Hanoi GMT +7
EY
Corner Stone Building
8th Floor
16 Phan Chu Trinh Street Hoan Kiem District Hanoi Vietnam
Indirect tax contacts
Huong Vu
+84 (24) 3211- 6662 huong.vu@vn.ey.com
Trang Pham +84 (24) 3211-6665 trang.pham@vn.ey.com
Ho Chi Minh City GMT +7
EY
Bitexco Financial Tower
28th Floor
2 Hai Trieu Street District 1 Ho Chi Minh City Vietnam
Indirect tax contacts
Robert M. King
+84 (28) 3629-7744 robert.m.king@vn.ey.com
Thinh Xuan Than +84 (28) 3629-7775 thinh.xuan.than@vn.ey.com
Anh Tuan Thach +84 (28) 3629-7366 anh.tuan.thach@vn.ey.com
A. At a glance
Date
Gia tri gia
1 January 1999
Trading bloc membership Association of Southeast Asian Nations (ASEAN)
Administered by Ministry of Finance (http://www.mof.gov.vn)
VAT rates
Standard
Other
VAT number format
Zero-rated (0%) and exempt
Tax ID number - 9999999999 (10 digits)
VAT return periods Monthly or quarterly
Thresholds
Registration
None
Recovery of VAT by non-established businesses No (except under certain circumstances)
B. Scope of the tax
VAT applies to goods and services used for production, business and consumption in Vietnam, including goods and services purchased from foreign suppliers, except for those specifically identified as not subject to VAT.
VAT on imported goods is payable by the importer within the same time limit for declaring and paying import duty.
C. Who is liable
Organizations and individuals that produce and trade in taxable goods and services in Vietnam or who import taxable goods and services from overseas (referred to in this chapter as “busi nesses”) are liable to pay VAT. Businesses for these purposes include the following:
• Business organizations with business registrations issued under Vietnamese laws
• Economic organizations of political, social and professional organizations and units of the people’s armed forces
• Enterprises with foreign-owned capital incorporated under Vietnamese laws and foreign corpo rations and individuals conducting business in Vietnam that have not established a legal entity in Vietnam
• Individuals, family households, partnerships and other forms of businesses conducting produc tion, trading or import activities in Vietnam
• Organizations and individuals conducting production and business in Vietnam and purchasing services (including services attached to goods) from foreign organizations without a permanent establishment in Vietnam or foreign individuals who are nonresidents of Vietnam
• An Export Processing Enterprise (EPE) and its branches (if any) that are established to trade in goods and do the tasks related to goods trading in Vietnam in accordance with the laws of Vietnam
An EPE imports goods for manufacturing and then re-exports the goods. An EPE is generally not subject to the requirement of VAT filing in Vietnam. However, under current regula tions an EPE is also allowed to do some trading activities that are indicated in an EPE’s business license. To perform trading activities, an EPE is required to separately account and declare relevant expenses/revenues from its manufacturing operations. Accordingly, an EPE is liable to register, declare and make payment of VAT for its trading activities. This means that trading activities conducted by an EPE and its branches (if any) shall be treated simi larly to transactions of local entities
No VAT registration threshold applies in Vietnam.
In certain cases, tax declaration and payment are not required. Examples of cases where tax declaration and payment are not required:
• Organizations and individuals that receive revenues from compensation (including compensation for land and land-attached assets upon land recovery under decisions of competent state agencies), bonus, support, transfer of emission rights and other financial revenues (except for compensation/cash supports received for the purpose of performing service of repair, warranty, sales promotion or advertising to supporters, in which case VAT declaration and payment are required)
• Services provided by foreign organizations that do not have a permanent establishment in Vietnam, limited to the following: repair of vehicles, machinery and equipment (including supplies and spare parts); advertising and marketing; investment and trade promotion; goods sale and service provision brokerage; training; and sharing of charges for international post or telecommunications services provided outside Vietnam between Vietnamese and foreign
partners, and lease of communication and transmission lines and foreign satellite frequency bands in accordance with law
• Assets sold by nonbusiness individuals or organizations (which do not have to pay VAT when selling their assets)
• Organizations/individuals that transfer investment projects on production or trading of goods or services liable to VAT to enterprises and cooperatives
• Assets used for capital contributions
Exemption from registration. The VAT Act in Vietnam does not contain any provision for exemp tion from registration. Notwithstanding, EPEs and suppliers of nontaxable supplies are exempted from VAT filings (see detail above in respect of EPEs).
