Some changes in the guidance on value added tax law have effect from 01 Jan 2014

Some changes in guidance on value added tax law

Some notable changes in Decree guiding value added tax law No.209/2013/ND-CP dated 18 Dec 2013 of Government have effect from 01 Jan 2014 includes:
1. The first change in the Guidance on value-added tax law about non taxable objects

* Law on value added tax added some non taxable objects as follows:

 - Health insurance, other insurance services related to humans, the agricultural insurance services other insured vessels, equipment and other necessary tools in direct service fishing production; insurance for fishermen.
 - Lending services of taxpayers being not credit institutions;
 - Sale of secured property of debt held by Vietnam Assets Management Corporation (100 % State own charter capital established by the Government) to write-offs bad debts of credit institutions in Vietnam.
 - Spare-parts which can not be produced domestically to be imported for direct use in scientific research activities.
 - Goods and services of business individual have an annual turnover of 100 VND million or less.

* Law of value added tax converted the non taxable objective to tax rate of 10%:
 - Services to public sanitation, residential and street drainage.

2. The second change in the Guidance on value-added tax law about taxable price

 - The VAT taxable price of goods bearing environmental protection tax is the sale price including environmental tax but excluding VAT.

3. Third change in the Guidance on value-added tax law about VAT rate.

 - Goods and services export enjoying 0% tax rate is defined the goods and services consumed outside Vietnam, in non-tariff areas; goods and services provided to foreign customers.
 - Goods being sold at delivery point of sale which is outside Vietnam has applied VAT 0 %, instead of previously not subject to VAT declaration.
 - Additional 5% tax rate for the sale, lease, and lease purchase social housing under the provisions of the Housing Law.

4. The fourth change in the Guidance on value-added tax law about revenue threshold applied for tax credit method.

 - The tax credit method shall be applied to revenue level from a VND billion or more, unless there is a voluntary registration of tax credit method.
 - The business cases which their revenue less than 1 VND billion but are registered tax credit method includes (Clause 4, Article 7):
 + The enterprise has fully implemented the regime on accounting, invoices and source vouchers.
 + New enterprise established from an investment project of existing enterprises and declare VAT by the credit method.
 + Newly established enterprise investment, purchase of fixed assets, machinery and equipment. Organizations and individuals doing business in Vietnam according to contract, subcontract.
 + Other economic organizations may post account of output and input VAT.
 - Business households and individuals are subject to VAT by applying the direct method – be  not subject to the tax credit method, even where there is an annual revenue of over 1 VND billion.

5. Fifth change in the Guidance on value-added tax law about direct VAT calculation method:

 Direct VAT calculation method, if calculating tax directly on basis of added value only applies to activities of trading, processing of gold, silver and precious stones. By specifying that the amount of value added tax payable shall equal the added value multiplied by the value added tax rate

Calculating method by % rate multiplied by the revenue to be applied on the objects:
 - Enterprises, cooperatives have annual revenues below the revenue threshold of a billion VND, unless otherwise voluntary registration tax credit method.
 - Business household, individuals;
 - Foreign contractors have not implemented a full regimes on accounting, invoices and source vouchers, except for oil and gas contractors paying VAT by tax credit method by the Vietnamese party do on their behalf;
 - Other economic organizations, unless otherwise voluntarily registration of tax payment under the tax credit method.

 Formula: The amount of tax payable is equal to (=) % Rate (x) Revenue.

 In particular, the % rate is classified by four types of business lines:
 + Distribution, supply of goods: 1 %
 + Service, construction without building materials: 5 %
 + Production, transport, services associated with goods, construction including building materials: 3 %.
 + Other business activity: 2%.

6. The sixth change in the Guidance on value-added tax law on credit VAT
 - Remove a time limit of maximum of 6 months to conduct a supplementary declaration and credit VAT for adjusted invoices in case of errors, as long as it is prior to the tax authorities announces the tax inspection at the headquarters of the taxpayer in accodance with the provisions of the Law on tax administration.
 - Remove the provisions “Input VAT levied on fixed assets used in manufacturing of and business in both value added taxable goods and services and non-taxable goods and services shall be fully credited”.
 - Input VAT on fixed assets is the canteen, the break between shifts houses, changing rooms, garages, toilets , water tanks for workers in manufacturing, business and housing, health clinics for workers in the catering industry if production and trading of goods and services subject to VAT are fully credit ( Clause 1, Article 9 ).

7. Seventh change in the Guidance on value added tax law about VAT refund.

 - Adding tax refund quarterly to fit the revised quarterly tax declaration period in the Tax Administration Law. Accordingly, in case business is subject to quarterly declaration if the VAT on inputs are not credit in the quarter, it is credit in subsequent periods. In case after four quarters from the first quarter of VAT incurred is not credit, but still some input VAT shall not be credit business establishments be refunded VAT.
 - Amend the method of tax refund in consecutive 03 months having negative tax amount to credit tax in the subsequent period until after at least twelve months from the first month if there is any the negative tax amount, it shall be refund.
 - Amend minimum tax rate being refund for investment and exporters are defined as 200 VND million to 300 VND million.
 - Adding the provisions for credit tax for carrying goods upon exit of foreign passport holders.
 - Adding 2 case on VAT refund was stipulated in the Decree, specifically for VAT refund: (i) The programs and projects funded with official development assistance (ODA) is not or non-refundable aid, humanitarian aid and (ii) beneficiaries of diplomatic privileges and immunities under the provisions of the Ordinance on diplomatic privileges and immunities.

8. The eight change in the Guidance on value added tax law about VAT reduction solutions.
 - Perform 50% reduction in the VAT rate from 01 July 2013 to end on 30/06/2014 for sale, for rent, for rent and purchase commercial house being complete apartment has a floor area of less than 70 m2 and priced below 15 million/m2.

 Decree takes effect from the date 01 Jan 2014 and replaces Decree No.123/2008/ND-CP dated 08 Dec 2008 and No.121/2011/ND-CP dated 27 Dec 2011.
  Repeal Paragraph 1 of Article 4 of Decree No.92/2013/ND-CP dated 13 Aug 2013

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