Newsletter regarding Draft Law on Value Added Tax (Amended)

1. Goods and services not subject to Value Added Tax (“VAT”)

• To specify transactions as capital transfers not subject to VAT , for clear distinguishing them from investment project transfers and asset transfers subject to VAT;
• To include “goods imported by financial leasing companies for the purpose of financial leasing to entities within a non-tariff zone” in the not subject to VAT category;
• To increase the annual revenue threshold for business households and individuals exempt from VND 100 million or less to VND 150 million or less;
• To add "imported goods for supporting and sponsoring the prevention and fighting of natural disasters, epidemics, and wars as per Government regulations" in the not subject to VAT category;
• To add “software services in accordance with legal regulations” in the not subject to VAT category.

 

2. VAT rate

• To narrow the category of "export services subject to the 0% VAT rate" to three groups of services provided to foreign organizations and individuals, including: Vehicle rental services for use outside Vietnam; International transportation services; and Aviation and maritime services provided directly for international transport;
• To add goods sold in duty-free shops to the category of exported goods subject to 0% VAT;
• To recategorize some goods and services from non-taxable category to taxable categories:
  • Subject to 5% tax rate: Offshore fishing vessels; Fertilizer; Special-purpose machinery and equipment for agricultural production: ploughing machines; harrowing machines; milling machine; slitting machine; root removal machine; field leveling equipment; seeding machines; rice-planting machines; sugarcane planting machines; carpet seedling production machine system; tillers, bed cultivators, spreaders, fertilizer spreaders, and fertilizers; Machines and sprayers for plant protection chemicals; rice, corn, sugarcane, coffee, cotton harvesting machines; tuber, fruit and root harvester; tea leaf cutting machine, tea picking machines; rice threshing machines; corn peeling machines; corn threshing machine; soybean thresher; peanut shelling machine; coffee husk grinders; coffee and wet rice processing equipment; dryer for agricultural products (rice, corn, coffee, pepper, cashew...), aquatic products; machines for collecting and loading sugarcane, rice, and straw in the fields; poultry egg incubator and hatcher; grass harvesting machines, straw and grass baler machines; milking machines and specialized machinery and equipment.
  • Subject to 10% tax rate: Public post and telecommunications and universal Internet services;  Services of maintenance of zoos, flower gardens, parks, street greeneries and public lighting;.
• To recategorize some goods and services from subject-to-5% category to subject-to-10% category:
  • Fresh and live food; Unprocessed forest products; Sugar; by-products in sugar production, including molasses, bagasse and sludge.
  • Cultural, exhibition, physical training and sports activities; film production, film import, film distribution and screening.

3. Regarding VAT declaration of omitted invoices

To add regulations that allow taxpayers to declare and deduct the omitted input VAT amounts in the period when the omission errors are discovered, before the tax authority announces the tax audit or tax inspection decision at the taxpayer's premises.

 

4. Regarding VAT deductibility and refund conditions

To add regulation on input VAT deductibility:

• There is proof of non-cash payment payment for purchase from 05 million VND or more, instead of 20 million VND or more as currently prescribed;
• For exported goods and services: supporting documents must include packing slip, bill of lading, and cargo insurance.

To add regulations on VAT refund conditions:

• Expanding eligibility for VAT refund to the following cases:
  • Business establishments that only produce goods and provide services subject to the 5% VAT rate and their accumulated input VAT has not fully been credited of VND 300 million or more after a period of 12 months or 04 quarters;
  • Business establishments having registered VAT declaration on credit method and having investment projects in compliance with investment laws and regulations are eligible for refund of input VAT incurred during the investment stage (applicable to both new investment projects and expansion investment projects) where the accumulated input VAT not fully credited is VND 300 million or more. The time limit for business establishments to apply for VAT refund is within one year from the date when the investment project, investment phase, or investment unit is completed.
• Remove regulations:
  • Remove the regulation determining the rate of 51% for export products that are natural resources and minerals for VAT refund purposes. Instead, there will be a list regulated by the Government of exported products that are natural resources and minerals exploited and processed into other products, subject to VAT refund;
  • Abolish the regulation that VAT cannot be refunded for investment projects of business establishments that do not contribute enough charter capital as registered;
  • Abolish regulations on VAT refund for ownership change, business conversion, merger, consolidation, division, separation, and termination of operations.