Voluntary registration and small businesses. Ongoing enterprises and business cooperatives that (1) adopt full Vietnamese Accounting Standards, as well as accounting books (together with invoic es) under Vietnamese regulations and (2) generate revenue less than VND1 billion per year from the supply of goods and services subject to VAT, may apply to register voluntarily to deduct VAT.
A foreign individual or corporation doing business in Vietnam may also register if it satisfies the following conditions:
• It has a contract with a Vietnamese entity for more than 183 days or is a resident of Vietnam
• It has a permanent establishment in Vietnam
• It adopts full Vietnamese Accounting Standards or keeps accounting books in accordance with Vietnamese accounting laws
Group registration. Group VAT registration is not allowed in Vietnam.
Non-established businesses. Foreign contractors that have a permanent establishment in Vietnam, that conduct business in Vietnam for more than 183 days and that adopt the Vietnamese Accounting Standards/Hybrid Method pay VAT in accordance with the tax credit method and pay their tax liabilities directly to the tax office. Otherwise, they must pay VAT on a withholding basis.
As outlined above, there are two methods for VAT calculation (under the current VAT regulations) in Vietnam:
• Credit method: declare the input and output tax and pay to authority the offset amount between output and input tax
• Withholding method/direct method: fixed tax rate on added value/revenue
A foreign contractor will elect the most suitable method for its VAT filings in Vietnam, subject to fulfillment of relevant conditions. For example, if it anticipates that it will incur a lot of local input tax, it will apply credit method.
The tax authority will issue a tax number for each foreign contractor (FC) when they register directly with the tax authority. Otherwise, the Vietnamese contracting party will be responsible for registering and declaring the tax liability for the FCs on their behalf.
Foreign nonresident entities selling goods and services in Vietnam via digital and e-commerce supply chains must directly register and pay taxes in Vietnam or authorize a Vietnamese party to do so on their behalf. Tax liabilities are determined based on fixed tax rates on revenue. Detailed guidance on tax registration, declaration and payment has been issued and shall take effect from 1 January 2022. However, the implementation shall take place only after the online portal of the Vietnamese tax authority goes live.
At the time of preparing this chapter, the online portal has not yet gone live. Since the filing is on a quarterly basis, it is expected to be released before the deadline of the first filing, which is quar ter January 2022, i.e., before 30 April 2022.
If foreign nonresident entities fail to register to declare and pay taxes, relevant parties, including Vietnamese contracting parties or commercial banks/intermediary payment service providers, will be responsible for registering and declaring the tax liabilities on their behalf. For further details, see the Digital economy subsection below. In addition, non-established businesses are required to retain all related information used for determining their Vietnam-sourced income in accordance with the Law on Tax Administration in the event of a future tax audit by the Vietnamese tax authority.
Tax representatives. Tax representatives are not required in Vietnam.
Reverse charge. Reverse-charge services relate to foreign contractors who apply the foreign contractor tax (FCT) declaration under the deemed method. Upon making the payment, the Vietnamese purchasers must self-assess and withhold the FCT amount (including VAT and cor porate income tax).
Domestic reverse charge. There are no domestic reverse charges in Vietnam.
Digital economy. For business-to-business (B2B) transactions, the supply of a lease/rent/license for the right to use intellectual property (IP) may be subject to VAT, since it is not considered as a transfer of ownership right in accordance with the Vietnam law on intellectual ownership rights. If the supplier is a nonresident business and does not register to declare and pay taxes in Vietnam, the customer should withhold, declare and pay VAT via the withholding tax regime. The applicable VAT rate for the payment of such activities is 5%.
For business-to-consumer (B2C) transactions, the individual customer makes payment directly to the nonresident business (e.g., by way of credit card). By regulations, there would be a FCT of 5% VAT on the payment. The withholding parties would be commercial banks/intermediary pay ment service providers. Nonresident business must register to declare and pay taxes directly to the tax authority.
Regulations on the import/export procedure for e-commerce goods are being developed. At the time of preparing this chapter, such regulations are at the drafting stage.
Online marketplaces and platforms. New rules came into effect 1 July 2020 for cross-border business activities based on digital intermediary platforms. The foreign parties must register for VAT directly with the tax authority or authorize a representative in Vietnam to do so on their behalf. Otherwise, VAT will be withheld by Vietnamese counterparties, commercial banks or payment service providers who facilitate the offshore payment. Detailed guidance on the imple mentation of these new rules has been issued and shall take effect from 1 January 2022. However, the implementation shall only take place after the online portal of the local tax authority goes live. At the time of preparing this chapter, the online portal has not yet gone live. Since the filing is on a quarterly basis, it is expected to be released before the deadline of the first filing, which is quarter January 2022, i.e., before 30 April 2022.
