On 18 December 2013 the Government issued Decree No. 209/2013/ND-CP providing guidelines for the implementation of the Law on Value Added Tax (Decree 209). Decree 209 took effect as of 1 January 2014 and replaced Decree No. 123/2008/ND-CP dated 8 December 2008 and Decree No. 121/2011/ND-CP dated 27 December 2011 on the same subject. Decree 209 makes a number of new guidelines, including:
- Expansion of the group of subjects which are not required to declare and pay value added tax (VAT):
In particular, organizations and individuals transferring an investment project for production or business in value added taxable goods or services to enterprises or cooperatives is not required to make VAT declaration and payment.
- Provision of clearer guidance for free of charge goods/services, especially goods/services used for trade promotion:
- The taxable price is determined to equal zero in case of goods/services used for trade promotion if such goods/services or trade promotion activities are in compliance with the regulations on commerce (to be registered with or submitted to the commercial authorities); and
- If not in compliance with the regulations on commerce as said, the taxable price of such goods/services is determined to their market values (as goods and services used for internal consumption, for a gift or donation).
- Revision of exported goods/services to which the VAT rate of 0% is applied:
- Goods exported abroad, sold into non-tariff zones; civil/building works constructed, installed overseas or in non-tariff zones; goods sold with place for delivery and receipt outside Vietnam; accessories, spare parts for replacement, repair, maintenance of vehicles, machinery and equipment for foreign parties and for consumption outside Vietnam; on-site export and other cases which are considered to be exported under the current law and regulations; and
- Services provided directly to overseas organizations/individuals or in non-tariff zones and consumed outside Vietnam, or consumed in non-tariff zones.
- Revision of VAT calculation method:
- Credit method applies to (i) business establishments currently operating and having an annual turnover of VND1 billion or more from sale of goods and provision of services; (ii) enterprises and co-operatives, which are voluntarily registered to apply VAT credit method, currently operating and having an annual turnover of less than VND1 billion from sale of goods and provision of services; and (iii) foreign contractors providing goods and service to the oil and gas sector, even if they bear foreign contractor tax under the withholding method. If they still choose to use the withholding method, the output VAT is now applied at the standard rate (instead of the deemed rate) and no input VAT can be claimed; and
- Direct method applies to enterprises and co-operatives currently operating and having an annual turnover of less than VND1 billion, except for the cases of voluntary registration for application of the credit method as said above.
- Changes in tax credits and tax refunds:
- VAT on goods and services purchased with value of 20 million or more paid in cash will not be credited nor treated as a deductible expense;
- A business establishment that changes its tax payment method is allowed to credit input VAT incurred from the beginning of application of the credit method. It may also be allowed to record the VAT costs not yet credited when converting to the direct method;
- The input VAT to be refunded is increased from VND200 million to VND300 million for business establishments each month or each quarter or for business establishments of the VAT credit method having new investment projects or under investment phase; and
- The eligible accumulated period for refund of input VAT is increased from 3 months to 12 months.