal transport bills issued by the Finance Ministry (the General Department of Tax) and make the internal transfer orders for use as vouchers for circulation of goods on the market. Only after paying VAT at the importation stage for goods imported by consignment can the establishments make the invoices according to the above regulations.
An added value invoice on delivery and hand-over of goods imported by consignment shall be inscribed with:
a/ The VAT-exclusive sale price covering the value of goods actually imported at CIF price, the import tax, the special consumption tax and other amounts payable according to the regime at the importation stage (if any).
b/ The VAT rate and VAT amount, inscribed according to tax payment notices of the customs offices.
c/ The total payment amount (= a + b).
The import consignees shall make separate added value invoices in order to have the commission paid for the consigned import.
5.3. Production and/or business establishments (including those engaged in processing of export goods) which pay tax by tax deduction method and have export goods subject to VAT, when exporting goods, shall use added value invoices.
When delivering goods for transport to border gates or places where export procedures shall be carried out, if having no grounds yet to make added value invoices, the establishments shall use the delivery-cum-internal transport bills issued by the Finance Ministry (the General Department of Tax) together with the internal transfer orders as vouchers for circulation of goods on the market. After completing the procedures for export goods, the establishments shall make added value invoices for export goods.
In case of consigned export of goods (including consigned export of processed goods for other establishments), when delivering goods to the export consignees, the consignors shall use delivery-cum- internal transport bills issued by the Finance Ministry (the General Department of Tax) together with the internal transfer order. When goods are actually exported, with the certification thereof by the customs offices, basing themselves on the export consignees’ vouchers for comparing and certifying the quantity and value of actually exported goods, the goods export consignors shall make added value invoices for VAT payment and refund declarations. In this case, the exporting business establishments must keep copies 2. In cases where the exporting business establishments have registered with the tax offices for printing and circulating by themselves invoices to be used for export goods and to be issued to foreign clients, they shall use invoices printed by themselves for tax payment and refund declaration.
5.4. Use of invoices, vouchers for goods consumed internally, donated, presented as gifts, put for sale promotion:
- For products, goods delivered for internal consumption, sale promotion, advertisement, in service of goods production and business, services subject to VAT, the establishments shall use added value invoices, which shall clearly state that the goods are for internal consumption in service of production and business, or sale promotion, advertisement, free of charge. The business establishments shall use invoices as accounting vouchers.
- For products, goods delivered for barter, reward or wage payment to laborers, for internal consumption not in service of production and business or in service of the production of, and/or trading in, goods and/or services not subject to VAT, the establishments shall have to make added value invoices (or sale invoices), which are fully inscribed in all contents and with VAT calculated like invoices on sale of goods to customers.
5.5. For goods and services sold at discount prices inscribed on their invoices, such invoices must clearly state the discount percentage or level, the VAT-exclusive price (discount price), VAT and total payment price inclusive of VAT.
If the price reduction is applied on the basis of the quantity, turnover of actually purchased goods or services, which must reach certain levels, the reduced amounts of already sold goods shall be adjusted on the invoices of the last purchase of goods or services or the next period. Such invoices must contain the invoices’ serial numbers and reduced amounts.
5.6. Production and/or business establishments which deliver and transfer goods to their dependent cost-accounting establishments such as branches, shops… in other localities (provinces, centrally-run cities) for sale or transfer among branches, dependent units; deliver goods back to the business establishments from dependent cost-accounting units; deliver goods to agents for sale at fixed prices and enjoying commissions based on the mode of business organization and cost-accounting, may opt for either of the two following ways of using invoices, vouchers:
- Using added value invoices as a basis for settlement and declaration of VAT payment in each unit and at each independent stage.
- Using delivery-cum-internal transport bills issued by the Finance Ministry (the General Department of Tax), together with the internal transfer orders for goods internally transferred; using the delivery bills for goods for agency sale, issued by the Finance Ministry (the General Department of Tax) for goods delivered to agents, together with the internal transfer orders.
Dependent cost-accounting units and units acting as agents, when selling goods in various forms, shall have to make invoices as prescribed, and at the same time, to make the lists of sold goods (according to Form No. 02/GTGT promulgated together with this Circular, not printed herein), and send them to the establishments which have delivered the goods to them or delivered goods for agency sale so that these establishments make added value invoices for goods actually consumed. Where an establishment has a large sale volume and turnover, such a list may be made every 5 or 10 days. Where the sold goods are subject to different VAT rates, different lists must be made for sold goods according to their tax rates.
Production and business establishments shall apply only either of the two methods of using invoices and vouchers prescribed at this Point and, before applying it, must make registration with their managing tax offices.
5.7. Business establishments acting as goods-gathering and -purchasing agents in various forms, when returning goods to the gathering and purchase- consigning establishments, must make invoices for goods gathered and purchased by agency and enjoyed commissions (if any).
5.8. Where business establishments purchase goods and the sellers have issued the invoices while the purchasers have received the goods which have, however, been partially or fully returned due to their wrong specifications or poor quality, before returning such goods to the sellers, the establishments shall have to make invoices clearly stating the goods returned to the sellers due to wrong specifications, poor quality, and the VAT. These invoices shall serve as a basis for the purchasers and the sellers to adjust the already declared purchase and sale turnovers as well as VAT amounts.
Where the purchasers have no such invoices, upon the return of goods, the purchasers and the sellers shall have to make the written records or written agreements, clearly stating the types, quantity and value of the returned goods according to the VAT-exclusive prices and the VAT inscribed on the sale invoices (serial numbers and dates of the invoices), the reasons for the return, which are sent together with the invoices to the sellers. Such records shall be kept together with the sale invoices for use as a basis to adjust the sellers’ declared sale turnover and VAT.