Registration procedures. For newly established businesses that have completed incorporation procedures and received an incorporation license, the incorporation number shown on the license serves as the tax registration number. No separate registration procedures are required. The local business registration office/authority shall – internally – inform the local tax office where a newly established business is located. The application for new enterprise can be submitted online or by paper, including the following documents:
• Enterprise registration request form
• Enterprise charter
• List of investors/members and identification documents of individual investors, business regis tration certificate of organization investors
• Decision on enterprise establishment
• Investment registration certificate for foreign investors as stipulated under the Law on Investment
When a newly established business has an office, factory, branch or outlet engaging in direct sales in another province, different from the locality of the headquarter, such office, factory, branch or outlet must separately pay VAT to the local tax office where it is located, except for certain cases in which the head office can declare and pay VAT. However, there is no need to register with the local tax office of such office, factory, branch or outlet. When the headquarter sets up an office, factory, branch or outlet in another province, it shall need to update its tax registration information with a local business registration office/authority in the locality where its office, factory, branch or outlet is located. This registration office/authority shall internally inform the local tax office the number of this newly licensed office, factory, branch or outlet, which is also the tax number.
Other businesses (e.g., foreign contractors having a permanent establishment in Vietnam) must register for tax purposes within 10 working days from the date on which contract award agree ments are signed. This registration requires the regulated form (i.e., Form 04-DK-TCT), a copy of contractor license (or the equivalent issued by competent authority) and a copy of the acknowl edgment/confirmation of the registration of the project office establishment (or the equivalent issued by the competent authority). Within three working days of receiving the sufficient dossier, the tax authority will issue the tax code for the taxable person.
Currently, there is no process for registering for a tax code online.
Deregistration. When the organization/individuals end their business in Vietnam, they need to proceed with the closure of the tax code after clearance of current tax liabilities (Article 14, Section 4, Circular 105/2020/TT-BTC).
Changes to VAT registration details. Upon any change to taxable person registration information (e.g., company name, address, type of business), taxable persons must notify the changes and apply for amendment of its business registration certificate (if required) to the licensing author ity (i.e., Business Registration Division of local Department of Planning and Investment where the company’s headquarters is located) within 10 working days with changes to business registration information as prescribed. The local business registration office/authority shall – internally – inform the local tax office where a newly established business is located.
D. Rates
The term “taxable supplies” refers to supplies of goods and services liable to a rate of VAT, including the zero-rate.
The VAT rates are:
• Standard rate: 10%
• Reduced rate: 5%
• Zero-rate: 0%
The standard rate of VAT applies to all supplies of goods and services, unless a specific measure provides for a reduced rate, the zero-rate or an exemption.
From 1 November to 31 December 2021, taxable persons in sectors heavily affected by COVID19, such as transportation services (e.g., transport by railways, water, air, road), lodging services, food service, etc., could obtain a 30% reduction on VAT rates (i.e., the applicable VAT rates will be reduced by a third). For example, when a taxable person issues a VAT invoice with 10% VAT, it would indicate 10%*70% on the tax rate line.
The Government issued a Decree to introduce a 2% VAT reduction applicable to the goods and services currently subject to 10% (i.e., a reduced VAT rate of 8%), except for the following goods and services: telecommunications, information technology, financial activities, banking, securities, insurance, real estate business, metal production and manufacture of products from prefabricated metal, mining industry (excluding coal mining), production of coking coal, refined petroleum,
production of chemicals and chemical products, goods and services subject to special consumption tax. This 2% VAT rate reduction will apply from 1 February to 31 December 2022.
Examples of goods and services taxable at 0%
• Exported goods and services, including goods and services sold to overseas organizations or individuals outside Vietnam, as well as goods and services supplied to organizations or individuals in non-tariff areas
• Construction and installation carried out overseas or within export processing zones
• International transportation
Examples of goods and services taxable at 5%
• Water (except for bottled water)
• Medicine and medical equipment (except for medicine included in medical service package)
• Teaching tools
• Agricultural products
• Residential housing for sale or lease
The term “exempt supplies” refers to supplies of goods and services that are not liable to VAT and that do not qualify for input tax deduction.
Examples of exempt supplies of goods and services
• Raw agricultural products
• Livestock
• Aircraft, oil rigs and ships that are not yet locally produced and that are leased from overseas
• Land-use rights
• Credit activities, credit guarantees, financial leases and financial derivative services
• Capital transfers
• Securities transfers
• Life insurance services
• Health services, veterinary medicine services, including medical examination and treatment services for humans and animals
• Care services for elderly people and disabled people
• Education and vocational training
• Publication of newspapers, magazines and certain kinds of books
• Public transportation by bus and electric car
• Reinsurance services
• Technology transfers
• Public sewage services
• Foreign currency trading
• Debt transfers
• Credit card issuance
• Factoring
• Exported natural resources that are not processed or cover 51% into other products inclusive of energy cost
Option to tax for exempt supplies. Option to tax for exempt supplies is not allowed in Vietnam.
