Some principles for deducting input VAT in Vietnam

Hi DMS Law office in Vietnam! Can you advise me about some rules for deducting input VAT ?

Hi!

Some rules for deducting input VAT in Vietnam:

Input VAT on goods and services serving the manufacture or sale of goods/ services subject to VAT shall be deducted in full, including non-refundable input VAT on damaged goods (Clause 1 Article 14 Circular No. 14/VBHN-BTC dated May 09, 2018).

When goods and services (including fixed assets) are purchased to serve the manufacture or sale of both the goods/services that are subject to VAT and goods/services that are not subject to VAT, only VAT on the goods and services serving the manufacture or sale of the goods/services subject to VAT shall be deducted. The taxpayer must separate the deductible input VAT from non-deductible one. Otherwise, input VAT shall be deducted according to the percentage of taxable revenue to the total revenue from selling goods and services (Clause 2.24 Article 14 Circular No. 14/VBHN-BTC dated May 09, 2018).

With regard to fixed assets being cars with fewer than 9 seats (except for cars used for cargo transport, passenger transport, tourism, or hotel services; cars used for display and test drive by car dealers) whose value are over VND 1.6 billion (VAT-exclusive), the input VAT amount in proportion to the amount in excess of VND 1.6 billion shall not be deducted (Clause 3.25 Article 14 Circular No. 14/VBHN-BTC dated May 09, 2018).

Input VAT on goods and services serving the manufacture or sale of non-taxable goods and services mentioned in Article 4 of this Circular shall not be deducted, except for the following cases:

- VAT on purchased goods and services serving the provision of goods and services for foreign entities that use them for humanitarian aid or non-refundable aid according to Clause 19 Article 4 of this Circular shall be deducted in full.

- Input VAT on goods and services serving petroleum exploration shall be deducted in full until the first day of extraction (Clause 7 Article 14 Circular No. 14/VBHN-BTC dated May 09, 2018).

Input VAT shall be declared and deducted in the period during which it is incurred, whether the products are used or still in storage.

If the taxpayer finds that the input VAT is incorrectly declared, an adjustment may be made before the tax authority announces the decision on tax examination, tax inspection at the taxpayer’s premises (Clause 8 Article 14 Circular No. 14/VBHN-BTC dated May 09, 2018).

Input VAT that is not deductible shall be aggregated with costs to calculate corporate income tax, or aggregated with costs of fixed assets, except for the VAT on any purchase that costs 20 million VND or more without receipts for non-cash payments (Clause 9 Article 14 Circular No. 14/VBHN-BTC dated May 09, 2018).

Before a company is established, its founders authorizes another entity in writing to pay on their behalf some amounts related to the establishment of the company and purchase some goods, the company may deduct input VAT according to the invoices bearing the name of the authorized entity. The invoices of which the value is VND 20 million  or more must be paid by bank transfer (Point b Clause 12 Article 14 Circular No. 14/VBHN-BTC dated May 09, 2018).

Related topics:

Differences in tax position of individual investors in Vietnam

Consulting services:

Phone: 0914 165 703 or email: dmslawfirm@gmail.com

Some principles for deducting input VAT in Vietnam