Where the sellers have delivered goods and made the invoices while the purchasers have not yet received the goods but detected that goods are of wrong specifications and/or poor quality, hence they must be fully or partially returned, upon the return of goods, the purchasers and the sellers shall have to make written records thereon clearly stating the type, quantity, the VAT-exclusive value and VAT amount of the returned goods and the reasons therefor as inscribed on the sale invoices (serial numbers, codes and dates of the invoices) for returning the goods together with the invoices to the sellers so that the latter can re-make added value invoices for the received goods and use them a basis for adjusting their turnover and output VAT.
5.9. Where business establishments have sold or supplied goods and/or services and made invoices therefor but have to adjust the sale prices (up or down) due to poor quality and/or wrong specifications of such goods and/or services, the sellers and the purchasers shall have to make written records thereon or written agreements clearly stating the quantity and specifications of goods, the level of price increase (decrease) as inscribed in the sale invoices (serial numbers, date of the invoices, time), the reasons for price increase (decrease), and at the same time the sellers shall make invoices according to the adjusted prices. Such invoices clearly state the adjusted prices of the goods and/or services in invoices no…, code…. Basing themselves on the invoices with the adjusted prices, the sellers and the purchasers shall declare the adjusted purchase or sale turnovers, output and input taxes.
5.10. Business establishments which deliver goods for mobile sale shall use delivery-cum- internal transport bills, issued by the Finance Ministry (the General Department of Tax), together with the internal transfer orders and, when selling goods, make invoices as prescribed.
5.11. Business establishments which directly retail goods and/or provide services of a value below the prescribed levels shall not have to make invoices; if the purchasers request invoices, they shall have to make the invoices as prescribed; where invoices are not made, the retail lists (according to form No. 06/GTGT promulgated together with this Circular, not printed herein) must be made for use as basis for tax calculation.
5.12. For construction establishments having construction and installation projects which take a long time and for which the payment is made according to implementation progress or completed and handed-over work volume, they must make invoices of payment for the completed and handed-over construction volume. Such added value invoices must clearly state the tax-exclusive turnover and the VAT. Where the construction works have been completed and the invoices of payment for the value of the works have been made but then the payable value of the construction volume is adjusted down in the process of approving the settlement of the value of the capital construction works, invoices and vouchers for the adjusted payable value of the works must be made as in the case prescribed at Point 5.9 of this Section.
5.13. For establishments which are assigned or leased land by the State for investment in the construction of houses for sale, infrastructures for lease, for transport services with turnover from international transport; international tour services, invoices shall be made as follows:
- The line for the sale price shall be inscribed with the VAT-exclusive house sale price, infrastructure rental, transport or package tour service turnover.
- The line for VAT calculation shall be inscribed with the house sale price (or infrastructure rental) already minus the land use levy (or land rental) payable to the State budget; tourist turnover already minus expenses arising overseas such as those for meals, accommodation, transport; transport turnover already minus international transport turnover.
- The line for VAT rate and amount shall be inscribed with the payment prices as prescribed.
(See example at Point 10, Section I, Part B of this Circular).
5.14. Financial leasing establishments which lease assets subject to VAT shall make invoices as prescribed,
Establishments engaged in financial leasing activities, when leasing assets subject to VAT, must have added value invoices (for assets purchased at home) or vouchers of VAT payment at the importation stage (for imported assets); the total VAT amounts inscribed on the financial leasing service invoices must match the VAT amounts inscribed on added value invoices (or vouchers of VAT payment at the importation stage).
For cases where assets purchased for lease are not subject to VAT and added value invoices or vouchers of VAT payment at the importation stage are not available, VAT must not be inscribed on the invoices.
When the VAT on financial leasing assets have been fully deducted and the asset ownership right has been transferred to the lessees, the lessors shall transfer to the lessees the added value invoices or the imported goods purchase invoices together with the vouchers of VAT payment for the financial leasing assets.
5.15. For foreign currency-trading establishments conducting foreign currency-purchasing and -selling activities abroad, they shall make the detailed lists of the trading turnover of each kind of foreign currency. The establishments must keep all vouchers on transaction with the purchasers or sellers abroad strictly according to the Ordinance on Accounting and Statistics. For foreign currency- buying and -selling activities arising at home, invoices must be made according to regulations.
5.16. For establishments engaged in buying and/or selling gold, silver, gems, if they buy them from non-business individuals who have no invoices, they shall make the lists of purchased goods according to form No. 04/GTGT promulgated together with this Circular (not printed herein).
5.17. Export-processing enterprises, when selling goods and/or services, shall use sale invoices (or invoices issued by themselves) according to the Finance Ministry’s regulations.
In case of using adjusted invoices, business establishments must not inscribe negative (-) figures therein.
6. For individuals as well as administrative and non-business units that are engaged in the irregular production of, and/or trading in, goods and/or services subject to VAT and have the demand to use invoices, they shall be supplied with separate invoices for use for each specific case.
C. TAX REGISTRATION, DECLARATION, PAYMENT AND FINAL SETTLEMENT
I. TAX PAYMENT REGISTRATION:
1. Business establishments, including companies, factories, enterprises, branches and stores attached to principal business establishments, must register tax payment with the provincial/municipal Tax Departments or Sub-Departments for business individuals, regarding the business locations, business lines, labor, capital, tax payment venues and other relevant indexes according to set forms on tax payment registration and guidance of the tax offices.
For newly set-up establishments, the time limit for tax payment registration shall be 10 days as from the date they are granted the investment licenses or business registration certificates and the seals; where the establishment