Foreign contractors. Foreign contractors that supply goods and services to Vietnam are subject to the following deemed VAT rates:
• Trading goods (separate value from service in the contract): exempt
• Services: 5%
• Construction and installation with supply of materials and equipment: 3%
• Construction and installation without supply of materials and equipment, or if supply of materials and equipment is subcontracted: 5%
• Supply of machinery and equipment with installation, training, operation and trial operation services, if the value of each activity is not calculated separately in the contract: 3%
• Transport and production: 3%
• Other business: 2%
VAT is withheld at source by the Vietnamese party to the contract unless the foreign contractor has registered for tax.
Business individuals. Business individuals who have annual income of over VND100 million are subject to the following deemed VAT rates:
• Supply of goods: 1%
• Construction (without supply of materials) and services (including leasing of assets): 5%
• Construction (with supply of materials and equipment), manufacturing, transportation: 3%
• Other business: 2%
E. Time of supply
For goods, the time of supply for VAT purposes (the tax point) is when the ownership or use rights of the goods are transferred, regardless of whether the payment is made.
For services, the tax point is when the service is completely performed or when the invoice for the service is issued, regardless in both cases of whether the purchaser makes payment.
Deposits and prepayments. For deposits and prepayments, the tax point is when the prepayment is made, requiring an invoice to be issued.
Continuous supplies of services. There is no special time of supply rules in Vietnam for supplies of continuous supplies of services. As such, the general time of supply rules apply (as outlined above).
Goods sent on approval for sale or return. If goods are returned to the seller because the buyer finds that the goods are not in line with a previous agreement between the parties in respect of their quality, quantity and characteristics, etc., the following applies. If the invoice has already been issued, an adjustment invoice should be issued by the buyer that clearly states the reason for the return and the amount of VAT. If the buyer is not eligible to issue the invoice, an adjustment minute should be prepared between the two parties as the evidence to make a VAT adjustment declaration.
Reverse-charge services. Reverse-charge services relate to foreign contractors who apply the Foreign Contractor Tax (FCT) declaration under the deemed method. Upon making the payment, the Vietnamese purchasers must self-assess and withhold the FCT amount (including VAT and corporate income tax).
Leased assets. There is no special time of supply rules in Vietnam for supplies of leased assets. As such, the general time of supply rules apply (as outlined above).
Imported goods. For supplies of imported goods, VAT becomes due at the time of registration of the customs declarations.
Installment sales. For supplies of installment sales, VAT becomes due when the purchaser pos sesses the right to use the goods.
F. Recovery of VAT by taxable persons
Businesses may claim input tax paid on goods or services used for the production or trading of goods or services that are subject to VAT. Businesses recover input tax by offsetting it against output tax (VAT on sales).
To be entitled to VAT credit, a document evidencing payment made through a bank is required except for the case where the purchase value is less than VND20 million. Bank payments must be made from the bank account of the buyer(s) to the bank account of the supplier(s).
In general, a valid tax invoice must be retained to support claims for input tax credits. The tax invoice must state the pretax price, the VAT and the total amount payable.
The basis for determining the amount of deductible input tax is the amount of VAT stated on the following:
• Valid tax invoice for the goods or services
• Documentation evidencing VAT payment at the stage of importation
• Documentation evidencing VAT payment on behalf of a foreign party
If a business establishment discovers that it has not deducted an amount of VAT in its declaration because the tax invoice or receipt of the tax payment was omitted, it may make an additional declaration requesting the credit. However, any additional VAT credit declaration must be made before the tax authority issues a decision about any tax inspections carried out at the premises.
The time limit for a taxable person to reclaim input tax in Vietnam is. in principle, the period during which the input tax is incurred, whether the products are used or still in storage. If the taxable person finds that the input tax is incorrectly declared, an adjustment may be made before the tax authority or a competent authority announces the decision on tax inspection at the tax payer’s premises.
Nondeductible input tax. Businesses may not claim input tax paid on goods or services used for producing or trading nontaxable goods or services. They also cannot claim the input tax of the unrelated expenses or incorrect payment method as regulations.
