Chapter 2: VAT

VAT is a sale tax, charged as a percentage of the added value of an article or commodity as it changes hands from manufacturer to wholesaler and to retailer and consumer.

1.      Taxable goods and services: subject to VAT are goods and services used for production, bz and consumption in VN (including imported goods and services), except for those listed as non-taxable items.

2.      Non-taxable goods and servicess- exemption

-          Necessities such as education and health service

-          For social and charity objectives

-          Products of preferential fields

-          Imported goods, but not really used for production, distribution and consuming in VN, such as goods transferred from border gate to border gate, transited or transported by land

-          Products and services considered to be for non-profit aim such as public transportation by bus

-          Goods and services paid by the gov such as imported weapons

3.      Tax base: vat base is base price. The base price for sale of goods or provision of services is the total value received or receivable by a supplier from the sale or service exclusive of output tax

The time to determine the base price is the time a bz establishment completely transfers the right to owning or using goods or services, regardless of the time of payment

4.      Tax rates:

·         The 0% rate:

-          Purpose: the taxpayer can claim tax credit on input VAT, so they can get refund VAT for exported goods and services. Therefore, the price of exported goods doesn’t comprise VAT, which can make exporters get competitive advantage. Thus it can reduce tax burden falling on domestic traders. Exported goods will be taxed where they are consumed, which means that VAT follows the destination principle

-          Conditions for zero rate:

Goods: legitimate economic contract, export declaration form, bank payment and legitimate import invoice

Services: legitimate economic contract, bank payment and legitimate input invoice.

·         The 5% rate: is applicable to goods and services basically used for production and consumption, goods and services such as clean water in services of production and daily life, curative and preventive medicines for human and animal use…

·         The 10% rate is applicable to the normal goods and services, such as petroleum oil, gas….

5.      VAT method: credit method and substraction method. Just study credit method

-          Who has to apply this one: bz establishment and org, enterprises and other bz establishments and org allowed applying the tax credit method under the guidance of the Ministry of finance, except for those applying the substraction method

-          Formula:

VAT amount payable = Output VAT – Deductible input VAT

The output VAT = Base price x VAT rate

      The deductible input VAT: Total VAT on added value invoice, vouchers of payment of VAT at import stage.

-          Principle of deductible input VAT

Only VAT on goods or services Used for the production of and trading in  goods and services which are subject to VAT is deductible (some exceptions).

The dedcutible input tax amount of goods or services arising in a month is declared for credit immediately when the tax amount payable in that month is determined, regardless of whether these goods or services have been delivered for use or still remain in stock, except for imported goods and investment projects.

Only legible input invoices, vouchers are deductible

Via-bank payment

-          Conditions:

Having elligible contracts on sales of goods, processing of goods, provision of services for foreign orgs or individuals

Customs declarations of exported goods, with the certification by the custom offices that the goods have been exported

Via-bank payment applicable to transactions having value of VND 20 million or more or regarded as via-bank payment.

Added value invoices on the sale of goods or services or return of processed goods to foreign parties or exporting-processing enterprise.

Chapter 3: excise duty

1.      Excise duty is a tax that is imposed on certain special goods and services imported or produced within a country

2.      Excisable goods and services

-          Goods: cigarettes, cigar and processed products made from tobacco; liquors; beers; under 24-seat passenger cars, semi passenger cars; aircrafts and passenger boats; gasoline of various kinds, naphtha, reformade componentc and other components for mixing gasoline; air conditioners of a capacity of <= 90000 BTU; playing cards, votive gilt paper+votive objects; motors w cylinder capacity of over 125 cubic cm

-          Services: dancing halls; massage parlors, karaoke bars; casinos, electronic games with prizes; bet tickets bz; golf bz: sale of golf club membership cards, golf playing tickets; lottery bz

3.      Non-taxble transaction

Why: - the gov wants to stimulate export, because export transaction is not taxed, price of exported goods is cheaper.

-          Besides, excise duty is consumption tax which follows destination principle. When exporting, the foreigners consumes those goods, not for consumers in domestic country

4.      Base price:

-          Goods produced in country: base price= before VAT price of goods/1+ excise duty rate of goods

-          Imported goods: = import tax base price + the import tax

-          Service:    

5.      Tax rate: the highest rate is 70%, the lowest is 10%

6.      Tax calculation: excise duty payable= base price of goods or service* tax rate

Chapter 4: custom duty

1.      Dutible goods

Goods exported or imported through vietnamese border gates or border, including goods exported or imported through border gates on land, rivers, at seaport, transnational railways, international posts & other customs procedure clearance venues established under decisions of competent state agancies.

Goods brought from the domestic market into non-tariff zones and vice versa.

Other traded or exchanged goods that are considered imported or exported

2.      Non-dutiable objects

-          Goods transited and transported by mode of border-gatre transshipment through VN’s border gates or borders under the provisions of custom law(not real import or export)

-          Humanitarian aid goods, non-refundable aid goods provided by foreign govs…..(not for commercial purpose)

-          Goods exported from non-tariff zones to abroad, goods imported from aboad into non-tariff zones and only used therein, goods brought from one non-tariff zone to another

-          Exported petroleum belonging to the State’s natural resources tax

3.      Tax base- base price

-          For exports: is the selling price at the export border-gates FOB or DAF, exclusive of insurance I and freight F

-          For imports:base on the transaction value

Transaction value is the total amount of money actually paid or payable by the buyer directly or indirectly to the seller for purchasing imported goods, after being adjusted with additions or deductions where necessary

It includes: freight cost F+ insurance I + commission except for buying commission+wrapping cost for imports+ containers for imports+other benefits or payments paid to the seller

-          Conditions to apply this method:

There must be no restrictions stipulated by the seller on the disposal and use of the goods after the importation

The goods price or goods sale doesnot depend on conditions or payment for which a value of goods being valued cannot be determined

After re-selling, transferring or using imported goods, the buyer shall not have to additionally pay any part of the proceeds from the disposal of imported goods.

The buyer and the seller have no special relationship or such relationship, if any, will not affect the transaction value.

4.      Tax rate

-          Export tax rates: are specified for every goods item in the Export tax Tariffs promulgated by the ministry of finance within the ceiling rates stipulated by the Standing Committee of the National Assembly of VN

-          Import tax rates: includes preferential tax rates, specially preferential tax rates and ordinay tax rates

preferential tax rates: are applicable to imported goods originated from countries or groups of countries or territories which implement the most favored nation treatment in trade relations with Vn

specially preferential tax rates: are applicable to imported goods originated from countries or groups of countries or territories which implement specially preferential treament concerning import tax rates w VN under the regime of free trade areas, tariff alliance, or aiming ro facilitate border trade flows and other cases of special preferential treatment

-          Conditions for application of specially preferential tax rates:

Imported goods must be accompanied by certificates of origin from countried, groups of countries or territories which have reached agreements w Vn on specially preferential treament concerning import tax rates.

Imported goods must be items specified in the agreements and meets all conditions stated in such agreement.

Certificates of goods must be compliant w current provisions of law on origin of goods

-          Ordinay tax rates are applicable to imported goods orginating from countries, groups of countries or territories which do not implement the most favored nation treament or special treatment regarding import tax toward VN

5.      Tax exemption consideration

-          Imported goods for exclusive use in direct service of national security or defense

-          Imported goods exclusively in direct service of scientific research, except for the case specified at axemption section

-          Imported goods for exclusive use in service of education and training

-          Gifts or present permitted for export from VN as gifts and presents to orgs or individuals in foreign countries…