Examples of items for which input tax is nondeductible
• Food and beverage expenses for employees (snack, soft drink, moon cake)
• House rental fees for employees who have signed labor contracts with the company. In cases in which these expatriates are assigned to work in Vietnam by the foreign parent company but remain employees of the foreign parent company during their secondment period in Vietnam (i.e., they receive salaries and other benefits from the foreign parent company), and the Vietnamese entity and the foreign parent company enter into a written agreement that states that the Vietnamese entity shall bear all accommodation fees for these expatriates during their secondment period in Vietnam, input tax of these accommodation fees is creditable
• Expenses paid in cash with the value of more than VND20 million
Examples of items for which input tax is deductible (if related to a taxable business use)
• Expenses paid for raw materials, offices supplies, transportation, etc
Partial exemption. Businesses that produce or trade taxable and nontaxable goods or services must maintain separate accounts for input tax paid on goods or services used for taxable and nontaxable goods or services. If no separate accounts are maintained, the deductible input tax is calculated using a ratio based on the proportion of taxable turnover compared with total turnover.
Approval from the tax authorities is not required to use the partial exemption standard method or special methods in Vietnam.
Capital goods. “Capital goods” are defined as tangible fixed assets such as building, machines, equipment, etc. When capital goods are purchased and relate to both taxable and exempt supplies made by a taxable person, an apportionment has to be calculated to work out the percentage of the goods that relates to the taxable supplies. This percentage can only be deducted as input tax,
and the remaining percentage that relates to the exempt supplies is not allowed to be deducted. There are no special rules for capital goods in respect of time and duration of use.
Refunds. Businesses that pay VAT using the tax credit method (see the non-established busi nesses subsection above for detail on this method) are eligible for a refund of VAT in the follow ing circumstances:
•
The business exports goods and services (including goods imported to export) during a month or quarter and has a credit balance of input tax of at least VND300 million at the end of that month. The refund is granted monthly or quarterly
• An incorporated establishment is entitled to a refund if it is in the investment stage of a new project (except investment projects that construct houses for sale or rent but without constituting any fixed assets) and if it has accumulated input tax of at least VND300 million that has not been credited against output tax of its operating businesses. In the following events, a busi ness shall not be eligible for a refund but can carry forward remaining deductible VAT on its investment project to the subsequent period:
The charter capital of the investment project of the business has not been fully contributed as registered as per the laws
An investment project is carried out by a business that undertakes conditional trade(s) but is not satisfying business conditions as per the Investment Law; in other words, such invest ment project is run by a business that engages conditional trade(s) but is not licensed thereto; by a business that engages in conditional trade(s) but is not qualified for this; by a business that engages in conditional trade(s) but is not permitted to perform this trade; or by a business that engages in but does not meet conditions to perform conditional trade(s) though not required by the laws on investment to be permitted or certified in writing
An investment project is carried out by a business that undertakes conditional trade(s) but fails to sustain business conditions during its operations; in other words, such investment projects are run by a business that engages in conditional trade(s) but has its relevant license(s) revoked during its operations; by a business whose certificate(s) of eligibility for conditional trade(s) is (are) revoked; by a business that has the written permission revoked by a competent authority for conditional trade(s); or by a business that fails conditions to undertake conditional trade(s) as per the laws on investment. In this event, the business shall be ineligible for the refund of VAT upon the revocation of one of the said documents or upon being exposed by competent government authorities as having failed to meet the conditions for conditional trades
The value of natural resources and/or minerals plus the energy cost of an investment project for extraction of natural resources and minerals that has been licensed since 1 July 2016 or an investment project for production of goods makes up 51% of its prime cost or above
• The business establishment that uses the deduction method shall receive a refund of the surplus VAT or the VAT that is not completely deducted when there is a change of ownership, or when the enterprise is converted, merged, amalgamated, divided, dissolved and bankrupt or shut down
• Foreigners and Vietnamese people residing abroad who have passports or entry papers issued by foreign competent authorities shall receive refunds of VAT paid on goods purchased in Vietnam and taken abroad
• VAT will be refunded when paid by programs/projects using nonrefundable ODA, nonrefund able aid or humanitarian aid
• A taxable person eligible for diplomatic immunity who purchases goods and services in Vietnam shall receive a refund of the VAT stated on the VAT invoice or the receipt that indicates the VAT-inclusive price
• Refunds will be paid when a business establishment receives a decision on VAT refunds from the competent authorities and when VAT refunds are due according to international agreements to which the Socialist Republic of Vietnam is a signatory
An application for a refund must be submitted to the tax authority (that is, to the tax department or to the general tax department in some special cases). Taxable persons may file an electronic claim online or file a physical claim directly or by post to the supervisory tax authority.
The notice detailing the outcome of the tax refund application shall be sent to the applicant within six working days (in the case of refund before examination) or within 40 days (in the case of examination before refund).
Pre-registration costs. A taxable person may recover input tax it incurred prior to registering for VAT. It must hold the invoices bearing the name of the authorized business. The invoices of which the value is VND20 million or more (inclusive of VAT) must be reimbursed via the bank of the company and not via the tax authority.
Bad debts. Input tax incurred in relation to bad debts can be recovered by taxable persons. The VAT must have already been written off as an expense, as a provision for bad debts.
Noneconomic activities. Input tax incurred on purchases that are used for noneconomic activities is not recoverable in Vietnam.
G. Recovery of VAT by non-established businesses
A VAT refund is allowed only for businesses using the tax credit method. A foreign contractor that has no legal presence in Vietnam but conducts business or derives income from activities in Vietnam may recover VAT if it adopts the Vietnam Accounting Standard/Hybrid Method and it satisfies certain bookkeeping and tax registration requirements. To be eligible for VAT recovery, a foreign contractor must meet all the following conditions:
• It has a permanent establishment in Vietnam or is a resident of Vietnam
• It conducts business in Vietnam under the contractor’s or subcontractor’s contract for 183 days or more beginning on the date on which the contract takes effect
• It adopts the Vietnam Accounting Standard/Hybrid Method
Foreign contractors that do not apply the Vietnam Accounting Standard/Hybrid Method may not recover input tax unless a specific international agreement entered into by Vietnam provides otherwise.
H. Invoicing
VAT invoices. A taxable person must provide an invoice for all taxable supplies made, including exports. There are four categories of invoices:
• Invoices of exports for exporting transactions (i.e., the commercial invoice is required instead of VAT invoice). From 1 July 2022, all exporting transactions are required to use VAT e-invoic es or sales e-invoices (see the Electronic invoicing subsection below)
• VAT invoices for domestic transactions of taxable persons applying the tax credit method
• Sales invoices for domestic transactions of taxable persons applying the direct method
• Others, including receipts, tickets and other vouchers
The invoices can be presented in the following three forms:
• Self-printed invoice: wholly printed by the taxable person’s printers
• Invoice printed by order: produced by a printing house by order of taxable person or tax authorities for provision or sale to taxable person
• Electronic invoice: must be created, issued and processed on computers of issuer under the law on e-transactions
The tax authorities may sell only blank invoices to a few specified persons such as nonbusiness organizations, individuals and households that generate sale revenue.
A valid invoice is necessary to support a claim for input tax deduction.
Credit notes. Credit notes are not available in Vietnam. An adjustment or cancellation to a supply is reflected by way of an adjustment invoice. If it is return of goods, the buyer is required to issue an invoice to the seller. In case an issued invoice is found incorrect before it is given to the buyer, the seller shall cross out the copies and keep the incorrect invoice.
In case an issued invoice is found incorrect after it is given to the buyer but before goods are delivered or services are provided, or after it is given to the buyer but before the buyer and the seller declare tax, the invoice shall be void; the buyer and the seller shall make a record on with drawal of copies of the incorrect invoice. The withdrawal record must specify the reasons for invoice withdrawal. The seller shall cross out the copies, keep the incorrect invoice and issue a new invoice as prescribed.
In case an invoice is found incorrect after it is given to the buyer, goods are delivered or services are provided, the buyer and the seller are declared tax, the buyer and the seller shall make a record or a written agreement specifying the errors, then the seller shall make a corrective invoice. The corrective invoice must specify the adjustment (increase or decrease) to the quantity of goods, sale prices, VAT rates, VAT amounts on the invoice number. According to the corrective invoice, the buyer and the seller shall adjust the sales, input tax and output tax. Negative numbers must not be written on the corrective invoices.
Electronic invoicing. Electronic invoicing is mandatory in Vietnam for all taxable persons (with effect from 1 July 2022). All taxable persons must prepare to meet the information technology infrastructure requirements for electronic invoicing. From the time of preparing this chapter until 30 June 2022, in case the local tax authority notifies taxable persons to apply e-invoices but taxable persons fail to meet the information technology requirements and wish to continue using current invoices, they shall send invoice data to the local tax office authority (under statutory forms) together with its VAT returns. Some taxable persons, such as SMEs, that fail to meet the information technology requirements after 1 July 2022, can use the VAT invoices (paper-based) issued by the tax authority for a maximum 12 months, and the tax authority shall enforce gradual transition into e-invoice.
An electronic invoice is legally valid when it satisfies the following conditions:
• Includes all the compulsory information as prescribed and includes the date of issuance
• Data included on the invoice is under the format prescribed by the Ministry of Finance
• The information contained on an electronic invoice can be accessed and used in complete form when necessary
The electronic invoices can be presented in the following two forms:
• Electronic invoice with a certified code from the tax authority: an electronic invoice that is assigned an identification code by the tax authority before an organization or individual selling goods or providing services sends it to buyer
• Electronic invoice without a certified code from the tax authority: an electronic invoice that an organization selling goods or providing services sends to the buyer in the absence of a tax authority’s identification code. Subject to the approval of local tax authority, business entity shall register to use such kind of electronic invoice via the portal of General Department of Vietnam Taxation
Simplified VAT invoices. Simplified invoices are only allowed to be issued in the following cir cumstances:
• A seller can use invoices without a buyer’s signature or the seller’s seal in the following cases: electricity bills, water bills, telephone bills and banking service bills that are self-printed as prescribed by laws
• Invoices printed by supermarkets and shopping malls can omit name, tax code number, signa ture of buyer and seal of seller
• Stamps and tickets that have prices printed thereon can omit signature and seal of seller, name, address, tax code number and signature of buyer
• Some specific cases as requested by a taxable person (a taxable person that uses large amounts of invoices and adheres to tax laws) and approved by local tax department: no seller’s seal is required
Self-billing. Self-billing is not allowed in Vietnam.
Proof of exports. Exports of goods and services are zero-rated. Proof of export is required. The required documents to claim a refund of input tax include contracts for the sale of goods, legiti mate invoices, customs declarations for exporting goods or evidence of exporting services consumed outside of Vietnam for exporting services and proof of payment through a bank by foreign parties.
Foreign currency invoices. If an invoice is allowed to be issued in a foreign currency in accordance with regulations of the law on foreign exchange, all values on the invoice must be reported in the foreign currency without having to be converted into the domestic currency, which is the Vietnamese dong (VND). The seller must use an acceptable exchange rate on invoices.
Supplies to nontaxable persons. For the payment of purchases of goods and services valued at less than VND200,000 the supplier is not required to issue a VAT invoice unless the purchasers require one; however, at the end of the day, the supplier must issue VAT invoice for the total of those such purchases. Suppliers using electronic invoices must issue a full VAT invoice for each transaction.
Records. In Vietnam, VAT books and records must be held within the country. These include documents and other accounting records (including VAT invoices and related documents support ing input tax claims).
In addition, non-established businesses are required to retain all related information used for determining their Vietnam-sourced income in accordance with the Law on Tax Administration in the event of a future tax audit by the Vietnamese tax authority.
Record retention period. The following general guidelines apply to the retention of documents and other accounting records (including VAT invoices and related documents supporting input tax claims):
• Documents to be kept for at least five years include those used for management or operation of the enterprise
• Documents to be kept for at least 10 years include accounting data, accounting books, financial statements and reports of independent auditing firms
• Documents to be kept permanently include those that are significant in terms of economics, national security and defense
In general, records must be physically kept at the premises of the enterprise, which can be in Vietnam or outside.
Electronic archiving. Enterprises can choose whether to keep the records in physical form or electronically. E-invoices must be maintained in electric form (XML format), kept in a secured manner to protect them from being altered and assessable to tax authority upon request. Upon the request from competent authorities for the purpose of inspection, enterprises might be required to print out the electronic records, sign and seal to provide.
I. Returns and payment
Periodic returns. Businesses are generally required to file a monthly tax return to the tax office by the 20th day of the following month. Exceptions are taxable persons that make quarterly declarations (permitted for businesses whose revenue in the previous year is VND50 billion or
lower). Newly established entities are eligible to choose the option of filing VAT on a quarterly basis. After 12 months of operation as of the following calendar year, if eligible for quarterly VAT declarations for satisfaction of the condition on revenue of goods/services of the prior full calen dar year, the entity can request permission of the local tax authority to continue declaring VAT quarterly.
If the entity is eligible for paying VAT on a quarterly basis and would like to change from the monthly to quarterly VAT declaration, it is required to notify the local tax office under statutory Form No. 01/DK-TDKTT within the deadline of the first month of the year it commences the monthly VAT declarations at the latest. The method of VAT declaration must be fixed for a cal endar year.
Periodic payments. Businesses are generally required to remit the monthly VAT payable to the tax office by the 20th day of the following month or quarterly VAT payable by the last day of the first month of the following quarter. This deadline changed from the 30th day of the following quarter, with effect from 1 July 2020.
Any excess input tax paid may be credited in the following period or refunded if the business is eligible for a refund (see Section F).
A business that imports goods subject to VAT must file a customs declaration and remit VAT payable on each occasion when goods are imported. The time limit for notices and payments of VAT with respect to imported goods is the same as the time limit applicable to notices and pay ments of import duties.
VAT liabilities must be paid in Vietnamese dong (VND). Tax payment can be made via banks. This is done by the taxable person filling out a payment to state budget form and submitting to the commercial bank (which can be done online or in person), and therefore not paying directly to state treasury, but via a commercial bank instead.
Electronic filing. Electronic filing is allowed in Vietnam, but not mandatory. Where a taxable person is carrying out business in a locality with online access, it must make its declarations, pay tax and make transactions with the tax authority as prescribed by the laws on electronic transactions. Different online systems (i.e., both online and offline software such as eTax, iHTKK) have been deployed across Vietnam to facilitate electronic filing.
Payments on account. Payments on account are not required in Vietnam.
Special schemes. Business individuals and household business. There is a special scheme that applies for business individuals and household business (in terms of tax rates). Periodical filings apply to large-scale household businesses and individual businesses or other household businesses and individual businesses that choose to pay taxes under periodical filings. For this, they must com ply with accounting, invoices and documents. In addition, they are not required to finalize taxes. Individual businesses that have casual business operations and do not have fixed business loca tions shall pay taxes when arisen.
Annual returns. Annual returns are not required to be filed in Vietnam.
Supplementary filings. No supplementary filings are required in Vietnam. However, in case the tax declaration dossier submitted to the tax authority is erroneous or inadequate, supplementary documents may be provided within 10 years from the deadline for submission of the erroneous or inadequate tax declaration dossier but before the tax authority or a competent authority announc es a decision on tax document examination.
In addition, non-established businesses are required to retain all related information used for determining their Vietnam-sourced income in accordance with the Law on Tax Administration in the event of a future tax audit by the Vietnamese tax authority.
Correcting errors in previous returns. If the taxable person detects errors in a submitted VAT return after the deadline, the taxable persons may submit supplementary filings to correct errors in previous returns, which can be done online or in paper. The revised returns can be submitted to the local tax authority in any working days, regardless of the next deadline, as long as it is submitted before the local tax authority announces its decision on tax inspection at taxable per sons’ premises. Supplementary documents include:
• The supplementary tax returns
• The explanation for the supplementation and relevant documents
Noted that if the supplementary filing gives rise to additional tax payable, the taxable person will be subject to late payment interest.
When the decision on tax inspection has been issued:
• Adjustments can be made if errors in the submitted returns are not relevant to the scope of inspection and the inspection periods and late payment interest will be imposed
• Adjustments can be made if errors in the submitted returns are relevant to the inspection period but not relevant to the scope of inspection and late payment interest will be imposed
• Adjustments can be made if errors that are relevant to the inspected periods and the scope of inspection lead to an increase in the amount of tax payable or a decrease in the amount of tax refunded or a decrease in the amount of overpaid taxes. In this case, taxable persons will incur penalty as if such errors are detected by the local authority during tax inspection
If the local tax authority has issued the decision to settle the increase/decrease of deductible input tax, taxable persons shall adjust tax returns of the period during which the decision is received (no supplementary filing is required).
Digital tax administration. There are no transactional reporting requirements in Vietnam.
J. Penalties
Penalties for late registration. Failure to comply with registration requirements (if applicable) may result in a fine. The penalty for late registration ranges from VND1 million to VND10 mil lion, depending on the length of the delay.
Penalties for late payment and filings. Interest is imposed for late payment of VAT at the progressive rate of 0.03% per day from 1 July 2016.
Failure to comply with tax filing requirements may result in a warning or a fine ranging from VND2 million to VND25 million, depending on the length of the delay.
Penalties for errors. The fine for understatement of tax payable or overstatement of refundable tax, exempt tax shall be 20% of the tax arrears or overstated refundable tax, exempt tax.
Penalties for fraud. Tax evasion or tax avoidance if incurring may result in a fine ranging from one to three times of the tax arrears.
Personal liability for company officers. In general, company officers are not personally liable for the company’s tax violations, unless criminal intent is detected.
Statute of limitations. The statute of limitations in Vietnam is 2, 5 or 10 years. Tax authorities can go back up to 10 years to review returns and identify errors and impose a shortfall amount of tax and late payment interests. For administrative penalties, the time limit is two or five years, depending on the violation. Taxable persons that fail to apply for a tax registration shall pay all the tax arrears and late payment interest that ever arose before the day of discovering the viola tions.